Generating
value
ANNUAL REPORT 2010
ANNUAL REPORT 2010
Generating
value
Corporate Headquarters
Lago Zurich 245 Edificio Frisco
Col. Ampliación Granada
Mexico City, 11529
www.carso.com.mx
Investor information
Investor Relations
Jorge Serrano Esponda
[email protected]
Angélica Piña Garnica
[email protected]
Share Information
Grupo Carso S.A.B. de C.V. Series A-1 shares are listed on the
Bolsa Mexicana de Valores, S.A.B. de C.V.
under the ticker symbol “GCARSO”.
ADR Information
Symbol: GPOVY
2:1
Cusip: 400485207
Depositary Bank
BNY Mellon
P.O. Box 11258
New York, N.Y. 10286-1258
Phone 1-888-BNY-ADRS (1-888-269-2377)
Phone (International) 201-680-6825
[email protected]
www.bnymellon.com/shareowner
Websites
For more information about Grupo Carso and social responsibility
activities, visit:
www.carso.com.mx
www.carlosslim.com
www.museosoumaya.com
PLAZA CARSO
This is one of the largest mixed-use real estate
developments in Latin America and an example
of urban reconversion. A former industrial lot is
the site of an integral project of offices, housing, a
shopping mall and a cultural area, in addition to
proposals to renovate surrounding areas.
This would imply adding green areas, improving
roadways and creating a linear park. In addition to
the innovation in the architectural project and the
engineering efficiency, Plaza Carso was created
with a focus on sustainability. The design uses
materials and processes that allow for the reduction
in consumption of natural resources. For example,
thermal windows reduce the use of air conditioning
and through recycling, absorption wells and the
capture of rain water, consumption of water is
reduced throughout the complex.
The new environment created by Plaza Carso also
increases cultural options through Teatro Cervantes,
Museo Jumex and Museo Soumaya, a vanguard
building that houses one of the most important
private collections in the world.
CONTENTS
Introduction 1
Brands, Services and Products 2
Key Financial Data 4
Letter to Shareholders 6
Report of the Chief Operating Officer 7
Commercial and Consumer Division 8
Industrial and Manufacturing Division 12
Infrastructure and Construction Division 16
Discontinued Operations 22
Board of Directors 24
Corporate and Auditing Practices Committee Report 25
Consolidate Financial Statements 27
Design: www.signi.com.mx
1
ANNUAL REPORT 2010 •
Generating value
1
Grupo Carso is a dynamic
conglomerate with the ability and
experience to adapt to economic
cycles, as well as anticipate
trends and opportunities.
It holds a solid competitive position
in the commercial, industrial and
infrastructure industries thanks to
a passion for innovation, a history
of proven growth, solid corporate
governance and, most importantly,
exemplary management of resources
and technology.
Grupo Carso generates value for
shareholders by adapting its portfolio
of businesses and taking advantage of
market opportunities.
Generating
value
2
Carso Infraestructura
y Construcción
Construction firm focused on five areas:
oil and chemical industry services,
ducts installation, infrastructure, civil
construction and housing development.
18.4%
PARTICIPATION
IN REVENUES
14.1%
PARTICIPATION IN
OPERATING INCOME
GRUPO
CONDUMEX
This company offers a
broad range of products
and services focused on
satisfying needs in the
telecommunications,
construction, electrical,
power, automotive and
mining industries.
29.1%
PARTICIPATION
IN REVENUES
23.1%
PARTICIPATION IN
OPERATING INCOME
PRODUCTS AND SERVICES
• High-tension,
telecommunications,
electronics, coaxial, mining,
fiber optic and construction
cables
• Magnetic wire
• Electromechanical
installations
• Transformers and reactors
• Mobile electrical substations
• Automotive shock absorbers
• Alternative energy systems
• Low-consumption interior
and exterior lighting
• Precision steel tubing
• Specialized transportation
• Turnkey power projects
industrial
manufacturing
and
51.8%
PARTICIPATION IN
REVENUES
56.9%
PARTICIPATION IN
OPERATING INCOME
FORMATS
• Department Stores and
Boutiques
• Restaurants and Shops
• Music Stores
• Electronic and Software
Stores
GRUPO
SANBORNS
Present in Mexico and Latin
America, Grupo Sanborns
operates some of the best-
known and most-successful
retail formats in the region,
focused on middle, upper-
middle and high segments.
commercial and consumer
infrastructure
and
construction
3
ANNUAL REPORT 2010 •
Generating value
BRANDS, SERVICES AND PRODUCTS
3
PRODUCTS AND SERVICES
• Platform construction, well
perforation and rental of
perforation equipment for the
oil industry.
• Construction of shopping malls,
industrial plants and office
buildings.
• Construction of highways,
dams, water treatment plants,
gas ducts and aqueducts.
• Installation of residential
natural gas networks.
• Steel tubing.
• Design and installation of
telecommunications networks and
radio bases for cellular telephony.
• Low, middle and residential housing.
• Fabrication of pressure vessels, hot
and cold-side heat exchangers.
MARKETS
• Local and federal governments and
decentralized companies.
• Petroleum producers and natural gas
companies.
• Commercial and industrial
companies.
• Fixed-line and cellular
phone operators in Mexico
and other Latin American
countries.
• Concessionaires of
infrastructure projects.
MAIN BRANDS
• CICSA
• CILSA
• GRUPO PC
• SERVICIOS INTEGRALES
GSM
• SWECOMEX
• URVITEC
MARKETS
• Electrical infrastructure of all
types, construction of everything
from housing to heavy industry,
operators of fixed-line and
cellular telephony in Mexico and
other Latin American countries,
mining and automotive
companies.
MAIN BRANDS
• CONDUMEX CABLES
• LATINCASA • CONDULAC
• IEM • MICROM
• GABRIEL • SINERGIA
• PRECITUBO • EQUITER
• SITCOM • LOGTEC
MINERA FRISCO
Recently spun-off from
CONDUMEX, this division
participates in the mining
industry as an independent
public entity.
METALS PRODUCED:
• Gold, silver, zinc, lead and copper.
• Six production units in 2010, with a
milling capacity of 97,000 tons/day.
• Five expansion projects with additional
capacity of 104,000 tons/day.
MINING UNITS:
• Asientos
• Concheño
• El Coronel
• Minera María
• San Felipe
• San Francisco del Oro
• Tayahua
BRANDS
• SEARS
• SANBORNS
• SAKS FIFTH AVENUE
• MIXUP
• ISHOP
• PIER 1 IMPORTS
INMUEBLES CARSO
Recently spun off from Grupo
Sanborns, this division is
dedicated to developing and
brokering varied real estate
assets, including Plaza Carso, as
an independent public company.
TYPES OF REAL ESTATE:
• Corporate Offices
• Shopping Malls
• Department Stores
• Restaurants and Shops
• Education Centers
• Hospitals
4
59,525
56,688
64,196
08 09 10
SALES
(million pesos)
• Operating Margin
• EBITDA Margin
12.7%
10.6%
5
ANNUAL REPORT 2010 •
Generating value
key
financial data
5
BREAKDOWN OF SALES
BY SUBSIDIARY
(million pesos)
Grupo Sanborns 51.8% $ 33,261
Grupo Condumex 29.1% $ 18,680
CICSA 18.4% $ 11,837
Others 0.7% $ 418
Total 100.0% $ 64,196
BREAKDOWN OF OPERATING INCOME
BY SUBSIDIARY
(million pesos)
Grupo Sanborns 56.9% $ 3,877
Grupo Condumex 23.1% $ 1,574
CICSA 14.1% $ 959
Others 5.9% $ 398
Total 100.0% $ 6,808
(Thousand pesos as of December 31, 2010*)
2008 2009 2010
Sales 59,524,542 56,687,753 64,196,109
Operating Income 5,742,068 6,133,505 6,807,913
Majority Net Income 6,545,216 6,390,360 7,064,064
EBITDA 7,025,138 7,467,550 8,124,389
Total Assets 91,099,380 97,677,526 81,156,498
Total Liabilities 36,800,532 37,980,272 42,537,837
Stockholder’s Equity 54,298,848 59,697,254 38,618,661
Outstanding shares 2,326,485,500 2,323,718,400 2,302,750,000
Earnings per share** 2.81 2.75 3.06
* Except for outstanding shares and earnings per share.
** Majority net earnings divided by weighted average shares outstanding.
6
Economic Panorama
In 2010 Mexico experienced an economic recovery following
the 2009 crash and the reactivation of the U.S. economy
in some areas, notably the automotive industry. As a result,
there was an increase in GDP and the labor market.
During this time, Mexico’s Gross Domestic Product grew
5.5%, an increase that was driven by a 9.9% increase in
manufacturing, especially automotive vehicle manufactu-
ring, which grew 40.4%, and commercial activity, which
increased 13.3%.
The peso appreciated 5.5% against the dollar, finishing
2010 at 12.3496 pesos per dollar. The rate for 28-day CE-
TES averaged 4.41% for 2010, ending the year at 4.45%.
Inflation for 2010 was 4.40%, above the 3.57% for 2009.
Meanwhile, the average price for the Mexican crude oil mix
increased 26.01% in 2010, reaching US$72.33 per barrel.
The peso has continued to appreciate in 2011 due to the
weakness of the dollar, and the Mexican crude oil mix has
continued to rise above 100 dollars per barrel.
The trade balance registered a deficit of US$3.121 billion
dollars, a 32.2% decrease in the deficit compared to 2009.
This was a consequence of a 29.8% increase in total
exports, which were supported by a 34.8% increase in oil
exports due to higher prices compared to 2009, as well as a
29.1% increase in non-oil exports.
Grupo Carso
Improved economic conditions in 2010 allowed us to
consolidate the performance of Grupo Carso and carry out
activities that illustrate the dynamism of the company, the
generation of value and our vision of long-term growth.
One of the most relevant events of the year was the spin-
off of the mining and real estate areas, creating Minera
Frisco, S.A.B. de C.V. and Inmuebles Carso, S.A.B. de C.V.
These two publicly-listed companies allow us to clearly
reflect the value of the real estate and mining patrimony of
the group, since each independent entity will seek growth
and value creation for shareholders with its own strategy
and resource allocation.
letter
to shareholders
Meanwhile, we continue to focus on three strategic areas.
Through Grupo Condumex, we continued to offer products
and services for the telecommunications, construction,
power, mining and automotive industries.
Carso Infraestructura y Construcción, S.A.B. de C.V.
(“CICSA”), in the infrastructure and civil construction
industries, continued to receive new projects and advanced
with others that were already in construction, including im-
portant strategic projects for the country such as the Linea
12 of the Mexico City subway and the Emisor Oriente deep
sewage tunnel, as well as others that were initiated this year.
Other important projects included the Atotonilco Water
Treatment Plant and the Culiacan interstate freeway. The
duct installation division also had outstanding performance
in Mexico and Latin America with the groundbreaking of
the Ciudad Juarez aqueduct and the construction of natural
gas distribution networks. The division of fabrication and
services for the chemical and oil industries decreased
business volume for structural reasons, but maintained
favorable profitability and will conclude the construction of
the Jack-Up Independencia 1 mobile oil platform in June
of this year. The housing sector experienced a restructuring
process in 2010 that has led to positive results.
At Grupo Sanborns, we continue implementing actions to
stay close to our clients and consumers, enriching their
purchasing experiences through an innovative selection of
formats, products and services.
All these activities and actions taken in the area of inven-
tory management and cost and expense reduction have
resulted in solid growth of sales, operating income, EBITDA
and net income.
The financial position of the group remains solid, even after
adjusting for the effects of discontinued operations. Total
assets reached $81.156 billion pesos, while shareholder
equity was $38.619 billion pesos. The debt to equity ratio
was 1.1 times, while net debt was 1.1 times EBITDA for
2010, adjusted for the accounts receivable mainly of
Minera Frisco. The coverage of debt service was a solid
3.22 times.
ANNUAL REPORT 2010 •
Generating value
7
report
of the chief
operating officer
Part of the dynamism of Grupo Carso is not only developing
current businesses, but also evaluating new growth areas.
This is why on February 22, 2011, we announced an
agreement for an ownership stake in Tabasco Oil Company
(TOC), a company dedicated to hydrocarbon exploration,
exploitation and commercialization in Colombia. TOC
represents an interesting opportunity in South America and
opens a new line of action in an industry of activities that we
consider complementary.
On the other hand, one of the symbolic and significant
events of 2010 was the recent opening of Plaza Carso.
With an estimated investment of US$800 million dollars,
this mixed-use project exemplifies the urban reconversion
activities that the group is successfully carrying out, with
a stellar management of resources and technology that
supports job growth.
In the area of sustainability, the group foments the use
of materials and processes that reduce the consumption
of natural resources, and seeks to positively impact the
environment and communities where we operate. This is
why we are proud of the recent recognition of CICSA as a
Socially Responsible Company by the Centro Mexicano para
la Filantropía (Cemefi).
Lastly, on behalf of the Board of Directors, I would like
to thank our shareholders, clients and suppliers for the
support and confidence they have given us, as well as
our entire team for their effort and commitment that allow
Grupo Carso to achieve its goals, continue generating value
and contribute to the development of Mexico.
Sincerely,
Carlos Slim Domit
Chairman of the Board
On December 31, 2010, Grupo Carso spun-off its
mining and real estate businesses to create two new
public companies: Minera Frisco, S.A.B. de C.V.
and Inmuebles Carso, S.A.B. de C.V. As a result,
the figures presented in this report do not include
operations from these businesses, which are reported
as discontinued operations.
In 2010, consolidated revenue of Grupo Carso was
$64.196 billion pesos, a 13.2% increase from the
prior year. Meanwhile, operating profit grew 11.0% to
$6.808 billion pesos, while EBITDA was $8.124 billion
pesos, an 8.8% increase from the previous year.
The operating results of Grupo Carso are due to the
good performance of Grupo Condumex as well as
Grupo Sanborns, which showed improved margins in
manufacturing and its main retail formats.
On the other hand, despite a superior backlog
compared to 2009, sales and operating profit of CICSA
were down due mainly to the conclusion of projects
last year and the fact that many projects contracted in
2010 were in the startup phase, without income but
with the outlays related to the startup of operations.
Due to the stronger operating results, net profit for the
year was $7.064 billion pesos, a 10.5% increase from
the net income of 2009.
Meanwhile, Grupo Carso made $3.949 billion pesos of
capital expenditures in the year, distributed among its
three business divisions.
8
8
ANNUAL REPORT 2010 •
Generating value
9
commercial
consumer
and
The Commercial and Consumer division of
Grupo Carso includes Grupo Sanborns, with
a nationwide presence, operating some of the
most successful and most recognized retail
formats, focused on the middle, upper-middle
and upper class segments.
Revenues for Grupo
Sanborns during
2010 were:
33.261
09 10
30,555
33,261
billion pesos.
SALES
(million pesos)
• Operating Margin
• EBITDA Margin
13.6%
11.7%
division
10
GRUPO SANBORNS
Total sales for Grupo Sanborns grew 8.9% to
$33.261 billion pesos in 2010, compared
to $30.555 billion pesos in 2009.
This is due to an increase in annual sales from
the principal retail format, which grew 9.0% in
the year, while same-store sales were up 9.3%.
Similarly, sales at Sears grew 8.3% in 2010,
while same-store sales increased 6.1%.
Operating income grew 14.1% to $3.877 billion
pesos, which translated into a 0.53 percentage
point increase in margin to 11.6%. Meanwhile,
EBITDA was $4.529 billion pesos, an 11.5%
increase in 2010. EBITDA margin was 13.6%.
Likewise, Sears reported operating margins of
10.8% and EBITDA margins of 12.3%, largely
unchanged from 2009.
Grupo Sanborns kept its traditional formats
current through permanent innovation,
introducing new consumer options, exclusive
merchandise and promotions. At the same time,
organic expansion of the group continued, with
special attention on format types and locations.
The second Saks Fifth Avenue store was
inaugurated in 2010, located within Plaza
Carso. Two new Sanborns stores were also
opened for a total of 163 units. In the case of
entertainment stores, there were 10 openings
of ishop formats, four Edumac centers and the
closing of one music store for a total of 101
units to finish the year.
11
ANNUAL REPORT 2010 •
Generating value
11
Sears maintained the same number of units and
one Dorian’s store was closed, bringing December
2010 to 72 Sears stores and four Dorian’s stores.
In all, Grupo Sanborns operates 399 units
in Mexico and five in Central America under
different formats of the above mentioned and
also Tiendas Dax, Sanborns Café, as well as some
specialty boutiques.
It is important to note that many real estate
holdings within this division were spun off and
transferred to Inmuebles Carso, S.A.B. de C.V.,
including those destined for Sears department
stores and Sanborns, as well as 10 shopping
malls in cities throughout Mexico.
Grupo Sanborns made $207.0 million pesos of
capital expenditures in 2010, which included
investments in new stores and remodeling.
