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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 20-F
 o
    
    REGISTRATION STATEMENT PERSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF
1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED ON DECEMBER 31, 2007
 OR
 o
    
    TRANSITION REPORT PERSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM
 _____ 
TO
 _____
 OR
 o
    
    SHELL COMPANY REPORT PERSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Date of event requiring this shell company report
 COMMISSION FILE NUMBER: 1-10905
 Vitro, S.A.B. de C.V.
 N/A
 United Mexican States
 
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredShares of Series A common stock, no par value
    
    New York Stock Exchange*Ordinary Participation Certificate, each representing 
one share of Series A common stock
    
    New York Stock Exchange*American Depositary Shares, evidenced by American 
Depositary Receipts, each representing three 
Ordinary Participation Certificates
    
    New York Stock Exchange
 
 *
    
    Not for trading, but only in connection with the registration of American Depositary Shares,
pursuant to the requirements of the Securities and Exchange Commission. 
  o þ
  o þ
  þ o
  o þ o
  o o þ
  o þ
  o þ




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TABLE OF CONTENTS
 PagePresentation of Certain Information
    
    
    iiiForward-Looking Statements
    
    
    vItem 1. Identity of Directors, Senior Management and Advisers
    
    
    1Item 2. Offer Statistics and Expected Timetable
    
    
    1Item 3. Key Information
    
    
    1Recent Developments
    
    
    1Risk Factors
    
    
    3Exchange Rates
    
    
    12Selected Consolidated Financial Information
    
    
    13Item 4. Information on the Company
    
    
    18Organizational Structure
    
    
    18Business
    
    
    19Item 4A. Unresolved Staff Comments
    
    
    37Item 5. Operating and Financial Review and Prospects
    
    
    38Operating Results
    
    
    38Liquidity and Capital Resources
    
    
    47Off-Balance Sheet Arrangements
    
    
    53Tabular Disclosure of Contractual Obligations
    
    
    54Accounting Considerations
    
    
    55Research and Development
    
    
    58Item 6. Directors, Senior Management and Employees
    
    
    59Directors and Senior Management
    
    
    59Board Practices
    
    
    67Share Ownership
    
    
    71Employees
    
    
    73Item 7. Major Shareholders and Related Party Transactions
    
    
    74Major Shareholders
    
    
    74Related Party Transactions
    
    
    77Item 8. Financial Information
    
    
    78Item 9. The Offer and Listing
    
    
    80Listing Details
    
    
    80Markets
    
    
    82
  i




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PageItem 10. Additional Information
    
    
    83Mexican Corporate Law and By-Laws
    
    
    83Material Contracts
    
    
    95Exchange Controls
    
    
    95Material Tax Consequences
    
    
    96Where You Can Find More Information
    
    
    101Differences in Corporate Governance Practices
    
    
    102Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    106Item 12. Description of Securities Other than Equity Securities
    
    
    109Item 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    109Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    109Item 15. Controls and Procedures
    
    
    109Item 16. Reserved
    
    
    111Item 16A. Audit Committee Financial Expert
    
    
    111Item 16B. Code of Ethics
    
    
    112Item 16C. Principal Accountant Fees and Services
    
    
    112Item 16D. Exemption from the Listing Standards for Audit Committees
    
    
    113Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    113Item 17. Financial Statements
    
    
    113Item 18. Financial Statements
    
    
    113Item 19. Exhibits
    
    
    114Exhibit 2.11Exhibit 2.12Exhibit 2.18Exhibit 2.19Exhibit 2.23Exhibit 2.24Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 12.3Exhibit 13.1
   ii




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PRESENTATION OF CERTAIN INFORMATION
 sociedad anónima
bursátil de capital variable
         iii




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Diario Oficial de la Federación
       iv




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FORWARD-LOOKING STATEMENTS
    
    
    cost and availability of energy;
    
    transportation costs and availability;
    
    consolidation among competitors and customers;
    
    the general political, economic and competitive conditions in markets and countries
where we have operations, including competitive pricing pressures, inflation or
deflation and changes in tax rates;
    
    foreign currency exchange fluctuations relative to the U.S. dollar against the
Mexican peso;
    
    changes in capital availability or cost, including interest rate or foreign
currency exchange rate fluctuations;
    
    liquidity, debt repayment and access to credit;
    
    fluctuations in the price of raw materials and labor costs;
    
    capacity utilization of our facilities;
    
    availability of raw materials;
    
    the ability to integrate operations of acquired businesses;
    
    consumer preferences for forms of packaging that are alternatives to glass
containers;
    
    the ability to hire and retain experienced management;
    
    the performance by customers of their obligations under purchase agreements;
    
    lifting of trade barriers and enforcement of measures against unfair trade
practices;
    
    the enactment of stricter environmental laws; and
    
    the timing and occurrence of events which are beyond our control.
   v




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Item 1. Identity of Directors, Senior Management and Advisers
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 
 RECENT DEVELOPMENTS
 New Perspectives
 Strategic Focus
     Debt Refinancing
  Strategic Growth
    1




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Genesis Project
 
   
    
    Standardize and optimize our operating and administrative processes,
    
    Facilitate the integration of our operations globally,
    
    Improve and maintain compliance with regulatory requirements regarding effective
internal control over financial reporting,
    
    Standardize management and operational information across our subsidiaries in Mexico
and abroad, enhancing also its availability for decision making at all levels of the Vitro
organization,
    
    Establish, integrate and apply best practices standards in our operations, and
    
    Continue our strategy of pursuing consistent and integrated growth globally.
     2




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RISK FACTORS
 You should carefully consider the following risk factors, as well as all of the other
information presented in this annual report, including our consolidated financial statements and
the notes thereto. In general, investing in the securities of issuers in emerging market countries
such as Mexico involves certain risks not typically associated with investing in securities of U.S.
companies.
 The risks and uncertainties described below are not the only risks and uncertainties affecting
us. Additional risks and uncertainties that we do not know about or that we currently think are
immaterial also may impair our business operations or our ability to make payments under our
existing indebtedness.
 For purposes of this section, when we state that a risk, uncertainty or problem may, could or
would have an adverse effect on us, we mean that the risk, uncertainty or problem may, could or
would have an adverse effect on our business, financial condition, liquidity, results of operations
or prospects, except as otherwise indicated or as the context may otherwise require.
 RISK FACTORS RELATING TO US
 We have high interest payment requirements.
    
    
    we may have less cash available to expand and improve our business, since we
are required to dedicate a significant portion of our cash flow from operations to the
payment of interest on our debt;
    
    our ability to obtain additional debt financing may be limited and the terms on
which such financing is obtained may be negatively affected; and
    
    our ability to compete effectively against better-capitalized competitors and
to withstand downturns in our business may be affected since a significant portion of
our cash flow from operations is required to be dedicated to making interest payments.
As a result, we may lose market share and experience lower sales, which, in turn, could
result in a material adverse effect on our financial condition, results of operations
and liquidity.
 Our indentures contain certain restrictive covenants.
   3




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We have to pay interest and principal on our dollar-denominated debt with revenues generated in
pesos or other currencies, as we do not generate sufficient revenue in dollars from our operations.
    We have experienced rising operating costs in our businesses.
    We continue to experience competition from our global competitors and vertically integrated
customers.
   4




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Difficult market conditions in the automotive industry may affect our operating margins and results
of operations.
   We have customers that are significant to us and the loss of all or a portion of their business
would have an adverse effect on us.
  Downturns in the economies in which we operate may negatively affect the demand for our products
and our results of operations.
     5




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Inflation fluctuations may have an adverse effect on our total comprehensive financing result.
    Foreign currency exchange rate fluctuations may have an adverse effect on our total comprehensive
financial result.
    Changes in the value of the peso to the U.S. dollar and the Euro may have an adverse effect on us.
   6




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We may be adversely affected by increases in interest rates.
    The costs of complying with environmental protection and health and safety laws, and any
liabilities arising thereunder, may increase and adversely affect our business, results of
operations, cash flows or financial condition.
   Procuraduría
Federal de Protección al Ambiente
  7




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Substitution trends in the glass container industry may continue to adversely affect our business.
  If we fail to maintain an effective system of internal control over financial reporting, we may not
be able to accurately report our financial results or prevent fraud.
  
    
    reinforcement of personnel knowledge base regarding technical accounting
matters;
    
    hiring a professional service firm to assist our accounting staff with the
implementation of superior processes and new internal controls; and
    
    Genesis Project implementation, including the ERP conversion, across Vitros
global operating model. See Item 3. Key InformationRecent DevelopmentsGenesis
Project and Item 15. Controls and Procedures.
   8




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We have a disagreement with our partner in our Flat Glass business unit about the merger of Vitro
Plan into Viméxico, which may affect the value of the guaranty of the 2012 Senior Notes, 2017
Senior Notes, and 2013 Senior Notes by our Flat Glass business unit.
       RISK FACTORS RELATING TO ECONOMIES IN WHICH WE PARTICIPATE
 Economic developments in Mexico and the United States affect our business.
   9




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Developments in other countries may adversely affect our business or the market price of our
securities.
  If foreign currency exchange controls and restrictions are imposed, we may not be able to service
our debt in U.S. dollars, which exposes investors to foreign currency exchange risk.
  Political events in Mexico could affect Mexican economic policy and adversely affect us.
   10




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Social Instability in Mexico could affect Mexican economic policy and adversely affect us
  Our financial statements may not give you the same information as financial statements prepared
under United States accounting principles.
   11




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EXCHANGE RATES
  Noon Buying Rate(1)Year ended December 31,
    
    High
    
    
    Low
    
    
    Average
    
    
    Period-End2003
    
    Ps.
    11.41
    
    
    Ps.
    10.11
    
    
    Ps.
    10.80
    
    
    Ps.
    11.242004
    
    
    11.64
    
    
    
    10.81
    
    
    
    11.29
    
    
    
    11.152005
    
    
    11.41
    
    
    
    10.41
    
    
    
    10.89
    
    
    
    10.632006
    
    
    11.46
    
    
    
    10.43
    
    
    
    10.91
    
    
    
    10.802007
    
    
    11.27
    
    
    
    10.67
    
    
    
    10.93
    
    
    
    10.92
 
 (1)
    
    Source: Federal Reserve Bank of New York  Noon Buying Rate(1)High
    
    
    LowDecember 2007
    
    Ps.
    10.92
    
    
    Ps.
    10.80January 2008
    
    
    10.97
    
    
    
    10.82February
    
    
    10.82
    
    
    
    10.67March
    
    
    10.85
    
    
    
    10.63April
    
    
    10.60
    
    
    
    10.44May
    
    
    10.57
    
    
    
    10.31June (through June 23, 2008)
    
    
    10.44
    
    
    
    10.27
 
 (1)
    
    Source: Federal Reserve Bank of New York  12




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SELECTED CONSOLIDATED FINANCIAL INFORMATION
   As of or for the year ended December 31,2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2007(Ps. millions)(1)
    
    
    ($ millions)(1)(2)Income Statement Data:Mexican FRS:Net sales
    
    Ps.
    26,521
    
    
    Ps.
    26,385
    
    
    Ps.
    26,567
    
    
    Ps.
    27,876
    
    
    Ps.
    28,591
    
    
    $
    2,631Cost of sales
    
    
    18,920
    
    
    
    19,109
    
    
    
    19,198
    
    
    
    20,230
    
    
    
    20,187
    
    
    
    1,858Gross profit
    
    
    7,602
    
    
    
    7,276
    
    
    
    7,369
    
    
    
    7,646
    
    
    
    8,404
    
    
    
    773Selling, general and administrative expenses
    
    
    5,625
    
    
    
    5,643
    
    
    
    5,530
    
    
    
    5,529
    
    
    
    5,700
    
    
    
    524Operating income
    
    
    1,977
    
    
    
    1,632
    
    
    
    1,839
    
    
    
    2,117
    
    
    
    2,704
    
    
    
    249Financing result:Interest expense, net
    
    
    2,025
    
    
    
    2,204
    
    
    
    2,355
    
    
    
    2,155
    
    
    
    1,836
    
    
    
    169Derivative financial instruments
    
    
    0
    
    
    
    0
    
    
    
    17
    
    
    
    337
    
    
    
    201
    
    
    
    18Exchange loss (gain), net
    
    
    844
    
    
    
    90
    
    
    
    (417
    )
    
    
    224
    
    
    
    94
    
    
    
    9Gain from monetary position(3)
    
    
    (633
    )
    
    
    (776
    )
    
    
    (455
    )
    
    
    (440
    )
    
    
    (471
    )
    
    
    (43
    )Total comprehensive financing result
    
    
    2,235
    
    
    
    1,518
    
    
    
    1,500
    
    
    
    2,276
    
    
    
    1,660
    
    
    
    153Other expenses (income), net(4)
    
    
    208
    
    
    
    279
    
    
    
    494
    
    
    
    (229
    )
    
    
    869
    
    
    
    80(Loss) income before income and asset taxes
    
    
    (466
    )
    
    
    (165
    )
    
    
    (155
    )
    
    
    70
    
    
    
    175
    
    
    
    16Income and asset tax expense (benefit)
    
    
    47
    
    
    
    (9
    )
    
    
    (519
    )
    
    
    228
    
    
    
    44
    
    
    
    4Net income (loss) from continuing operations before changes
in accounting principles
    
    
    (513
    )
    
    
    (156
    )
    
    
    364
    
    
    
    (158
    )
    
    
    131
    
    
    
    12Net income (loss) from discontinued operations(5)
    
    
    64
    
    
    
    97
    
    
    
    3
    
    
    
    (31
    )
    
    
    0
    
    
    
    0Gain on sale of discontinued operations
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    480
    
    
    
    0
    
    
    
    0Cumulative effect of changes in accounting
principles(11)
    
    
    0
    
    
    
    0
    
    
    
    (124
    )
    
    
    0
    
    
    
    0
    
    
    
    0Net income (loss)(5)
    
    
    (449
    )
    
    
    (59
    )
    
    
    243
    
    
    
    291
    
    
    
    131
    
    
    
    12Net income (loss) of majority interest(5)
    
    
    (672
    )
    
    
    (308
    )
    
    
    63
    
    
    
    401
    
    
    
    (13
    )
    
    
    (1
    )Net income (loss) from continuing operations per share
    
    
    (1.86
    )
    
    
    (0.57
    )
    
    
    1.33
    
    
    
    (0.54
    )
    
    
    0.38
    
    
    
    0.04Net income (loss) from discontinued operations per
share(5)
    
    
    0.23
    
    
    
    0.36
    
    
    
    0.01
    
    
    
    1.55
    
    
    
    0
    
    
    
    0Diluted and basic net income (loss) of majority interest
per share(5)
    
    
    (2.44
    )
    
    
    (1.13
    )
    
    
    0.23
    
    
    
    1.39
    
    
    
    (0.04
    )
    
    
    (0.00
    )U.S. GAAP(6)(11):Net sales
    
    Ps.
    23,300
    
    
    Ps.
    23,891
    
    
    Ps.
    24,292
    
    
    Ps.
    25,655
    
    
    Ps.
    26,159
    
    
    $
    2,407Operating income
    
    
    1,110
    
    
    
    723
    
    
    
    831
    
    
    
    1,436
    
    
    
    2,524
    
    
    
    232Net income (loss) from continuing
operations(5)(11)
    
    
    (1,077
    )
    
    
    (873
    )
    
    
    (183
    )
    
    
    (554
    )
    
    
    469
    
    
    
    43Net income (loss)(5)(11)
    
    
    (839
    )
    
    
    (248
    )
    
    
    (287
    )
    
    
    (74
    )
    
    
    469
    
    
    
    43Net income (loss) from continuing operations per
share(5)(11)
    
    
    (3.91
    )
    
    
    (3.21
    )
    
    
    (0.66
    )
    
    
    (1.92
    )
    
    
    1.37
    
    
    
    0.13Net income (loss) from discontinued operations
per
share(5)(11)
    
    
    0.87
    
    
    
    2.30
    
    
    
    (0.38
    )
    
    
    1.66
    
    
    
    0
    
    
    
    0Diluted and basic net income (loss) per
share(5)(11)
    
    
    (3.05
    )
    
    
    (0.91
    )
    
    
    (1.04
    )
    
    
    (0.26
    )
    
    
    1.37
    
    
    
    0.13
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As of or for the year ended December 31,2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2007(Ps. millions)(1)
    
    
    ($ millions)(1)(2)Balance Sheet Data:Mexican FRS:Cash and cash equivalents
    
    
    1,146
    
    
    
    2,838
    
    
    
    1,441
    
    
    
    1,222
    
    
    
    1,638
    
    
    
    151Current assets
    
    
    9,260
    
    
    
    10,704
    
    
    
    9,863
    
    
    
    9,175
    
    
    
    11,136
    
    
    
    1,025Total assets from discontinued operations(5)
    
    
    2,585
    
    
    
    2,180
    
    
    
    2,021
    
    
    
    0
    
    
    
    0
    
    
    
    0Total assets
    
    
    36,045
    
    
    
    34,692
    
    
    
    32,937
    
    
    
    28,695
    
    
    
    32,187
    
    
    
    2,962Current liabilities
    
    
    9,276
    
    
    
    8,200
    
    
    
    8,675
    
    
    
    4,835
    
    
    
    7,140
    
    
    
    657Total debt
    
    
    17,658
    
    
    
    17,926
    
    
    
    15,959
    
    
    
    12,826
    
    
    
    14,918
    
    
    
    1,373Total liabilities from discontinued
operations(5)
    
    
    1,995
    
    
    
    1,647
    
    
    
    1,398
    
    
    
    0
    
    
    
    0
    
    
    
    0Total liabilities
    
    
    26,058
    
    
    
    25,715
    
    
    
    23,704
    
    
    
    19,329
    
    
    
    22,801
    
    
    
    2,098Stockholders equity(5)
    
    
    9.987
    
    
    
    8,977
    
    
    
    9,234
    
    
    
    9,366
    
    
    
    9,386
    
    
    
    864Minority interest in consolidated
subsidiaries(5)
    
    
    3,360
    
    
    
    3,114
    
    
    
    3,198
    
    
    
    1,892
    
    
    
    1,960
    
    
    
    180Majority stockholders equity(5)
    
    
    6,627
    
    
    
    5,863
    
    
    
    6,036
    
    
    
    7,474
    
    
    
    7,426
    
    
    
    684U.S. GAAP(5)(11):Total assets
    
    Ps.
    34,541
    
    
    Ps.
    33,736
    
    
    Ps.
    30,579
    
    
    Ps.
    26,097
    
    
    Ps.
    29,985
    
    
    $
    2,759Total liabilities
    
    
    25,874
    
    
    
    25,895
    
    
    
    23,178
    
    
    
    19,272
    
    
    
    22,923
    
    
    
    2,110Net assets
    
    
    8,667
    
    
    
    7,841
    
    
    
    7,402
    
    
    
    6,826
    
    
    
    7,062
    
    
    
    650Capital stock
    
    
    7,566
    
    
    
    7,566
    
    
    
    7,566
    
    
    
    7,632
    
    
    
    7,632
    
    
    
    702Stockholders equity
    
    
    6,188
    
    
    
    5,375
    
    
    
    4,913
    
    
    
    5,710
    
    
    
    5,850
    
    
    
    538Other Data:Mexican FRS:Capital expenditures
    
    
    1,968
    
    
    
    1,505
    
    
    
    1,107
    
    
    
    1,252
    
    
    
    2,695
    
    
    
    248Depreciation and amortization
    
    
    2,035
    
    
    
    2,283
    
    
    
    1,854
    
    
    
    1,795
    
    
    
    1,414
    
    
    
    130Total shares issued at end of period(6)
    
    
    324
    
    
    
    324
    
    
    
    324
    
    
    
    386.9
    
    
    
    386.9Total shares held in Stock Option Trust at end of
period(6)
    
    
    24.7
    
    
    
    22.8
    
    
    
    22.3
    
    
    
    17.6
    
    
    
    17.5Total shares held as treasury stock at end of
period(6)
    
    
    28.2
    
    
    
    28.2
    
    
    
    28.2
    
    
    
    28.3
    
    
    
    28.3Total shares issued and outstanding at end of
period(6)
    
    
    271.1
    
    
    
    273.1
    
    
    
    273.5
    
    
    
    341.0
    
    
    
    341.0Average total shares outstanding during
period(6)
    
    
    275.2
    
    
    
    271.8
    
    
    
    273.1
    
    
    
    289.6
    
    
    
    341.0Inflation and Foreign Currency Exchange Rate Data:Percentage of change in INPC(7)
    
    
    4.0
    %
    
    
    5.2
    %
    
    
    3.3
    %
    
    
    4.1
    %
    
    
    3.8
    %Peso/dollar exchange rate at the end of
period(8)
    
    
    11.2372
    
    
    
    11.1495
    
    
    
    10.6344
    
    
    
    10.8116
    
    
    
    10.8662Average exchange rate(9)
    
    
    10.8251
    
    
    
    11.3091
    
    
    
    10.8786
    
    
    
    10.9034
    
    
    
    10.9371
 (1)
    
    Except per share amounts, number of shares and inflation and foreign currency
exchange rate data.(2)
    
    Peso amounts have been translated into U.S. dollars, solely for the convenience of
the reader, at the rate of 10.8662 pesos per one U.S. dollar, the Free Exchange Rate on
December 31, 2007.  14




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##### Table of Contents



(3)
    
    The gain from monetary position reflects the result of holding monetary assets and
liabilities during periods of inflation. Values stated in current monetary units decrease in
purchasing power over time. This means that losses are incurred by holding monetary assets
over time, whereas gains are realized by maintaining monetary liabilities. See Item 5.
Operating and Financial Review and Prospects.(4)
    
    Other expenses (income), net, includes: Year ended December 31,(millions)2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007Restructuring charges (i)
    
    Ps.
    99
    
    
    Ps.
    267
    
    
    Ps.
    332
    
    
    Ps.
    61
    
    
    Ps.
    7Impairment of long-lived assets
    
    
    143
    
    
    
    352
    
    
    
    385
    
    
    
    393
    
    
    
    122Loss (gain) from sale of long-lived assets
    
    
    5
    
    
    
    10
    
    
    
    6
    
    
    
    (795
    )
    
    
    47Loss (gain) from sale of subsidiaries
    
    
    (41
    )
    
    
    (545
    )
    
    
    137
    
    
    
    (68
    )
    
    
    11Assignment of Vitro Club Trust (ii)
    
    
    
    
    
    
    
    
    
    
    (458
    )Early extinguishment of employee
retirement obligations
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    8
    
    
    
    97Fees and costs for extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    488Statutory employee profit sharing
    
    
    44
    
    
    
    129
    
    
    
    51
    
    
    
    55
    
    
    
    54Other
    
    
    (42
    )
    
    
    66
    
    
    
    23
    
    
    
    117
    
    
    
    43Ps.
    208
    
    
    Ps.
    279
    
    
    Ps.
    494
    
    
    Ps.
    (229
    )
    
    Ps.
    869
 (i)
    
    The restructuring charges relate to the downsizing and streamlining of our
corporate functions and organization at some of our business units and are part of an
ongoing benefit arrangement.(ii)
    
    The Vitro Club holds land and facilities for our employees recreational
activities, which are held in a trust (the Trust). The Trust can only be assigned if
all of the participants name one entity as the sole beneficiary. In 2005, all the
participants named the Company as the sole beneficiary, and therefore the Company has
the right to take control of the Trust. The Company recorded the fair value of the
assets and recognized other income of Ps. 458 million.
 (5)
    
    On June 16, 2006, we completed the sale of our 51% equity ownership interest in
Vitrocrisa to Libbey, the owner of the remaining 49% equity interest. See Item 4. Information
on the Company BusinessStrategic Sales of Non-Core Businesses and Assets. All financial and
operating information relating to Vitrocrisa in this annual report, which was previously
presented as one of our reportable segments is now presented as a discontinued operation. In
addition, the discussion of our indebtedness in this annual report does not include the
indebtedness of Vitrocrisa, which is presented under Mexican FRS in our consolidated balance
sheets as a part of Total liabilities of discontinued operations.  15




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##### Table of Contents



(6)
    
    Millions of shares.(7)
    
    Calculated using year-end INPC of the most recent year divided by the year-end INPC
of the previous year.(8)
    
    Based on the Free Exchange Rate at the end of the period.(9)
    
    Calculated using the average of Free Exchange Rates on the last day of each month
during the period.(10)
    
    Effective January 1, 2005, the Company adopted the provisions of Bulletin C-10,
Derivative Financial Instruments and Hedging Activities, which requires that all derivative
instruments be recognized at fair value, sets the rules to recognize hedging activities and
requires separation, if practical, of embedded derivative instruments. Through December 31,
2004, according to prior accounting standards (Bulletin C-2, Financial Instruments), the
Company did not recognize the effect of hedging derivatives under financial expenses until
the flow exchanges mentioned in the swap contract were actually executed. The effect of
adopting Bulletin C-10 was a charge to cumulative effect of changes in accounting principles
of Ps. 124 million, net of tax.(11)
    
    Certain of our subsidiaries have been classified as discontinued operations in our
U.S. GAAP consolidated financial information as they meet the definition of held for sale for
U.S. GAAP purposes. These subsidiaries did not meet the definition of discontinued operations
for Mexican FRS purposes as they do not constitute the sale of a significant portion of our
business. See note 24 k to our consolidated financial statements for a description of those
subsidiaries.  16




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##### Table of Contents



Dividends per Share
  Fiscal Year WithRespect to WhichDividend Was
    
    Month Dividend
    
    Total Dividend
    
    
    Dividends per
    
    
    Dividend per
    
    
    Month DividendDeclared
    
    Was Declared
    
    Amount(1)
    
    
    Share
    
    
    Share(2)
    
    
    Was Paid(Ps. millions)
    
    
    (Pesos)
    
    
    (Dollars)2003
    
    March 2004
    
    
    89
    
    
    
    0.30
    
    
    
    0.0267
    
    
    April 20042004
    
    March 2005
    
    
    90
    
    
    
    0.30
    
    
    
    0.0268
    
    
    April 20052005
    
    April 2006
    
    
    89
    
    
    
    0.30
    
    
    
    0.0270
    
    
    May 20062006
    
    March 2007
    
    
    133
    
    
    
    0.37
    
    
    
    0.0334
    
    
    April 20072007
    
    April 2008
    
    
    143
    
    
    
    0.40
    
    
    
    0.0372
    
    
    May 2008
 
 (1)
    
    Under Mexican corporate law, our shares held by the Stock Option Trust are
considered issued and outstanding and therefore are entitled to receive dividends.(2)
    
    For purposes of calculating the dividends paid in U.S. dollars per share, we divided
the dividends paid in Mexican peso per share by the Free Exchange Rate as of the date on which
such dividend was declared.  17




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##### Table of Contents



Item 4. Information on the Company
 
 ORGANIZATIONAL STRUCTURE
  
  18




---



##### Table of Contents



BUSINESS
 Business Overview
 sociedad anónima bursátil de
capital variable
       19




---



##### Table of Contents



Acquisitions
      Strategic Sales of Non-Core Businesses and Assets
    20




---



##### Table of Contents



Our Operating Business Units
   21




---



##### Table of Contents



Business Segment Data
  Glass
    
    
    Flat
    
    
    Corporate &Containers
    
    
    Glass
    
    
    Eliminations
    
    
    Consolidated
    
    
    $ million2007Consolidated net sales
    
    Ps.
    14,639
    
    
    Ps.
    13,591
    
    
    Ps.
    361
    
    
    Ps.
    28,591
    
    
    $
    2,631Operating income
    
    
    2,054
    
    
    
    782
    
    
    
    (132
    )
    
    
    2,704
    
    
    
    249Total assets
    
    
    17,040
    
    
    
    12,835
    
    
    
    2,312
    
    
    
    32,187
    
    
    
    2,962Capital expenditures
    
    
    2,328
    
    
    
    324
    
    
    
    43
    
    
    
    2,695
    
    
    
    2482006Consolidated net sales
    
    Ps.
    13,982
    
    
    Ps.
    13,461
    
    
    Ps.
    433
    
    
    Ps.
    27,876
    
    
    $
    2,565Operating income
    
    
    1,853
    
    
    
    418
    
    
    
    (154
    )
    
    
    2,117
    
    
    
    195Total assets
    
    
    13,937
    
    
    
    11,401
    
    
    
    3,357
    
    
    
    28,695
    
    
    
    2,641Capital expenditures
    
    
    894
    
    
    
    338
    
    
    
    20
    
    
    
    1,252
    
    
    
    1152005Consolidated net sales
    
    Ps.
    12,349
    
    
    Ps.
    13,701
    
    
    Ps.
    517
    
    
    Ps.
    26,567
    
    
    $
    2,445Operating income
    
    
    1,327
    
    
    
    514
    
    
    
    (2
    )
    
    
    1,839
    
    
    
    169Total assets
    
    
    14,668
    
    
    
    13,949
    
    
    
    4,775
    
    
    
    32,937
    
    
    
    3,031Capital expenditures
    
    
    622
    
    
    
    468
    
    
    
    17
    
    
    
    1,107
    
    
    
    102
  Glass
    
    
    Flat
    
    
    Corporate &Containers
    
    
    Glass
    
    
    Eliminations
    
    
    Consolidated2007Consolidated net sales
    
    
    51
    %
    
    
    48
    %
    
    
    1
    %
    
    
    100
    %Operating income
    
    
    76
    %
    
    
    29
    %
    
    
    (5
    %)
    
    
    100
    %Total assets
    
    
    53
    %
    
    
    40
    %
    
    
    7
    %
    
    
    100
    %Capital expenditures
    
    
    86
    %
    
    
    12
    %
    
    
    2
    %
    
    
    100
    %2006Consolidated net sales
    
    
    50
    %
    
    
    48
    %
    
    
    2
    %
    
    
    100
    %Operating income
    
    
    88
    %
    
    
    20
    %
    
    
    (8
    %)
    
    
    100
    %Total assets
    
    
    49
    %
    
    
    40
    %
    
    
    11
    %
    
    
    100
    %Capital expenditures
    
    
    71
    %
    
    
    27
    %
    
    
    2
    %
    
    
    100
    %2005Consolidated net sales
    
    
    46
    %
    
    
    52
    %
    
    
    2
    %
    
    
    100
    %Operating income
    
    
    72
    %
    
    
    28
    %
    
    
    
    
    
    
    100
    %Total assets
    
    
    45
    %
    
    
    42
    %
    
    
    13
    %
    
    
    100
    %Capital expenditures
    
    
    56
    %
    
    
    42
    %
    
    
    2
    %
    
    
    100
    %
  22




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##### Table of Contents



Glass Containers
  
    
    Covisa, which conducts a substantial majority of our glass containers
operations in Mexico;
    
    Comegua, our joint venture with London Overseas and Golden Beer, which we
believe is the largest glass containers producer in Central America (London Overseas
and Golden Beer each hold 25.15% of Comeguas outstanding shares);
    
    Vitro Packaging, our glass containers distribution subsidiary in the United
States;
    
    Vilux, which is engaged in the manufacture and distribution of glass containers
in Bolivia and neighboring countries;
    
    Álcali, which is engaged in the manufacture and distribution of soda ash,
sodium bicarbonate, calcium chloride and salt, which are the main raw materials used in
the manufacture of glass products; and
    
    Fama, which is engaged in the manufacture of capital goods such as glass
forming machines and molds.
   
    
    soda ash, sodium bicarbonate, calcium chloride and salt, which are the main raw
materials used in the manufacture of glass products, and
    
    capital goods such as glass forming machines and molds.
   Flat Glass
    23




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##### Table of Contents




    
    Vidrio y Cristal and Vidrio y Cristal del Noroeste, (formerly Vitro AFG) which
manufacture and distribute a majority of our raw (float) flat glass products for the
Mexican construction industry and to automotive safety glass manufacturers as raw
material.
    
    
    VAU and Vitro Flex, our subsidiaries that manufacture and distribute our flat glass
products for the Mexican and the United States automotive industry for the OEM and
AGR markets;
    
    Vitrocar, which is engaged in our AGR installation business in Mexico through
distribution and installation centers strategically located throughout Mexico; and
    
    Cristales Automotrices, our joint venture with a group of individual investors that
owns a 49% equity interest in this business and operates a part of our AGR
installation business, in Mexico City and its surrounding states.
    
    
    Vitro America, which performs a substantial majority of our flat glass
operations in the United States and derives 85% of its sales from the distribution of
construction glass and 15% from the distribution and installation of auto glass;
    
    Vitro Cristalglass, our joint venture with a group of individual investors that
owns a 40% equity interest in this business, and is engaged in the manufacture and
distribution of value-added flat glass products for the Spanish, French and Portuguese
construction industries, with specialties in value-added glass products and glass for
landmark construction projects;
  24




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##### Table of Contents




    
    Vitro Cristalglass France, which conducts our flat glass business operations in
France and is engaged in the production and distribution of value-added glass products
in the French residential and commercial construction market- see Item 4. Information
on the Company  Business  Acquisitions;
    
    Vitro Chaves, a joint venture of Vitro Cristalglass with a group of individual
investors that owns a 40% equity interest in this business, and is engaged in the
manufacture and distribution of glass and glazing products for the Portuguese
construction industry; and
    
    Vitro Colombia, which conducts our Colombian flat glass operations and is
engaged in the manufacture and distribution of flat glass products for the automotive
and construction markets.
    25




---



##### Table of Contents



Our Products
  Glass Containers:
 Customers andBusiness Line
    
    Products
    
    End-Users
    
    Sales Regions
    
    Joint Venture PartnersGlass Containers
    
    Glass containers
    
    Soft drink, beer,
food, wine &
liquor,
pharmaceutical and
cosmetics
industries
    
    Mexico, the United
States, the
Caribbean, Central
and South America,
Europe, and Asia
    
    London Overseas and
Golden Beer in
ComeguaRaw Materials
    
    Soda ash, sodium
bicarbonate,
calcium chloride
and salt
    
    Glass manufacturers
and detergent
producers
    
    Mexico, the United
States and South
AmericaMachinery and Molds
    
    Glass forming
machines, castings
for glass molds,
machinery parts and
electronic controls
    
    Flat Glass business
unit, Glass
Containers business
unit, glass
manufacturers and
other third-party
manufacturers
    
    Mexico, the United
States and Central
and South America
 Flat Glass:
 Customers andBusiness Line
    
    Products
    
    End-Users
    
    Sales Regions
    
    Joint Venture PartnersFloat Glass
    
    Float glass,
architectural
tempered safety
glass, insulated
glass units,
laminated, table
tops
    
    Construction
industry,
distributors,
retailers and
installers, and
furniture and home
appliances
manufacturers.
Automotive Safety
Glass
manufacturers.
    
    Mexico, the United
States, Canada,
Europe and Central
and South America
    
    Pilkington in
Viméxico/ Individual
investors in Vitro
Cristalglass and in
Vitro ChavesAutomotive Glass
    
    Windshields, side
laminated glass,
rear and side
tempered glass
    
    Automotive OEMs,
automotive glass
replacement (AGR)
market,
distributors and
installers
    
    Mexico, the United
States, Canada and
Central and South
America
    
    Pilkington in
Viméxico/ Individual
investors in
Cristales
Automotrices
   26




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##### Table of Contents



Our Operations
 Glass Containers Business Unit
    
    
    focus on current operations to maximize organic growth and to take advantage of
future opportunities by adding capacity when refurbishing existing furnaces;
    
    consolidate its competitive position by defending share and margins in the
domestic market;
    
    use our growing position in niche markets and focus on value added products to
enhance profitability;
    
    continue the promotion of innovative new product development;
    
    reduce costs and enhance operating efficiencies; and
    
    maximize cash flow through growth in sales and margins while optimizing the use
of capital expenditures and assets.
     27




---



##### Table of Contents



Mexican Operations
   28




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##### Table of Contents



Exports and U.S. Operations
  Central and South American Operations
    Raw Materials, Machinery and Molds
    29




---



##### Table of Contents



Competition
    Flat Glass Business Unit
      30




---



##### Table of Contents




    
    reduce costs and enhance operating efficiencies;
    
    improve cash flow and optimize asset use;
    
    protect and increase our market share in the Mexican market for construction
glass, reducing our reliance on the export market;
    
    maintain our leading position and growth trend in the OEM glass business
through increasing participation with the Asian car manufacturers;
    
    consolidate and grow North American leadership of laminated window products for
the OEMs and other value-added products;
    
    diversify client portfolio;
    
    increase fabrication of value-added products in the United States and Mexico;
    
    increase European presence through Vitro Cristalglass; and
    
    leverage the Vitro brand name.
  Mexican Operations
     31




---



##### Table of Contents



United States Operations
    European Operations
    32




---



##### Table of Contents



Central and South American Operations
  Competition
     Our Raw Materials
 Soda Ash, Sand and Feldspar
  Energy
   33




---



##### Table of Contents



Fuel
   Our Capital Expenditures
  Year ended December 31,2005
    
    
    2006
    
    
    2007Business Unit
    
    (Ps. millions)Glass Containers
    
    Ps.
    622
    
    
    Ps.
    894
    
    
    Ps.
    2,328Flat Glass
    
    
    468
    
    
    
    338
    
    
    
    324Corporate and other
    
    
    17
    
    
    
    20
    
    
    
    43Total
    
    Ps.
    1,107
    
    
    Ps.
    1,252
    
    
    Ps.
    2,695
  
    
    Our Glass Containers Business Unit expects to make capital expenditures of Ps.
2,065 million ($190 million), of which Ps. 1,282 million ($118 million) will be used
to provide maintenance to certain of our furnaces and to the relocation of our
Vidriera Mexico operation to the Vidriera Toluca facility. The remaining Ps. 783
million ($72 million) will be applied to expand production capacity. The production
capacity expansion would take place within the Vidriera Monterrey, Vidriera Mexico (in
its new location at the Vidriera Toluca premises), and Vidriera Los Reyes facilities.
    
    Our Flat Glass Business Unit expects to make capital expenditures of Ps. 598
million ($55 million), of which Ps. 348 million ($32 million) will be used by its
Mexican subsidiaries, highlighted by the purchase of a new furnace for the Companys
automotive glass operations and the other Ps. 250 million ($23 million) will be used
by its foreign subsidiaries.
    
    Our corporate entities expect to make capital expenditures of approximately Ps. 32
million ($3 million).
   Genesis Project
   34




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##### Table of Contents



Our Property, Plant and Equipment
    Average Capacity
    
    
    Average CapacityUtilization(1)as of
    
    
    Utilization(2)as of
    
    
    Number of FacilitiesBusiness Unit
    
    
    
    December 31, 2006
    
    
    December 31, 2007
    
    
    by City or CountryGlass Containers
    
    
    
    
    98
    %
    
    
    97
    %
    
    Monterrey(3)GuadalajaraMexico City(2)QueretaroTolucaCosta RicaGuatemalaPanamaBoliviaFlat Glass
    
    Float
    
    
    94
    %
    
    
    99
    %
    
    Monterrey(4)Furnaces(3)
    
    
    
    
    
    
    
    
    
    Mexico City(2)(4)MexicaliUnited States(9)AutomotiveFacilities
    
    
    79
    %
    
    
    77
    %
    
    ColombiaSpain(7)Portugal
 
 (1)
    
    Average for the twelve-month period ended December 31, 2006.(2)
    
    Average for the twelve-month period ended December 31, 2007.(3)
    
    Capacity utilization may sometimes be greater than 100% because pulling capacity is
calculated based on a certain number of changes in glass color and thickness, determined by
historical averages.(4)
    
    Does not include a furnace in Mexico City that has been shut down since 2006.     35




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##### Table of Contents



Environmental Matters
 Ley General de Equilibrio Ecológico y la Protección al Ambiente Ley de Aguas
Nacionales
 Ley General para la Prevención y Gestión Integral de los Residuos
 Normas Oficiales Mexicanas Ley General de Metrología
y Normalización
 Secretaria del Medio Ambiente y Recursos Naturales Procuraduria Federal de Protección al Ambiente
  Industria Limpia
  36




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##### Table of Contents



Item 4A. Unresolved Staff Comments
   37




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##### Table of Contents



Item 5. Operating and Financial Review and Prospects
 You should read this discussion in conjunction with, and this discussion is qualified in its
entirety by reference to, our consolidated financial statements and notes thereto and other
financial information included elsewhere in this annual report. Our consolidated financial
statements are prepared in accordance with Mexican FRS, which differs in certain significant
respects from U.S. GAAP. Note 24 to our consolidated financial statements for the year ended
December 31, 2007 provides a description of the principal differences between Mexican FRS and U.S.
GAAP as they relate to us. This section contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those discussed in the forward-looking
statements as a result of various factors, including without limitation those set forth in Item 3.
Key InformationRisk Factors and the other matters set forth in this annual report. See
Forward-Looking Statements.
 
 OPERATING RESULTS
 Factors Affecting Our Results of Operations
  Trend Information
    38




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##### Table of Contents



Economic Developments in Mexico and the United States Affect our Business
    39




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##### Table of Contents



Inflation and Foreign Currency Exchange Rate Fluctuations
  For the Year Ended December 31,2005
    
    
    2006
    
    
    2007Nominal peso devaluation (appreciation) relative to the U.S.
dollar(1)
    
    
    (4.6%)
    
    
    
    1.7%
    
    
    
    0.5%Mexican inflation (based on changes in INPC)(1)
    
    
    3.3%
    
    
    
    4.1%
    
    
    
    3.8%U.S. inflation (based on changes in Consumer Price Index)(2)
    
    
    3.5%
    
    
    
    2.5%
    
    
    
    4.1%Inflation differential (Mexican vs. U.S.)(1)(2)(3)
    
    
    (0.2%)
    
    
    
    1.6%
    
    
    
    (0.3%)Real peso devaluation (appreciation) relative to the U.S. dollar(4)
    
    
    (4.5%)
    
    
    
    0.1%
    
    
    
    0.8%Free Exchange Rate as of year end(1)
    
    Ps.
    10.6344
    
    
    Ps.
    10.8116
    
    
    Ps.
    10.8662Mexican GDP growth rate(5)
    
    
    3.0%
    
    
    
    4.7%
    
    
    
    3.3%Exchange rate of euro per pesos as of year end(6)
    
    Ps.
    12.5932
    
    
    Ps.
    14.2680
    
    
    Ps.
    15.9526
 
 (1)
    
    Source: Banco de México.(2)
    
    Source: U.S. Bureau of Labor Statistics.(3)
    
    Compounded.(4)
    
    Peso devaluation (appreciation) in real terms = -((Nominal peso devaluation +1) / (Inflation
differential + 1))-1.(5)
    
    Source: Instituto Nacional de Estadística, Geografía e Informática.(6)
    
    Source: Federal Reserve Bank of New YorkNoon Buying Rates as to euro-to-dollar exchange
rate and Banco de México as to dollar-to-peso exchange rate. Effects of Inflation and Foreign Currency Exchange Rate Fluctuations on Operating Margins
    40




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##### Table of Contents



Effect of Inflation and Foreign Currency Exchange Rate Fluctuations on Total Comprehensive
Financing Result
     41




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##### Table of Contents



Results of Operations
   For the year ended December 31,2005
    
    
    2006
    
    
    2007Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    72.3
    
    
    
    72.6
    
    
    
    70.6Gross profit
    
    
    27.7
    
    
    
    27.4
    
    
    
    29.4General, administrative and selling expenses
    
    
    20.8
    
    
    
    19.8
    
    
    
    19.9Operating income
    
    
    6.9
    
    
    
    7.6
    
    
    
    9.5Total comprehensive financing result
    
    
    5.6
    
    
    
    8.2
    
    
    
    5.8Net income
    
    
    0.9
    
    
    
    1.0
    
    
    
    0.5
  For the year ended December 31,2005
    
    
    2006
    
    
    2007
    
    
    2007% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount(Ps. millions, except for percentages)
    
    
    ($ millions)(1)Net salesGlass Containers
    
    Ps.
    12,488
    
    
    
    47
    %
    
    Ps.
    14,068
    
    
    
    51
    %
    
    Ps.
    14,676
    
    
    
    51
    %
    
    $
    1,351Flat Glass
    
    
    13,704
    
    
    
    52
    %
    
    
    13,462
    
    
    
    48
    %
    
    
    13,605
    
    
    
    48
    %
    
    
    1,252Corporate and other eliminations
    
    
    375
    
    
    
    1
    %
    
    
    346
    
    
    
    1
    %
    
    
    310
    
    
    
    1
    %
    
    
    28Consolidated net sales
    
    Ps.
    26,567
    
    
    
    100
    %
    
    Ps.
    27,876
    
    
    
    100
    %
    
    Ps.
    28,591
    
    
    
    100
    %
    
    $
    2,631(Ps. millions, except for percentages)
    
    
    ($ millions)(1)Net salesDomestic
    
    Ps.
    10,919
    
    
    
    41
    %
    
    Ps.
    11,875
    
    
    
    43
    %
    
    Ps.
    12,707
    
    
    
    44
    %
    
    $
    1,169Exports
    
    
    6,987
    
    
    
    26
    %
    
    
    6,384
    
    
    
    23
    %
    
    
    6,674
    
    
    
    23
    %
    
    
    614Foreign Subsidiaries
    
    
    8,662
    
    
    
    33
    %
    
    
    9,617
    
    
    
    34
    %
    
    
    9,210
    
    
    
    32
    %
    
    
    848Ps.
    26,567
    
    
    
    100
    %
    
    Ps.
    27,876
    
    
    
    100
    %
    
    Ps.
    28,591
    
    
    
    100
    %
    
    $
    2,631($millions(2), except for percentages)Net salesDomestic
    
    $
    916
    
    
    
    41
    %
    
    $
    1,028
    
    
    
    43
    %
    
    $
    1,145
    
    
    
    45
    %Exports
    
    
    588
    
    
    
    27
    %
    
    
    556
    
    
    
    23
    %
    
    
    601
    
    
    
    23
    %Foreign Subsidiaries
    
    
    708
    
    
    
    32
    %
    
    
    817
    
    
    
    34
    %
    
    
    814
    
    
    
    32
    %$
    2,212
    
    
    
    100
    %
    
    $
    2,401
    
    
    
    100
    %
    
    $
    2,560
    
    
    
    100
    %($millions(2), except for percentages)Export salesGlass Containers
    
    $
    290
    
    
    
    49
    %
    
    $
    344
    
    
    
    62
    %
    
    $
    364
    
    
    
    61
    %Flat Glass
    
    
    298
    
    
    
    51
    %
    
    
    212
    
    
    
    38
    %
    
    
    237
    
    
    
    39
    %Consolidated export sales
    
    $
    588
    
    
    
    100
    %
    
    $
    556
    
    
    
    100
    %
    
    $
    601
    
    
    
    100
    %(Ps. millions, except for percentages)
    
    
    ($ millions)(1)Operating income (loss)Glass Containers
    
    Ps.
    1,327
    
    
    
    72
    %
    
    Ps.
    1,853
    
    
    
    87
    %
    
    Ps.
    2,054
    
    
    
    76
    %
    
    $
    189Flat Glass
    
    
    514
    
    
    
    28
    %
    
    
    418
    
    
    
    20
    %
    
    
    782
    
    
    
    29
    %
    
    
    72Corporate and other eliminations
    
    
    (2
    )
    
    
    0
    %
    
    
    (154
    )
    
    
    (7
    )%
    
    
    (132
    )
    
    
    (5
    )%
    
    
    (12
    )Consolidated operating income
    
    Ps.
    1,839
    
    
    
    100
    %
    
    Ps.
    2,117
    
    
    
    100
    %
    
    Ps.
    2,704
    
    
    
    100
    %
    
    $
    249
 
 (1)
    
    These amounts have been translated into U.S. dollars, solely for the convenience
of the reader, at the rate of 10.8662 pesos per one U.S. dollar, the Free Exchange Rate on
December 31, 2007.(2)
    
    Dollar figures reported herein are in nominal dollars resulting from dividing each
months nominal pesos by that months ending exchange rate published by Banco de México.  42




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##### Table of Contents



Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
 Net Sales
   Glass Containers Business Unit
   Flat Glass Business Unit
    Operating Income
   43




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##### Table of Contents



Glass Containers Business Unit
  Flat Glass Business Unit
  Total Comprehensive Financing Result
  Other Expenses (Income), Net
  Income and Asset Taxes
  Net Income
   44




---



##### Table of Contents



Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
 Net Sales
   Glass Containers Business Unit
   Flat Glass Business Unit
    Operating Income
  Glass Containers Business Unit
   45




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##### Table of Contents



Flat Glass Business Unit
  Total Comprehensive Financing Result
  Other (Income) Expenses, Net
  Income Tax and Tax on Assets
  Net Income
   46




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
   Principal Sources and Uses of Cash
 For the Year Ended December 31,2005
    
    
    2006
    
    
    2007(in millions of constant pesos)Sources:Net resources generated by operating activities
    
    Ps.
    2,085
    
    
    Ps.
    1,081
    
    
    Ps.
    1,803Issuance of capital stock
    
    
    
    
    
    
    578Debt issuance
    
    
    8,968
    
    
    
    6,374
    
    
    
    16,939Sale of assets
    
    
    201
    
    
    
    2,907
    
    
    
    109Uses:Capital expenditures
    
    
    1,107
    
    
    
    1,252
    
    
    
    2,695Debt repayments
    
    
    10,780
    
    
    
    9,508
    
    
    
    14,868Dividends declared and paid
    
    
    195
    
    
    
    161
    
    
    
    215
 Changes in Working Capital
  Capital Expenditures
     47




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##### Table of Contents




    
    Our Glass Containers Business Unit expects to make capital expenditures of Ps.
2,065 million ($190 million), of which Ps. 1,282 million ($118 million) will be used to
provide needed maintenance to certain of our furnaces and to the relocation of the
Vidriera Mexico operations
to the Vidriera Toluca facility. The remaining Ps. 783 million ($72 million) will be
applied to expand production capacity. The production capacity expansion would take
place within the Vidriera Monterrey, Vidriera Mexico (in its new location at the
Vidriera Toluca premises) and Vidriera Los Reyes facilities.
    
    Our Flat Glass Business Unit expects to make capital expenditures of Ps. 598
million ($55 million), of which Ps. 348 million ($32 million) will be used by its
Mexican subsidiaries, highlighted by the purchase of a new furnace for the Companys
automotive glass operations and the other Ps. 250 million ($23 million) will be used by
its foreign subsidiaries.
    
    Our corporate entities expect to make capital expenditures of approximately Ps. 32
million ($3 million).
     Genesis Project
  Financing Transactions
   48




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##### Table of Contents



Indebtedness
  As of December 31, 2007(Ps. millions)
    
    
    ($ millions)(1)Short-term debt(2)(3)
    
    Ps.
    943
    
    
    $
    87Long-term debt(4)(5)
    
    
    13,975
    
    
    
    1,286
 
 (1)
    
    Peso amounts have been translated into U.S. dollars, solely for the convenience of the
reader, at a rate of 10.8662 pesos per U.S. dollar, the Free Exchange Rate on December 31,
2007.(2)
    
    Includes the current portion of our long-term debt, which was Ps. 545 million ($50 million)
as of December 31, 2007.(3)
    
    58% and 24% of the aggregate amount of our short-term debt as of December 31, 2007 was
denominated in U.S. dollars and euros, respectively. Includes the current portion of our
long-term debt.(4)
    
    Excludes the current portion of our long-term debt. If the current portion of our long-term
debt were included, the aggregate amount of outstanding long-term debt as of December 31, 2007
would be Ps. 14,520 million ($1,336 million).(5)
    
    99% and 1% of the aggregate amount of our long-term debt as of December 31, 2007 was
denominated in U.S. dollars and pesos, respectively. Excludes the current portion of our
long-term debt. As of March 31, 2008, we have entered into swap arrangements under which all
interest payments, until 2012, on $500 million principal amount of our outstanding debt were
swapped from a fixed dollar rate to a variable peso rate and interest payments on another $500
million principal amount of our outstanding debt were swapped from a fixed dollar rate to a
fixed peso rate. In the ordinary course of business, we also enter into currency swap and
option agreements to hedge our exposure to foreign currency exchange rate variations. Short-Term Debt
  Long-Term Debt
   49




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##### Table of Contents



OutstandingPrincipal
    
    
    
    FinalAmount as of
    
    
    
    Amortization/Facility
    
    December 31, 2007
    
    Interest Rate and Payment Dates
    
    Maturity2012 Senior NotesIssuer:Vitro
    
    $300.0 million
    
    Interest Rate:8.625% per
    
    February 1, 2012annum.Guarantors: Wholly owned
    
    
    
    Interest Payment Dates:subsidiaries of Vitro,
    
    
    
    Semiannually on August 1  andVENA and Viméxico
    
    
    
    February 1 of each year.2017 Senior NotesIssuer:Vitro
    
    $700.0 million
    
    Interest Rate:9.125% per
    
    February 1, 2017annum.Guarantors: Wholly owned
    
    
    
    Interest Payment Dates:subsidiaries of Vitro,
    
    
    
    Semiannually on August 1 andVENA and Viméxico
    
    
    
    February 1 of each year.2013 Senior NotesIssuer:Vitro
    
    $225 million
    
    Interest Rate:11.75% per
    
    November 1, 2013annum.Guarantors: Wholly owned
    
    
    
    Interest Payment Dates:subsidiaries of Vitro,
    
    
    
    Semiannually on May 1 andVENA and Viméxico
    
    
    
    November 1 of each year.Certificados Bursatiles
    
    Tranche A:
    
    Interest Rate: Cetes + 3.25%
    
    Tranche A:Issuer:Vitro
    
    Ps. 10 million
    
    Interest Payment Dates: Every
    
    October 2, 2008($0.9 million)
    
    28th day from October 7, 2004
    
    Tranche B:Tranche B:
    
    (Tranche A), from November 1,
    
    December 22, 2008Ps. 206 million
    
    2004 (Tranche B), and from
    
    Tranche C:($18.9 million)
    
    October 21, 2004 (Tranche C).
    
    February 5, 2009Tranche C:Ps. 150 million($13.8 million)
  50




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##### Table of Contents



2012 Senior Notes and 2017 Senior Notes.
  2013 Senior Notes
 Certificados Bursátiles Certificados Bursátiles Certificados Bursátiles Certificados Bursátiles
 Other Restrictions on Dividend Payments
 Mexican Ley General de Sociedades Mercantiles
   Strategic Sales of Non-Core Assets
  Share Repurchases and Sales
   51




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##### Table of Contents



PBGC Matter
    Energy
  Call/Put on Shares of Vitro Cristalglass
   52




---



##### Table of Contents



OFF-BALANCE SHEET ARRANGEMENTS
 Sales of receivables
  Securitization of trade receivables
 certificados bursátiles
preferentes certificados bursátiles preferentes
    53




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##### Table of Contents



TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
  Less than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    

5
years(Ps. millions)Short- and long-term debt(1)(2) (3)
    
    Ps.
    23,706
    
    
    Ps.
    2,320
    
    
    Ps.
    2,972
    
    
    Ps.
    5,382
    
    
    Ps.
    13,031Operating leases(4)
    
    
    1,383
    
    
    
    365
    
    
    
    600
    
    
    
    286
    
    
    
    132Unconditional purchase obligations(5)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Other long-term obligations(6)
    
    
    2,641
    
    
    
    298
    
    
    
    621
    
    
    
    511
    
    
    
    1,211Total contractual obligations
    
    Ps.
    27,730
    
    
    Ps.
    2,983
    
    
    Ps.
    4,193
    
    
    Ps.
    6,179
    
    
    Ps.
    14,374
 
 (1)
    
    For a description of our most recent financing transactions, see Item 3. Key
InformationRecent DevelopmentsNew Perspectives and Item 5. Operating and Financial
Review and ProspectsLiquidity and Capital ResourcesIndebtedness.(2)
    
    Includes scheduled interest payments with fixed and variable rates. For our variable
interest rate debt, we utilized the rates in effect as of December 31, 2007, as disclosed in
note 10 of our consolidated financial statements when estimating the scheduled interest payments.(3)
    
    Includes Ps. 91 million of capital lease obligations.(4)
    
    The amounts set forth above under Operating leases include mainly payments that
will be made under leases relating to two airplanes, warehouses, forklifts and computer equipment.(5)
    
    Certain of our subsidiaries agreed to purchase, in the aggregate, 90 megawatts of
electrical power and 1.3 million tons of steam per year pursuant to a 15-year take-or-pay
power purchase agreement with Tractebel Energía. This contract began in April 2003 and the
price at which we are required to purchase electrical power and steam is based on variables
such as inflation, the peso/U.S. dollar exchange rate and the price of natural gas, whose
future value is uncertain.(6)
    
    Expected benefit payments regarding the company pension plans, seniority premium and
severance indemnities.  54




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##### Table of Contents



ACCOUNTING CONSIDERATIONS
 Critical Accounting Estimates
  Trade Receivables
  Contingencies
  Financial Instruments
   Seniority Premiums and Pension Plans
   55




---



##### Table of Contents



For theYear EndedDecember 31, 2007(Ps. millions)One-percentage-point increase in assumed discount rate+ Effect on total net periodic cost
    
    Ps.
    4+ Effect on net pension liability
    
    
    (218
    )One-percentage-point decrease in assumed discount rate+ Effect on total net periodic cost
    
    
    (1
    )+ Effect on net pension liability
    
    
    259One-percentage-point increase in expected rate of
return on plan assets+ Effect on total net periodic cost
    
    
    (12
    )+ Effect on net pension liability
    
    
    One-percentage-point decrease in expected rate of
return on plan assets+ Effect on total net periodic cost
    
    
    12+ Effect on net pension liability
    
    
    
 Environmental Obligations
  Impairment of Long-Lived Assets
    56




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##### Table of Contents



Recoverability of Deferred Tax Assets
   New Accounting Pronouncements
 Mexican FRS
   Presentation of Comparative Financial Statements Prepared under NIF B-10
 U.S. GAAP
   57




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##### Table of Contents



RESEARCH AND DEVELOPMENT
         58




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##### Table of Contents



Item 6. Directors, Senior Management and Employees
 
 DIRECTORS AND SENIOR MANAGEMENT
  Directors
 consejeros
   FirstBecame
    
    Year ofName
    
    Principal Occupation
    
    a Director
    
    BirthAdrián Sada Treviño
    
    Director and Honorary Chairman of the Board of Directors of Vitro,
S.A.B. de C.V.
    
    
    1969
    
    
    
    1920Adrián Sada González
    
    Chairman of the Board of Directors of Vitro, S.A.B. de C.V.
    
    
    1984
    
    
    
    1944Federico Sada González
    
    President and Chief Executive Officer of Vitro, S.A.B. de C.V.
    
    
    1982
    
    
    
    1949Tomás González Sada
    
    Chairman of the Board, President and Chief Executive Officer of
Cydsa, S.A.B. de C.V.
    
    
    1980
    
    
    
    1943Andrés Yarte Cantú
    
    Chief Executive Officer of Distribuidora de Productos Cerámicos, S.A.
    
