14. Total financing cost
 
Following is a disclosure of the most important items that are included in total financing cost.
 
 
  Year ended December 31,
  1998 1999 2000
             
Interest expense on debt denominated in dollars Ps. 1,463 Ps. 1,286 Ps. 1,191
Interest expense on debt denominated in pesos 661 754 362
Interest expense on debt denominated in UDI's 206 198 170
Restatement of UDI's 294 182 149
Interest income (54) (34) (24)
Exchange loss (gain), net 2,965 (434) 176
Gain from monetary position (2,733) (1,921) (1,261)
Other financial expenses 364 288 390
Total financing cost Ps. 3,166 Ps. 319 Ps. 1,153
 
 
15. Restructuring charges included in Other expense, net
 
a) In 1999 the Company downsized the production capacity of its Glass Containers business unit to match the market's demand. The downsizing involved closing the facility known as Vidriera Oriental, located in México City. A charge of Ps. 732 was taken in 1999 to reduce the book value of the operation to its net realizable value associated with the plant shut-down. Also in 1999 and 2000 the Company downsized its corporate services at headquarters and certain business units, which resulted in a charge of Ps. 134 and
Ps. 156, respectively.
 
b) During 1997 the Company discontinued the use of the equity method of accounting for its investment in Grupo Financiero Serfin. The Company wrote down its investment by Ps. 284 and Ps. 170 in 1998 and 1999, respectively to reduce it to market value.
 
c) See note 19), for other amounts included in Other expense, net.
 
 
16. Amortizable tax losses
 
At December 31, 2000, the tax loss carry forwards, the asset tax to be recovered and the capital losses that can be amortized against capital gains consist of the following:
 
 
  Tax loss carry forwards Asset Tax  
Expiration
  Majority
 Minority Majority Minority Capital
Year interest interest interest interest losses
             
2001 Ps. Ps. Ps. Ps. 2 Ps.  
2002 4 995
2003 2 2
2004 10 199 4 2,587
2005 300 1
2006 16 1
2007 2,383 3 1
2008 4,157 50 173 2
2009 348 52 25 9
2010 309 91 10 7
Ps. 7,197 Ps. 524 Ps. 407 Ps. 33 Ps. 3,582

17. Income tax and workers' profit sharing

a) The income tax and workers' profit sharing included in the Company's results are (the 2000 amounts are not comparable with the amounts of 1999 and 1998, see note 3 f)

 

  Year ended December 31,
  1998 1999 2000
             
Income tax            
Current Ps. 770 Ps. 1,478 Ps. 482
Deferred   57   (54)   160
    827   1,424   642
Asset tax   194   118   12
  Ps. 1,021 Ps. 1,542 Ps. 654
             

 

 
  Year ended December 31
  1998 1999 2000
             
Workers' profit sharing:            
Current Ps. 225 Ps. 261 Ps. 174
Deferred (21) (13) 138
Ps. 204 Ps. 248 Ps. 312
 
Deferred tax assets (liabilities) presented on the balance sheet result from the following:
  December 31,
  1999 2000
   
Assets:  
Accounts receivable reserve Ps . 173 Ps  
Tax benefit from the future deduction  
of inventories held on  
December 31, 1986 540 288
Reserve for seniority premiums  
and pensions 458
Tax loss carry forwards 2,769
Exchange fluctuations 4
Assets tax 112
  540 3,804
Liabilities:  
Deduction of inventories 885
Deduction of fixed assets (304) 4,003
Deduction of other assets 534
  5,422
Assets (liabilities), net (304) 5,422
  Ps 844 Ps (1,618)
b) The reconciliation between the Company's effective income tax rate and the statutory income tax rate is as follows (the 2000 amounts are not comparable with the amounts of 1999 and 1998, see note 3 f):
 
  Year ended December 31
  1998 1999 2000
       
Effective income tax rate 231.0% 56.9% 36.8%
Asset tax included as income tax (38.3) (5.6)  
Effect of loss in value of long-term investments (82.7) 2.0  
Loss on sale of subsidiaries   (2.1)  
Purchase deductions 24.2 0.2  
Difference between tax and accounting basis for monetary gain (10.8) 0.7 (0.6)
Reserves (16.2) 0.4  
Loss from foreign companies      
and minority interest (13.5) (0.2)  
Difference between tax and accounting      
basis for depreciation (17.0) (2.4)  
Difference between tax and accounting      
basis on sale and write-down of fixed assets   (12.5)  
Other (42.7) (2.6) (1.0)
Statutory income tax rate 34.0% 35.0% 35.0%
       

c) Effective January 1, 1999, the Mexican income tax law was changed in several respects. In addition to the changes described in note 13 d), other significant changes include: (i) a company which files a consolidated tax return is allowed to consolidate only 60% of its share of its subsidiaries for tax purposes, (ii) estimated tax payments are based on the taxable income of each subsidiary individually as opposed to a consolidated basis, and (iii) the overall tax rate increased from 34% to 35%; however, income taxes are currently payable based on a 30% rate and the remaining 5% will be paid when such amounts are paid out as dividends (transitorily 32% and 3%, respectively in 1999). Taxpayers have the option to pay 35% currently rather than deferring a remainder until dividends are paid.

 
18. Extraordinary item
 
The extraordinary item in 1998 and 1999 is the tax benefit that resulted from the utilization of tax loss carry forwards and the recovery of the asset tax paid in previous years.
 
 
19. Business acquisitions and dispositions
 
a) Sale of Silicatos y Derivados, S.A.- In December 1999, Vitro sold its 55% interest in Silicatos y Derivados, S.A., to its long-standing partner in such company, PQ Corporation, for US$ 9.9 million. A loss of Ps. 41 was realized as a result of this transaction and is included in Other expense, net. This company produces sodium silicate and aluminum sulfate for the soap, detergent, water treatment and paper industries. The company's sales represented approximately 1.4% of Vitro's consolidated sales.
 
b) Sale of Compañía Manufacturera de Vidrio del Perú Ltda, S.A.- In December 1999, Vitro accepted the November 17, 1999 public tender offer made by Vidrios Industriales, S.A. (a subsidiary of Owens-Illinois, Inc.) for its 23.66% interest of Compañía Manufacturera de Vidrio del Perú Ltda, S.A. The amount received for the sale was US$ 6.6 million. A loss of Ps. 38 was realized as a result of this transaction and is included in Other expense, net. Vitro accounted for this investment under the equity method.
 

c) Acquisition of Harding Glass Inc.- In April 2000, VVP America consummated the acquisition of substantially all of the assets of Harding Glass, Inc., for an amount of US$ 31.4 million. With the acquisition of Harding, VVP America incorporated into its operations 5 distribution centers and 118 retail stores located throughout the United States. Harding is one of the leading distributors of glass products for automotive and construction markets

d) Disposition of Manufacturas, Ensamblajes y Fundiciones, S. de R. L. de C.V.- On August 10, 2000 Vitro and GE México, S.A. de C.V. a subsidiary of General Electric Company, a U.S. Corporation, decided to terminate their Joint Venture Agreement which in 1997 resulted in the creation of Manufacturas, Ensamblajes y Fundiciones, S. de R.L. de C.V. The termination of the Joint Venture was subject to complying with certain requirements imposed by both parties. Those requirements were completed in January 2001, resulting in the closing of such facility. A loss of Ps. 69 was recognized and is included in Other expense, net.