REVENUES
Sears 55.7%
Sanborns 34.3%
Others 10.0%
TOTAL 100.0%
OPERATING INCOME
Sears 51.7%
Sanborns 26.2%
Others 22.1%
TOTAL 100.0%
12
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ANNUAL REPORT 2010 •
Generating value
13
industrial
manufacturing
The Industrial and Manufacturing
division of Grupo Carso is comprised
of Grupo Condumex, an industrial
conglomerate focused mainly on the
telecommunications, power, construction,
mining and auto parts industries.
18.680
Consolidated Revenues for
Grupo Condumex reached:
billion pesos during 2010.
13,757
18,680
SALES
(million pesos)
• Operating Margin
• EBITDA Margin
10.4%
8.4%
09 10
and
division
14
GRUPO CONDUMEX
Consolidated sales at Grupo Condumex were $18.680
billion pesos from January through December of 2010,
a solid growth of 35.8% from the $13.757 billion pesos
reported for the same period of last year.
The increases were the result of double-digit
growth practically across the board in volume of
manufactured products. Growth was especially
high in products for the telecommunications
industry, such as fiber optic and coaxial
cable, which increased 176.1% and 99.3%,
respectively.
Sales of harnesses and automotive cable
increased 51.0% and 50.0% respectively
in the automotive division, while within the
construction and energy division, sales of
transformers increased 30.7% and industrial
metals were up 19.6%.
Operating income of Grupo Condumex was
$1.574 billion pesos for the past 12 months, a
12.8% increase compared to 2009. EBITDA for
the year was $1.942 billion pesos, 8.0% above
the EBITDA for the prior year. The results were
attributed to solid performance of sales volume,
as well as a reduction in costs and expenses
throughout the divisions of the company.
15
ANNUAL REPORT 2010 •
Generating value
1515
Please note that the mining business, which
was spun-off, used to be reported within Grupo
Condumex. The transaction transferred to Minera
Frisco, S.A.B. de C.V. six mining units that
produce gold, silver, copper, zinc and lead.
Capital expenditures during the year were about
$561 million pesos, mainly for the maintenance
programs of industrial assets.
12.8%
Operating Income grew
compared with 2009.
16
17
ANNUAL REPORT 2010 •
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17
Carso Infraestructura y Construcción has its
businesses grouped in five sectors: Fabrication
and Services for the Oil and Chemical
Industries (Swecomex, Servicios Integrales GSM),
Infrastructure Projects (CILSA), Ducts Installation
(CICSA), Civil Construction (Grupo PC Constructores)
and Housing Development (Urvitec).
infrastructure
division
construction
and
$11.837
billion pesos in 2010.
Annual Revenues of
Carso Infraestructura y
Construcción reached:
12,177
11,837
SALES
(million pesos)
• Operating Margin
• EBITDA Margin
10.5%
8.1%
18
CARSO INFRAESTRUCTURA
Y CONSTRUCCIÓN
Annual revenues of Carso Infraestructura y
Construcción were $11.837 billion pesos, 2.8%
less than 2009.
On the operating front, profits were $959 million
pesos, while EBITDA was $1.238 billion pesos,
decreases of 9.5% and 5.3%, respectively.
As a result, net income of the controlling interest
went from $705 million pesos in 2009 to $485
million pesos in 2010.
It is important to note that the results mentioned
do not include operations of Cilsa Panamá, S.A.,
a subsidiary of Carso Infraestructura y Construc-
ción, due to an agreement reached on November
30, 2010 regarding the sale of the entirety of its
shares to Ideal Panamá, S.A.
Meanwhile, total assets of Carso Infraestructura y
Construcción were $17.038 billion pesos at the
close of the year, representing a 16.3% increase
compared to the close of 2009. Shareholder
equity rose 8.8% from $9.302 billion pesos in
2009 to $10.121 billion pesos in 2010.
The consolidated financial situation of Carso
Infraestructura y Construcción at the close
of 2010 included total debt of $2.589 billion
pesos and cash and short-term investments of
$704 million pesos, resulting in a net debt
of $1.885 billion pesos. This compares to a
net cash position of $290 million pesos at the
19
ANNUAL REPORT 2010 •
Generating value
1919
close of 2009. The increase of net debt of Carso
Infraestructura y Construcción is mainly due to
investments related to the construction of the
Jack-Up Independencia 1.
At the close of 2010, the backlog of Carso In-
fraestructura y Construcción was $23.546 billion
pesos, a 12.0% increase from the same period
last year.
Investments in fixed assets for Carso Infraestruc-
tura y Construcción for 2010 were $3.109 billion
pesos, of which more than 80% went to the Jack-
Up Independencia 1, and the rest was allocated
for the acquisition of heavy construction and
production machinery and equipment.
Fabrication and Services for the Oil and
Chemical Industries
This division had revenues of $2.955 billion pe-
sos in 2010, a 23.8% decrease compared to the
prior year. Operating income and EBITDA were
$247 million and $380 million pesos, a decrease
of 38.4% and 23.5%, respectively.
At the close of the year, the backlog for this divi-
sion was $6.052 billion pesos for projects to be
carried out in 2011 and 2012.
Infrastructure Projects
Total sales of CICSA infrastructure projects were
$3.658 billion pesos at the close of 2010, a
2.6% increase. Operating income and EBITDA
were $268 million and $298 million pesos,
respectively, increases of 10.2% and 15.5%
compared to 2009.
Revenue increases for the period were due mainly
to an increase in the number of projects. Im-
portant projects that were awarded to CILSA in
2010 include: the Mitla-Tehuantepec highway
in the state of Oaxaca, the FARAC II Libramiento
Mazatlán interstate highway, the expansion of
the Tenango-Ixtapan de la Sal highway and the
Atotonilco Residual Water Treatment Plant.
At the close of 2010, this division had a backlog
of about $13.780 billion pesos, of which 36.0%
is to be completed in 2011 and the rest between
2012 and 2013.
8.8%
Shareholder Equity rose
8.8% from $9.302 billion pesos in
2009 to $10.121 billion pesos in 2010.
20
Ducts Installation
The division of ducts installation reported rev-
enues of $2.978 billion pesos, a 5.7% increase
for 2010. Operating income was $284 million
pesos, an increase of 61.4% compared to the
prior year and a 3.2 percentage point expansion
in the margin to 9.5% of sales. Similarly, EBITDA
increased 45.7% to $325 million pesos.
The revenue increase was constant throughout
the year thanks to the conclusion of projects such
as the Monterrey Aqueduct and the Conejos-
Médanos de Chihuahua Aqueduct, as well as
advances of 87% and 75%, respectively, in the
Cactus-Samaria gas ducts and the installation of
video cameras for the “Ciudad Segura” project in
Mexico City. Additionally, the division began the
projects to install gas ducts and commercialize
natural gas.
At the close of the year, this division had con-
tracted projects of $1.054 billion pesos.
Civil Construction
Grupo PC Constructores reported annual sales of
$1.862 billion pesos in 2010, a solid growth of
81.3% compared to 2009. Operating profit and
EBITDA also showed outstanding results at $113
million and $121 million pesos, increases of
156.8% and 168.8%, respectively, and expan-
sion in margins of 1.8 and 2.1 percentage points.
The results were due to more completed proj-
ects compared to the prior year, including: Plaza
Mariana in Mexico City, stations of the Línea 12
of the Mexico City subway, the Operations Center
for the Federal Police, the Huimanguillo Peniten-
tiary, the Ciudad Segura C-4 building, shopping
malls in Villahermosa and San Luis Potosi and
two Star Médica hospitals.
21
ANNUAL REPORT 2010 •
Generating value
21
Housing Division
Accumulated revenue of the housing division for
2010 was $756 million pesos, a 22.9% decrease
compared to the same period last year. Operating
profit and EBITDA decreased 79.6% and 71.3%,
respectively.
The decrease in revenue in this division was
largely due to delays in the permit process in
developments that have been well received and
cutbacks in housing construction according to
local conditions.
23.546
At the close of 2010, the backlog of
Carso Infraestructura y
Construcción
was:
billion pesos.
22
MINERA FRISCO
S.A.B. DE C.V.
With more than 80 years in the industry,
Minera Frisco is dedicated to the exploration
and exploitation of mineral deposits, as well as
the development of metallurgic research. The
company is currently focused primarily on the
search for precious metals.
In 2010, sales at Minera Frisco were $7.141
billion pesos, a solid growth of 59.3% compared
to the same period of the prior year. This was the
result of an increase in production volume as well
as an increase in metals prices.
Similarly, operating income grew 70.1% from
$1.904 billion pesos in 2009 to $3.238 billion
pesos in 2010, with a margin of 45.3% over sales.
EBITDA increased 68.7%, with a 3.5 percentage
point expansion in EBITDA margin.
At the close of the year, CAPEX for Minera Frisco
was $3.143 billion pesos, which was allocated
to increase exploration in several mining reserves
that the company has maintained for several
years in which new operations are beginning.
In April of 2010, the expansion of the “El
Coronel” mine was completed. Throughout the
year the company continued with the installation
of new projects in “San Felipe,” “Concheño,”
“Minera Tayahua,” and the expansions in “San
Francisco del Oro” and “Asientos.” These
projects are expected to be completed in the
second half of 2011, with the exception of the
copper-zinc project of Minera Tayahua, which is
planned for the second half of 2012. It should
also be noted that Minera Frisco reached an
agreement in April 2011 to purchase 39.2% of
Minera Tayahua.
Exploration also continued in the mining lots
with the highest geological expectations, which
are: Santa Fe, Tetela, Lampazos, Guanacevi,
Fortuna, Cerro Gordo, El Ranchito, Parralense,
El Jordán, Noche Buena Ale, Noche Buena
Coronel, Los Federicos, Taita Las Mercedes and
Sagrado Corazón.
discontinued
operations
With the goal of strengthening its participation
in strategic industries, toward the end of 2010
Grupo Carso spun-off its divisions to create
two new public companies: Minera Frisco and
Inmuebles Carso.
23
ANNUAL REPORT 2010 •
Generating value
23
Regarding social responsibility and sustainability,
Minera Real de Ángeles, a subsidiary of
Minera Frisco, S.A.B. de C.V., obtained in
March recognition from Cemefi as a Socially
Responsible Company.
Minera Frisco contributes through biodiversity
conservation and with production needs
and socioeconomic development through its
Management Unit for Wildlife Conservation
(UMA) “San Francisco del Oro Reserve” in
the municipality of San Francisco del Oro
in Chihuahua.
INMUEBLES CARSO
S.A.B. de C.V.
Inmuebles Carso was created as a new
investment option for the Mexican real estate
market. The company has a diversified portfolio
of assets, including: shopping malls and retail
space, office space, hospitals, educational
centers, the real estate of Sanborns restaurants
and Sears stores, and the mixed-use Plaza
Carso complex.
Sales of Imuebles Carso increased 13.5% in
the year to $4.249 billion pesos at the close of
December 2010. This was due to revenue from
rent at shopping malls, as well as the sale of
retail space and apartments in the Plaza Carso
development.
Operating profit and EBITDA were $1.465 billion
and $1.762 billion pesos, increases of 34.0%
and 29.9%, respectively. Operating margin grew
a solid 5.3 percentage points from 29.2% to
34.5% of sales.
Operating profit and the improvement in margin
is mainly due to the development of Plaza Carso.
Sincerely,
José Humberto Gutiérrez-Olvera Zubizarreta
CEO
2424
Board
Members
Position*
Years as Board
Member**
Type of Board
Member***
Carlos Slim Domit
COB – Grupo Carso
COB and CEO – Grupo Sanborns
COB – Telmex Internacional
COB – Teléfonos de México
Twenty Patrimonial
Related
Rubén Aguilar Monteverde
Member of National Advisory Board –
Banco Nacional de México, S.A.
Six Independent
Antonio Cosío Ariño
CEO – Cía. Industrial de Tepeji del Río
Twenty Independent
Arturo Elías Ayub
Director of Strategical Alliances, Communication and
Institutional Relations – Teléfonos de México
CEO – Fundación Telmex
Thirteen Related
Claudio X. González Laporte
COB – Kimberly Clark de México
Twenty Independent
José Humberto Gutiérrez
Olvera Zubizarreta
CEO – Grupo Carso
COB – Minera Frisco
COB and CEO – Grupo Condumex
Twenty Related
Daniel Hajj Aboumrad
CEO – América Móvil
Sixteen Related
David Ibarra Muñoz
CEO – Despacho David Ibarra Muñoz
Nine Related
Rafael Moisés Kalach Mizrahi
COB and CEO – Grupo Kaltex
Seventeen Independent
José Kuri Harfush
COB – Janel
Twenty-one Independent
Juan Antonio Pérez Simón
COB – Sanborn Hermanos
Vice Chairman – Teléfonos de México
Twenty-one Independent
Fernando Senderos Mestre
COB – Grupo Kuo
COB – Dine
Four Independent
Patrick Slim Domit
Vice Chairman – Grupo Carso
COB – América Móvil
Director of Retail – Teléfonos de México
COB – Grupo Telvista
COB Sears Operadora México
Fifteen Patrimonial
Related
Marco Antonio Slim Domit
COB and CEO – Grupo Financiero Inbursa
COB – Inversora Bursátil
COB – Seguros Inbursa
Vice Chairman – Impulsora del Desarrollo
y el Empleo en América Latina
Twenty Patrimonial
Related
Fernando Solana Morales
CEO – Solana y Asociados, S.C.
Six Independent
Alternate Board Members
Eduardo Valdés Acra
Vice Chairman – Grupo Financiero Inbursa
COB – Banco Inbursa
CEO – Inversora Bursátil
Nineteen Related
Julio Gutiérrez Trujillo
Business Consultant
Six Independent
Antonio Cosío Pando
General Manager – Cía. Industrial de Tepeji del Río
Nine Independent
Fernando G. Chico Pardo
CEO – Promecap, S.C.
Twenty-one Related
Alfonso Salem Slim
Vice Chairman – Impulsora del Desarrollo
y el Empleo en América Latina
COB –Inmuebles Carso
Ten Patrimonial
Related
Antonio Gómez García
CEO – Carso Infraestructura y Construcción
Seven Related
Carlos Hajj Aboumrad
CEO – Sears Roebuck de México
Thirteen Patrimonial
Related
Ignacio Cobo González
COB– Grupo Calinda
Nine Independent
Alejandro Aboumrad Gabriel
COB– Grupo Proa
Twenty Related
Luis Hernández García
CEO – Cigatam
Four Independent
Treasurer
Quintín Humberto Botas Hernández
Comptroller – Grupo Condumex
Eight
Secretary
Sergio F. Medina Noriega
Legal Director – Teléfonos de México
Twenty-one
Pro-secretary
Alejandro Archundia Becerra
Legal General Manager – Grupo Condumex
Nine
* Based on board members information.
** Years as board member are considered since 1990, year of listing on the Mexican Stock Exchange.
*** Based on board members information.
Board of Directors
25
ANNUAL REPORT 2010 •
Generating value
Corporate and auditing practices committee report
José Kuri Harfush
Chairman
Antonio Cosío Ariño
Claudio X. González Laporte
Rafael Moisés Kalach Mizrahi
Annual Report of the Corporate and Auditing Practices Committee of Grupo Carso, S.A.B. de C.V.
To the Board of Directors:
As the chairman of the Corporate and Auditing Practices Committee of Grupo Carso, S.A.B. de C.V. (the “Committee”), I submit
the following annual report of activities for the 2010 fiscal year.
Corporate Practices, Evaluation and Compensation
The director general of Grupo Carso, S.A.B. de C.V. (the “Company”) and the executives of the corporate entities controlled by the
Company, satisfactorily complied with the stated goals and with their responsibilities.
The transactions with affiliates submitted to the consideration of the Committee were approved. Among them are the following significant
transactions, each of which represents more than 1% of the consolidated assets of the Company, executed successively:
1.Teléfonos de México, S.A.B. de C.V., for installation services of the external plant, optical fiber and network design, including the
sale of copper and fiber optic telephone cable; call center services, telephone installation services and sale of telephone articles;
food service and commission for the sale of junk, salvaging and substitution of automobiles for fleets; Embratel Participacaoes,
S.A., for the sale of cable and fiber optics and the construction of ducts and telephone installation in Brazil; Ideal Panamá for
construction services of the Bajo de Mina hydroelectric plant in Panamá; Constructora Mexicana de Infraestructura Subterránea,
S.A. de C.V. for infrastructure of the Emisor Oriente tunnel project; Inmuebles General, S.A. de C.V. for the construction of
housing, the Presa Falcón shopping mall, Museo Soumaya and Teatro Cervantes; the sale of Selmec real estate and the sale
of marble for the flooring of Plaza Carso, and Delphi Packard Electric Systems for the sale of harness, cable and automotive
engineering services.
All transactions with related parties were reviewed by Galaz, Yamazaki, Ruiz Urquiza, S.C., and a summary of them is contained in
a note of the certified financial statements of Grupo Carso, S.A.B. de C.V. and subsidiaries at December 31, 2010.
The director general of Grupo Carso, S.A.B. de C.V. receives no remuneration for his activity. The Company does not have
employees, and as to remuneration of the relevant executives of the companies controlled by the Company, we verified that they
complied with the policies approved by the Board of Directors.