    
    1991
    
    
    
    1941Gustavo Madero Muñoz*
    
    Federal Congressman (Senator), Mexican Congress
    
    
    1996
    
    
    
    1955Carlos Eduardo Represas
de Almeida*
    
    Chairman of the Board of Directors of Nestlé México S.A. de C.V.
    
    
    1998
    
    
    
    1945Jaime Serra Puche*
    
    Founder, SAI-Consultores, S.C.
    
    
    1998
    
    
    
    1951Carlos Muñoz Olea*
    
    Private Investor
    
    
    2000
    
    
    
    1955Joaquín Vargas Guajardo*
    
    Chairman of the Board of Directors of Grupo MVS Comunicaciones, S.A.
de C.V.
    
    
    2000
    
    
    
    1954Alejandro Garza Lagüera*
    
    President of Desarrollo Inmobiliario Omega, S.A. de C.V.
    
    
    2001
    
    
    
    1926Jaime Rico Garza
    
    President and Chief Executive Officer of Vitro Europa, Ltd.
    
    
    2008
    
    
    
    1957Manuel Güemez de la Vega*
    
    Chairman of the Board of Regio Empresas and Grupo PREZ
    
    
    2006
    
    
    
    1942Julio Escamez Ferreiro
    
    Member of the Board of Directors of Consorcio Industrial de
Manufacturas, S.A.
    
    
    2006
    
    
    
    1934Carlos Bremer Gutierrez*
    
    President and CEO of Value Grupo Financiero, S.A. de C.V.
    
    
    2007
    
    
    
    1960Ricardo Martin Bringas*
    
    President and CEO of Organización Soriana
    
    
    2007
    
    
    
    1960
 
 *
    
    Independent non-management directors.  59




---



##### Table of Contents



Centenarios Centenarios Centenarios
  Adrián Sada Treviño, Member and Honorary Chairman of the Board of Directors of Vitro, S.A.B. de
C.V.:
  Adrián Sada González, Chairman of the Board of Directors of Vitro:
  Federico Sada González, President and Chief Executive Officer of Vitro:
  Tomás González Sada, Chairman of the Board, President and Chief Executive Officer of Cydsa, S.A.B.
de C.V.:
  Andrés Yarte Cantú, Chief Executive Officer of Distribuidora de Productos Cerámicos, S.A.:
  Gustavo Madero Muñoz, Federal Congressman (Senator), Mexican Congress:
  Carlos Eduardo Represas de Almeida, Chairman of the Board of Directors of Nestlé México S.A. de
C.V.:
   60




---



##### Table of Contents



Jaime Serra Puche, Founder, SAI-Consultores, S.C.:
  Carlos Muñoz Olea, Private Investor:
  Joaquín Vargas Guajardo, Chairman of the Board of Directors of Grupo MVS Comunicaciones, S.A. de
C.V.:
  Alejandro Garza Lagüera, Member of the Executive Committee of Desarrollo Inmobiliario Omega:
  Jaime Rico, President and CEO of Vitro Europa, Ltd.:
  Manuel Güemez de la Vega, Chairman of the Board of Regio Empresas and Grupo PREZ:
  Julio Escamez Ferreiro, Member of the Board of Directors of Consorcio Industrial de Manufacturas,
S.A.:
  Carlos Bremer Gutierrez, President and CEO of Value Grupo Financiero:
  Ricardo Martin Bringas, CEO of Organización Soriana:
   61




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##### Table of Contents



Secretary and Surveillance
 Ley del Mercado de Valores
  Senior Management
 directores generales
 CurrentPosition
    
    Year ofName
    
    Title
    
    Held Since
    
    BirthFederico Sada González
    
    President and Chief Executive Officer
    
    
    1995
    
    
    
    1949Alejandro Sánchez Mújica
    
    General Counsel
    
    
    2005
    
    
    
    1954Claudio Del Valle Cabello
    
    Chief Administrative Officer
    
    
    2003
    
    
    
    1960Enrique Osorio López
    
    Chief Financial Officer
    
    
    2007
    
    
    
    1951Hugo Lara García
    
    President of the Flat Glass business unit
    
    
    2006
    
    
    
    1965David González Morales
    
    President of the Glass Containers business unit
    
    
    2007
    
    
    
    1955Roberto Rubio Barnes
    
    President of Diverse Industries and Central
Technology
    
    
    2007
    
    
    
    1955
  Federico Sada González, President and Chief Executive Officer:
    Alejandro Sánchez Mújica, General Counsel:
   62




---



##### Table of Contents



Claudio Del Valle Cabello, Chief Administrative Officer:
   Enrique Osorio López, Chief Financial Officer:
  Hugo Lara García, President of the Flat Glass business unit:
  David González Morales, President of the Glass Containers business unit:
   63




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##### Table of Contents



Roberto Rubio Barnes
   Family Relationship of Directors and Senior Management
  Use of Certain Assets and Services
 Política de Uso de
Activos Restringidos Política de Uso Especial de
Servicios Corporativos y de Seguridad
 Compensation
    64




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##### Table of Contents



Directors Compensation
  Variable Compensation
   Employee Stock Option Plan
    For the year ended December 31,Total1998
    
    
    1999
    
    
    2000
    
    
    2001
    
    
    1998*
    
    
    2002
    
    
    outstandingOptions granted
    
    
    2,813,300
    
    
    
    2,893,000
    
    
    
    4,851,900
    
    
    
    3,204,800
    
    
    
    940,950
    
    
    
    3,941,950Options cancelled or
exercised at December
31, 2007
    
    
    2,350,000
    
    
    
    1,059,500
    
    
    
    3,986,950
    
    
    
    2,827,950
    
    
    
    478,050
    
    
    
    3,208,150Options outstanding
December 31, 2007
    
    
    463,300
    
    
    
    1,833,500
    
    
    
    864,950
    
    
    
    376,850
    
    
    
    462,900
    
    
    
    733,800
    
    
    
    4,735,300Initial Exercise Price
    
    Ps.
    31.31
    
    
    Ps.
    14.88
    
    
    Ps.
    11.00
    
    
    Ps.
    8.27
    
    
    Ps.
    13.00
    
    
    Ps.
    7.53Adjusted Exercise
Price at December 31,
2007
    
    Ps.
    79.90
    
    
    Ps.
    45.78
    
    
    Ps.
    11.00
    
    
    Ps.
    8.27
    
    
    Ps.
    13.00
    
    
    Ps.
    7.53
 *
    
    In 2001, we repriced 940,950 options granted in 1998 to Ps. 13.00 per option.  65




---



##### Table of Contents



Pension Benefits
   Severance Benefits
    66




---



##### Table of Contents



BOARD PRACTICES
     Comisión Nacional Bancaria y de
Valores (CNBV)
  67




---



##### Table of Contents



68




---



##### Table of Contents



(Registro Nacional de
Valores)
  69




---



##### Table of Contents



70




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##### Table of Contents



SHARE OWNERSHIP
  Percentage of
    
    
    
    
    
    
    
    
    Exercise
    
    
    AdjustedNumber of
    
    
    Shares
    
    
    Granted
    
    
    Outstanding
    
    
    Price on
    
    
    Exercise
    
    
    ExpirationName
    
    Shares Owned
    
    

Outstanding(4)
    
    

Options(5)
    
    

Options(5)(6)
    
    
    Grant Date
    
    
    Price
    
    
    DateAdrián Sada Treviño
    
    
    17,664,652
    (1)
    
    
    4.93
    %
    
    
    90,400
    
    
    
    90,400
    
    
    
    13.00
    
    
    
    N/A
    
    
    March 2011Adrián Sada González
    
    
    25,134,357
    (2)(7)
    
    
    7.01
    %
    
    
    90,400
    
    
    
    90,400
    
    
    
    13.00
    
    
    
    N/A
    
    
    March 2011225,000
    
    
    
    225,000
    
    
    
    14.88
    
    
    
    45.78
    
    
    March 2009430,000
    
    
    
    430,000
    
    
    
    11.00
    
    
    
    N/A
    
    
    June 2010550,000
    
    
    
    137,500
    
    
    
    8.27
    
    
    
    N/A
    
    
    March 2011550,000
    
    
    
    275,000
    
    
    
    7.53
    
    
    
    N/A
    
    
    March 2012Federico Sada González
    
    
    24,801,235
    (3)
    
    
    6.92
    %
    
    
    90,400
    
    
    
    90,400
    
    
    
    13.00
    
    
    
    N/A
    
    
    March 2011225,000
    
    
    
    225,000
    
    
    
    14.88
    
    
    
    45.78
    
    
    March 2009430,000
    
    
    
    107,500
    
    
    
    11.00
    
    
    
    N/A
    
    
    June 2010550,000
    
    
    
    137,500
    
    
    
    8.27
    
    
    
    N/A
    
    
    March 2011550,000
    
    
    
    275,000
    
    
    
    7.53
    
    
    
    N/A
    
    
    March 2012Tomás González Sada
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Andrés Yarte Cantú
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gustavo Madero Muñoz
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Carlos Represas de Almeida
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Jaime Serra Puche
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Carlos Muñoz Olea
    
    
    3,789,800
    
    
    
    1.06
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Joaquín Vargas Guajardo
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Alejandro Garza Lagüera
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Manuel Güemez de la VegaJulio Escámez FerreiroCarlos Bremer Gutierrez
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ricardo Martin Bringas
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Jaime Rico Garza
    
    
    *
    
    
    
    *
    
    
    
    26,000
    
    
    
    26,000
    
    
    
    14.88
    
    
    
    45.78
    
    
    March 2009Claudio Del Valle Cabello
    
    
    *
    (7)
    
    
    *
    
    
    
    15,100
    
    
    
    15,100
    
    
    
    13.00
    
    
    
    N/A
    
    
    March 201128,000
    
    
    
    28,000
    
    
    
    14.88
    
    
    
    45.78
    
    
    March 200960,000
    
    
    
    15,000
    
    
    
    11.00
    
    
    
    N/A
    
    
    June 201059,000
    
    
    
    14,750
    
    
    
    8.27
    
    
    
    N/A
    
    
    March 201160,500
    
    
    
    30,250
    
    
    
    7.53
    
    
    
    N/A
    
    
    March 2012Enrique Osorio López
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Alejandro Sánchez Mújica
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Hugo Lara García
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    David González Morales
    
    
    *
    
    
    
    *
    
    
    
    26,000
    
    
    
    26,000
    
    
    
    14.88
    
    
    
    45.78
    
    
    March 2009Roberto Rubio Barnes
    
    
    *
    
    
    
    *
    
    
    
    100,000
    
    
    
    100,000
    
    
    
    14.88
    
    
    
    45.78
    
    
    March 2009
 
 *
    
    Beneficially owns less than one percent of our shares.(1)
    
    Reported as a group with his wife, Mrs. María Nelly González de Sada.  71




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##### Table of Contents



(2)
    
    Reported as a group with his wife, Mrs. Esther Cueva de Sada, and his son, Adrián
Sada Cueva.(3)
    
    Reported as a group with his wife, Mrs. Liliana Melo de Sada, his sons, Messrs.
Federico Sada Melo and Mauricio Sada Melo, and his daughter, Ms. Liliana Sada Melo.(4)
    
    For purposes of calculating percentage of shares outstanding, we use the number of
our shares outstanding that was 358,389,574 shares, which is the number equal to our
386,357,143 issued shares minus the shares held as treasury stock.(5)
    
    The options listed below are options to purchase our shares.(6)
    
    All the options are exercisable.(7)
    
    In addition to the shares set forth below, Mssers Adrián Sada González and Claudio
del Valle Cabello may be deemed to be beneficial owners of the 17,464,614 shares held by our
Stock Option Trust, as they are members of the Technical Committee of the Stock Option Trust
and share the right to vote and the right to sell the shares held by the Stock Option Trust
with the other member of the Technical Committee.   72




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##### Table of Contents



EMPLOYEES
   2005
    
    
    2006
    
    
    2007Business Unit
    
    Period End
    
    
    Average
    
    
    Period End
    
    
    Average
    
    
    Period End
    
    
    AverageGlass Containers
    
    
    10,296
    
    
    
    10,683
    
    
    
    12,426
    
    
    
    11,918
    
    
    
    13,967
    
    
    
    13,717Flat Glass
    
    
    9,664
    
    
    
    9,712
    
    
    
    8,998
    
    
    
    9,288
    
    
    
    9,488
    
    
    
    8,965Other(1)
    
    
    94
    
    
    
    210
    
    
    
    0
    
    
    
    69
    
    
    
    0
    
    
    
    0Corporate Offices
    
    
    823
    
    
    
    798
    
    
    
    870
    
    
    
    819
    
    
    
    987
    
    
    
    815Total
    
    
    20,877
    
    
    
    21,403
    
    
    
    22,294
    
    
    
    22,094
    
    
    
    24,442
    
    
    
    23,497
 (1)
    
    Other is comprised by Bosco which we sold on April 1, 2005 and our metal flatware
business, which we sold in October 2006, and which were previously included in our
Glassware reportable segment.  2005
    
    
    2006
    
    
    2007Business Unit
    
    Period End
    
    
    Average
    
    
    Period End
    
    
    Average
    
    
    Period End
    
    
    AverageMexico
    
    
    15,322
    
    
    
    15,902
    
    
    
    15,979
    
    
    
    16,101
    
    
    
    18,070
    
    
    
    17,063United States
    
    
    2,675
    
    
    
    2,684
    
    
    
    2,729
    
    
    
    2,716
    
    
    
    2,632
    
    
    
    2,676Rest of the world
    
    
    2,880
    
    
    
    2,817
    
    
    
    3,586
    
    
    
    3,277
    
    
    
    3,740
    
    
    
    3,758Total
    
    
    20,877
    
    
    
    21,403
    
    
    
    22,294
    
    
    
    22,094
    
    
    
    24,442
    
    
    
    23,497
 Relation with Labor Unions
 empleados de confianza
   73




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##### Table of Contents



Item 7. Major Shareholders and Related Party Transactions
  
 MAJOR SHAREHOLDERS
    Name
    
    Shares Outstanding(1)
    
    
    % of Shares Outstanding(1)(2)Pension Plan Trust
    
    
    47,541,076
    
    
    
    13.27Stock Option Trust
    
    
    17,464,614
    
    
    
    4.87Mr. Adrián Sada Treviño(3) (4)
    
    
    17,664,652
    
    
    
    4.93Mr. Adrián Sada González(5)
    
    
    25,134,357
    
    
    
    7.01Mr. Federico Sada González(6)
    
    
    24,801,235
    
    
    
    6.92Ms. Alejandra Sada González
    
    
    21,646,821
    
    
    
    6.04
 
 (1)
    
    All of the shares that may be issued upon exercise of our outstanding options are held by our
Stock Option Trust, and all of our outstanding options are currently exercisable. Therefore,
shares outstanding and the calculation of percentage of shares outstanding include all our
outstanding options.(2)
    
    Calculation of percentage of shares outstanding based upon 386,357,143 shares issued shares
minus 28,467,569 held as treasury stock.(3)
    
    Reported as a group with his wife, Mrs. María Nelly González de Sada. Mr. Adrián Sada Treviño
and Mrs. Maria Nelly Gonzalez de Sada disclaim beneficial ownership with respect to the shares
held by their children and their childrens families.(4)
    
    Mrs. María Nelly Sada de Yarte, her children and her childrens spouses collectively hold
12,770,807 of our shares, representing 3.56% of our issued and outstanding shares, which are
not included in the table above. Mrs. María Nelly Sada de Yarte is a daughter of Mr. Adrián
Sada Treviño and Mrs. María Nelly González de Sada.(5)
    
    Reported as a group with his wife, Mrs. Esther Cueva de Sada, and his son Adrián Sada Cueva.
In addition to the shares set forth below, Mr. Adrián Sada González may be deemed to be a
beneficial
owner of the 17,464,614 shares held by our Stock Option Trust, as a member of the Technical
Committee of the Stock Option Trust who shares the right to vote and the right to sell the
shares held by the Stock Option Trust with the other member of the Technical Committee.(6)
    
    Reported as a group with his wife, Mrs. Liliana Melo de Sada, his sons Messrs. Federico Sada
Melo and Mauricio Sada Melo, and his daughter, Ms. Liliana Sada Melo.  74




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##### Table of Contents



75




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##### Table of Contents



76




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##### Table of Contents



RELATED PARTY TRANSACTIONS
 Certain Arrangements with Respect to Real Estate
  Goods Sold to or Purchased from Certain Companies
   Sale of Real Estate
   77




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##### Table of Contents



Item 8. Financial Information
 Consolidated Financial Statements
  Export Sales
  % of
    
    
    
    
    
    
    % of
    
    
    Corporate
    
    
    % of
    
    
    
    
    
    
    % ofGlass
    
    
    Consolidated
    
    
    Flat
    
    
    Consolidated
    
    
    and other(1)
    
    
    Consolidated
    
    
    
    
    
    
    ConsolidatedContainers
    
    
    Net Sales
    
    
    Glass
    
    
    Net Sales
    
    
    eliminations
    
    
    Net Sales
    
    
    Consolidated
    
    
    Net Sales(Ps. millions)
    
    
    
    
    
    (Ps. millions)
    
    
    
    
    
    (Ps. millions)
    
    
    
    
    
    (Ps. millions)2007Domestic sales
    
    Ps.
    8,371
    
    
    
    57
    %
    
    Ps.
    3,974
    
    
    
    29
    %
    
    Ps.
    361
    
    
    
    100
    %
    
    Ps.
    12,706
    
    
    
    44
    %Export sales
    
    
    4,028
    
    
    
    28
    %
    
    
    1,946
    
    
    
    14
    %
    
    
    
    
    
    
    
    
    
    
    5,974
    
    
    
    21
    %Foreign subsidiaries
    
    
    2,240
    
    
    
    15
    %
    
    
    7,671
    
    
    
    57
    %
    
    
    
    
    
    
    
    
    
    
    9,911
    
    
    
    35
    %Total net sales
    
    Ps.
    14,639
    
    
    
    100
    %
    
    Ps.
    13,591
    
    
    
    100
    %
    
    Ps.
    361
    
    
    
    100
    %
    
    Ps.
    28,591
    
    
    
    100
    %2006Domestic sales
    
    Ps.
    8,145
    
    
    
    58
    %
    
    Ps.
    3,296
    
    
    
    25
    %
    
    Ps.
    433
    
    
    
    100
    %
    
    Ps.
    11,875
    
    
    
    42
    %Export sales
    
    
    3,921
    
    
    
    28
    %
    
    
    2,463
    
    
    
    18
    %
    
    
    
    
    
    
    
    
    
    
    6,384
    
    
    
    23
    %Foreign subsidiaries
    
    
    1,915
    
    
    
    14
    %
    
    
    7,702
    
    
    
    57
    %
    
    
    
    
    
    
    
    
    
    
    9,617
    
    
    
    35
    %Total net sales
    
    Ps.
    13,982
    
    
    
    100
    %
    
    Ps.
    13,461
    
    
    
    100
    %
    
    Ps.
    433
    
    
    
    100
    %
    
    Ps.
    27,876
    
    
    
    100
    %2005Domestic sales
    
    Ps.
    7,546
    
    
    
    61
    %
    
    Ps.
    2,855
    
    
    
    21
    %
    
    Ps.
    517
    
    
    
    100
    %
    
    Ps.
    10,918
    
    
    
    41
    %Export sales
    
    
    3,413
    
    
    
    28
    %
    
    
    3,574
    
    
    
    26
    %
    
    
    
    
    
    
    
    
    
    
    6,987
    
    
    
    26
    %Foreign subsidiaries
    
    
    1,390
    
    
    
    11
    %
    
    
    7,272
    
    
    
    53
    %
    
    
    
    
    
    
    
    
    
    
    8,662
    
    
    
    33
    %Total net sales
    
    Ps.
    12,349
    
    
    
    100
    %
    
    Ps.
    13,701
    
    
    
    100
    %
    
    Ps.
    517
    
    
    
    100
    %
    
    Ps.
    26,567
    
    
    
    100
    %
 (1)
    
    Other is comprised by Bosco which we sold on April 1, 2005 and our metal flatware
business, which we sold in October 2006, and which we previously included in our Glassware
reportable segment. Legal Proceedings
     78




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##### Table of Contents



Dividend Policy
  Significant Changes
   79




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##### Table of Contents



Item 9.  The Offer and Listing
  
 LISTING DETAILS
   BMV
    
    
    NYSEPesos per Share(1)(2)
    
    
    U.S. dollars per ADS(2)(3)Year
    
    High
    
    
    Low
    
    
    High
    
    
    Low2003
    
    Ps.
    11.63
    
    
    Ps.
    7.03
    
    
    $
    3.10
    
    
    $
    2.002004
    
    
    14.66
    
    
    
    9.75
    
    
    
    4.02
    
    
    
    2.472005
    
    
    14.58
    
    
    
    7.33
    
    
    
    4.08
    
    
    
    2.072006
    
    
    20.30
    
    
    
    8.35
    
    
    
    5.55
    
    
    
    2.192007
    
    
    30.99
    
    
    
    19.06
    
    
    
    8.53
    
    
    
    5.16
 
 (1)
    
    Source: Infosel.(2)
    
    Not adjusted for dividends.(3)
    
    Each of our ADSs indirectly represents three of our shares.  BMV
    
    
    NYSEPesos per Share(1)(2)
    
    
    U.S. dollars per ADS(2)(3)Year
    
    High
    
    
    Low
    
    
    High
    
    
    Low2005First Quarter
    
    Ps.
    12.93
    
    
    Ps.
    9.01
    
    
    $
    3.45
    
    
    $
    2.40Second Quarter
    
    
    9.90
    
    
    
    7.33
    
    
    
    2.63
    
    
    
    2.07Third Quarter
    
    
    14.07
    
    
    
    7.90
    
    
    
    3.88
    
    
    
    2.23Fourth Quarter
    
    
    14.58
    
    
    
    9.83
    
    
    
    4.08
    
    
    
    2.712006First Quarter
    
    Ps.
    14.55
    
    
    Ps.
    9.90
    
    
    $
    4.06
    
    
    $
    2.71Second Quarter
    
    
    11.32
    
    
    
    8.35
    
    
    
    3.10
    
    
    
    2.19Third Quarter
    
    
    13.62
    
    
    
    9.33
    
    
    
    3.70
    
    
    
    2.51Fourth Quarter
    
    
    20.30
    
    
    
    12.38
    
    
    
    5.55
    
    
    
    3.322007First Quarter
    
    Ps.
    24.68
    
    
    Ps.
    19.06
    
    
    $
    6.72
    
    
    $
    5.16Second Quarter
    
    
    29.58
    
    
    
    24.47
    
    
    
    8.30
    
    
    
    6.63Third Quarter
    
    
    30.99
    
    
    
    24.84
    
    
    
    8.53
    
    
    
    6.63Fourth Quarter
    
    
    28.61
    
    
    
    19.10
    
    
    
    7.88
    
    
    
    5.252008First Quarter
    
    Ps.
    24.00
    
    
    Ps.
    16.90
    
    
    $
    6.58
    
    
    $
    4.70
 
 (1)
    
    Source: Infosel.(2)
    
    Not adjusted for dividends.(3)
    
    Each of our ADSs indirectly represents three of our shares.  80




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##### Table of Contents



BMV
    
    
    NYSEPesos per Share(1)(2)
    
    
    U.S. dollars per ADS(2)(3)Month
    
    High
    
    
    Low
    
    
    High
    
    
    LowDecember 2007
    
    Ps.
    24.10
    
    
    Ps.
    19.80
    
    
    $
    6.65
    
    
    $
    5.46January 2008
    
    Ps.
    24.00
    
    
    Ps.
    16.90
    
    
    $
    6.58
    
    
    $
    4.70February
    
    
    19.40
    
    
    
    18.31
    
    
    
    5.37
    
    
    
    5.10March
    
    
    19.16
    
    
    
    17.46
    
    
    
    5.41
    
    
    
    4.70April
    
    
    20.01
    
    
    
    18.67
    
    
    
    5.78
    
    
    
    5.29May
    
    
    18.94
    
    
    
    17.82
    
    
    
    5.45
    
    
    
    5.12June (through June 23, 2008)
    
    
    19.73
    
    
    
    17.59
    
    
    
    5.73
    
    
    
    5.10
 
 (1)
    
    Source: Infosel.(2)
    
    Not adjusted for dividends.(3)
    
    Each of our ADSs indirectly represents three of our shares.  81




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##### Table of Contents



MARKETS
 Trading on the Mexican Stock Exchange
  Boletín Diario de Precios y
Cotizaciones
 Trading on the New York Stock Exchange
    82




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##### Table of Contents



Item 10.  Additional Information.
  
 MEXICAN CORPORATE LAW AND BY-LAWS
  General Information and Corporate Purpose
 sociedad anónima Registro Público de la
Propiedad y del Comercio de Monterrey
  obligaciones títulos valor masa reportos fideicomiso por aval derechos reales derechos personales
 Directors and Shareholders Conflict of Interest
   83




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##### Table of Contents



Related Party Transactions and Certain Other Transactions
     Directors Compensation
  Capital Structure
 sociedad anónima bursátil de capital variable
    84




---



##### Table of Contents



Share Registration and Transfer
  Limitation on Acquiring Shares
  de facto or de jure,
       85




---



##### Table of Contents



Voting Rights; Preferences and Restrictions
   Dividends
  Código de Comercio
  Liquidation
  Employees Mandatory Share in the Companys Profits
   86




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##### Table of Contents



Capital Reduction
   corredor titulado
 corredor titulado
   sociedad anónima bursátil derecho de retiro
 Purchase by us of our Shares
    87




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##### Table of Contents



Purchase Obligation
    Capital Increase; Preemptive Rights
 Libro de Variaciones de Capital, .
 Periódico Oficial del Estado de
Nuevo León
  Appraisal Rights
    88




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##### Table of Contents



Modification of Shareholders Rights
  Shareholders Meetings and Resolutions
     89




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##### Table of Contents



Periódico Oficial del Estado de
Nuevo León
   Asset Acquisitions and Divestitures
  Description of CPOs
 Registro Público
del Comercio de la Ciudad de México, D.F. Registro Público del Comercio de la Ciudad de México, D.F. Ley General de Títulos y Operaciones de
Credito
  90




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##### Table of Contents



Dirección General de Inversiones Extranjeras de la Comisión Nacional de
Inversiones Extranjeras Registro Nacional de
Inversiones Extranjeras
 Ley de Inversión
Extranjera
 Deposit and Withdrawal of our Shares
    Dividends, Other Distributions and Preemptive and Other Rights
   91




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##### Table of Contents



Secretaría de Salud.
 Changes Affecting our Shares
  Voting of our Shares
   92




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##### Table of Contents



Administration of the CPO Trust
 Comisión Nacional de Inversiones Extranjeras Asociación Mexicana
de Casas de Bolsa
 
 Diario Oficial de la Federación
     93




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##### Table of Contents



Enforcement of Rights of CPO Holders
  Status of CPO Holders
  Termination of the CPO Trust
   Limitations Affecting ADSs Holders
    94




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##### Table of Contents



MATERIAL CONTRACTS
 Divestitures
  Indebtedness
  Off-Balance Sheet Arrangements
  
 EXCHANGE CONTROLS
 .
  95




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##### Table of Contents



MATERIAL TAX CONSEQUENCES
  Mexican Federal Income Taxation
    Our ADSs, CPOs and Shares
 Taxation of Cash Distributions
  Taxation of Sale or Other Disposition
  Registro Nacional de Valores
  96




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##### Table of Contents



United States Federal Income Taxation
  
    
    a citizen or resident of the United States;
    
    a corporation (or entity taxable as a corporation) organized or created in the
United States, any of its constituent states or their respective political
subdivisions, as the case may be;
    
    an estate the income of which is subject to United States federal income tax
regardless of its source; or
    
    a trust if a court within the United States is able to exercise primary supervision
over its administration and one or more United States persons have the authority to
control all substantial decisions of the trust (each, a United States Holder).
    97




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Our ADSs, CPOs and Shares
 Taxation of Cash Distributions and Distributions of Stock
      98




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##### Table of Contents



Taxation of Sale or Other Disposition
    Passive Foreign Investment Company Considerations
  Deposits, Withdrawals and Pre-Releases
   99




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##### Table of Contents



United States Backup Withholding and Information Reporting
  Tax Treaties
     100




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##### Table of Contents



WHERE YOU CAN FIND MORE INFORMATION
  
    
    annual reports on Form 20-F;
    
    certain other reports or information that we make public under Mexican law, file
with the CNBV and the Mexican Stock Exchange or distribute to our shareholders; and
    
    other information.
     
   101




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##### Table of Contents



DIFFERENCES IN CORPORATE GOVERNANCE PRACTICES
   NYSE Standards
    
    Our Corporate Governance PracticesDirector Independence.Majority
of board of directors must be
independent. §303A.01
    
    Director Independence.Pursuant to the
Mexican Law of the Securities Market,
our shareholders are required to appoint
a Board of Directors in which at least
25% of its members must be independent
as defined under the Mexican Law of the
Securities Market. However, Vitro has a
Board of Directors composed of sixteen
members, out of whom ten are
independent, this is, 56.2% are
considered independent directors. The
Ordinary Shareholders Meeting is
required to make a determination as to
the independence of our directors and
the CNBV has a term of 30 days to
challenge such determination. The
definition of independence under Mexican
law differs from the NYSE standards.
Under Article 26 of the Mexican Law of
the Securities Market, a director is not
independent if such director is:
 (i) Key Executive Directors, an employee
or the subsidiaries of the Company (one
year cooling off period);(ii) a person who has a significant
influence or authority over the Company,
the Companys affiliates or the
corporate group to which the Company
belongs;(iii) a shareholder who is part of a
group of persons who has control
over the Company.(iv) an important client, supplier,
debtor or creditor (or a partner,
director or employee thereof). A client
and supplier is considered important
where its sales to or purchases from the
company represents more than 10% of the
clients or suppliers total sales or
purchases. A debtor or creditor is
considered important whenever its loan
or credit from to the company represents
more than 15% of the debtors or
creditors total assets;(v) an employee of a non-profit entity
that receives contributions from the
company that represent more than 15% of
the total contributions received;(vi) a CEO or other high ranking officer
of another company in which the issuers
CEO or other high ranking officer is a
member of the Board of Directors; or(vii) a family member related to any
of the persons mentioned above in (i)
through (iv).Family member includes a persons
relative of up to four degrees of
consanguinity, affinity or civil, or a
persons spouse or partner, in the case
of (i) and (iv) above.
  102




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##### Table of Contents



NYSE Standards
    
    Our Corporate Governance PracticesExecutive Sessions.
Non-management directors must
meet regularly in executive
sessions without management.
Independent directors should
meet alone in an executive
session at least once a year.
Also, §303A.03requires a process
for interested parties to
communicate their concerns to
non-management directors.
    
    Executive Sessions.Our non-management
directors have not held executive
sessions without management in the past,
and under our bylaws and applicable
Mexican law, they are not required to do
so.Nominating/Corporate Governance
Committee.Nominating/corporate
governance committee of entirely
independent directors is
required. The committee must
have a written charter
specifying the purpose, duties
and evaluation procedures of the
committee. §303A.04
    
    Nominating Committee.We do not have a
nominating committee or corporate
governance committee. We are not
required to have a nominating/corporate
governance committee, and it is not
expressly recommended by the Mexican Law
of the Securities Market. However the
charter of the Corporate Practices
Committee provides that this Committee
shall supervise the composition of the
Board and ensure compliance with the
maximum number of members and with the
minimum number of independent directors,
as provided by Mexican law.Compensation Committee.
Compensation committee of
independent directors is
required, which must evaluate
and approve executive officer
compensation. The committee must
have a charter specifying the
purpose, duties and evaluation
procedures of the committee.
§303A.05
    
    Compensation Committee. The relevant
compensation matters are brought to the
attention of the Corporate Practices
Committee, such as the (i) appointment
and removal of the CEO and his or her
total compensation, as well as the total
compensation of the Chairman of the
Board of Directors; (ii) approval of the
policies for the appointment and total
compensation of the other Key Executive
Directors and (iii) approval of the
maximum percentage of wages and salary
increases per year.Our committee does not produce a report
on executive compensation. However the
charter of the Corporate Practices
Committee specifies its duties in this
regard.Audit Committee.Audit committee
satisfying the independence and
other requirements of Rule 10A-3
under the Exchange Act and the
more stringent requirements
under the NYSE standards is
required. §§303A.06, 303A.07.
The audit committee must be
composed of a minimum of three
independent directors, one of
whom must have accounting or
related financial management
expertise. The committee must
have written charter specifying
the purpose, duties and
evaluation procedures of the
committee. Additionally, a
listed company must have an
internal audit function to
assess risk management processes
and the companys system of
internal control.
    
    Audit Committee.We have an audit
committee of four members plus a
non-member financial expert. Each member
of the audit committee is independent,
as independence is defined under the
Mexican Law of the Securities Market,
and also meets the independence
requirements of Rule 10A-3 under the
U.S. Securities Exchange Act of 1934, as
amended. Our audit committee operates
primarily pursuant to a written charter
adopted by our Board of Directors.Equity Compensation Plans.
Equity compensation plans
require shareholder approval,
subject to limited exemptions.
§§303A.08 , 312.03 & 312.04
    
    Equity Compensation Plans. Shareholder
approval is not expressly required under
Mexican law or our bylaws for the
adoption and amendment of an
equity-compensation plan. However, the
Mexican Law of the Securities Market
require shareholder approval under
certain circumstances.
  103




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##### Table of Contents



NYSE Standards
    
    Our Corporate Governance PracticesShareholder Approval for
Issuance of Securities.
Shareholder approval is
required, subject to limited
exceptions, for issuance of
common stock, or of any
securities convertible into or
exercisable for common stock
(even if not listed on the
NYSE), (1) to a director,
officer or substantial security
holder of the company (each, a
Related Party), (2) to a
subsidiary, affiliate or other
closely-related person of a
Related Party, (3) to a company
or entity in which a Related
Party has a substantial
interest, if the number of
shares of common stock to be
issued, or if the number of
shares of common stock into
which the securitiesmay be
convertible or exercisable
exceeds one percent of the
number of shares of common stock
or one percent of the voting
power outstanding before such
issuance, (4) that have voting
power equal to at least 20% of
the outstanding common stock
voting power before such
issuance, (5) that will increase
the number of outstanding shares
of common stock by at least 20%
of the number of outstanding
shares before such issuance or
(6) that will result in a change
of control of the issuer.
§§312.03(b)-(e) & 312.04
    
    Shareholder Approval for Issuance of
Securities.Mexican law and our bylaws
require us to obtain shareholder
approval of the issuance of equity
securities.Code of Business Conduct and
Ethics.Corporate governance
guidelines and a code of
business conduct and ethics are
required, with prompt disclosure
of any waiver for directors or
executive officers. The
guidelines and code must be
disclosed and publicly available
and the code must contain compliance standards and
procedures that will facilitate
the effective operation of the
code. §§303 A.09 & 303A.10
    
    Code of Business Conduct and Ethics.We
have adopted a code of ethics, which has
been accepted by all of our directors
and executive officers and other
personnel. Our Corporate Practices
Committee monitors the applicability of
our code of ethics, and may propose
amendments to the same, according to its
charter. A copy of our code of ethics is
available on our web site: www.vitro.com.Solicitation of Proxies.
Solicitation of proxies and
provision for proxy materials is
required for all meetings of
shareholders. Copies of such
proxy solicitations are to be
provided to NYSE. §§402.01 &
402.04-.06
    
    Solicitation of Proxies.Pursuant to the
provisions of the Mexican Law of the
Securities Market, beginning on the
date when the notice to the shareholders
meeting is published, we immediately and
free of any charge, make available to
the shareholders the documents and
information related to each item of the
meeting agenda.Likewise, pursuant to the Mexican Law of
the Securities Market, in order for the
shareholders to be represented in the
shareholders meetings, we elaborate and
make available to them power of attorney
forms that contain at least: The name
of the Company, the items of the agenda
and some blank spaces to be filled in by
the shareholders to instruct their
representatives how to exercise such
power of attorney.
  104




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##### Table of Contents



NYSE Standards
    
    Our Corporate Governance PracticesWebsite Requirements.The
company must maintain a website
that includes printable versions
of board committee charters,
corporate governance guidelines
and the code of business conduct
and ethics. Additionally, a
foreign private issuer must
include on its website English
language disclosure of
significant differences between
its corporate governance
practices and the NYSE
standards. §§303A.11 & 303A.14
    
    Website Requirements. Pursuant to the
applicable Mexican Law, we are not
required to maintain printable versions
of any document at our website nor
information of significant differences
between our corporate practices and NYSE
standards. Additionally, we are not
required to have information available
other than in Spanish.  Under Mexican
Law, we are required to maintain an
updated website in Spanish that includes
our current bylaws, our annual and
quarterly reports and compliance report
with the corporate governance code
(código de mejores prácticas
corporativas), material corporate
restructuring and information
about relevant events.  Additionally,
our website contains Spanish printable
versions of the charters of the
Corporate Practices Committee, the Audit
Committee and the Finance and Planning
Committee as well as of the compliance
report with the corporate governance
code and of the code of ethics. We also
have available at our website the
English version of the significant
differences between our corporate
governance practices and the NYSE
standards.
 AVAILABLE INFORMATION
   105




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##### Table of Contents



Item 11.  Quantitative and Qualitative Disclosures About Market Risk
 Quantitative and Qualitative Disclosures About Market Risk
  Debt Subject to Market Risk
  FairExpected Maturity Date
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    Thereafter
    
    
    Total
    
    
    Value(million, except for percentages)Fixed-Rate Debt:Dollar-denominated(1)
    
    Ps.
    332
    
    
    Ps.
    7
    
    
    Ps.
    7
    
    
    Ps.
    8
    
    
    Ps.
    3,231
    
    
    Ps.
    9,981
    
    
    Ps.
    13,566
    
    
    Ps.
    12,944Weighted-average coupon
    
    
    10.20
    %Floating-Rate Debt:Dollar-denominated(1)
    
    Ps.
    249
    
    
    Ps.
    117
    
    
    Ps.
    63
    
    
    Ps.
    64
    
    
    Ps.
    64
    
    
    Ps.
    235
    
    
    Ps.
    792
    
    
    Ps.
    792Weighted-average interest rate
    
    LIBOR plus 1.66
    %Euro-denominated(2)
    
    Ps.
    230
    
    
    Ps.
    11
    
    
    Ps.
    10
    
    
    Ps.
    9
    
    
    Ps.
    6
    
    
    Ps.
    11
    
    
    Ps.
    278
    
    
    Ps.
    278Weighted-average interest rate
    
    Euribor plus 1.02
    %Peso-denominated
    
    Ps.
    131
    
    
    Ps.
    150
    
    
    Ps.
    
    
    
    Ps.
    
    
    
    Ps.
    
    
    
    Ps.
    
    
    
    Ps.
    282
    
    
    Ps.
    282Weighted-average interest rate
    
    CETES plus 3.25
    %
 
 (1)
    
    The principal amount of our dollar-denominated debt was translated to pesos at
Ps.10.8662 per U.S. dollar, the Free Exchange Rate as of December 31, 2007.(2)
    
    The principal amount of our euro-denominated debt was translated at Ps. 15.9526 per
euro, the exchange rate as of December 31, 2007.  106




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##### Table of Contents



Interest Rate Risk
  Notional
    
    
    Company
    
    
    CompanyAmount
    
    
    pays interest
    
    
    receives interest
    
    
    
    
    
    
    Fair ValueDerivative financial instruments
    
    (million)
    
    
    rate (in pesos)
    
    
    rate (in US$)
    
    
    Period
    
    
    AssetInterest rate optionsCross currency swaps
    
    US$
    150
    
    
    TIIE + 1.08 %
    
    
    8.63
    %
    
    February 2007 to February 2012
    
    Ps.
    23Cross currency swaps
    
    US$
    350
    
    
    TIIE + 1.62 %
    
    
    9.13
    %
    
    February 2007 to February 2012
    
    
    58Cross currency swaps
    
    US$
    350
    
    
    TIIE + 1.60 %
    
    
    9.13
    %
    
    February 2007 to February 2012
    
    
    61Cross currency swaps
    
    US$
    150
    
    
    TIIE + 1.06 %
    
    
    8.63
    %
    
    February 2007 to February 2012
    
    
    24Interest rate swaps
    
    Ps.
    3,294
    
    
    
    8.10 %
    
    TIIE (in pesos)
    
    February 2007 to February 2012
    
    
    28Total interest rate options (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ps.
    194
 (1)
    
    The derivative asset related to the Companys interest rate options includes payments made
by the Company of Ps. 349 million, which resulted in a net loss of Ps. 155 million, and is
presented in total comprehensive financing result.  Foreign Currency Exchange Rate Risk
  NotionalAmount
    
    
    
    
    
    
    Fair ValueDerivative financial instruments
    
    (million)
    
    
    Period
    
    
    AssetForeign exchange optionsExotic instruments
    
    US$
    266
    
    
    January to April 2008
    
    Ps.
    2
 Natural Gas Price Risk
     107




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##### Table of Contents



Notional
    
    
    
    
    Fair ValueAmount
    
    
    
    
    AssetDerivative financial instruments
    
    (MMBTUs)
    
    
    Period
    
    (Liability)Natural gas contractsCapped swap (2)
    
    
    8,040,000
    
    
    January to December 2008
    
    Ps.
    (556
    )Swaps
    
    
    1,640,000
    
    
    January to December 2008
    
    
    6Options
    
    
    4,800,000
    
    
    January to December 2008
    
    
    10Exotic
    
    
    8,400,000
    
    
    January to December 2008
    
    
    (10
    )Total natural gas contracts
    
    
    
    
    
    
    
    Ps.
    (550
    )
 (2)
    
    In December 2007, the Company entered into a natural gas capped swap and executed an
option to receive a prepayment from the counterparty for Ps. 534 million, which will be
repaid throughout 2008. The net loss from the transaction was Ps. 22 million, which is
recorded in total comprehensive financing result. In January 2008, the Company entered into
a contrary position to that of the natural gas capped swap it acquired in 2007, offsetting
the market risks from such instrument.  108




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##### Table of Contents



Item 12.  Description of Securities Other than Equity Securities
  
 Item 13.  Defaults, Dividend Arrearages and Delinquencies
 Covenant Compliance
   
 Item 14.  Material Modifications to the Rights of Security Holders and Use of Proceeds
  
 Item 15.  Controls and Procedures
    3⁄4
   109




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3⁄4
   Internal
ControlIntegrated Framework
     110




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##### Table of Contents



Internal
ControlIntegrated Framework
  
  
   
 Item 16.  Reserved
 
 Item 16A.  Audit Committee Financial Expert
 experto financiero experto financiero
 Código de Mejores Prácticas Corporativas
  111




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##### Table of Contents



Item 16B.  Code of Ethics
   
 Item 16C.  Principal Accountant Fees and Services
  For the year ended December 31,2006
    
    
    2007(Ps. Millions)Audit Fees
    
    Ps.
    57.1
    
    
    
    88
    %
    
    Ps.
    42.1
    
    
    
    81
    %Audit-Related Fees
    
    
    5.6
    
    
    
    9
    %
    
    
    7.9
    
    
    
    15
    %Tax Fees
    
    
    2.4
    
    
    
    4
    %
    
    
    2.1
    
    
    
    4
    %Other Fees
    
    
    0.0
    
    
    
    0
    %
    
    
    0.2
    
    
    
    0
    %Total
    
    Ps.
    65.1
    
    
    
    100
    %
    
    Ps.
    52.3
    
    
    
    100
    %
 Audit Fees.
 Audit-Related Fees.
 Tax Fees.
 Other Fees. seguro social
 Audit Committee Pre-Approval Policies and Procedures
 de minimis
  112




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##### Table of Contents



Item 16D.  Exemption from the Listing Standards for Audit Committees
  
 Item 16E.  Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  
 Item 17.  Financial Statements
  
 Item 18.  Financial Statements
  Index to Financial Statements:
 PageVitro, S.A.B. de C.V. and SubsidiariesReport of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets as of December 31, 2006 and 2007
    
    
    F-3Consolidated Statements of Operations for the years ended December
31, 2005, 2006 and 2007
    
    
    F-5Consolidated Statements of Changes in Financial Position for the
years ended December 31, 2005, 2006 and 2007
    
    
    F-6Consolidated Statements of Changes in Stockholders Equity for the
years ended December 31, 2005, 2006 and 2007
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8Viméxico, S.A. de C.V. and SubsidiariesReport of Independent Registered Public Accounting Firm
    
    
    F-83Consolidated Balance Sheets as of December 31, 2006 and 2007
    
    
    F-84Consolidated Statements of Operations for the years ended December
31, 2005, 2006 and 2007
    
    
    F-85Consolidated Statements of Changes in Financial Position for the
years ended December 31, 2005, 2006 and 2007
    
    
    F-86Consolidated Statements of Changes in Stockholders Equity for the
years ended December 31, 2005, 2006 and 2007
    
    
    F-87Notes to Consolidated Financial Statements
    
    
    F-88
  113




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 To the Board of Directors and Stockholders of
 Vitro, S.A.B. de C.V.
 Garza Garcia, N.L., Mexico
         F-1




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##### Table of Contents



Internal ControlIntegrated Framework
 
  
  F-2




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##### Table of Contents



(Millions of constant Mexican pesos as of December 31, 2007)
 Millions ofUS dollars(ConvenienceTranslation)December 31,
    
    
    December 31,2006
    
    
    2007
    
    
    2007ASSETSCash and cash equivalents
    
    Ps.
    1,222
    
    
    Ps.
    1,638
    
    
    US$
    151Trade receivables, net
    
    
    1,383
    
    
    
    1,629
    
    
    
    150Retained undivided interests in securitized receivables
    
    
    1,223
    
    
    
    968
    
    
    
    89Derivative financial instruments
    
    
    343
    
    
    
    425
    
    
    
    39Taxes receivable
    
    
    136
    
    
    
    559
    
    
    
    52Other receivables
    
    
    886
    
    
    
    1,797
    
    
    
    165Inventories, net
    
    
    3,982
    
    
    
    4,120
    
    
    
    379Current assets
    
    
    9,175
    
    
    
    11,136
    
    
    
    1,025Land and buildings, net
    
    
    8,763
    
    
    
    8,426
    
    
    
    776Machinery and equipment, net
    
    
    6,722
    
    
    
    7,812
    
    
    
    718Construction in progress
    
    
    838
    
    
    
    1,603
    
    
    
    148Goodwill
    
    
    788
    
    
    
    873
    
    
    
    80Intangible employee retirement obligation asset
    
    
    357
    
    
    
    338
    
    
    
    31Deferred taxes
    
    
    887
    
    
    
    1,030
    
    
    
    95Other assets
    
    
    1,165
    
    
    
    969
    
    
    
    89Long-term assets
    
    
    19,520
    
    
    
    21,051
    
    
    
    1,937Total assets
    
    Ps.
    28,695
    
    
    Ps.
    32,187
    
    
    US$
    2,962
  Federico Sada G.
    
    Claudio L. Del Valle C.
    
    Enrique Osorio L.President and Chief Executive Officer
    
    Chief Administrative Officer
    
    Chief Financial Officer
  F-3




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##### Table of Contents



(Millions of constant Mexican pesos as of December 31, 2007)
 Millions ofUS dollars(ConvenienceTranslation)December 31,
    
    
    December 31,2006
    
    
    2007
    
    
    2007LIABILITIESShort-term borrowings
    
    Ps.
    319
    
    
    Ps.
    398
    
    
    US$
    37Current maturities of long-term debt
    
    
    66
    
    
    
    545
    
    
    
    50Trade payables
    
    
    2,197
    
    
    
    2,462
    
    
    
    227Accrued expenses
    
    
    1,124
    
    
    
    1,441
    
    
    
    132Derivative financial instruments
    
    
    140
    
    
    
    767
    
    
    
    70Other current liabilities
    
    
    989
    
    
    
    1,527
    
    
    
    141Current liabilities
    
    
    4,835
    
    
    
    7,140
    
    
    
    657Long-term debt
    
    
    12,441
    
    
    
    13,975
    
    
    
    1,286Employee retirement obligations
    
    
    1,564
    
    
    
    1,245
    
    
    
    115Deferred taxes
    
    
    252
    
    
    
    236
    
    
    
    22Other long-term liabilities
    
    
    237
    
    
    
    205
    
    
    
    18Long-term liabilities
    
    
    14,494
    
    
    
    15,661
    
    
    
    1,441Total liabilities
    
    
    19,329
    
    
    
    22,801
    
    
    
    2,098Commitments and contingencies (note 12)STOCKHOLDERS EQUITYCapital stock: no par value, 386,857,143 shares issued and
outstanding in 2006 and 2007
    
    
    387
    
    
    
    387
    
    
    
    36Restatement of capital stock
    
    
    7,245
    
    
    
    7,245
    
    
    
    666Restated capital stock
    
    
    7,632
    
    
    
    7,632
    
    
    
    702Treasury stock (45,874,816 shares in 2006 and 45,816,783 in 2007)
    
    
    (621
    )
    
    
    (622
    )
    
    
    (57
    )Additional paid-in capital
    
    
    2,437
    
    
    
    2,437
    
    
    
    224Shortfall in restatement of capital
    
    
    (21,090
    )
    
    
    (21,154
    )
    
    
    (1,947
    )Cumulative initial effect of deferred taxes
    
    
    (1,810
    )
    
    
    (1,810
    )
    
    
    (166
    )Minimum labor liability adjustment
    
    
    (492
    )
    
    
    (326
    )
    
    
    (30
    )Retained earnings reserved for reacquisition of Vitro shares
    
    
    2,000
    
    
    
    2,000
    
    
    
    184Retained earnings
    
    
    19,418
    
    
    
    19,269
    
    
    
    1,774Total majority interest
    
    
    7,474
    
    
    
    7,426
    
    
    
    684Minority interest in consolidated subsidiaries
    
    
    1,892
    
    
    
    1,960
    
    
    
    180Total stockholders equity
    
    
    9,366
    
    
    
    9,386
    
    
    
    864Total liabilities and stockholders equity
    
    Ps.
    28,695
    
    
    Ps.
    32,187
    
    
    US$
    2,962
   F-4




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##### Table of Contents



(Millions of constant Mexican pesos as of December 31, 2007, except per share amounts)
 Millions ofUS dollars(ConvenienceTranslation)Year ended December 31,
    
    
    December 31,2005
    
    
    2006
    
    
    2007
    
    
    2007Net sales
    
    Ps.
    26,567
    
    
    Ps.
    27,876
    
    
    Ps.
    28,591
    
    
    US$
    2,631Cost of sales
    
    
    19,198
    
    
    
    20,230
    
    
    
    20,187
    
    
    
    1,858Gross profit
    
    
    7,369
    
    
    
    7,646
    
    
    
    8,404
    
    
    
    773Selling, general and administrative expenses
    
    
    5,530
    
    
    
    5,529
    
    
    
    5,700
    
    
    
    524Operating income
    
    
    1,839
    
    
    
    2,117
    
    
    
    2,704
    
    
    
    249Total comprehensive financing result
    
    
    1,500
    
    
    
    2,276
    
    
    
    1,660
    
    
    
    153Operating income (loss) after financing result
    
    
    339
    
    
    
    (159
    )
    
    
    1,044
    
    
    
    96Other expenses (income), net
    
    
    494
    
    
    
    (229
    )
    
    
    869
    
    
    
    80(Loss) income from continuing operations before taxes
    
    
    (155
    )
    
    
    70
    
    
    
    175
    
    
    
    16Income tax (benefit) expense
    
    
    (519
    )
    
    
    228
    
    
    
    44
    
    
    
    4Net income (loss) from continuing operations
    
    
    364
    
    
    
    (158
    )
    
    
    131
    
    
    
    12Gain on sale of discontinued operations
    
    
    
    
    
    
    480Income (loss) from discontinued operations
    
    
    3
    
    
    
    (31
    )Cumulative effect of change in accounting principle, net of tax
    
    
    (124
    )Net income for the year
    
    Ps.
    243
    
    
    Ps.
    291
    
    
    Ps.
    131
    
    
    US$
    12Minority income (loss)
    
    Ps.
    180
    
    
    Ps.

    (110
    )
    
    Ps.
    144
    
    
    US$
    13Net majority income (loss)
    
    
    63
    
    
    
    401
    
    
    
    (13
    )
    
    
    (1
    )Ps.
    243
    
    
    Ps.
    291
    
    
    Ps.
    131
    
    
    US$
    12Earnings per common share (based on weighted average
shares outstanding of 273,116,069 for 2005,289,636,496 for 2006 and 341,042,193 for 2007):Income (loss) from continuing operations
    
    Ps.
    1.33
    
    
    Ps.
    (0.54
    )
    
    Ps.
    0.38
    
    
    US$
    0.04Gain on sale of discontinued operations
    
    
    
    
    
    
    1.66Income (loss) from discontinued operations
    
    
    0.01
    
    
    
    (0.11
    )Cumulative effect of change in accounting principle, net of tax
    
    
    (0.45
    )Minority (income) loss
    
    
    (0.66
    )
    
    
    0.38
    
    
    
    (0.42
    )
    
    
    (0.04
    )Net majority income (loss)
    
    Ps.
    0.23
    
    
    Ps.
    1.39
    
    
    Ps.
    (0.04
    )
    
    US$
    0.00
   F-5




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##### Table of Contents



(Millions of constant Mexican pesos as of December 31, 2007)
 Millions of US dollars(Convenience Translation)Year ended December 31,
    
    
    Year ended December 31,2005
    
    
    2006
    
    
    2007
    
    
    2007OPERATING ACTIVITIES:Net income (loss) from continuing operations
    
    Ps.
    364
    
    
    Ps.
    (158
    )
    
    Ps.
    131
    
    
    US$
    12Add (deduct) non-cash items:Depreciation and amortization
    
    
    1,854
    
    
    
    1,795
    
    
    
    1,414
    
    
    
    130Provision for employee retirement obligations
    
    
    348
    
    
    
    419
    
    
    
    261
    
    
    
    24Early extinguishment of employee retirement obligations
    
    
    18
    
    
    
    8
    
    
    
    97
    
    
    
    9Amortization of debt issuance costs
    
    
    219
    
    
    
    198
    
    
    
    170
    
    
    
    16Loss (gain) from sale of subsidiaries and associated companies
    
    
    137
    
    
    
    (68
    )
    
    
    11
    
    
    
    1Impairment of long-lived assets
    
    
    385
    
    
    
    393
    
    
    
    122
    
    
    
    11Loss (gain) from sale of long-lived assets
    
    
    6
    
    
    
    (795
    )
    
    
    47
    
    
    
    4Assignment of Vitro Club Trust
    
    
    (458
    )Mark-to market of derivative financial instruments
    
    
    (130
    )
    
    
    (109
    )
    
    
    216
    
    
    
    20Deferred taxes and workers profit sharing
    
    
    (743
    )
    
    
    49
    
    
    
    (351
    )
    
    
    (32
    )2,000
    
    
    
    1,732
    
    
    
    2,118
    
    
    
    195Decrease (increase) in trade receivables
    
    
    714
    
    
    
    (14
    )
    
    
    (207
    )
    
    
    (19
    )(Increase) decrease in inventories
    
    
    (169
    )
    
    
    223
    
    
    
    (308
    )
    
    
    (28
    )Increase in trade payables
    
    
    11
    
    
    
    173
    
    
    
    243
    
    
    
    22Change in other current assets and liabilities
    
    
    (441
    )
    
    
    (443
    )
    
    
    429
    
    
    
    39Employee retirement obligations
    
    
    (311
    )
    
    
    (589
    )
    
    
    (472
    )
    
    
    (43
    )Income (loss) from discontinued operations
    
    
    3
    
    
    
    (31
    )Discontinued operations
    
    
    278
    
    
    
    30Net resources generated by operating activities
    
    
    2,085
    
    
    
    1,081
    
    
    
    1,803
    
    
    
    166FINANCING ACTIVITIES:Proceeds from short-term bank loans
    
    
    3,103
    
    
    
    4,893
    
    
    
    2,650
    
    
    
    244Proceeds from long-term bank loans
    
    
    5,865
    
    
    
    1,481
    
    
    
    14,289
    
    
    
    1,315Amortization in real terms of bank loans
    
    
    (550
    )
    
    
    (564
    )
    
    
    (545
    )
    
    
    (50
    )Payment of short-term bank loans
    
    
    (4,406
    )
    
    
    (3,472
    )
    
    
    (4,864
    )
    
    
    (448
    )Payment of long-term bank loans
    
    
    (5,824
    )
    
    
    (5,472
    )
    
    
    (9,459
    )
    
    
    (870
    )Debt issuance costs
    
    
    (199
    )
    
    
    (23
    )
    
    
    (293
    )
    
    
    (27
    )Issuance of capital stock
    
    
    
    
    
    
    578Dividends paid to stockholders of Vitro, S.A.B. de C.V.
    
    
    (99
    )
    
    
    (95
    )
    
    
    (136
    )
    
    
    (13
    )Dividends paid to minority interest
    
    
    (96
    )
    
    
    (66
    )
    
    
    (79
    )
    
    
    (7
    )Sale (purchase) of treasury stock
    
    
    8
    
    
    
    69
    
    
    
    (1
    )Other financing activities
    
    
    (23
    )
    
    
    75
    
    
    
    487
    
    
    
    45Discontinued operations
    
    
    (90
    )
    
    
    (20
    )Net resources (used in) generated by financing activities
    
    
    (2,311
    )
    
    
    (2,616
    )
    
    
    2,049
    
    
    
    189INVESTING ACTIVITIES:Investments in land, buildings, machinery and equipment
    
    
    (1,107
    )
    
    
    (1,252
    )
    
    
    (2,695
    )
    
    
    (248
    )Proceeds from sale of land, buildings, machinery and equipment
    
    
    31
    
    
    
    1,693
    
    
    
    72
    
    
    
    7Restricted cash
    
    
    1
    
    
    
    419
    
    
    
    (331
    )
    
    
    (30
    )Investment in subsidiaries
    
    
    
    
    
    
    (218
    )
    
    
    (181
    )
    
    
    (17
    )Proceeds from sale of subsidiaries and associated companies
    
    
    170
    
    
    
    1,214
    
    
    
    37
    
    
    
    3Capital distribution to minority interest
    
    
    
    
    
    
    (109
    )Other long-term assets
    
    
    
    
    
    
    (359
    )
    
    
    (36
    )
    
    
    (3
    )Deferred charges
    
    
    (76
    )
    
    
    (92
    )
    
    
    (302
    )
    
    
    (28
    )Discontinued operations
    
    
    (191
    )
    
    
    21Net resources (used in) generated by investing activities
    
    
    (1,172
    )
    
    
    1,317
    
    
    
    (3,436
    )
    
    
    (316
    )Net (decrease) increase in cash and cash equivalents
    
    
    (1,398
    )
    
    
    (218
    )
    
    
    416
    
    
    
    39Balance at beginning of year
    
    
    2,838
    
    
    
    1,440
    
    
    
    1,222
    
    
    
    112Balance at end of year
    
    Ps.
    1,440
    
    
    Ps.
    1,222
    
    
    Ps.
    1,638
    
    
    US$
    151
   F-6




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##### Table of Contents



(Millions of constant Mexican pesos as of December 31, 2007)
 Treasury
    
    
    
    
    
    
    Cumulativestock and
    
    
    
    
    
    
    initial
    
    
    MinimumRestated
    
    
    additional
    
    
    Shortfall
    
    
    effect of
    
    
    laborcapital
    
    
    paid-in
    
    
    in restatement
    
    
    deferred
    
    
    liability
    
    
    Retained
    
    
    Minority
    
    
    Stockholdersstock
    
    
    capital
    
    
    of capital
    
    
    taxes
    
    
    adjustment
    
    
    earnings
    
    
    interest
    
    
    equityBalance at
January 1, 2005
    
    Ps.
    7,566
    
    
    Ps.
    471
    
    
    Ps.
    (20,882
    )
    
    Ps.
    (1,810)
    
    
    Ps.
    (466)
    
    
    Ps.
    20,984
    
    
    Ps.
    3,114
    
    
    Ps.
    8,977Dividends (Ps. 0.32 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99
    )
    
    
    
    
    
    
    (99
    )Revoked dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164
    
    
    
    
    
    
    
    164Decrease in minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85
    )
    
    
    (85
    )Sale of treasury stock
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Comprehensive income
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    15
    
    
    
    63
    
    
    
    169
    
    
    
    271Balance at
December 31, 2005
    
    
    7,566
    
    
    
    479
    
    
    
    (20,858
    )
    
    
    (1,810
    )
    
    
    (451
    )
    
    
    21,112
    
    
    
    3,198
    
    
    
    9,236Dividends (Ps. 0.32 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (95
    )
    
    
    
    
    
    
    (95
    )Decrease in minority interest
    
    
    
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (609
    )
    
    
    (540
    )Dilution of minority interest
    
    
    
    
    
    
    687
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (687
    )Sale of treasury stock
    
    
    
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69Issuance of capital stock
    
    
    66
    
    
    
    512
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    578Comprehensive income
    
    
    
    
    
    
    
    
    
    
    (232
    )
    
    
    
    
    
    
    (41
    )
    
    
    401
    
    
    
    (10
    )
    
    
    118Balance at
December 31, 2006
    
    
    7,632
    
    
    
    1,816
    
    
    
    (21,090
    )
    
    
    (1,810
    )
    
    
    (492
    )
    
    
    21,418
    
    
    
    1,892
    
    
    
    9,366Dividends (Ps. 0.37 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (136
    )
    
    
    
    
    
    
    (136
    )Decrease in minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57
    )
    
    
    (57
    )Purchase of treasury stock
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    (64
    )
    
    
    
    
    
    
    166
    
    
    
    (13
    )
    
    
    125
    
    
    
    214Balance at
December 31, 2007
    
    Ps.
    7,632
    
    
    Ps.
    1,815
    
    
    Ps.
    (21,154
    )
    
    Ps.
    (1,810
    )
    
    Ps.
    (326
    )
    
    Ps.
    21,269
    
    
    Ps.
    1,960
    
    
    Ps.
    9,386
   F-7




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##### Table of Contents



(Millions of constant Mexican pesos as of December 31, 2007, except per share amounts)
 1.
    
    Activities of the CompanyVitro, S.A.B. de C.V. (Vitro) is a Mexican holding company, and together with its subsidiaries
serves multiple product markets, including construction and automotive glass; food and beverage,
wine, liquor, cosmetics and pharmaceutical glass containers. Vitros subsidiaries also produce
raw materials and equipment and capital goods for industrial use which are vertically integrated
into the Glass Containers business unit.2.
    
    Basis of presentation and principles of consolidation
 a)
    
    Basis of presentationThe accompanying consolidated financial statements of Vitro and its subsidiaries (the
Company) are prepared on the basis of Mexican Financial Reporting Standards (NIFs or
Mexican FRS).The consolidated financial statements presented herein are expressed in millions of
constant Mexican pesos as of December 31, 2007. However, solely for the convenience of
users, the consolidated financial statements as of and for the year ended December 31,
2007, have been translated into United States of America (US) dollars at the rate of Ps.
10.8662 per dollar, the rate of exchange determined by the Banco de México (Mexicos
Central Bank) on December 31, 2007. Such arithmetical translation should not be construed
as a representation that the peso amounts shown could be converted into US dollars at such
rate or at any other rate.In the financial statements and these notes, references to pesos or Ps. correspond to
Mexican pesos, and references to dollars or US$ correspond to dollar of United States of
America (the United States).b)
    
    Consolidated subsidiariesThose companies in which Vitro holds, directly or indirectly, more than 50% of the capital
stock, or which Vitro controls, are included in the consolidated financial statements. For
those companies in which Vitro has joint control, the proportionate consolidation method is
used. This method consists of consolidating on a proportionate basis the assets,
liabilities, stockholders equity and revenues and expenses (see note 20 f). All
significant intercompany balances and transactions have been eliminated in consolidation.
  F-8




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##### Table of Contents



At December 31, 2007, the main subsidiaries the Company consolidates are:
 FLAT GLASS
    
    GLASS CONTAINERSViméxico S.A. de C.V. (1)
    
    Vitro Envases Norteamérica, S.A. de C.V.(91.8%)
    
    (100%)
    
    CORPORATEVitro Vidrio y Cristal, S.A. de C.V.
    
    Compañía Vidriera, S.A. de C.V.
    
    Vitro Corporativo, S.A. de C.V.- Productos de Valor Agregado en Cristal,
S.A de C.V. (55%) (3)
    
    Vidriera Monterrey, S.A. de C.V.
    
    Servicios y Operaciones
Financieras Vitro, S.A. de
C.V.Vidriera Guadalajara, S.A. de C.V.Vitro Automotriz, S.A. de C.V.
    
    Vidriera Los Reyes, S.A. de C.V.
    
    Aerovitro, S.A. de C.V.Distribuidora Nacional de Vidrio, S.A. de C.V.
    
    Vitro Cosmos, S.A. de C.V. (4)Vidrio Plano de México, S.A. de C.V.
    
    Vidriera Querétaro, S.A. de C.V.Vitro Flex, S.A. de C.V.
    
    Vidriera Toluca, S.A. de C.V.Vidrio y Cristal del Noroeste, S.A. de C.V. (2)
    
    Vitro Packaging, Inc.Cristales Automotrices, S.A. de C.V. (51%)
    
    Empresas Comegua S.A. (49.7%)Vitro Flotado Cubiertas, S.A. de C.V.
    
    Vidrio Lux, S.A.Vitro America, Inc.
    
    Industria del Álcali, S.A. de C.V.Vitro Colombia, S.A.
    
    Comercializadora Álcali, S. de R.L. de C.V.Vitro Cristalglass, S.L. (60%)- Vitro Chaves Industria de Vidro, S.A. (60%)
    
    Fabricación de Máquinas, S.A. de C.V.
 (1)
    
    Merger of Vitro Plan, S.A. de C.V. (Vitro Plan) with Viméxico, S.A. de C.V.
(Viméxico) On October 18, 2006, Vitro and its subsidiary Vitro Corporativo, S.A. de
C.V. (Vicorp) incorporated Viméxico as a Mexican corporation and, on October 30,
2006, Vitro transferred, as a capital contribution to Viméxico, an account receivable
from Vitro Plan in the amount of US$ 135 million. Following the capital contribution,
on December 8, 2006, Vicorp and Vitro, as shareholders of Viméxico, adopted a unanimous
resolution approving the merger of Vitro Plan into Viméxico. On December 11, 2006, the
shareholders of Vitro Plan concluded an extraordinary general shareholders meeting
approving the merger of Vitro Plan into Viméxico based on financial information as of
October 31, 2006, with Viméxico as the surviving entity. This merger became effective
in December 2006 (see note 12 f).As a consequence of the merger, all assets, rights, liabilities and obligations of Vitro
Plan were assumed by Viméxico and all agreements, contracts and proceedings (legal or
otherwise) to which Vitro Plan was a party were assumed by Viméxico, resulting in
Viméxicos total indebtedness of US$ 228 million as of the date of the merger. Prior to
the merger, Vitro Plan was a direct 65% owned subsidiary of Vitro, and Pilkington Group
LTD (Pilkington) owned a 35% in Vitro Plan. As a result of the merger, Viméxico is now
a direct 91.8% owned subsidiary of Vitro, and Pilkington owns an 8.2% equity interest in
Viméxico. Due to the merger, the account receivable for US$ 135 million was cancelled in
its entirety.
 (2)
    
    On July 24, 2007, Viméxico acquired the remaining 50% of the outstanding
 shares of Vitro AFG, S.A. de C.V. (Vitro AFG) from AFG Industries Inc. (AFG
Industries), in order to assume
control and increase its ownership to 100%, subsequently changing its legal name to
Vidrio y Cristal del Noroeste, S.A. de C.V., (see note 20 f).
  F-9




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##### Table of Contents



(3)
    
    On August 29, 2007, Vitro Vidrio y Cristal, S.A. de C.V. (Vitro VyC), a
subsidiary of Viméxico acquired 55% of the outstanding shares of Productos de Valor
Agregado en Cristal, S.A. de C.V. (PVA), (see note 20 e).
 (4)
    
    In December 2007, the Companys subsidiary Vidriera México, S.A. de C.V.
changed its legal name to Vitro Cosmos, S.A. de C.V.
 c)
    
    Translation of financial Statements of foreign subsidiaries In order to consolidate
the financial statements of foreign subsidiaries, the effects of inflation were taken into
consideration in accordance with Bulletin B-10, Recognition of the Effects of Inflation
in Financial Information, as amended. Such companies financial statements are translated
into Mexican pesos using the current rate method. The assets, liabilities, stockholders
equity and the statement of operations accounts are translated into Mexican pesos using
the exchange rate as of the date of the most recent balance sheet presented. The
cumulative translation adjustment is included in shortfall in restatement of capital as a
component of stockholders equity.
 d)
    
    Comprehensive income (loss) Represents changes in stockholders equity during
the year, for concepts other than distributions and activity in contributed common stock,
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 statements of income. Other comprehensive income (loss)
items consist of the shortfall in restatement of capital, the translation effects of
foreign subsidiaries and the additional minimum labor liability adjustment.
 e)
    
    Classification of costs and expenses Costs and expenses presented in the consolidated
statements of operations were classified according to their function which allows for the
analysis of the Companys gross margin. The Company continues to present operating income
in the statement of operations as it is an important financial indicator within the
industry and helps to evaluate the Companys performance. Operating income includes
ordinary income and expenses as well as operating expenses. Such presentation is comparable
with what was utilized for the years ended December 31, 2005 and 2006.
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3.
    
    Summary of significant accounting policiesThe accompanying consolidated financial statements have been prepared in conformity with NIFs,
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)
    
    Changes in accounting policiesStatement of income Beginning January 1, 2007, the Company adopted new NIF B-3, Statement
of Income, which now classifies revenues, costs and expenses into ordinary and
non-ordinary. Ordinary items are derived from primary activities representing an entitys
main source of revenues. Non-ordinary items are derived from activities other than those
representing an entitys main source of revenues. Consequently, the classification of
certain transactions as special and extraordinary was eliminated; these items are now part
of other income and expenses and non-ordinary items, respectively. Statutory employee profit
sharing (PTU) should now be presented as an ordinary expense and no longer presented
within income taxes. According to Interpretation of Financial Information Standards Number
4, Presentation of Statutory Employee Profit Sharing in the Statement of Income (INIF
4), PTU should be included within other income and expenses. The main effect of adopting
this interpretation was the reclassification of current and deferred PTU for 2005 and 2006
of Ps. 51 and Ps. 55, respectively, to other income and expenses.Related parties Beginning January 1, 2007, the Company adopted NIF C-13, Related
Parties, which broadens the concept related parties to include a) the overall business in
which the reporting entity participates; b) close family members of key management or
prominent executives; and c) any fund created in connection with a labor-related
compensation plan. NIF C-13 also requires the following disclosures: 1) that the terms and
conditions of consideration paid or received in transactions carried out between related
parties be equivalent to those of similar transactions carried out between independent
parties and the reporting entity, only if sufficient evidence exists; 2) benefits granted to
the entitys key management or prominent executives. Notes to the 2005 and 2006
consolidated financial statements were amended to comply with the new provisions.Capitalization of comprehensive financing result Beginning January 1, 2007, the Company
adopted NIF D-6, Capitalization of Comprehensive Financing Result, which establishes
general capitalization standards. Some of these standards include: a) mandatory
capitalization of comprehensive financing result (CFR) directly attributable to the
acquisition of qualifying assets; b) when financing in domestic currency is used to acquire
assets, yields obtained from temporary investments before the capital expenditure is made
are excluded from the amount capitalized; c) a methodology to calculate capitalizable CFR
relating to funds from generic financing; d) regarding land, CFR may be capitalized if land
is developed; and e) conditions that must be met to capitalize CFR and rules indicating when
CFR should no longer be capitalized. In 2007, the Company capitalized CFR of Ps. 10
directly attributable to the acquisition of qualifying assets. Through 2006, CFR was
charged to current earnings.Derivative financial instruments and hedging operations Effective January 1, 2005, the
Company adopted the provisions of Bulletin C-10, Derivative Financial Instruments and
Hedging Activities, and the effect was a charge to the cumulative effect of the change in
accounting principle in 2005 of Ps. 124, net of tax.b)
    
    Recognition of the effects of inflation The Company restates its consolidated
financial statements to Mexican peso purchasing power of the most recent balance sheet date
presented. Accordingly, the consolidated financial statements of the prior year, which are
presented for comparative purposes,
have also been restated to Mexican pesos of the same purchasing power and, therefore, differ
from those originally reported in the prior year.
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Vitros Mexican subsidiaries use the Indice Nacional de Precios al Consumidor (Mexican
National Consumer Price Index, or NCPI), published by Banco de México. For Vitros foreign
subsidiaries, except as noted below, the Consumer Price Index  All Urban Consumers  All
Items, Unadjusted (CPI) published by the US Labor Department is used to restate the
financial statements, and the restated financial statements are translated into Mexican
pesos using the applicable exchange rate at the end of the last period presented, except in
the case of the Companys subsidiaries located in Spain for which it applies the Price
Consumption Index (PCI), published by the National Institute of Statistics of Spain before
translation into Mexican pesos using the exchange rate of the Euro.Recognition of the effects of inflation results mainly in inflationary gains or losses on
monetary and nonmonetary items that are presented in the financial statements as follows:
 
    
    Shortfall in restatement of capital This item, which is an element of
stockholders equity, represents the accumulated effect of holding nonmonetary
assets and the effect of the initial monetary position gain or loss. The cumulative
effect of holding nonmonetary assets represents the difference between the specific
values of nonmonetary assets in excess of or below the increase attributable to
general inflation.
 
    
    Monetary position result Monetary position result reflects the result of
holding monetary assets and liabilities during periods of inflation. Values stated
in current monetary units decrease in purchasing power over time. This means that
losses are incurred by holding monetary assets, whereas gains are realized by
maintaining monetary liabilities. The net effect is presented in the statements of
operations as part of the total comprehensive financing result. For foreign
subsidiaries the result from monetary position is calculated using the CPI, except
in the case of the Companys subsidiaries located in Spain for which it applies the
PCI.
 Statement of Changes in Financial Position Bulletin B-12, Statement of Changes in
Financial Position, requires presentation of the sources and uses of funds during the
period measured as the differences, in constant pesos, between the beginning and ending
balances of balance sheet items adjusted by the excess (shortfall) in restatement of
capital. As required by Bulletin B-12, the monetary effect and the effect of changes in
exchange rates are considered cash items in the determination of resources generated from
operations due to the fact they affect the purchasing power of the entity.c)
    
    Cash and cash equivalents Consist mainly of bank deposits in checking accounts and
readily available investments of highly liquid short-term investments. They are valued at
the lower of acquisition cost plus accrued yields or estimated net realizable value and are
recognized in results of operations as they accrue.d)
    
    Investments in securities According to its intent, from the date of acquisition, the
Company classifies its investments in securities instruments in any of the following
categories: (1) trading, when the Company intends to trade debt and equity instruments in
the short-term, before their maturity, if any.
These investments are stated at fair value; any fluctuations in the value of these
investments are recognized in current earnings; (2) held-to-maturity, when the Company
intends to and is financially capable of holding financial instruments until their maturity.
These investments are recognized and maintained at amortized cost; and (3)
available-for-sale, investments that include those that are classified neither as trading
nor held-to-maturity. These investments are stated at fair value; any unrealized gains and
losses resulting from valuation, net of income tax, are recorded as a component of other
comprehensive income within stockholders equity and reclassified to current earnings upon
their sale or maturity. The monetary position resulting from the effects of inflation on
available-for-sale investments is recorded as a component of other comprehensive income.
Fair value is determined using prices quoted in recognized markets. If such instruments are
not traded, fair value is determined by applying recognized technical valuation models.
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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.Financial liabilities derived from the issuance of debt instruments are recorded at the
value of the obligations they represent. Any expenses, premiums and discounts related to the
issuance of debt financial instruments are amortized over the life of the instruments.e)
    
    Derivative financial instruments The Company states all derivatives at fair value in
the balance sheet, regardless of the purpose for holding them. Fair value is determined
using prices quoted in recognized markets. If such instruments are not traded, fair value
is determined by applying recognized valuation techniques.When derivatives are entered into to hedge risks, and such derivatives meet all hedging
requirements, their designation is documented at the beginning of the hedging transaction,
describing the transactions objective, characteristics, accounting treatment and how the
ineffectiveness of the instrument will be measured.Changes in the fair value of derivative instruments designated as hedges for accounting
purposes are recognized as follows: (1) for fair value hedges, changes in both the
derivative instrument and the hedged item are recognized in current earnings; (2) for cash
flow hedges, changes in the derivative instrument are temporarily recognized as a component
of other comprehensive income and then reclassified to current earnings when affected by the
hedged item. Any ineffective portion of the change in fair value is immediately recognized
in current earnings, within total comprehensive financing result, regardless of whether the
derivative instrument is designated as a fair value hedge or a cash flow hedge.The Company uses interest rate swaps, foreign currency forward contracts and different
natural gas derivative instruments to manage its exposure to these market risks. The Company
formally documents all hedging relationships, including their objectives and risk management
strategies to carry out derivative transactions.
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While certain derivative financial instruments are contracted for hedging from an economic
point of view, they are not designated as hedges for accounting purposes because they do not
meet all of the requirements and are instead classified as held-for-trading for accounting
purposes. Changes in fair value of such derivative instruments are recognized in current
earnings as a component of total comprehensive financing result.The Company reviews all contracts entered into to identify embedded derivatives that should
be segregated from the host contract for purposes of valuation and recognition. When an
embedded derivative is identified and the host contract has not been stated at fair value
and adequate elements for its valuation exist, the embedded derivative is segregated from
the host contract, stated at fair value and classified as trading or designated as a
financial instrument for hedging. Initial valuation and changes in the fair value of the
embedded derivatives at the closing of each period are recognized in current earnings.f)
    
    Inventories and cost of sales Inventories are stated at the lower of replacement cost
using the latest purchase price method without exceeding net realizable value. Cost of
sales is restated using replacement cost or the latest production cost at the time of the
sale.g)
    
    Land, buildings, machinery and equipment Expenditures for land, buildings, machinery
and equipment, including renewals and improvements that extend useful lives, are
capitalized and restated using the NCPI. The initial balance to apply the NCPI was the net
replacement value of the Companys long-lived asset as of December 31, 1996. For machinery
and equipment purchased in a foreign country, the restatement is based on the inflation
index mentioned above and the exchange rate at the end of each period.Beginning on January 1, 2007, the carrying value of qualifying assets includes the
capitalization of total comprehensive financing result.Depreciation is calculated using the straight-line method based on the remaining estimated
useful lives of the related assets. Depreciation begins in the month in which the asset is
placed in service. The estimated useful lives of the assets are as follows:
 YearsBuildings
    
    
    20 to 50Machinery and equipment
    
    
    3 to 30
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Maintenance and repair expenses are recorded as costs and expenses in the period incurred.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 amounts
mentioned above. The 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)
    
    Provisions Provisions are recognized for current obligations that result from a past
event, are probable to result in the use of economic resources, and can be reasonably
estimated.
 j)
    
    Goodwill Goodwill represents the excess of cost over fair value of subsidiaries as of
the date of acquisition. It is restated using the NCPI and at least once a year is subject
to impairment tests.
 k)
    
    Employee retirement obligations Seniority premiums, pension plans and severance
payments are recognized as costs over the expected service period of employees and are
calculated by independent actuaries using the projected unit credit method at net discount
rates. Accordingly, the liability is being accrued which, at present value, will cover the
obligation from benefits projected to the estimated retirement date of the Companys
employees.
 l)
    
    Share-based payment plans The Company has equity incentive plans that permit the
Company to grant stock options and nonvested shares (equity awards) to certain employees
and directors of the Company. The Company recognizes the fair value of equity awards
computed at the awards grant date over the period in which the requisite service is
rendered.
 m)
    
    Foreign currency balances and transactions for Mexican subsidiaries 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 result in the
consolidated statements of operations.
 n)
    
    Revenue recognition Revenues and related costs are recognized in the period in which
risks and rewards of ownership of the inventories are transferred to customers, which
generally coincides with the shipment of products to customers in satisfaction of orders.
 o)
    
    Statutory employee profit sharing (PTU) Statutory employee profit sharing 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 between the accounting result and income for PTU
purposes and is recognized only when it can be reasonably assumed that such difference will
generate a liability or benefit, and there is no indication that circumstances will change
in such a way that the liabilities will not be paid or benefits will not be realized.
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p)
    
    Income taxes Income taxes are recorded in the results of the year in which they are
incurred. Beginning October 2007, based on its financial projections, the Company must
determine whether it will essentially incur income tax (ISR) or the new Business Flat Tax
(IETU) and, accordingly,
recognize deferred taxes based on the tax it will pay. Deferred taxes are calculated by
applying the corresponding tax rate to the applicable temporary differences resulting from
comparing the accounting and tax bases of assets and liabilities and including, if any,
future benefits from tax loss carryforwards and certain tax credits. Deferred tax assets
are recorded only when there is a high probability of recovery.
 Tax on assets (IMPAC) paid that is expected to be recoverable is recorded as an advance
payment of ISR and is presented in the balance sheet increasing the deferred ISR asset.q)
    
    Earnings (loss) per share Basic earnings (loss) per common share are calculated by
dividing consolidated net income (loss) of majority stockholders by the weighted average
number of shares and equivalent common shares outstanding during the year. Diluted earnings
per share are determined by adjusting consolidated net income and common shares on the
assumption that the entitys commitments to issue or exchange its own shares would be
realized. Diluted earnings per share is not presented for periods in which the effect of
including common stock equivalents is anti-dilutive or periods in which the Company records
a net loss from continuing operations as was the case in 2006. In 2005 and 2007 diluted
earnings per share was not presented as it is the same as basic earnings per share.
 r)
    
    Foreign subsidiaries as economic hedges The Companys management designated some of
its foreign subsidiaries as economic hedges. The resulting exchange rate fluctuation is
presented in the shortfall in restatement of capital within stockholders equity to the
extent the net investment in the foreign subsidiary covers the debt. The result from
monetary position is measured using inflation factors from the designated subsidiarys
country of origin. The effect related to this charge to the results of operations for 2005,
2006 and 2007 was a (charge) credit of Ps. (93), Ps. (13) and Ps. 16, respectively.
 4.
    
    Discontinued operationsOn June 16, 2006, the Company completed the sale of its 51% equity ownership interest in
Vitrocrisa Holding, S. de R.L. de C.V. and subsidiaries, Crisa Libbey S.A. de C.V. and Crisa
Industrial, LLC, (together Vitrocrisa) to Libbey, Inc. (Libbey), the owner of the other 49%
equity interest, recognizing a gain on the sale of Ps. 480. The Company received proceeds of
approximately US$ 119 million from this divestiture, comprised of US$ 80 million in cash from
the sale of its equity interest, approximately US$ 28 million from the payment of intercompany
receivables and US$ 11 million from the repayment of intercompany debt. As a part of this
transaction, all of the liabilities of Vitrocrisa were assumed by Libbey, including bank debt of
US$ 62 million as of May 31, 2006, except for labor liabilities of approximately US$ 27 million.
Vitrocrisa, which was previously presented as one of the Companys reportable segments, is
presented as a discontinued operation as its disposition represented the termination of a
significant activity of the Company.
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The following table discloses Vitrocrisas condensed statements of operations for the periods
presented:
 Year ended
    
    
    Period fromDecember 31,
    
    
    January 1, toCondensed statements of operations:
    
    2005
    
    
    June 16, 2006Net sales
    
    Ps.
    2,349
    
    
    Ps.
    1,033Cost of sales
    
    
    2,008
    
    
    
    861Gross profit
    
    
    341
    
    
    
    172Selling, general and administrative expenses
    
    
    277
    
    
    
    129Operating income
    
    
    64
    
    
    
    43Total comprehensive financing result
    
    
    52
    
    
    
    102Other expenses (income), net
    
    
    12
    
    
    
    (5
    )Income tax benefit
    
    
    (3
    )
    
    
    (23
    )Net income (loss)
    
    Ps.
    3
    
    
    Ps.
    (31
    )
 5.
    
    Trade receivables
 a)
    
    Trade receivables are recorded net of an allowance for doubtful accounts and other
discounts of Ps. 277 and Ps. 301 at December 31, 2006 and 2007, respectively.
 b)
    
    At December 31, 2006 and 2007, the Company recorded Ps. 57 and Ps. 388, respectively,
as restricted cash. In 2006, the amount represents the collateral held with one of its
counterparties in its natural gas hedges, and in 2007 includes cash deposited in a trust
to pay principal and interest related to the Companys 2011 Vena Bond, which will be paid
in July 2008. Restricted cash is included in other current receivables.
 c)
    
    Sales of receivables  Vitro Cristalglass, S.L. (Vitro Cristalglass), a subsidiary
of the Company, has entered into revolving factoring program agreements to sell trade
accounts receivable with several financial institutions. In accordance with the terms of
some of these agreements, the Company has the obligation to reimburse for uncollected
receivables in the case of non-payment of customers. As of December 31, 2006 and 2007 the
maximum capacity available under these programs was US$ 35 million and US$ 45 million,
respectively. At such dates Vitro Cristalglass had sold approximately US$ 21 million and
US$ 16 million of trade receivables, respectively.
 d)
    
    Securitization of trade receivables:
 
    
    Securitization of Vitro Envases Norteamérica, S.A. de C.V. (VENA) trade
receivables  On March 31, 2005, Compañía Vidriera, S.A. de C.V., Industria del
Álcali, S.A. de C.V. and Comercializadora Álcali, S. de R.L. de C.V., all subsidiaries
of VENA, closed a five-year non-recourse revolving accounts receivable facility,
through which such companies obtained approximately Ps. 550 (nominal amount) and US$
19 million. The VENA subsidiaries entered into an agreement to sell all of their trade
accounts receivable, on a revolving basis, to a trust (the Trust, a qualifying
special purpose entity) that was formed prior to the execution of this
agreement for the sole purpose of buying and selling accounts receivable and is
designed to be bankruptcy remote.
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The Ps. 550 (nominal amount) was obtained through
the issuance of certified preferred securities (certificados bursátiles preferentes)
that trade on the Mexican Stock Exchange (BMV) issued by the Trust, and US$ 19
million in subordinated notes issued in United States of America, which are guaranteed
by the Company. The interest payments and eventual principal reimbursement on the
certificados bursátiles preferentesand the subordinated notes are payable from the
collection of the receivables originated by the VENA subsidiaries and sold to the
Trust. At December 31, 2006 and 2007 the gross receivables sold to the Trust totaled
Ps. 1,074 and Ps. 1,075, respectively, and are reflected as a reduction of trade
accounts receivable. The estimated fair value of the retained undivided interests in
securitized receivables at December 31, 2006 and 2007 was Ps. 529 and Ps. 312,
respectively.
 
    
    Securitization of Viméxico (formerly Vitro Plan) trade receivables  On
August 22, 2005, Viméxico, the holding company of our flat glass segment, closed a
private issuance of promissory notes in the United States for US$ 21.5 million, at an
interest rate of 6.5%. Viméxico entered into an agreement to sell all of its trade
accounts receivable, on a revolving basis, to a trust (the Trust, a qualifying
special purpose entity) that was formed prior to the execution of this agreement for
the sole purpose of buying and selling accounts receivable and is designed to be
bankruptcy remote. The interest payments and eventual principal reimbursement will be
provided from the collection of the receivables originated by four subsidiaries of
Viméxico and sold to the Trust, which are: Distribuidora Nacional de Vidrio, S.A. de
C.V., Vitro Flotado Cubiertas, S.A. de C.V., Vitro Automotriz, S.A. de C.V. and Vitro
Vidrio y Cristal, S.A. de C.V. At December 31, 2006 and 2007, the gross receivables
sold to the Trust totaled Ps. 574 and Ps. 580, respectively, and are reflected as a
reduction of trade accounts receivable. The estimated fair value of the retained
undivided interests in securitized receivables at December 31, 2006 and 2007 was Ps.
332 and Ps. 346, respectively.
 
    
    During 2004, Vitro America, Inc. (Vitro America) closed a contract for
selling all their accounts receivable, on a revolving basis, to VVP Funding, a
wholly-owned subsidiary of Vitro America. VVP Funding is a special-purpose entity that
was formed prior to the execution of this agreement for the sole purpose of buying and
selling accounts receivable and is designed to be bankruptcy remote. Vitro America and
VVP Funding entered an agreement with an unrelated major financial institution whereby
VVP Funding sells, on a revolving basis and subject to the maintenance of certain
financial and receivables based ratios, an undivided percentage ownership in all
eligible accounts receivable, as defined, for consideration composed of cash up to a
maximum amount of US$ 40 million and retained undivided interests in securitized
receivables. The transfer of undivided ownership interests from VVP Funding to the
unrelated major financial institution for cash consideration is accounted for as a
sale of receivables. Effective April 16, 2007, the new agreement was signed and
amended to increase the maximum selling amount from US$ 40 million to US$ 50 million.
The agreement expires in April 2008 but is subject to annual renewal approval by the
financial institution. As of December 31, 2006 and 2007, the gross receivables sold
totaled approximately US$ 78 million and US$ 76 million, respectively and are
reflected as a reduction of trade accounts receivable. The estimated fair
value of the retained undivided interests in securitized receivables at December 31,
2006 and 2007 was US$ 32 million and US$ 29 million, respectively.
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6.
    
    InventoriesInventories are summarized as follows:
 December 31,2006
    
    
    2007Semi-finished and finished products
    
    Ps.
    2,836
    
    
    Ps.
    2,643Raw materials
    
    
    603
    
    
    
    641Packaging materials
    
    
    70
    
    
    
    493,509
    
    
    
    3,333Spare parts
    
    
    259
    
    
    
    304Refractory
    
    
    34
    
    
    
    55Merchandise in transit
    
    
    131
    
    
    
    358Other
    
    
    49
    
    
    
    70Ps.
    3,982
    
    
    Ps.
    4,120
 7.
    
    Land, buildings, machinery and equipment
 a)
    
    Land, buildings, machinery and equipment are summarized as follows:
 December 31,2006
    
    
    2007Land
    
    Ps.
    3,660
    
    
    Ps.
    3,645Buildings
    
    
    10,540
    
    
    
    10,585Accumulated depreciation
    
    
    5,437
    
    
    
    5,804Ps.
    8,763
    
    
    Ps.
    8,426Machinery and equipment
    
    Ps.
    24,865
    
    
    Ps.
    25,403Accumulated depreciation
    
    
    18,143
    
    
    
    17,591Ps.
    6,722
    
    
    Ps.
    7,812
 The Company reviewed the operating conditions of certain of its fixed assets and determined
to extend their estimated remaining useful life, which resulted in a decrease in
depreciation expense of Ps. 78 in 2007.b)
    
    In 2007, the Company capitalized CFR of Ps. 10 directly attributable to the acquisition
of qualifying assets. Through 2006, all CFR was charged to current earnings.c)
    
    Sale of real estate On December 14, 2006, Vitro sold real estate located in Mexico
City used by Compañía Vidriera, S.A. de C.V. (COVISA) for US$ 100 million, 80% payable on
the date of sale and the remainder payable on the delivery date of the property. COVISA
uses these premises to manufacture glass containers for cosmetics and perfume products. The
Company is in the process of relocating this production to another facility in Toluca,
Mexico. In connection with the sale of the
property, the Company has agreed to deliver the real estate within 24 months following the
sale, free and clear of all buildings and fixtures, as well as any environmental claims,
recording reserves of Ps. 56 for the estimated asset retirement costs and prepaid rent of
Ps. 62 for the estimated fair value of the rental expense over the 24 months.
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The Company
also has an option to extend the delivery date for an additional 12 months for an annual
rental payment of US$ 11.2 million. Vitro has also guaranteed up to US$ 80 million in favor
of the purchaser payable in the event that the property is not delivered to the purchaser
within 36 months following the sale. As of the issuance date of these consolidated financial
statements, the Company estimates that its delivery of the land will be completed by
December 2008.
 d)
    
    Sale of corporate building On November 28, 2006, the Company sold one of the
buildings located at its corporate headquarters in Garza Garcia, N.L., Mexico, for Ps. 128.
 8.
    
    Derivative financial instrumentsWhile the Companys derivative financial instruments are primarily entered from an economic
point of view, they are not designated as hedges because they do not meet all of the accounting
requirements and are therefore classified as trading for accounting purposes.At December 31, 2007, the Companys derivative financial instruments had the following
positions:
 a)
    
    Trading derivative instruments:
 NotionalDerivative financial
    
    Amount
    
    
    
    
    Fair Valueinstruments
    
    (million)
    
    
    Period
    
    AssetForeign exchange optionsExotic instruments
    
    US$
    266
    
    
    January to April 2008
    
    Ps.
    2
 Notional
    
    
    Company
    
    
    CompanyDerivative financial
    
    Amount
    
    
    pays interest
    
    
    receives interest
    
    
    
    
    Fair Valueinstruments
    
    (million)
    
    
    rate (in pesos)
    
    
    rate (in US$)
    
    
    Period
    
    AssetInterest rate optionsCross currency swaps
    
    US$
    150
    
    
    TIIE + 1.08 %
    
    
    8.63
    %
    
    February 2007 to February 2012
    
    Ps.
    23Cross currency swaps
    
    US$
    350
    
    
    TIIE + 1.62 %
    
    
    9.13
    %
    
    February 2007 to February 2012
    
    
    58Cross currency swaps
    
    US$
    350
    
    
    TIIE + 1.60 %
    
    
    9.13
    %
    
    February 2007 to February 2012
    
    
    61Cross currency swaps
    
    US$
    150
    
    
    TIIE + 1.06 %
    
    
    8.63
    %
    
    February 2007 to February 2012
    
    
    24Interest rate swaps
    
    Ps.
    3,294
    
    
   8.10 %
    
    TIIE (in pesos)
    
    February 2007 to February 2012
    
    
    28Total interest rate options (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ps.
    194
 Notional
    
    
    
    
    Fair ValueAmount
    
    
    
    
    AssetDerivative financial instruments
    
    (MMBTUs)
    
    
    Period
    
    (Liability)Natural gas contractsCapped swap (2)
    
    
    8,040,000
    
    
    January to December 2008
    
    Ps.
    (556
    )Swaps
    
    
    1,640,000
    
    
    January to December 2008
    
    
    6Options
    
    
    4,800,000
    
    
    January to December 2008
    
    
    10Exotic
    
    
    8,400,000
    
    
    January to December 2008
    
    
    (10
    )Total natural gas contracts
    
    
    
    
    
    
    
    Ps.
    (550
    )
  F-20




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##### Table of Contents



Fair ValueSummary of derivative financial
    
    Assetinstruments
    
    (Liability)Foreign exchange options
    
    Ps.
    2Interest rate options
    
    
    194Natural gas contracts
    
    
    (550
    )Embedded
    
    
    12Total derivative financial instruments
    
    Ps.
    (342
    )
 (1)
    
    The derivative asset related to the Companys interest rate options, includes
payments made by the Company of Ps. 349, which resulted in a net loss of Ps. 155, and
is presented in total comprehensive financing result.
 (2)
    
    In December 2007, the Company entered into a natural gas capped swap and
executed an option to receive a prepayment from the counterparty for Ps. 534, which
will be repaid throughout 2008. The net loss from the transaction was Ps. 22, which is
recorded in total comprehensive financing result. In January 2008, the Company entered
into a contrary position to that of the natural gas capped swap it acquired in 2007,
offsetting the market risks from such instrument.
 b)
    
    Embedded derivatives  The Company identified embedded derivatives within certain of
its supply contracts. As of December 31, 2007, the amount recognized for these instruments
was an asset and a credit to total comprehensive financing result of Ps. 12.
 9.
    
    Short-term borrowingsAt December 31, 2006 and 2007, the short-term borrowings denominated in foreign currency (US
dollars and euros) totaled Ps. 319 and Ps. 398, respectively. During 2007, the Companys
weighted average interest rate for short-term borrowings denominated in US dollars was 7.75%
and denominated in euros 3.29%.As disclosed in note 10 c), the Company issued US$ 700 million of senior guaranteed notes due
February 1, 2017 and US$ 300 million of senior guaranteed notes due February 1, 2012. Upon
completion of this transaction, at December 31, 2006, Ps. 2,380 of short-term borrowings were
refinanced and have therefore been reclassified as long-term debt.
  F-21




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##### Table of Contents



10.
    
    Long-term debt
 a)
    
    Long-term debt consists of the following:
 December 31,
    
    
    December 31,2006
    
    
    2007I. Foreign Subsidiaries (payable in US dollars):Secured debt, floating interest rate based on LIBOR
plus a spread of 3.15%, principal payable in several installments
through 2009.
    
    Ps.
    61
    
    
    Ps.
    52Unsecured debt, floating interest rate based on LIBOR
plus a spread between 1.25% and 1.75%, principal payable in several
installments through 2017.
    
    
    233
    
    
    
    544Unsecured debt, floating interest rate based on
Fixed Term Deposits (DTF) plus a spread of 6%,
principal payable in several installments through 2012.
    
    
    
    
    
    
    8Unsecured debt, fixed interest rate of 10.7494%, principal payable
in several installments through 2016.
    
    
    87
    
    
    
    78II. Foreign Subsidiaries (payable in euros):Secured debt, floating interest rate based on EURIBOR
plus a spread ranging from 0.80% to 1.25%, principal payable in
several installments through 2008.
    
    
    7
    
    
    
    2Unsecured debt, floating interest rate based on EURIBOR
plus a spread ranging from 0.625% to 2.5%, principal payable in
several installments through 2011.
    
    
    55
    
    
    
    66III. Vitro and Mexican Subsidiaries (payable in US dollars):Secured debt, floating interest rate based on LIBOR
plus a spread ranging from 2.5% to 4.0%, principal payable in
several installments through 2007.
    
    
    321Unsecured debt, floating interest rate based on LIBOR
plus a spread ranging from 0.25% and 2.95%, principal
payable in several installments through 2009, which was paid in 2007.
    
    
    1010.75% Senior secured guaranteed notes due in 2008.
    
    
    2,762
    
    
    
    326Senior secured term loan, floating interest rate based on LIBOR plus
a spread of 6.25%, principal payable in several installments through
2010, which was prepaid in 2007.
    
    
    1,628
  F-22




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##### Table of Contents



December 31,
    
    
    December 31,2006
    
    
    200711.375% Guaranteed senior unsecured notes due in 2007.
    
    
    1,71011.75% Guaranteed senior unsecured notes due in 2013.
    
    
    2,509
    
    
    
    2,4348.625% Guaranteed senior unsecured notes due in 2012.
    
    
    
    
    
    
    3,2229.125% Guaranteed senior unsecured notes due in 2017.
    
    
    
    
    
    
    7,506IV. Vitro and Mexican Subsidiaries (payable in Mexican pesos):Unsecured medium-term notes, floating interest
rate based on 182-day Mexican treasury bonds (CETES) plus a spread
of 3.25%, principal payable in 2008 and 2009.
    
    
    744
    
    
    
    282V. Vitro debt issuance (payable in US dollars):Refinanced short-term borrowings (note 9)
    
    
    2,38012,507
    
    
    
    14,520Less current maturities
    
    
    66
    *
    
    
    545Ps.
    12,441
    
    
    Ps.
    13,975
 *
    
    As a result of the debt issuance disclosed in note 10 c), a portion of the long-term debt
was refinanced and therefore, in 2006, Ps. 1,998 of current maturities have been reclassified
as long-term debt. As of December 31, 2007, the interest rates of EURIBOR, CETES, TIIE, LIBOR and DTF were
4.684%, 7.4669%, 7.9250%, 4.6788% and 9.15%, respectively.
  F-23




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##### Table of Contents



The schedule of contractual principal payments of long-term debt as of December 31, 2007 is
as follows:
 Year ending December 31,2009
    
    Ps.
    2852010
    
    
    812011
    
    
    812012
    
    
    3,3012013 and thereafter
    
    
    10,227Ps.
    13,975
 b)
    
    Certain of the Companys long-term debt agreements contain limitations including the
restriction of payments to repurchase shares, limitation on dividends, limitation on leans
and certain financial covenants that if the Company does not meet at a consolidation
levels, its ability to incur additional debt is restricted. As of December 31, 2007 such
restrictions did not represent an event of default on the credit facilities nor did it
allow the lenders to accelerate the maturity of the debt under such credit facilities.As of December 31, 2007, the Company is restricted to a maximum of US$ 100 million of
additional debt for working capital needs, capital expenditures and interest payments, US$25
million for capital expenditures secured by liens and an additional US$25 million for any
other purpose. The financing contracts do not restrict the Companys ability to refinance
debt.
 c)
    
    Vitro debt issuance On February 1, 2007, Vitro S.A.B. de C.V. successfully closed an
offering, of US$1.0 billion of senior guaranteed notes (the Notes) principally to
refinance existing third-party debt at the Vitro holding company level, substantially all
of the third-party debt at its subsidiary VENA and certain third-party debt at some of
Viméxicos subsidiaries.The Notes were issued in two tranches: US$700 million of senior guaranteed notes due
February 1, 2017, callable after year 2012, at a coupon of 9.125% and US$300 million of
senior unsecured notes due February 1, 2012, non-callable for the notes life, at a coupon
of 8.625%. The notes pay interest semiannually and are guaranteed by VENA and its
wholly-owned subsidiaries and by Viméxico and its wholly-owned subsidiaries.
  F-24




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##### Table of Contents



11.
    
    Employee retirement obligationsThe disclosures relating to the Companys pension plans, seniority premiums and severance
payments required by Bulletin D-3, calculated as described in note 3 k), together with certain
actuarial assumptions utilized, are presented below as of December 31, 2006 and 2007:
 
 December 31,2006
    
    
    2007Accumulated benefit obligation
    
    Ps.
    2,118
    
    
    Ps.
    2,653Projected benefit obligation
    
    Ps.
    2,774
    
    
    Ps.
    3,319Plan assets at fair value
    
    
    (1,290
    )
    
    
    (1,548
    )Unfunded status
    
    
    1,484
    
    
    
    1,771Unrecognized items:Prior service costs and plan amendments
    
    
    (174
    )
    
    
    (242
    )Unrecognized transition obligation
    
    
    (249
    )
    
    
    (181
    )Changes in assumptions and adjustments from experience
    
    
    (528
    )
    
    
    (899
    )Projected net liability
    
    Ps.
    533
    
    
    Ps.
    449Additional minimum liability adjustment
    
    Ps.
    1,031
    
    
    Ps.
    796
 At December 31, 2007, the plan assets presented above, include 47.5 million shares of Vitro.
 December 31,Assumptions:
    
    2006
    
    
    2007Discount rate
    
    
    5.50
    %
    
    
    5.00
    %Expected rate of return on plan assets
    
    
    7.0
    %
    
    
    7.0
    %Rate of compensation increase
    
    
    0.0
    %
    
    
    0.0
    %
 December 31,Net periodic cost:
    
    2005
    
    
    2006
    
    
    2007Service cost
    
    Ps.
    60
    
    
    Ps.
    73
    
    
    Ps.
    96Interest cost
    
    
    136
    
    
    
    143
    
    
    
    149Amortization of transition obligation
    
    
    97
    
    
    
    100
    
    
    
    42Amortization of prior service costs
and plan amendments
    
    
    15
    
    
    
    11
    
    
    
    14Amortization of changes in
assumptions and adjustments from
experience
    
    
    101
    
    
    
    149
    
    
    
    145Actual return on plan assets
    
    
    (43
    )
    
    
    (49
    )
    
    
    (88
    )Net periodic cost*
    
    Ps.
    366
    
    
    Ps.
    427
    
    
    Ps.
    358
 *
    
    At December 31, 2005, 2006 and 2007 includes Ps. 18, Ps. 8 and Ps. 97, respectively, for the
early extinguishment of retirement obligations and also includes Ps. 68, Ps. 108 and Ps. 49 for
severance payments, respectively.  F-25




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##### Table of Contents



The unrecognized items are being amortized over the average remaining service lives of the
Companys employees. The amortization period of unrecognized items is as follows:
 
 December 31,Amortization of unrecognized items (in years):
    
    2006
    
    
    2007Prior service costs and plan amendments
    
    
    15
    
    
    
    14Transition obligation
    
    
    4
    
    
    
    6Changes in assumptions and adjustments from experience
    
    
    15
    
    
    
    14
 12.
    
    Commitments and contingencies
 a)
    
    In October 2000, several subsidiaries of Vitro, which have facilities throughout
Monterrey, Mexico and the Mexico City area, entered into a 15-year energy purchase
agreement for approximately 90 megawatts of electricity and 1.3 million tons of steam per
year with Tractebel Energía de Monterrey, S. de R.L. de C.V. (Tractebel).
 b)
    
    The Company has several non-cancelable operating lease agreements for the rent of
warehouses and equipment. Rental expense for the years ended December 31, 2005, 2006 and
2007 was Ps. 546, Ps. 527 and Ps. 541, respectively.Future minimum lease payments under these agreements are as follows:
 2008
    
    Ps.
    3652009
    
    
    3342010
    
    
    2662011
    
    
    1712012
    
    
    1152013 and thereafter
    
    
    132
 c)
    
    The Company is not a party to, and none of its assets are subject to, any pending legal
proceedings, nor is the Company subject to any contingent liabilities, other than as
described in notes 12 d) and f) and legal proceedings and contingent liabilities arising in
the ordinary course of business and against which the Company is adequately insured or
indemnified or which the Company believes are not material in the aggregate.
 d)
    
    As part of the disposal of Anchor Glass Containers Corporation (Anchor) in August
1996, in a transaction approved by the U.S. Bankruptcy Court, the Company entered into a
term sheet which contemplated an agreement pursuant to which the Company would provide to
the Pension Benefit Guaranty Corporation PBGC, a United States governmental agency that
guarantees pensions, a limited guaranty of Anchors unfunded pension liability. No payments
would be made under such a guaranty unless the PBGC terminated any of the covered pension
plans, and the guaranty would be payable only to the extent the PBGC could not otherwise
recover the unfunded liabilities from the entity that purchased Anchors assets New
Anchor. The amount of the guaranty was originally limited to US$ 70 million. Under the
guaranty, payments would not begin until August 1, 2002, and
would then generally be payable in equal semi-annual installments over the following 10
years. Payments would not bear interest. The amount and the term of the guaranty would be
proportionately reduced if the pension plans were terminated after January 31, 2002.
Beginning February 2002, the guaranty would be reduced by US$ 7 million semiannually until
August 1, 2006, when the guaranty would expire if the plans did not terminate.
  F-26




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##### Table of Contents



On April 15, 2002, New Anchor filed a pre-negotiated plan of reorganization under Chapter 11
of the U.S. Bankruptcy Code. On August 8, 2002, an amended plan of reorganization was
confirmed, pursuant to which the plan resulting from the merger of the covered pension plans
was terminated, and the obligations thereunder were assumed by the PBGC in exchange for
cash, securities and a commitment of reorganized New Anchor to make certain future payments.On June 20, 2003, the PBGC wrote to the Company, asserting that the plan had been terminated
effective as of July 31, 2002, with an estimated unfunded liability of US$ 219 million. The
PBGC stated that the value of the recovery from New Anchor and reorganized New Anchor
amounts to no more than US$ 122.25 million; it alleged that the recovery that it secured in
the bankruptcy was insufficient and that an underfunding in excess of the Companys limited
guaranty had occurred. Accordingly, to such letter, the PBGC demanded payments pursuant to
the term sheet of US$ 7 million on or before August 1, 2003 and of US$ 3.5 million
semiannually through August 1, 2011. The Company intends to contest this liability. There
are various issues concerning such demand and certain defenses that may be asserted by the
Company. Management is currently evaluating these issues and defenses. At this point, it is
not possible to reasonably estimate the amounts that will ultimately be payable in response
to such demand. When management is able to reasonably estimate those amounts, the Company
will establish an appropriate accounting reserve. As of this date, the Company has not
established any reserves in connection with such potential liability.e)
    
    Call/Put on shares of Vitro Cristalglass  A group of individual investors owns a 40%
interest in Vitro Cristalglass. The Company has the option of purchasing the 40% minority
interest, which can be exercised beginning May 1, 2005 for fair value as calculated by
independent appraisers and cannot be less than 28.9 million euros (US$ 42.4 million as of
December 31, 2007). Additionally, the minority interest has a put option pursuant to which
they may require the Company to purchase all or part of their 40% interest in Vitro
Cristalglass, which can be exercised beginning on May 1, 2003 for 28.4 million euros (US$
41.8 million as of December 31, 2007), as adjusted to reflect inflation in Spain from 2003
through the time the put is exercised. As of December 31, 2007, the estimated fair value of
the 40% interest is higher than the option price held by Vitro.
 f)
    
    At a general extraordinary shareholders meeting of Vitro Plan held in December 2006,
the merger into Vitros subsidiary Viméxico was approved. Notwithstanding that this merger
has become fully effective, since all approvals were granted and the corresponding filings
were made, Pilkington, who voted against such merger, filled a lawsuit Viméxico.In February 2008 Viméxico was notified of a ruling issued by the First District Court on
Civil and Labor matters that the lawsuit brought by Pilkington seeking to annul the
resolutions adopted at the general extraordinary shareholders meeting was unfounded. In its
ruling, the Court determined that all resolutions adopted at the general extraordinary
shareholders meeting were valid. Despite this ruling, Pilkington has appealed this
decision. Based on advice from its Mexican special litigation counsel, management continues
to believe that this lawsuit is without merit and expects to obtain another favorable
ruling.
  F-27




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##### Table of Contents



13.
    
    Foreign currency operations
 a)
    
    At December 31, 2007, the foreign currency denominated assets and liabilities of the
Companys Mexican subsidiaries consist of the following:
 US dollars
    
    
    Mexican pesosMonetary assets
    
    US$
    259
    
    
    Ps.
    2,813Inventories
    
    
    15
    
    
    
    167Fixed assets
    
    
    332
    
    
    
    3,606Monetary liabilities
    
    
    1,443
    
    
    
    15,684
 b)
    
    Foreign currency operations of the Companys Mexican subsidiaries for the year ended
December 31, 2007, consisted of the following:
 US dollars
    
    
    Mexican pesosExports
    
    US$
    601
    
    
    Ps.
    6,674Imports
    
    
    321
    
    
    
    3,591Interest expense, net
    
    
    132
    
    
    
    1,478
 c)
    
    The condensed financial information of the principal foreign subsidiaries of the
Company at December 31, 2007, consisted of the following:
 Central andUnited States
    
    
    South America
    
    
    EuropeNet sales
    
    Ps.
    8,794
    
    
    Ps.
    2,662
    
    
    Ps.
    2,432Operating income
    
    
    274
    
    
    
    203
    
    
    
    247Total assets
    
    
    2,996
    
    
    
    3,489
    
    
    
    2,403Total liabilities
    
    
    887
    
    
    
    1,415
    
    
    
    1,052Capital expenditures
    
    
    110
    
    
    
    331
    
    
    
    108
 d)
    
    The exchange rates of the Mexican peso against the US dollar and the Euro, used for
purposes of the Companys consolidated financial statements at the following dates were:
 US dollar
    
    
    EuroDecember 31, 2005
    
    Ps.
    10.6344
    
    
    Ps.
    12.5932December 31, 2006
    
    
    10.8116
    
    
    
    14.2680December 31, 2007
    
    
    10.8662
    
    
    
    15.9526
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##### Table of Contents



14.
    
    Stockholders equity
 a)
    
    The capital stock of the Company consists of 386,857,143, ordinary, nominative, fully
paid common shares, without par value, at December 31, 2006 and 2007.b)
    
    Capital stock increase On September 27, 2006, at an ordinary shareholders meeting,
the Companys shareholders approved an increase of Ps. 550 (nominal) in the variable
portion of the Companys capital stock. This capital increase was completed on October 31,
2006, through the issuance of 62,857,143 new shares at a price of Ps. 8.75 per share. The
offering was made primarily to current shareholders and holders of the Companys ADRs.c)
    
    The Company maintains an Employee Stock Option Plan established in March 1998 (the
Plan). The Plan specifies the amount of shares, time and initial exercise price, which
is equal to the average closing price on the BMV of the common shares on the 20 days prior
to the grant date, except for options issued during 2000, 2001 and 2002, which were Ps.
11.00, Ps. 8.27 and Ps. 7.53, respectively. The vesting period of the options is five
years and the life of such options is 10 years.The following table summarizes the activity relating to the Plan:
 Total1998
    
    
    1999
    
    
    2000
    
    
    2001
    
    
    1998 *
    
    
    2002
    
    
    outstandingOptions granted
during the year
    
    
    2,813,300
    
    
    
    2,893,000
    
    
    
    4,851,900
    
    
    
    3,204,800
    
    
    
    940,950
    
    
    
    3,941,950Options cancelled
or exercised at
December 31, 2007
    
    
    2,350,000
    
    
    
    1,059,500
    
    
    
    3,986,950
    
    
    
    2,827,950
    
    
    
    478,050
    
    
    
    3,208,150Options outstanding at
December 31, 2007
    
    
    463,300
    
    
    
    1,833,500
    
    
    
    864,950
    
    
    
    376,850
    
    
    
    462,900
    
    
    
    733,800
    
    
    
    4,735,300Initial exercise price
    
    Ps.
    31.31
    
    
    Ps.
    14.88
    
    
    Ps.
    11.00
    
    
    Ps.
    8.27
    
    
    Ps.
    13.00
    
    
    Ps.
    7.53Exercise price at
December 31, 2007
    
    Ps.
    79.90
    
    
    Ps.
    45.78
    
    
    Ps.
    11.00
    
    
    Ps.
    8.27
    
    
    Ps.
    13.00
    
    
    Ps.
    7.53
 *
    
    During 2001 the Company
modified the exercise price of 940,950 options granted in 1998 to
Ps. 13.00.
 The closing price of the Companys shares on the BMV on December 31, 2007 was Ps. 24.00.The estimated fair value of the options was made on the grant date using the Black-Scholes
option-pricing model.d)
    
    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 par value (historical pesos). The legal
reserve may be capitalized but may not be distributed unless the entity is dissolved. The
legal reserve must be replenished if it is reduced for any reason. At December 31, 2006
and 2007, the legal reserve, in historical pesos, was Ps. 72.e)
    
    At December 31, 2006 and 2007, the Company held 45,874,816 and 45,816,783,
respectively, treasury shares, which reduced the amount of total shares outstanding, and
included 17,555,747 and
17,464,614 shares held by the Stock Option Trust (see note 14 c) at December 31, 2006 and
2007, respectively.
  F-29




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##### Table of Contents



f)
    
    Stockholders equity, except restated paid-in capital and tax retained earnings, will
be subject to income tax at the rate in effect when a dividend is distributed. 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. At
December 31, 2007, the majority interest stockholders equity tax account, corresponding
to the contributed capital account and the net tax income account was Ps. 2,269 and Ps.
2,377, respectively.g)
    
    Dividends declared and paid:
 Dividend AmountStockholders meeting date
    
    Nominal Value
    
    
    Restated Value
    
    
    Payment DateMarch 17, 2005
    
    Ps.
    90
    
    
    Ps.
    99
    
    
    April 2005April 27, 2006
    
    
    89
    
    
    
    95
    
    
    May 2006March 28, 2007
    
    
    133
    
    
    
    136
    
    
    April 2007
 h)
    
    Minority interest in consolidated subsidiaries consists of the following:
 December 31,2006
    
    
    2007Capital stock
    
    Ps.
    456
    
    
    Ps.
    479Shortfall in restatement of capital
    
    
    (165
    )
    
    
    (183
    )Retained earnings
    
    
    1,601
    
    
    
    1,664Ps.
    1,892
    
    
    Ps.
    1,960
 i)
    
    Majority stockholders equity consists of the following:
 December 31, 2007Nominal
    
    
    
    
    
    
    RestatedValue
    
    
    Restatement
    
    
    ValueCapital stock
    
    Ps.
    387
    
    
    Ps.
    7,245
    
    
    Ps.
    7,632Treasury stock
    
    
    (298
    )
    
    
    (324
    )
    
    
    (622
    )Paid-in capital
    
    
    1,147
    
    
    
    1,290
    
    
    
    2,437Shortfall in restatement of capital
    
    
    
    
    
    
    (21,154
    )
    
    
    (21,154
    )Cumulative effect of deferred taxes
    
    
    (1,259
    )
    
    
    (551
    )
    
    
    (1,810
    )Minimum labor liability adjustment
    
    
    (326
    )
    
    
    
    
    
    
    (326
    )Reserve for reacquisition of Vitro shares
    
    
    
    
    
    
    2,000
    
    
    
    2,000(Accumulated deficit) retained earnings
    
    
    (3,000
    )
    
    
    22,269
    
    
    
    19,269Ps.
    (3,349
    )
    
    Ps.
    10,775
    
    
    Ps.
    7,426
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##### Table of Contents



15.
    