The Board of Directors of the Company granted no exemption to any members of the Board, relevant executives or anyone in
an executive position to take advantage of business opportunities, either for himself or for third parties, that correspond to the
Company or to the corporate entities it controls or in which it has a significant influence. The Committee, on its part, granted no
exemptions for the operations referred to in paragraph c), Section III, Article 28 of the Securities Market Law.
Auditing Functions
The internal control and internal auditing system of Grupo Carso, S.A.B. de C.V. and of the corporate entities controlled by it are
satisfactory and comply with the guidelines approved by the Board of Directors, as observed in the information provided to the
Committee by management of the Company and in the external audit certification.
We have no knowledge of any relevant default on the guidelines and operation and accounting registry policies of the Company or
of the corporate entities controlled by it and, consequently, no preventive or corrective measures were implemented.
Grupo Carso, S.A.B. de C.V. and Subsidiaries
2626
The performance of the Galaz, Yamazaki, Ruiz Urquiza, S.C. and Camacho, Camacho y Asociados, S.C. accounting firms, the
corporate entities that conducted the audit of the financial statements of Grupo Carso, S.A.B. de C.V. and subsidiaries at December
31, 2010, and of the external auditor in charge of said audit, was satisfactory and the objectives agreed at the time they were
retained were achieved. In addition, according to the information provided by said firms to the management of the Company, their
fees for the external audit represented a percentage less than 20% of their total revenue.
On the other hand, approval was given for Galaz, Yamazaki, Ruiz Urquiza, S.C. to provide to Grupo Carso, S.A.B. de C.V. and to
some of its subsidiaries the following additional services: limited review of financial statements and the elaboration of pro-forma
balances at June 30, 2010, which the Company required for a legal separation; limited review of the financial statements of Sears
Roebuck de México at September 30, 2010, which the subsidiary required to emit securities certificates for its legal separation;
preparation of the fiscal annexes that were modified in 2010, and work done for the fiscal consolidation related to the changes in
relevant fiscal regulation as of the 2010 fiscal year.
As a result of the review of the financial statements of Grupo Carso, S.A.B. de C.V. and subsidiaries at December 31, 2010, no
adjustments were required to the audited figures contained in said financial statements.
Pursuant to the information provided to us by the management of the Company and the meetings we held with the external
and internal auditors without the presence of the Company’s officers, and to the best of our knowledge, there were no relevant
comments from shareholders, members of the Board, relevant executives, employees or, in general, any third party, related to
the accounting, internal control and matters related to the internal or external audit, nor claims by said persons regarding any
irregularity in the management of the Company.
During the period to which this report refers, we verified that the resolutions adopted by shareholders’ meetings and the Board of
Directors of the Company were duly complied with. In addition, according to the information provided to us by the management
of the Company, we verified that it has controls that allow for determining that it complies with provisions applicable to the
stock market and that the legal department conducts a review at least once a year to verify said compliance, and there were no
comments in this respect or any adverse change in the legal situation.
With respect to financial information prepared by the Company and filed with the Bolsa Mexicana de Valores (Mexican Stock
Exchange) and the Comisión Nacional Bancaria y de Valores (National Banking and Securities Commission), we verified that
the information was prepared under the same principles, criteria and accounting practices with which the annual information
is prepared.
Finance and Planning Functions
During the 2010 fiscal year, the Company and some of the entities under its control effected significant investments. In this regard,
we verified that the financing was carried out in accordance with the strategic plan of the Company over the medium and long
terms. In addition, we evaluated from time to time that the strategic position of the Company conformed to said plan. We also
reviewed and evaluated the budget for the 2010
fiscal year together with financial projects that were taken into account for its preparation, which include the principal investments
and financial transactions of the Company, which we consider are viable and congruent with investment and financing policies and
with the strategic vision of the Company.
For the preparation of this report, the Committee for Corporate and Auditing Practices evaluated information provided by
the director general of the Company, the relevant executives of the corporate persons controlled by the Company and by the
external auditor.
The Chairman
José Kuri Harfush
27
ANNUAL REPORT 2010 •
Generating value
27
Independent auditors’ report
To the Board of Directors and Stockholders of Grupo Carso, S.A.B. de C.V.
We have audited the accompanying consolidated balance sheets of Grupo Carso, S.A.B. de C.V. and subsidiaries (the “Company”)
as of December 31, 2010 and 2009, and the related consolidated statements of income, changes in stockholders’ equity and cash
flows 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.
We conducted our audits in accordance with auditing standards generally accepted in Mexico. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement
and that they are prepared in accordance with Mexican Financial Reporting Standards. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the financial
reporting standards used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
As mentioned in Note 3, beginning January 1, 2010, the Company adopted Mexican Financial Reporting Standard C-1, Cash and
Cash Equivalents and the 2010 Improvements to Mexican Financial Reporting Standards issued by the Mexican Board for the
Research and Development of Financial Information Standards.
As mentioned in Note 1.b, effective on December 31, 2010, the Company spun off its real estate and mining resulting in the
formation of: i) Inmuebles Carso, S.A.B. de C.V., which is a stock-exchange traded, joint-stock company of variable capital that
will own, directly or indirectly through its subsidiaries, certain real estate properties that were previously held by Grupo Carso,
S.A.B. de C.V. and its subsidiaries, and ii) Minera Frisco, S.A.B. de C.V., which is a stock-exchange traded, joint-stock company
of variable capital that will own, directly or indirectly through its subsidiaries, the mining assets previously held by Grupo Carso,
S.A.B. de C.V. and its subsidiaries.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Grupo Carso, S.A.B. de C.V. and subsidiaries December 31, 2010 and 2009, and the related consolidated statements of
income, changes in stockholders’ equity and cash flows for the years then ended, in conformity with Mexican Financial Reporting
Standards.
The accompanying consolidated financial statements have been translated into English for the convenience of users.
Galaz, Yamazaki, Ruiz Urquiza, S.C.
Member of Deloitte Touche Tohmatsu Limited
C.P.C. Walter Fraschetto
March 17, 2011
Grupo Carso, S.A.B. de C.V. and Subsidiaries
28
Consolidated balance sheets
As of December 31, 2010 and 2009
(In thousands of Mexican pesos)
See accompanying notes to consolidated financial statements.
Grupo Carso, S.A.B. de C.V. and Subsidiaries
ASSETS 2010 2009
Current assets:
Cash and cash equivalents $ 2,124,418 $ 3,554,663
Investments in securities 1,044,667 1,186,114
Notes and accounts receivable:
Trade (net of allowances for doubtful accounts of $ 450,295
in 2010 and $470,006 in 2009) 13,942,177 13,980,904
Other 2,206,455 1,664,903
Due from related parties 1,562,207 3,673,491
17,710,839 19,319,298
Derivative financial instruments 412,290 736,706
Inventories – net 14,241,968 12,689,026
Prepaid expenses 174,439 490,090
Discontinued operations 947,054 5,172,608
Total current assets 36,655,675 43,148,505
Long-term receivables 12,591,441 103,612
Property, machinery and equipment:
Buildings and leasehold improvements 11,316,474 11,492,977
Machinery and equipment 13,260,734 13,552,610
Vehicles 982,229 897,116
Furniture and equipment 2,921,234 2,781,729
Computers 1,386,313 1,468,529
29,866,984 30,192,961
Accumulated depreciation (17,138,485) (16,892,796)
12,728,499 13,300,165
Land 3,028,770 3,321,852
Construction in progress 4,500,466 1,690,744
20,257,735 18,312,761
Real estate inventories 667,131 643,116
Investment in shares of associated companies and others 9,035,467 8,493,825
Net asset projected for labor obligations 457,647 375,538
Deferred income tax asset from tax loss carry-forwards 199,266 131,096
Other assets – net 899,776 720,919
Long-term assets from discontinued operations 392,360 25,748,154
Total $ 81,156,498 $ 97,677,526
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Borrowings from financial institutions $ 17,158,734 $ 3,913,439
Current portion of long-term debt 7,449,346 48,278
Trade accounts payable 6,903,805 5,770,511
Direct employee benefits 593,055 521,503
Accrued expenses and taxes other than income taxes 3,249,276 4,981,747
Derivative financial instruments 550,140 49,046
Advances from customers 1,496,373 1,202,110
Due to related parties 1,941,484 906,194
Current liabilities from discontinued operations 1,024,879 5,707,110
Total current liabilities 40,367,092 23,099,938
Long-term debt 141,564 7,987,657
Deferred income taxes 1,893,346 2,545,739
Deferred statutory employee profit sharing 48,933 43,249
Other long-term liabilities 71,680 9,148
Deferred income – 37,602
Long-term liabilities from discontinued operations 15,222 4,256,939
Total liabilities 42,537,837 37,980,272
Stockholders’ equity:
Capital stock 4,282,349 6,605,928
Net share placement premium 1,388,378 2,160,658
Additional paid-in capital 39,900 39,900
Retained earnings 25,337,611 41,243,391
Insufficiency in restated stockholders’ equity 605,899 1,068,710
Valuation of derivative financial instruments (64,123) (345,525)
Controlling interest 31,590,014 50,773,062
Non-controlling interest 7,028,647 8,924,192
Total stockholders’ equity 38,618,661 59,697,254
Total $ 81,156,498 $ 97,677,526
29
ANNUAL REPORT 2010 •
Generating value
For the years ended December 31, 2010 and 2009
(In thousands of Mexican pesos, except per share information)
See accompanying notes to consolidated financial statements.
Consolidated statements of income
Grupo Carso, S.A.B. de C.V. and Subsidiaries
30
Consolidated statements of changes in stockholders’ equity
For the years ended December 31, 2010 and 2009
(In thousands of Mexican pesos)
Translation
Net share Additional effects of Valuation of Total
placement paid-in Retained foreign financial Controlling Non-controlling stockholders’
Capital stock premium capital earnings subsidiaries instruments interest interest equity
Consolidated balances as of January 1, 2009 $ 6,606,995 $ 2,160,658 $ 39,900 $ 36,568,221 $ 872,285 $ (403,095) $ 45,844,964 $ 8,453,884 $ 54,298,848
Repurchase of capital stock (1,067) – – (93,757) – – (94,824) – (94,824)
Excess of cost over book value in acquisition of non-controlling interest in subsidiary – – – (68,611) – – (68,611) 12,175 (56,436)
Dividends paid (including payments to non-controlling interest of subsidiaries) – – – (1,395,891) – – (1,395,891) (443,459) (1,839,350)
Balances before comprehensive income 6,605,928 2,160,658 39,900 35,009,962 872,285 (403,095) 44,285,638 8,022,600 52,308,238
Consolidated net income – – – 6,390,360 – – 6,390,360 949,053 7,339,413
Translation effect of foreign subsidiaries – – – – 196,425 – 196,425 34,901 231,326
Valuation of financial instruments – – – – – 57,570 57,570 (548) 57,022
Effect of early adoption of INIF 14 – – – (156,931) – – (156,931) (81,814) (238,745)
Comprehensive income – – – 6,233,429 196,425 57,570 6,487,424 901,592 7,389,016
Consolidated balances as of December 31, 2009 6,605,928 2,160,658 39,900 41,243,391 1,068,710 (345,525) 50,773,062 8,924,192 59,697,254
Repurchase of capital stock (8,082) – – (968,132) – – (976,214) – (976,214)
Effects of spin offs (2,315,497) (772,280) – (20,492,160) – 6,498,987 (17,080,950) (1,828,834) (18,909,784)
Excess of book value over cost in acquisition of non-controlling interest in subsidiary – – – 15,057 – – 15,057 (15,582) (525)
Dividends paid (including payments to non-controlling interest of subsidiaries) – – – (1,524,609) – – (1,524,609) (133,158) (1,657,767)
Balances before comprehensive income 4,282,349 1,388,378 39,900 18,273,547 1,068,710 6,153,462 31,206,346 6,946,618 38,152,964
Consolidated net income – – – 7,064,064 – – 7,064,064 475,780 7,539,844
Translation effect of foreign subsidiaries – – – – (462,811) – (462,811) (43,904) (506,715)
Valuation of financial instruments – – – – – (6,217,585) (6,217,585) (349,847) (6,567,432)
Comprehensive income – – – 7,064,064 (462,811) (6,217,585) 383,668 82,029 465,697
Consolidated balances as of December 31, 2010 $ 4,282,349 $ 1,388,378 $ 39,900 $ 25,337,611 $ 605,899 $ (64,123) $ 31,590,014 $ 7,028,647 $ 38,618,661
See accompanying notes to consolidated financial statements.
Grupo Carso, S.A.B. de C.V. and Subsidiaries
ANNUAL REPORT 2010 •
Generating value
31
Consolidated statements of changes in stockholders’ equity
Translation
Net share Additional effects of Valuation of Total
placement paid-in Retained foreign financial Controlling Non-controlling stockholders’
Capital stock premium capital earnings subsidiaries instruments interest interest equity
Consolidated balances as of January 1, 2009 $ 6,606,995 $ 2,160,658 $ 39,900 $ 36,568,221 $ 872,285 $ (403,095) $ 45,844,964 $ 8,453,884 $ 54,298,848
Repurchase of capital stock (1,067) – – (93,757) – – (94,824) – (94,824)
Excess of cost over book value in acquisition of non-controlling interest in subsidiary – – – (68,611) – – (68,611) 12,175 (56,436)
Dividends paid (including payments to non-controlling interest of subsidiaries) – – – (1,395,891) – – (1,395,891) (443,459) (1,839,350)
Balances before comprehensive income 6,605,928 2,160,658 39,900 35,009,962 872,285 (403,095) 44,285,638 8,022,600 52,308,238
Consolidated net income – – – 6,390,360 – – 6,390,360 949,053 7,339,413
Translation effect of foreign subsidiaries – – – – 196,425 – 196,425 34,901 231,326
Valuation of financial instruments – – – – – 57,570 57,570 (548) 57,022
Effect of early adoption of INIF 14 – – – (156,931) – – (156,931) (81,814) (238,745)
Comprehensive income – – – 6,233,429 196,425 57,570 6,487,424 901,592 7,389,016
Consolidated balances as of December 31, 2009 6,605,928 2,160,658 39,900 41,243,391 1,068,710 (345,525) 50,773,062 8,924,192 59,697,254
Repurchase of capital stock (8,082) – – (968,132) – – (976,214) – (976,214)
Effects of spin offs (2,315,497) (772,280) – (20,492,160) – 6,498,987 (17,080,950) (1,828,834) (18,909,784)
Excess of book value over cost in acquisition of non-controlling interest in subsidiary – – – 15,057 – – 15,057 (15,582) (525)
Dividends paid (including payments to non-controlling interest of subsidiaries) – – – (1,524,609) – – (1,524,609) (133,158) (1,657,767)
Balances before comprehensive income 4,282,349 1,388,378 39,900 18,273,547 1,068,710 6,153,462 31,206,346 6,946,618 38,152,964
Consolidated net income – – – 7,064,064 – – 7,064,064 475,780 7,539,844
Translation effect of foreign subsidiaries – – – – (462,811) – (462,811) (43,904) (506,715)
Valuation of financial instruments – – – – – (6,217,585) (6,217,585) (349,847) (6,567,432)
Comprehensive income – – – 7,064,064 (462,811) (6,217,585) 383,668 82,029 465,697
Consolidated balances as of December 31, 2010 $ 4,282,349 $ 1,388,378 $ 39,900 $ 25,337,611 $ 605,899 $ (64,123) $ 31,590,014 $ 7,028,647 $ 38,618,661
32
Consolidated statement of cash flows
For the years ended December 31, 2010 and 2009
(In thousands of Mexican pesos)
2010 2009
Operating activities:
Income from the continuing operations before income taxes $ 6,866,611 $ 6,729,654
Items related to investing activities:
Depreciation and amortization 1,316,476 1,334,045
Gain from sale of subsidiary shares (42,489) (59,798)
Gain on sale of property, machinery and equipment (139,044) (58,247)
Impairment of long-lived assets 80,411 9,273
Equity in income of associated companies (1,034,536) (1,058,207)
Deferred statutory employee profit sharing 205,790 161,525
Interest income (690,507) (396,145)
Items related to financing activities:
Interest expense 1,075,334 857,495
Exchange loss from financings (347,187) (237,346)
Income from discontinued operations 2,618,675 2,385,777
Items with no impact on cash:
Estimates and accruals (83,868) 1,066,165
9,825,666 10,734,191
(Increase) decrease in:
Notes and accounts receivable 55,565 (477,500)
Inventories (385,834) 1,151,348
Prepaid expenses 315,651 (353,254)
Other assets (2,337,770) 7,998
Discontinued operations 4,225,554 2,394,109
Increase (decrease) in:
Trade accounts payable 1,133,294 (578,883)
Direct employee benefits (81,576) (444,339)
Accrued expenses and taxes other than income taxes (2,142,856) 217,353
Income taxes paid (2,368,277) (4,015,682)
Advances from customers 294,263 (571,492)
Due to related parties 3,146,574 1,954,435
Derivative financial instruments 825,510 1,214,982
Other liabilities (57,410) (33)
Discontinued operations (4,682,231) (4,706,383)
(2,059,543) (4,207,341)
Net cash provided by operating activities 7,766,123 6,526,850
Investing activities:
Sale of investments in securities available, net 141,447 (908,502)
Purchases of property, machinery and equipment (3,948,796) (4,682,364)
Sales of property, machinery and equipment 1,008,783 520,607
(Purchase) sale of real estate inventories (24,015) 116,308
Investments in concessions – (235,557)
Sale of subsidiary, net of cash 42,489 6,054,565
Purchase of shares of associated companies – (5,395,308)
Dividends received 744,290 862,227
Decrease in minority interest in subsidiary (525) (56,436)
Long-term receivables (12,487,829) (107,516)
Effects of spin offs (4,363,139) –
Interest received 654,578 396,145
Other (130,491) (39,117)
Net cash used in investing activities (18,363,208) (3,474,948)
Cash to (obtain from) apply to financing activities (10,597,085) 3,051,902
Financing activities:
Loans received 20,409,230 6,728,180
Repayment of loans (7,131,282) (7,074,811)
Interest paid (1,048,158) (832,492)
Dividends paid (including payments to non-controlling interest of subsidiaries) (1,657,767) (1,839,350)
Repurchase of capital stock (976,214) (94,824)
Net cash provided by (used in) financing activities 9,595,809 (3,113,297)
Net increase (decrease) in cash and cash equivalents (1,001,276) (61,395)
Adjustment to cash flows due to exchange rate fluctuations (428,969) 231,326
Cash and cash equivalents at beginning of year 3,554,663 3,384,732
Cash and cash equivalents at end of year $ 2,124,418 $ 3,554,663
See accompanying notes to consolidated financial statements.