    Total comprehensive financing resultThe following represents a summary of the Companys total comprehensive financing result for
the periods presented:
 Year ended December 31,2005
    
    
    2006
    
    
    2007Interest expense on debt denominated in US dollars
    
    Ps.
    1,627
    
    
    Ps.
    1,634
    
    
    Ps.
    1,660Interest expense on debt denominated in pesos
    
    
    241
    
    
    
    117
    
    
    
    34Interest expense on debt denominated in UDIs
    
    
    130
    
    
    
    63Restatement of UDIs
    
    
    37
    
    
    
    20Interest income
    
    
    (172
    )
    
    
    (134
    )
    
    
    (175
    )Derivative financial instruments
    
    
    17
    
    
    
    337
    
    
    
    201Exchange (gain) loss
    
    
    (417
    )
    
    
    224
    
    
    
    94Gain from monetary position
    
    
    (455
    )
    
    
    (440
    )
    
    
    (471
    )Other financing expenses, net
    
    
    492
    
    
    
    455
    
    
    
    317Ps.
    1,500
    
    
    Ps.
    2,276
    
    
    Ps.
    1,660
 16.
    
    Other expenses (income), netThe following represents a summary of the Companys other expenses (income), net for the periods
presented:
 Year ended December 31,2005
    
    
    2006
    
    
    2007Restructuring charges
    
    Ps.
    332
    
    
    Ps.
    61
    
    
    Ps.
    7Impairment of long-lived assets
    
    
    385
    
    
    
    393
    
    
    
    122Loss (gain) from sale of long-lived assets
    
    
    6
    
    
    
    (795
    )
    
    
    47Loss (gain) from sale of subsidiaries
    
    
    137
    
    
    
    (68
    )
    
    
    11Assignment of Vitro Club Trust (1)
    
    
    (458
    )Early extinguishment of employee retirement
Obligations
    
    
    18
    
    
    
    8
    
    
    
    97Fees and costs for extinguishment of debt
    
    

    
    
    
    
    
    
    
    
    488Statutory employee profit sharing
    
    
    51
    
    
    
    55
    
    
    
    54Other
    
    
    23
    
    
    
    117
    
    
    
    43Ps.
    494
    
    
    Ps.
    (229
    )
    
    Ps.
    869
 (1)
    
    The Vitro Club holds land and facilities for our employees recreational
activities, which are held in a trust (the Trust). The Trust can only be assigned if
all of the participants name one entity as the sole beneficiary. In 2005, all the
participants named the Company as the sole beneficiary, and therefore the Company has the
right to take control of the Trust. The Company recorded the fair value of the assets and
recognized other income of Ps. 458.  F-31




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##### Table of Contents



17.
    
    Tax loss carryforwardsAt December 31, 2007, tax loss carryforwards consist of the following:
 Tax loss carryforwardsExpiration
    
    Majority
    
    
    MinorityYear
    
    interest
    
    
    interest2010
    
    Ps.
    41
    
    
    Ps.
    42011
    
    
    141
    
    
    
    22012
    
    
    249
    
    
    
    142013
    
    
    71
    
    
    
    12014
    
    
    261
    
    
    
    172015
    
    
    22016
    
    
    22017
    
    
    1
    
    
    
    12Ps.
    768
    
    
    Ps.
    50
 18.
    
    Income and asset taxes
 a)
    
    The Company is subject to ISR, and through 2007, to IMPAC on a consolidated basis in
proportion to Vitros voting interest in its subsidiaries. ISR is computed taking into
consideration the taxable and deductible effects of inflation, such as depreciation
calculated on restated asset values. Taxable income is increased or reduced by the effects
of inflation on certain monetary assets and liabilities through the inflationary component,
which is similar to the gain or loss from monetary position. As of 2007, the tax rate is
28% and in 2006 it was 29% and 30% in 2005. For ISR purposes, effective in 2005, cost of
sales is deducted instead of inventory purchases. Beginning in 2006 PTU is deductible when
paid.In 2007, IMPAC was calculated by applying 1.25% to the value of the assets of the year,
without deducting any debt amounts. Through 2006, IMPAC was calculated by applying 1.8% on
the net average of the majority of restated assets less certain liabilities, including
liabilities payable to banks and foreign entities. IMPAC is payable only to the extent
that it exceeded ISR payable for the same period.On October 1, 2007, the IETU was enacted and went into effect on January 1, 2008. IETU
applies to the sale of goods, the provision of independent services and the granting of use
or enjoyment of goods, according to the terms of the IETU law, less certain authorized
deductions. The IETU payable is calculated by subtracting certain tax credits from the tax
determined. Revenues, as well as deductions and certain tax credits, are determined based
on cash flows generated beginning January 1, 2008. The IETU law establishes that the IETU
rate will be 16.5% in 2008, 17.0% in 2009, and 17.5% in 2010 and subsequently. In addition,
as opposed to ISR which allows for fiscal consolidation, companies that expect to incur
IETU must file individual returns.Based on its financial projections, the Company estimates that it will pay only ISR in the
future. Therefore, the enactment of IETU did not have any effects on its consolidated
financial information, since it only recognizes deferred ISR.
  F-32




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b)
    
    The income and asset tax expense (benefit) included in the Companys results are:
 Year ended December 31,2005
    
    
    2006
    
    
    2007Income tax:Current
    
    Ps.
    116
    
    
    Ps.
    179
    
    
    Ps.
    395Deferred
    
    
    (923
    )
    
    
    (208
    )
    
    
    (145
    )(807
    )
    
    
    (29
    )
    
    
    250Asset tax
    
    
    288
    
    
    
    257
    
    
    
    (206
    )Ps.
    (519
    )
    
    Ps.
    228
    
    
    Ps.
    44
 To determine deferred income tax at December 31, 2005, 2006 and 2007, the Company applied
the different tax rates that will be in effect to temporary differences according to their
estimated dates of reversal.c)
    
    Net deferred tax assets presented in the consolidated balance sheets consist of the
following:
 December 31,2006
    
    
    2007Allowance for doubtful accounts
    
    Ps.
    94
    
    
    Ps.
    66Reserve for employee retirement obligations
    
    
    398
    
    
    
    364Tax loss carryforwards
    
    
    533
    
    
    
    229Intangible asset
    
    
    548
    
    
    
    499Fixed assets
    
    
    (961
    )
    
    
    (617
    )Asset tax credit carryforwards
    
    
    243Derivative financial instruments
    
    
    1
    
    
    
    192Inventories
    
    
    19
    
    
    
    43Other
    
    
    274
    
    
    
    270Total
    
    
    1,149
    
    
    
    1,046Valuation allowance
    
    
    (514
    )
    
    
    (252
    )Ps.
    635
    
    
    Ps.
    794Balance:Liabilities:Deferred tax assets
    
    Ps.
    887
    
    
    Ps.
    1,030Deferred tax liabilities
    
    
    (252
    )
    
    
    (236
    )Ps.
    635
    
    
    Ps.
    794
  F-33




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##### Table of Contents



d)
    
    Following is a reconciliation between the Companys effective income tax rate and the
statutory rate:
 Year ended December 31,2005
    
    
    2006
    
    
    2007Effective income tax rate
    
    
    335
    %
    
    
    326
    %
    
    
    25
    %Asset tax presented as income tax
    
    
    142
    
    
    
    (303
    )
    
    
    120Intangible asset
    
    
    (482
    )
    
    
    
    
    
    
    (28
    )Sale of subsidiaries
    
    
    (38
    )
    
    
    462
    
    
    
    8Difference between tax and
accounting basis for monetary gain
    
    
    (1
    )
    
    
    (23
    )
    
    
    (2
    )Foreign subsidiaries
    
    
    (9
    )
    
    
    25
    
    
    
    (5
    )Effect of reduction in statutory rate on deferred ISR
    
    
    (21
    )
    
    
    (141
    )Valuation allowance
    
    
    58
    
    
    
    (198
    )
    
    
    (15
    )Nondeductible expenses
    
    
    9
    
    
    
    (22
    )
    
    
    (10
    )Other
    
    
    37
    
    
    
    (97
    )
    
    
    (65
    )Statutory income tax rate
    
    
    30
    %
    
    
    29
    %
    
    
    28
    %
 e)
    
    Changes in stockholders equity for shortfall in restatement of capital and the
minimum labor liability adjustment are presented net of the deferred tax effect as
follows:
 Year ended December 31,2005
    
    
    2006
    
    
    2007Income tax effect of:Shortfall in restatement of capital
    
    Ps.
    20
    
    
    Ps.
    26
    
    
    Ps.
    66Minimum labor liability adjustment
    
    
    (6
    )
    
    
    19
    
    
    
    (73
    )Ps.
    14
    
    
    Ps.
    45
    
    
    Ps.
    (7
    )
 19.
    
    Related party transactionsThe transactions with related parties, carried out in the ordinary course of business, were as
follows:
 a)
    
    Certain Arrangements with Respect to Real Estate The Company uses real estate owned
by relatives of certain directors and senior managers to meet with customers, suppliers or
for other business purposes. The Company pays an annual fee for the right to use these
properties for a specified number of days per year. Additionally, it has agreed to pay
maintenance and operating costs. In 2005, 2006 and 2007, the aggregate amounts paid as
annual fees were approximately Ps. 10.
 b)
    
    Goods Sold to Certain Companies The Company sells flat glass products and glass
containers to certain companies whose shareholders are directors and senior managers. In
2005, 2006 and 2007, the aggregate amount of these sales was Ps. 59, Ps. 58 and Ps. 69,
respectively.The Companys subsidiary Comegua sells glass containers to Cervecería Centroamericana and to
Cervecería de Costa Rica, subsidiaries of its partners in such company. In 2005, 2006 and
2007, the aggregate amount of these sales was US$ 13 million, US$ 11 million and US$ 9
million, respectively.c)
    
    Sale of Real Estate In 2007, a member of the Companys Board of Directors, purchased
an unused parcel of real estate from one of its subsidiaries. The price of the real estate
was US$ 5.4 million. The Company received several offers for the property and such
member of the Board made the highest
offer. The transaction was approved by the Companys Audit Committee in accordance with its
charter at the time.
  F-34




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##### Table of Contents



d)
    
    Compensation For the years ended December 31, 2005, 2006 and 2007, the aggregate
compensation the Company paid to its directors and senior managers was approximately Ps.
149, Ps. 199 and Ps. 182, respectively. This amount includes fees, salaries, the use of
certain assets and services, and variable compensation.
 20.
    
    Business dispositions and acquisitions
 a)
    
    Sale of Química M, S.A. de C.V. (Química M) On March 2, 2006, the Company sold
its 51% interest in Química M, to Solutia Inc. for US$ 20 million in cash. Solutia is now
the sole owner of this Mexican operation which was formed in 1995. Química M was a joint
venture between Vitro Plan and Solutia and is located near the city of Puebla, Mexico.
Química M is engaged in the production of PVB (polyvinyl butyral) interlayer, which is
used by major glass producers such as Vitro to make laminated glass for use in automobiles
and buildings.b)
    
    Acquisition of Vidrios Panameños, S. A. (VIPASA) On April 20, 2006, the Company
announced that in a joint effort with its Central American partners and through its
subsidiary Empresas Comegua S.A. it had completed the acquisition of VIPASA, a glass
container company located in Panama for a purchase price of US$ 21 million. VIPASA is the
largest and most important glass container manufacturer for the beverage, liquor, food and
pharmaceutical industries in Panama and exports to more than 15 countries in the American
continent. VIPASAs sales in 2006 and 2007 reached approximately US$ 23 million and US$ 29
million, respectively.c)
    
    Sale of Vitrocrisa As disclosed in note 4, on June 16, 2006 the Company completed
the sale of its 51% interest in Vitrocrisa to Libbey, recognizing a gain on the sale of
Ps. 480.d)
    
    Visteon Corporations retirement from Vitro Flex, S.A. de C.V. (Vitro Flex)   On
September 29, 2006, Vitro Plan, Vitros flat glass division, and Visteon Inc. (Visteon)
ended their joint venture agreement in Vitro Flex through a reimbursement and cancellation
of Visteons capital investment. Vitro Plan is now the sole owner of Vitro Flex. Vitro
Flex was a joint venture formed in 1979 with Fairlane Holdings (Fairlane), a Visteon
affiliate. Vitro Flex primarily manufactures tempered and laminated glass for use in Ford
vehicles. Fairlane will receive US$ 9.4 million for the 38% stake in Vitro Flex. An
initial payment of US$ 2 million was made on September 29, 2006, which will be followed by
four annual payments of US$ 1.85 million, starting on September 30, 2007. The transaction
is being funded by Vitro Flex with cash from operations. The difference between the
transaction value and the book value result in a credit of Ps. 70, recorded in the
majority stockholders equity. Vitro Flex together with Vitro Automotriz (VAU) will now
directly manage their relationship with Ford and will serve all Vitros automotive
customers. Under the prior structure, contractual restrictions limited Vitro Flexs
ability to use excess capacity for non Ford volumes.e)
    
    Acquisition of 55% of the shares of PVA On August 29, 2007, Vitro Vidrio y Cristal,
S.A. de C.V., a subsidiary of Viméxico, acquired 55% of the outstanding shares of PVA, a
company dedicated to the installation of value added crystal products for Ps. 110. As a
result of the preliminary purchase price allocation, the Company recorded goodwill of Ps.
85.
  F-35




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##### Table of Contents



f)
    
    Acquisition of 50% of the shares of Vitro AFG On July 3, 2007, Viméxico exercised its
option to acquire the remaining 50% of the outstanding shares of Vitro AFG from its joint
venture partner AFG Industries, a subsidiary of Asahi Glass Co. Limited (a Japanese
company) to assume control and increase its ownership to 100%. The transaction closed on
July 24, 2007 with Vitro paying AFG Industries US$ 6 million in cash and subsequently
changing Vitro AFGs legal name to Vidrio y Cristal del Noroeste, S.A. de C.V .Vitro AFG, which is located in Mexicali, Baja California, Mexico, was formed in November
2003 as a 50/50 joint venture between Vitro and AFG Industries, with the closing of this
transaction, Viméxico terminated the joint venture and became the sole owner of this entity,
whose primary operations include the manufacture, processing and distribution of flat glass,
thereby increasing Vitros available production capacity by 78,000 tons.In accordance with Bulletin B-7, Business Acquisitions, the acquisition was accounted for
using the purchase method. In conjunction with the acquisition, the Company recognized an
impairment charge of Ps. 91 related to the termination of the joint venture.
 21.
    
    Business segment dataThe accounting policies of the Companys segments are the same as those followed by Vitro. The
Company evaluates the performance of its segments on the basis of operating income.
Intersegment sales and transfers are accounted for as if the sales and transfers were to third
parties, that is, at current market prices.Vitros reportable segments are strategic business units that offer different products. The
segments are managed separately; each requires different manufacturing operations, technology
and marketing strategies; and each segment primarily serves a different customer base.The Company has two reportable segments: Glass Containers and Flat Glass. The principal
products of each of the segments are summarized below:
 Segment
    
    Principal productsGlass Containers
    
    Glass containers, sodium carbonate and bicarbonate, capital goods,
precision components and molds for glass industry.Flat Glass
    
    Flat glass for the construction and automotive industries.
  F-36




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##### Table of Contents



Flat
    
    
    Corporate &Glass Containers
    
    
    Glass
    
    
    Eliminations
    
    
    ConsolidatedDecember 31, 2005:Net sales
    
    Ps.
    12,488
    
    
    Ps.
    13,704
    
    
    Ps.
    517
    
    
    Ps.
    26,709Intersegment sales
    
    
    139
    
    
    
    3
    
    
    
    
    
    
    
    142Consolidated net sales
    
    
    12,349
    
    
    
    13,701
    
    
    
    517
    
    
    
    26,567Operating income
    
    
    1,327
    
    
    
    514
    
    
    
    (2
    )
    
    
    1,839Total assets
    
    
    14,668
    
    
    
    13,494
    
    
    
    4,775
    
    
    
    32,937Capital expenditures
    
    
    622
    
    
    
    468
    
    
    
    17
    
    
    
    1,107Depreciation and amortization
    
    
    1,139
    
    
    
    668
    
    
    
    47
    
    
    
    1,854Goodwill
    
    
    
    
    
    
    773
    
    
    
    
    
    
    
    773Impairment
    
    
    
    
    
    
    214
    
    
    
    171
    
    
    
    385December 31, 2006:Net sales
    
    Ps.
    14,068
    
    
    Ps.
    13,462
    
    
    Ps.
    433
    
    
    Ps.
    27,963Intersegment sales
    
    
    86
    
    
    
    1
    
    
    
    
    
    
    
    87Consolidated net sales
    
    
    13,982
    
    
    
    13,461
    
    
    
    433
    
    
    
    27,876Operating income
    
    
    1,853
    
    
    
    418
    
    
    
    (154
    )
    
    
    2,117Total assets
    
    
    13,937
    
    
    
    11,401
    
    
    
    3,357
    
    
    
    28,695Capital expenditures
    
    
    894
    
    
    
    338
    
    
    
    20
    
    
    
    1,252Depreciation and amortization
    
    
    1,160
    
    
    
    595
    
    
    
    40
    
    
    
    1,795Goodwill
    
    
    3
    
    
    
    785
    
    
    
    
    
    
    
    788Impairment
    
    
    55
    
    
    
    334
    
    
    
    4
    
    
    
    393December 31, 2007:Net sales
    
    Ps.
    14,676
    
    
    Ps.
    13,605
    
    
    Ps.
    361
    
    
    Ps.
    28,642Intersegment sales
    
    
    37
    
    
    
    14
    
    
    
    
    
    
    
    51Consolidated net sales
    
    
    14,639
    
    
    
    13,591
    
    
    
    361
    
    
    
    28,591Operating income
    
    
    2,054
    
    
    
    782
    
    
    
    (132
    )
    
    
    2,704Total assets
    
    
    17,040
    
    
    
    12,835
    
    
    
    2,312
    
    
    
    32,187Capital expenditures
    
    
    2,328
    
    
    
    324
    
    
    
    43
    
    
    
    2,695Depreciation and amortization
    
    
    870
    
    
    
    480
    
    
    
    64
    
    
    
    1,414Goodwill
    
    
    3
    
    
    
    870
    
    
    
    
    
    
    
    873Impairment
    
    
    31
    
    
    
    91
    
    
    
    
    
    
    
    122
  Year ended December 31,2005

    
    2006
    
    
    2007US$
    588
    
    US$
    556
    
    
    US$
    601
  F-37




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##### Table of Contents



Year ended December 31,2005
    
    
    2006
    
    
    2007Net sales (1) to customers in:Mexico
    
    Ps.
    10,919
    
    
    Ps.
    11,875
    
    
    Ps.
    12,707All foreign countries, mainly the
United States, Canada and Europe
    
    
    15,648
    
    
    
    16,001
    
    
    
    15,884Consolidated
    
    Ps.
    26,567
    
    
    Ps.
    27,876
    
    
    Ps.
    28,591
 (1)
    
    Net sales are attributed to countries based on the location of the
customer.   December 31,2005
    
    
    2006
    
    
    2007Land and buildings, machinery
and equipment:Mexico
    
    Ps.
    15,195
    
    
    Ps.
    13,842
    
    
    Ps.
    14,960All foreign countries, mainly the
United States, Europe,
Central and South America
    
    
    2,620
    
    
    
    2,481
    
    
    
    2,881Consolidated
    
    Ps.
    17,815
    
    
    Ps.
    16,323
    
    
    Ps.
    17,841
 22.
    
    New accounting principlesIn 2007, the Mexican Board for Research and Development of Financial Information Standards
(CINIF) issued the following NIFs and Interpretations of Financial Reporting Standards
(INIF), which became effective for fiscal years beginning on January 1, 2008:
 
    
    NIF B-2, Statement of Cash Flows.
    
    NIF B-10, Effects of Inflation.
    
    NIF B-15, Translation of Foreign Currencies.
    
    NIF D-3, Employee Benefits.
    
    NIF D-4, Income Taxes.
    
    INIF 5, Recognition of the Additional Consideration Agreed to at the
Inception of a Derivative Financial Instrument to Adjust It to Fair Value.
    
    INIF 6, Timing of Formal Hedge Designation.
    
    INIF 7, Application of Comprehensive Income or Loss Resulting From a Cash
Flow Hedge on a Forecasted Purchase of a Non-Financial Asset.
 
  F-38




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##### Table of Contents




    
    NIF B-2, Statement of Cash Flows This NIF establishes general rules for the
presentation, structure and preparation of a cash flow statement, as well as the
disclosures supplementing such statement, which replaces the statement of changes in
financial position. NIF B-2 requires that the statement show a companys cash inflows and
outflows during the period. Line items should be preferably presented gross. Cash flows
from financing activities are now presented below those from investing activities (a
departure from the statement of changes in financial position). In addition, NIF B-2
allows entities to determine and present their cash flows from operating activities using
either the direct or the indirect method.
    
    NIF B-10, Effects of Inflation CINIF defines two economic environments: a)
inflationary environment, when cumulative inflation of the three preceding years is 26% or
more, in which case, the effects of inflation should be recognized using the comprehensive
method; and b) non-inflationary environment, when cumulative inflation of the three
preceding years is less than 26%, in which case, no inflationary effects should be
recognized in the financial statements. Additionally, NIF B-10 eliminates the replacement
cost and specific indexation methods for inventories and fixed assets, respectively, and
requires that the cumulative gain or loss from holding non-monetary assets be reclassified
to retained earnings,if such gain or loss is realized; the gain or loss that is not
realized will be maintained in stockholders equity and charged to current earnings of the
period in which the originating item is realized.
    
    NIF B-15, Translation of Foreign Currencies  NIF B-15 eliminates classification of
integrated foreign operations and foreign entities and incorporates the concepts of
accounting currency, functional currency and reporting currency. NIF B-15 establishes the
procedures to translate the financial information of a foreign subsidiary: i) from the
accounting to the functional currency; and ii) from the functional to the reporting
currency, and allows entities to present their financial statements in a reporting currency
other than their functional currency.
    
    NIF D-3, Employee Benefits This NIF includes current and deferred PTU. Deferred PTU
should be calculated using the same methodology established in NIF D-4. It also includes
the career salary concept and the amortization period of most items is reduced to five
years, as follows:The following unrecognized items will be amortized over a 5-year period, or less, if
employees remaining labor life is less than 5 years:
 
    
    The beginning balance of transition obligation for severance and retirement
benefits.
    
    The beginning balance of prior service cost and plan amendments.
    
    The beginning balance of gains and losses from seniority premiums and pension
benefits should be amortized over a 5-year period (net of the transition
obligation), with the option to fully amortize such item against the results of
2008.
 The beginning balance of gains and losses from severance benefits should be amortized
against the results of 2008.
    
    NIF D-4, Income Taxes This NIF relocates accounting for current and deferred PTU to
NIF D-3, eliminates the permanent difference concept, redefines and incorporates various
definitions and requires that the cumulative ISR effect be reclassified to retained
earnings, unless it is identified with some of the other comprehensive income items that
have not been applied against current earnings.
  F-39




---



##### Table of Contents




    
    INIF 5, Recognition of the Additional Consideration Agreed to at the Inception of a
Derivative Financial Instrument to Adjust It to Fair Value INIF 5 states that any
additional consideration agreed to at the inception of a derivative financial instrument to
adjust it to its fair value at that time should be part of the instruments initial fair
value and not subject to amortization as established by paragraph 90 of Bulletin C-10.
INIF 5 also establishes that the effect of the change should be prospectively recognized,
affecting results of the period in which this INIF becomes effective. If the effect of the
change is material, it should be disclosed.
    
    INIF 6, Timing of Formal Hedge Designation INIF 6 states that hedge designations may
be made as of the date a derivative financial instrument is contracted, or at a later date,
provided its effects are prospectively recognized as of the date when formal conditions are
met and the instrument qualifies as a hedging relationship. Paragraph 51 of Bulletin C-10
only considered the hedge designation at the inception of the transaction.
    
    INIF 7, Application of Comprehensive Income or Loss Resulting From a Cash Flow Hedge on
a Forecasted Purchase of a Non-Financial Asset- INIF 7 states that the effect of a hedge
reflected in other comprehensive income or loss resulting from a forecasted purchase of a
non-financial asset should be capitalized within the cost of such asset, whose price is set
through a hedge, rather than reclassifying the effect to the results of the period affected
by the asset, as required by Paragraph 105 of Bulletin C-10. The effect of this change
should be recognized by applying any amounts recorded in other comprehensive income or loss
to the cost of the acquired asset, as of the effective date of this INIF.
 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.23.
    
    Authorization of financial statements issuanceOn February 29, 2008 the issuance of the consolidated financial statements was authorized by:Federico Sada G.
President and Chief Executive OfficerClaudio L. Del Valle C.
Chief Administrative OfficerEnrique Osorio López
Chief Financial OfficerThese consolidated financial statements are subject to approval at the ordinary stockholders
meeting, who may modify the financial statements, based on provisions set forth by the Mexican
General Corporate Law.
  F-40




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##### Table of Contents



24.
    
    Differences between Mexican FRS and U.S. generally accepted accounting principlesThe Companys consolidated financial statements are prepared in accordance with Mexican FRS,
which differ in certain significant respects from accounting principles generally accepted in the
United States of America (U.S. GAAP). The Mexican FRS consolidated financial statements include
the effects of inflation as provided for under Bulletin B-10, (see note 3 b), whereas financial
statements prepared under U.S. GAAP are presented on a historical basis. However, the following
reconciliation to U.S. GAAP does not include the reversal of the adjustments required under
Bulletin B-10, permitted by the rules and regulations of the Securities and Exchange Commission
(the SEC). The application of Bulletin B-10 represents a comprehensive measure of the effects
of price level changes in the inflationary Mexican economy and, as such, is considered a more
meaningful presentation than historical cost-based financial reporting for both Mexican and U.S.
accounting purposes.As mentioned in note 22, NIF B-10, Effects of Inflation, is effective January 1, 2008. NIF
B-10 revised the accounting for inflation such that the inflation accounting methods summarized
in note 3 b) will no longer apply unless the economic environment in Mexico qualifies as
inflationary for purposes of Mexican FRS. Given the cumulative inflation in Mexico for the
three years ended December 31, 2007, the Mexican economic environment will not qualify as
inflationary in 2008, thereby eliminating inflationary accounting in the Companys consolidated
Mexican FRS financial statements. This will result in the elimination of certain reconciling
items between Mexican FRS and U.S. GAAP in 2008 and thereafter as discussed in inserts (e) and
(h) below.The other differences between Mexican FRS and U.S. GAAP and the effect on consolidated net income
(loss) and consolidated stockholders equity are presented below:
 2007(US$Year ended December 31,
    
    
    millions)2005
    
    
    2006
    
    
    2007
    
    
    (Convenience(Ps. millions)
    
    
    Translation)Reconciliation of Net Income (Loss):Net income (loss) of majority interest as reported under Mexican FRS
    
    Ps.
    63
    
    
    Ps.
    401
    
    
    Ps.
    (13
    )
    
    US$
    (1
    )U.S. GAAP adjustments:Effect of the adjustments below on minority interest (see a)
    
    
    (61
    )
    
    
    26
    
    
    
    17
    
    
    
    2Deferred income taxes (see b)
    
    
    (436
    )
    
    
    54
    
    
    
    55
    
    
    
    5Negative goodwill and reduction in depreciation expense (see c)
    
    
    112
    
    
    
    30
    
    
    
    
    
    
    
    Deferred workers profit sharing (see d)
    
    
    43
    
    
    
    (51
    )
    
    
    
    
    
    
    Monetary position result on deferred income taxes and deferred
workers profit sharing (see e)
    
    
    27
    
    
    
    44
    
    
    
    31
    
    
    
    3Capitalization of interest (see f)
    
    
    56
    
    
    
    72
    
    
    
    16
    
    
    
    1Amortization of capitalized interest (see f)
    
    
    (28
    )
    
    
    (36
    )
    
    
    (36
    )
    
    
    (3
    )Effect of applying Bulletin B-10 (see h)
    
    
    (184
    )
    
    
    (187
    )
    
    
    (36
    )
    
    
    (3
    )Effect of applying Bulletin B-15 (see i)
    
    
    (12
    )
    
    
    34
    
    
    
    
    
    
    
    Derivative financial instruments (see j)
    
    
    179
    
    
    
    
    
    
    
    
    
    
    
    Discontinued operations (see k)
    
    
    (1
    )
    
    
    (57
    )
    
    
    26
    
    
    
    2Employee retirement obligations (see m)
    
    
    39
    
    
    
    31
    
    
    
    (15
    )
    
    
    (1
    )Purchase of Visteons capital investment (see n)
    
    
    
    
    
    
    1
    
    
    
    5
    
    
    
    Sale of real estate (see o)
    
    
    
    
    
    
    (815
    )
    
    
    429
    
    
    
    39Impairment of long-lived assets (see p)
    
    
    (84
    )
    
    
    379
    
    
    
    (10
    )
    
    
    (1
    )Total U.S. GAAP adjustments
    
    
    (350
    )
    
    
    (475
    )
    
    
    482
    
    
    
    44Net (loss) income under U.S. GAAP
    
    Ps.
    (287
    )
    
    Ps.
    (74
    )
    
    Ps.
    469
    
    
    US$
    43
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Year ended December 31,2007(US$millions)2006
    
    
    2007
    
    
    (Convenience(Ps. millions)
    
    
    Translation)Reconciliation of Stockholders Equity:Total stockholders equity reported under Mexican FRS
    
    Ps.
    9,366
    
    
    Ps.
    9,386
    
    
    US$
    864Less minority interest included as stockholders equity
under Mexican FRS (see a)
    
    
    (1,892
    )
    
    
    (1,960
    )
    
    
    (180
    )Majority stockholders equity under Mexican FRS
    
    
    7,474
    
    
    
    7,426
    
    
    
    684U.S. GAAP adjustments:Effect of the adjustments below on minority interest (see a)
    
    
    (63
    )
    
    
    (24
    )
    
    
    (2
    )Deferred income taxes (see b)
    
    
    (858
    )
    
    
    (673
    )
    
    
    (62
    )Capitalization of interest (see f)
    
    
    358
    
    
    
    374
    
    
    
    34Accumulated amortization for capitalized interest (see f)
    
    
    (149
    )
    
    
    (185
    )
    
    
    (17
    )Goodwill (see g)
    
    
    124
    
    
    
    124
    
    
    
    11Effect of applying Bulletin B-10 (see h)
    
    
    4
    
    
    
    3
    
    
    
    Effect of applying Bulletin B-15 (see i)
    
    
    (71
    )
    
    
    
    
    
    
    Discontinued operations (see k)
    
    
    (26
    )
    
    
    
    
    
    
    Effect of SFAS No. 158 (see m)
    
    
    (371
    )
    
    
    (895
    )
    
    
    (84
    )Employee retirement obligations (see m)
    
    
    (88
    )
    
    
    (100
    )
    
    
    (7
    )Purchase of Visteons capital investment (see n)
    
    
    (72
    )
    
    
    (67
    )
    
    
    (6
    )Sale of real estate (see o)
    
    
    (815
    )
    
    
    (386
    )
    
    
    (36
    )Impairment of long-lived assets (see p)
    
    
    263
    
    
    
    253
    
    
    
    23Total U.S. GAAP adjustments
    
    
    (1,764
    )
    
    
    (1,576
    )
    
    
    (146
    )Total stockholders equity under U.S. GAAP
    
    Ps.
    5,710
    
    
    Ps.
    5,850
    
    
    US$
    538
 a)
    
    Minority interestUnder Mexican FRS, minority interest in consolidated subsidiaries is presented as a
separate component within the stockholders equity section in the consolidated balance
sheet. For U.S. GAAP purposes, minority interest is not included in stockholders equity
and is presented below total liabilities and above the stockholders equity section in the
consolidated balance sheet.As discussed in insert q(15) below, SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements  an amendment of ARB No. 51, will be effective for the
Company beginning January 1, 2009. SFAS No. 160 modifies the presentation of minority
interest in the balance sheet (to be included within stockholders equity) and statement
of income similar to that of Mexican FRS, for which reason the Company anticipates that
this difference will no longer be applicable beginning January 1, 2009.
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##### Table of Contents



b)
    
    Deferred income taxesUnder Mexican FRS as required by Bulletin D-4, Accounting for Income Tax, Tax on Assets
and Employee Statutory Profit Sharing, income taxes are charged to results as they are
incurred and the Company recognizes deferred income tax assets and liabilities for the
future consequences of temporary differences between the financial statement carrying
amounts of assets and liabilities and their respective income tax bases, measured using
enacted rates. The effects of changes in the statutory rates are accounted for in the
period that includes the enactment date. Deferred income tax assets are also recognized
for the estimated future effects of tax loss carryforwards and asset tax credit
carryforwards. Deferred tax assets are recognized only when it is highly probable that
sufficient future taxable income will be generated to recover such deferred tax assets.Under U.S. GAAP, as required by SFAS No. 109, Accounting for Income Taxes, the Company
recognizes deferred income tax assets and liabilities for the future consequences of
temporary differences between the financial statement carrying amounts of assets and
liabilities and their respective income tax bases, measured using enacted rates. The
effects of changes in the statutory rates are accounted for in the period that includes
the enactment date. Deferred income tax assets are also recognized for the estimated
future effects of tax loss carryforwards and asset tax credit carryforwards.The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this assessment. Based upon the
level of historical taxable income, projections of future taxable income over the periods
in which the deferred tax assets are deductible and tax planning strategies that would be
taken to prevent an operating loss or tax credit carryforward from expiring unused,
management believes it is more likely than not that the Company will realize the benefits
of these deductible differences, net of the existing valuation allowance at December 31,
2007.For U.S. GAAP purposes the Company recognizes deferred taxes each period for the changes
in the taxable portions of its distributable stockholders equity. The Companys policy is
to compare the deferred tax balance that would be required if all of
the stockholders
equity were distributed. This amount is compared to the total deferred tax balance
recorded prior to this adjustment. The difference between the amount recorded and the
amount calculated from the stockholders equity taxable accounts is recorded as an
adjustment to deferred taxes as of the balance sheet date.For U.S. GAAP purposes the Company recognizes a deferred tax asset for the temporary
difference that exists between the book basis and the tax basis of its foreign
subsidiaries that legally own Vitros intellectual property at the applicable tax rate in
the foreign jurisdiction based on the expected reversal date. For Mexican FRS purposes,
the Company recognizes a deferred tax asset for the temporary difference that exists
between the book basis and the tax basis at the applicable rate in Mexico, which is where
it expects to recognize such benefits.
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U.S. GAAP differences to the extent taxable are reflected in the U.S. GAAP deferred tax
balances. The significant components of deferred tax assets and liabilities, which differ
for U.S. GAAP from deferred tax assets and liabilities calculated under Mexican FRS, are
presented as follows:
 As of December 31,2006
    
    
    2007Deferred Tax Assets and Liabilities:Employee retirement obligations
    
    Ps.
    267
    
    
    Ps.
    370Discontinued operations
    
    
    7
    
    
    
    Sale of real estate
    
    
    227
    
    
    
    108Purchase of Visteon capital investment
    
    
    20
    
    
    
    19Buildings, machinery and equipment
    
    
    (87
    )
    
    
    (72
    )Stockholders equity
    
    
    (892
    )
    
    
    (776
    )Intellectual property
    
    
    (342
    )
    
    
    (269
    )Other
    
    
    (58
    )
    
    
    (53
    )Net deferred tax liability
    
    Ps.
    (858
    )
    
    Ps.
    (673
    )
   Mexico
    
    U.S.
    
    Spain
    
    Guatemala
    
    Costa Rica2003-2007
    
    2003-2007
    
    2004-2007
    
    2004-2007
    
    2005-2007
 c)
    
    Negative goodwill and reduction in depreciation expenseThrough December 31, 2004, for purposes of Mexican FRS, the Company recorded as a
component of the consolidated statements of operations the amortization of the excess of
the adjusted book value over cost of certain acquisitions (negative goodwill). The period
of amortization for negative goodwill was 18 months.Under U.S. GAAP, SFAS No. 141, Business Combinations, requires that any negative
goodwill (excess of fair value over cost) first be allocated to reduce long-lived assets
acquired and if any negative goodwill remains that amount is recognized as an
extraordinary gain.Effective January 1, 2005, Bulletin B-7, conforms to the accounting established by U.S.
GAAP as it relates to the accounting for negative goodwill.
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d)
    
    Deferred workers profit sharingIn accordance with Mexican FRS the Company determines the provision for deferred workers
profit sharing by applying the partial accrual method of Bulletin D-4 applicable to
temporary differences between the financial and adjusted tax income that are expected to
reverse within a defined period. For U.S. GAAP purposes the Company accrues for workers
profit sharing based on a liability approach similar to accounting for income taxes under
SFAS No. 109.As discussed in note 22, NIF D-3, Employee Benefits, is effective beginning January 1,
2008, which will require companies to calculate deferred PTU using a similar balance sheet
methodology similar to that required by U.S. GAAP.e)
    
    Monetary position result on deferred income taxes and deferred workers profit
sharingThe monetary position result is determined by (i) applying the annual inflation factor to
the net monetary position of the U.S. GAAP adjustments at the beginning of the period,
plus (ii) the monetary position effect of such adjustments during the period, determined
in accordance with the weighted average inflation factor.As discussed in the introduction to this note as well as note 22, beginning January 1,
2008 with the issuance of NIF B-10, the Company expects that the basic financial
statements under Mexican FRS will no longer include inflationary effects, for which
reason, this reconciling item will no longer be applicable in the future.f)
    
    Capitalization of interestUnder Mexican FRS beginning January 1, 2007, the Company adopted NIF D-6, Capitalization
of Comprehensive Financing Result, accordingly the capitalization of the comprehensive
financing result (interest expense, foreign exchange results and monetary position result)
generated by borrowings obtained to finance investment directly attributable to the
acquisition of qualifying assets is mandatory. Prior to the adoption of NIF D-6, the
Company did not capitalize the comprehensive financing result as it was optional.In accordance with SFAS No. 34, Capitalization of Interest Cost, if the comprehensive
financing result is incurred during the construction of qualifying assets, capitalization
is required as part of the cost of such assets. Accordingly, until December 31, 2006 a
reconciling item for the capitalization of a portion of the comprehensive financing result
was included in the U.S. GAAP reconciliation of the majority net income and majority
stockholders equity. The amortization expense and related accumulated amortization of
such items generates a difference compared to Mexican FRS.Beginning on January 1, 2007, a reconciling item is generated for borrowings denominated
in US dollars, related to the foreign exchange results and monetary position result, which
is capitalized under Mexican FRS and not for U.S. GAAP. If the borrowings are denominated
in Mexican pesos, the amount of interest to be capitalized as noted above is reduced by
the gain on monetary position associated with the debt.
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g)
    
    GoodwillAs mentioned in note 3 j), under Mexican FRS, until December 31, 2004 goodwill represented
the excess of cost over book value of subsidiaries as of the date of acquisition and was
restated using the NCPI and amortized using the straight-line method over 20 years.
Beginning on January 1, 2005, goodwill represents the excess of cost over fair value of
subsidiaries as of the date of acquisition. Goodwill is restated using the NCPI and at
least once a year is subject to impairment tests, as it ceased to be amortized under the
provisions of Bulletin B-7 (see note 3 j).In accordance with SFAS No. 142, Goodwill and Other Intangibles Assets, beginning in
2002 goodwill and indefinite-lived assets are also no longer subject to amortization, but
rather are subject at least once a year to impairment tests.The difference between Mexican FRS and U.S. GAAP as it relates to this item is due to the
accumulate amortization of goodwill recorded under Mexican FRS that has been reversed in
the reconciliation of stockholders equity for purposes of U.S. GAAP.The changes in the carrying amount of goodwill for the years ended December 31, 2006 and
2007 are as follows:
 Balance as of December 31, 2005
    
    Ps.
    763Changes for effects of inflation and exchange rates
    
    
    83Balance as of December 31, 2006
    
    
    846Acquisition (1)
    
    
    85Changes for effects of inflation and exchange rates
    
    
    63Balance as of December 31, 2007
    
    Ps.
    994
 (1)
    
    The Company recorded goodwill of Ps. 85 related to the acquisition of 55%
of the shares of Productos de Valor Agregado en Cristal, S.A. de C.V (see note 20 e). h)
    
    Effect of applying Bulletin B-10As discussed in note 3 g), under Mexican FRS Bulletin B-10 allows the restatement of the
value of machinery and equipment purchased in a foreign country using the consumer price
index of the country of origin and the period-end exchange rate. For U.S. GAAP purposes,
such restatement is based on the NCPI.As discussed in the introduction to this note as well as note 22, beginning January 1,
2008 with the issuance of NIF B-10, the Company expects that the basic financial
statements under Mexican FRS will no longer include inflationary effects, for which
reason, this reconciling item will no longer be applicable in the future. Further, even
during inflationary periods, the alternate methodology described above has been eliminated
by NIF B-10.i)
    
    Effect of applying Bulletin B-15In 1997, the IMCP issued Bulletin B-15, Foreign Currency Transactions and Translation of
Financial Statements of Foreign Operations, which specifies the procedures to be applied
in the consolidation of foreign subsidiaries by Mexican companies for (i) current year
amounts and (ii) prior year amounts, presented for comparative purposes. Vitros
accounting policies for the consolidation of its
foreign subsidiaries are described in notes 2 c) and 3 b). Such policies conform to the
requirements of Bulletin B-15.
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The Company believes that the application of the methodology of Bulletin B-15 to translate
the current year amounts for foreign operations does not result in a difference between
Mexican FRS and U.S. GAAP that must be reconciled in order to comply with the rules and
regulations of the SEC. However, there are two methods allowed under Bulletin B-15 to
restate prior year amounts for foreign subsidiaries. Vitro uses the method that
reconsolidates prior year balances by restating foreign subsidiaries using the current
inflation rate in the foreign country and translating into pesos using the year-end
exchange rate. We believe that this methodology of Bulletin B-15 used to restate prior
years balances for comparative purposes does not conform to the requirements of SEC Rule
3-20e of Regulation S-X, which requires all amounts in financial statements to be
presented in the same reporting currency. Accordingly, in filings with the SEC, we are
including an adjustment for the difference in methodologies of restating prior year
balances. These amounts Ps. (12) and Ps. 34 in 2005 and 2006, respectively, in the
reconciliation of net income, and Ps. (71) in 2006 in the reconciliation of stockholders
equity represent the differences between (i) the balance if all amounts were adjusted by
applying the NCPI, and (ii) the balance used in the primary financial statements to comply
with Bulletin B-15.j)
    
    Derivative financial instrumentsAs of January 1, 2005, in accordance with Mexican FRS, as mentioned in note 3 a), the
Company values and records all derivative instruments and hedging activities according to
Bulletin C-10, which establishes similar accounting treatment as described in SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. Prior to the
implementation of Bulletin C-10, financial instruments entered into for hedging purposes
were valued using the same valuation criteria of the underlying assets or liabilities
hedged, and the effect of such valuation was recognized in net income, net of costs,
expenses or income from the assets or liabilities whose risks were being hedged.The Company determined that the accounting for derivative financial instruments is the
same for Mexican FRS and U.S. GAAP as they relate to their consolidated financial
statements as of and for the years ended December 31, 2005, 2006 and 2007. The effects of
the initial application of Bulletin C-10 were already reflected in the U.S. GAAP financial
statements for 2004. Therefore, the cumulative effect of the change in accounting
principle is reconciled out of the amounts presented in the U.S. GAAP income statement for
2005.k)
    
    Discontinued operationsMexican FRS as defined by Bulletin C-15, Impairment of Long-lived Assets and their
Disposal, requires the asset group being disposed of to be presented as a discontinued
operation only if its operations are individually significant to the consolidated
operations. Bulletin C-15 defines the discontinuance of an operation as the process of
final interruption of a significant business activity of an entity and establishes that
the discontinuation of an operation implies the final interruption of a significant
activity of the entity that leads to the sale, abandonment, exchange or return to
stockholders of long-lived assets originally intended for use, in addition to other assets
and liabilities related to the operation. Therefore, the analysis of the significance of
the disposed business is performed without considering the eventual gain or loss on sale
or aggregating each business
being disposed with other businesses sold, and instead considers only the significance of
the business activity of the relevant business being sold.
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U.S. GAAP as defined by SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, requires that an entity report as discontinued operations those
components of its business that have been classified as held for sale. A component of an
entity is defined as comprising operations and cash flows that can be clearly
distinguished, operationally and for financial reporting purposes, from the rest of the
business. Individually insignificant disposals of a component of an entity should be
aggregated for purposes of assessing materiality for all periods presented. Therefore,
individually insignificant dispositions should be aggregated and reported as discontinued
operations under SFAS No. 144 beginning in the period the impact of the dispositions is
material to the financial statements of any period presented. This evaluation should also
include the effect of the gain or loss on sale of the component.As a result of the differences identified above between U.S. GAAP and Mexican FRS, the
following components of the Companys business were presented as discontinued operations
for U.S. GAAP purposes and were not under Mexican FRS due to their low level of
significance.
 
    
    On April 1, 2005, the Company sold 100% of its interest in Plásticos Bosco, S.A.
de C.V. and Inmobiliaria de la Suerte, S.A. de C.V., which it refers to collectively
as Bosco, its subsidiaries engaged in the manufacturing and distribution of plastic
tubes and disposable thermo fold ware and industrial products, to Convermex, S.A. de
C.V., which it refers to as Convermex, for US$10 million in cash. The consolidated
net sales and operating loss of Bosco were approximately Ps. 112 and Ps. 8,
respectively, during the period beginning on January 1, 2005 and ending on April 1,
2005. The Company recorded a loss for the sale of Bosco of Ps. 137.
    
    On March 2, 2006, the Company sold its 51% interest in Química M, to Solutia Inc.
for US$ 20 million in cash, recognizing a gain on sale of Ps. 101 under Mexican FRS
and Ps. 100 under U.S. GAAP. Solutia is now the sole owner of this Mexican operation,
which was formed in 1995. Química M was previously included in our Flat Glass
reportable segment.
 Basis difference between U.S. GAAP and Mexican FRS 
 Disclosures of discontinued operations 
 For the year ended December 31, 2006Vitrocrisa
    
    
    Química M
    
    
    TotalCondensed Statement of Operations:Sales
    
    Ps.
    1,033
    
    
    Ps.
    82
    
    
    Ps.
    1,115Cost of sales
    
    
    861
    
    
    
    75
    
    
    
    936General, administrative and selling expenses
    
    
    130
    
    
    
    5
    
    
    
    135Operating income
    
    
    42
    
    
    
    2
    
    
    
    44Total financing cost and other expenses
    
    
    (96
    )
    
    
    (2
    )
    
    
    (98
    )Loss before income tax
    
    
    (54
    )
    
    
    
    
    
    
    (54
    )Income tax benefit (expense)
    
    
    23
    
    
    
    (1
    )
    
    
    22Net loss
    
    Ps.
    (31
    )
    
    Ps.
    (1
    )
    
    Ps.
    (32
    )
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For the year ended December 31, 2005BOSCO
    
    
    Vitrocrisa
    
    
    Química M
    
    
    TotalCondensed Statement of Operations:Sales
    
    Ps.
    112
    
    
    Ps.
    2,345
    
    
    Ps.
    644
    
    
    Ps.
    3,101Cost of sales
    
    
    102
    
    
    
    2,004
    
    
    
    540
    
    
    
    2,646General, administrative and selling expenses
    
    
    18
    
    
    
    277
    
    
    
    40
    
    
    
    335Operating (loss) income
    
    
    (8
    )
    
    
    64
    
    
    
    64
    
    
    
    120Total financing cost and other expenses
    
    
    (2
    )
    
    
    (63
    )
    
    
    (6
    )
    
    
    (71
    )(Loss) income before income tax
    
    
    (10
    )
    
    
    1
    
    
    
    58
    
    
    
    49Income tax (expense) benefit
    
    
    (1
    )
    
    
    3
    
    
    
    (18
    )
    
    
    (16
    )Net (loss) income
    
    Ps.
    (11
    )
    
    Ps.
    4
    
    
    Ps.
    40
    
    
    Ps.
    33
 l)
    
    Deconsolidation of ComeguaFor Mexican FRS purposes, based on: (a) the Companys control over the CEO whose function
is to govern the operating decisions and financial policies of Comegua; (b) the Companys
sole right to propose the CEO for designation by the Board of Directors of Comegua; and
(c) the Companys sole right to remove the CEO, the Company concludes that it controls
Comegua as defined by Bulletin B-8, Consolidated and Combined Financial Statements and
Valuation of Permanent Investments in Shares and therefore, Comegua should be
consolidated in accordance with Mexican FRS.For U.S. GAAP purposes, the Company has determined that the control it retains over the
management of the annual budget of Comegua is not unilateral and is not sufficient to meet
all of the technical requirements for consolidation. The Companys position is based on
the guidance provided by EITF 96-16, Investors Accounting for an Investee When the
Investor Has a Majority of the Voting Interest but the Minority Shareholder or
Shareholders Have Certain Approval or Veto Rights. Under EITF 96-16, such approval and
veto rights held by the minority shareholders of Comegua, including the approval of annual
budget, qualify as substantive participating rights and therefore do not allow the Company
to consolidate Comegua in its financial statements for U.S. GAAP purposes. Therefore, the
Companys investment in Comegua is recorded by applying the equity method in the Companys
U.S. GAAP consolidated financial statements. (See insert q(3)).m)
    
    Employee retirement obligationsThe Company maintains defined benefit pension plans for all of its subsidiaries and
provides for seniority premiums and severance payments (severance indemnities) for all of
its Mexican subsidiaries. For its Mexican FRS consolidated financial statements, the
Company applies Bulletin D-3. Prior to 2006, the accounting treatment for pensions and
seniority premiums set forth in this Bulletin is substantially the same as those set forth
in SFAS No. 87, Employers Accounting for Pensions. The Company records the pension cost
determined by actuarial computations, as described in notes 3 k) and 11. Significant
assumptions (weighted-average rates) used in determining net periodic pension cost and the
Companys related pension obligations for 2007 and 2006 are also described in note 11.
  F-49




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##### Table of Contents



Severance indemnities  Under Mexican FRS, effective 2005 revised Bulletin D-3 requires
the recognition of a severance indemnity liability calculated based on actuarial
computations. Similar recognition criteria under U.S. GAAP are established in SFAS No.
112, Employers Accounting for Post employment Benefits, which requires that a liability
for certain termination benefits provided under an ongoing benefit arrangement such as
these statutorily mandated severance indemnities, be
recognized when the likelihood of future settlement is probable and the liability can be
reasonably estimated. Mexican FRS allows for the Company to amortize the transition
obligation related to the adoption of revised Bulletin D-3 over the expected service life
of the employees. However, U.S. GAAP required the Company to recognize such effect upon
initial adoption, which results in a difference in the amount recorded under the two
accounting principles. The tables below reflect the requirements under U.S. GAAP, which
applies SFAS No. 112 standard for all years presented.The Company adopted SFAS No. 158, Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R),
in its December 31, 2006 consolidated financial statements. This statement requires
companies to (1) fully recognize, as an asset or liability, the over funded or under
funded status of defined pension and other postretirement benefit plans; (2) recognize
changes in the funded status through other comprehensive income in the year in which the
changes occur; and (3) provide enhanced disclosures. There is no impact on results of
operations or cash flows. Retrospective application of this standard is not permitted.A reconciliation of the Companys employee retirement obligations from Mexican FRS to U.S.
GAAP is shown in the following table:
 2006
    
    
    2007Employee retirement obligations under Mexican FRS
    
    Ps.
    1,563
    
    
    Ps.
    1,245Effect of SFASB No 158 adjustment
    
    
    863
    
    
    
    1,220Effect of retirement obligations
    
    
    88
    
    
    
    100Additional minimum liability adjustment under Mexican FRS (1)
    
    
    (1,030
    )
    
    
    (796
    )Comeguas employee retirement obligations (see l)
    
    
    (80
    )
    
    
    (83
    )Employee retirement obligations under U.S. GAAP
    
    Ps.
    1,404
    
    
    Ps.
    1,686
 (1)
    
    Includes Ps. 492 and Ps. 448 recognized in stockholders equity, net of the
deferred income tax of Ps. 182 and Ps. 123 as of December 31, 2006 and 2007, respectively.  2006
    
    
    2007Change in benefit obligation:Benefit obligation at beginning of year
    
    Ps.
    2,679
    
    
    Ps.
    2.694Service cost
    
    
    71
    
    
    
    74Interest cost
    
    
    143
    
    
    
    150Amendments
    
    
    
    
    
    
    378Actuarial losses
    
    
    186
    
    
    
    208Benefits paid
    
    
    (385
    )
    
    
    (351
    )Settlements
    
    
    
    
    
    
    82Benefit obligation at end of year
    
    
    2,694
    
    
    
    3,235Changes in plan assets:Fair value of plan assets at beginning of year
    
    
    720
    
    
    
    1,290Contribution of cash and securities
    
    
    449
    
    
    
    328Return on plan assets
    
    
    380
    
    
    
    184Benefits paid
    
    
    (259
    )
    
    
    (253
    )Fair value of plan assets at end of year(1)
    
    
    1,290
    
    
    
    1,549Employee retirement obligations- unfunded status
    
    Ps.
    1,404
    
    
    Ps.
    1,686
 (1)
    
    Includes approximately Ps. 1,139 and Ps. 914 as of December 31, 2007
and 2006, respectively of Vitro common stock (47,472,678 shares).  F-50




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##### Table of Contents



Year ended December 31,2005
    
    
    2006
    
    
    2007Service cost
    
    Ps.
    61
    
    
    Ps.
    71
    
    
    Ps.
    74Interest cost
    
    
    137
    
    
    
    143
    
    
    
    150Return on plan assets
    
    
    (44
    )
    
    
    (49
    )
    
    
    (88
    )Net amortization and deferral
    
    
    172
    
    
    
    243
    
    
    
    86Settlement cost
    
    
    
    
    
    
    
    
    
    
    117Net periodic pension cost
    
    Ps.
    326
    
    
    Ps.
    408
    
    
    Ps.
    339
  2007Unrecognized items included in AOCI:Transition obligation
    
    Ps.
    142Prior service cost
    
    
    181Net actuarial gain
    
    
    897Unrecognized items
    
    Ps.
    1,220Unrecognized items included in AOCI, net of tax of Ps. 342
    
    Ps.
    878
  Transition
    
    
    Prior service
    
    
    Net actuarialobligation
    
    
    cost
    
    
    gain
    
    
    TotalBalance as of December 31, 2006
    
    Ps.
    160
    
    
    Ps.
    174
    
    
    Ps.
    529
    
    
    Ps.
    863Amounts arising during the period
    
    
    6
    
    
    
    23
    
    
    
    516
    
    
    
    545Curtailment / Settlement effect
    
    
    
    
    
    
    (2
    )
    
    
    (100
    )
    
    
    (102
    )Amounts recognizad as components
of net periodic cost
    
    
    (24
    )
    
    
    (14
    )
    
    
    (48
    )
    
    
    (86
    )Balance as of December 31, 2007
    
    Ps.
    142
    
    
    Ps.
    181
    
    
    Ps.
    897
    
    
    Ps.
    1,220
  Transition Obligation
    
    Ps.
    23Prior Service cost
    
    
    18Net Actuarial gain
    
    
    40
  F-51




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##### Table of Contents



The trust assets consist of fixed income and variable funds, valued at market value. As of
December 31, 2006 and 2007, the pension plan assets were invested in the following financial
instruments:
 2006
    
    
    2007Fixed Rate:Federal Government instruments
    
    
    29
    %
    
    
    25
    %Variable Rate:Equity securities traded on the Mexican Stock Exchange
    
    
    71
    %
    
    
    75
    %100
    %
    
    
    100
    %
 We develop our expected long-term rate of return assumption based on the historical experience
of our portfolio and the review of projected returns by asset class on broad, publicly traded
equity and fixed-income indices. The composition of the objective portfolio is consistent with
the share composition of the portfolios of five of the best-known international companies
located in Mexico that manage long-term funds.Contributions to the pension plans amounted to Ps. 449 and Ps. 328 as of December 31, 2006 and
2007, respectively. The Company estimates that the contributions to the pension plan funds
during 2008 are expected to be approximately Ps. 261. Expected benefit payments for our
pension plans, seniority premium and severance indemnities are as follows:
 Year ended
    
    
    
    
    
    Seniority
    
    
    SeveranceDecember 31,
    
    Pension
    
    
    Premium
    
    
    Indemnities2008
    
    Ps.
    261
    
    
    Ps.
    10
    
    
    Ps.
    272009
    
    
    259
    
    
    
    9
    
    
    
    242010
    
    
    299
    
    
    
    9
    
    
    
    212011
    
    
    228
    
    
    
    9
    
    
    
    192012
    
    
    229
    
    
    
    9
    
    
    
    172013  2017
    
    
    1,108
    
    
    
    46
    
    
    
    57
 As discussed in note 22, NIF D-3, Employee Benefits, is effective January 1, 2008. The
Company is in the process of determining what effects, if any, adoption of this new NIF will
have on this reconciling item.n)
    
    Purchase of Visteons capital investmentIn connection with the termination of the joint venture agreement between Viméxico and Visteon
discussed in note 20 d), under Mexican FRS as established in Bulletin B-7, Business
Acquisitions the Company recognized the difference between the price paid and the book value
of Ps. 70 as a credit in the majority stockholders equity. Under U.S. GAAP, in accordance
with SFAS No. 141, Business Combinations the excess over cost of Ps. 90 was allocated as a
pro rata reduction of the acquired assets.
  F-52




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##### Table of Contents



o)
    
    Sale of real estateAs disclosed in note 7 c) on December 14, 2006, Vitro sold real estate located in Mexico City
used by COVISA for US$ 100 million, 80% payable on the date of sale and the remainder payable
on the delivery date of the property. In connection with the sale of the property, the Company
agreed to deliver the real estate within 24 months following the sale, free and clear of all
buildings and fixtures, as well as any
environmental claims, recording reserves of Ps. 56 for the estimated asset retirement costs
and prepaid rent of Ps. 62 for the estimated fair value of the rental expense over the 24
months. Vitro is obligated to refund the US$ 80 million to the purchaser in the event that
the property is not delivered to the purchaser within 24 months following the sale. A third
party financial institution has guaranteed the repayment of the purchase price in the event
Vitro does not deliver the property by such time and fails to refund the purchase price to the
purchaser. Under U.S. GAAP, in accordance with SFAS No. 66, Accounting for Sales of Real
Estate, SFAS No. 13, Leases and SFAS No. 98, Accounting for Leases as a result of the
Companys level of continuing involvement the gain on the sale of the land has been deferred
and is being recognized in earnings during the two years over which the Company continues to
utilize the property. During 2007, the Company recognized Ps. 429 in earnings related to this
transaction.The depreciation estimates of the fixed assets that will be disposed of as a result of the
real estate sale have been adjusted to reflect the use of the assets over their shortened
useful lives. Such change in estimate is being accounted for prospectively. For purposes of
Mexican FRS, the Company wrote off the net book value of the fixed assets against the gain on
sale.For U.S. GAAP purposes, a difference results due to the depreciation expense related to the
fixed assets that were written off under Mexican FRS.p)
    
    Impairment of long-lived assetsFor U.S. GAAP purposes, in accordance with SFAS No. 144, long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. The carrying amount of an asset is not recoverable when the
estimated future undiscounted cash flows expected to result from the use of the asset are less
than the carrying value of the asset. Impairment is recorded when the carrying amount of the
asset exceeds its fair value. Impairment charges and asset write-downs are presented in
selling, general and administrative expenses in operating income in our U.S. GAAP consolidated
financial statements.For Mexican FRS purposes, in accordance with Bulletin C-15, 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 amount of
the asset exceeds the greater of the amounts mentioned above. Impairment charges and asset
write-downs are presented in other expenses in our Mexican FRS consolidated financial
statements.In 2005 and 2006, for Mexican FRS purposes, while performing its annual impairment test using
its best estimates based on reasonable and supportable assumptions and projections, the
Company recorded an impairment charge of Ps. 111 and Ps. 334, respectively within its Flat
Glass reportable segment as the carrying amount of the long-lived assets exceeded the present
value of their future discounted cash flows. For U.S. GAAP purposes no impairment charge was
recorded as the assets were considered to be recoverable given that the estimated undiscounted
cash flows expected to result from the use of the assets were greater then the carrying value
of the asset.
  F-53




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##### Table of Contents



In 2005 for U.S. GAAP purposes, based on fair value appraisals received, the Company recorded
an impairment charge of Ps. 195 for land and buildings located at its corporate offices
classified as available for sale in accordance with SFAS No. 144. This charge is recorded in
operating income for U.S. GAAP purposes. Under Mexican FRS, the assets did not meet the
definition of held for sale as required by
Bulletin C-15 as such assets were still in use by the Company at that time. The discounted
cash flow model utilized by the Company did not result in an impairment charge for Mexican FRS
purposes. During 2006 as disclosed in note 7 d), Vitro sold one of its buildings located at
its corporate headquarters recognizing a loss on sale of Ps. 138 under Mexican FRS and PS. 93
under U.S. GAAP.As a result of the transactions described above, differences result between Mexican FRS and
U.S. GAAP due to the depreciation expense on fixed assets being recorded each year.q)
    
    Other differences and supplemental U.S. GAAP disclosures
 1.
    
    Accounts receivable securitizationsThe Company has included additional disclosures in accordance with SFAS No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,
primarily related to the retained interests in the securitized financial assets. See below
for the additional disclosures required by SFAS No. 140:
 
    
    In 2004, VVP entered into an agreement to sell of its accounts receivable, on a
revolving basis, to VVP Funding, a wholly owned subsidiary of VVP. VVP Funding is a
special-purpose entity that was formed prior to the execution of this agreement for the
sole purpose of buying and selling accounts receivable and is designed to be bankruptcy
remote and self liquidating. Also, during 2004, VVP and VVP Funding entered into
agreement with an unrelated financial institution whereby VVP Funding, on a revolving
basis and subject to the maintenance of certain financial and receivables-based ratios,
sells an undivided percentage ownership in all eligible accounts receivable, as
defined, for consideration composed of cash, up to a maximum amount of US$ 40 million,
and retain undivided interests in securitized receivables. The transfer of undivided
ownership interests from VVP Funding to the unrelated major financial institution for
cash consideration is accounted for as a sale of receivables in accordance with SFAS
No. 140. Effective April 16, 2007, a new agreement was signed and amended to increase
the maximum selling amount from US$ 40 million to US$ 50 million. The agreement expires
in April 2008 but is subject to annual renewal approval by the financial institution.The gross receivables sold, totaling approximately US$ 78 million and US$ 76 million at
December 31, 2006 and 2007, respectively, are reflected as a reduction of trade accounts
receivable. Estimated fair value of the retained undivided interests securitized
receivables at December 31, 2007 and 2006, totaled US$ 29 million and US$ 32 million and
was determined based on expected credit losses and allowance of 3%, expected average
receivable collection time of 52 days, and expected short-term commercial paper rates of
2.3% per annum. The Company has completed a sensitivity analysis on the estimated fair
value of the retained undivided interests with the objective of measuring the change in
value associated with changes in individual key variables. A 10% increase in expected
credit losses and allowance, to 3.3%, would decrease the year-end valuation by
approximately US$ 151 million, and 20% increase in expected credit losses and allowances,
to 3.6%, would decrease the year-end valuation by approximately US$ 302 million.
Similarly, 10 or 20% adverse fluctuations in either average receivable collection times or
expected short-term commercial paper rates would not significantly affect the recorded
fair value of the retained undivided interests. This sensitivity analysis is hypothetical
and should be used with caution. Changes in fair value based on a 10 or 20% variation
should not be extrapolated because the relationship of the change in assumption to the
change in fair value may not always be linear.
  F-54




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##### Table of Contents



Proceeds received by the Company from the revolving securitizations aggregated to US$ 492
million and US$ 498 million for the years ended December 31, 2006 and 2007, respectively,
and are included in cash flows from operating activities. Securitization fees totaled US$
3 million for the years ended December 31, 2006 and 2007 and are included in general and
administrative expenses. Delinquencies on securitized rec eivables, representing amounts
over 60 days past due, totaled US$ 9 million and US$ 12 million at December 31, 2006 and
2007, respectively with credit losses totaling US$ 2 million for the years then ended. VVP
continues to service the securitized receivables, receiving compensation that is
approximately equal to its cost of such servicing plus a reasonable profit margin;
accordingly, no servicing assets or liabilities are recorded. For the years ended December
31, 2006 and 2007, the Company received servicing fees totaling US$ 0.6 million each year.
    
    Securitization of VENA trade receivables.  On March 31, 2005, Compañía Vidriera, S.A.
de C.V., Industria del Álcali, S.A. de C.V. and Comercializadora Álcali, S. de R.L. de
C.V., all subsidiaries of VENA, closed a revolving accounts receivable facility, through
which such companies obtained Ps. 550 (nominal amount) and US$ 19 million. The VENA
subsidiaries entered into an agreement to sell all of their trade accounts receivable, on
a revolving basis during four years, to a fideicomiso(the Mexican Trust, a qualifying
special purpose entity) that was formed prior to the execution of this agreement for the
sole purpose of buying and selling accounts receivable and is designed to be bankruptcy
remote. The Ps. 550 (nominal amount) was obtained through the issuance of certified
preferred securities (certificados bursátiles preferentes) that trade on the Mexican
Stock Exchange issued by the Mexican Trust, and US$ 19 million in subordinated notes,
which have a payment guarantee by Vitro. The interest payments and eventual principal
reimbursement on the certificados bursátiles preferentesand the subordinated notes are
payable from the collection of the receivables originated by the VENA subsidiaries and
sold to the Mexican Trust. The transfer of undivided ownership interests from VENA to the
unrelated major financial institution for cash consideration is accounted for as a sale
of receivables in accordance with SFAS No. 140.At December 31, 2006 and 2007, the gross receivables sold to the Trust totaled Ps. 1,074
and Ps. 1,075 respectively, and are reflected as a reduction of trade accounts receivable.
The estimated fair value of the retained undivided interests in securitized receivables at
December 31, 2006 and 2007 was Ps. 529 and Ps. 312, respectively. The Company has
completed a sensitivity analysis on the estimated fair value of the retained undivided
interests with the objective of measuring the change in value associated with changes in
individual key variables. A 0.01% increase in the 12-month peak 3-month average loss
ratio from the May 31, 2007 amount to 0.76% would result in a reduction in the
availability equal to 0.13% of eligible funds.Proceeds received by the Company from the revolving securitizations aggregated to Ps.
8,434 and Ps. 9,065 for the years ended December 31, 2006 and 2007, and are included in
cash flows from operating activities. Delinquencies on securitized receivables,
representing amounts over 60 days past due, totaled Ps. 22 in 2006 and Ps. 28 in 2007.
VENA continues to service the securitized receivables, receiving compensation that is
approximately equal to its cost of such servicing plus a reasonable profit margin;
accordingly, no servicing assets or liabilities are recorded. For the years ended December
31, 2007 and 2006, the Company received servicing fees totaling Ps. 31 and Ps. 26,
respectively.
  F-55




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##### Table of Contents




    
    Securitization of Viméxico (formerly Vitro Plan) trade receivables.  On August 22,
2005, Dinavisa, Vitro Flotado Cubiertas, S.A. de C.V. (VFC), Vidrio y Cristal and VAU,
all subsidiaries of Viméxico, closed a five year revolving accounts receivable facility
through which such companies
obtained US$ 21.5 million. The Viméxico subsidiaries entered into an agreement to sell all
of its trade accounts receivable, on a revolving basis, to a Mexican Trust that was formed
prior to the execution of this agreement for the sole purpose of buying and selling
accounts receivable and is designed to be bankruptcy remote. The US$ 21.5 million was
obtained through a private issuance of notes in the United States. The interest payments
and eventual principal reimbursement will be provided from the collection of the
receivables originated by four subsidiaries of Viméxico and sold to the Mexican Trust. The
transfer of undivided ownership interests from Viméxico to the unrelated major financial
institution for cash consideration is accounted for as a sale of receivables in accordance
with SFAS No. 140.At December 31, 2006 and 2007, the gross receivables sold to the Trust totaled Ps. 574 and
Ps. 580, respectively and are reflected as a reduction of trade accounts receivable. The
estimated fair value of the retained undivided interests in securitized receivables at
December 31, 2006 and 2007 was Ps. 332 and Ps. 346, respectively. The Company has
completed a sensitivity analysis on the estimated fair value of the retained undivided
interests with the objective of measuring the change in value associated with changes in
individual key variables. A 0.01% increase in the 12-month peak 3-month average loss ratio
from the May 31, 2006 amount to 3% would result in a reduction in the availability equal
to 0.10% of eligible funds.Proceeds received by the Company from the revolving securitizations aggregated to Ps. 560
and US$ 286 million dollars and Ps. 856 and US$ 152 million dollars for the years ended
December 31, 2006 and 2007, respectively, and are included in cash flows from operating
activities. Delinquencies on securitized receivables, representing amounts over 60 days
past due, totaled Ps. 56 and US$ 1 million dollars, and Ps. 16 and US$ 1 million dollars
at December 31, 2006 and 2007, respectively. Viméxico continues to service the securitized
receivables, receiving compensation that is approximately equal to its cost of such
servicing plus a reasonable profit margin; accordingly, no servicing assets or liabilities
are recorded. For the years ended December 31, 2006 and 2007, the Company received
servicing fees totaling Ps. 11.
 2.
    
    Reclassifications:
 (a)
    
    Gain or loss on sale of assets  The gain or loss on sale of assets that do not
meet the definition of a component of a business as described in SFAS No. 144 are
included in operating income in the Companys U.S. GAAP consolidated financial
statements. Gains or losses on sales of assets not presented as discontinued operations
under Mexican FRS are included in other expenses in the Companys consolidated Mexican
FRS financial statements (see note 16).(b)
    
    Classification of workers profit sharing  Under Mexican FRS, statutory employee
profit sharing is presented under other income and expenses. In the Companys U.S. GAAP
statements of operations, workers profit sharing expense is classified as an operating
expense.(c)
    
    Restructuring charges  During 2006 and 2007, the Company restructured certain
operating units and its corporate and administrative functions. For Mexican FRS purposes
the corresponding costs met the definition of a restructuring charge and were included in
other expenses in the Companys consolidated financial statements, but for U.S. GAAP
purposes the Company applied SFAS No. 112. These costs are included in general and
administrative expenses in the accompanying U.S. GAAP consolidated statements of
operations.
  F-56




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##### Table of Contents



3.
    
    Equity method investments  Through July 27, 2007, the Company accounted for its
50% joint venture investments in Vitro AFG under the equity method for US GAAP purposes
and under proportionate consolidation method for Mexican FRS. Subsequent to acquiring
the remaining 50% of the outstanding shares and assuming complete control over its
operations, the Company began to consolidate its wholly-owned subsidiary (see note 20 f)
for both Mexican FRS and U.S. GAAP. In addition, as mentioned in note 24 l) we account
for Comegua under the equity method for U.S. GAAP purposes.
 Summary information of the Companys equity method investments is as follows:
 As of and for the year ended December 31,2006
    
    
    2007*
    
    
    2006
    
    
    2007AFG
    
    
    ComeguaCurrent assets
    
    Ps.
    42
    
    
    
    
    
    
    Ps.
    1,348
    
    
    Ps.
    1,117Total assets
    
    
    884
    
    
    
    
    
    
    
    2,467
    
    
    
    2,863Current liabilities
    
    
    402
    
    
    
    
    
    
    
    384
    
    
    
    539Total liabilities
    
    
    434
    
    
    
    
    
    
    
    968
    
    
    
    1,326Stockholders equity
    
    
    450
    
    
    
    
    
    
    
    1,499
    
    
    
    1,537
 As of and for the year ended December 31,2006
    
    
    2007*
    
    
    2006
    
    
    2007AFG
    
    
    ComeguaNet sales
    
    Ps.
    224
    
    
    Ps.
    368
    
    
    Ps.
    1,789
    
    
    Ps.
    2,127Net income (loss)
    
    
    14
    
    
    
    (134
    )
    
    
    14
    
    
    
    38Cash flow information:Operating activities
    
    Ps.
    2
    
    
    
    (6
    )
    
    Ps.
    107
    
    
    Ps.
    344Financing activities
    
    
    
    
    
    
    
    
    
    
    225
    
    
    
    380Investing activities
    
    
    
    
    
    
    
    
    
    
    (344
    )
    
    
    (694
    )
 *
    
    For the period from January 1 through July 27, 2007. Under U.S. GAAP, as of December 31, 2006 the Companys investment in AFG was Ps. 225 and the
investment in Comegua was Ps. 745 and Ps. 763 as of December 31, 2006 and 2007, respectively.
 4.
    
    Weighted-average interest rates  The weighted-average interest rates on short-term
borrowings outstanding as of December 31, 2005, 2006 and 2007 were approximately 7.31%,
8.85% and 7.75%, respectively.5.
    
    Fair value of financial instruments  SFAS No. 107, Disclosures about Fair Value
of Financial Instruments, requires disclosure of the estimated fair values of certain
financial instruments. The carrying amounts and estimated fair values of the Companys
significant financial instruments not previously disclosed in these financial statements
were as follows:
 December 31, 2006
    
    
    December 31, 2007Carrying
    
    
    
    
    
    
    CarryingAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueLiabilities:Short-term borrowings
    
    Ps.
    319
    
    
    Ps.
    319
    
    
    Ps.
    398
    
    
    Ps.
    398Long-term debt(1)
    
    
    12,507
    
    
    
    13,036
    
    
    
    14,520
    
    
    
    13,948
 
 (1)
    
    Includes current portion of long-term debt.  F-57




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##### Table of Contents



The fair value of short-term borrowings approximates their carrying value due to their
short maturities. The fair value of the US (dollar denominated) publicly traded long-term
debt was Ps.
7,567 and Ps. 13,067 as of December 31, 2006 and 2007, respectively, and its related book
value was Ps. 7,038 and Ps. 13,639 respectively. The fair value of the remaining long-term
debt approximates its book value of Ps. 5,469 and Ps. 881 as of December 31, 2006 and
2007, respectively.The fair value of long-term debt was determined using available quoted market prices or
other appropriate valuation methodologies that require considerable judgment in
interpreting market data and developing estimates. Accordingly, the estimates presented
above on long-term financial instruments are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the estimated
fair value amounts.The fair value information presented herein is based on information available to
management as of December 31, 2006 and 2007. Although management is not aware of any
factors that would significantly affect the estimated fair value amounts, such amounts
have not been comprehensively revalued for purposes of these financial statements since
that date and, therefore, the current estimates of fair value may differ significantly
from the amounts presented herein.6.
    
    Earnings per share in accordance with U.S. GAAP  Earnings per share in accordance
with U.S. GAAP is based on the provisions of SFAS No. 128, Earnings Per Share. The
methodologies required by Mexican FRS and U.S. GAAP as it relates to the calculation and
presentation of the Companys basic and diluted earnings per share differs only in the
net income (loss) utilized for purposes of the calculation.Income (loss) per common share computed in accordance with U.S. GAAP is presented below:
 Year ended December 31,2005
    
    
    2006
    
    
    2007Basic and diluted income (loss) per share from
continuing operations
    
    Ps.
    (0.66
    )
    
    Ps.
    (1.92
    )
    
    Ps.
    1.37Discontinued operations
    
    
    (0.38
    )
    
    
    1.66Basic and diluted income (loss) per common share
    
    Ps.
    (1.04
    )
    
    Ps.
    (0.26
    )
    
    Ps.
    1.37
 7.
    
    Comprehensive income  Under U.S. GAAP, SFAS No. 130, Reporting Comprehensive
Income, establishes standards for reporting and display of comprehensive income and its
components. Vitros items of other comprehensive income are: loss from holding
nonmonetary assets, unrealized gain (loss) on long-term investments, the currency
translation adjustment and the amortization of unrecognized items related to its labor
obligations.See note 24 r), for consolidated financial statements presented on a U.S. GAAP basis,
which reflect the provisions of SFAS No. 130, Reporting Comprehensive Income. There
were no reclassification adjustments for any of the periods presented.8.
    
    Share-based Payment  In 2006 the Company adopted and currently applies SFAS No.
123(R), Share-Based Payment, in accounting for its share-based payment awards. The
Companys employee stock option plan was adopted in 1998. The disclosures required under
U.S. GAAP as they relate to this plan are included in note 14 c).
  F-58




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##### Table of Contents



9.
    
    Restrictions that limit the payment of dividends by the registrant  The Company
derives substantially all of its operating income from advances, fees, interest and
dividends paid to the Company by its subsidiaries. Accordingly, in paying the principal
of, premium, if any, interest on, and additional amounts, if any, with respect to the
Companys indebtedness, the Company relies on income from advances, fees, interest and
dividends from its subsidiaries, as well as income from the disposition of one or more
of its subsidiaries, interests therein or assets thereof. Therefore, the Companys
subsidiaries ability to pay such dividends or make such distributions are subject to (i)
such subsidiaries having net income and the requisite amount of paid-in capital under
Mexican law, (ii) such subsidiaries shareholders (including the Companys joint venture
partners) having approved the payment of such dividends at the annual general ordinary
shareholders meeting and (iii) applicable laws and, in certain circumstances,
restrictions contained in joint venture and debt agreements. At December 31, 2007 and
2006, the net assets of the Companys subsidiaries were not restricted.10.
    
    Concentration of credit risk  The Company sells products to customers primarily in
Mexico, the U.S. and Europe, although no single customer accounted for more than 8% of
consolidated net sales in 2007, 2006 and 2005, the Company has customers that are
significant to its business units and to its consolidated financial statements taken as a
whole. The Companys three largest customers accounted for approximately 15% of its
consolidated net sales in 2007, 2006 and 2005. The Company conducts periodic evaluations
of its customers financial condition and generally does not require collateral. The
Company does not believe that significant risk of loss from a concentration of credit
risk exists given the large number of customers that comprise its customer base and their
geographical dispersion. The Company also believes that its potential credit risk is
adequately covered by the allowance for doubtful accounts.11.
    
    Irrevocable Standby Letters of Credit  As of December 31, 2006 and 2007 VVP
Holdings Corp. (one of the Companys U.S. subsidiaries), had outstanding irrevocable
standby letters of credit issued, for insurance purposes, totaling US$18 and US$13,
respectively.12.
    
    Vicap Notes  11 3/8% Vicap Notes registered under the U.S. Securities Act of 1933
were issued by Vicap (now known as SOFIVSA), the Companys 100% owned finance subsidiary,
and fully and unconditionally guaranteed by Vitro. There are no restrictions on the
ability of Vitro to obtain funds from SOFIVSA by dividend or loan. The Vicap Notes were
repaid prior to their maturity date in March 2007.13.
    
    Major Maintenance Activities  The provisions of FASB Staff Position AUG AIR.1
Accounting for Planned Major Maintenance became effective on January 1, 2007; this
guidance prohibits the use of the accrue-in-advance method of accounting for planned
major maintenance. The adoption of this standard did not have a material impact on the
Companys consolidated financial position or results of operations.14.
    
    Under Mexican FRS, the Company presents a consolidated statement of changes in
financial position in accordance with Bulletin B-12, Statement of Changes in Financial
Position, which identifies the generation and application of resources by the
differences between beginning and ending balance sheet items presented in constant
Mexican pesos. Bulletin B-12 also requires that monetary and foreign exchange gains and
losses be treated as cash items for the determination of resources generated by operating
activities.
  F-59




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##### Table of Contents



In accordance with U.S. GAAP, the Company follows SFAS No. 95, Statement of Cash Flows,
which is presented in historical Mexican pesos, without the effects of inflation.As mentioned in note 22, NIF B-2, Statement of Cash Flows, is effective January 1, 2008.
NIF B-2 requires that the statement show a companys cash inflows and outflows during
the period and establishes general rules for the presentation, structure and preparation
of a cash flow statement and replaces the statement of changes in financial position on a
prospective basis.15.
    
    Recently Issued Accounting StandardsIn February 2007, the FASB issued Statement of Financial Accounting Standards No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities  including an
amendment of FASB Statement No. 115. SFAS No. 159 gives the Company the irrevocable
option to carry most financial assets and liabilities at fair value that are not currently
required to be measured at fair value. If the fair value option is elected, changes in
fair value would be recorded in earnings at each subsequent reporting date. SFAS No. 159
is effective for the Companys 2008 fiscal year. The Company is currently evaluating the
impact the adoption of this statement could have on its financial condition, results of
operations and cash flows.In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurement. SFAS
No. 157 defines fair value, establishes a framework for the measurement of fair value, and
enhances disclosures about fair value measurements. The Statement does not require any new
fair value measures. The Statement is effective for fair value measures already required
or permitted by other standards for fiscal years beginning after November 15, 2007. The
Company is required to adopt SFAS No. 157 beginning on January 1, 2008. SFAS No. 157 is
required to be applied prospectively, except for certain financial instruments. Any
transition adjustment will be recognized as an adjustment to opening retained earnings in
the year of adoption. On February 12, 2008, the FASB issued FSP FAS 157-1 and FSP FAS
157-2, which remove leasing transactions accounted for under SFAS No. 13, Accounting for
Leases from the scope of SFAS No. 157 and partially defer the effective date of SFAS No.
157 as it relates all nonrecurring fair value measurements of nonfinancial assets and
nonfinancial liabilities until fiscal years beginning after November 15, 2008. The
Company is currently evaluating the impact of adopting SFAS No. 157 on its results of
operations and financial position.In December 2007, the FASB issued SFAS No. 141(R), Business Combinationsa replacement of
FASB No. 141. SFAS No. 141(R) requires (a) a company to recognize the assets acquired,
the liabilities assumed, and any noncontrolling interest in the acquiree at fair value as
of the acquisition date; and (b) an acquirer in preacquisition periods to expense all
acquisition-related costs. SFAS No. 141(R) requires that any adjustments to an acquired
entitys deferred tax asset and liability balance that occur after the measurement period
be recorded as a component of income tax expense. The presentation and disclosure
requirements must be applied retrospectively to provide comparability in the financial
statements. Early adoption is prohibited. SFAS No. 141(R) is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after December 15,
2008. The impact of this standard is dependant upon the level of future acquisitions.
  F-60




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##### Table of Contents



In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51. SFAS No. 160 (a) amends ARB 51 to
establish accounting and reporting standards for the noncontrolling interest in a
subsidiary (to be included
within stockholders equity) and the deconsolidation of a subsidiary; (b) changes the way
the consolidated income statement is presented; (c) establishes a single method of
accounting for changes in a parents ownership interest in a subsidiary that do not result
in deconsolidation; (d) requires that a parent recognize a gain or loss in net income when
a subsidiary is deconsolidated; and (e) requires expanded disclosures in the consolidated
financial statements that clearly identify and distinguish between the interests of the
parents owners and the interests of the noncontrolling owners of a subsidiary. SFAS No.
160 must be applied prospectively but to apply the presentation and disclosure
requirements must be applied retrospectively to provide comparability in the financial
statements. Early adoption is prohibited. SFAS No. 160 is effective for fiscal years,
and interim periods within those fiscal years, beginning on or after December 15, 2008.
The impact of this standard is dependant upon the level of future acquisitions.In September 2006, the FASBs Emerging Issues Task Force reached a consensus on Issue No.
06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of
Endorsement Split-Dollar Life Insurance Arrangements. EITF 06-4 provides guidance on the
accounting for arrangements in which an employer owns and controls the insurance policy
and has agreed to share a portion of the cash surrender value and/or death benefit with
the employee. This guidance requires an employer to record a postretirement benefit, in
accordance with FASB Statement No. 106, Employers Accounting for Postretirement Benefits
Other Than Pensions, or APB Opinion No. 12, Omnibus Opinion-1967, if there is an
agreement by the employer to share a portion of the proceeds of a life insurance policy
with the employee during the postretirement period. This guidance is effective for
reporting periods beginning after December 15, 2007. The Company is in the process of
assessing the impact of adopting EITF 06-4 on its consolidated financial position and
results of operations; however, the Company currently expects that additional liabilities
may be required to be recognized upon implementation of the consensus based on the current
terms of certain life insurance arrangements with executive officers of the Company.16.
    
    Subsequent eventBy resolution adopted by the Ordinary General Shareholders Meeting on April 17, 2008, the
Company paid on May 12, 2008 a cash dividend in an amount of Ps. 0.40 per share, for a
total amount of Ps. 143 million.r)
    
    Comparative consolidated financial statements  U.S. GAAP
  F-61




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##### Table of Contents



CONSOLIDATED BALANCE SHEETS
U.S. GAAP BASIS  (Millions of constant Mexican pesos as of December 31, 2007)
 December 31,2006
    
    
    2007AssetsCash and cash equivalents
    
    Ps.
    1,081
    
    
    Ps.
    1,491Trade receivables, net
    
    
    1,042
    
    
    
    1,293Retained undivided interests in securitized receivables
    
    
    1,249
    
    
    
    968Other receivables
    
    
    1,167
    
    
    
    2,589Inventories
    
    
    3,537
    
    
    
    3,720Deferred income taxes
    
    
    140
    
    
    
    634Current assets
    
    
    8,216
    
    
    
    10,695Investment in unconsolidated and associated companies
    
    
    970
    
    
    
    764Land and buildings, net
    
    
    7,992
    
    
    
    7,884Machinery and equipment, net
    
    
    6,150
    
    
    
    7,179Construction in progress
    
    
    822
    
    
    
    1,539Goodwill
    
    
    846
    
    
    
    994Other assets
    
    
    1,101
    
    
    
    930Total assets
    
    Ps.
    26,097
    
    
    Ps.
    29,985LiabilitiesShort-term borrowings
    
    Ps.
    185
    
    
    Ps.
    253Current maturities of long-term debt
    
    
    57
    
    
    
    485Trade payables
    
    
    2,035
    
    
    
    2,339Sundry creditors
    
    
    849
    
    
    
    2,209Accrued expenses
    
    
    969
    
    
    
    1,346Current portion of unrealized gain on sale of real estate
    
    
    524
    
    
    
    484Current liabilities
    
    
    4,619
    
    
    
    7,116Long-term debt
    
    
    12,063
    
    
    
    13,439Employee retirement obligations
    
    
    1,404
    
    
    
    1,686Unrealized gain on sale of real estate
    
    
    502
    
    
    
    Deferred income taxes
    
    
    466
    
    
    
    477Other long-term liabilities
    
    
    218
    
    
    
    205Long-term liabilities
    
    
    14,653
    
    
    
    15,807Total liabilities
    
    
    19,272
    
    
    
    22,923Minority interest in consolidated subsidiaries
    
    
    1,115
    
    
    
    1,212Stockholders EquityTotal stockholders equity
    
    
    5,710
    
    
    
    5,850Total liabilities, minority interest in
consolidated subsidiaries and stockholders
equity
    
    Ps.
    26,097
    
    
    Ps.
    29,985
  F-62




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##### Table of Contents



CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. GAAP BASIS  (Millions of constant Mexican pesos as of December 31, 2007)
 Year ended December 31,2005
    
    
    2006
    
    
    2007Net sales
    
    Ps.
    24,292
    
    
    Ps.
    25,655
    
    
    Ps.
    26,159Cost of sales
    
    
    17,570
    
    
    
    18,875
    
    
    
    18,429Gross profit
    
    
    6,722
    
    
    
    6,780
    
    
    
    7,730Selling, general and administrative expenses, net
    
    
    5,891
    
    
    
    5,344
    
    
    
    5,206Operating income
    
    
    831
    
    
    
    1,436
    
    
    
    2,524Interest expense
    
    
    2,390
    
    
    
    2,487
    
    
    
    2,138Interest income
    
    
    (163
    )
    
    
    (133
    )
    
    
    (169
    )Exchange loss (gain), net
    
    
    (417
    )
    
    
    214
    
    
    
    83Gain from monetary position
    
    
    (447
    )
    
    
    (536
    )
    
    
    (504
    )Total financing cost
    
    
    1,363
    
    
    
    2,032
    
    
    
    1,548Operating (loss) income after financing cost
    
    
    (532
    )
    
    
    (596
    )
    
    
    976Other income (expenses), net
    
    
    415
    
    
    
    52
    
    
    
    (491
    )(Loss) income from continuing operations before taxes
    
    
    (117
    )
    
    
    (544
    )
    
    
    485Income and asset tax (benefit) expense
    
    
    (144
    )
    
    
    175
    
    
    
    (74
    )Minority interest
    
    
    (216
    )
    
    
    150
    
    
    
    (107
    )Share in earnings of unconsolidated associated companies
    
    
    6
    
    
    
    15
    
    
    
    17Net (loss) income from continuing operations
    
    
    (183
    )
    
    
    (554
    )
    
    
    469Discontinued operations including a (loss) gain on
disposal of discontinued operations of Ps. (137) in
2005 and Ps. 513 in 2006, net of taxes of Ps. (4) and
Ps. (86) respectively
    
    
    (104
    )
    
    
    480
    
    
    
    Net (loss) income
    
    Ps.
    (287
    )
    
    Ps.
    (74
    )
    
    Ps.
    469
  F-63




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
U.S. GAAP BASIS  (Millions of constant Mexican pesos as of December 31, 2007)
 2005
    
    
    2006
    
    
    2007Stockholders equity at the beginning of the year
    
    Ps.
    5,375
    
    
    Ps.
    4,913
    
    
    Ps.
    5,710Comprehensive income (loss):Net income
    
    
    (287
    )
    
    
    (74
    )
    
    
    469Other comprehensive income (loss):Employee retirement obligations
    
    
    22
    
    
    
    
    
    
    
    (282
    )Gain from holding nonmonetary assets
    
    
    37
    
    
    
    (126
    )
    
    
    (141
    )Cumulative translation adjustment
    
    
    (18
    )
    
    
    1
    
    
    
    11Deferred income taxes
    
    
    (439
    )
    
    
    (67
    )
    
    
    259Deferred workers profit sharing
    
    
    7
    
    
    
    
    
    
    
    Effect of applying Bulletin B-10
    
    
    (96
    )
    
    
    (34
    )
    
    
    32Other comprehensive loss
    
    
    (487
    )
    
    
    (226
    )
    
    
    (121
    )Comprehensive loss
    
    
    (774
    )
    
    
    (300
    )
    
    
    348Bulletin B-15 adjustments
    
    
    241
    
    
    
    (45
    )
    
    
    (72
    )SFAS No. 158 adjustment
    
    
    
    
    
    
    (131
    )
    
    
    Canceled dividends
    
    
    164
    
    
    
    
    
    
    
    Dividends declared and paid
    
    
    (100
    )
    
    
    (95
    )
    
    
    (136
    )Sale of treasury stock
    
    
    7
    
    
    
    70
    
    
    
    Issuance of capital stock
    
    
    
    
    
    
    577
    
    
    
    Dilution of minority interest
    
    
    
    
    
    
    721
    
    
    
    Stockholders equity at the end of the year
    
    Ps.
    4,913
    
    
    Ps.
    5,710
    
    
    Ps.
    5,850
  F-64




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. GAAP BASIS*  (Millions of nominal pesos)
 Year ended December 31,2005
    
    
    2006
    
    
    2007Operating Activities:(Loss) income from continuing operations in constant pesos
    
    Ps.
    (183
    )
    
    Ps.
    (554
    )
    
    
    469Effect of constant pesos and monetary gain
    
    
    (370
    )
    
    
    (453
    )
    
    
    (532
    )(Loss) income from continuing operations in nominal pesos
    
    
    (553
    )
    
    
    (1,007
    )
    
    
    (63
    )Add (deduct) non-cash items:Minority interest
    
    
    200
    
    
    
    (145
    )
    
    
    108Depreciation and amortization
    
    
    1,636
    
    
    
    1,718
    
    
    
    1,400Provision for employee retirement obligations and other

long-term liabilities
    
    
    293
    
    
    
    377
    
    
    
    344Amortization of debt issuance costs
    
    
    200
    
    
    
    188
    
    
    
    166Share in earnings of unconsolidated associated companies
    
    
    (6
    )
    
    
    (13
    )
    
    
    (17
    )Dividends received from unconsolidated associated companies
    
    
    17
    
    
    
    12
    
    
    
    28Fair value of derivative financial instruments
    
    
    (123
    )
    
    
    (107
    )
    
    
    208Gain on execution of Vitro Clubs trust
    
    
    (424
    )
    
    
    
    
    
    
    Gain from sale of subsidiaries
    
    
    
    
    
    
    34
    
    
    
    12Write-off and loss (gain) from sale of fixed assets
    
    
    428
    
    
    
    48
    
    
    
    (371
    )Deferred income tax and workers profit sharing
    
    
    (323
    )
    
    
    71
    
    
    
    (404
    )Exchange (gain) loss
    
    
    (373
    )
    
    
    197
    
    
    
    145Changes in operating assets and liabilitiesIncrease in trade payables
    
    
    97
    
    
    
    213
    
    
    
    278Decrease (increase) in trade receivables
    
    
    616
    
    
    
    26
    
    
    
    (181
    )(Increase) decrease in inventories
    
    
    (170
    )
    
    
    320
    
    
    
    (265
    )Changes in other current assets and liabilities
    
    
    (482
    )
    
    
    (471
    )
    
    
    465Employee retirement obligations
    
    
    (282
    )
    
    
    (557
    )
    
    
    (472
    )Net income (loss) from discontinued operations
    
    
    31
    
    
    
    (30
    )
    
    
    Operating assets and liabilities from discontinued operations
    
    
    151
    
    
    
    29
    
    
    
    Net cash provided by operating activities
    
    
    933
    
    
    
    903
    
    
    
    1,383Investing Activities:Sale of land, buildings, machinery and equipment
    
    
    29
    
    
    
    1,342
    
    
    
    71Investment in land, buildings, machinery and equipment
    
    
    (978
    )
    
    
    (1,009
    )
    
    
    (2,146
    )Sale of subsidiaries and associated companies
    
    
    157
    
    
    
    1,049
    
    
    
    38Investment subsidiaries
    
    
    
    
    
    
    
    
    
    
    (177
    )Restricted cash
    
    
    1
    
    
    
    385
    
    
    
    (327
    )Discontinued operations
    
    
    (178
    )
    
    
    20
    
    
    
    Capital distribution to minority interest
    
    
    
    
    
    
    (21
    )
    
    
    (21
    )Deferred charges and other long-term assets
    
    
    (64
    )
    
    
    (86
    )
    
    
    (316
    )Net cash (used in) provided by investing activities
    
    
    (1,033
    )
    
    
    1,680
    
    
    
    (2,878
    )
  F-65




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##### Table of Contents



Year ended December 31,2005
    
    
    2006
    
    
    2007Financing Activities:Proceeds from short-term borrowings
    
    
    2,820
    
    
    
    4,603
    
    
    
    2,413Proceeds from long-term debt
    
    
    5,606
    
    
    
    840
    
    
    
    13,581Payment of short-term borrowings
    
    
    (3,927
    )
    
    
    (3,191
    )
    
    
    (4,644
    )Payment of long-term debt
    
    
    (5,278
    )
    
    
    (5,419
    )
    
    
    (9,201
    )Debt issuance costs
    
    
    (183
    )
    
    
    (23
    )
    
    
    (285
    )Issuance of capital stock
    
    
    
    
    
    
    556Sale (purchase) of treasury stock
    
    
    7
    
    
    
    67
    
    
    
    (1
    )Dividends paid to stockholders of Vitro
    
    
    (90
    )
    
    
    (92
    )
    
    
    (133
    )Dividends paid to minority interests
    
    
    (67
    )
    
    
    (20
    )
    
    
    (47
    )Other financing activities
    
    
    
    
    
    
    
    
    
    
    279Discontinued operations
    
    
    (4
    )
    
    
    (19
    )Net cash (used in) provided by financing activities
    
    
    (1,116
    )
    
    
    (2,698
    )
    
    
    1,962Net (decrease) increase in cash and cash equivalents
    
    
    (1,216
    )
    
    
    (115
    )
    
    
    467Exchange rate effect on cash and cash equivalents
    
    
    (47
    )
    
    
    26
    
    
    
    (18
    )Balance at beginning of year
    
    
    2,394
    
    
    
    1,131
    
    
    
    1,042Balance at end of year
    
    Ps.
    1,131
    
    
    Ps.
    1,042
    
    
    Ps.
    1,491Net cash provided by operating activities reflects net cash
payments of interest and income taxes as follows:Interest
    
    Ps.
    1,773
    
    
    Ps.
    1,694
    
    
    Ps.
    1,369Income taxes
    
    
    246
    
    
    
    20
    
    
    
    441
 *
    
    This consolidated statement of cash flows on the basis of nominal pesos is presented to
fulfill disclosure requirements of the International Practices Task Force of the American
Institute of Certified Public Accountants.  F-66




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##### Table of Contents



Schedule II  Valuation and Qualifying Accounts  Mexican FRS
 
 Balance at the
    
    
    
    
    
    
    
    
    
    
    Changes forbeginning of
    
    
    
    
    
    
    
    
    
    
    effects of
    
    
    Balance at the endyear
    
    
    Additions
    
    
    Deductions
    
    
    inflation
    
    
    of the yearYear ended December 31, 2007Allowance for doubtful accounts
    
    Ps.
    213
    
    
    Ps.
    115
    
    
    Ps.
    (59
    )
    
    Ps.
    (7
    )
    
    Ps.
    262Deferred tax valuation allowance
    
    
    269
    
    
    
    159
    
    
    
    (132
    )
    
    
    (10
    )
    
    
    286Ps.
    482
    
    
    Ps.
    274
    
    
    Ps.
    (191
    )
    
    Ps.
    (17
    )
    
    Ps.
    548Year ended December 31, 2006Allowance for doubtful accounts
    
    Ps.
    203
    
    
    Ps.
    72
    
    
    Ps.
    (55
    )
    
    Ps.
    (7
    )
    
    Ps.
    213Deferred tax valuation allowance

    
    
    628
    
    
    
    192
    
    
    
    (526
    )
    
    
    (25
    )
    
    
    269Ps.
    831
    
    
    Ps.
    264
    
    
    Ps.
    (581
    )
    
    Ps.
    (32
    )
    
    Ps.
    482Year ended December 31, 2005Allowance for doubtful accounts
    
    Ps.
    136
    
    
    Ps.
    105
    
    
    Ps.
    (39
    )
    
    Ps.
    1
    
    
    Ps.
    203Deferred tax valuation allowance
    
    
    737
    
    
    
    34
    
    
    
    (118
    )
    
    
    (25
    )
    
    
    628Ps.
    873
    
    
    Ps.
    139
    
    
    Ps.
    (157
    )
    
    Ps.
    (24
    )
    
    Ps.
    831
  F-67




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##### Table of Contents



25.
    
    Guarantor and non-guarantor financial informationAs disclosed in note 10 c), the Company issued US$ 700 million of senior guaranteed notes due
February 1, 2017 callable after year 2012 at a coupon of a 9.125% and US$ 300 million of senior
unsecured notes due February 1, 2012 not callable for the notes life at a coupon of 8.65%
(together the Notes) principally to refinance existing third-party debt at the Vitro holding
company level, substantially all of the third-party debt at its subsidiary VENA and certain
third-party debt at its subsidiary Viméxico.The obligations of the Company pursuant to each series of the Notes, including any repurchase
obligation resulting from a change of control, are unconditionally guaranteed, jointly and
severally, on an unsecured basis, by VENA and its wholly-owned subsidiaries and Viméxico and its
wholly-owned subsidiaries.The following Vitro subsidiaries are designated as guarantors as of December 31, 2007; Viméxico,
VENA, Vitro Corporativo, S.A. de C.V., Vitro Envases Holding, S.A. de C.V., Taller de Colección
Vitro, S.A. de C.V., Servicios Corporativos de Edificaciones, S.A. de C.V, Vidriera Monterrey, S.A.
de C.V., Vidriera Los Reyes, S.A. de C.V., Vidriera Guadalajara, S.A. de C.V., Vidriera Querétaro,
S.A. de C.V., Vitro Cosmos, S.A. de C.V., Vidriera Toluca, S.A. de C.V., Compañía Vidriera, S.A. de
C.V., Fabricación de Máquinas, S.A. de C.V., Servicios Integrales de Acabados, S.A. de
C.V., Inmobiliaria Loma del Toro, S.A. de C.V., Industria del Alcali, S.A. de C.V.,
Comercializadora Alcali, S. de R.L. de C.V., Vidrio Lux, S.A., Vitro Packaging, Inc., Vitro
Europa, Ltd., American Asset Holdings, Corp., Crisa Holding Corp., Troper Inc., Troper Services,
Inc., Amsilco Holdings, Inc., BBO Holdings, Inc., Crisa Corp., Vitro Automotriz, S.A. de
C.V., Vitro Flex, S.A. de C.V, Distribuidora Nacional de Vidrio, S.A. de C.V., Vitro Vidrio y
Cristal, S.A. de C.V., Vitro Flotado Cubiertas, S.A. de C.V., Distribuidor Vidriero Lan, S.A. de
C.V., Vitrocar, S.A. de C.V., Cristales Inastillables de México, S.A. de C.V., Vidrio Plano de
México, S.A. de C.V., VVP Holdings Corp., VVP Autoglass, Inc., Vitro America, Inc., Super Sky
Products, Inc., Super Sky International, Inc., VVP Finance Corp., Super Sky Constructors, Inc.,
Vitro Colombia, S.A., VVP Europa Holdings, B.V., Vitro do Brasil Industria e Comercio, Ltda., Vitro
Chemicals, Fibers and Mining, Inc., Vitro Global, Ltd, Servicios y Operaciones Financieras Vitro,
S.A. de C.V., Vidrio y Cristal del Noroeste, S.A de C.V., Vidrio Plano, S.A. de C.V., Distribuidora
de Vidrio y Cristal, S.A. de C.V., and Vidrio Plano de Mexicali, S.A. de C.V.The following condensed consolidating financial information includes separate columnar information
for:
 
    
    Vitro (the parent company issuer),
    
    Vitros combined wholly-owned guarantors,
    
    Consolidated information for Viméxico and its subsidiaries (Viméxico and its
wholly-owned guarantor and non-guarantor subsidiaries  the guarantor and non-guarantor
financial information for Viméxico and its subsidiaries is included in note 22 of
Viméxicos consolidated financial statements),
    
    Vitros combined non-guarantors (combined amounts of Vitros non-guarantor subsidiaries
not already included in the consolidated Viméxico column), and
 Investments in subsidiaries are accounted for by Vitro under the equity method for purpose of the
supplemental consolidating information. The principal elimination entries eliminate the parent
companys investment in subsidiaries and intercompany balances and transactions.
  F-68




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##### Table of Contents



a)
    
    Supplemental condensed consolidating balance sheets presented in accordance with Mexican FRS:
 Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    and
    
    
    VitroAs of December 31, 2006
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash, trade receivables and other current assets
    
    Ps.
    2,046
    
    
    Ps.
    2,941
    
    
    Ps.
    1,090
    
    
    Ps.
    4,189
    
    
    Ps.
    (6,296
    )
    
    Ps.
    3,970Retained undivided interests in securitized
receivables
    
    
    
    
    
    
    530
    
    
    
    693
    
    
    
    
    
    
    
    
    
    
    
    1,223Inventories, net
    
    
    
    
    
    
    1,578
    
    
    
    2,049
    
    
    
    355
    
    
    
    
    
    
    
    3,982Current assets
    
    
    2,046
    
    
    
    5,049
    
    
    
    3,832
    
    
    
    4,544
    
    
    
    (6,296
    )
    
    
    9,175Investments in subsidiaries
    
    
    11,427
    
    
    
    1,809
    
    
    
    
    
    
    
    
    
    
    
    (13,236
    )
    
    
    Property, plant and equipment, net
    
    
    1,908
    
    
    
    7,145
    
    
    
    5,758
    
    
    
    1,501
    
    
    
    11
    
    
    
    16,323Deferred taxes
    
    
    
    
    
    
    1,037
    
    
    
    477
    
    
    
    167
    
    
    
    (794
    )
    
    
    887Other assets
    
    
    904
    
    
    
    1,068
    
    
    
    1,079
    
    
    
    53
    
    
    
    (794
    )
    
    
    2,310Long-term assets
    
    
    14,239
    
    
    
    11,059
    
    
    
    7,314
    
    
    
    1,721
    
    
    
    (14,813
    )
    
    
    19,520Total assets
    
    Ps.
    16,285
    
    
    Ps.
    16,108
    
    
    Ps.
    11,146
    
    
    Ps.
    6,265
    
    
    Ps.
    (21,109
    )
    
    Ps.
    28,695Short-term borrowings
    
    Ps.
    
    
    
    Ps.
    
    
    
    Ps.
    263
    
    
    Ps.
    122
    
    
    Ps.
    
    
    
    Ps.
    385Trade payables
    
    
    
    
    
    
    1,148
    
    
    
    977
    
    
    
    121
    
    
    
    (49
    )
    
    
    2,197Tax liabilities
    
    
    4,402
    
    
    
    298
    
    
    
    343
    
    
    
    
    
    
    
    (5,043
    )
    
    
    Accrued expenses and other current liabilities
    
    
    292
    
    
    
    2,968
    
    
    
    2,734
    
    
    
    1,936
    
    
    
    (5,677
    )
    
    
    2,253Current liabilities
    
    
    4,694
    
    
    
    4,414
    
    
    
    4,317
    
    
    
    2,179
    
    
    
    (10,769
    )
    
    
    4,835Long-term debt
    
    
    3,484
    
    
    
    6,456
    
    
    
    416
    
    
    
    2,085
    
    
    
    
    
    
    
    12,441Employee retirement obligations and other
long-term liabilities
    
    
    633
    
    
    
    1,425
    
    
    
    459
    
    
    
    377
    
    
    
    (841
    )
    
    
    2,053Long-term liabilities
    
    
    4,117
    
    
    
    7,881
    
    
    
    875
    
    
    
    2,462
    
    
    
    (841
    )
    
    
    14,494Total liabilities
    
    
    8,811
    
    
    
    12,295
    
    
    
    5,192
    
    
    
    4,641
    
    
    
    (11,610
    )
    
    
    19,329Total majority interest
    
    
    7,474
    
    
    
    3,813
    
    
    
    4,516
    
    
    
    1,624
    
    
    
    (9,953
    )
    
    
    7,474Minority interest in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    1,438
    
    
    
    
    
    
    
    454
    
    
    
    1,892Total stockholders equity
    
    
    7,474
    
    
    
    3,813
    
    
    
    5,954
    
    
    
    1,624
    
    
    
    (9,499
    )
    
    
    9,366Total liabilities and stockholders equity
    
    Ps.
    16,285
    
    
    Ps.
    16,108
    
    
    Ps.
    11,146
    
    
    Ps.
    6,265
    
    
    Ps.
    (21,109
    )
    
    Ps.
    28,695
  F-69




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##### Table of Contents



Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    and
    
    
    VitroAs of December 31, 2007
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash, trade receivables and other
current assets
    
    Ps.
    6,227
    
    
    Ps.
    5,962
    
    
    Ps.
    1,302
    
    
    Ps.
    921
    
    
    Ps.
    (8,364
    )
    
    Ps.
    6,048Retained undivided interests in
securitized
receivables
    
    
    
    
    
    
    312
    
    
    
    656
    
    
    
    
    
    
    
    
    
    
    
    968Inventories, net
    
    
    
    
    
    
    1,824
    
    
    
    2,000
    
    
    
    296
    
    
    
    
    
    
    
    4,120Current assets
    
    
    6,227
    
    
    
    8,098
    
    
    
    3,958
    
    
    
    1,217
    
    
    
    (8,364
    )
    
    
    11,136Investments in subsidiaries
    
    
    11,269
    
    
    
    1,678
    
    
    
    
    
    
    
    
    
    
    
    (12,947
    )
    
    
    Property, plant and equipment, net
    
    
    2,198
    
    
    
    8,183
    
    
    
    5,777
    
    
    
    1,866
    
    
    
    (183
    )
    
    
    17,841Deferred taxes
    
    
    
    
    
    
    636
    
    
    
    570
    
    
    
    5
    
    
    
    (181
    )
    
    
    1,030Other assets
    
    
    9,538
    
    
    
    984
    
    
    
    1,363
    
    
    
    117
    
    
    
    (9,822
    )
    
    
    2,180Long-term assets
    
    
    23,005
    
    
    
    11,481
    
    
    
    7,710
    
    
    
    1,988
    
    
    
    (23,133
    )
    
    
    21,051Total assets
    
    Ps.
    29,232
    
    
    Ps.
    19,579
    
    
    Ps.
    11,668
    
    
    Ps.
    3,205
    
    
    Ps.
    (31,497
    )
    
    Ps.
    32,187Short-term borrowings
    
    Ps.
    131
    
    
    Ps.
    326
    
    
    Ps.
    281
    
    
    Ps.
    205
    
    
    Ps.
    
    
    
    Ps.
    943Trade payables
    
    
    
    
    
    
    1,148
    
    
    
    1,221
    
    
    
    176
    
    
    
    (83
    )
    
    
    2,462Tax liabilities
    
    
    4,905
    
    
    
    344
    
    
    
    391
    
    
    
    76
    
    
    
    (5,716
    )
    
    
    Accrued expenses and other
current liabilities
    
    
    2,946
    
    
    
    4,524
    
    
    
    2,993
    
    
    
    665
    
    
    
    (7,393
    )
    
    
    3,735Current liabilities
    
    
    7,982
    
    
    
    6,342
    
    
    
    4,886
    
    
    
    1,122
    
    
    
    (13,192
    )
    
    
    7,140Long-term debt
    
    
    13,313
    
    
    
    
    
    
    
    127
    
    
    
    535
    
    
    
    
    
    
    
    13,975Employee retirement obligations
and other long-term liabilities
    
    
    511
    
    
    
    9,138
    
    
    
    608
    
    
    
    283
    
    
    
    (8,854
    )
    
    
    1,686Long-term liabilities
    
    
    13,824
    
    
    
    9,138
    
    
    
    735
    
    
    
    818
    
    
    
    (8,854
    )
    
    
    15,661Total liabilities
    
    
    21,806
    
    
    
    15,480
    
    
    
    5,621
    
    
    
    1,940
    
    
    
    (22,046
    )
    
    
    22,801Total majority interest
    
    
    7,426
    
    
    
    4,099
    
    
    
    4,453
    
    
    
    1,265
    
    
    
    (9,817
    )
    
    
    7,426Minority interest in consolidated
subsidiaries
    
    
    
    
    
    
    
    
    
    
    1,594
    
    
    
    
    
    
    
    366
    
    
    
    1,960Total stockholders equity
    
    
    7,426
    
    
    
    4,099
    
    
    
    6,047
    
    
    
    1,265
    
    
    
    (9,451
    )
    
    
    9,386Total liabilities and
stockholders equity
    
    Ps.
    29,232
    
    
    Ps.
    19,579
    
    
    Ps.
    11,668
    
    
    Ps.
    3,205
    
    
    Ps.
    (31,497
    )
    
    Ps.
    32,187
  F-70




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##### Table of Contents



b)
    
    Supplemental condensed consolidating statements of operations presented in accordance with
Mexican FRS:
 Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    And
    
    
    VitroFor the year ended December 31, 2005
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    eliminations
    
    
    ConsolidatedNet sales and equity in earnings of subsidiaries
    
    Ps.
    265
    
    
    Ps.
    11,921
    
    
    Ps.
    13,704
    
    
    Ps.
    1,891
    
    
    Ps.
    (1,214
    )
    
    Ps.
    26,567Cost of sales
    
    
    
    
    
    
    8,420
    
    
    
    9,962
    
    
    
    1,100
    
    
    
    (284
    )
    
    
    19,198Selling, general and administrative expenses
    
    
    89
    
    
    
    2,238
    
    
    
    3,228
    
    
    
    785
    
    
    
    (810
    )
    
    
    5,530Total financing cost
    
    
    471
    
    
    
    656
    
    
    
    383
    
    
    
    10
    
    
    
    (20
    )
    
    
    1,500Other (income) expenses, net
    
    
    (378
    )
    
    
    357
    
    
    
    451
    
    
    
    (47
    )
    
    
    111
    
    
    
    494Income tax expense (benefit)
    
    
    23
    
    
    
    (51
    )
    
    
    (749
    )
    
    
    159
    
    
    
    99
    
    
    
    (519
    )Net income (loss) from continuing operations
before change in accounting principle
    
    
    60
    
    
    
    301
    
    
    
    429
    
    
    
    (116
    )
    
    
    (310
    )
    
    
    364Income from discontinued operations
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    (3
    )
    
    
    3Cumulative effect of change in accounting
principle, net of tax
    
    
    
    
    
    
    (94
    )
    
    
    (132
    )
    
    
    
    
    
    
    102
    
    
    
    (124
    )Net income (loss) for the year
    
    
    63
    
    
    
    207
    
    
    
    297
    
    
    
    (113
    )
    
    
    (211
    )
    
    
    243Net minority income (loss)
    
    
    
    
    
    
    
    
    
    
    185
    
    
    
    
    
    
    
    (5
    )
    
    
    180Net majority income (loss)
    
    Ps.
    63
    
    
    Ps.
    207
    
    
    Ps.
    112
    
    
    Ps.
    (113
    )
    
    Ps.
    (20
    6)
    
    Ps.
    63
 Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    And
    
    
    VitroFor the year ended December 31, 2006
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales and equity in earnings of subsidiaries
    
    Ps.
    566
    
    
    Ps.
    12,923
    
    
    Ps.
    13,462
    
    
    Ps.
    2,255
    
    
    Ps.
    (1,330
    )
    
    Ps.
    27,876Cost of sales
    
    
    
    
    
    
    8,979
    
    
    
    9,959
    
    
    
    1,313
    
    
    
    (21
    )
    
    
    20,230Selling, general and administrative expenses
    
    
    87
    
    
    
    2,315
    
    
    
    3,085
    
    
    
    871
    
    
    
    (829
    )
    
    
    5,529Total financing cost
    
    
    374
    
    
    
    1,242
    
    
    
    631
    
    
    
    49
    
    
    
    (20
    )
    
    
    2,276Other expenses (income), net
    
    
    3
    
    
    
    13
    
    
    
    450
    
    
    
    114
    
    
    
    (809
    )
    
    
    (229
    )Income tax expense (benefit)
    
    
    150
    
    
    
    212
    
    
    
    (77
    )
    
    
    46
    
    
    
    (103
    )
    
    
    228Net (loss) income from continuing operations
    
    
    (48
    )
    
    
    162
    
    
    
    (586
    )
    
    
    (138
    )
    
    
    452
    
    
    
    (158
    )Income (loss) from discontinued operations
    
    
    449
    
    
    
    
    
    
    
    
    
    
    
    (31
    )
    
    
    31
    
    
    
    449Net income (loss) for the year
    
    
    401
    
    
    
    162
    
    
    
    (586
    )
    
    
    (169
    )
    
    
    483
    
    
    
    291Net minority income (loss)
    
    
    
    
    
    
    
    
    
    
    188
    
    
    
    
    
    
    
    (298
    )
    
    
    (110
    )Net majority income (loss)
    
    Ps.
    401
    
    
    Ps.
    162
    
    
    Ps.
    (774
    )
    
    Ps.
    (169
    )
    
    Ps.
    781
    
    
    Ps.
    401
  F-71




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##### Table of Contents



Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    And
    
    
    VitroFor the year ended December 31, 2007
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales and equity in earnings of subsidiaries
    
    Ps.
    775
    
    
    Ps.
    13,487
    
    
    Ps.
    13,605
    
    
    Ps.
    2,511
    
    
    Ps.
    (1,787
    )
    
    Ps.
    28,591Cost of sales
    
    
    
    
    
    
    9,255
    
    
    
    9,578
    
    
    
    1,556
    
    
    
    (202
    )
    
    
    20,187Selling, general and administrative expenses
    
    
    100
    
    
    
    2,360
    
    
    
    3,245
    
    
    
    859
    
    
    
    (864
    )
    
    
    5,700Total financing cost
    
    
    803
    
    
    
    797
    
    
    
    443
    
    
    
    66
    
    
    
    (449
    )
    
    
    1,660Other (income) expenses, net
    
    
    (2
    )
    
    
    544
    
    
    
    91
    
    
    
    56
    
    
    
    180
    
    
    
    869Income tax (benefit) expense
    
    
    (113
    )
    
    
    360
    
    
    
    152
    
    
    
    36
    
    
    
    (391
    )
    
    
    44Net (loss) income for the year
    
    
    (13
    )
    
    
    171
    
    
    
    96
    
    
    
    (62
    )
    
    
    (61
    )
    
    
    131Net minority income (loss)
    
    
    
    
    
    
    
    
    
    
    182
    
    
    
    
    
    
    
    (38
    )
    
    
    144Net majority (loss) income
    
    Ps.
    (13
    )
    
    Ps.
    171
    
    
    Ps.
    (86
    )
    
    Ps.
    (62
    )
    
    Ps.
    (23
    )
    
    Ps.
    (13
    )
  F-72




---



##### Table of Contents



c)
    
    Supplemental condensed consolidating statements of changes in financial position presented in
accordance with Mexican FRS:
 Wholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    And
    
    
    VitroFor the year ended December 31, 2005
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net income (loss) from continuing operations
    
    Ps.
    60
    
    
    Ps.
    301
    
    
    Ps.
    429
    
    
    Ps.
    (116
    )
    
    Ps.
    (310
    )
    
    Ps.
    364Depreciation and amortization
    
    
    6
    
    
    
    1,071
    
    
    
    668
    
    
    
    109
    
    
    
    
    
    
    
    1,854Provision for employee retirement obligations
    
    
    
    
    
    
    268
    
    
    
    83
    
    
    
    15
    
    
    
    
    
    
    
    366Amortization of debt issuance costs
    
    
    98
    
    
    
    100
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    219Write-off and loss from sale of assets
    
    
    
    
    
    
    197
    
    
    
    220
    
    
    
    1
    
    
    
    (27
    )
    
    
    391Others non-cash charges
    
    
    277
    
    
    
    (859
    )
    
    
    (1,068
    )
    
    
    106
    
    
    
    350
    
    
    
    (1,194
    )Decrease (increase) in inventories
    
    
    
    
    
    
    61
    
    
    
    (266
    )
    
    
    13
    
    
    
    23
    
    
    
    (169
    )Changes in other current assets and liabilities
    
    
    (221
    )
    
    
    498
    
    
    
    671
    
    
    
    52
    
    
    
    (435
    )
    
    
    565Employee retirement obligations
    
    
    
    
    
    
    (247
    )
    
    
    (58
    )
    
    
    (6
    )
    
    
    
    
    
    
    (311
    )Net resources generated by (used in)
operating activities
    
    
    220
    
    
    
    1,390
    
    
    
    700
    
    
    
    174
    
    
    
    (399
    )
    
    
    2,085Financing Activities:Bank loans, net
    
    
    (2,057
    )
    
    
    1,045
    
    
    
    (646
    )
    
    
    (296
    )
    
    
    142
    
    
    
    (1,812
    )Other financing activities
    
    
    2,550
    
    
    
    (973
    )
    
    
    625
    
    
    
    (319
    )
    
    
    (2,382
    )
    
    
    (499
    )Net resources generated by (used in)
financing activities
    
    
    493
    
    
    
    72
    
    
    
    (21
    )
    
    
    (615
    )
    
    
    (2,240
    )
    
    
    (2,311
    )Investing Activities:Investments in land, buildings, machinery
and equipment
    
    
    
    
    
    
    (550
    )
    
    
    (468
    )
    
    
    (98
    )
    
    
    9
    
    
    
    (1,107
    )Proceeds from sale of land, machinery
and equipment
    
    
    
    
    
    
    1
    
    
    
    31
    
    
    
    9
    
    
    
    (10
    )
    
    
    31Restricted cash
    
    
    
    
    
    
    (122
    )
    
    
    1
    
    
    
    122
    
    
    
    
    
    
    
    1Investments in subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from sale of subsidiaries
and associated companies
    
    
    169
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    170Other investing activities
    
    
    (2,734
    )
    
    
    (152
    )
    
    
    (100
    )
    
    
    359
    
    
    
    2,360
    
    
    
    (267
    )Net resources (used in) generated by
investing activities
    
    
    (2,565
    )
    
    
    (823
    )
    
    
    (536
    )
    
    
    392
    
    
    
    2,360
    
    
    
    (1,172
    )Net (decrease) increase in cash and
cash equivalents
    
    
    (1,852
    )
    
    
    639
    
    
    
    143
    
    
    
    (49
    )
    
    
    (279
    )
    
    
    (1,398
    )Balance at beginning of year
    
    
    1,854
    
    
    
    329
    
    
    
    180
    
    
    
    196
    
    
    
    279
    
    
    
    2,838Balance at end of year
    
    Ps.
    2
    
    
    Ps.
    968
    
    
    Ps.
    323
    
    
    Ps.
    147
    
    
    Ps.
    -
    
    
    Ps.
    1,440
  F-73




---



##### Table of Contents



Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    And
    
    
    VitroFor the year ended December 31, 2006
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net income (loss) from continuing operations
    
    Ps.
    (48
    )
    
    Ps.
    162
    
    
    Ps.
    (586
    )
    
    Ps.
    (138
    )
    
    Ps.
    452
    
    
    Ps.
    (158
    )Depreciation and amortization
    
    
    11
    
    
    
    1,049
    
    
    
    598
    
    
    
    137
    
    
    
    
    
    
    
    1,795Provision for employee retirement obligations
    
    
    
    
    
    
    279
    
    
    
    138
    
    
    
    3
    
    
    
    
    
    
    
    427Amortization of debt issuance costs
    
    
    77
    
    
    
    84
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    198Write-off and loss from sale of assets
    
    
    (882
    )
    
    
    (56
    )
    
    
    465
    
    
    
    58
    
    
    
    13
    
    
    
    (402
    )Other non-cash charges
    
    
    (833
    )
    
    
    (1,408
    )
    
    
    (384
    )
    
    
    3
    
    
    
    2,494
    
    
    
    (128
    )(Increase) decrease in inventories
    
    
    
    
    
    
    (165
    )
    
    
    451
    
    
    
    (73
    )
    
    
    10
    
    
    
    223Changes in other current assets and liabilities
    
    
    2,284
    
    
    
    (393
    )
    
    
    (815
    )
    
    
    (77
    )
    
    
    (1,284
    )
    
    
    (285
    )Employee retirement obligations
    
    
    
    
    
    
    (406
    )
    
    
    (188
    )
    
    
    (2
    )
    
    
    7
    
    
    
    (589
    )Net resources generated by (used in)
operating activities
    
    
    609
    
    
    
    (847
    )
    
    
    (284
    )
    
    
    (89
    )
    
    
    1,692
    
    
    
    1,081Financing Activities:Banks loans, net
    
    
    (1,506
    )
    
    
    358
    
    
    
    (2,214
    )
    
    
    202
    
    
    
    26
    
    
    
    (3,134
    )Issuance of capital stock
    
    
    578
    
    
    
    
    
    
    
    1,526
    
    
    
    
    
    
    
    (1,526
    )
    
    
    578Other financing activities
    
    
    (26
    )
    
    
    5
    
    
    
    469
    
    
    
    438
    
    
    
    (946
    )
    
    
    (60
    )Net resources (used in) generated by
financing activities
    
    
    (954
    )
    
    
    363
    
    
    
    (219
    )
    
    
    640
    
    
    
    (2,446
    )
    
    
    (2,616
    )Investing Activities:Investments in land, buildings, machinery
and equipment
    
    
    (507
    )
    
    
    (848
    )
    
    
    (330
    )
    
    
    (116
    )
    
    
    549
    
    
    
    (1,252
    )Proceeds from sale of land, machinery
and equipment
    
    
    1,404
    
    
    
    504
    
    
    
    339
    
    
    
    53
    
    
    
    (607
    )
    
    
    1,693Restricted cash
    
    
    
    
    
    
    35
    
    
    
    281
    
    
    
    103
    
    
    
    
    
    
    
    419Investments in subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (218
    )
    
    
    
    
    
    
    (218
    )Proceeds from sale of subsidiaries
and associated companies
    
    
    681
    
    
    
    65
    
    
    
    177
    
    
    
    
    
    
    
    291
    
    
    
    1,214Other investing activities
    
    
    (562
    )
    
    
    (5
    )
    
    
    (117
    )
    
    
    (376
    )
    
    
    521
    
    
    
    (539
    )Net resources generated by (used in)
investing activities
    
    
    1,016
    
    
    
    (249
    )
    
    
    350
    
    
    
    (554
    )
    
    
    754
    
    
    
    1,317Net increase (decrease) in cash and
cash equivalents
    
    
    671
    
    
    
    (733
    )
    
    
    (153
    )
    
    
    (3
    )
    
    
    
    
    
    
    (218
    )Balance at beginning of year
    
    
    2
    
    
    
    968
    
    
    
    323
    
    
    
    147
    
    
    
    
    
    
    
    1,440Balance at end of year
    
    Ps.
    673
    
    
    Ps.
    235
    
    
    Ps.
    170
    
    
    Ps.
    144
    
    
    Ps.
    