Grupo Carso, S.A.B. de C.V. and Subsidiaries
33
ANNUAL REPORT 2010 •
Generating value
33
For the years ended December 31, 2010 and 2009
(In thousands of Mexican pesos)
1. ACTIVITIES AND SIGNIFICANT EVENTS
a. Activities - The consolidated financial statements include the financial statements of Grupo Carso, S.A.B. de C.V. and Subsidiaries
(“the Company” or “Grupo Carso”) as a single reporting entity.
The principal subsidiaries and associated companies and their activities are as follows:
Ownership percentage
Subsidiaries 2010 2009 Activity
Carso Infraestructura y Construcción, 65.76 65.72 Performance of several branches of engineering, including: oil well
S.A.B. de C.V. and Subsidiaries drilling and oil rig construction projects and all types of civil,
(“CICSA”) industrial and electromechanical projects and facilities; and
construction maintenance of highways, water pipes, water treatment
plants and hydroelectric stations; housing construction; manufacturing
and selling of cold-formed carbon steel tubes; and installation of
telecommunication and telephone networks.
(4)
Grupo Condumex, S.A. de C.V. 99.57 99.57 Manufacture and sale of products used by the construction, automotive,
and Subsidiaries (“Condumex”) energy and telecommunications industries; mining metallurgical
industry until December 2010.
(2) (3)
Grupo Sanborns, S.A. de C.V. 99.98 99.98 Operation of department stores, gift shops, record stores, restaurants,
and Subsidiaries (“Sanborns”) cafeterias and management of shopping malls through the following
commercial brands, principally: Sanborns, Sears, Saks Fifth Avenue
and Mix-up.
Industrial Cri, S.A. de C.V. 100.00 100.00 Holding of shares of companies in the following sectors: installation and
and Subsidiaries (“Industrial Cri”) maintenance of telephone stands, manufacturing all types of candies
and manufacture of bicycles.
Infraestructura y Transportes 16.75 16.75 Railroad transportation.
México, S.A. de C.V. (“ITM”)
Philip Morris México, S.A. de C.V. 20.00 20.00 Manufacture and sale of cigarettes.
(“Philip Morris”)
Elementia, S.A. de C.V. (“Elementia”) 46.00 49.00 Manufacture and sale of high technology products for the cement, concrete,
polyethylene, styrene, copper and aluminum production industries.
Notes to consolidated financial statements
Grupo Carso, S.A.B. de C.V. and Subsidiaries
34
b. Significant events
1. On December 31, 2010, the Company spun off its real estate and mining operations resulting in the formation of: i) Inmuebles
Carso, S.A.B. de C.V., which is a stock-exchange traded, joint-stock company of variable capital that will own, directly or
proprietor or indirectly through its subsidiaries, certain real estate properties that were previously held by Grupo Carso, S.A.B.
de C.V. and its subsidiaries, and ii) Minera Frisco, S.A.B. de C.V., which is a stock-exchange traded, joint-stock company of
variable capital that will own, directly or indirectly through its subsidiaries, the mining assets previously held by Grupo Carso,
S.A.B. de C.V. and its subsidiaries.
The balance sheets at December 31, 2010 and 2009 before and after the spin offs are summarized as follows:
December 2010
Grupo Carso Adjustments and Real State Mining Grupo Carso
(historical amounts) eliminations sector sector (after spin off)
Current assets:
Cash and cash equivalents $ 10,634,828 $ 112,065 $ (1,237,776) $ (6,340,032) $ 3,169,085
Notes and accounts receivable 21,808,972 2,074,451 (4,529,233) (1,643,351) 17,710,839
Derivative financial instruments 522,687 – (63,300) (47,097) 412,290
Inventories 15,301,959 214,564 (7,190) (1,267,365) 14,241,968
Prepaid expenses 210,797 (11,518) (14,551) (10,289) 174,439
Discontinued operations 409,386 537,668 – – 947,054
Total current assets 48,888,629 2,927,230 (5,852,050) (9,308,134) 36,655,675
Long-term receivables 95,912 12,499,329 (3,800) – 12,591,441
Property, machinery and equipment 49,033,825 594,073 (23,791,793) (5,578,370) 20,257,735
Investment in shares of associated
companies and others 10,156,928 – (1,121,461) – 9,035,467
Other assets – net 4,693,422 2,766,582 (53,488) (5,182,696) 2,223,820
Long-term assets from
discontinued operations 275,284 117,076 – – 392,360
Total $ 113,144,000 $ 18,904,290 $ (30,822,592) $ (20,069,200) $ 81,156,498
Current liabilities:
Borrowings from financial institutions $ 20,967,478 $ 762,710 $ (4,454,739) $ (116,715) $ 17,158,734
Current portion of long-term debt 7,514,030 – (64,684) – 7,449,346
Trade accounts payable 7,208,302 106,992 (196,920) (214,569) 6,903,805
Accrued expenses and taxes other
than income taxes 11,124,702 2,399,640 (4,385,647) (1,308,367) 7,830,328
Discontinued operations 715,301 309,578 – – 1,024,879
Total current liabilities 47,529,813 3,578,920 (9,101,990) (1,639,651) 40,367,092
Long-term debt 2,807,226 12,499,330 (2,665,662) (12,499,330) 141,564
Other long-term liabilities 4,531,095 2,810,818 (1,127,554) (4,200,400) 2,013,959
Discontinued operations – 15,222 – – 15,222
Total liabilities 54,868,134 18,904,290 (12,895,206) (18,339,381) 42,537,837
Stockholders’ equity:
Controlling interest 48,670,964 – (16,719,158) (361,792) 31,590,014
Non-controlling interest 9,604,902 – (1,208,228) (1,368,027) 7,028,647
Total stockholders’ equity 58,275,866 – (17,927,386) (1,729,819) 38,618,661
Total $ 113,144,000 $ 18,904,290 $ (30,822,592) $ (20,069,200) $ 81,156,498
35
ANNUAL REPORT 2010 •
Generating value
35
December 2009
Grupo Carso Adjustments and Real State Mining Grupo Carso
(historical amounts) eliminations sector sector (after spin off)
Current assets:
Cash and cash equivalents $ 8,595,281 $ 108,662 $ (958,512) $ (3,004,654) $ 4,740,777
Notes and accounts receivable 18,522,069 5,418,385 (3,641,019) (980,137) 19,319,298
Derivative financial instruments 987,627 – (101,921) (149,000) 736,706
Inventories 14,544,836 (1,010,973) (317,168) (527,669) 12,689,026
Prepaid expenses 498,692 18,197 (25,104) (1,695) 490,090
Discontinued operations – (4,534,271) 5,043,724 4,663,155 5,172,608
Total current assets 43,148,505 – – – 43,148,505
Long-term receivables 107,628 – (4,016) – 103,612
Property, machinery and equipment 42,269,423 (405,023) (20,631,659) (2,919,980) 18,312,761
Investment in shares of associated
companies and others 9,640,862 – (1,147,037) – 8,493,825
Other assets – net 2,511,108 (191,116) (5,371) (443,952) 1,870,669
Long-term assets from
discontinued operations – 596,139 21,788,083 3,363,932 25,748,154
Total $ 97,677,526 $ – $ – $ – $ 97,677,526
Current liabilities:
Borrowings from financial
institutions $ 6,679,273 $ 3,222,579 $ (3,118,642) $ (2,869,771) $ 3,913,439
Current portion of long-term debt 72,278 – (24,000) – 48,278
Trade accounts payable 6,163,309 (75,133) (216,994) (100,671) 5,770,511
Accrued expenses and taxes other
than income taxes 10,185,078 1,289,056 (2,971,444) (842,090) 7,660,600
Discontinued operations – (4,436,502) 6,331,080 3,812,532 5,707,110
Total current liabilities 23,099,938 – – – 23,099,938
Long-term debt 10,756,414 – (2,768,757) – 7,987,657
Other long-term liabilities 4,123,920 (116,761) (1,204,789) (166,632) 2,635,738
Discontinued operations – 116,761 3,973,546 166,632 4,256,939
Total liabilities 37,980,272 – – – 37,980,272
Stockholders’ equity:
Controlling interest 50,773,062 – – – 50,773,062
Non-controlling interest 8,924,192 – – – 8,924,192
Total stockholders’ equity 59,697,254 – – – 59,697,254
Total $ 97,677,526 $ – $ – $ – $ 97,677,526
3636
Also the Company presents the income statements before and after the effects of the spin offs, which are integrated
as follows:
December 2010
Grupo Carso Adjustments and Real State Mining Grupo Carso
(historical amounts) eliminations sector sector (after spin-off)
Net sales $ 74,809,496 $ 777,114 $ (4,248,798) $ (7,141,703) $ 64,196,109
Cost of sales 51,111,969 539,204 (1,774,149) (3,452,236) 46,424,788
Gross profit 23,697,527 237,910 (2,474,649) (3,689,467) 17,771,321
Operating expenses 11,959,939 464,977 (1,010,052) (451,456) 10,963,408
Income from operations 11,737,588 (227,067) (1,464,597) (3,238,011) 6,807,913
Other (expenses) income - net (366,206) 132,638 (72,953) 200,178 (106,343)
Net comprehensive financing result (1,674,782) (56,627) 244,587 617,327 (869,495)
Equity in income of associated
companies and others 1,154,946 – (120,410) – 1,034,536
Income from continuing operations
before income taxes 10,851,546 (151,056) (1,413,373) (2,420,506) 6,866,611
Income taxes 2,915,657 (26,218) (212,558) (731,439) 1,945,442
Income from continuing operations 7,935,889 (124,838) (1,200,815) (1,689,067) 4,921,169
Income (loss) from
discontinued operations (70,347) 126,795 1,166,755 1,395,472 2,618,675
Consolidated net income $ 7,865,542 $ 1,957 $ (34,060) $ (293,595) $ 7,539,844
Controlling interest $ 7,064,064 $ – $ – $ – $ 7,064,064
Non-controlling interest 801,478 1,957 (34,060) (293,595) 475,780
$ 7,865,542 $ 1,957 $ (34,060) $ (293,595) $ 7,539,844
December 2009
Grupo Carso Adjustments and Real State Mining Grupo Carso
(historical amounts) eliminations sector sector (after spin-off)
Net sales $ 66,035,556 $ (1,122,140) $ (3,741,703) $ (4,483,960) $ 56,687,753
Cost of sales 45,816,901 (1,422,519) (1,796,716) (2,234,182) 40,363,484
Gross profit 20,218,655 300,379 (1,944,987) (2,249,778) 16,324,269
Operating expenses 11,145,049 243,748 (852,094) (345,939) 10,190,764
Income from operations 9,073,606 56,631 (1,092,893) (1,903,839) 6,133,505
Other (expenses) income - net (134,306) (16,926) (94,114) 116,588 (128,758)
Net comprehensive financing result (1,488,941) (13,977) 286,783 882,835 (333,300)
Equity in income of associated
companies and others 1,169,909 – (111,702) – 1,058,207
Income from continuing operations
before income taxes 8,620,268 25,728 (1,011,926) (904,416) 6,729,654
Income taxes 1,916,523 (4,032) 74,473 (210,946) 1,776,018
Income from continuing operations 6,703,745 29,760 (1,086,399) (693,470) 4,953,636
Income (loss) from
discontinued operations 635,668 (29,760) 1,086,399 693,470 2,385,777
Consolidated net income $ 7,339,413 $ – $ – $ – $ 7,339,413
Controlling interest $ 6,390,360 $ – $ – $ – $ 6,390,360
Non-controlling interest 949,053 – – – 949,053
$ 7,339,413 $ – $ – $ – $ 7,339,413
2. On March 31, 2009, Tenedora de Empresas de Materiales de Construcción, S.A. de C.V. (“Temaco”) (formerly Industrias
Nacobre, S.A. de C.V.), a subsidiary of the Company, sold 100% of shares of its subsidiary Tubos Flexibles, S.A. de C.V., a
company engaged in the manufacture and sale of PVC pipes, for consideration of $402,600. Such transaction generated
a gain of $203,308, which is presented in the caption discontinued operations - net in the accompanying consolidated
statements of income. (See Note 19)
3. On June 1, 2009, Temaco, subsidiary of the Company, sold to Elementia (formerly Mexalit, S.A.) 100% of the shares in
its subsidiaries engaged in the business of copper and aluminum, as well as those assets necessary for the operation of
such companies for consideration of $5,404,845. Such transaction generated a gain of $227,593, which is presented in
the caption discontinued operations - net in the accompanying consolidated statements of income. (See Note 19). At the
same time, Temaco acquired 49% of Elementia’s shares for consideration of $4,020,890. Net effect of fair value was for
$2,839,984, and therefore goodwill generated by the acquisition of net assets was for $1,180,906.
37
ANNUAL REPORT 2010 •
Generating value
In August 2010, the shareholders made a capital contribution in Elementia, however, Temaco did not participate in such
capital contribution, so its participation in Elementia was diluted by 3% to 46% at December 31, 2010. The income generated
by this dilution was $59,552, which was recorded as a credit to investments in associates reducing the goodwill.
4. On September 2009, CICSA concluded an agreement to acquire for consideration of US $30 million, 60% of Bronco Drilling
MX, S. de R.L. de C.V. (“Bronco MX”), a wholly owned subsidiary of Bronco Drilling Company, Inc. (“Bronco Drilling”) which
is engaged in the operation, equipment rent and maintenance and repair of drilling equipment used for oil and gas wells in
Mexico and Latin America. Additionally, CICSA acquired from Banco Inbursa S.A., commercial bank, a stock option (warrant)
for 5,440,770 shares of Bronco Drilling.
2. BASIS OF PRESENTATION
a. Explanation for translation into English - The accompanying consolidated financial statements have been translated from Spanish
into English for use outside of Mexico. These consolidated financial statements are presented on the basis of Mexican Financial
Reporting Standards (“MFRS” individually referrend to as or “NIFs”). Certain accounting practices applied by the Company that
conform with MFRS may not conform with accounting principles generally accepted in the country of use.
b. Monetary unit of the financial statements - The financial statements and notes as of December 31, 2010 and 2009 and for the
years then ended include balances and transactions denominated in Mexican pesos of different purchasing power.
c. Consolidation of financial statements - The consolidated financial statements include the financial statements of the holding
company and its subsidiaries presented as a single reporting entity. Significant intercompany balances and transactions have
therefore been eliminated from these consolidated financial statements.
d. Translation of financial statements of foreign subsidiaries - To consolidate financial statements of foreign subsidiaries, the
accounting policies of the foreign entity are converted to MFRS. Subsequently, if the functional currency of the foreign operation
is different from the currency in which transactions are recorded, the financial information is converted from the currency used
to record the transactions to the functional currency. Finally, if the functional and reporting currency are different, the financial
information is then converted from the functional to the reporting currency considering the following methodologies:
Foreign operations whose functional currency is the Mexican peso translate their financial statements prepared in the currency
in which transactions are recorded, using the following exchange rates: 1) the closing exchange rate in effect at the balance sheet
date for monetary assets and liabilities; 2) the historical exchange rate for non-monetary assets and liabilities and stockholders’
equity; and 3) the rate upon accrual in the statement of income for revenues, costs and expenses, except those arising from
non-monetary items, which are translated using the historical exchange rate for the related non-monetary item. Translation
effects are recorded in comprehensive financing result.
Foreign operations whose functional currency is different from the reporting currency translate their financial statements into
Mexican pesos using the following rates: 1) closing rates for assets and liabilities, 2) historical rates for capital and 3) the date of
accrual for revenues, costs and expenses. The effects of conversion are recorded in stockholders’ equity.