    
    
    Ps.
    1,222
  F-74




---



##### Table of Contents



ConsolidatedCombined
    
    
    Viméxico
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    and
    
    
    Non-
    
    
    And
    
    
    VitroFor the year ended December 31, 2007
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net (loss) income
    
    Ps.
    (13
    )
    
    Ps.
    171
    
    
    Ps.
    96
    
    
    Ps.
    (62
    )
    
    Ps.
    (61
    )
    
    Ps.
    131Depreciation and amortization
    
    
    15
    
    
    
    771
    
    
    
    480
    
    
    
    148
    
    
    
    
    
    
    
    1,414Provision for employee retirement obligations
    
    
    0
    
    
    
    176
    
    
    
    57
    
    
    
    28
    
    
    
    
    
    
    
    261Amortization of debt issuance costs
    
    
    24
    
    
    
    142
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    170Impairment of long-lived assets
    
    
    
    
    
    
    
    
    
    
    91
    
    
    
    31
    
    
    
    
    
    
    
    122Loss (gain) from sale of long-lived assets
    
    
    
    
    
    
    (89
    )
    
    
    (55
    )
    
    
    
    
    
    
    191
    
    
    
    47Derivative financial instruments
    
    
    87
    
    
    
    100
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    216Deferred taxes
    
    
    (113
    )
    
    
    (183
    )
    
    
    (104
    )
    
    
    3
    
    
    
    47
    
    
    
    (351
    )Other non-cash charges
    
    
    296
    
    
    
    22
    
    
    
    20
    
    
    
    
    
    
    
    (230
    )
    
    
    108(Increase) decrease in trade receivables
    
    
    
    
    
    
    171
    
    
    
    (194
    )
    
    
    (39
    )
    
    
    (145
    )
    
    
    (207
    )(Increase) decrease in inventories
    
    
    
    
    
    
    (334
    )
    
    
    (19
    )
    
    
    42
    
    
    
    3
    
    
    
    (308
    )Increase (decrease) in trade payables
    
    
    
    
    
    
    
    
    
    
    223
    
    
    
    55
    
    
    
    (35
    )
    
    
    243Changes in other current assets and liabilities
    
    
    741
    
    
    
    (462
    )
    
    
    105
    
    
    
    (32
    )
    
    
    77
    
    
    
    429Employee retirement obligations
    
    
    
    
    
    
    (351
    )
    
    
    (101
    )
    
    
    (20
    )
    
    
    
    
    
    
    (472
    )Net resources generated by (used in) operating
activities
    
    
    1,037
    
    
    
    134
    
    
    
    632
    
    
    
    154
    
    
    
    (154
    )
    
    
    1,803Financing Activities:Banks loans, net
    
    
    9,959
    
    
    
    (7,839
    )
    
    
    (270
    )
    
    
    243
    
    
    
    (22
    )
    
    
    2,071Debt issuance cost
    
    
    (76
    )
    
    
    (208
    )
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    (293
    )Dividends paid
    
    
    (136
    )
    
    
    
    
    
    
    (51
    )
    
    
    (101
    )
    
    
    73
    
    
    
    (215
    )Other financing activities
    
    
    (10,266
    )
    
    
    7,939
    
    
    
    261
    
    
    
    134
    
    
    
    2,418
    
    
    
    486Net resources (used in) generated by financing
activities
    
    
    (519
    )
    
    
    (108
    )
    
    
    (69
    )
    
    
    276
    
    
    
    2,469
    
    
    
    2,049Investing Activities:Investments in land, buildings, machinery and equipment
    
    
    (306
    )
    
    
    (1,919
    )
    
    
    (324
    )
    
    
    (445
    )
    
    
    299
    
    
    
    (2,695
    )Proceeds from sale of land, machinery and equipment
    
    
    
    
    
    
    239
    
    
    
    131
    
    
    
    1
    
    
    
    (299
    )
    
    
    72Restricted cash
    
    
    
    
    
    
    (322
    )
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    (331
    )Investments in subsidiaries
    
    
    (144
    )
    
    
    
    
    
    
    (181
    )
    
    
    
    
    
    
    144
    
    
    
    (181
    )Proceeds from sale of subsidiaries and associated
companies
    
    
    12
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37Other long-term assets
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    (85
    )
    
    
    (36
    )Deferred charges
    
    
    
    
    
    
    (80
    )
    
    
    (206
    )
    
    
    (16
    )
    
    
    1
    
    
    
    (302
    )Other investing activities
    
    
    
    
    
    
    2,336
    
    
    
    
    
    
    
    38
    
    
    
    (2,374
    )Net resources (used in) generated by investing
activities
    
    
    (438
    )
    
    
    279
    
    
    
    (540
    )
    
    
    (422
    )
    
    
    (2,315
    )
    
    
    (3,436
    )Net increase in cash and cash equivalents
    
    
    80
    
    
    
    305
    
    
    
    23
    
    
    
    8
    
    
    
    
    
    
    
    416Balance at beginning of year
    
    
    673
    
    
    
    235
    
    
    
    170
    
    
    
    144
    
    
    
    
    
    
    
    1,222Balance at end of year
    
    Ps.
    753
    
    
    Ps.
    540
    
    
    Ps.
    193
    
    
    Ps.
    152
    
    
    Ps.
    
    
    
    Ps.
    1,638
  F-75




---



##### Table of Contents



d)
    
    Supplemental condensed consolidating financial information reconciled from Mexican FRS to U.S.
GAAP:
 As disclosed in note 24, the Companys reconciliation from Mexican FRS to U.S. GAAP does not
eliminate the effects of inflation as it represents a comprehensive measure of the effects of price
level changes in the inflationary Mexican economy and, as such, is considered a more meaningful
presentation than historical cost-based financial reporting for both Mexican and U.S. accounting
purposes.The other differences between Mexican FRS and U.S. GAAP and the effects on consolidated net income
(loss) and consolidated stockholders equity as it relates to the Companys guarantor and
non-guarantor subsidiaries are presented below (see note 24 for a description of such differences):
 Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    and
    
    
    VitroFor the year ended December 31, 2005
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet income (loss) of majority interest as
reported under Mexican FRS
    
    Ps.
    63
    
    
    Ps.
    207
    
    
    Ps.
    112
    
    
    Ps.
    (113
    )
    
    Ps.
    (206
    )
    
    Ps.
    63U.S. GAAP adjustments:Effect of the adjustments below on minority
interest (see note 24 a)
    
    
    
    
    
    
    (2
    )
    
    
    2
    
    
    
    
    
    
    
    (61
    )
    
    
    (61
    )Deferred income taxes (see note 24 b)
    
    
    81
    
    
    
    (130
    )
    
    
    (387
    )
    
    
    
    
    
    
    
    
    
    
    (436
    )Negative goodwill and reduction in depreciation
expense (see note 24 c)
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112Deferred workers profit sharing
(see note 24 d)
    
    
    
    
    
    
    59
    
    
    
    (16
    )
    
    
    
    
    
    
    
    
    
    
    43Monetary position result on deferred income
taxes and deferred workers profit sharing (see note 24 e)
    
    
    
    
    
    
    29
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    27Capitalization of interest (see note 24 f)
    
    
    
    
    
    
    38
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    56Amortization of capitalized interest
(see note 24 f)
    
    
    
    
    
    
    (22
    )
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    (28
    )Effect of applying Bulletin B-10
(see note 24 h)
    
    
    
    
    
    
    (114
    )
    
    
    (70
    )
    
    
    
    
    
    
    
    
    
    
    (184
    )Effect of applying Bulletin B-15 (see note 24 i)
    
    
    (8
    )
    
    
    21
    
    
    
    (7
    )
    
    
    
    
    
    
    (18
    )
    
    
    (12
    )Derivative financial instruments
(see note 24 j)
    
    
    (145
    )
    
    
    136
    
    
    
    188
    
    
    
    
    
    
    
    
    
    
    
    179Discontinued operations (see note 24 k)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Employee retirement obligations
(see note 24 m)
    
    
    
    
    
    
    31
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    39Impairment of long-lived assets
(see note 24 p)
    
    
    (149
    )
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    (84
    )Investment in subsidiaries
    
    
    (241
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    241
    
    
    
    Total U.S. GAAP adjustments
    
    
    (350
    )
    
    
    46
    
    
    
    (207
    )
    
    
    (1
    )
    
    
    162
    
    
    
    (350
    )Net (loss) income under U.S. GAAP
    
    Ps.
    (287
    )
    
    Ps.
    253
    
    
    Ps.
    (95
    )
    
    Ps.
    (114
    )
    
    Ps.
    (44
    )
    
    Ps.
    (287
    )
  F-76




---



##### Table of Contents



Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    and
    
    
    VitroFor the year ended December 31, 2006
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet income (loss) of majority interest as reported
under Mexican FRS
    
    Ps.
    401
    
    
    Ps.
    162
    
    
    Ps.
    (774
    )
    
    Ps.
    (169
    )
    
    Ps.
    781
    
    
    Ps.
    401U.S. GAAP adjustments:Effect of the adjustments below on minority
interest (see note 24 a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    26Deferred income taxes (see note 24 b)
    
    
    233
    
    
    
    (137
    )
    
    
    (182
    )
    
    
    
    
    
    
    140
    
    
    
    54Negative goodwill and reduction in depreciation
expense (see note 24 c)
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30Deferred workers profit sharing (see note 24 d)
    
    
    
    
    
    
    (36
    )
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    (51
    )Monetary position result on deferred income taxes
and deferred workers profit sharing (see note 24 e)
    
    
    (2
    )
    
    
    33
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    44Capitalization of interest (see note 24 f)
    
    
    
    
    
    
    63
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    72Amortization of capitalized interest (see note 24 f)
    
    
    
    
    
    
    (28
    )
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    (36
    )Effect of applying Bulletin B-10 (see note 24 h)
    
    
    
    
    
    
    (119
    )
    
    
    (68
    )
    
    
    
    
    
    
    
    
    
    
    (187
    )Effect of applying Bulletin B-15 (see note 24 i)
    
    
    1
    
    
    
    17
    
    
    
    4
    
    
    
    
    
    
    
    12
    
    
    
    34Discontinued operations (see note 24 k)
    
    
    (57
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57
    )Employee retirement obligations (see note 24 m)
    
    
    
    
    
    
    20
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    31Purchase of
Visteons capital investment (see note
24 n)
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1Sale of real estate (see 24 o)
    
    
    (815
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (815
    )Impairment of long-lived assets (See note 24 p)
    
    
    
    
    
    
    
    
    
    
    379
    
    
    
    
    
    
    
    
    
    
    
    379Investment in subsidiaries
    
    
    135
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (135
    )
    
    
    Total U.S. GAAP adjustments
    
    
    (475
    )
    
    
    (187
    )
    
    
    144
    
    
    
    
    
    
    
    43
    
    
    
    (475
    )Net (loss) income under U.S. GAAP
    
    Ps.
    (74
    )
    
    Ps.
    (25
    )
    
    Ps.
    (630
    )
    
    Ps.
    (169
    )
    
    Ps.
    824
    
    
    Ps.
    (74
    )
  F-77




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##### Table of Contents



Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    and
    
    
    VitroFor the year ended December 31, 2007
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet (loss) income of majority interest as reported
under Mexican FRS
    
    Ps.
    (13
    )
    
    Ps.
    171
    
    
    Ps.
    (86
    )
    
    Ps.
    (62
    )
    
    Ps.
    (23
    )
    
    Ps.
    (13
    )U.S. GAAP adjustments:Effect of the adjustments below on minority
interest (see note 24 a)
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    21
    
    
    
    17Deferred income taxes (see note 24 b)
    
    
    (120
    )
    
    
    110
    
    
    
    (37
    )
    
    
    
    
    
    
    102
    
    
    
    55Monetary position result on deferred income
taxes and deferred workers profit sharing
(see note 24 e)
    
    
    (10
    )
    
    
    24
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    31Capitalization of interest (see note 24 f)
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16Amortization of capitalized interest (see note 24 f)
    
    
    
    
    
    
    (32
    )
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    (36
    )Effect of applying Bulletin B-10 (see note 24 h)
    
    
    
    
    
    
    (15
    )
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    (36
    )Discontinued operations (see note 24 k)
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26Employee retirement obligations (see note 24 m)
    
    
    
    
    
    
    (8
    )
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    (15
    )Purchase of Visteons capital investment
(see note 24 n)
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5Sale of real state (see note 24 o)
    
    
    429
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    429Impairment of long-lived assets (see note 24 p)
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    (10
    )Investment in subsidiaries
    
    
    157
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (157
    )Total U.S. GAAP adjustments
    
    
    482
    
    
    
    95
    
    
    
    (54
    )
    
    
    
    
    
    
    36
    
    
    
    482Net income (loss) under U.S. GAAP
    
    Ps.
    469
    
    
    Ps.
    266
    
    
    Ps.
    (140
    )
    
    Ps.
    (62
    )
    
    Ps.
    13
    
    
    Ps.
    469
  F-78




---



##### Table of Contents



Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    and
    
    
    VitroAs of December 31, 2006
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedTotal stockholders equity reported under
Mexican FRS
    
    Ps.
    7,474
    
    
    Ps.
    3,813
    
    
    Ps.
    5,954
    
    
    Ps.
    1,624
    
    
    Ps.
    (9,499
    )
    
    Ps.
    9,366Less minority interest included as
stockholders equity under Mexican FRS (see
note 24 a)
    
    
    
    
    
    
    
    
    
    
    (1,438
    )
    
    
    
    
    
    
    (454
    )
    
    
    (1,892
    )Majority stockholders equity under Mexican FRS
    
    
    7,474
    
    
    
    3,813
    
    
    
    4,516
    
    
    
    1,624
    
    
    
    (9,953
    )
    
    
    7,474U.S. GAAP adjustments:Effect of the adjustments below on minority
interest (see note 24 a)
    
    
    
    
    
    
    
    
    
    
    (51
    )
    
    
    
    
    
    
    (12
    )
    
    
    (63
    )Deferred income taxes (see note 24 b)
    
    
    277
    
    
    
    (773
    )
    
    
    (510
    )
    
    
    5
    
    
    
    143
    
    
    
    (858
    )Capitalization of interest (see note 24 f)
    
    
    
    
    
    
    315
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    358Accumulated amortization of capitalized interest
(see note 24 f)
    
    
    
    
    
    
    (131
    )
    
    
    (19
    )
    
    
    
    
    
    
    1
    
    
    
    (149
    )Goodwill (see note 24 g)
    
    
    
    
    
    
    
    
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    124Effect of applying Bulletin B-10 (see note 24 h)
    
    
    
    
    
    
    (16
    )
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    4Effect of applying Bulletin B-15 (see note 24 i)
    
    
    (71
    )
    
    
    
    
    
    
    119
    
    
    
    
    
    
    
    (119
    )
    
    
    (71
    )Discontinued operations (see note 24 k)
    
    
    (26
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26
    )Effect of SFASB No. 158 (see note 24 m)
    
    
    
    
    
    
    (220
    )
    
    
    (131
    )
    
    
    (20
    )
    
    
    
    
    
    
    (371
    )Employee retirement obligations (see note 24 m)
    
    
    
    
    
    
    (57
    )
    
    
    (31
    )
    
    
    
    
    
    
    
    
    
    
    (88
    )Purchase of Visteons capital investment
(see note 24 n)
    
    
    
    
    
    
    
    
    
    
    (72
    )
    
    
    
    
    
    
    
    
    
    
    (72
    )Sale of real state (see note 24 o)
    
    
    (815
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (815
    )Impairment of long-lived assets (see note 24 p)
    
    
    (149
    )
    
    
    13
    
    
    
    399
    
    
    
    
    
    
    
    
    
    
    
    263Investment in subsidiaries
    
    
    (980
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    980
    
    
    
    Total U.S. GAAP adjustments
    
    
    (1,764
    )
    
    
    (869
    )
    
    
    (109
    )
    
    
    (15
    )
    
    
    993
    
    
    
    (1,764
    )Total stockholders equity under U.S. GAAP
    
    Ps.
    5,710
    
    
    Ps.
    2,944
    
    
    Ps.
    4,407
    
    
    Ps.
    1,609
    
    
    Ps.
    (8,960
    )
    
    Ps.
    5,710
  F-79




---



##### Table of Contents



Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    and
    
    
    VitroAs of December 31, 2007
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedTotal stockholders equity reported under
Mexican FRS
    
    Ps.
    7,426
    
    
    Ps.
    4,099
    
    
    Ps.
    6,047
    
    
    Ps.
    1,265
    
    
    Ps.
    (9,451
    )
    
    Ps.
    9,386Less minority interest included as stockholders
equity under Mexican FRS (see note 24 a)
    
    
    
    
    
    
    
    
    
    
    (1,594
    )
    
    
    
    
    
    
    (366
    )
    
    
    (1,960
    )Majority stockholders equity under Mexican FRS
    
    
    7,426
    
    
    
    4,099
    
    
    
    4,453
    
    
    
    1,265
    
    
    
    (9,817
    )
    
    
    7,426U.S. GAAP adjustments:Effect of the adjustments below on minority interest
(see note 24 a)
    
    
    
    
    
    
    
    
    
    
    (49
    )
    
    
    
    
    
    
    25
    
    
    
    (24
    )Deferred income taxes (see note 24 b)
    
    
    146
    
    
    
    (524
    )
    
    
    (541
    )
    
    
    6
    
    
    
    240
    
    
    
    (673
    )Capitalization of interest (see note 24 f)
    
    
    
    
    
    
    332
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    374Accumulated amortization of capitalized interest
(see note 24 f)
    
    
    
    
    
    
    (163
    )
    
    
    (22
    )
    
    
    
    
    
    
    
    
    
    
    (185
    )Goodwill (see note 24 g)
    
    
    
    
    
    
    
    
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    124Effect of applying Bulletin B-10(see note 24 h)
    
    
    
    
    
    
    21
    
    
    
    (18
    )
    
    
    
    
    
    
    
    
    
    
    3Effect of SFAS No. 158 (see note 24 m)
    
    
    
    
    
    
    (711
    )
    
    
    (163
    )
    
    
    (21
    )
    
    
    
    
    
    
    (895
    )Employee retirement obligations(see note 24 m)
    
    
    
    
    
    
    (61
    )
    
    
    (38
    )
    
    
    (1
    )
    
    
    
    
    
    
    (100
    )Purchase of Visteons capital investment (see note
24 n)
    
    
    
    
    
    
    
    
    
    
    (67
    )
    
    
    
    
    
    
    
    
    
    
    (67
    )Sale of real state (see note 24 o)
    
    
    (386
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (386
    )Impairment of long-lived assets(see note 24 p)
    
    
    (149
    )
    
    
    12
    
    
    
    390
    
    
    
    
    
    
    
    
    
    
    
    253Investment in subsidiaries
    
    
    (1,187
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,187Total U.S. GAAP adjustments
    
    
    (1,576
    )
    
    
    (1,094
    )
    
    
    (342
    )
    
    
    (16
    )
    
    
    1,452
    
    
    
    (1,576
    )Total stockholders equity under U.S. GAAP
    
    Ps.
    5,850
    
    
    Ps.
    3,005
    
    
    Ps.
    4,111
    
    
    Ps.
    1,249
    
    
    Ps.
    (8,365
    )
    
    Ps.
    5,850
  F-80




---



##### Table of Contents



e)
    
    Supplemental U.S. GAAP Cash Flow InformationThe classifications of cash flows under MFRS and U.S. GAAP are basically the same in respect of the
transactions presented under each caption. The nature of the differences between Mexican MFRS and
U.S. GAAP in the amounts reported is primarily due to (i) the elimination of inflationary effects
in the variations of monetary assets and liabilities arising from financing and investing
activities, against the corresponding monetary position result in operating activities, (ii) the
elimination of exchange rate fluctuations resulting from financing and investing activities,
against the corresponding unrealized foreign exchange gain or loss included in operating
activities, and (iii) the recognition in operating, financing and investing activities of the U.S.
GAAP adjustments.For the Guarantors, the following table summarizes the cash flow items as required under SFAS No.
95 provided by (used in) operating, financing and investing activities for the years ended December
31, 2005, 2006 and 2007, giving effect to the U.S. GAAP adjustments, excluding the effects of
inflation required by Bulletin B-10 and Bulletin B-15. The following information is presented, in
millions of pesos, on a historical peso basis and it is not presented in pesos of constant
purchasing power.
 Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    

Viméxico and
    
    
    Non-
    
    
    and
    
    
    VitroAs of December 31, 2005
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash (used in)
provided by operating
activities
    
    Ps.
    (21
    )
    
    Ps.
    995
    
    
    Ps.
    615
    
    
    Ps.
    (28
    )
    
    Ps.
    (628
    )
    
    Ps.
    933Net cash provided by
(used in) financing
activities
    
    
    678
    
    
    
    209
    
    
    
    33
    
    
    
    146
    
    
    
    (2,182
    )
    
    
    (1,116
    )Net cash (used in)
investing activities
    
    
    (2,317
    )
    
    
    (636
    )
    
    
    (525
    )
    
    
    (165
    )
    
    
    2,610
    
    
    
    (1,033
    )
 Net cash flow from operating activities reflects cash payments for interest and income taxes as follows:
 Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    and
    
    
    VitroAs of December 31, 2005
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedInterest paid
    
    Ps.
    787
    
    
    Ps.
    762
    
    
    Ps.
    535
    
    
    Ps.
    668
    
    
    Ps.
    (979
    )
    
    Ps.
    1,773Income taxes paid
    
    
    (34
    )
    
    
    162
    
    
    
    104
    
    
    
    58
    
    
    
    (44
    )
    
    
    246
 Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    and
    
    
    VitroAs of December 31, 2006
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by
(used in) operating
activities
    
    Ps.
    427
    
    
    Ps.
    (657
    )
    
    Ps.
    (293
    )
    
    Ps.
    (72
    )
    
    Ps.
    1,498
    
    
    Ps.
    903Net cash (used in)
provided by financing
activities
    
    
    (1,049
    )
    
    
    181
    
    
    
    (142
    )
    
    
    770
    
    
    
    (2,458
    )
    
    
    (2,698
    )Net cash provided by
(used in) investing
activities
    
    
    1,270
    
    
    
    (181
    )
    
    
    308
    
    
    
    (695
    )
    
    
    978
    
    
    
    1,680
  F-81




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##### Table of Contents



Net cash flow from operating activities reflects cash payments for interest and income taxes as follows:
 Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    and
    
    
    VitroAs of December 31, 2006
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedInterest paid
    
    Ps.
    549
    
    
    Ps.
    863
    
    
    Ps.
    658
    
    
    Ps.
    723
    
    
    Ps.
    (1,099
    )
    
    Ps.
    1,694Income taxes paid
    
    
    (1,847
    )
    
    
    1,675
    
    
    
    151
    
    
    
    29
    
    
    
    12
    
    
    
    20
 Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    and
    
    
    VitroAs of December 31, 2007
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by
(used in) operating
activities
    
    Ps.
    547
    
    
    Ps.
    629
    
    
    Ps.
    549
    
    
    Ps.
    (30
    )
    
    Ps.
    (312
    )
    
    Ps.
    1,383Net cash (used in)
provided by financing
activities
    
    
    (4
    )
    
    
    (879
    )
    
    
    (7
    )
    
    
    141
    
    
    
    2,711
    
    
    
    1,962Net cash (used in)
provided by investing
activities
    
    
    (438
    )
    
    
    582
    
    
    
    (505
    )
    
    
    (116
    )
    
    
    (2,401
    )
    
    
    (2,878
    )
 Net cash flow from operating activities reflects cash payments for interest and income taxes as follows:
 Combined
    
    
    Consolidated
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Viméxico and
    
    
    Non-
    
    
    and
    
    
    VitroAs of December 31, 2007
    
    Vitro
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedInterest paid
    
    Ps.
    914
    
    
    Ps.
    1,492
    
    
    Ps.
    373
    
    
    Ps.
    88
    
    
    Ps.
    (1,498
    )
    
    Ps.
    1,369Income taxes paid
    
    
    (581
    )
    
    
    834
    
    
    
    204
    
    
    
    10
    
    
    
    (26
    )
    
    
    441
  F-82




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
         
 
  F-83




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##### Table of Contents



Viméxico, S.A. de C.V. and Subsidiaries
 Consolidated Balance Sheets
As of December 31, 2006 and 2007
(Millions of constant Mexican pesos as of December 31, 2007)
 2006
    
    
    2007AssetsCash and cash equivalents
    
    Ps.
    170
    
    
    Ps.
    193Trade receivable, net
    
    
    438
    
    
    
    670Retained undivided interests in securitized receivables
    
    
    693
    
    
    
    656Recoverable taxes
    
    
    119
    
    
    
    8Other accounts receivable
    
    
    363
    
    
    
    431Inventories
    
    
    2,049
    
    
    
    2,000Current assets
    
    
    3,832
    
    
    
    3,958Land and buildings
    
    
    2,854
    
    
    
    2,658Machinery and equipment
    
    
    2,743
    
    
    
    2,943Construction in progress
    
    
    161
    
    
    
    176Goodwill
    
    
    776
    
    
    
    861Intangible employee retirement obligation asset
    
    
    56
    
    
    
    72Deferred taxes
    
    
    477
    
    
    
    570Other assets
    
    
    247
    
    
    
    430Long-term assets
    
    
    7,314
    
    
    
    7,710Total assets
    
    Ps.
    11,146
    
    
    Ps.
    11,668LiabilitiesShort-term borrowings
    
    Ps.
    203
    
    
    Ps.
    254Current maturities of long-term debt
    
    
    60
    
    
    
    27Trade payables
    
    
    977
    
    
    
    1,221Accrued expenses
    
    
    343
    
    
    
    391Derivative financial instruments
    
    
    25
    
    
    
    70Accounts and notes payables to affiliates
    
    
    2,258
    
    
    
    2,285Other accounts payable
    
    
    451
    
    
    
    638Current liabilities
    
    
    4,317
    
    
    
    4,886Long-term debt
    
    
    416
    
    
    
    127Long-term notes payables to affiliates
    
    
    
    
    
    
    294Employee retirement obligations
    
    
    138
    
    
    
    39Deferred tax liabilities
    
    
    89
    
    
    
    76Other liabilities
    
    
    232
    
    
    
    199Long-term liabilities
    
    
    875
    
    
    
    735Total liabilities
    
    
    5,192
    
    
    
    5,621Commitments and contingencies (Note 11)Stockholders equityCapital stock
    
    
    4,721
    
    
    
    4,721Shortfall in restatement of capital
    
    
    (2,493
    )
    
    
    (2,537
    )Cumulative initial effect of deferred taxes
    
    
    (1,644
    )
    
    
    (1,644
    )Minimum labor liability adjustment
    
    
    (96
    )
    
    
    (29
    )Retained earnings
    
    
    4,028
    
    
    
    3,942Total majority interest
    
    
    4,516
    
    
    
    4,453Minority interest in consolidated subsidiaries
    
    
    1,438
    
    
    
    1,594Total stockholders equity
    
    
    5,954
    
    
    
    6,047Total liabilities and stockholders equity
    
    Ps.
    11,146
    
    
    Ps.
    11,668
  Ing. Hugo A. Lara García 
Chief Executive Officer
    
    Ing. Jorge Mario Guzmán Guzmán
Chief Financial Officer
  F-84




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##### Table of Contents



Viméxico, S.A. de C.V. and Subsidiaries
 Consolidated Statements of Operations
For the years ended December 31, 2005, 2006 and 2007
(Millions of constant Mexican pesos as of December 31, 2007)
 2005
    
    
    2006
    
    
    2007Net sales
    
    Ps.
    13,704
    
    
    Ps.
    13,462
    
    
    Ps.
    13,605Cost of sales
    
    
    9,962
    
    
    
    9,959
    
    
    
    9,578Gross profit
    
    
    3,742
    
    
    
    3,503
    
    
    
    4,027Operating expenses
    
    
    3,228
    
    
    
    3,085
    
    
    
    3,245Operating income
    
    
    514
    
    
    
    418
    
    
    
    782Comprehensive financing result:Interest expense, net
    
    
    577
    
    
    
    724
    
    
    
    472Exchange gain (loss)
    
    
    32
    
    
    
    (28
    )
    
    
    (86
    )Derivative financial instruments gain (loss)
    
    
    7
    
    
    
    (28
    )
    
    
    3Gain from monetary position
    
    
    155
    
    
    
    149
    
    
    
    112383
    
    
    
    631
    
    
    
    443Operating income (loss) after financing cost
    
    
    131
    
    
    
    (213
    )
    
    
    339Other expenses, net
    
    
    451
    
    
    
    450
    
    
    
    91(Loss) income before taxes
    
    
    (320
    )
    
    
    (663
    )
    
    
    248Income taxes (benefit) expense
    
    
    (749
    )
    
    
    (77
    )
    
    
    152Income (loss) before cumulative effect of change in accounting principle
    
    
    429
    
    
    
    (586
    )
    
    
    96Cumulative effect of change in accounting principle, net of tax
    
    
    132Net income (loss) for the year
    
    Ps.
    297
    
    
    Ps.
    (586
    )
    
    Ps.
    96Minority income
    
    Ps.
    185
    
    
    Ps.
    188
    
    
    Ps.
    182Net majority income (loss)
    
    
    112
    
    
    
    (774
    )
    
    
    (86
    )Consolidated net income (loss)
    
    Ps.
    297
    
    
    Ps.
    (586
    )
    
    Ps.
    96
   F-85




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##### Table of Contents



Viméxico, S.A. de C.V. and Subsidiaries
 Consolidated Statements of Changes in
Financial Position
For the years ended December 31, 2005, 2006 and 2007
(Millions of constant Mexican pesos as of December 31, 2007)
 2005
    
    
    2006
    
    
    2007Operating activities:Net income (loss) from continuing operations
    
    Ps.
    429
    
    
    Ps.
    (586
    )
    
    Ps.
    96Add (deduct) non-cash items:Depreciation and amortization
    
    
    668
    
    
    
    598
    
    
    
    480Provision for employee retirement obligations
    
    
    70
    
    
    
    138
    
    
    
    57Early extinguishment of employee retirement obligations
    
    
    13
    
    
    
    1
    
    
    
    20Amortization of debt issuance costs
    
    
    21
    
    
    
    37
    
    
    
    4Gain from sale of subsidiaries and associated companies
    
    
    
    
    
    
    (100
    )Impairment of long-lived assets
    
    
    181
    
    
    
    334
    
    
    
    91Loss (gain) from sale of long-lived assets
    
    
    39
    
    
    
    131
    
    
    
    (55
    )Mark-to-market of derivative financial instruments
    
    
    (116
    )
    
    
    (28
    )
    
    
    29Deferred taxes and employee profit sharing
    
    
    (952
    )
    
    
    (257
    )
    
    
    (104
    )353
    
    
    
    268
    
    
    
    618Decrease (increase) in trade receivables
    
    
    508
    
    
    
    148
    
    
    
    (194
    )(Increase) decrease in inventories
    
    
    (266
    )
    
    
    451
    
    
    
    (19
    )Increase in trade payables
    
    
    33
    
    
    
    1
    
    
    
    223Increase (decrease) in retained undivided interests in securitized receivables
    
    
    (327
    )
    
    
    (19
    )
    
    
    37Change in other current assets and liabilities
    
    
    457
    
    
    
    (945
    )
    
    
    68Employee retirement obligations
    
    
    (58
    )
    
    
    (188
    )
    
    
    (101
    )Net resources generated by used in operating activities
    
    
    700
    
    
    
    (284
    )
    
    
    632Financing activities:Notes payable to affiliated companies
    
    
    740
    
    
    
    448
    
    
    
    317Proceeds from short-term bank loans
    
    
    1,679
    
    
    
    1,317
    
    
    
    557Proceeds from long-term bank loans
    
    
    848
    
    
    
    47
    
    
    
    145Amortization in real terms of bank loans
    
    
    (98
    )
    
    
    (64
    )
    
    
    (24
    )Payment of short-term bank loans
    
    
    (1,575
    )
    
    
    (1,837
    )
    
    
    (564
    )Payment of long-term bank loans
    
    
    (1,500
    )
    
    
    (1,677
    )
    
    
    (384
    )Debt issuance costs
    
    
    (57
    )
    
    
    (2
    )
    
    
    (9
    )Issuance of capital stock
    
    
    
    
    
    
    1,526Dividends paid to minority interest
    
    
    (79
    )
    
    
    (54
    )
    
    
    (51
    )Other financing activities
    
    
    21
    
    
    
    77
    
    
    
    (56
    )Net resources used in financing activities
    
    
    (21
    )
    
    
    (219
    )
    
    
    (69
    )Investing activities:Investments in land, buildings, machinery and equipment
    
    
    (468
    )
    
    
    (330
    )
    
    
    (324
    )Proceeds from sale of land, buildings, machinery and equipment
    
    
    31
    
    
    
    339
    
    
    
    131Restricted cash
    
    
    1
    
    
    
    281
    
    
    
    (9
    )Investment in subsidiaries
    
    
    (9
    )
    
    
    
    
    
    
    (181
    )Proceeds from sale of subsidiaries and associated companies
    
    
    
    
    
    
    177Capital distribution to minority interest
    
    
    11
    
    
    
    (109
    )Long-term accounts receivables
    
    
    (3
    )
    
    
    96
    
    
    
    53Other long-term assets
    
    
    6
    
    
    
    (2
    )
    
    
    (4
    )Deferred charges
    
    
    (105
    )
    
    
    (102
    )
    
    
    (206
    )Net resources (used in) generated by investing activities
    
    
    (536
    )
    
    
    350
    
    
    
    (540
    )Net increase (decrease) in cash and cash equivalents
    
    
    143
    
    
    
    (153
    )
    
    
    23Balance at beginning of year
    
    
    180
    
    
    
    323
    
    
    
    170Balance at end of year
    
    Ps.
    323
    
    
    Ps.
    170
    
    
    Ps.
    193
   F-86




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##### Table of Contents



Viméxico, S.A. de C.V. and Subsidiaries
 Consolidated Statements of Changes in
Stockholders Equity
For the years ended December 31, 2005, 2006 and 2007
(Millions of Mexican constant pesos as of December 31, 2007)
 Shortfall in
    
    
    Cumulative
    
    
    Minimumrestatement of
    
    
    initial effect of
    
    
    labor liability
    
    
    Retained
    
    
    Minority
    
    
    StockholdersCapital stock
    
    
    capital
    
    
    deferred taxes
    
    
    adjustment
    
    
    earnings
    
    
    interest
    
    
    equityBalance as of
January 1, 2005
    
    Ps.
    3,195
    
    
    Ps.
    (2,541
    )
    
    Ps.
    (1,644
    )
    
    Ps.
    (101
    )
    
    Ps.
    4,690
    
    
    Ps.
    1,470
    
    
    Ps.
    5,069Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (79
    )
    
    
    (79
    )Comprehensive
income
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    5
    
    
    
    112
    
    
    
    196
    
    
    
    307Balance as of
December 31, 2005
    
    
    3,195
    
    
    
    (2,547
    )
    
    
    (1,644
    )
    
    
    (96
    )
    
    
    4,802
    
    
    
    1,587
    
    
    
    5,297Issuance of
capital stock
    
    
    1,526
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,526Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    (54
    )Decrease in
minorityinterest
    
    
    
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (325
    )
    
    
    (256
    )Comprehensive loss
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    (774
    )
    
    
    230
    
    
    
    (559
    )Balance as of
December 31, 2006
    
    
    4,721
    
    
    
    (2,493
    )
    
    
    (1,644
    )
    
    
    (96
    )
    
    
    4,028
    
    
    
    1,438
    
    
    
    5,954Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )
    
    
    (51
    )Comprehensive
income
    
    
    
    
    
    
    (44
    )
    
    
    
    
    
    
    67
    
    
    
    (86
    )
    
    
    207
    
    
    
    144Balance as of
December 31, 2007
    
    Ps.
    4,721
    
    
    Ps.
    (2,537
    )
    
    Ps.
    (1,644
    )
    
    Ps.
    (29
    )
    
    Ps.
    3,942
    
    
    Ps.
    1,594
    
    
    Ps.
    6,047
   F-87




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##### Table of Contents



Viméxico, S.A. de C.V. and Subsidiaries
 Notes to Consolidated Financial Statements
For the years ended December 31, 2005, 2006 and 2007
(Millions of constant Mexican pesos as of December 31, 2007)
 1
    
    Activities of the companyViméxico, S.A. de C.V. (Viméxico) and subsidiaries (the Company), a 91.8% subsidiary of
Vitro, S.A.B. de C.V. (Vitro or the Parent Company), was incorporated on October 18,
2006, as a Mexican Company, which, through its subsidiaries, is mainly dedicated to the
manufacturing and selling of float glass in the architectural and automotive industries.At the Extraordinary General Shareholders meeting held on December 11, 2006, it was agreed
to merge the Company with Vitro Plan, S.A. de C.V. a subsidiary under the common control of
Vitro. Subsequent to the merger, the Company remained as the surviving entity and assumed all
the rights and obligations of the newly merged entity. As the transaction was entered into
between entities under common control, the financial statements and related footnote
disclosures of the merged entity were presented as if the two subsidiaries had been combined
as of the earliest period presented, with intercompany transactions eliminated (see Note
11e).2
    
    Basis of presentation and principles of consolidation
 a.
    
    Basis of presentationThe consolidated financial statements are prepared on the basis of Mexican Financial
Reporting Standards (NIFs or Mexican FRS).All references in the consolidated financial statements and accompanying notes, to pesos
or Ps. correspond to Mexican pesos, and references to dollars or US$ correspond to
dollar of United States of America (the United States).
  F-88




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##### Table of Contents



b.
    
    Consolidated subsidiariesThose companies in which Viméxico holds, directly or indirectly, more than 50% of the
capital stock, or which it controls, are included in the consolidated financial
statements. For those companies in which Viméxico has joint control, the proportionate
consolidation method is used. This method consists of consolidating on a proportionate
basis the assets, liabilities, stockholders equity and revenues and expenses. All
significant intercompany balances and transactions have been eliminated upon
consolidation. The main subsidiaries the Company consolidates as of December 31, 2007,
are as follows:
 % interest in the capitalstock2006
    
    
    2007Vidrio Plano de México, S.A. de C.V.
    
    
    100
    
    
    
    100Vidrio Plano, S.A. de C.V.
    
    
    100
    
    
    
    100Cristales Inastillables de México, S.A. de C.V.
    
    
    100
    
    
    
    100Vitro Flex, S.A. de C.V.(1)
    
    
    100
    
    
    
    100Cristales Centroamericanos, S.A.
    
    
    100
    
    
    
    100Distribuidora Nacional de Vidrio, S.A. de C.V.
    
    
    100
    
    
    
    100V.V.P. Holdings Corporation.
    
    
    100
    
    
    
    100Cristales Automotrices, S.A. de C.V.
    
    
    51
    
    
    
    51Distribuidor Vidriero Lan, S.A. de C.V.
    
    
    100
    
    
    
    100Vitro Automotriz, S.A. de C.V.
    
    
    100
    
    
    
    100Vitro Vidrio y Cristal, S.A. de C.V.
    
    
    100
    
    
    
    100Productos de Valor Agregado en Cristal, S.A. de C.V.(4)
    
    
    
    
    
    
    55Vitro Flotado Cubiertas, S.A. de C.V.
    
    
    100
    
    
    
    100Tecnológica Vitro Vidrio y Cristal, Ltd
    
    
    100
    
    
    
    100IP Vitro Vidrio y Cristal, Ltd
    
    
    100
    
    
    
    100VVP Europa Holdings BV
    
    
    100
    
    
    
    100Vitro Cristalglass, S.L.
    
    
    60
    
    
    
    60Vitro Chaves Industria de Vidrio, S.A.
    
    
    60
    
    
    
    60Vidrio Plano de Mexicali, S.A. de C.V.
    
    
    100
    
    
    
    100Vidrio y Cristal del Noroeste, S.A. de C.V.(2)
    
    
    50
    
    
    
    100Vitro America, Inc.
    
    
    100
    
    
    
    100Vitro Colombia, S.A.
    
    
    100
    
    
    
    100Química M, S.A. de C.V.(3)
 (1)
    
    On September 29, 2006, the Company assumed 100% control of Vitro Flex,
S.A. de C.V. (see Note 17).(2)
    
    On July 24, 2007, the Company acquired the remaining 50% of the
outstanding shares of Vitro AFG, S.A. de C.V. (Vitro AFG) from AFG Industries
Inc. (AFG Industries), in order to assume control and increase its ownership to
100%, subsequently changing its legal name to Vidrio y Cristal del Noroeste, S.A.
de C.V. (see Note 17).(3)
    
    On March 2, 2006, the Company sold its 51% interest in the capital
stock of this company (see Note 17).(4)
    
    On August 29, 2007, Vitro Vidrio y Cristal, S.A. de C.V. (Vitro VyC),
a subsidiary of Viméxico acquired 55% of the outstanding shares of Productos de
Valor Agregado en Cristal, S.A. de C.V. (PVA) (see Note 17). c.
    
    Translation of financial statements of foreign subsidiariesIn order to consolidate the financial statements of foreign subsidiaries, the effects of
inflation were taken into consideration in accordance with Bulletin B-10, Recognition
of the Effects of Inflation in Financial Information, as amended. Such companies
financial statements are translated into Mexican pesos using the current rate method.
The assets, liabilities, stockholders equity and the statement of operations accounts
are translated into Mexican pesos using the exchange rate as of the date of the most
recent balance sheet presented. The cumulative translation adjustment is included in
shortfall in restatement of capital as a component of stockholders equity.
  F-89




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##### Table of Contents



d.
    
    Comprehensive income (loss)Represents changes in stockholders equity during the year, for concepts other than
distributions and activity in contributed common stock, 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 statements of operations. Other comprehensive income (loss) items consist
of the shortfall in restatement of capital, the translation effects of foreign
subsidiaries and the additional minimum labor liability adjustment.e.
    
    Classification of costs and expensesCosts and expenses presented in the consolidated statements of operations were
classified according to their function which allows for the analysis of the Companys
gross margin. The Company continues to present operating income in the statements of
operations as it is an important financial indicator within the industry and helps to
evaluate the Companys performance. Operating income includes ordinary income and
expenses as well as operating expenses. Such presentation is comparable with what was
utilized for the years ended December 31, 2005 and 2006.
 3
    
    Summary of significant accounting policiesThe accompanying consolidated financial statements have been prepared in conformity with
NIFs, 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.
    
    Changes in accounting policies:Statement of income Beginning January 1, 2007, the Company adopted new NIF B-3,
Statement of Income, which now classifies revenues, costs and expenses into ordinary
and non-ordinary. Ordinary items are derived from primary activities representing an
entitys main source of revenues. Non-ordinary items are derived from activities other
than those representing an entitys main source of revenues. Consequently, the
classification of certain transactions as special and extraordinary was eliminated;
these items are now part of other income and expenses and non-ordinary items,
respectively. Statutory employee profit sharing (PTU) should now be presented as an
ordinary expense and no longer presented with income taxes. According to Interpretation
of Financial Information Standards Number 4, Presentation of Statutory Employee Profit
Sharing in the Statement of Income (INIF 4), PTU should be included within other
income and expenses. The main effect of adopting this interpretation was the
reclassification of current and deferred PTU for 2005, 2006 and 2007 of Ps. 25, Ps. 26
and Ps. 24 respectively, to other income and expenses.
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Related parties Beginning January 1, 2007, the Company adopted NIF C-13, Related
Parties, which broadens the concept related parties to include a) the
overall business in which the reporting entity participates; b) close family members of
key management or prominent executives; and c) any fund created in connection with a
labor-related compensation plan. NIF C-13 also requires the following disclosures: 1)
that the terms and conditions of consideration paid or received in transactions carried
out between related parties be equivalent to those of similar transactions carried out
between independent parties and the reporting entity, only if sufficient evidence
exists; 2) benefits granted to the entitys key management or prominent executives.
Notes to the 2005 and 2006 consolidated financial statements were amended to comply with
the new provisions.Capitalization of comprehensive financing result Beginning January 1, 2007, the
Company adopted NIF D-6, Capitalization of Comprehensive Financing Result, which
establishes general capitalization standards. Some of these standards include: a)
mandatory capitalization of comprehensive financing result (CFR) directly attributable
to the acquisition of qualifying assets; b) when financing in domestic currency is used
to acquire assets, yields obtained from temporary investments before the capital
expenditure is made are excluded from the amount capitalized; c) a methodology to
calculate capitalizable CFR relating to funds from generic financing; d) regarding land,
CFR may be capitalized if land is developed; and e) conditions that must be met to
capitalize CFR and rules indicating when CFR should no longer be capitalized. The
Company did not have any qualifying assets in 2007 and therefore it did not capitalize
CFR during the period.Derivative financial instruments and hedging operations Effective January 1, 2005, the
Company adopted the provisions of Bulletin C-10, Derivative Financial Instruments and
Hedging Activities, and recognized the cumulative effect of a change in accounting
principle in 2005 of Ps. 132, net of tax.b.
    
    Recognition of the effects of inflation The Company restates its consolidated
financial statements to Mexican peso purchasing power of the most recent balance sheet
date presented. Accordingly, the consolidated financial statements of the prior year,
which are presented for comparative purposes, have also been restated to Mexican pesos
of the same purchasing power and, therefore, differ from those originally reported in
the prior year.Viméxicos Mexican subsidiaries use the Indice Nacional de Precios al Consumidor
(Mexican National Consumer Price Index, or NCPI), published by Banco de México. For
Viméxicos foreign subsidiaries , except as noted below, the Consumer Price Index  All
Urban Consumers  All Items, Unadjusted (CPI) published by the United States Labor
Department is used to restate the financial statements, and the restated financial
statements are translated into Mexican pesos using the applicable exchange rate at the
end of the last period presented, except in the case of the Companys subsidiaries
located in Spain, for which it applies the Price Consumption Index (PCI), published by
the National Institute of Statistics of Spain before translation into Mexican pesos
using the exchange rate of the Euro.
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Recognition of the effects of inflation results mainly in inflationary gains or losses
on monetary and nonmonetary items that are presented in the consolidated financial
statements as follows:
 
    
    Shortfall in restatement of capital This item, which is an element of
stockholders equity, represents the accumulated effect of holding nonmonetary
assets and the effect of the initial monetary position gain or loss. The cumulative
effect of holding nonmonetary assets represents the difference between the specific
values of nonmonetary assets in excess of or below the increase attributable to
general inflation.
    
    Monetary position result Monetary position result reflects the result of
holding monetary assets and liabilities during periods of inflation. Values stated
in current monetary units decrease in purchasing power over time. This means that
losses are incurred by holding monetary assets, whereas gains are realized by
maintaining monetary liabilities. The net effect is presented in the statements of
operations as part of the total comprehensive financing result. For foreign
subsidiaries the result from monetary position is calculated using the CPI, except
in the case of the Companys subsidiaries located in Spain for which it applies the
PCI.
    
    Statement of Changes in Financial Position Bulletin B-12 This statement
requires presentation of the sources and uses of funds during the period measured
as the differences, in constant pesos, between the beginning and ending balances of
balance sheet items adjusted by the excess (shortfall) in restatement of capital.
As required by Bulletin B-12, the monetary effect and the effect of changes in
exchange rates are considered cash items in the determination of resources
generated from operations due to the fact they affect the purchasing power of the
entity.
 c.
    
    Cash and cash equivalents Consist mainly of bank deposits in checking accounts
and readily available investments of highly liquid short-term investments. They are
valued at the lower of acquisition cost plus accrued yields or estimated net realizable
value and are recognized in results of operations as they accrue.d.
    
    Investments in securities According to its intent, from the date of acquisition
the Company classifies its investments in securities instruments in any of the following
categories: (1) trading, when the Company intends to trade debt and equity instruments
in the short-term, before their maturity, if any. These investments are stated at fair
value; any fluctuations in the value of these investments are recognized in current
earnings; (2) held-to-maturity, when the Company intends to and is financially capable
of holding financial instruments until their maturity. These investments are recognized
and maintained at amortized cost; and (3) available-for-sale, investments that include
those that are classified neither as trading nor held-to-maturity. These investments are
stated at fair value; any unrealized gains and losses resulting from valuation, net of
income tax, are recorded as a component of other comprehensive income within
stockholders equity and reclassified to current earnings upon their sale or maturity.
The monetary position resulting from the effects of inflation on available-for-sale
investments is recorded as a component of other comprehensive income. Fair value is
determined using prices quoted in recognized markets. If such instruments are not
traded, fair value is determined by applying recognized technical valuation models.
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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.Financial liabilities derived from the issuance of debt instruments are recorded at the
value of the obligations they represent. Any expenses, premiums and discounts
related to the issuance of debt financial instruments are amortized over the life of the
instruments.e.
    
    Derivative financial instruments The Company states all derivatives at fair
value in the balance sheet, regardless of the purpose for holding them. Fair value is
determined using prices quoted in recognized markets. If such instruments are not
traded, fair value is determined by applying recognized valuation techniques.When derivatives are entered into to hedge risks, and such derivatives meet all hedging
requirements, their designation is documented at the beginning of the hedging
transaction, describing the transactions objective, characteristics, accounting
treatment and how the ineffectiveness of the instrument will be measured.Changes in the fair value of derivative instruments designated as hedges for accounting
purposes are recognized as follows: (1) for fair value hedges, changes in both the
derivative instrument and the hedged item are recognized in current earnings; (2) for
cash flow hedges, changes in the derivative instrument are temporarily recognized as a
component of other comprehensive income and then reclassified to current earnings when
affected by the hedged item. Any ineffective portion of the change in fair value is
immediately recognized in current earnings, within total comprehensive financing result,
regardless of whether the derivative instrument is designated as a fair value hedge or a
cash flow hedge.The Company uses interest rate swaps, foreign currency forward contracts and different
natural gas derivative instruments to manage its exposure to these market risks. The
Company formally documents all hedging relationships, including their objectives and
risk management strategies to carry out derivative transactions.While certain derivative financial instruments are contracted for hedging from an
economic point of view, they are not designated as hedges for accounting purposes
because they do not meet all of the requirements and are instead classified as
held-for-trading for accounting purposes. Changes in fair value of such derivative
instruments are recognized in current earnings as a component of total comprehensive
financing result.The Company reviews all contracts entered into to identify embedded derivatives that
should be segregated from the host contract for purposes of valuation and recognition.
When an embedded derivative is identified and the host contract has not been stated at
fair value and adequate elements for its valuation exist, the embedded derivative is
segregated from the host contract, stated at fair value and classified as trading or
designated as a financial instrument for hedging. Initial valuation and changes in the
fair value of the embedded derivatives at the closing of each period are recognized in
current earnings.f.
    
    Inventories and cost of sales Inventories are stated at the lower of
replacement cost using the latest purchase price method without exceeding net realizable
value. Cost of sales is restated using replacement cost or the latest production cost at
the time of the sale.
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g.
    
    Land, buildings, machinery and equipment Expenditures for land, buildings,
machinery and equipment, including renewals and improvements that extend useful lives,
are capitalized and restated using the NCPI. The initial balance to apply the NCPI was
the net replacement value of the Companys long-lived asset as of December 31, 1996. For
machinery and equipment purchased in a foreign country, the restatement is based on the
inflation index mentioned above and the exchange rate at the end of each period.Beginning on January 1, 2007, the carrying value of qualifying assets includes the
capitalization of total comprehensive financing result.Depreciation is calculated using the straight-line method based on the remaining
estimated useful lives of the related assets. Depreciation begins in the month in which
the asset is placed in service. The estimated useful lives of the assets are as
follows:
 YearsBuildings
    
    20 to 50Machinery and equipment
    
    5 to 30
 Maintenance and repair expenses are recorded as costs and expenses in the period
incurred.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 amounts mentioned above. The 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.
    
    Provisions Provisions are recognized for current obligations that result from a
past event, are probable to result in the use of economic resources, and can be
reasonably estimated.j.
    
    Goodwill Goodwill represents the excess of cost over fair value of subsidiaries
as of the date of acquisition. It is restated using the NCPI and at least once a year
is subject to impairment tests.k.
    
    Employee retirement obligations Seniority premiums, pension plans and severance
payments are recognized as costs over the expected service period of employees and are
calculated by independent actuaries using the projected unit credit method at net
discount rates. Accordingly, the liability is being accrued which, at present value,
will cover the obligation from benefits projected to the estimated retirement date of
the Companys employees.
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l.
    
    Foreign currency balances and transactions for Mexican subsidiaries 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 result in the consolidated statements of operations.m.
    
    Revenue recognition Revenues and related costs are recognized in the period in
which risks and rewards of ownership of the inventories are transferred to customers,
which generally coincide with the shipment of products to customers in satisfaction of
orders.n.
    
    Statutory employee profit sharing (PTU) Statutory employee profit sharing 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 between the accounting result and income for PTU
purposes and is recognized only when it can be reasonably assumed that such difference
will generate a liability or benefit, and there is no indication that circumstances will
change in such a way that the liabilities will not be paid or benefits will not be
realized.o.
    
    Income taxes Income taxes are recorded in the results of the year in which they
are incurred. Beginning October 2007, based on its financial projections, the Company
must determine whether it will essentially incur income tax (ISR) or the new Business
Flat Tax (IETU) and, accordingly, recognize deferred taxes based on the tax it will
pay. Deferred taxes are calculated by applying the corresponding tax rate to the
applicable temporary differences resulting from comparing the accounting and tax bases
of assets and liabilities and including, if any, future benefits from tax loss
carryforwards and certain tax credits. Deferred tax assets are recorded only when there
is a high probability of recovery.Tax on assets (IMPAC) paid that is expected to be recoverable is recorded as an
advance payment of ISR and is presented in the consolidated balance sheet increasing the
deferred ISR asset.p.
    
    Foreign subsidiaries as economic hedges The Companys management designated
some of its foreign subsidiaries as economic hedges. The resulting exchange rate
fluctuation is presented in the shortfall in restatement of capital within stockholders
equity to the extent the net investment in the foreign subsidiary covers the debt. The
result from monetary position is measured using inflation factors from the designated
subsidiarys country of origin. The effect related to this charge to the results of
operations for 2005, 2006 and 2007 was a (credit) charge of Ps. (53), Ps. 7 and Ps. 5,
respectively.
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4
    
    Trade receivables
 a.
    
    Trade receivables are recorded net of an allowance for doubtful accounts and
other discounts of Ps. 182 and Ps. 237 as of December 31, 2006 and 2007, respectively.b.
    
    Sales of receivables -Vitro Cristalglass, S.L. (Vitro Cristalglass) a
subsidiary of the Company, has entered into revolving factoring program agreements to
sell trade accounts receivable with several financial institutions. In accordance with
the terms of some of these agreements, the Company has the obligation to reimburse for
uncollected receivables, in the case of non-payment of customers. As of December 31,
2006 and 2007 the maximum capacity available under these programs was US$ 35 million and
US$ 45 million, respectively. As of such dates Vitro Cristalglass had sold approximately
US$ 21 million and US$ 16 million of trade receivables, respectively.c.
    
    As of December 31, 2007, the Company had restricted cash of Ps. 9. The amount
represents the collateral held with Vitro Cistalglass in its loan with Banco Pastor in
Spain. Restricted cash is included in other current receivables.d.
    
    Securitization of trade receivables:
 
    
    Securitization of the Viméxico (formerly Vitro Plan) accounts receivables -On
August 22, 2005, Distribuidora Nacional de Vidrio, S.A. de C.V., Vitro Flotado
Cubiertas, S.A. de C.V., Vitro Automotriz, S.A. de C.V. and Vitro Vidrio y Cristal,
S.A. de C.V., subsidiaries of Viméxico entered into an accounts receivable
securitization agreement for five years, whereby they obtained approximately US$
21.5 million. Viméxicos subsidiaries held an agreement to sell all their accounts
receivable, on a revolving basis, through a trust designed specifically for this
transaction for the sole purpose of selling and buying accounts receivable, and was
designed to be legally isolated. Such amounts were obtained through a private
issuance of notes payable in the United States amounting to US$ 21.5 million
bearing interest at 6.5%. As of December 31, 2006 and 2007, the gross accounts
receivable transferred to the trust by the Company was Ps. 574 and Ps. 580,
respectively, and are reflected as a reduction of accounts receivable. The
estimated fair value of the rights retained in the portfolio securitization as of
December 31, 2006 and 2007 was Ps. 332 and Ps. 346, respectively.
    
    During 2004, Vitro America, Inc. (Vitro America) closed a contract for selling
all their accounts receivable, on a revolving basis, to VVP Funding, a wholly-owned
subsidiary of Vitro America. VVP Funding is a special-purpose entity that was
formed prior to the execution of this agreement for the sole purpose of buying and
selling accounts receivable and is designed to be bankruptcy remote. Vitro America
and VVP Funding entered an agreement with an unrelated major financial institution
whereby VVP Funding sells, on a revolving basis and subject to the maintenance of
certain financial and receivables-based ratios, an undivided percentage ownership
in all eligible accounts receivable, as defined, for consideration composed of cash
up to a maximum amount of US$ 40 million and retained undivided interests in
securitized receivables. The transfer of undivided ownership interests from VVP
Funding to the unrelated major financial institution for cash consideration is
accounted for as a sale of receivables. Effective April 16, 2007, the new agreement
was signed and amended to increase the maximum selling amount from US$ 40 million
to US$ 50 million. The agreement expires in April 2008 but is subject to annual
renewal approval by the financial institution. As of December 31, 2006 and 2007,
the gross receivables sold totaled approximately US$ 78 million and US$ 76 million,
respectively and are reflected as a reduction of trade accounts receivable. The
estimated fair value of the retained undivided interests in securitized receivables
as of December 31, 2006 and 2007 was US$ 32 million and US$ 29 million,
respectively.
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5
    
    Inventories
 2006
    
    
    2007Semi-finished and finished products
    
    Ps.
    1,436
    
    
    Ps.
    1,228Raw materials
    
    
    460
    
    
    
    494Packaging materials
    
    
    7
    
    
    
    91,903
    
    
    
    1,731Spare parts
    
    
    67
    
    
    
    83Merchandise in transit
    
    
    66
    
    
    
    170Refractory and other
    
    
    13
    
    
    
    16Ps.
    2,049
    
    
    Ps.
    2,000
  6
    
    Land, buildings, machinery and equipment
 2006
    
    
    2007Buildings
    
    Ps.
    4,657
    
    
    Ps.
    4,833Accumulated depreciation
    
    
    (2,246
    )
    
    
    (2,608
    )2,411
    
    
    
    2,225Land
    
    
    443
    
    
    
    433Ps.
    2,854
    
    
    Ps.
    2,658Machinery and equipment
    
    Ps.
    9,215
    
    
    Ps.
    9,487Accumulated depreciation
    
    
    (6,472
    )
    
    
    (6,544
    )Ps.
    2,743
    
    
    Ps.
    2,943
 The Company reviewed the operating conditions of certain of its fixed assets and determined
to extend their estimated remaining useful life, which resulted in a decrease in depreciation
expense of Ps. 56 in 2007.7
    
    Derivative financial instruments
 a)
    
    Derivative instruments entered into by Vitro AffiliatesVitro Envases de Norteamérica, S.A. de C.V. (Vena), a wholly-owned subsidiary of
Vitro, entered into an agreement with Calyon Corporate and Investment Bank (Calyon) to
hedge their natural gas consumption needs and those of certain Vitro subsidiaries by
means of a capped swap and exercised an option to receive advanced payments, which will
be repaid to Calyon during 2008. Concurrently, Vena entered into a hedge contract with
the Company subject to a mercantile commission agreement whereby the Company would be
responsible for its related portion of the hedge contract with Calyon.Vena entered into a hedge agreement with Credit Suisse First Boston (CSFB) to hedge
their natural gas consumption needs and those of certain Vitro subsidiaries.
Concurrently, Vena entered into a mercantile commission agreement whereby the Company
would be responsible for its related portion of the hedge contract with CSFB.
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Vidriera Querétaro, S.A. de C.V. (Viquesa), a wholly-owned subsidiary of Vitro,
entered into a hedge agreement with Pemex Gas and Petroquímica Básica (Pemex) to hedge
their natural gas consumption needs and those of certain Vitro subsidiaries, by buying
and selling options and swaps. Concurrently, Viquesa entered into a hedge contract with
the Company subject to a mercantile commission agreement whereby the Company would be
responsible for its related portion of the hedge contract with Pemex.Compañía Vidriera, S.A. de C.V. (Covisa), a wholly-owned subsidiary of Vitro, entered
into a hedge agreement with Citibank, N.A. (Citi) to hedge their natural gas
consumption needs and those of certain Vitro subsidiaries, by buying and selling complex
derivative instruments and swaps. Concurrently, Covisa entered into a hedge contract
with the Company subject to a mercantile commission agreement whereby the Company would
be responsible for its related portion of the hedge contract with Citi.Vitro Cristalglass, a Vitro subsidiary, entered into an agreement with Compañía
Vidriera, S.A. de C.V. (COVISA), a wholly-owned subsidiary of Vitro, to hedge their
risk of foreign exchange fluctuations by buying forwards exchange rate contracts.The fair value of the derivative financial instruments entered into between the Company
and the Vitro subsidiaries mentioned above was a liability of Ps. 70. The details of the
derivative financial instruments are as follows:
 Derivative financial
    
    
    
    
    
    
    
    Fair Valueinstruments Natural gas
    
    
    
    
    
    
    
    Assetcontracts:
    
    Notional Amount

    
    Period
    
    (Liability)Capped swap
    
    877,091 MMBTU
    
    January to December 2008
    
    Ps.
    (61
    )Swaps
    
    382,581 MMBTU
    
    January to December 2008
    
    
    1Options
    
    1,119,751 MMBTU
    
    January to December 2008
    
    
    2Exotic instruments
    
    1,959,562 MMBTU
    
    January to December 2008
    
    
    (3
    )Total natural gas contracts
    
    
    
    
    
    
    
    
    (61
    )Foreign exchange forward:Foreign exchange forward
    
    10,000,000 Euros
    
    January to December 2008
    
    
    (9
    )Total derivative financial instruments with affiliates
    
    Ps.
    (70
    )
 The Company recognized a loss of Ps. 31 related to its derivative instruments that
expired during 2007, which was recognized in the comprehensive financing result.b)
    
    Embedded derivatives:The Company identified embedded derivatives within certain of its supply contracts. As
of December 31, 2007, the amount recognized for these instruments was an asset and a
credit to total comprehensive financing result of Ps. 11.
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8
    
    Long-term debt
 a.
    
    As of December 31, 2006 and 2007, short-term bank loans were denominated in US
dollars. During 2007, the Companys weighted average interest rate for short-term
borrowings denominated in US dollars was 7.75%.As disclosed in Note 8 c), on February 1, 2007, Vitro issued US$ 700 million of senior
guaranteed notes due February 1, 2017 and US$ 300 million of senior guaranteed notes due
February 1, 2012. Upon completion of this transaction, short-term borrowings as of
December 31, 2006 Ps. 313 were refinanced and have therefore been reclassified as
long-term debt.b.
    
    Long-term debt consists of the following:
 2006
    
    
    2007Payable in US dollars:Unsecured debt, interest rate based on LIBOR plus
2.25%, principal payable through 2007.
    
    Ps.
    313Capitalizable capital lease obligations with
collateral and fixed interest rate of 10.749%, with
the principal maturing in 2016.
    
    
    87
    
    
    Ps.
    78Unsecured note, interest payable at LIBOR plus 1.2%,
principal payable in semiannual installments through
2007.
    
    
    1Unsecured debt, floating interest rate based on
LIBOR plus .25%, principal payable through 2008.
    
    
    9Payable in Euros:Unsecured debt, floating interest rate based on
EURIBOR plus a spread between 0.75% and 2.5%,
principal payable in various installments through
2010.
    
    
    37
    
    
    
    63Unsecured debt, floating interest rate based on
EURIBOR plus 1.5%, principal payable in various
installments through 2009.
    
    
    6Unsecured debt, floating interest rate based on
EURIBOR plus 1.125%, principal payable in various
installments through 2009.
    
    
    5Secured debt, floating interest rate based on
EURIBOR plus 8%, principal payable in various
installments through 2008.
    
    
    11
    
    
    
    3Secured debt, floating interest rate based on
EURIBOR plus a spread between 1.25 and 1.10,
principal payable in various installments through
2008.
    
    
    7
    
    
    
    2Payable in Colombian pesos:Unsecured debt payable in Colombian pesos with a
rate DFT plus 6%, principal payable through 2011.
    
    
    
    
    
    
    8476
    
    
    
    154Less current maturities
    
    
    60
    
    
    
    27Ps.
    416
    
    
    Ps.
    127
   Year ending December 31,
    
    Total2009
    
    Ps.
    192010
    
    
    192011
    
    
    192012
    
    
    182013 and thereafter
    
    
    52Ps.
    127
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Collateral  Bank debt totaling Ps. 80 is secured by fixed assets with a book value of
Ps. 158 as of December 31, 2007.c.
    
    Vitro debt issuanceOn February 1, 2007 Vitro successfully closed an offering, of US$1.0 billion of senior
guaranteed notes (the Notes) principally to refinance existing third-party debt at the
Vitro holding company level, substantially all of the third-party debt at its subsidiary
VENA and certain third-party debt at some of Viméxicos subsidiaries.The Notes were issued in two tranches: US$ 700 million of senior guaranteed notes due
February 1, 2017, callable after year 2012, at a coupon of 9.125% and US$ 300 million of
senior unsecured notes due February 1, 2012, non-callable for the notes life, at a
coupon of 8.625%. The notes pay interest semiannually and are guaranteed by VENA and its
wholly-owned subsidiaries 100% and by Viméxico and its wholly-owned subsidiaries 100%.
 9
    
    Long-term notes payables to affiliatesAs of December 31, 2007, notes payables to affiliates of Ps. 294 are payable in US dollars at
a fixed annual interest rate between 10% and 11% and mature from 2008 to 2017.10
    
    Employee retirement obligationsThe disclosures relating to the Companys pension plans, seniority premiums and severance
payments required by Bulletin D-3 Labor Obligations, calculated as described in Note 3 k),
together with certain actuarial assumptions utilized, are presented below as of December 31,
2006 and 2007:
 2006
    
    
    2007Accumulated benefit obligation
    
    Ps.
    347
    
    
    Ps.
    513Projected benefit obligation
    
    Ps.
    648
    
    
    Ps.
    673Plan assets at fair value
    
    
    (441
    )
    
    
    (517
    )Unfunded status
    
    
    207
    
    
    
    156Unrecognized transition obligation
    
    
    (53
    )
    
    
    (34
    )Changes in assumptions and adjustments from experience
    
    
    (173
    )
    
    
    (119
    )Prior service costs and plan amendments
    
    
    (35
    )
    
    
    (81
    )Projected net asset
    
    Ps
    (54
    )
    
    Ps
    (78
    )Additional minimum liability adjustment
    
    Ps.
    192
    
    
    Ps.
    117
  2006
    
    
    2007Assumptions:Discount rate
    
    
    5.50
    %
    
    
    5.00
    %Expected rate of return on plan assets
    
    
    7.00
    %
    
    
    7.0
    %Rate of compensation increase
    
    
    0
    %
    
    
    0
    %
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2005
    
    
    2006
    
    
    2007Service cost
    
    Ps.
    31
    
    
    Ps.
    19
    
    
    Ps.
    45Interest cost
    
    
    32
    
    
    
    33
    
    
    
    31Amortization of transition obligation
    
    
    19
    
    
    
    20
    
    
    
    10Amortization of prior service costs and plan amendments
    
    
    3
    
    
    
    2
    
    
    
    2Amortization of changes in assumptions and adjustments from experience
    
    
    13
    
    
    
    82
    
    
    
    16Actual return on plan assets
    
    
    (15
    )
    
    
    (17
    )
    
    
    (27
    )Net periodic cost (1)
    
    Ps.
    83
    
    
    Ps.
    139
    
    
    Ps.
    77
 (1)
    
    For the years ended December 31, 2005, 2006 and 2007 includes Ps. 13, Ps. 1
and Ps. 20, respectively, for the early extinguishment of retirement obligations and
also includes Ps. 23, Ps. 78 and Ps. 23 for indemnification of personnel at the end of
the work relationship, respectively.  2006
    
    
    2007Remaining amortization period of unrecognized items (in years):Prior service costs and plan amendments
    
    
    14
    
    
    
    19Transition obligation
    
    
    6
    
    
    
    5Changes in assumptions and adjustments from experience
    
    
    15
    
    
    
    16
 11
    
    Commitments and contingencies
 a.
    
    In October 2000, several subsidiaries of Viméxico, which have facilities
throughout Monterrey, Mexico and the Mexico City area, entered into a 15-year energy
purchase agreement for approximately 31 megawatts of electricity per year with Tractebel
Energía de Monterrey, S. de R.L. de C.V. (Tractebel).b.
    
    The Company has several non-cancelable operating lease agreements for the rent of
warehouses and equipment. Rental expense for the years ended December 31, 2005, 2006 and
2007 was Ps. 308, Ps. 297 and Ps. 365, respectively.Future minimum lease payments under these agreements are as follows:
 Year
    
    Amount2008
    
    Ps.
    2732009
    
    
    2282010
    
    
    1782011
    
    
    1422012
    
    
    1152013 and thereafter
    
    
    132
 c.
    
    The Company is not a party to, and none of its assets are subject to, any pending
legal proceedings, nor is the Company subject to any contingent liabilities, other than
as described in Note e) below. The Company believes that the legal proceedings and
contingent liabilities arising in the ordinary course of business and against which the
Company is adequately insured or indemnified are not material in the aggregate.d.
    
    Call/Put on shares of Vitro Cristalglass  A group of individual investors owns a
40% interest in Vitro Cristalglass. The Company has the option of purchasing the 40%
minority interest, which can be exercised beginning May 1, 2005 for fair value as
calculated by independent appraisers and cannot be less than 28.9 million euros (US$
42.4 million as of December 31, 2007). Additionally, the minority interest has a put
option pursuant to which they may require the Company to purchase all or part of their
40% interest in Vitro Cristalglass, which can be exercised beginning on May 1, 2003 for
28.4 million euros (US$ 41.8 million as of December 31, 2007), as adjusted to reflect
inflation in Spain from 2003 through the time the put is exercised. As of
December 31, 2007, the estimated fair value of the 40% interest is higher than the
option price held by Viméxico (previously Vitro Plan).
  F-101




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e.
    
    At a general extraordinary shareholders meeting of Vitro Plan held in December
2006, the merger into Vitros subsidiary Viméxico was approved. Notwithstanding that
this merger has become fully effective, since all approvals were granted and the
corresponding filings were made, Pilkington (the Companys minority shareholder), who
voted against such merger, has filed a lawsuit against Viméxico.In February 2008, Viméxico was notified of a ruling issued by the First District Court
on Civil and Labor Matters that the lawsuit brought by Pilkington seeking to annul the
resolutions adopted at the general extraordinary shareholders meeting was unfounded. In
its ruling, the Court determined that all resolutions adopted at the general
extraordinary shareholders meeting were valid. Despite this ruling, Pilkington has
appealed this decision. Based on advice from its Mexican special litigation counsel,
management continues to believe that this lawsuit is without merit and expects to obtain
another favorable ruling.
 12
    
    Foreign currency operations and balancesAs of December 31, 2007, the assets and liabilities of the Company denominated in foreign
currency consist of the following:
 US dollars
    
    
    Mexican pesosMonetary assets
    
    US$
    124
    
    
    Ps.
    1,348Inventories
    
    
    7
    
    
    
    75Fixed assets
    
    
    121
    
    
    
    1,318Monetary liabilities
    
    
    204
    
    
    
    2,220
  US dollars
    
    
    Mexican pesosExports
    
    US$
    237
    
    
    Ps.
    2,590Imports
    
    
    61
    
    
    
    671Interest expense, net
    
    
    4
    
    
    
    45
  United States
    
    
    Central America
    
    
    EuropeNet sales
    
    Ps.
    5,482
    
    
    Ps.
    422
    
    
    Ps.
    2,434Operating income
    
    
    70
    
    
    
    31
    
    
    
    314Total assets
    
    
    1,582
    
    
    
    427
    
    
    
    2,636Total liabilities
    
    
    912
    
    
    
    158
    
    
    
    1,111Capital expenditure
    
    
    107
    
    
    
    17
    
    
    
    108
  F-102




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US dollar
    
    
    EuroDecember 31, 2005
    
    Ps.
    10.6344
    
    
    Ps.
    12.5932December 31, 2006
    
    
    10.8116
    
    
    
    14.2680December 31, 2007
    
    
    10.8662
    
    
    
    15.9526
  13
    
    Stockholders equity
 a.
    
    The fixed portion of the Companys capital stock is represented by 1,503,510,000
series A ordinary, nominative, fully paid and issued common shares, without par value.b.
    
    At the ordinary shareholders meeting held on October 31, 2006, Vitro made a
capital contribution by capitalizing a loan owed to it by the Company and received
1,454,490,000 Series A shares, amounting to Ps. 1,526 (Ps.1,454 nominal) or US$ 135
million dollars.c.
    
    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 par value (historical pesos).
The legal reserve may be capitalized but may not be distributed unless the entity is
dissolved. The legal reserve must be replenished if it is reduced for any reason. As of
December 31, 2005 and 2006, the legal reserve, in historical pesos was Ps. 25.d.
    
    Stockholders equity, except restated paid-in capital and tax retained earnings,
will be subject to income tax at the rate in effect when a dividend is distributed. 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.At December 31, 2006 and 2007, the majority interest stockholders equity tax account
corresponding to the contributed capital account and the net consolidated tax income
account was Ps. 2,024 and Ps. 1,923, respectively.e.
    
    Minority interest in consolidated subsidiaries consists of the following:
 2006
    
    
    2007Capital stock
    
    Ps.
    140
    
    
    Ps.
    147Shortfall in restatement of capital
    
    
    21
    
    
    
    314Retained earnings
    
    
    1,089
    
    
    
    951Net income
    
    
    188
    
    
    
    182Ps.
    1,438
    
    
    Ps.
    1,594
 14
    
    Other expenses net
 2005
    
    
    2006
    
    
    2007Restructuring charges
    
    Ps.
    105
    
    
    Ps.
    13
    
    
    Ps.
    9Impairment of long-lived assets
    
    
    181
    
    
    
    334
    
    
    
    91Loss (gain) from sale of long-lived assets
    
    
    69
    
    
    
    131
    
    
    
    (55
    )Gain from sale of subsidiaries
    
    
    
    
    
    
    (100
    )Statutory employee profit sharing
    
    
    25
    
    
    
    26
    
    
    
    24Other
    
    
    71
    
    
    
    46
    
    
    
    22Ps.
    451
    
    
    Ps.
    450
    
    
    Ps.
    91
  F-103




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15
    
    Tax loss carryforwardsAs of December 31, 2007, tax loss carryforwards consist of the following:
 Expiration Year
    
    Amount2010
    
    Ps.
    492011
    
    
    192012
    
    
    402013
    
    
    42014
    
    
    2062015
    
    
    22016
    
    
    72017
    
    
    144Ps.
    471
 16
    
    Income and asset taxes
 a.
    
    The Company is subject to ISR, and through 2007, to IMPAC on an individual basis.
ISR is computed taking into consideration the taxable and deductible effects of
inflation, such as depreciation calculated on restated asset values. Taxable income is
increased or reduced by the effects of inflation on certain monetary assets and
liabilities through the inflationary component, which is similar to the gain or loss
from monetary position. As of 2007, the tax rate is 28% and in 2006 it was 29% and 30%
in 2005. For ISR purposes, effective in 2005, cost of sales is deducted instead of
inventory purchases. Beginning in 2006 PTU is deductible when paid.In 2007, IMPAC was calculated by applying 1.25% to the value of the assets of the year,
without deducting any debt amounts. Through 2006, IMPAC was calculated by applying 1.8%
on the net average of the majority of restated assets less certain liabilities,
including liabilities payable to banks and foreign entities. IMPAC is payable only to
the extent that it exceeded ISR payable for the same period.On October 1, 2007, the IETU was enacted and went into effect on January 1, 2008. IETU
applies to the sale of goods, the provision of independent services and the granting of
use or enjoyment of goods, according to the terms of the IETU law, less certain
authorized deductions. The IETU payable is calculated by subtracting certain tax
credits from the tax determined. Revenues, as well as deductions and certain tax
credits, are determined based on cash flows generated beginning January 1, 2008. The
IETU law establishes that the IETU rate will be 16.5% in 2008, 17.0% in 2009, and 17.5%
in 2010 and subsequently. In addition, as opposed to ISR which allows for fiscal
consolidation, companies that expect to incur IETU must file individual returns.Based on its financial projections, the Company estimates that it will pay only ISR in
the future. Therefore, the enactment of IETU did not have any effects on its
consolidated financial information, since it only recognizes deferred ISR.
  F-104




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b.
    
    The income and asset tax expense (benefit) included in the Companys results are:
 2005
    
    
    2006
    
    
    2007Current income tax
    
    Ps.
    154
    
    
    Ps.
    172
    
    
    Ps.
    208Deferred income tax
    
    
    (913
    )
    
    
    (257
    )
    
    
    (104
    )(759
    )
    
    
    (85
    )
    
    
    104Asset tax
    
    
    10
    
    
    
    8
    
    
    
    48Ps.
    (749
    )
    
    Ps.
    (77
    )
    
    Ps.
    152
 To determine deferred income taxes as of December 31, 2005, 2006 and 2007, the Company
applied the different tax rates that will be in effect to the temporary differences
according to their estimated dates of reversal.
 c.
    
    Net deferred tax assets presented in the consolidated balance sheets consist of
the following
 2006
    
    
    2007Assets:Allowance for doubtful accounts
    
    Ps.
    32
    
    
    Ps.
    25Reserve for employee retirement obligation
    
    
    86
    
    
    
    53Tax loss carryforwards
    
    
    168
    
    
    
    165Asset tax credit carryforwards
    
    
    27
    
    
    
    1Derivate financial instruments
    
    
    14
    
    
    
    18Intangible asset
    
    
    541
    
    
    
    491Other
    
    
    119
    
    
    
    100987
    
    
    
    853Liabilities:Fixed assets
    
    
    486
    
    
    
    283Other
    
    
    24510
    
    
    
    283Net deferred tax asset
    
    Ps.
    477
    
    
    Ps.
    570Deferred tax liabilities of foreign subsidiaries
    
    Ps.
    89
    
    
    Ps.
    76
 d.
    
    Following is a reconciliation between the Companys effective income tax rate and
the statutory rate:
 2005
    
    
    2006
    
    
    2007Effective income tax rate
    
    
    234
    %
    
    
    12
    %
    
    
    61
    %Asset tax included as income tax
    
    
    3
    
    
    
    
    
    
    
    (21
    )Intangible asset
    
    
    (204
    )
    
    
    1
    
    
    
    (17
    )Effect of reduction in statutory rate on deferred ISR
    
    
    (1
    )
    
    
    8
    
    
    
    Foreign subsidiaries
    
    
    6
    
    
    
    4
    
    
    
    17Investment subsidy
    
    
    
    
    
    
    
    
    
    
    (4
    )Other
    
    
    (8
    )
    
    
    4
    
    
    
    (8
    )Statutory income tax rate
    
    
    30
    %
    
    
    29
    %
    
    
    28
    %
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e.
    
    Changes in stockholders equity for shortfall in restatement of capital and the
minimum labor liability adjustment are presented net of the deferred tax effect as
follows:
 2005
    
    
    2006
    
    
    2007Shortfall in restatement of capital
    
    Ps.
    (42
    )
    
    Ps.
    97
    
    
    Ps.
    98Minimum labor liability adjustment
    
    
    4
    
    
    
    (5
    )
    
    
    (24
    )Ps.
    (38
    )
    
    Ps.
    92
    
    
    Ps.
    74
 17
    
    Business dispositions and acquisitions
 a)
    
    Sale of Química M, S.A. de C.V. (Química M) On March 2, 2006, the Company
sold its 51% interest in Química M, to Solutia Inc. for US$20 million in cash. Solutia
is now the sole owner of this Mexican operation which was formed in 1995. Química M was
a joint venture between Vitro Plan and Solutia and is located near the city of Puebla,
Mexico. Química M is engaged in the production of PVB (polyvinyl butyral) interlayer,
which is used by major glass producers such as Vitro to make laminated glass for use in
automobiles and buildings. .
 b)
    
    Visteon Corporations retirement from Vitro Flex, S.A. de C.V. (Vitro Flex)  
On September 29, 2006, Viméxico and Visteon Inc. (Visteon) ended their joint venture
agreement in Vitro Flex through a reimbursement and cancellation of Visteons capital
investment. Viméxico is now the sole owner of Vitro Flex. Vitro Flex was a joint venture
formed in 1979 with Fairlane Holdings (Fairlane), a Visteon affiliate. Vitro Flex
primarily manufactures tempered and laminated glass for use in Ford vehicles. Fairlane
will receive US$9.4 million for the 38% stake in Vitro Flex. An initial payment of US$2
million was made on September 29, 2006, which will be followed by four annual payments
of US$1.85 million, starting on September 30, 2007. The transaction is being funded by
Vitro Flex with cash from operations. The difference between the transaction value and
the book value result in a credit of Ps 70, recorded in majority stockholders equity.
Vitro Flex together with Vitro Automotriz (VAU) will now directly manage their
relationship with Ford and will serve all Vitros automotive customers. Under the prior
structure, contractual restrictions limited Vitro Flexs ability to use excess capacity
for non-Ford units.
 c)
    
    Acquisition of 55% of the shares of PVA   On August 29, 2007, Vitro VyC a
subsidiary of Viméxico, acquired 55% of the outstanding shares of PVA, a company
dedicated to the installation of value added crystal products for Ps 110. As a result of
the preliminary purchase price allocation, the Company recorded
goodwill of Ps. 85.
 d)
    
    Acquisition of 50% of the shares of Vitro AFG On July 3, 2007, Viméxico
exercised its option to acquire the remaining 50% of the outstanding shares of Vitro AFG
from its joint venture partner AFG Industries, a subsidiary of Asahi Glass Co. Limited
(a Japanese company) to assume control and increase its ownership to 100%. The
transaction closed on July 24, 2007 with Vitro paying AFG Industries US$6 million in
cash and subsequently changing Vitro AFGs legal name to Vidrio y Cristal del Noroeste,
S.A. de C.V.Vitro AFG, which is located in Mexicali, Baja California, Mexico, was formed in November
2003 as a 50/50 joint venture between Vitro and AFG Industries, with the closing of this
transaction, Viméxico terminated the joint venture and became the sole owner of this
entity, whose primary operations include the manufacture, processing
and distribution of flat glass, thereby increasing Vitros available production capacity
by 78,000 tons.
 In accordance with NIF B-7, Business Acquisitions, the acquisition was accounted for
using the purchase method. In conjunction with the acquisition, the Company recognized
an impairment charge of Ps 91 related to the termination of the joint venture.
  F-106




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18
    
    Transactions and balances with related parties
 The main transactions and balances with affiliated companies not shown separately in the
financial statements are as follows:
 2005
    
    
    2006
    
    
    2007Trade receivables
    
    Ps.
    41
    
    
    Ps.
    21
    
    
    Ps.
    5Other receivables
    
    
    234
    
    
    
    126
    
    
    
    191Trade payables
    
    
    13
    
    
    
    10
    
    
    
    33Net sales
    
    
    2
    
    
    
    1
    
    
    
    14Cost of sales
    
    
    124
    
    
    
    139
    
    
    
    95Operating expenses
    
    
    238
    
    
    
    231
    
    
    
    200Interest income
    
    
    5
    
    
    
    46
    
    
    
    Exchange loss (gain)
    
    
    (12
    )
    
    
    2
    
    
    
    (6
    )Interest expense
    
    
    306
    
    
    
    454
    
    
    
    325Other (income) expenses, net
    
    
    (6
    )
    
    
    (26
    )
    
    
    80
 19
    
    New accounting principlesIn 2007, the Mexican Board for Research and Development of Financial Information Standards
(CINIF) issued the following NIFs and Interpretations of Financial Reporting Standards
(INIF), which became effective for fiscal years beginning on January 1, 2008:
 
    
    NIF B-2, Statement of Cash Flows.
    
    NIF B-10, Effects of Inflation.
    
    NIF B-15, Translation of Foreign Currencies.
    
    NIF D-3, Employee Benefits.
    
    NIF D-4, Income Taxes
    
    INIF 5, Recognition of the Additional Consideration Agreed to at the
Inception of a Derivative Financial Instrument to Adjust It to Fair Value.
    
    INIF 6, Timing of Formal Hedge Designation.
    
    INIF 7, Application of Comprehensive Income or Loss Resulting From a
Cash Flow Hedge on a Forecasted Purchase of a Non-Financial Asset.
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Some of the significant changes established by these standards are as follows:
 
    
    NIF B-2, Statement of Cash Flows. This NIF establishes general rules for the
presentation, structure and preparation of a cash flow statement, as well as the
disclosures supplementing such statement, which replaces the statement of changes in
financial position. NIF B-2 requires that the statement show a companys cash inflows
and outflows during the period. Line items should be preferably presented gross. Cash
flows from financing activities are now presented below those from investing
activities (a departure from the statement of changes in financial position). In
addition, NIF B-2 allows entities to determine and present their cash flows from
operating activities using either the direct or the indirect method.
 
    
    NIF B-10, Effects of Inflation. CINIF defines two economic environments: a)
inflationary environment, when cumulative inflation of the three preceding years is 26%
or more, in which case, the effects of inflation should be recognized using the
comprehensive method; and b) non-inflationary environment, when cumulative inflation of
the three preceding years is less than 26%, in which case, no inflationary effects
should be recognized in the financial statements. Additionally, NIF B-10 eliminates the
replacement cost and specific indexation methods for inventories and fixed assets,
respectively, and requires that the cumulative gain or loss from holding non-monetary
assets be reclassified to retained earnings, if such gain or loss is realized; the gain
or loss that is not realized will be maintained in stockholders equity and charged to
current earnings of the period in which the originating item is realized.
 
    
    NIF B-15, Translation of Foreign Currencies. NIF B-15 eliminates classification of
integrated foreign operations and foreign entities and incorporates the concepts of
accounting currency, functional currency and reporting currency. NIF B-15 establishes
the procedures to translate the financial information of a foreign subsidiary: i) from
the accounting to the functional currency; and ii) from the functional to the reporting
currency, and allows entities to present their financial statements in a reporting
currency other than their functional currency.
 
    
    NIF D-3, Employee Benefits. This NIF include current and deferred PTU. Deferred
PTU should be calculated using the same methodology established in NIF D-4. It also
includes the career salary concept and the amortization period of most items is reduced
to five years, as explained below:
 The following unrecognized items will be amortized over a 5-year period, or less, if
employees remaining labor life is less than 5 years:
 
    
    The beginning balance of transition obligation for severance and retirement
benefits.
    
    The beginning balance of prior service cost and plan amendments.
    
    The beginning balance of gains and losses from seniority premiums and
pension benefits should be amortized over a 5-year period (net of the
transition obligation), with the option to fully amortize such item against
the results of 2008.
    
    The beginning balance of gains and losses from severance benefits should be
amortized against the results of 2008.
 
    
    NIF D-4, Income Taxes. This NIF relocates accounting for current and deferred PTU
to NIF D-3, eliminates the permanent difference concept, redefines and incorporates
various definitions and requires that the cumulative ISR effect be reclassified to
retained earnings, unless it is identified with some of the other comprehensive income
items that have not been applied against current earnings.
 
    
    INIF 5, Recognition of the Additional Consideration Agreed to at the Inception of a
Derivative Financial Instrument to Adjust It to Fair Value. INIF 5 states that any
additional consideration agreed to at the inception of a derivative financial instrument
to adjust it to its fair value at that time should be part of the instruments initial
fair
value and not subject to amortization as established by paragraph 90 of Bulletin C-10.
INIF 5 also establishes that the effect of the change should be prospectively
recognized, affecting results of the period in which this INIF becomes effective. If
the effect of the change is material, it should be disclosed.
  F-108




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
    
    INIF 6, Timing of Formal Hedge Designation. INIF 6 states that hedge designations
may be made as of the date a derivative financial instrument is contracted, or at a
later date, provided its effects are prospectively recognized as of the date when formal
conditions are met and the instrument qualifies as a hedging relationship. Paragraph
51a) of Bulletin C-10 only considered the hedge designation at the inception of the
transaction.
 
    
    INIF 7, Application of Comprehensive Income or Loss Resulting From a Cash Flow Hedge
on a Forecasted Purchase of a Non-Financial Asset. INIF 7 states that the effect of a
hedge reflected in other comprehensive income or loss resulting from a forecasted
purchase of a non-financial asset should be capitalized within the cost of such asset,
whose price is set through a hedge, rather than reclassifying the effect to the results
of the period affected by the asset, as required by Paragraph 105 of Bulletin C-10. The
effect of this change should be recognized by applying any amounts recorded in other
comprehensive income or loss to the cost of the acquired asset, as of the effective date
of this INIF.
 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.
 20
    
    Authorization of financial statements issuanceOn February 29, 2008 the issuance of the consolidated financial statements was authorized by:Ing. Hugo A. Lara García
Chief Executive OfficerIng. Jorge Mario Guzmán Guzmán
Chief Financial Officer
 These consolidated financial statements are subject to approval at the ordinary stockholders
meeting, who may modify the financial statements, based on provisions set forth by the
Mexican General Corporate Law. 21
    
    Differences between Mexican Financial Reporting Standards and accounting principles
generally accepted in the United States of AmericaThe Companys consolidated financial statements are prepared in accordance with Mexican FRS,
which differ in certain significant respects from accounting principles generally accepted in
the United States of America (U.S. GAAP). The Mexican FRS consolidated financial statements
include the effects of inflation as provided for under Bulletin B-10, (see note 3 b), whereas
financial statements prepared under U.S. GAAP are presented on a historical basis. However,
the following reconciliation to U.S. GAAP does not include the reversal of the adjustments
required under Bulletin B-10, permitted by the
rules and regulations of the Securities and Exchange Commission (the SEC). The application
of Bulletin B-10 represents a comprehensive measure of the effects of price level changes in
the inflationary Mexican economy and, as such, is considered a more meaningful presentation
than historical cost-based financial reporting for both Mexican and U.S. accounting purposes.
 F-109




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As mentioned in Note 19, NIF B-10, is effective January 1, 2008. NIF B-10 revised the
accounting for inflation such that the inflation accounting methods summarized in note 3 b)
will no longer apply unless the economic environment in Mexico qualifies as inflationary
for purposes of Mexican FRS. Given the cumulative inflation in Mexico for the three years
ended December 31, 2007, the Mexican economic environment will not qualify as inflationary in
2008, thereby eliminating inflationary accounting in the Companys consolidated Mexican FRS
financial statements. This will result in the elimination of certain reconciling items
between Mexican FRS and U.S. GAAP in 2008 and thereafter as discussed in inserts (d) and (g)
below.The other differences between Mexican FRS and U.S. GAAP and the effect on consolidated net
income (loss) and consolidated stockholders equity are presented below:
 Year ended December 31,2005
    
    
    2006
    
    
    2007Net majority income (loss) reported under Mexican FRS
    
    Ps.
    112
    
    
    Ps.
    (774
    )
    
    Ps.
    (86
    )U.S. GAAP adjustments:Effect of the adjustments below on minority interest (see a)
    
    
    2
    
    
    
    
    
    
    
    3Deferred income taxes (see b)
    
    
    (387
    )
    
    
    (182
    )
    
    
    (37
    )Deferred workers profit sharing (see c)
    
    
    (16
    )
    
    
    (15
    )Monetary position result on deferred income taxes and
deferred workers profit sharing (see d)
    
    
    (2
    )
    
    
    13
    
    
    
    17Capitalization of interest (see e)
    
    
    18
    
    
    
    9
    
    
    
    Amortization of capitalized interest (see e)
    
    
    (6
    )
    
    
    (8
    )
    
    
    (4
    )Effect of applying Bulletin B-10 (see g)
    
    
    (70
    )
    
    
    (68
    )
    
    
    (21
    )Effect of applying Bulletin B-15 (see h)
    
    
    (7
    )
    
    
    4Derivative financial instruments (see i)
    
    
    188
    
    
    
    
    
    
    
    Employee retirement obligations (see j)
    
    
    8
    
    
    
    11
    
    
    
    (7
    )Purchase of Visteons capital investment (see k)
    
    
    
    
    
    
    1
    
    
    
    5Impairment of longlived assets (see l)
    
    
    65
    
    
    
    379
    
    
    
    (10
    )Total U.S. GAAP adjustments
    
    
    (207
    )
    
    
    144
    
    
    
    (54
    )Net (loss) under U.S. GAAP
    
    Ps.
    (95
    )
    
    Ps.
    (630
    )
    
    Ps.
    (140
    )
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Year ended December 31,2006
    
    
    2007Total stockholders equity reported under Mexican FRS
    
    Ps.
    5,954
    
    
    Ps.
    6,047Less minority interest included as stockholders equity under Mexican FRS (See a)
    
    
    (1,438
    )
    
    
    (1,594
    )Majority stockholders equity under Mexican FRS
    
    
    4,516
    
    
    
    4,453US GAAP adjustments:Effect of the adjustments below on minority interest (see a)
    
    
    (51
    )
    
    
    (49
    )Deferred income taxes (see b)
    
    
    (510
    )
    
    
    (541
    )Capitalization of interest (see e)
    
    
    43
    
    
    
    42Accumulated amortization of capitalized interest (see e)
    
    
    (19
    )
    
    
    (22
    )Goodwill (see f)
    
    
    125
    
    
    
    124Effect of applying Bulletin B-10 (see g)
    
    
    20
    
    
    
    (18
    )Effect of applying Bulletin B-15 (see h)
    
    
    (119
    )Effect of SFAS No. 158 (see j)
    
    
    (131
    )
    
    
    (163
    )Employee retirement obligations (see j)
    
    
    (31
    )
    
    
    (38
    )Purchase of Visteons capital investment (see k)
    
    
    (71
    )
    
    
    (67
    )Impairment of longlived assets (see l)
    
    
    399
    
    
    
    390Total U.S. GAAP adjustments
    
    
    (345
    )
    
    
    (342
    )Total stockholders equity under U.S. GAAP
    
    Ps.
    4,171
    
    
    Ps.
    4,111
 a)
    
    Minority interestUnder Mexican FRS, minority interest in consolidated subsidiaries is presented as a
separate component within the stockholders equity section in the consolidated balance
sheet. For U.S. GAAP purposes, minority interest is not included in stockholders equity
and is presented below total liabilities and above the stockholders equity section in
the consolidated balance sheet.As discussed in insert (o) SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51, will be effective for the Company
beginning January 1, 2009. SFAS No. 160 modifies the presentation of minority interest
in the balance sheet and statement of income similar to that of Mexican FRS, for which
reason the Company anticipates that this difference will no longer be applicable
beginning January 1, 2009.
 b)
    
    Deferred income taxesUnder Mexican FRS as required by Bulletin D-4, Accounting for Income Tax, Tax on Assets
and Employee Statutory Profit Sharing, income taxes are charged to results as they are
incurred and the Company recognizes deferred income tax assets and liabilities for the
future consequences of temporary differences between the financial statement carrying
amounts of assets and liabilities and their respective income tax bases, measured using
enacted rates. The effects of changes in the statutory rates are accounted for in the
period that includes the enactment date. Deferred income tax assets are also recognized
for the estimated future effects of tax loss carryforwards and asset tax credit
carryforwards. Deferred tax assets are recognized only when it is highly probable that
sufficient future taxable income will be generated to recover such deferred tax assets.
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Under U.S. GAAP, as required by SFAS No. 109, Accounting for Income Taxes, the Company
recognizes deferred income tax assets and liabilities for the future consequences of
temporary differences between the financial statement carrying amounts of assets and
liabilities and their respective income tax bases, measured using enacted rates. The
effects of changes in the statutory rates are accounted for in the period that includes
the enactment date. Deferred income tax assets are also recognized for the estimated
future effects of tax loss carryforwards and asset tax credit carryforwards.The ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income, and tax planning strategies in making this assessment.
Based upon the level of historical taxable income, projections of future taxable income
over the periods in which the deferred tax assets are deductible and tax planning
strategies that would be taken to prevent an operating loss or tax credit carryforward
from expiring unused, management believes it is more likely than not that the Company
will realize the benefits of these deductible differences, net of the existing valuation
allowance at December 31, 2007.For U.S. GAAP purposes the Company recognizes deferred taxes each period for the changes
in the taxable portions of its distributable stockholders equity. The Companys policy
is to compare the deferred tax balance that would be required if all of the stockholders
equity were distributed. This amount is compared to the total deferred tax balance
recorded prior to this adjustment. The difference between the amount recorded and the
amount calculated from the stockholders  equity taxable accounts is recorded as an
adjustment to deferred taxes as of the balance sheet date.For U.S. GAAP purposes the Company recognizes a deferred tax asset for the temporary
difference that exists between the book basis and the tax basis of its foreign
subsidiaries that legally own Vitros intellectual property at the applicable tax rate in
the foreign jurisdiction based on the expected reversal date. For Mexican FRS purposes,
the Company recognizes a deferred tax asset for the temporary difference that exists
between the book basis and the tax basis at the applicable rate in Mexico, which is where
it expects to recognize such benefits.U.S. GAAP differences as described in the reconciliations above, to the extent taxable
are reflected in the U.S. GAAP deferred tax balances.In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No.
48, Accounting for Uncertainty in Income Taxes. FIN 48 provides detailed guidance for
the financial statement recognition, measurement and disclosure of uncertain tax
positions recognized in an enterprises financial statements in accordance with Statement
of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. FIN 48
requires an entity to recognize the financial statement impact of a tax position when it
is more likely than not that the position will be sustained upon examination. If the tax
position meets the more-likely-than-not recognition threshold, the tax effect is
recognized at the largest amount of the benefit that is greater than 50% likely of being
realized upon ultimate settlement. Any difference between the tax position taken in the
tax return and the tax position recognized in the financial statements using the criteria
above results in the recognition of a liability in the financial statements for the unrecognized benefit. Similarly, if a tax position fails to
meet the more-likely-than-not recognition threshold, the benefit taken in the tax return
will also result in the recognition of a liability in the financial statements for the
full amount of the unrecognized benefit. FIN 48 became effective for fiscal years
beginning after December 15, 2006 for public entities and their subsidiaries. The
Company adopted FIN 48 as of January 1, 2007, as required. The provisions of FIN 48 were
applied to all tax positions under SFAS No. 109 upon initial adoption. The impact of
adopting this interpretation was not material to the Companys consolidated financial
position, results of operations or cash flows.
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It is the Companys policy to classify interest and penalties related to income tax
related matters within income tax expense and other expenses, respectively. The Companys
significant operations are all located in Mexico, the United States of America and Spain.
The tax laws in these jurisdictions permit the respective tax authorities to examine
previously filed tax returns for the following years:
 Mexico
    
    U.S.
    
    Spain2003-2007
    
    2003-2007
    
    2004-2007
 c)
    
    Deferred workers profit sharingIn accordance with Mexican FRS the Company determines the provision for deferred workers
profit sharing by applying the partial accrual method of Bulletin D-4 applicable to
temporary differences between the financial and adjusted tax income that are expected to
reverse within a defined period. For U.S. GAAP purposes the Company accrues for workers
profit sharing based on a liability approach similar to accounting for income taxes under
SFAS No. 109.As discussed in note 21, NIF D-3, Employee Benefits, is effective beginning January 1,
2008, which will require companies to calculate deferred PTU using a similar balance
sheet methodology similar to that required by U.S. GAAP.
 d)
    
    Monetary position result on deferred income taxes and deferred workers profit
sharingThe monetary position result is determined by (i) applying the annual inflation factor to
the net monetary position of the U.S. GAAP adjustments at the beginning of the period,
plus (ii) the monetary position effect of such adjustments during the period, determined
in accordance with the weighted average inflation factor.As discussed in the introduction to this note as well as note 19, beginning January 1,
2008 with the issuance of NIF B-10, the Company expects that the basic financial
statements under Mexican FRS will no longer include inflationary effects, for which
reason, this reconciling item will no longer be applicable in the future.
 e)
    
    Capitalization of interestUnder Mexican FRS beginning January 1, 2007, the Company adopted NIF D-6, Capitalization
of Comprehensive Financing Result, accordingly the capitalization of the comprehensive
financing result (interest expense, foreign exchange results and monetary position
result) generated by borrowings obtained to finance investment
directly attributable to the acquisition of qualifying assets is mandatory. Prior to the
adoption of NIF D-6, the Company did not capitalize the comprehensive financing result as
it was optional.
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In accordance with SFAS No. 34, Capitalization of Interest Cost, if the comprehensive
financing result is incurred during the construction of qualifying assets, capitalization
is required as part of the cost of such assets. Accordingly, until December 31, 2006 a
reconciling item for the capitalization of a portion of the comprehensive financing
result was included in the U.S. GAAP reconciliation of the majority net income and
majority stockholders equity. The amortization expense and related accumulated
amortization of such items generates a difference compared to Mexican FRS.Beginning on January 1, 2007, a reconciling item is generated for borrowings denominated
in U.S. dollars, related to foreign exchange results and the monetary position result,
which is capitalized under Mexican FRS and not for U.S. GAAP. If the borrowings are
denominated in Mexican pesos, the amount of interest to be capitalized as noted above is
reduced by the gain on monetary position associated with the debt.f)
    
    GoodwillUnder Mexican FRS, until December 31, 2004 goodwill represented the excess of cost over
book value of subsidiaries as of the date of acquisition and was restated using the NCPI
and amortized using the straight-line method over 20 years. Beginning on January 1, 2005,
goodwill represents the excess of cost over fair value of subsidiaries as of the date of
acquisition. Goodwill is restated using the NCPI and at least once a year is subject to
impairment test, as it ceased to be amortized under the provisions of Bulletin B-7In accordance with SFAS No. 142, Goodwill and Other Intangibles Assets, beginning in
2002 goodwill and indefinite-lived assets are also no longer subject to amortization, but
rather are subject at least once a year to impairment tests.The difference between Mexican FRS and U.S. GAAP as it relates to this item is due to the
accumulate amortization of goodwill recorded under Mexican FRS that has been reversed in
the reconciliation of stockholders equity for purposes of U.S. GAAP.g)
    
    Effect of applying Bulletin B-10As discussed in note 3 g), under Mexican FRS Bulletin B-10 allows the restatement of the
value of machinery and equipment purchased in a foreign country using the consumer price
index of the country of origin and the period-end exchange rate. For U.S. GAAP purposes,
such restatement is based on the NCPI.As discussed in the introduction to this note as well as Note 19, beginning January 1,
2008 with the issuance of NIF B-10, the Company expects that the basic financial
statements under Mexican FRS will no longer include inflationary effects, for which
reason, this reconciling item will no longer be applicable in the future. Further, even
during inflationary periods, the alternate methodology described above has been
eliminated by NIF B-10.
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h)
    
    Effect of applying Bulletin B-15In 1997, the IMCP issued Bulletin B-15, Foreign Currency Transactions and Translation of
Financial Statements of Foreign Operations, which specifies the procedures to be applied
in the consolidation of foreign subsidiaries by Mexican companies for (i) current year
amounts and (ii) prior year amounts, presented for comparative purposes. The Companys
accounting policies for the consolidation of its foreign subsidiaries are described in
notes 2 c) and 3 b). Such policies conform to the requirements of Bulletin B-15.The Company believes that the application of the methodology of Bulletin B-15 to
translate the current year amounts for foreign operations does not result in a difference
between Mexican FRS and U.S. GAAP that must be reconciled in order to comply with the
rules and regulations of the SEC.However, there are two methods allowed under Bulletin B-15 to restate prior year amounts
for foreign subsidiaries. Vitro uses the method that reconsolidates prior year balances
by restating foreign subsidiaries using the current inflation rate in the foreign country
and translating into pesos using the year-end exchange rate. Management believes that
this methodology of Bulletin B-15 used to restate prior years balances for comparative
purposes does not conform to the requirements of SEC Rule 3-20e of Regulation S-X, which
requires all amounts in financial statements to be presented in the same reporting
currency. Accordingly, in filings with the SEC, the Company includes an adjustment for
the difference in methodologies of restating prior year balances.i)
    
    Derivative financial instrumentsAs of January 1, 2005, in accordance with Mexican FRS, as mentioned in note 3 a), the
Company values and records all derivative instruments and hedging activities according to
Bulletin C-10  Derivative Financial Instruments and Hedging Activities, which
establishes similar accounting treatment as described in SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. Prior to the implementation of Bulletin
C-10, financial instruments entered into for hedging purposes were valued using the same
valuation criteria of the underlying assets or liabilities hedged, and the effect of such
valuation was recognized in net income, net of costs, expenses or income from the assets
or liabilities whose risks were being hedged.The Company determined that the accounting for derivative financial instruments is the
same for Mexican FRS and U.S. GAAP as they relate to their consolidated financial
statements as of and for the year ended December 31, 2005, 2006 and 2007. The effects of
the initial application of Bulletin C-10 were already reflected in the U.S. GAAP
financial statements for 2004. Therefore, the cumulative effect of the change in
accounting principle is reconciled out of the amounts presented in the U.S. GAAP income
statement for 2005.
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j)
    
    Employee retirement obligationsThe Company maintains defined benefit pension plans for all of its subsidiaries and
provides for seniority premiums and severance payments (severance indemnities) for all of
its Mexican subsidiaries. For its Mexican FRS consolidated financial statements,
the Company applies Bulletin D-3, Labor Obligations. Prior to 2006, the accounting
treatment for pensions and seniority premiums set forth in this Bulletin is substantially
the same as those set forth in SFAS No. 87, Employers Accounting for Pensions. The
Company records the pension cost determined by actuarial computations, as described in
notes 3 k) and 10. Significant assumptions (weighted-average rates) used in determining
net periodic pension cost and the Companys related pension obligations for 2007, 2006
and 2005 are also described in note 10.The Company adopted SFAS No. 158, Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R),
in its December 31, 2006 consolidated financial statements. This statement requires
companies to (1) fully recognize, as an asset or liability, the over funded or under
funded status of defined pension and other postretirement benefit plans; (2) recognize
changes in the funded status through other comprehensive income in the year in which the
changes occur; and (3) provide enhanced disclosures. There is no impact on results of
operations or cash flows. Retrospective application of this standard is not permitted.The Company has prepared a study of pension costs under U.S. GAAP based on actuarial
calculations using the same assumptions applied under Mexican FRS (see note 3 k). Prior
to the adoption of SFAS No. 158, there was no difference in the liabilities for pension
plans and seniority premiums between Mexican FRS and U.S. GAAP.Severance indemnities  Under Mexican FRS, effective 2005 revised Bulletin D-3 requires
the recognition of a severance indemnity liability calculated based on actuarial
computations. Similar recognition criteria under U.S. GAAP are established in SFAS No.
112, Employers Accounting for Postemployment Benefits, which requires that a liability
for certain termination benefits provided under an ongoing benefit arrangement such as
these statutorily mandated severance indemnities, be recognized when the likelihood of
future settlement is probable and the liability can be reasonably estimated. Mexican FRS
allows for the Company to amortize the transition obligation related to the adoption of
revised Bulletin D-3 over the expected service life of the employees. However, U.S. GAAP
required the Company to recognize such effect upon initial adoption, which results in a
difference in the amount recorded under the two accounting principles.k)
    
    Purchase of Visteons capital investmentIn connection with the termination of the joint venture agreement between Viméxico and
Visteon discussed in note 17 b), under Mexican FRS as established in Bulletin B-7
Business Acquisitions, the Company recognized the difference between the price paid and
the book value of Ps 70 as a credit in the majority stockholders equity. Under U.S.
GAAP, in accordance with SFAS No. 141, Business Combinations the excess over cost of Ps
90 was allocated as a pro rata reduction of the acquired assets.
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l)
    
    Impairment of long-lived assetsFor U.S. GAAP purposes, in accordance with SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The carrying amount of an asset is not
recoverable when the estimated future undiscounted cash flows expected to result from the
use of the asset are less than the carrying value of the asset. Impairment is recorded
when the carrying amount of the asset exceeds its fair value. Impairment charges and
asset write-downs are presented in selling, general and administrative expenses in
operating income in our U.S. GAAP consolidated financial statements.For Mexican FRS purposes, in accordance with Bulletin C-15, Impairment of long-lived
assets, 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 amount of the asset exceeds the
greater of the amounts mentioned above. Impairment charges and asset write-downs are
presented in other expenses in our Mexican FRS consolidated financial statements.In 2005 and 2006, for Mexican FRS purposes, while performing its annual impairment test
using its best estimates based on reasonable and supportable assumptions and projections,
the Company recorded an impairment charge of Ps 111 and Ps 334, respectively as the
carrying amount of the long-lived assets exceeded the present value of their future
discounted cash flows. For U.S. GAAP purposes no impairment charge was recorded as the
assets were considered to be recoverable given that the estimated undiscounted cash flows
expected to result from the use of the assets were greater then the carrying value of the
asset.In 2005 for U.S. GAAP purposes, based on fair value appraisals received the Company
recorded an impairment charge of Ps 45 for land and buildings located at its corporate
offices classified as available for sale in accordance with SFAS No. 144. This charge is
recorded in operating income for U.S. GAAP purposes. Under Mexican FRS, the assets did
not meet the definition of held for sale as required by Bulletin C-15 as such assets were
still in use by the Company at that time. The discounted cash flow analysis performed by
the Company did not result in an impairment charge for Mexican FRS purposes. During 2006
the Company sold one of its buildings located at its corporate headquarters recognizing a
loss on sale of Ps 138 under Mexican FRS and Ps 93 under U.S. GAAP.m)
    
    ReclassificationsGain or loss on sale of assets  The gain or loss on sale of assets that do not meet the
definition of a component of a business as described in SFAS No. 144 are included in
operating income in the Companys U.S. GAAP consolidated financial statements. Gains or
losses on sales of assets not presented as discontinued operations under Mexican FRS are
included in other expenses in the Companys consolidated Mexican FRS financial statements
(see note 14).Classification of workers profit sharing  Under Mexican FRS, statutory employee profit
sharing is presented under other income and expenses. In the Companys U.S. GAAP
statements of operations, workers profit sharing expense is classified as an operating
expense.Restructuring charges  During 2006 and 2007, the Company restructured certain operating
units and its corporate and administrative functions. For Mexican FRS
purposes the corresponding costs met the definition of a restructuring charge and were
included in other expenses in the Companys consolidated financial statements, but for
U.S. GAAP purposes the Company applied SFAS No. 112, Employers Accounting for
Postemployment Benefits. These costs are included in general and administrative expenses
in the accompanying U.S. GAAP consolidated statements of operations.
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n)
    
    Supplemental U.S. GAAP Cash Flow InformationThe classifications of cash flows under Mexican FRS and U.S. GAAP are basically the same
in respect of the transactions presented under each caption. The nature of the
differences between Mexican FRS and U.S. GAAP in the amounts reported is primarily due to
(i) the elimination of inflationary effects in the variations of monetary assets and
liabilities arising from financing and investing activities, against the corresponding
monetary position result in operating activities, (ii) the elimination of exchange rate
fluctuations resulting from financing and investing activities, against the corresponding
unrealized foreign exchange gain or loss included in operating activities, and (iii) the
recognition in operating, financing and investing activities of the U.S. GAAP
adjustments.The following table summarizes the cash flow items as required under SFAS No. 95,
Statement of Cash Flows, provided by (used in) operating, financing and investing
activities for the years ended December 31, 2005, 2006 and 2007, giving effect to the
U.S. GAAP adjustments, excluding the effects of inflation required by Bulletin B-10 and
Bulletin B-15. The following information is presented, in millions of pesos, on a
historical peso basis and it is not presented in pesos of constant purchasing power:
 Years ended December 31,2005
    
    
    2006
    
    
    2007Net cash provided by (used in) operating activities
    
    Ps.
    615
    
    
    Ps.
    (293
    )
    
    Ps.
    549Net cash provided by (used in) financing activities
    
    
    33
    
    
    
    (142
    )
    
    
    (7
    )Net cash (used in) provided by investing activities
    
    
    (525
    )
    
    
    308
    
    
    
    (505
    )
 Net cash flow from operating activities reflects cash payments for interest and income
taxes as follows:
 Years ended December 31,2005
    
    
    2006
    
    
    2007Interest paid
    
    Ps.
    535
    
    
    Ps.
    658
    
    
    Ps.
    373Income taxes paid
    
    
    104
    
    
    
    151
    
    
    
    204
 o)
    
    Recently Issued Accounting StandardsIn February 2007, the FASB issued Statement of Financial Accounting Standards No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities  including an
amendment of FASB Statement No. 115. SFAS No. 159 gives the Company the irrevocable
option to carry most financial assets and liabilities at fair value that are not
currently required to be measured at fair value. If the fair value option is elected,
changes in fair value would be recorded in earnings at each subsequent reporting date.
SFAS No. 159 is effective for the Companys 2008 fiscal year. The Company is currently
evaluating the impact the adoption of this statement could have on its financial
condition, results of operations and cash flows.
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In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurement. SFAS
No. 157 defines fair value, establishes a framework for the measurement of fair value,
and enhances disclosures about fair value measurements. The Statement does not require
any new fair value measures. The Statement is effective for fair value measures already
required or permitted by other standards for fiscal years beginning after November 15,
2007. The Company is required to adopt SFAS No. 157 beginning on January 1, 2008. SFAS
No. 157 is required to be applied prospectively, except for certain financial
instruments. Any transition adjustment will be recognized as an adjustment to opening
retained earnings in the year of adoption. On February 12, 2008, the FASB issued FSP FAS
157-1 and FSP FAS 157-2, which remove leasing transactions accounted for under SFAS No.
13, Accounting for Leases from the scope of SFAS No. 157 and partially defer the
effective date of SFAS No. 157 as it relates all nonrecurring fair value measurements of
nonfinancial assets and nonfinancial liabilities until fiscal years beginning after
November 15, 2008. The Company is currently evaluating the impact of adopting SFAS No.
157 on its results of operations and financial position.In December 2007, the FASB issued SFAS No. 141(R), Business Combinationsa replacement
of FASB No. 141. SFAS No. 141(R) requires (a) a company to recognize the assets
acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at
fair value as of the acquisition date; and (b) an acquirer in preacquisition periods to
expense all acquisition-related costs. SFAS No. 141(R) requires that any adjustments to
an acquired entitys deferred tax asset and liability balance that occur after the
measurement period be recorded as a component of income tax expense. The presentation
and disclosure requirements must be applied retrospectively to provide comparability in
the financial statements. Early adoption is prohibited. SFAS No. 141(R) is effective
for fiscal years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. The impact of this standard is dependant upon the level of future
acquisitions.In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51. SFAS No. 160 (a) amends ARB 51 to
establish accounting and reporting standards for the noncontrolling interest in a
subsidiary (to be included within stockholders equity) and the deconsolidation of a
subsidiary; (b) changes the way the consolidated income statement is presented; (c)
establishes a single method of accounting for changes in a parents ownership interest in
a subsidiary that do not result in deconsolidation; (d) requires that a parent recognize
a gain or loss in net income when a subsidiary is deconsolidated; and (e) requires
expanded disclosures in the consolidated financial statements that clearly identify and
distinguish between the interests of the parents owners and the interests of the
noncontrolling owners of a subsidiary. SFAS No. 160 must be applied prospectively but to
apply the presentation and disclosure requirements must be applied retrospectively to
provide comparability in the financial statements. Early adoption is prohibited. SFAS
No. 160 is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. The impact of this standard is dependant upon
the level of future acquisitions.
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In September 2006, the FASBs Emerging Issues Task Force reached a consensus on Issue No.
06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of
Endorsement Split-Dollar Life Insurance Arrangements. EITF 06-4 provides guidance on the
accounting for arrangements in which an employer owns and controls the insurance policy
and has agreed to share a portion of the cash surrender value and/or death benefit with
the employee. This guidance requires an employer to record a postretirement benefit, in
accordance with FASB Statement No. 106, Employers Accounting for Postretirement
Benefits Other Than Pensions, or APB Opinion No. 12, Omnibus Opinion-1967, if there is
an agreement by the employer to share a portion of the proceeds of a life insurance
policy with the employee during the postretirement period. This guidance is effective for
reporting periods beginning after December 15, 2007. The Company is in the process of
assessing the impact of adopting EITF 06-4 on its consolidated financial position and
results of operations; however, the Company currently expects that additional liabilities
may be required to be recognized upon implementation of the consensus based on the
current terms of certain life insurance arrangements with executive officers of the
Company.
 22.
    