Inflationary economic environment - Foreign operations with a functional currency different from the local currency and the
reporting currency translate their financial statements from the currency in which transactions are recorded into the functional
currency using the following exchange rates: 1) the closing exchange rate in effect at the balance sheet date for monetary assets
and liabilities; 2) historical exchange rates for non-monetary assets and liabilities and stockholders’ equity; and 3) the rate on
the date of accrual of revenues, costs and expenses, except those arising from non-monetary items that are translated using the
historical exchange rate for the related non-monetary item. Translation effects are recorded in comprehensive financing result.
To translate the financial statements from the functional currency to Mexican pesos, the financial statements are first restated in
currency of purchasing power as of the date of the balance sheet, using the price level index of the country, and subsequently
translated to Mexican pesos using the closing exchange rate in effect at the balance sheet date for all items; translation effects
are recorded in stockholders’ equity.
The main subsidiaries whose functional currencies are different from the Mexican peso are:
Currency in which
Company transactions are recorded Functional currency
Cablena, S.A. Euro Euro
Cablena do Brasil, Limitada Brazilian real Brazilian real
Cicsa Colombia, S.A. Colombian peso Colombian peso
Cicsa Dominicana, S.A. Dominican peso Dominican peso
Cicsa Ingeniería y Construcción Chile, Limitada S. de R.L. Chilean peso Chilean peso
Cicsa Perú, S.A.C. Nuevo Sol Nuevo Sol
Cobre de México, S.A. de C.V. Mexican peso US Dollar
Condumex Inc. US Dollar US Dollar
Condutel Austral Comercial e Industrial, Limitada Chilean peso Chilean peso
Grupo Sanborns Internacional, S.A. (Chile) Chilean peso Chilean peso
Grupo Sanborns Internacional, S.A. (Panamá) Panamanian balboa Panamanian balboa
Nacel de Centroamérica, S.A. Quetzal Quetzal
Nacel de Honduras, S.A. Lempira Lempira
Nacel de Nicaragua, S.A. Cordoba Cordoba
Nacel de El Salvador, S.A. US Dollar US Dollar
Procisa Ecuador, S.A. US Dollar US Dollar
Procisa do Brasil Projetos, Construcoes e Instalacoes, Ltd. Real Real
Procosertel, S.A. Argentine peso Argentine peso
Planteir, S.A. Uruguayan peso Uruguayan peso
Sanborns El Salvador, S.A. Colon Colon
38
The translation of financial statements effect at December 31, 2010 and 2009 is $(503,474) and $231,326, respectively.
e. Comprehensive income - Represents changes in stockholders’ equity during the year, for concepts other than capital contributions,
reductions and distributions, and is comprised of the net income (loss) of the year, plus other comprehensive income (loss) items
of the same period, which are presented directly in stockholders’ equity without affecting the consolidated statement of income.
Other comprehensive income (loss) is represented by the effects of translation of foreign operations, and the valuation of financial
instruments. Upon realization of assets and settlement of liabilities giving rise to other comprehensive income (loss) items, the
latter are recognized in the consolidated statements of income.
f. Income from operations - Income from operations is the result of subtracting cost of sales and general expenses from net sales.
While NIF B-3, Statement of Income, does not require inclusion of this line item in the consolidated statements of income, it has
been included for a better understanding of the Company’s economic and financial performance.
g. Reclassifications - Certain amounts in the consolidated financial statements as of and for year ended December 31, 2009 have
been reclassified to conform to the presentation adopted for 2010.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements have been prepared in conformity with MFRS, which require that
management make certain estimates and use certain assumptions that affect the amounts reported in the financial statements
and their related disclosures; however, actual results may differ from such estimates. The Company’s management, upon applying
professional judgment, considers that estimates made and assumptions used were adequate under the circumstances.
The significant accounting policies of the Company are as follows:
a. Accounting changes due to issuance of NIFs -
Beginning January 1, 2010, the Company adopted the following new NIFs and Interpretations to the Financial Reporting
Standards (INIFs):
NIF C-1, Cash and Cash Equivalents - This standard requires presentation of cash and restricted cash equivalents together
within the caption “cash and cash equivalents”, as opposed to Bulletin C-1, which required restricted cash to be presented
separately. This standard also replaces the concept “temporary investments payable on demand” with “readily available
investments” and permits their classification as cash equivalents only when they have a maturity within three months from
the date of acquisition.
Improvements to Mexican Financial Reporting Standards 2010 - The main improvements that generate accounting changes
are as follows:
NIF B-1, Accounting Changes and Correction of Errors - This improvement requires extended disclosures when the
Company applies a new standard.
NIF B-2, Statement of Cash Flows - This improvement requires that the impact of changes in value of cash and
cash equivalents resulting from exchange rate fluctuations be presented separately within the caption “Effects from
exchange rate changes on cash”, presented below financing activities. In addition, this caption includes the effects of
converting the cash flows and balances of foreign operations to the reporting currency as well as the effects of inflation
associated with the cash flows and balances of any entities within the consolidated group that operate in an inflationary
economic environment.
NIF B-7, Business Acquisitions - This improvement permits the recognition of intangible assets or provisions stemming
from above- or below-market leases in a business acquisition only when the acquired business is the lessee of an
operating lease. This accounting change may be recognized retroactively beginning January 1, 2010.
NIF C-7, Investments in Associated Companies and Other Permanent Investment - This improvement modifies the
manner in which the effects of increases in an investment in an associated company are determined. It also requires
that the effects of increases or decreases in an investment in an associated company be recognized in equity in
income (loss) of associated companies, instead of under non-ordinary items in the statement of income.
NIF C-13, Related Parties - This improvement requires that if the direct parent company or the ultimate parent
company of the reporting entity does not issue financial statements for public use, the reporting entity should disclose
the name of the direct parent company or the closest indirect parent company that does issue financial statements
available for public use.
b. Recognition of the effects of inflation - Since the cumulative inflation for the three fiscal years prior to those ended December
31, 2010 and 2009, was 14.48% and 15.01%, respectively, the economic environment may be considered non-inflationary
in both years and, consequently, no inflationary effects are recognized in the accompanying consolidate financial statements.
Inflation rates for the years ended 2010 and 2009 were 4.40% and 3.57%, respectively.
39
ANNUAL REPORT 2010 •
Generating value
c. Cash and cash equivalents - Consist mainly of bank deposits in checking accounts and readily available daily investments
of cash surpluses that are highly liquid and easily convertible into cash, and which are subject to insignificant value change
risks. Cash is stated at nominal value and cash equivalents are measured at fair value; any fluctuations in value are recognized
in the comprehensive financing result of the period. Cash equivalents are represented mainly by daily investments of cash
surpluses.
d. Investments in securities - According to its intent, from the date of acquisition the Company classifies investments in debt
and equity securities in one of the following categories: (1) trading, when the Company intends to trade debt and equity
instruments in the short-term, prior to maturity, if any, and are stated at fair value. Any value fluctuations are recognized
within current earnings; (2) held-to-maturity, when the Company intends to, and is financially capable of, holding such
investments until maturity. These investments are recognized and maintained at amortized cost; and (3) available-for-sale.
These investments include those that are classified neither as trading nor as held-to-maturity. These investments are stated
at fair value; any unrealized gains or losses, net of income taxes and statutory employee profit sharing, are recorded as a
component of comprehensive income within stockholders’ equity, and reclassified to current earnings upon their sale. Fair
value is determined using prices quoted on recognized markets. If such securities are not traded, fair value is determined by
applying technical valuation models recognized in the financial sector.
Investments in securities classified as held-to-maturity and available-for-sale are subject to impairment tests. If there is
evidence that the reduction in fair value is other than temporary, the impairment is recognized in current earnings.
e. Inventories and cost of sales - Inventories are stated at the lower of cost or realizable value.
f. Real state inventories - Real state inventories are valued at the acquisition costs of land, licenses, materials, labor and
overhead incurred in the construction activity of the Company. The Company classifies as long term inventories, real estate
for which the construction phase exceeds one year.
g. Property, machinery and equipment - Are initially recorded at acquisition cost for those entities operating in noninflationary
economic environments. Balances arising from acquisitions made through December 31, 2007 for all entities and to date
for those foreign entities operating in inflationary environments are restated by applying factors derived from the National
Consumer Price Index (“NCPI”). In the case of fixed assets of foreign origin, acquisition cost is restated for the effects of
inflation through the respective date based on the inflation of the country of origin and considering the exchange fluctuations
of the Mexican peso against the currency of the country of origin. Depreciation is calculated by the straight-line method
based on the remaining useful lives of the related assets, considering a percentage of the estimated salvage value.
Comprehensive financing cost incurred during the period of construction and installation of qualifying property, plant and
equipment s capitalized and was restated for inflation through December 31, 2007 using the NCPI.
h. Impairment of long-lived assets in use - The Company reviews the carrying amounts of long-lived assets in use when an
impairment indicator suggests that such amounts might not be recoverable, considering the greater of the present value
of future net cash flows or the net sales price upon disposal. Impairment is recorded when the carrying amounts exceed
the greater of the aforementioned amounts. Impairment indicators considered for these purposes are, among others, the
operating losses or negative cash flows in the period if they are combined with a history or projection of losses, depreciation
and amortization charged to results, which in percentage terms in relation to revenues are substantially higher than that of
previous years, obsolescence, reduction in the demand for the products manufactured, competition and other legal and
economic factors.
i. Investment in shares of associated companies and others - Permanent investments in entities where significant influence
exists, are initially recognized based on the net fair value of the entities’ identifiable assets and liabilities as of the date of
acquisition. Such value is subsequently adjusted for the portion related both to comprehensive income (loss) of the associated
company and the distribution of earnings or capital reimbursements thereof. When the fair value of the consideration paid is
greater than the value of the investment in the associated company, the difference represents goodwill, which is presented
as part of the same investment. Otherwise, the value of the investment is adjusted to the fair value of the consideration
paid. If impairment indicators are present, investment in shares of associated companies is subject to impairment testing.
Permanent investments made by the Company in entities where it has no control, joint control, or significant influence, are
initially recorded at acquisition cost and any dividends received are recognized in current earnings, except when they are
taken from earnings of periods prior to the acquisition, in which case, they are deducted from the permanent investment.
j. Other assets - Intangible assets are recognized in the accompanying balance sheets only if they can be identified, provide
future economic benefits and control exists over such assets. Intangible assets with an indefinite useful life are not amortized
and the carrying value of these assets is subject to annual impairment testing, and intangible assets with a defined useful
life are amortized systematically based on the best estimate of their useful life, determined in accordance with the expected
future economic benefits. The value of these assets is subject to annual impairment assessment.
Intangible assets recognized by the Company related to the costs of the development phase are capitalized as other assets
and are amortized on the straight-line method over 5 years.
40
Plans and projects for environmental control are presented within other assets. The expenses that are made for this concept
are applied to the provision for environmental remediation and the subsequent increase to such provision is debited to
the income statement, only if it corresponds to present obligations or to other future obligations, in the year that they are
determined.
k. Derivative financial instruments - Derivative financial instruments for trading or to hedge the risk of adverse movements in: a)
interest rates, b) exchange rates for long-term debts, c) prices of shares, d) prices of metals, and e) the price of natural gas,
are recognized as assets and liabilities at their fair value.
When derivatives are contracted to hedge risks and fulfill all of the hedging requirements, their designation is documented at
the start of the hedge transaction, describing the objective, characteristics, accounting recognition and how the effectiveness
will be measured, in relation to this transaction.
Changes in the fair value of derivatives designated as hedges are recognized as follows: (1) when they are fair value hedges,
the fluctuations in both the derivative and the item hedged are valued at fair value and are recognized in results; (2) when
they are cash flow hedges, the effective portion is recognized temporarily in other comprehensive income and is applied to
results when the hedged item affects them; the ineffective portion is recognized immediately in results; (3) when the hedge
is an investment in a foreign subsidiary, the effective portion is recognized in other comprehensive income as part of the
translation effects of foreign subsidiaries; the gain or loss on the ineffective portion of the hedge instrument is recognized in
results of the period if it is a derivative financial instrument and, if it is not, it is recognized in other comprehensive income
until the investment is sold or transferred.
Although they are contracted for hedging purposes from an economic standpoint, some derivative financial instruments have
not been designated as hedging operations for accounting purposes. The fluctuation in the fair value of these derivatives is
recognized in results in the comprehensive result of financing.
The Company suspends the accounting for hedges when the derivative has matured, has been sold, is canceled or exercised,
when the derivative does not reach sufficiently high effectiveness to offset the changes in the fair value or cash flows from the
item hedged, or when the entity decides to cancel the hedge designation.
When the accounting for hedges is suspended in the case of cash flow hedges, any amounts recorded in stockholders’
equity as part of other comprehensive income, remain within capital until the effects of the forecast transaction or firm
commitment affect results. If it is no longer probable that the firm commitment or forecast transaction will take place, any
gains or losses that were accumulated in other comprehensive income are recognized immediately in results. When the
hedge of a forecasted transaction was first considered satisfactory and subsequently does not comply with the effectiveness
test, the effects accumulated in other comprehensive income within stockholders’ equity are carried proportionally to results
to the extent that the forecasted asset or liability affects results.
The Company has executed certain contracts with effects yet to be recognized, and which due to their nature include an
embedded derivative. These are valued at fair value and the effect is recorded in the statement of income at the close of the
period in which they are valued.
l. Direct employee benefits - Direct employee benefits are calculated based on the services rendered by employees, considering
their most recent salaries. The liability is recognized as it accrues. These benefits include mainly PTU payable, compensated
absences, such as vacation and vacation premiums, and incentives.
m. Provisions - Provisions are recognized for current obligations that arise from a past event, that will probable to result in the
future use of economic resources, and that can be reasonably estimated.
n. Provision for environmental remediation - The Company has adopted environmental protection policies within the framework
of applicable laws and regulations. However, due to their activities, the industrial subsidiaries, and more specifically its mining
subsidiaries, sometimes perform activities that adversely affect the environment. Consequently, the Company implements
remediation plans (which are generally approved by the competent authorities) that involve estimating the expenses incurred
for this purpose.
The estimated costs to be incurred could be modified due to changes in the physical condition of the affected work zone, the
activity performed, laws and regulations, variations affecting the prices of materials and services (especially for work to be
performed in the near future), as well as the modification of criteria used to determine work to be performed in the affected
area, etc.
o. Employee benefits from termination, retirement and other - Liabilities from seniority premiums, pension plans for non-
union employees and payments that are similar to pensions and severance payments are recognized as they accrue and
are calculated by independent actuaries using nominal interest rates. Therefore, the liability is being recognized that is
considered sufficient to cover the present value of the obligation for these benefits to the estimated dates of retirement of all
employees working in the Company. As of December 31, 2010 and 2009, some subsidiaries have created investment funds
to cover such contingency.
41
ANNUAL REPORT 2010 •
Generating value
p. Statutory employee profit sharing (PTU) - PTU is recorded in the results of the year in which it is incurred and presented
under other income and expenses in the accompanying consolidated statements of income. Deferred PTU is derived from
temporary differences that result from comparing the accounting and tax bases of assets and liabilities and is recognized
only when it can be reasonably assumed that such difference will change in such a way that the liabilities will not be paid or
benefits will not be realized.
q. Income taxes - Income tax (“ISR”) and the Business Flat Tax (“IETU”) are recorded in the results of the year they are
incurred. To recognize deferred income taxes, based on its financial projections, the Company determines whether it expects
to incur ISR or IETU and recognizes deferred taxes based on the tax it expects to pay. Deferred taxes are calculated by
applying the corresponding tax rate to temporary differences resulting from comparing the accounting and tax bases of
assets and liabilities and including, if any, future benefits from tax loss carry-forwards and certain tax credits. Deferred tax
assets are recorded only when there is a high probability of recovery.
r. Foreign currency transactions - Foreign currency transactions are recorded at the applicable exchange rate in effect at the
transaction date. Monetary assets and liabilities denominated in foreign currency are translated into Mexican pesos at the
applicable exchange rate in effect at the balance sheet date. Exchange fluctuations are recorded as a component of net
comprehensive financing cost (income) in the consolidated statements of income.
s. Revenue recognition - Revenues are recognized as follows:
1. Revenues from product sales - These are recognized in the period in which the risks and rewards of ownership of the
inventories are transferred to those who acquire them, which generally coincides with when the inventories are delivered
or shipped to the customer and the customer assumes responsibility for them.
2. Revenues from services - These are recognized as the service is rendered.
3. Revenues from long-term construction contracts - These are recognized based on the percentage-of-completion method,
which identifies the revenue in proportion to the costs incurred to reach the progress required to terminate the project. If
the final estimated costs determined exceed the revenues contracted, the respective provision is recorded with a charge
to results for the year.
4. Revenues from change orders - These are recognized when their amount can be reliably quantified and there is reasonable
evidence of their approval by the customer. The revenues from claims are recognized when they can be reliably quantified
and when, depending on the progress made in the negotiation, there is reasonable evidence that the customer will agree
to their payment.