    Guarantor and non-guarantor financial information (Information for Viméxico)As disclosed in note 8 c), the Vitro issued US$ 700 million of senior guaranteed notes due
February 1, 2017 callable after year 2012 at a coupon of a 9.125% and US$ 300 million of
senior unsecured notes due February 1, 2012 not callable for the notes  ́ life at a coupon of
8.65% (together the Notes) principally to refinance existing third-party debt at the Vitro
holding company level, substantially all of the third-party debt at its subsidiary VENA and
certain third-party debt at its subsidiary Viméxico.The obligations of the Vitro pursuant to each series of the Notes, including any repurchase
obligation resulting from a change of control, are unconditionally guaranteed, jointly and
severally, on an unsecured basis, by VENA and its wholly-owned subsidiaries and Viméxico and
its wholly-owned subsidiaries.The following of Viméxicos subsidiaries are designated as guarantors as of December 31,
2007; Viméxico, Vitro Automotriz, S.A. de C.V., Vitro Flex, S.A. de C.V, Distribuidora
Nacional de Vidrio, S.A. de C.V., Vitro Vidrio y Cristal, S.A. de C.V., Vitro Flotado
Cubiertas, S.A. de C.V., Distribuidor Vidriero Lan, S.A. de C.V., Vitrocar, S.A. de C.V.,
Cristales Inastillables de México, S.A. de C.V., Vidrio Plano de México, S.A. de C.V., VVP
Holdings Corp., VVP Autoglass, Inc., Vitro America, Inc., Super Sky Products, Inc., Super Sky
International, Inc., VVP Finance Corp., Super Sky Constructors, Inc., Vitro Colombia, S.A.,
VVP Europa Holdings, B.V., Vidrio y Cristal del Noroeste, S.A de C.V., Vidrio Plano, S.A. de
C.V., Distribuidora de Vidrio y Cristal, S.A. de C.V., and Vidrio Plano de Mexicali, S.A. de
C.V.The following condensed consolidating financial information includes separate columnar
information for:
 
    
    Viméxico (the holding company),
    
    Viméxicos combined wholly-owned guarantors , and
    
    Viméxicos combined non-guarantors.Investments in subsidiaries are accounted for by Viméxico under the equity method for purpose
of the supplemental consolidating information. The principal elimination entries
eliminate the Viméxicos investment in subsidiaries and intercompany balances and
transactions.
  F-120




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##### Table of Contents



a)
    
    Supplemental condensed consolidating balance sheets presented in accordance with Mexican
FRS
 Combined
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    and
    
    
    ViméxicoAs of December 31, 2006
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash, trade receivables and other current
assets
    
    Ps.
    3,233
    
    
    Ps.
    741
    
    
    Ps.
    1,576
    
    
    Ps.
    (4,460
    )
    
    Ps.
    1,090Retained undivided interests in securitized
receivables
    
    
    
    
    
    
    693
    
    
    
    
    
    
    
    
    
    
    
    693Inventories, net
    
    
    
    
    
    
    1,675
    
    
    
    380
    
    
    
    (6
    )
    
    
    2,049Current assets
    
    
    3,233
    
    
    
    3,109
    
    
    
    1,956
    
    
    
    (4,466
    )
    
    
    3,832Investments in subsidiaries
    
    
    3,621
    
    
    
    535
    
    
    
    
    
    
    
    (4,156
    )
    
    
    Property plant and equipment, net
    
    
    
    
    
    
    4,795
    
    
    
    963
    
    
    
    
    
    
    
    5,758Deferred taxes
    
    
    64
    
    
    
    300
    
    
    
    113
    
    
    
    
    
    
    
    477Other assets
    
    
    31
    
    
    
    774
    
    
    
    692
    
    
    
    (418
    )
    
    
    1,079Long-term assets
    
    
    3,716
    
    
    
    6,404
    
    
    
    1,768
    
    
    
    (4,574
    )
    
    
    7,314Total assets
    
    Ps.
    6,949
    
    
    Ps.
    9,513
    
    
    Ps.
    3,724
    
    
    Ps.
    (9,040
    )
    
    Ps.
    11,146Short-term borrowings
    
    Ps.
    
    
    
    Ps.
    72
    
    
    Ps.
    191
    
    
    Ps.
    
    
    
    Ps.
    263Trade payables
    
    
    
    
    
    
    667
    
    
    
    317
    
    
    
    (7
    )
    
    
    977Tax liabilities
    
    
    18
    
    
    
    347
    
    
    
    83
    
    
    
    (105
    )
    
    
    343Accrued expenses and other current liabilities
    
    
    2,415
    
    
    
    4,523
    
    
    
    537
    
    
    
    (4,741
    )
    
    
    2,734Current liabilities
    
    
    2,433
    
    
    
    5,609
    
    
    
    1,128
    
    
    
    (4,853
    )
    
    
    4,317Long-term debt
    
    
    
    
    
    
    391
    
    
    
    25
    
    
    
    
    
    
    
    416Employee retirement obligations and other
long-term liabilities
    
    
    
    
    
    
    129
    
    
    
    528
    
    
    
    (198
    )
    
    
    459Long-term liabilities
    
    
    
    
    
    
    520
    
    
    
    553
    
    
    
    (198
    )
    
    
    875Total liabilities
    
    
    2,433
    
    
    
    6,129
    
    
    
    1,681
    
    
    
    (5,051
    )
    
    
    5,192Total majority interest
    
    
    4,516
    
    
    
    3,384
    
    
    
    2,043
    
    
    
    (5,427
    )
    
    
    4,516Minority interest in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,438
    
    
    
    1,438Total stockholders equity
    
    
    4,516
    
    
    
    3,384
    
    
    
    2,043
    
    
    
    (3,989
    )
    
    
    5,954Total liabilities and stockholders equity
    
    Ps.
    6,949
    
    
    Ps.
    9,513
    
    
    Ps.
    3,724
    
    
    Ps.
    (9,040
    )
    
    Ps.
    11,146
  F-121




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##### Table of Contents



Combined
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    and
    
    
    ViméxicoAs of December 31, 2007
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash, trade receivables and other current
assets
    
    Ps.
    1,947
    
    
    Ps.
    2,143
    
    
    Ps.
    1,818
    
    
    Ps.
    (4,606
    )
    
    Ps.
    1,302Retained undivided interests in securitized
receivables
    
    
    
    
    
    
    656
    
    
    
    
    
    
    
    
    
    
    
    656Inventories, net
    
    
    
    
    
    
    1,529
    
    
    
    471
    
    
    
    
    
    
    
    2,000Current assets
    
    
    1,947
    
    
    
    4,328
    
    
    
    2,289
    
    
    
    (4,606
    )
    
    
    3,958Investments in subsidiaries
    
    
    3,607
    
    
    
    684
    
    
    
    
    
    
    
    (4,291
    )
    
    
    Property plant and equipment, net
    
    
    
    
    
    
    5,125
    
    
    
    651
    
    
    
    1
    
    
    
    5,777Deferred taxes
    
    
    37
    
    
    
    447
    
    
    
    47
    
    
    
    39
    
    
    
    570Other assets
    
    
    30
    
    
    
    1,048
    
    
    
    726
    
    
    
    (441
    )
    
    
    1,363Long-term assets
    
    
    3,674
    
    
    
    7,304
    
    
    
    1,424
    
    
    
    (4,692
    )
    
    
    7,710Total assets
    
    Ps.
    5,621
    
    
    Ps.
    11,632
    
    
    Ps.
    3,713
    
    
    Ps.
    (9,298
    )
    
    Ps.
    11,668Short-term borrowings
    
    Ps.
    
    
    
    Ps.
    51
    
    
    Ps.
    230
    
    
    Ps.
    
    
    
    Ps.
    281Trade payables
    
    
    
    
    
    
    799
    
    
    
    486
    
    
    
    (64
    )
    
    
    1,221Tax liabilities
    
    
    29
    
    
    
    1,084
    
    
    
    93
    
    
    
    (815
    )
    
    
    391Accrued expenses and other current liabilities
    
    
    1,139
    
    
    
    5,544
    
    
    
    172
    
    
    
    (3,862
    )
    
    
    2,993Current liabilities
    
    
    1,168
    
    
    
    7,478
    
    
    
    981
    
    
    
    (4,741
    )
    
    
    4,886Long-term debt
    
    
    
    
    
    
    79
    
    
    
    48
    
    
    
    
    
    
    
    127Employee retirement obligations and other
long-term liabilities
    
    
    
    
    
    
    466
    
    
    
    408
    
    
    
    (266
    )
    
    
    608Long-term liabilities
    
    
    
    
    
    
    545
    
    
    
    456
    
    
    
    (266
    )
    
    
    735Total liabilities
    
    
    1,168
    
    
    
    8,023
    
    
    
    1,437
    
    
    
    (5,007
    )
    
    
    5,621Total majority interest
    
    
    4,453
    
    
    
    3,609
    
    
    
    2,276
    
    
    
    (5,885
    )
    
    
    4,453Minority interest in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,594
    
    
    
    1,594Total stockholders equity
    
    
    4,453
    
    
    
    3,609
    
    
    
    2,276
    
    
    
    (4,291
    )
    
    
    6,047Total liabilities and stockholders equity
    
    Ps.
    5,621
    
    
    Ps.
    11,632
    
    
    Ps.
    3,713
    
    
    Ps.
    (9,298
    )
    
    Ps.
    11,668
  F-122




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##### Table of Contents



b)    Supplemental condensed consolidating statements of operations presented in accordance with
Mexican FRS
 Combined
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    and
    
    
    ViméxicoFor the year ended December 31, 2005
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales and equity in earnings of
subsidiaries
    
    Ps.
    156
    
    
    Ps.
    11,347
    
    
    Ps.
    3,168
    
    
    Ps.
    (967
    )
    
    Ps.
    13,704Cost of sales
    
    
    
    
    
    
    8,350
    
    
    
    2,374
    
    
    
    (762
    )
    
    
    9,962Selling, general and administrative expenses
    
    
    9
    
    
    
    2,722
    
    
    
    486
    
    
    
    11
    
    
    
    3,228Total financing cost
    
    
    52
    
    
    
    241
    
    
    
    25
    
    
    
    65
    
    
    
    383Other expenses, net
    
    
    4
    
    
    
    360
    
    
    
    85
    
    
    
    2
    
    
    
    451Income and asset tax benefit
    
    
    (30
    )
    
    
    (707
    )
    
    
    (11
    )
    
    
    (1
    )
    
    
    (749
    )Net income before change in accounting
principle
    
    
    121
    
    
    
    381
    
    
    
    209
    
    
    
    (282
    )
    
    
    429Cumulative effect of change in accounting
principle, net of tax
    
    
    (9
    )
    
    
    (121
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (132
    )Net income for the year
    
    
    112
    
    
    
    260
    
    
    
    208
    
    
    
    (283
    )
    
    
    297Net minority income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    185
    
    
    
    185Net majority income (loss)
    
    Ps.
    112
    
    
    Ps.
    260
    
    
    Ps.
    208
    
    
    Ps.
    (468
    )
    
    Ps.
    112
 CombinedWholly-
    
    
    Combined
    
    
    AdjustmentsOwned
    
    
    Non-
    
    
    and
    
    
    ViméxicoFor the year ended December 31, 2006
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales and equity in earnings of
subsidiaries
    
    Ps.
    (699
    )
    
    Ps.
    11,208
    
    
    Ps.
    2,788
    
    
    Ps.
    165
    
    
    Ps.
    13,462Cost of sales
    
    
    
    
    
    
    8,453
    
    
    
    1,926
    
    
    
    (420
    )
    
    
    9,959Selling, general and administrative expenses
    
    
    10
    
    
    
    2,625
    
    
    
    483
    
    
    
    (33
    )
    
    
    3,085Total financing cost
    
    
    121
    
    
    
    575
    
    
    
    54
    
    
    
    (119
    )
    
    
    631Other (income) expenses, net
    
    
    (102
    )
    
    
    524
    
    
    
    28
    
    
    
    
    
    
    
    450Income and asset tax expense(benefit)
    
    
    46
    
    
    
    (176
    )
    
    
    52
    
    
    
    1
    
    
    
    (77
    )Net (loss) income for the year
    
    
    (774
    )
    
    
    (793
    )
    
    
    245
    
    
    
    736
    
    
    
    (586
    )Net minority income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188
    
    
    
    188Net majority (loss) income
    
    Ps.
    (774
    )
    
    Ps.
    (793
    )
    
    Ps.
    245
    
    
    Ps.
    548
    
    
    Ps.
    (774
    )
  F-123




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##### Table of Contents



Combined
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    and
    
    
    ViméxicoFor the year ended December 31, 2007
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales and equity in earnings of
subsidiaries
    
    Ps.
    164
    
    
    Ps.
    11,123
    
    
    Ps.
    2,962
    
    
    Ps.
    (644
    )
    
    Ps.
    13,605Cost of sales
    
    
    
    
    
    
    7,957
    
    
    
    1,946
    
    
    
    (325
    )
    
    
    9,578Selling, general and administrative expenses
    
    
    6
    
    
    
    2,724
    
    
    
    545
    
    
    
    (30
    )
    
    
    3,245Total financing cost
    
    
    187
    
    
    
    431
    
    
    
    91
    
    
    
    (266
    )
    
    
    443Other expenses (income), net
    
    
    1
    
    
    
    74
    
    
    
    17
    
    
    
    (1
    )
    
    
    91Income tax
expense (benefit)
    
    
    56
    
    
    
    23
    
    
    
    73
    
    
    
    
    
    
    
    152Net (loss) income for the year
    
    
    (86
    )
    
    
    (86
    )
    
    
    290
    
    
    
    (22
    )
    
    
    96Net minority income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182
    
    
    
    182Net majority (loss) income
    
    Ps.
    (86
    )
    
    Ps.
    (86
    )
    
    Ps.
    290
    
    
    Ps.
    (204
    )
    
    Ps.
    (86
    )
  F-124




---



##### Table of Contents



c)
    
    Supplemental condensed consolidating statements of changes in financial position presented
in accordance with Mexican FRS
 Combined
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    and
    
    
    ViméxicoFor the year ended December 31, 2005
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net income before change in accounting principle
    
    Ps.
    112
    
    
    Ps.
    381
    
    
    Ps.
    210
    
    
    Ps.
    (274
    )
    
    Ps.
    429Depreciation and amortization
    
    
    1
    
    
    
    523
    
    
    
    144
    
    
    
    
    
    
    
    668Provision for employee retirement obligations
    
    
    
    
    
    
    32
    
    
    
    51
    
    
    
    
    
    
    
    83Amortization of debt issuance costs
    
    
    21
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    21Write-off and loss from sale of assets
    
    
    9
    
    
    
    157
    
    
    
    54
    
    
    
    
    
    
    
    220Other non-cash charges
    
    
    (175
    )
    
    
    (1,159
    )
    
    
    (67
    )
    
    
    333
    
    
    
    (1,068
    )Increase in inventories
    
    
    
    
    
    
    (247
    )
    
    
    (19
    )
    
    
    
    
    
    
    (266
    )Change in other current assets and liabilities
    
    
    (7
    )
    
    
    653
    
    
    
    (23
    )
    
    
    48
    
    
    
    671Employee retirement obligations
    
    
    
    
    
    
    (33
    )
    
    
    (25
    )
    
    
    
    
    
    
    (58
    )Net resources (used in) generated by operating
activities
    
    
    (39
    )
    
    
    308
    
    
    
    324
    
    
    
    107
    
    
    
    700Financing Activities:Bank loans, net
    
    
    (298
    )
    
    
    (431
    )
    
    
    83
    
    
    
    
    
    
    
    (646
    )Other financing activities
    
    
    (34
    )
    
    
    399
    
    
    
    (144
    )
    
    
    404
    
    
    
    625Net resources (used in) generated by financing
activities
    
    
    (332
    )
    
    
    (39
    )
    
    
    (61
    )
    
    
    404
    
    
    
    (21
    )Investing Activities:Investments in land, buildings, machinery and
equipment
    
    
    
    
    
    
    (424
    )
    
    
    (44
    )
    
    
    
    
    
    
    (468
    )Proceeds from sale of land, machinery and equipment
    
    
    
    
    
    
    30
    
    
    
    1
    
    
    
    
    
    
    
    31Restricted cash
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1Other investing activities
    
    
    371
    
    
    
    165
    
    
    
    (125
    )
    
    
    (511
    )
    
    
    (100
    )Net resources generated (used in) investing activities
    
    
    371
    
    
    
    (228
    )
    
    
    (168
    )
    
    
    (511
    )
    
    
    (536
    )Net increase in cash and cash equivalents
    
    
    
    
    
    
    48
    
    
    
    95
    
    
    
    
    
    
    
    143Balance at beginning of year
    
    
    
    
    
    
    143
    
    
    
    37
    
    
    
    
    
    
    
    180Balance at end of year
    
    Ps.
    
    
    
    Ps.
    191
    
    
    Ps.
    137
    
    
    Ps.
    
    
    
    Ps.
    323
  F-125




---



##### Table of Contents



Combined

    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    and
    
    
    ViméxicoFor the year ended December 31, 2006
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net (loss) income
    
    Ps.
    (774
    )
    
    Ps.
    (793
    )
    
    Ps.
    254
    
    
    Ps.
    727
    
    
    Ps.
    (586
    )Depreciation and amortization
    
    
    1
    
    
    
    487
    
    
    
    110
    
    
    
    
    
    
    
    598Provision for employee retirement obligations
    
    
    
    
    
    
    80
    
    
    
    58
    
    
    
    
    
    
    
    138Amortization of debt issuance costs
    
    
    34
    
    
    
    4
    
    
    
    (1
    )
    
    
    
    
    
    
    37Write-off and loss from sale of assets
    
    
    
    
    
    
    477
    
    
    
    (12
    )
    
    
    
    
    
    
    465Other non-cash charges
    
    
    822
    
    
    
    (444
    )
    
    
    22
    
    
    
    (784
    )
    
    
    (384
    )Decrease in inventories
    
    
    
    
    
    
    420
    
    
    
    47
    
    
    
    (16
    )
    
    
    451Change in other current assets and liabilities
    
    
    (35
    )
    
    
    (724
    )
    
    
    (227
    )
    
    
    171
    
    
    
    (815
    )Employee retirement obligations
    
    
    
    
    
    
    (101
    )
    
    
    (87
    )
    
    
    
    
    
    
    (188
    )Net resources generated by (used in)
operating activities
    
    
    48
    
    
    
    (594
    )
    
    
    164
    
    
    
    98
    
    
    
    (284
    )Financing Activities:
    
    
    
    
    
    
    
    
    
    
    Bank loans, net
    
    
    (1,428
    )
    
    
    (653
    )
    
    
    (133
    )
    
    
    
    
    
    
    (2,214
    )Issuance of capital stock
    
    
    1,526
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,526Other financing activities
    
    
    181
    
    
    
    728
    
    
    
    (159
    )
    
    
    (281
    )
    
    
    469Net resources generated by (used in)
financing activities
    
    
    279
    
    
    
    75
    
    
    
    (292
    )
    
    
    (281
    )
    
    
    (219
    )Investing Activities:Investments in land, buildings, machinery and
equipment
    
    
    
    
    
    
    (265
    )
    
    
    (65
    )
    
    
    
    
    
    
    (330
    )Proceeds from sale of land, machinery and
equipment
    
    
    
    
    
    
    170
    
    
    
    169
    
    
    
    
    
    
    
    339Restricted cash
    
    
    
    
    
    
    279
    
    
    
    2
    
    
    
    
    
    
    
    281Proceeds from sale of subsidiaries and
associated companies
    
    
    219
    
    
    
    
    
    
    
    3
    
    
    
    (45
    )
    
    
    177Other investing activities
    
    
    (546
    )
    
    
    267
    
    
    
    (66
    )
    
    
    228
    
    
    
    (117
    )Net resources (used in) generated by
investing activities
    
    
    (327
    )
    
    
    451
    
    
    
    43
    
    
    
    183
    
    
    
    350Net decrease in cash and cash equivalents
    
    
    
    
    
    
    (68
    )
    
    
    (85
    )
    
    
    
    
    
    
    (153
    )Balance at beginning of year
    
    
    
    
    
    
    191
    
    
    
    132
    
    
    
    
    
    
    
    323Balance at end of year
    
    Ps.
    
    
    
    Ps.
    123
    
    
    Ps.
    47
    
    
    Ps.
    
    
    
    Ps.
    170
  F-126




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##### Table of Contents



Combined
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    and
    
    
    ViméxicoFor the year ended December 31, 2007
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net (loss) income
    
    Ps.
    (86
    )
    
    Ps.
    (86
    )
    
    Ps.
    290
    
    
    Ps.
    (22
    )
    
    Ps.
    96Depreciation and amortization
    
    
    2
    
    
    
    374
    
    
    
    104
    
    
    
    
    
    
    
    480Provision for employee retirement obligations
    
    
    
    
    
    
    45
    
    
    
    12
    
    
    
    
    
    
    
    57Amortization of debt issuance costs
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4Impairment of long-lived assets
    
    
    
    
    
    
    
    
    
    
    91
    
    
    
    
    
    
    
    91Loss (gain) from sale of long-lived assets
    
    
    
    
    
    
    (55
    )
    
    
    
    
    
    
    
    
    
    
    (55
    )Derivative financial instruments
    
    
    
    
    
    
    27
    
    
    
    9
    
    
    
    (7
    )
    
    
    29Deferred taxes
    
    
    21
    
    
    
    (122
    )
    
    
    (3
    )
    
    
    
    
    
    
    (104
    )Other non-cash activities
    
    
    102
    
    
    
    (106
    )
    
    
    
    
    
    
    24
    
    
    
    20(Increase) decrease in trade receivables
    
    
    2
    
    
    
    (80
    )
    
    
    (271
    )
    
    
    155
    
    
    
    (194
    )Decrease in inventories
    
    
    
    
    
    
    138
    
    
    
    (157
    )
    
    
    
    
    
    
    (19
    )(Decrease) increase in trade payables
    
    
    
    
    
    
    96
    
    
    
    186
    
    
    
    (59
    )
    
    
    223Change in other current assets and liabilities
    
    
    12
    
    
    
    235
    
    
    
    (62
    )
    
    
    (80
    )
    
    
    105Employee retirement obligations
    
    
    
    
    
    
    (100
    )
    
    
    (1
    )
    
    
    
    
    
    
    (101
    )Net resources generated by operating activities
    
    
    53
    
    
    
    370
    
    
    
    198
    
    
    
    11
    
    
    
    632Financing Activities:Bank loans, net
    
    
    
    
    
    
    (331
    )
    
    
    61
    
    
    
    
    
    
    
    (270
    )Debt issuance cost
    
    
    
    
    
    
    (7
    )
    
    
    (2
    )
    
    
    
    
    
    
    (9
    )Dividends paid to minority interest
    
    
    
    
    
    
    
    
    
    
    (67
    )
    
    
    16
    
    
    
    (51
    )Other financing activities
    
    
    (1,265
    )
    
    
    403
    
    
    
    (54
    )
    
    
    1,177
    
    
    
    261Net resources (used in) generated by financing
activities
    
    
    (1,265
    )
    
    
    65
    
    
    
    (62
    )
    
    
    1,193
    
    
    
    (69
    )Investing Activities:Investments in land, buildings, machinery and
equipment
    
    
    
    
    
    
    (216
    )
    
    
    (108
    )
    
    
    
    
    
    
    (324
    )Proceeds from sale of land, machinery and
equipment
    
    
    
    
    
    
    131
    
    
    
    
    
    
    
    
    
    
    
    131Restricted cash
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    (9
    )Investment in subsidiaries
    
    
    (67
    )
    
    
    (114
    )
    
    
    
    
    
    
    
    
    
    
    (181
    )Deferred charges
    
    
    
    
    
    
    (175
    )
    
    
    (31
    )
    
    
    
    
    
    
    (206
    )Other investing activities
    
    
    1,279
    
    
    
    (37
    )
    
    
    11
    
    
    
    (1,204
    )
    
    
    49Net resources generated (used in) by investing
activities
    
    
    1,212
    
    
    
    (411
    )
    
    
    (137
    )
    
    
    (1,204
    )
    
    
    (540
    )Net increase (decrease) in cash and cash
equivalents
    
    
    
    
    
    
    24
    
    
    
    (1
    )
    
    
    
    
    
    
    23Balance at beginning of year
    
    
    
    
    
    
    123
    
    
    
    47
    
    
    
    
    
    
    
    170Balance at end of year
    
    Ps.
    
    
    
    Ps.
    147
    
    
    Ps.
    46
    
    
    Ps.
    
    
    
    Ps.
    193
  F-127




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##### Table of Contents



d)
    
    Supplemental condensed consolidating financial information reconciled from Mexican FRS to
U.S. GAAP:
   Combined
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    andFor the year ended December 31, 2006
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet income of majority interest as
reported under Mexican FRS
    
    Ps.
    112
    
    
    Ps.
    260
    
    
    Ps.
    208
    
    
    Ps.
    (468
    )
    
    Ps.
    112U.S. GAAP adjustments:Effect of the adjustments below on
minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Deferred income taxes
    
    
    (6
    )
    
    
    (381
    )
    
    
    
    
    
    
    
    
    
    
    (387
    )Deferred workers profit sharing
    
    
    
    
    
    
    9
    
    
    
    (25
    )
    
    
    
    
    
    
    (16
    )Monetary position result on
deferred income taxes and deferred
workers profit sharing
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    (2
    )Capitalization of interest
    
    
    
    
    
    
    15
    
    
    
    3
    
    
    
    
    
    
    
    18Amortization of capitalized interest
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    (6
    )Effect of applying Bulletin B-10
    
    
    
    
    
    
    (63
    )
    
    
    (7
    )
    
    
    
    
    
    
    (70
    )Effect of applying Bulletin B-15
    
    
    (8
    )
    
    
    
    
    
    
    (3
    )
    
    
    4
    
    
    
    (7
    )Derivative financial instruments
    
    
    15
    
    
    
    173
    
    
    
    
    
    
    
    
    
    
    
    188Employee retirement obligations
    
    
    
    
    
    
    6
    
    
    
    2
    
    
    
    
    
    
    
    8Impairment of long-lived assets
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    65Investment in subsidiaries
    
    
    (208
    )
    
    
    
    
    
    
    
    
    
    
    208
    
    
    
    Total U.S. GAAP adjustments
    
    
    (207
    )
    
    
    (183
    )
    
    
    (31
    )
    
    
    214
    
    
    
    (207
    )Net (loss) income under U.S. GAAP
    
    Ps.
    (95
    )
    
    Ps.
    77
    
    
    Ps.
    177
    
    
    Ps.
    (254
    )
    
    Ps.
    (95
    )
  F-128




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##### Table of Contents



Combined
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    and
    
    
    ViméxicoFor the year ended December 31, 2006
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet (loss) income of majority interest
as reported under Mexican FRS
    
    Ps.
    (774
    )
    
    Ps.
    (793
    )
    
    Ps.
    245
    
    
    Ps.
    548
    
    
    Ps.
    (774
    )U.S. GAAP adjustments:Deferred income taxes
    
    
    (119
    )
    
    
    (63
    )
    
    
    
    
    
    
    
    
    
    
    (182
    )Deferred workers profit sharing
    
    
    
    
    
    
    (6
    )
    
    
    (9
    )
    
    
    
    
    
    
    (15
    )Monetary position result on
deferred income taxes and deferred
workers profit sharing
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    13Capitalization of interest
    
    
    
    
    
    
    8
    
    
    
    1
    
    
    
    
    
    
    
    9Amortization of capitalized interest
    
    
    
    
    
    
    (7
    )
    
    
    (1
    )
    
    
    
    
    
    
    (8
    )Effect of applying Bulletin B-10
    
    
    
    
    
    
    (62
    )
    
    
    (6
    )
    
    
    
    
    
    
    (68
    )Effect of applying Bulletin B-15
    
    
    3
    
    
    
    4
    
    
    
    (2
    )
    
    
    (1
    )
    
    
    4Employee retirement obligations
    
    
    
    
    
    
    6
    
    
    
    5
    
    
    
    
    
    
    
    11Purchase of Visteons capital
investment
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Impairment of longlived assets
    
    
    
    
    
    
    379
    
    
    
    
    
    
    
    
    
    
    
    379Investment in subsidiaries
    
    
    259
    
    
    
    
    
    
    
    
    
    
    
    (259
    )
    
    
    Total U.S. GAAP adjustments
    
    
    144
    
    
    
    271
    
    
    
    (12
    )
    
    
    (260
    )
    
    
    144Net (loss) income under U.S. GAAP
    
    Ps.
    (630
    )
    
    Ps.
    (521
    )
    
    Ps.
    234
    
    
    Ps.
    288
    
    
    Ps.
    (630
    )
  F-129




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##### Table of Contents



Combined
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    and
    
    
    ViméxicoFor the year ended December 31, 2007
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet (loss) income of majority interest as
reported under Mexican FRS
    
    Ps.
    (86
    )
    
    Ps.
    (86
    )
    
    Ps.
    290
    
    
    Ps.
    (204
    )
    
    Ps.
    (86
    )U.S. GAAP adjustments:Effect of the adjustments below on
minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    3Deferred income taxes
    
    
    (103
    )
    
    
    63
    
    
    
    3
    
    
    
    
    
    
    
    (37
    )Monetary position result on deferred
income taxes and deferred workers
profit sharing
    
    
    5
    
    
    
    14
    
    
    
    (2
    )
    
    
    
    
    
    
    17Amortization of capitalized interest
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    (4
    )Effect of applying Bulletin B-10
    
    
    
    
    
    
    (15
    )
    
    
    (6
    )
    
    
    
    
    
    
    (21
    )Employee retirement obligations
    
    
    
    
    
    
    (4
    )
    
    
    (3
    )
    
    
    
    
    
    
    (7
    )Purchase of Visteons capital investment
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Impairment of longlived assets
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    (10
    )Investment in subsidiaries
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    Total U.S. GAAP adjustments
    
    
    (54
    )
    
    
    44
    
    
    
    (8
    )
    
    
    (36
    )
    
    
    (54
    )Net (loss) income under U.S. GAAP
    
    Ps.
    (140
    )
    
    Ps.
    (42
    )
    
    Ps.
    282
    
    
    Ps.
    (240
    )
    
    Ps.
    (140
    )
  F-130




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##### Table of Contents



Combined
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    and
    
    
    ViméxicoAs of December 31, 2006
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedTotal stockholders equity reported
under Mexican FRS
    
    Ps.
    4,516
    
    
    Ps.
    3,384
    
    
    Ps.
    2,043
    
    
    Ps.
    (3,989
    )
    
    Ps.
    5,954Less minority interest included as
stockholders equity under Mexican
FRS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,438
    )
    
    
    (1,438
    )Majority stockholders equity under
Mexican FRS
    
    
    4,516
    
    
    
    3,384
    
    
    
    2,043
    
    
    
    (5,427
    )
    
    
    4,516U.S. GAAP adjustments:Effect of the adjustments below on
minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )
    
    
    (51
    )Deferred income taxes
    
    
    (162
    )
    
    
    (390
    )
    
    
    42
    
    
    
    
    
    
    
    (510
    )Capitalization of interest
    
    
    
    
    
    
    39
    
    
    
    4
    
    
    
    
    
    
    
    43Accumulated amortization of capitalized
interest
    
    
    
    
    
    
    (17
    )
    
    
    (2
    )
    
    
    
    
    
    
    (19
    )Goodwill
    
    
    
    
    
    
    5
    
    
    
    120
    
    
    
    
    
    
    
    125Effect of applying Bulletin B-10
    
    
    
    
    
    
    11
    
    
    
    9
    
    
    
    
    
    
    
    20Effect of applying Bulletin B-15
    
    
    (118
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (119
    )Effect of adoption of SFAS No. 158
    
    
    
    
    
    
    (76
    )
    
    
    (55
    )
    
    
    
    
    
    
    (131
    )Employee retirement obligations
    
    
    
    
    
    
    (24
    )
    
    
    (7
    )
    
    
    
    
    
    
    (31
    )Purchase of Visteons capital investment
    
    
    (71
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (71
    )Impairment of longlived assets
    
    
    
    
    
    
    399
    
    
    
    
    
    
    
    
    
    
    
    399Investment in subsidiaries
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    Total U.S. GAAP adjustments
    
    
    (345
    )
    
    
    (53
    )
    
    
    110
    
    
    
    (57
    )
    
    
    (345
    )Total stockholders equity under U.S.
GAAP
    
    Ps.
    4,171
    
    
    Ps.
    3,331
    
    
    Ps.
    2,153
    
    
    Ps.
    (5,484
    )
    
    Ps.
    4,171
  F-131




---



##### Table of Contents



CombinedWholly-
    
    
    Combined
    
    
    AdjustmentsOwned
    
    
    Non-
    
    
    and
    
    
    ViméxicoAs of December 31, 2007
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedTotal stockholders equity reported
under Mexican FRS
    
    Ps.
    4,453
    
    
    Ps.
    3,609
    
    
    Ps.
    2,276
    
    
    Ps.
    (4,291
    )
    
    Ps.
    6,047Less minority interest included as
stockholders equity under Mexican FRS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,594
    )
    
    
    (1,594
    )Majority stockholders equity under
Mexican FRS
    
    
    4,453
    
    
    
    3,609
    
    
    
    2,276
    
    
    
    (5,885
    )
    
    
    4,453U.S. GAAP adjustments:Effect of the adjustments below on
minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49
    )
    
    
    (49
    )Deferred income taxes
    
    
    (259
    )
    
    
    (292
    )
    
    
    10
    
    
    
    
    
    
    
    (541
    )Capitalization of interest
    
    
    
    
    
    
    38
    
    
    
    4
    
    
    
    
    
    
    
    42Accumulated amortization of capitalized
interest
    
    
    
    
    
    
    (20
    )
    
    
    (2
    )
    
    
    
    
    
    
    (22
    )Goodwill
    
    
    
    
    
    
    5
    
    
    
    119
    
    
    
    
    
    
    
    124Effect of applying Bulletin B-10
    
    
    
    
    
    
    (23
    )
    
    
    5
    
    
    
    
    
    
    
    (18
    )Effect of SFAS No. 158
    
    
    
    
    
    
    (130
    )
    
    
    (33
    )
    
    
    
    
    
    
    (163
    )Employee retirement obligations
    
    
    
    
    
    
    (28
    )
    
    
    (10
    )
    
    
    
    
    
    
    (38
    )Purchase of Visteons capital investment
    
    
    (67
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (67
    )Impairment of longlived assets
    
    
    
    
    
    
    390
    
    
    
    
    
    
    
    
    
    
    
    390Investment in subsidiaries
    
    
    (16
    )
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    Total U.S. GAAP adjustments
    
    
    (342
    )
    
    
    (60
    )
    
    
    93
    
    
    
    (33
    )
    
    
    (342
    )Total stockholders equity under U.S.
GAAP
    
    Ps.
    4,111
    
    
    Ps.
    3,549
    
    
    Ps.
    2,369
    
    
    Ps.
    (5,918
    )
    
    Ps.
    4,111
  F-132




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##### Table of Contents



Supplemental U.S. GAAP Cash Flow Information
   Combined
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    and
    
    
    ViméxicoAs of December 31, 2005
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash (used in)
provided by operating
activities
    
    Ps.
    (74
    )
    
    Ps.
    (71
    )
    
    Ps.
    322
    
    
    Ps.
    438
    
    
    Ps.
    615Net cash (used in)
provided by financing
activities
    
    
    (215
    )
    
    
    441
    
    
    
    (75
    )
    
    
    (118
    )
    
    
    33Net cash provided by
(used in) investing
activities
    
    
    289
    
    
    
    (327
    )
    
    
    (169
    )
    
    
    (318
    )
    
    
    (525
    )
  Combined
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    and
    
    
    ViméxicoAs of December 31, 2005
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedInterest paid
    
    Ps.
    116
    
    
    Ps.
    421
    
    
    Ps.
    69
    
    
    Ps.
    (71
    )
    
    Ps.
    535Income taxes paid
    
    
    (10
    )
    
    
    35
    
    
    
    49
    
    
    
    30
    
    
    
    104
 Combined
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    and
    
    
    ViméxicoAs of December 31, 2006
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by
(used in) operating
activities
    
    Ps.
    23
    
    
    Ps.
    (562
    )
    
    Ps.
    137
    
    
    Ps.
    109
    
    
    Ps.
    (293
    )Net cash provided by
(used in) financing
activities
    
    
    369
    
    
    
    56
    
    
    
    (183
    )
    
    
    (384
    )
    
    
    (142
    )Net cash (used in)
provided by investing
activities
    
    
    (393
    )
    
    
    448
    
    
    
    (22
    )
    
    
    275
    
    
    
    308
  F-133




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##### Table of Contents



Combined
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    and
    
    
    ViméxicoAs of December 31, 2006
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedInterest paid
    
    Ps.
    100
    
    
    Ps.
    602
    
    
    Ps.
    72
    
    
    Ps.
    (116
    )
    
    Ps.
    658Income taxes paid
    
    
    (4
    )
    
    
    147
    
    
    
    8
    
    
    
    
    
    
    
    151
 Combined
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    and
    
    
    ViméxicoAs of December 31, 2007
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by
(used in) operating
activities
    
    Ps.
    6
    
    
    Ps.
    270
    
    
    Ps.
    229
    
    
    Ps.
    44
    
    
    Ps.
    549Net cash (used in)
provided by financing
activities
    
    
    (1,193
    )
    
    
    225
    
    
    
    (47
    )
    
    
    1,008
    
    
    
    (7
    )Net cash provided by
(used in) investing
activities
    
    
    1,188
    
    
    
    (470
    )
    
    
    (171
    )
    
    
    (1,052
    )
    
    
    (505
    )
  Combined
    
    
    Combined
    
    
    AdjustmentsWholly-Owned
    
    
    Non-
    
    
    and
    
    
    ViméxicoAs of December 31, 2007
    
    Viméxico
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedInterest paid
    
    Ps.
    244
    
    
    Ps.
    522
    
    
    Ps.
    69
    
    
    Ps.
    (462
    )
    
    Ps.
    373Income taxes paid
    
    
    16
    
    
    
    174
    
    
    
    14
    
    
    
    
    
    
    
    204
  F-134




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##### Table of Contents



Item 19.   Exhibits
 Exhibit No.
    
    Description
    
    Page1.01
    
    
    Amended and restated by-laws (estatutos sociales) of
Vitro, S.A.B. de C.V., together with an English
translation
    
    b2.01
    
    
    Form of Deposit Agreement among the Company,
Nacional Financiera S.N.C., Citibank, N.A. and all
registered holders from time to time of American
Depositary Receipts issued thereunder, including the
form of American Depositary Receipt
    
    h2.02
    
    
    Trust Agreement dated November 28, 1990 between the
Common Shares Trustee, as grantor, and the CPO
Trustee (the CPO Trust Agreement), together with
an English translation
    
    h2.03
    
    
    Public Deed dated November 29, 1990 (the Public
Deed), together with an English translation
    
    h2.04
    
    
    Common Shares Trust Agreement
    
    h2.05
    
    
    CPO Trust Agreement and Public Deed
    
    h2.06
    
    
    Form of Certificado Bursátil
    
    f2.07
    
    
    Indenture dated as of October 22, 2003 (2013
Indenture) between Vitro, S.A. de C.V. and Wachovia
Bank (including exhibits); including Form of 11.75%
Senior Note due 2013
    
    e2.08
    
    
    Form of First Supplemental Indenture dated as of
October 23, 2006 to the 2013 Indenture between
Vitro, S.A. de C.V. and U.S. Bank National
Association as successor trustee to Wachovia Bank,
National Association
    
    a2.09
    
    
    First Supplemental Indenture to the 2013 Indenture
dated as of February 1, 2007 among Vitro, S.A.B. de
C.V., the Guarantors party thereto and U.S. Bank
National Association as successor trustee to
Wachovia Bank, National Association
    
    b2.10
    
    
    Second Supplemental Indenture to the 2013 Indenture
dated as of April 27, 2007 among Vitro, S.A.B. de
C.V., the New Guarantors party thereto, the Existing
Guarantors party thereto and U.S. Bank National
Association as successor trustee to Wachovia Bank,
National Association
    
    b2.11
    
    
    Third Supplemental Indenture to the 2013 Indenture
dated as of January 16, 2008 between Vitro, S.A.B.
de C.V., the New Guarantors party thereto, the
Existing Guarantors party thereto and U.S. Bank
National Association as successor trustee to
Wachovia Bank, National Association
    
    +2.12
    
    
    Fourth Supplemental Indenture to the 2013 Indenture
dated as of May 15, 2008 between Vitro, S.A.B. de
C.V., the New Guarantors party thereto, the Existing
Guarantors party thereto and U.S. Bank National
Association as successor trustee to Wachovia Bank,
National Association
    
    +2.13
    
    
    Trust Agreement between Banco Invex, S.A.,
Institucion de Banca Multiple, Invex Grupo
Financiero, as issuer and trustee, Distribuidora
Nacional de Vidrio, S.A. de C.V., Vitro Flotado
Cubiertas, S.A. de C.V., Vitro Automotriz, S.A. de
C.V., and Vitro Vidrio y Cristal, S.A. de C.V.,
dated August 3, 2005, in connection with the
issuance of the 6.46% Preferred Notes
    
    c2.14
    
    
    Purchase Agreement between Banco Invex, S.A.,
Institucion de Banca Multiple, Invex Grupo
Financiero, as issuer, Distribuidora Nacional de
Vidrio, S.A. de C.V., Vitro Flotado Cubiertas, S.A.
de C.V., Vitro Automotriz, S.A. de C.V., Vitro
Vidrio y Cristal, S.A. de C.V., and Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A. Rabobank
International, as purchaser, dated August 22, 2005,
in connection to the sale of 6.46% Preferred Notes 
Summary of the document in English attached
    
    c2.15
    
    
    Indenture dated as of February 1, 2007 between
Vitro, S.A.B. de C.V., the Guarantors party thereto
and The Bank of New York as Trustee (2012
Indenture)
    
    b2.16
    
    
    Form of 8.625% Senior Note due 2012
    
    b
  114




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##### Table of Contents



Exhibit No.
    
    Description
    
    Page2.17
    
    
    First Supplemental Indenture to the 2012 Indenture
dated as of April 27, 2007 among Vitro, S.A.B. de
C.V. the New Guarantors party thereto, the Existing
Guarantors party thereto and the Bank of New York
    
    b2.18
    
    
    Second Supplemental Indenture to the 2012 Indenture
dated as of January 16, 2008 among Vitro, S.A.B. de
C.V., the New Guarantors party thereto, the Existing
Guarantors party thereto and the Bank of New York
    
    +2.19
    
    
    Third Supplemental Indenture to the 2012 Indenture
dated as of May 15, 2008 among Vitro, S.A.B. de
C.V., the New Guarantors party thereto, the Existing
Guarantors party thereto and the Bank of New York
    
    +2.20
    
    
    Indenture dated as of February 1, 2007 between
Vitro, S.A.B. de C.V., the Guarantors party thereto
and The Bank of New York as Trustee (2017
Indenture)
    
    b2.21
    
    
    Form of 9.125% Senior Note due 2017
    
    b2.22
    
    
    First Supplemental Indenture to the 2017 Indenture
dated as of April 27, 2007 among Vitro, S.A.B. de
C.V. the New Guarantors party thereto, the Existing
Guarantors party thereto and the Bank of New York
    
    b2.23
    
    
    Second Supplemental Indenture to the 2017 Indenture
dated as of January 16, 2008 among Vitro, S.A.B. de
C.V., the New Guarantors party thereto, the Existing
Guarantors party thereto and the Bank of New York
    
    +2.24
    
    
    Third Supplemental Indenture to the 2017 Indenture
dated as of May 15, 2008 among Vitro, S.A.B. de
C.V., the New Guarantors party thereto, the Existing
Guarantors party thereto and the Bank of New York
    
    +4.01
    
    
    Receivables Purchase Agreement dated as of May 7,
2004 among VVP Funding Corporation, Vitro America,
Inc., Windmill Funding Corporation, ABN Amro Bank
N.V. and Finacity Corporation
    
    e4.02
    
    
    Receivables Sales Agreement dated as of May 7, 2004
between Vitro America, Inc. and VVP Funding
Corporation
    
    e4.03
    
    
    Second Amendment to Receivables Purchase Agreement
dated as of May 5, 2006, among VVP Funding
Corporation, Vitro America, Inc., Windmill Funding
Corporation and ABN Amro Bank N.V.
    
    e4.04
    
    
    Third Amendment to Receivables Purchase Agreement
dated as of April 16, 2007, among VVP Funding
Corporation, Vitro America, Inc., Windmill Funding
Corporation and ABN Amro Bank N.V.
    
    b4.05
    
    
    Stock Purchase Agreement dated as of June 3, 2002
among Vitro, S.A. de C.V. Whirlpool Corporation and
Whirlpool Holdings, Inc.
    
    f4.06
    
    
    Stock Purchase Agreement dated as of January 23,
2004 among Vitro, S.A. de C.V., Vitro Envases
Norteamérica, S.A. de C.V., Owens Corning and Owens
Corning VF Holdings, Inc.
    
    e4.07
    
    
    Stock Purchase Agreement dated as of September 25,
2004 among Rexam plc, Rexam Overseas Holding Limited
and Vitro, S.A. de C.V.
    
    d4.08
    
    
    Trust Agreement dated as of March 23, 2005 among
Compañía Vidriera, S.A. de C.V., Industria del
Álcali, S.A. de C.V., Comercializadora Álcali, S. de
R.L. de C.V., ABN AMRO Bank (México), S.A.,
Institución de Banca Múltiple, División Fiduciaria
and Banco Invex, S.A., Institución de Banca
Múltiple, Invex Grupo Financiero; Assignment of
Rights dated as of March 23, 2005 among Compañía
Vidriera, S.A. de C.V., Industria del Álcali, S.A.
de C.V., Comercializadora Álcali, S. de R.L. de C.V.
and ABN AMRO Bank (México), S.A. Institución de
Banca Múltiple, Division Fiduciana; Certificados
Subordinadosissued by ABN AMRO Bank (México), S.A.,
Institución de Banca Múltiple, Division Fiduciaria,
together with English summary.
    
    d4.09
    
    
    Guaranty dated as of March 31, 2005 among Vitro,
S.A.B. de C.V. and of the holders of the
CertificadosSubordinados
    
    d4.10
    
    
    Purchase Agreement dated as of March 31, 2005 among
ABN AMRO Bank (México), S.A., Institución de Banca
Múltiple, División Fiduciaria, Compañía Vidriera,
S.A. de C.V., Industria del Álcali, S.A.de C.V.,
Comercializadora Álcali, S. de R.L. de C.V., and
Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A.
Rabobank International, New York Branch
    
    d
  115




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##### Table of Contents



Exhibit No.
    
    Description
    
    Page4.11
    
    
    Placement Agent Agreement dated as of March 29, 2005
among Compañía Vidriera, S.A. de C.V., Industría del
Álcali, S.A. de C.V., Comercializadora Álcali, S. de
R.L. de C.V., ABN AMRO Bank (México), S.A.,
Institución de Banca Múltiple, División Fiduciaria,
and Banco Invex, S.A. Institución de Múltiple, Invex
Grupo Financiero
    
    d4.12
    
    
    Letter of extension between Pilkington plc and Vitro
Vidrio y Cristal, S.A. de C.V., dated April 24, 2006
    
    d4.13
    
    
    Stock Purchase Agreement of Vidrios Panameños S.A.
between the Sellers listed therein and Empresas
Comegua, S.A., dated April 4, 2006.
    
    c8.1
    
    
    List of subsidiaries of Vitro, S.A.B. de C.V.
    
    +12.1
    
    
    Certification of the Chief Executive Officer of
Vitro, S.A.B. de C.V. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
    
    +12.2
    
    
    Certification of the Chief Financial Officer of
Vitro, S.A.B. de C.V. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
    
    +12.3
    
    
    Certification of the Chief Administrative Officer of
Vitro, S.A.B. de C.V. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
    
    +13.1
    
    
    Certification of the Chief Executive Officer, Chief
Financial Officer and Chief Administrative Officer
of Vitro, S.A.B. de C.V. pursuant to 18 U.S.C.
§1350, as adopted pursuant to Section 906 of the
Sarbanes Oxley Act of 2002.
    
    +
 
 +
    
    Filed herewith.a
    
    Filed as an exhibit to the Registration Statement of Vitro,
S.A.B. de C.V. on Form F-4 (File No. 333-135546) and
incorporated herein by reference thereto.b
    
    Filed as an exhibit to Vitro, S.A.B. de C.V.s annual report on
Form 20-F for the year ended December 31, 2006 and incorporated
herein by reference thereto.c
    
    Filed as an exhibit to Vitro, S.A.B. de C.V.s annual report on
Form 20-F for the year ended December 31, 2005 and incorporated
herein by reference thereto.d
    
    Filed as an exhibit to Vitro, S.A.B. de C.V.s annual report on
Form 20-F for the year ended December 31, 2004 and incorporated
herein by reference thereto.e
    
    Filed as an exhibit to Vitro, S.A.B. de C.V.s annual report on
Form 20-F for the year ended December 31, 2003 and incorporated
herein by reference thereto.f
    
    Filed as an exhibit to Vitro, S.A.B. de C.V.s annual report
for the year ended December 31, 2002 and incorporated herein by
reference thereto.g
    
    Filed as an exhibit to the Registration Statement of Vicap,
S.A. de C.V. on Form F-4 (File no. 333-9498) and incorporated
herein by reference thereto.h
    
    Filed as an exhibit to the Registration Statement of Vitro,
S.A. de C.V. on Form F-1 (File no. 33-43660) and incorporated
herein by reference thereto.  116




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##### Table of Contents



SIGNATURES
   VITRO, S.A.B. DE C.V.,by
    /s/ Federico Sada GonzálezName:
    Federico Sada GonzálezTitle:
    President and Chief Executive Officerby
    /s/ Claudio Del Valle CabelloName:
    Claudio Del Valle CabelloTitle:
    Chief Administrative Officerby
    /s/ Enrique Osorio LópezName:
    Enrique Osorio LópezTitle:
    Chief Financial OfficerVIMÉXICO, S.A. DE C.V.,by
    /s/ Claudio Del Valle CabelloName:
    Claudio Del Valle CabelloTitle:
    Chief Administrative Officer  117




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description2.11
    
    
    Third Supplemental Indenture to the 2013 Indenture dated as of
January 16, 2008 between Vitro, S.A.B. de C.V., the New
Guarantors party thereto, the Existing Guarantors party
thereto and U.S. Bank National Association as successor
trustee to Wachovia Bank, National Association2.12
    
    
    Fourth Supplemental Indenture to the 2013 Indenture dated as
of May 15, 2008 between Vitro, S.A.B. de C.V., the New
Guarantors party thereto, the Existing Guarantors party
thereto and U.S. Bank National Association as successor
trustee to Wachovia Bank, National Association2.18
    
    
    Second Supplemental Indenture to the 2012 Indenture dated as
of January 16, 2008 among Vitro, S.A.B. de C.V., the New
Guarantors party thereto, the Existing Guarantors party
thereto and the Bank of New York2.19
    
    
    Third Supplemental Indenture to the 2012 Indenture dated as of
May 15, 2008 among Vitro, S.A.B. de C.V., the New Guarantors
party thereto, the Existing Guarantors party thereto and the
Bank of New York2.23
    
    
    Second Supplemental Indenture to the 2017 Indenture dated as
of January 16, 2008 among Vitro, S.A.B. de C.V., the New
Guarantors party thereto, the Existing Guarantors party
thereto and the Bank of New York2.24
    
    
    Third Supplemental Indenture to the 2017 Indenture dated as of
May 15, 2008 among Vitro, S.A.B. de C.V., the New Guarantors
party thereto, the Existing Guarantors party thereto and the
Bank of New York8.1
    
    
    List of subsidiaries of Vitro, S.A.B. de C.V.12.1
    
    
    Certification of the Chief Executive Officer of Vitro, S.A.B.
de C.V. pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.12.2
    
    
    Certification of the Chief Financial Officer of Vitro, S.A.B.
de C.V. pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.12.3
    
    
    Certification of the Chief Administrative Officer of Vitro,
S.A.B. de C.V. pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.13.1
    
    
    Certification of the Chief Executive Officer, Chief Financial
Officer and Chief Administrative Officer of Vitro, S.A.B. de
C.V. pursuant to 18 U.S.C. §1350, as adopted pursuant to
Section 906 of the Sarbanes Oxley Act of 2002.
  118