5. Revenues from real estate developments - These are recognized at the signing date of the respective contract of purchase
and sale, in which the rights and obligations of the real estate property are transferred to the buyer, and at least 20%
of the price agreed has been received. If there is uncertainty about future collections, the revenue is recorded as it is
received. In those cases where there are indicators of difficulty in recovery, additional allowances for doubtful accounts
are created, with a charge against results of the year in which they are determined.
t. Earnings per share - Basic earnings per common share are calculated by dividing net income of majority stockholders by the
weighted average number of shares outstanding during the year.
4. CASH AND CASH EQUIVALENTS
2010 2009
Cash and bank deposits $ 1,174,317 $ 1,714,348
Daily investments of cash surpluses 950,101 1,840,315
$ 2,124,418 $ 3,554,663
5. INVESTMENTS IN SECURITIES
2010 2009
Trading $ 1,044,667 $ 1,186,114
42
6. OTHER ACCOUNTS RECEIVABLE
2010 2009
Sundry debtors $ 520,252 $ 430,673
Recoverable income tax 636,390 531,427
Creditable value-added tax 457,682 –
Recoverable business flat tax (IETU) 215,743 360,461
Other recoverable taxes 81,995 90,297
Other 294,433 252,045
$ 2,206,455 $ 1,664,903
7. INVENTORIES
2010 2009
Raw materials and auxiliary materials $ 2,707,052 $ 1,962,855
Production-in-process 684,620 600,852
Finished goods 592,693 424,188
Merchandise in stores 7,150,536 6,801,327
Land and housing construction in progress 968,011 1,184,639
Allowance for obsolete inventories (374,709) (382,693)
11,728,203 10,591,168
Merchandise in-transit 1,355,262 985,349
Replacement parts and other inventories 209,806 131,506
Advances to suppliers 948,697 981,003
$ 14,241,968 $ 12,689,026
Real state inventories $ 667,131 $ 643,116
8. PROPERTY, MACHINERY AND EQUIPMENT
Given the diversity of the business activities in which the Company is engaged, the estimated useful lives of the assets vary
significantly; and it is therefore impractical to disclose them here.
The Company is constantly evaluating its idle assets in order to determine their possible short-term use or take the necessary
measures for their realization. The assets which are temporarily out of use refer to machinery and equipment from the mining and
industrial sector with estimated net realizable values amounts of $82,489 and $51,311 at net realizable value as of December
31, 2010 and 2009, respectively, which are presented within other expenses in the consolidated income statements.
9. INVESTMENT IN SHARES OF ASSOCIATED COMPANIES AND OTHERS
2010
Stockholders’ Ownership Investment in Equity in
equity Net income Percentage shares income
Elementia, S.A. de C.V.
(1)
$ 6,171,222 $ (182,753) 46 $ 4,031,206 $ (24,108)
Infraestructura y Transportes México,
S.A. de C.V.
(2)
18,613,659 2,227,707 17 3,564,137 373,141
Philip Morris México, S.A. de C.V. 4,715,346 3,420,441 20 943,071 684,088
Grupo Telvista, S.A. de C.V. 1,731,234 60,345 10 173,123 6,035
Investment in shares of
associated companies 8,711,537 1,039,156
Allis Chalmers Energy, Inc. 236,552 –
Others 87,378 (4,620)
Investment in shares of associated companies and others $ 9,035,467 $ 1,034,536
(1)
Investment in shares includes goodwill of $1,121,355.
(2)
Investment in shares includes a fair value complement of $446,349.
43
ANNUAL REPORT 2010 •
Generating value
2009
Stockholders’ Ownership Investment in Equity in
equity Net income Percentage shares income
Elementia, S.A. de C.V.
(1)
$ 6,437,892 $ 142,853 49 $ 4,063,617 $ 41,122
Infraestructura y Transportes
México, S.A. de C.V.
(2)
16,231,077 1,535,998 17 3,165,054 257,280
Philip Morris México, S.A. de C.V. 4,876,357 3,579,229 20 975,272 715,845
Grupo Telvista, S.A. de C.V. 2,000,193 417,739 10 200,019 41,774
Investment in shares of associated companies 8,403,962 1,056,021
Others 89,863 2,186
Investment in shares of associated companies and others $ 8,493,825 $ 1,058,207
(1)
Investment in shares includes goodwill of $909,050.
(2)
Investment in shares includes a fair value complement of $446,349.
10. OTHER ASSETS
2010 2009
Guarantee deposits $ 138,799 $ 176,913
Investment in concessions 286,435 235,557
Goodwill 92,706 91,051
Derivative financial instruments 91,209 60,754
Others, net 290,627 156,644
$ 899,776 $ 720,919
11. LONG-TERM DEBT
2010 2009
l. Syndicated loan for US 600,000 thousand maturing in September 2011,
bearing interest payable on a quarterly basis at interest rate equal to
Libor plus 0.275% $ 7,414,260 $ 7,835,220
ll. Direct loan in euros, with quarterly and semiannual maturities at
variable rates, and final maturity in 2014 132,092 188,124
III. Other loans 44,558 12,591
7,590,910 8,035,935
Less – current portion (7,449,346) (48,278)
Long-term liability $ 141,564 $ 7,987,657
Long-term debt bears interest at variable rates. The weighted average interest rates during 2010 and 2009 for US dollar loans
were 0.65% and 1.20%, respectively.
Maturities of long-term debt as of December 31, 2010 are as follows:
Year ending
December 31
2012 $ 54,390
2013 33,023
2014 33,023
2015 and thereafter 21,128
$ 141,564
The syndicated and direct loan contracts establish affirmative and negative covenants for the borrowers; additionally, based on
the Company’s and some of their subsidiaries consolidated financial statements, certain financial ratios and percentages must
be maintained. All of these requirements have been met at the date of issuance of these consolidated financial statements.
44
12. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING INSTRUMENTS
The purpose of contracting financial derivative instruments is: (i) to partially cover the financial risks for exposure to exchange
rates, interest rates, and prices of natural gas and of certain metals; or (ii) the expectation of a good financial return due to
the behavior of the underlyings. The decision to contract an economical financial hedge is based on market conditions, the
expectation of such instrument at a given date, and the domestic and international economic context of the economic indicators
that influence the Company’s operations.
The transactions performed with foreign exchange and/or interest rate forwards and swaps; as well as embedded derivates, are
summarized below:
Valuation as of December 31, 2010
Notional Comprehensive financing result (Profit) loss on
Designated Amount Assets settlement into
Instrument as (‘000) Unit Maturity (liabilities) Of the year Of prior years comprehensive
financing result
Dollar forwards Purchase 35,000 Dollars March 2011 $ (2,526) $ 2,596 $ – $ –
Dollar forwards Purchase 2,055,300 Dollars During 2010 – – – 607,040
Euros forwards Purchase 2,708 Euros During 2010 – – – (656)
Dollar forwards Sale 2,053,000 Dollars During 2010 – – – (669,596)
Dollar swaps / Libor
in pesos / TIIE Purchase 110,000 Dollars September 2011 154,734 93,742 (248,476) 61,581
TIIE swaps to Purchase 8,700,000 Mexi-can May 2017 and
fixed rate Pesos September 2018 (547,431) 567,357 (19,925) 276,446
TIIE swaps to Purchase 451,846 Mexi-can February and
fixed rate Pesos September 2011 (113) 113 – –
TIIE swaps to e Hedge purchase 3,258,000 Mexi-can
fixed rat Pesos During 2010 – – – 3,699
TIIE swaps to Sale 1,700,000 Mexi-can June 2017 and
fixed rate Pesos May 2018 206,027 (107,708) (98,319) (71,955)
Warrant Purchase 5,440,770 Shares 2011 and 2012 91,209 (30,461) (166) –
Embedded N/A 23,942 Dollars 2011,2012 and 2020 21,359 27,889 (49,248) –
Total at December 31, 2010 $ (76,811) $ 553,528 $ (416,134) $ 206,529
Total at December 31, 2009 $ 729,287 $ (894,169) $ (1,562,873) $ (504,100)
a. Open and closed transactions with hedge forwards to purchase foreign currency are summarized below:
(Profit) loss on
Notional Valuation as of December 31, 2010 settlement into
Assets Comprehensive comprehensive
Instrument Amount Unit Maturity (liabilities) financing result financing result
Euro Forwards 1,420 Euros March 2011 to
December 2013 $ (985) $ 591 $ –
Total at December 31, 2010 $ (985) $ 591 $ –
The transactions opened and settled with hedge swap to purchase metals and natural gas.
(Profit) loss on
Notional Valuation as of December 31, 2010 settlement into
Assets Comprehensive comprehensive
Instrument Amount Unit Maturity (liabilities) financing result financing result
Copper Swap 1,579 Tons January to December 2011 $ 28,572 $ (19,172) $ –
Copper Swaps 16,424 Tons During 2010 – – (30,464)
Aluminum Swaps 746 Tons January to May 2011 1,598 (1,118) –
Aluminum Swaps 2,891 Tons During 2010 – – (11,841)
Natural Gas Swaps 348,655 MMBtu During 2010 – – 3,666
Total at December 31, 2010 $ 30,170 $ (20,290) $ (38,639)
Total at December 31, 2009 $ 19,025 $ (13,150) $ 109,920
45
ANNUAL REPORT 2010 •
Generating value
13. EMPLOYEE RETIREMENT OBLIGATIONS
The Company has plans for retirement, death or total disability payments for non-union employees in most of its subsidiaries.
It also maintains seniority premium plans for all employees as stipulated in their employment contracts. The Company is also
required to pay severance for reasons other than restructuring. The related liabilities and the annual benefit costs are calculated
by an independent actuary on the basis of formulas defined in the plans, using the projected unit credit method.
The present value of these obligations and the rates used for their calculation are:
2010 2009
Vested benefit obligation $ (451,137) $ (439,272)
Nonvested benefit obligation (2,010,835) (1,757,614)
Defined benefit obligation (2,461,972) (2,196,886)
Plan assets at fair value 3,029,033 2,723,090
Funded status – overfunded 567,061 526,204
Unrecognized items:
Past service costs and changes to the plan 205,081 116,734
Unrecognized actuarial gains and losses (314,495) (267,400)
Net projected asset $ 457,647 $ 375,538
Contributions to plan assets $ 50,209 $ 59,201
The rates used in actuarial calculations were as follows:
2010 2009
% %
Discount of the projected benefit obligation at present value 7.27 8.36
Expected yield on plan assets 6.94 8.42
Salary increase 4.55 4.51
Future pension increase 2.00 5.95
Unrecognized items are charged to results over a period of five years.
Net period cost (income) comprises the following:
2010 2009
Service costs $ 172,864 $ 163,483
Interest cost 152,151 133,081
Expected yield on plan assets (196,195) (188,854)
Amortization of unrecognized prior service costs 62,170 69,164
Actuarial gains and losses – net (113,041) (113,000)
Effect of reduction or early liquidation
(other than a restructuring or discontinued operation) (2,048) (82,276)
Net period cost (income) $ 75,901 $ (18,402)
Under Mexican legislation, the Company must make payments equivalent to 2% of its workers’ daily integrated salary (ceiling)
to a defined contribution plan that is part of the retirement savings system. The expense in 2010 and 2009 was $121,289 and
$166,753, respectively.
Amounts for the current year and the four preceding years:
2010 2009 2008 2007 2006
Defined benefit obligation $ (2,461,972) $ (2,196,886) $ (1,559,060) $ (1,697,719) $ (1,640,419)
Plan assets at fair value 3,029,033 2,723,090 2,286,278 3,269,477 2,802,064
Funded status $ 567,061 $ 526,204 $ 727,218 $ 1,571,758 $ 1,161,645
Adjustments to defined benefit obligation based on experience $ (314,495) $ (267,400) $ (562,378) $ (998,161) $ (584,864)
Adjustments to plan assets based on experience $ 205,081 $ 116,734 $ 165,757 $ (26,585) $ (87,826)
46
14. STOCKHOLDERS’ EQUITY
a. The historical amount of subscribed and paid-in common stock of Grupo Carso as of December 31, 2010 and 2009 is as follows:
Number of Shares Amount
2010 2009 2010 2009
Series A1 2,745,000,000 2,745,000,000 $ 644,313 $ 1,058,036
Treasury shares repurchased (442,250,000) (421,281,600) (103,806) (162,380)
Historical capital stock 2,302,750,000 2,323,718,400 $ 540,507 $ 895,656
Common stock consists of ordinary, nominative and no par value shares.
Pursuant to a resolution of the general extraordinary stockholders’ meeting on November 4, 2010, the Company spun off its
real estate and mining net assets resulting in the formation of: i) Inmuebles Carso, S.A.B. de C.V. which is owns directly or
indirectly through its subsidiaries, various real estate properties and ii) Minera Frisco, S.A.B. de C.V., which owns directly or
indirectly through its subsidiaries, the mining assets. On December 31, 2010 the above spin off took effect and the Company
with a historical capital stock of $540,507.
Pursuant a general ordinary Stockholders’ meeting on April 29, 2010, the payment of a dividend was approved to the
shareholders at the amount of $0.66 per share, payable in two exhibitions of $ 0.33 per share each, on May 18 and October
19, 2010. This payment amounted to $1,524,609.
Pursuant a general ordinary Stockholders’ meeting on April 30, 2009, the payment of a dividend was approved to the
shareholders at the amount of $0.60 per share, payable on May 18, 2009. This dividend payment amounted to
$1,395,891.
Dividends declared in the year were taken from the consolidated net tax income account (“CUFIN”) balance.
b. Retained earnings include the statutory legal reserve. Mexican General Corporate Law requires that at least 5% of net income
of the year be transferred to the legal reserve until the reserve equals 20% of capital stock at its historical amount (nominal
pesos). The legal reserve may be capitalized but may not be distributed unless the Company is dissolved, and must be
replenished if it is reduced for any reason. At December 31, 2010 and 2009, the legal reserve of Grupo Carso is $380,635
(nominal pesos) and it is presented as part of retained earnings.
c. Stockholders’ equity, except restated paid-in capital and tax retained earnings, will be subject to income tax payable by
the Company at the rate in effect upon distribution. Any tax paid on such distribution may be credited against annual and
estimated income taxes of the year in which the tax on dividends is paid and the following two fiscal years.
d. The balances of the stockholders’ equity tax accounts as of December 31 are:
2010 2009
Contributed capital account $ 4,097,640 $ 6,034,915
Consolidated net tax income account 38,659,127 44,576,787
Total $ 42,756,767 $ 50,611,702
15. FOREIGN CURRENCY BALANCES AND TRANSACTIONS
a. At December 31, the foreign currency monetary position in thousands of U.S. dollars is as follows:
2010 2009
Monetary assets 404,999 157,733
Short-term monetary liabilities (1,048,731) (152,502)
Long-term monetary liabilities (11,456) (611,580)
Net monetary asset (liability) position (655,188) (606,349)
Equivalent in Mexican pesos $ (8,096,223) $ (7,918,129)
47
ANNUAL REPORT 2010 •
Generating value
b. Transactions denominated in foreign currency in thousands of U.S. dollars were as follows:
2010 2009
Export sales $ 376,075 $ 230,709
Foreign sales of subsidiaries 299,606 253,482
Import purchases (1,227,569) (677,869)
Interest income 1,229 829
Interest expense (12,806) (6,617)
Other $ (257,077) $ (159,401)
c. The exchange rates in effect at the dates of the consolidated balance sheets and at the date of the independent auditors’
report are as follows:
December 31, March 17,
2010 2009 2011
U.S. dollar $ 12.3571 $ 13.0587 $ 12.071
16. TRANSACTIONS AND BALANCES WITH RELATED PARTIES
a. Transactions with related parties, carried out in the ordinary course of business, were as follows:
2010 2009
Sales $ 11,621,360 $ 9,789,283
Rentals collected 5,582 13,690
Purchases (2,117,775) (1,670,432)
Prepaid insurance (119,487) (206,452)
Services rendered (488,965) (224,208)
Interest expenses (10,615) (91,800)
Other expenses, net (134,508) (143,439)
Purchases of fixed assets (185,611) (350)
b. Transactions with associated companies, carried out in the ordinary course of business, were as follows:
2010 2009
Sales $ 1,186,069 $ 412,653
Acquired services 99,029 180
Rentals collected 26,006 –
Interest income – 118
Purchases (132,206) (99,711)
Interest expense (394) –
Other income, net (67,797) –
48
c. Balances receivable and payable with related parties are as follows:
2010 2009
Receivable-
Teléfonos de México, S.A.B. de C.V. $ 236,698 $ 111,910
Minera San Francisco del Oro, S.A. de C.V. 172,126 –
Delphi Packard Electric Systems, Inc. 126,623 134,106
Autopista Arco Norte, S.A. de C.V. 123,784 340
Minera Real de Ángeles, S.A. de C.V. 109,969 2,475,075
Inmuebles General, S.A. de C.V. 76,472 30,821
Compañía Dominicana de Teléfonos, C. por A. 69,973 10,969
Telmex Colombia, S.A. 49,082 6,294
Servicios Minera Real de Ángeles, S.A. de C.V. 47,916 30,083
Radiomóvil Dipsa, S.A. de C.V. 39,982 264,146
Concesionaria de Vías Troncales, S.A. de C.V. 36,071 –
Telmex, S.A. 33,723 3,363
Compañía Internacional Minera, S.A. de C.V. 28,692 26,420
Nacional de Cobre, S.A. de C.V. 27,053 2,129
Uninet, S.A. de C.V. 26,184 17,972
CTE Telecom Personal, S.A. de C.V. 25,259 630
Elementia, S.A. 23,565 4,887
América Móvil Perú, S.A.C. 22,929 736
Telecomunicaciones de Guatemala, S.A. 21,632 11,586
Telmex Argentina, S.A. 20,877 1,121
Telmex Perú, S.A. 20,762 1,284
Compañía de Teléfonos y Bienes Raíces, S.A. de C.V. 20,012 8,023
Consorcio Red Uno, S.A. de C.V. 19,927 35,819
Empresa Nicaragüense de Telecomunicaciones, S.A. 18,318 5,757
Renta de Equipo, S.A. de C.V. 17,823 17,443
Ecuador Telecom, L.L.C. 16,636 –
CFC Concesiones, S.A. de C.V. 15,760 85
Construcciones y Servicios Frisco, S.A. de C.V. 11,908 –
AMX Paraguay, S.A. 11,826 –
Servicios de Comunicaciones de Honduras, S.A. de C.V. 11,350 –
Minera María, S.A. de C.V. – 293,105
Minera San Felipe, S.A. de C.V. – 51,456
Concesionaria de Carreteras y Libramientos del Pacífico Norte, S.A. de C.V. – 28,962
Construcción, Conservación y Mantenimiento Urbano, S.A. de C.V. – 11,062
Other 79,275 87,907
$ 1,562,207 $ 3,673,491
Payable-
Patrimonial Inbursa, S.A. de C.V. $ 920,610 $ 873
Inmuebles y Servicios Mexicanos, S.A. de C.V. 411,552 333,305
Minera María, S.A. de C.V. 187,506 –
Fianzas la Guardiana Inbursa, S.A. de C.V. 89,100 62,922
Alquiladora de Casas, S.A. de C.V. 65,076 –
Constructora Mexicana de Infraestructura Subterránea, S.A. de C.V. 49,667 185,583
Impulsora del Desarrollo y el Empleo en América Latina, S.A.B. de C.V. 49,075 –
Distribuidora Telcel, S.A. de C.V. 29,397 34,352
Inmobiliaria las Trufas, S.A. de C.V. 27,405 1,236
Claro CR Telecomunicaciones, S.A. 23,038 –
Philip Morris México, S.A. de C.V. 22,569 70,052
Cleaver Brooks de México, S.A. de C.V. 12,380 14,791
Seguros Inbursa, S.A. – 156,177
Other 54,109 46,903
$ 1,941,484 $ 906,194
49
ANNUAL REPORT 2010 •
Generating value
d. Borrowings from financial institutions includes balances with Banco Inbursa, S.A. of $2,503,932 and $740,335, as of
December 31, 2010 and 2009, respectively, which accrue interest at a variable rate based on general market conditions.
e. Long-term debt includes balances with Banco Inbursa, S.A. of $8,603 as of December 31, 2009, which accrue interest at
a variable rate based on general market conditions.
f. Benefits granted to key management and/or executive personnel were as follows:
2010 2009
Short and long-term direct benefits $ 135,441 $ 141,642
Severance benefits 6,349 4,652
Postretirement benefits 31,595 234,635
g. The accounts receivable include long-term loan granted in December 2010 to related parties of $ 11,943,260, which bears
interest at a variable rate of TIIE + 2.25 annually. In addition, the Company granted a loan account on the same day of US
45.000 dollars equivalent to $556,069, which bears interest at a variable rate of LIBOR + 2.5 annually. Both loans mature in
December 2015.
17. OTHER EXPENSES - NET
2010 2009
Loss (gain) from sale of subsidiary shares $ 42,489 $ (59,798)
Employee profit sharing (“PTU”) 205,790 161,525
Sale of brands – (300,000)
Provision for legal dispute (Porcelanite and Atlas Flooring) – 365,644
Other, net (141,936) (38,613)
$ 106,343 $ 128,758
a. PTU is calculated on taxable income, which for these purposes does not consider the annual adjustment for inflation, while
tax depreciation is at historical, not restated values.
2010 2009
Composed of:
Current expense $ 192,140 $ 155,458
Deferred benefit 13,650 6,067
$ 205,790 $ 161,525
b. The main items comprising the liability balance of deferred PTU are:
2010 2009
Deferred PTU (asset) liability:
Inventories $ 3,983 $ 1,803
Property, machinery and equipment 16,147 6,818
Advances from customers (1,838) (860)
Estimates and reserves (9,587) 6,281
Other, net 40,228 29,207
Long-term liability for deferred PTU $ 48,933 $ 43,249
18. TAXES ON INCOME
The Company is subject to ISR and IETU.
The ISR rate is 30% and 28% for 2010 and 2009, respectively and will be 30% in 2011 and 2012, 29% in 2013 and 28% in
2014 and thereafter. The Company pays ISR, together with subsidiaries on a consolidated basis.
On December 7, 2009, amendments to the ISR Law were published, to become effective beginning in 2010. These amendments
state that: a) ISR relating to tax consolidation benefits obtained from 1999 through 2004 should be paid in installments beginning
in 2010 through 2015, and b) ISR relating to tax benefits obtained in the 2005 tax consolidation and thereafter, should be paid
during the sixth through the tenth year after that in which the benefit was obtained.
IETU - Revenues, as well as deductions and certain tax credits, are determined based on cash flows of each fiscal year.
Beginning in 2010 the IETU rate is 17.5% and it was17%, in 2009. The Asset Tax (IMPAC) Law was repealed upon enactment
of the IETU Law; however, under certain circumstances, IMPAC paid in the ten years prior to the year in which ISR is paid for
the first time, may be recovered, according to the terms of the law. In addition, as opposed to ISR, the parent and its subsidiaries
will incur IETU on an individual basis.
50
Income tax incurred will be the higher of ISR and IETU.
Based on financial projections, in accordance with INIF 8, Effects of IETU, the Company and most of its subsidiaries, determined
that they will essentially pay ISR, and therefore only recognize deferred ISR.
Grupo Carso has authorization from the Mexican Treasury Department (“SHCP”) to file a consolidated income and asset tax
return with its subsidiaries.
a. ISR consists of the following:
2010 2009
ISR:
Current $ 2,580,468 $ 2,720,041
Deferred (635,026) (950,939)
Change in valuation allowance for recoverable asset tax and tax loss carry-forwards – 19,674
IETU:
Current – 13,254
Deferred – (26,012)
$ 1,945,442 $ 1,776,018
b. Following is a reconciliation of the statutory and effective ISR rates expressed as a percentage of income before taxes on
income:
2010 2009
% %
Statutory rate 30 28
Add (deduct) the effect of permanent differences:
Nondeductible expenses 1 1
Effects of inflation 1 1
Equity in income of associated companies and others (4) (4)
Effective rate 28 26
c. Other comprehensive income amounts and items and the deferred taxes affected during the period are as follows:
Amount before Amount net of
income taxes Income taxes income taxes
Unrealized gain on cash flow hedge $ 402,004 $ 120,602 $ 281,402
Effect of translation of foreign operations (661,159) (198,348) (462,811)
$ (259,155) $ (77,746) $ 181,409
d. The main items comprising the (asset) liability balance of deferred ISR:
2010 2009
Property, machinery and equipment $ 1,571,669 $ 1,420,080
Inventories 406,753 737,487
Accounts receivable from installment sales 389,160 576,624
Advances from customers (328,186) (495,510)
Natural gas and metals swaps and futures (89,310) 108,595
Revenues and costs by percentage-of-completion method (16,626) (174,404)
Supplemental estimates for assets, reserves for liabilities (637,639) (639,156)
Other, net 297,334 624,011
Deferred ISR on temporary differences 1,593,155 2,157,727
Effect of tax loss carry-forwards 163,554 483,082
Difference income tax payable for CUFIN 195,123 –
Tax loss reserve (17,422) (60,302)
Losses on sale of shares (39,865) (33,962)
Deferred ISR payment (long-term CUFINRE) (1,199) (806)
Net deferred ISR liability $ 1,893,346 $ 2,545,739
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ANNUAL REPORT 2010 •
Generating value
e. Unapplied tax losses and recoverable asset tax of Grupo Carso, S.A.B. de C.V. and its subsidiaries for which a deferred
income tax asset and an advanced income tax payment, respectively, have been recognized, may be recovered provided
certain requirements are fulfilled. Their maturities and restated amounts at December 31, 2010 are as follows:
Year of Tax loss
Expiration carryforwards
2016 $ 290
2017 1,920
2018 265,881
2019 82,659
2020 and thereafter 382,681
$ 733,431
19. DISCONTINUED OPERATIONS
As discussed in Note 1, during 2010, the Company spun off its mining and real estate assets. In addition, the Company
decided to sell the shares in its subsidiaries Hubard y Bourlon, S.A. de C.V., Ingenieria HB, S.A. de C.V., Selmec Equipos
Industriales, S.A. de C.V. and CILSA Panamá, S.A. Therefore, in the balance sheets at December 31, 2010, the assets and
liabilities of those subsidiaries are classified as held for sale and included within short term and long term assets and liabilities
from discontinued operations.
The balance sheets at December 31, 2010 and 2009 of the spun off subsidiaries and / or disposed, are summarized as follows:
2010 2009
Current assets:
Cash and cash equivalents $ 201,078 $ 3,854,504
Accounts receivable – net 8,999 1,937,615
Inventories – net 389,177 1,855,810
Other 347,800 (2,475,321)
Total current assets 947,054 5,172,608
Property, machinery and equipment 165,487 23,956,662
Other assets 226,873 1,791,492
392,360 25,748,154
Total assets $ 1,339,414 $ 30,920,762
Current liabilities:
Current portion of long-term debt $ 218,498 $ 2,789,834
Trade accounts payable 431,583 392,798
Accrued expenses, taxes and others deferred income taxes 374,798 2,524,478
Total current liabilities 1,024,879 5,707,110
Long-term debt – 2,768,757
Deferred income taxes 6,022 1,277,245
Long- term taxes and others 9,200 210,937
15,222 4,256,939
Total liabilities $ 1,040,101 $ 9,964,049
52
Also, the income statements for the year of the split sector sales to date are presented separately in the consolidated income
statement as discontinued operations.
The following are relevant income statement figures of the discontinued subsidiaries, for the period they were held. Such amounts
correspond to the real estate and mining subsidiaries, Hubard y Bourlon, S.A. de C.V., Ingenieria HB, S.A. de C.V., Selmec
Equipos Industriales, S.A. de C.V. and CILSA Panamá, S.A. to December 31, 2010 and 2009. During 2009, the Company sold
shares of its subsidiaries engaged in the processing and sale of copper and aluminum, products and the manufacture and sale
of tubes of PVC:
2010 2009
Net sales $ 12,371,602 $ 12,371,771
Costs and expenses 6,588,324 7,805,721
Operating expenses 1,004,671 1,073,803
Other expenses , net (172,888) (112,376)
Net comprehensive financing result (811,466) (1,219,206)
Equity in income of associated companies 120,410 111,702
Income before taxes 3,914,663 2,272,367
Income taxes 970,290 236,741
Income of discontinued operations 2,944,373 2,035,626
Gain on sale of subsidiary – 350,151
Net income of discontinued operations 2,944,373 2,385,777
Non-controlling interest 325,698 –
Net income of discontinued operations $ 2,618,675 $ 2,385,777
20. COMMITMENTS
At the date of the financial statements, the Company has the following commitments of its main subsidiaries:
I. Commercial group:
a. At December 31, 2010, Sanborns has executed contracts with suppliers for the remodeling and construction of certain
stores. These commitments are for an amount of approximately $580,892.
b. In addition, as of December 31, 2010, Sanborns and its subsidiaries executed lease contracts in 280 stores (Sears,
Saks Fifth Avenue, Sanborn Hermanos, Sanborns-Café, Mix-Up, Discolandia, I Shop, Dorian’s, Corpti, Promusic and
Sanborns Panamá). These lease contracts establish mandatory terms ranging from one to 20 years. Lease amounts paid
during 2010 and 2009 were $748,096 and $686,356, respectively. Similarly, the Company and its subsidiaries have
contracts with terms ranging from one to 15 years, with lease revenues in 2010 and 2009 of $1,109,915 and $835,243,
respectively.
c. On September 12, 2006, Sanborns, signed a contract for the payment of consultancy and license of use of trademark
fees with an initial term of 15 years, with an option to renew for 10 more years, which establishes an annual minimum
payment of 500,000 dollars for the use of the name of Saks Fifth Avenue.
d. Sears Operadora de México, S.A. de C.V. (formerly Sears Roebuck de México, S.A. de C. V. or Sears México) and Sears
Roebuck and Co. (Sears US), recently signed an agreement through which the parties decided to extend the same terms
in effect in the License and Trademark Use Agreement and contracts related to the sale of goods and the consultancy
business covering the relationship between them. The agreement is in place until September 30, 2019, but provides for
an additional seven-year extension on the same terms, unless one of the parties decides not to prolong it, by notifying
the other party two years in advance.
II. Infrastructure and construction
a. During December 2009, Operadora signed an agreement to work at unit prices with the System of Highways, Airports,
and Related Auxiliary Services of the State of Mexico, Sistema de Autopistas, Aeropuertos, Servicios Conexos y Auxiliares
del Estado de México (SAASCAEM), a government agency, to modernize the Highway Tenango-Ixtapan de la Sal, 4
lanes, the Km 1 +100 to Km 32 +630, in the State of Mexico. The project consists of the increase from 2 to 4 lanes,
including earthworks, drainage works, structures, asphalt paving, construction and adaptation of junctions with a total
length of 31.6 km. The value of the project is $492,162 plus VAT and the contract period runs over 20 months. As of the
date of the issuance of this report, hit project has already begun.
b. In October 2009, Operadora announced the agreement with Impulsora del Desarrollo y el Empleo en America Latina,
S.A.B. de C.V. (“IDEAL”) (related party) to carry out works for the Construction and Modernization “ North Pacific Project
“consisting of: (i) The South Libramiento Culiacán and Mazatlán Libramiento league and its branches, and (ii) The
Highway Specifications High-Mazatlán Culiacán and modernization works associated with it. The works to be executed,
according to contract signed in February 2010, amount to a total of $3,678,200 plus VAT. CICSA bound serves as
support in this project. In the fourth quarter of 2010, this project began with the Libramiento of Culiacán.
53
ANNUAL REPORT 2010 •
Generating value
c. In July 2009, Servicios Integrales GSM, S.A. de C.V. ( “GSM”) and Operadora Cicsa , S.A. de C.V. ( “Operadora”)
received from Pemex Exploracion y Produccion ( “PEP”) the award of the public works contract for the “Work integrated
drilling in Tertiary Gulf Oil Project (Additional Package VIII). The value of this contract is approximately $203,528 plus
US 119,897 thousand, plus the corresponding VAT, and will be executed over a period of approximately two years. The
project implementation began in September 2009 started with the drilling of 144 oil wells.
d. In April 2009, Operadora entered into a contract with CFC Concesiones, S.A. de C.V., a subsidiary of IDEAL, to carry out
the construction of phase two of the highway located in the Northeast metropolitan area of Toluca, which consisted of two
additional lanes, with a length of 29.4 km, located in the cities of Lerma, Toluca, Otzolotepec, Xonacatlán, Temoaya and
Almoloya de Juárez, within a year. The contract is worth approximately $750,675. At the date of issuance of this report,
the project continues under the program established.
e. In November 2008, CICSA signed a contract for the construction of the “Túnel Emisor Oriente” in the amount of $9,596
million pesos, which will restore the drainage capacity of Mexico City and thus avoid flooding during the rainy season.
Given the need for such construction work and the technical capacity and experience of the Mexican companies involved
in the consortium, the National Water Commission, the Federal District Government and the Mexico State Government,
through Trust 1928, made a direct award under the Public Works and Related Services Law, to allocate such project
to the company named Constructora Mexicana de Infraestructura Subterránea, S.A. de C.V. (COMISSA), whose
shareholders are: CICSA with a 40% equity holding, Ingenieros Civiles Asociados, S.A. de C.V. (ICA), Construcciones y
Trituraciones, S.A. de C.V. (COTRISA), Constructora Estrella, S.A. de C.V. (CESA) and Lombardo Construcciones, S.A. de
C.V. (LOMBARDO).
The project has already begun engineering and construction work under a mixed construction contract scheme on a
unit price, lump sum and fixed term basis, which must be concluded in September 2012. The contract involves the
construction of a tunnel measuring 7 meters in diameter, approximately 62 km in length, with flow capacity of 150 m³
a second. The Túnel Emisor Oriente will significantly increase the drainage capacity in the Valley of Mexico and the
normal development of maintenance programs deep drainage. At the end of 2010, development has advanced at project
Lumbrera 17 and construction of 2 production plants and Huehuetoca Zumpango segments has been completed and
have received most of the components of Tunnel Boring Machines (TBMs ). Also, access roads have been completed in
section III and there is significant progress on access roads to section IV.
f. In the third quarter of 2008, CICSA obtained the contract to carry out work involving the design, development and
engineering and construction of the El Realito reservoir, to provide drinking water to the metropolitan area of San Luis
Potosí, S.L.P., located on the Santa María river, in the municipality of San Luis de La Paz, Guanajuato. The contract
amount is $550 million pesos, in which CILSA has a 52% participation, and is expected to be completed within a three-
year period. At the date of the financial statements, there have been advances in the placement of CCR, the drilling and
injection of holes is 44% complete, while construction has advanced 61%.
g. In the second quarter of 2008, the consortium in which CICSA participates together with Ingenieros Civiles Asociados,
S.A. de C.V. (a subsidiary of Empresas ICA, S.A.B. de C.V.) and Alstom Mexicana, S.A. de C.V., was assigned the project
to construct Line 12 of the Mexico City subway system (also known as Línea Dorada), which would cover a distance of
approximately 24 km (from Mixcoac to Tláhuac). This assignment was made by the Department of Public Transportation
Works of the Federal District Government, by means of an international public bid. The contract amount is $15,290
million pesos. The participation of CICSA will be 25% of the value of the construction work related to such project. At
the end of 2010, the civil works is 99% complete while significant progress has been made on the superstructure. Work
continues on the storm sewer pipes, and at the stations.
h. During October 2007, CICSA signed a contract with the Junta Municipal de Agua y Saneamiento de Juárez (JMAS),
Chihuahua, to carry out the construction, maintenance, preservation and operation of the Acueducto Conejos Médanos
required to supply drinking water to the city of Ciudad Juárez, Chihuahua. The construction will be $254 million pesos
and will take two years, while the operating and maintenance services will be $942 million pesos and will be performed
over 10 years, through the monthly payment of tariffs guaranteed by an administration trust which the JMAS will handle
over the contract term. In 2009, construction of this project was completed, under the program established, and the
project has already been opened and is in operation. The investment in this grant through a trust is presented in the
consolidated balance sheet as “Investments in concessions.”
i. In September 2007, CICSA through Operadora Cicsa signed a construction contract to expand the ethylene oxide plant in
the Central Petroquímica Morelos. The contract amount is $485 million pesos. The project work began in October 2007
and is expected to conclude in the first quarter of 2009. At the end of 2010, this project is completed and is in process
of settlement and document delivery to the customer.
j. In December 2006, GSM signed a contract for the drilling and termination of 60 oil wells (including infrastructure work)
in Villahermosa, Tabasco. The respective construction work began in February 2007 and was concluded during the first
quarter of 2010. The contract amount is $1,432 million pesos (nominal value) plus US 280 million.
In August 2008, a contract was signed to extend the drilling contract described in the preceding paragraph, as a result
of which the original contract was increased by 60 additional wells, the original contract and extended the completion
deadline to 2010. At the date of these financial statements, the contract has yet to be concluded.
54
k. In February 2006, Operadora Cicsa signed a contract to dismantle a residential platform located in Dos Bocas and to
carry out the engineering, procurement, construction, interconnection, start-up and initial operation of a new residential
module with capacity for 84 persons in the Cantarell Field, Campeche Sound, Gulf of México. The contract amount is
$198,591 (nominal value) plus US 40,669 thousand. The work began in 2006 and the original project was expected
to conclude in September 2007. In 2009 this project was completed and in 2010 100% of related accounts receivable
related and additional work performed was recovered.
l. In January 2006, Operadora signed a contract with Autopista Arco Norte, S.A. de C.V., a subsidiary of IDEAL, to carry
out projects of coordination, inspection, oversight, construction and execution of the high specification highway named
Libramiento Norte de la Ciudad de México, for an approximate length of 141.62 km, beginning at the junction of Tula,
Hidalgo and ending at San Martín Texmelucan, Puebla. The original termination deadline, subject to changes derived
from the timely and proper release of rights of way, was 24 months computed as of January 2006. The contract value is
$2,722 million (nominal pesos) plus construction coordination services.
During 2008, the 11-kilometer section of the junction of Ciudad Sahagún to Tulancingo, Hidalgo has been delivered for
operation, thus completing a total of 69.8 km of this highway. During the first months of 2009, the project continued, and
finally, in the third quarter of 2009, this project was completed, except for minor construction, and the road was placed
into operation. At the end of 2010, the project is in the process of being finalized.
m. In April 2005, Operadora signed a contract with Concesionaria de Carreteras, Autopistas y Libramientos de la República
Mexicana, S.A. de C.V. (related party) for the coordination, inspection, surveillance, construction and operation of the
Tepic-Villa Unión Highway. The period of performance of the work was of 553 calendar days from 27 April 2005. The
original value of the project was $2,416,229 (nominal value) and in July 2006 an agreement was signed amendment to
the coordination, inspection and monitoring section of the highway junction known as San Blas - Estación Yago worth
$287,308 (nominal value) plus work coordination services. The project started in 2005 and ended in 2007. At December
31, 2010, final documentation was completed.
In February 2006, the subsidiary Grupo PC Constructores, S.A. de C.V. (Grupo PC) signed several contracts to produce
works of closure and remediation of a landfill to build a sports center in Ciudad Nezahualcóyotl, Estado de México, with
a total value of approximately $750,000 (nominal value). The project began in March 2007 and projects completed
during September 2007. The project was completed in late 2008; at the end of 2010, it is in process of documentary
settlement.
n. During 2004, Grupo Condumex and Operadora jointly signed contracts for the construction of two production oil rigs
platforms (including engineering, procurement, manufacturing, loading, tying up and technical assistance during the
installation, as well as interconnection, testing and start-up). The construction work began in July 2004 and concluded
in December 2006. Also, during 2007, offshore installation and testing work was performed for both platforms. The
original amount of this contract was $956,589 (nominal value), plus US 266,684 thousand. Also, between 2005 and
2007, amendment agreements were signed to adjust certain prices, execution deadlines and additional costs incurred.
During 2008, the final construction works were realized. Accordingly, in 2008 and continuing throughout 2009, partial
recoveries were received and at December 31, 2010, the documentary and financial settlement of the two projects was
completed, in which100% of scheduled, as well as additional work was recovered.
o. During 2009 and 2010, the Company signed contracts and work orders with related parties in México and Latin America,
for amounts totaling $ 1,361,552 and $ 1,589,000 and U.S. 94 and U.S. 52 million, respectively. Contracts include
professional services for construction and modernization of copper wire networks (peers) and outside plant fiber, and to
build pipelines and installation of fiber optic links and zonal urban, urban fiber, fiber optic automation, public works, and
connections. Most of the projects contracted in Mexico were completed during 2008 and 2009, while Latin American
projects, which have been executed normally, are estimated to be completed during 2011.
21. CONTINGENCIES
a. There is an investigation of absolute monopolistic practices in the public market of rail freight in country initiated by the
Federal Competition Commission ( “Cofeco”) by reason of the sale of the shares representing the capital of Ferrosur, S.A. de
C.V. and the acquisition of shares representing the capital of Infrastructura y Transportes México, S.A. de C.V. As a result of
these transactions, the Cofeco determined absolute monopolistic practice under Article 9 °, fraction I, of the Federal Law on
Economic Competition, by and among Grupo Carso and other companies, and ordered the suppression of the monopolistic
practice and imposed a fine on, among other companies, Grupo Carso in the amount of $ 82,200, who also was ordered to
post bond for the same amount, which was recorded as other assets in the accompanying consolidated balance sheet.
In response to this resolution, Grupo Carso initiated an indirect trial, with the court Sixth District Administrative Matters in
the Federal District. The demand for guarantees is declared admissible and a constitutional hearing was held on September
28, 2010. By court decision rendered on December 16, 2010, the Sixth District Judge in Administrative Matters in the
Federal District ordered the dismissal of the trial 887/2009-III, considering that it updated the causes of inadmissibility on
the grounds that against the claimed resolution issued by the Federal Competition Commission establish nullification lawsuit
came before the Federal Tribunal of Fiscal and Administrative Justice. In response to this resolution, Grupo Carso, among
other companies, filed a petition for review, which, to date, is still pending.
55
ANNUAL REPORT 2010 •
Generating value
b. Certain subsidiaries have court proceedings under way with the competent authorities for different reasons, mainly taxes and
the recovery of long-term accounts receivable which they are owed. In the opinion of the Company’s officers and attorneys,
most of these issues will be resolved favorably; if not, the result of such lawsuits is not expected to substantially affect its
financial position or results of operations.
22. INFORMATION BY SEGMENT
Information by operating segment is presented based on the management focus and general information is also presented by
product, geographical area and homogenous groups of customers.
a. Analytical information by operating segment:
2010
Production for
the automotive,
construction and
telecommunications Infrastructure Others and Total
industries Retail and construction eliminations consolidated
Net sales $ 18,680,135 $ 33,261,013 $ 11,837,040 $ 417,921 $ 64,196,109
Income from operations 1,573,779 3,877,055 958,961 398,118 6,807,913
Consolidated net income 3,135,618 3,502,604 452,270 449,352 7,539,844
Depreciation and amortization 367,971 652,320 279,232 16,953 1,316,476
Investments in shares of
associated companies 4,817,427 93,494 247,839 3,876,707 9,035,467
Total assets 31,971,131 27,530,162 17,037,985 4,617,220 81,152,498
Total liabilities 19,742,126 12,822,797 6,917,278 3,055,636 42,537,837
2009
Production for
the automotive,
construction and
telecommunications Infrastructure Others and Total
industries Retail and construction eliminations consolidated
Net sales $ 13,757,320 $ 30,554,592 $ 12,176,923 $ 198,918 $ 56,687,753
Income from operations 1,349,939 3,399,374 1,060,072 279,120 6,133,505
Consolidated net income 2,243,472 3,333,163 690,545 1,072,233 7,339,413
Depreciation and amortization 403,034 663,947 247,383 19,681 1,334,045
Investments in shares of
associated companies 4,801,613 9,140 4,825 3,678,247 8,493,825
Total assets 22,830,339 49,798,105 14,672,324 10,376,758 97,677,526
Total liabilities 7,285,234 24,312,308 5,369,980 1,012,750 37,980,272
b. General segment information by geographical area:
The Company operates in different geographical areas and has distribution channels in México, the United States and other
countries through industrial plants, commercial offices or representatives. The distribution of such sales is as follows:
2010 % 2009 %
North America $ 2,840,122 4.42 $ 1,900,721 3.35
Central and South America and Caribbean 5,254,708 8.19 4,195,462 7.40
Europe 378,782 0.59 394,169 0.70
Rest of the world 65,953 0.10 30,271 0.05
Total exports 8,539,565 13.30 6,520,623 11.50
México 55,656,544 86.70 50,167,130 88.50
Net sales $ 64,196,109 100.00 $ 56,687,753 100.00
c. The Company has a wide variety of customers according to the category of products and services it offers; however, no
particular customer represents more than 10% of net sales. The Company offers its products and services in the following
industries: energy, automotive, telecommunications, mining, construction, electronics and the general public.
56
23. SUBSEQUENT EVENT
a. On March 1, 2011, Grupo Carso, S.A.B. de C.V. contributed US 23.3 million to Tabasco Oil Company (“TOC”) in exchange for
a 70% stake in the company. TOC is a certified oil company that was awarded the concession for exploration and production
of hydrocarbons in the eastern plains region of northwest Colombia, by the National Hydrocarbon Agency of Colombia (“ANH
“) in February 2011. The concession area covers an area of 413 km2, and as part of the initial investment commitment
under the concession, the company must make a 3D (three dimensional) seismic study in an area of at least 145 km2 and
develop at least one exploratory well the during the first phase. To date, there are basic studies on the prospects of the block,
including 2D (two dimensional) seismic studies.
b. On January 14, 2011, Grupo Condumex, S.A. de C.V. (spin off of Inmuebles Corporativos e Industriales CDX, S.A. de C.V.,
formerly Grupo Condumex, S.A. de C.V.), sold the shares in its subsidiaries Hubard y Bourlon, S.A. de C.V., Ingenieria HB,
S.A. de C.V., Selmec Equipos Industriales, S.A. de C.V. which is a related party of Enesa Energía, S.A. de C.V. The sale price
of the shares was $515,000, generating an accounting gain of $ 92,040 for the sale of Hubard y Bourlon, S.A. de C.V., an
accounting loss of $69 for the sale of Ingenieria HB, S.A. de C.V. and an accounting gain of $78,228 for the sale of Selmec
Equipos Industriales, S.A. de C.V. At December 31, 2010, these assets are classified as available for sale.
c. On January 31, 2011, 100% of the shares of the subsidiary Cilsa Panama, S.A. were sold for U.S. 700.000 to Ideal Panamá,
S.A. (related party). At December 31, 2010, these assets are classified as available for sale.
24. NEW ACCOUNTING PRINCIPLES
As part of its efforts to converge Mexican standards with international standards, in 2009, the Mexican Board for Research and
Development of Financial Information Standards (“CINIF”) issued the following Mexican Financial Reporting Standards (NIFs),
Interpretations to Financial Information Standards (INIFs) and improvements to NIFs applicable to profitable entities which
become effective as follows:
a. For fiscal years that begin on January 1, 2011:
B-5, Financial Segment Information
B-9, Interim Financial Information
C-4, Inventories
C-5, Advance Payments and Other Assets
C-6, Property, Plant and Equipment
C-18, Obligations Associated with the Retirement of Property, Plant and Equipment
Improvements to Mexican Financial Reporting Standards 2011
b. For fiscal years that begin on or January 1, 2012:
The provisions of standard NIF C-6, Property, plant and equipment that generate changes from the segregation of components
of items of property, plant and equipment with different useful lives, will become effective on January 1, 2012.
At the date of issuance of these consolidated financial statements, the Company has not fully assessed the effects of adopting
these new standards on its financial information.
25. INTERNATIONAL FINANCIAL REPORTING STANDARDS
In January 2009, the National Banking and Securities Commission published the amendments to its Single Circular for Issuers,
which requires companies to file financial statements prepared according to the International Financial Reporting Standards
(IFRS) beginning in 2012, and permits their early adoption. The Company decided to adopt IFRS as of January 1, 2012, and as
of the date of issuance of this report it is in the process of assessing the impact this decision will have on the main items of its
financial statements.
26. AUTHORIZATION OF THE ISSUANCE OF THE FINANCIAL STATEMENTS
On March 17, 2011, the issuance of the consolidated financial statements was authorized by C.P. Quintín Botas Hernández.
These consolidated financial statements are subject to the approval of the Board of Directors of the Company and the Ordinary
Stockholders’ Meeting, at which the financial statements may be modified, based on provisions set forth in Mexican General
Corporate Law.
Investor information
Investor Relations
Jorge Serrano Esponda
[email protected]
Angélica Piña Garnica
[email protected]
Share Information
Grupo Carso S.A.B. de C.V. Series A-1 shares are listed on the
Bolsa Mexicana de Valores, S.A.B. de C.V.
under the ticker symbol “GCARSO”.
ADR Information
Symbol: GPOVY
2:1
Cusip: 400485207
Depositary Bank
BNY Mellon
P.O. Box 11258
New York, N.Y. 10286-1258
Phone 1-888-BNY-ADRS (1-888-269-2377)
Phone (International) 201-680-6825
[email protected]
www.bnymellon.com/shareowner
Websites
For more information about Grupo Carso and social responsibility
activities, visit:
www.carso.com.mx
www.carlosslim.com
www.museosoumaya.com
PLAZA CARSO
This is one of the largest mixed-use real estate
developments in Latin America and an example
of urban reconversion. A former industrial lot is
the site of an integral project of offices, housing, a
shopping mall and a cultural area, in addition to
proposals to renovate surrounding areas.
This would imply adding green areas, improving
roadways and creating a linear park. In addition to
the innovation in the architectural project and the
engineering efficiency, Plaza Carso was created
with a focus on sustainability. The design uses
materials and processes that allow for the reduction
in consumption of natural resources. For example,
thermal windows reduce the use of air conditioning
and through recycling, absorption wells and the
capture of rain water, consumption of water is
reduced throughout the complex.
The new environment created by Plaza Carso also
increases cultural options through Teatro Cervantes,
Museo Jumex and Museo Soumaya, a vanguard
building that houses one of the most important
private collections in the world.
CONTENTS
Introduction 1
Brands, Services and Products 2
Key Financial Data 4
Letter to Shareholders 6
Report of the Chief Operating Officer 7
Commercial and Consumer Division 8
Industrial and Manufacturing Division 12
Infrastructure and Construction Division 16
Discontinued Operations 22
Board of Directors 24
Corporate and Auditing Practices Committee Report 25
Consolidate Financial Statements 27
Design: www.signi.com.mx
Generating
value
ANNUAL REPORT 2010
ANNUAL REPORT 2010
Generating
value
Corporate Headquarters
Lago Zurich 245 Edificio Frisco
Col. Ampliación Granada
Mexico City, 11529
www.carso.com.mx