Financial
S
tatements and
Management Repor
t
Financial
Statements
O
BRASCON
H
UARTE
L
AIN
AND
SUBSIDIARIES
Auditor´s Report 115
Consolidated Financial Statements 116
A S S E T S 12/31/2003 12/31/2002
DUE FROM SHAREHOLDERS FOR UNCALLED CAPITAL 540 252
FIXED AND OTHER NONCURRENT ASSETS Start-up expenses
Start-up expenses 11,048 6,968
Capital increase and flotation expenses 1,883 470
12,931 7,438
Intangible assets
Rights on leased assets 29,116 30,822
Computer software 9,628 6,217
Other intangible assets 56,451 40,079
Accumulated amortization (30,001) (20,208)
65,194 56,910
Tangible fixed assets
Land and structures 87,035 28,928
Machinery 117,534 78,958
Tangible fixed assets of concession holders 1,139,608 526,142
Other fixtures, tools and furniture 47,690 49,357
Advances and construction in progress 18,506 9,822
Other tangible fixed assets 15,447 15,678
Accumulated depreciation (225,695) (132,689)
1,200,125 576,196
Long-term investments
Investments in Group companies 6,135 49,702
Investments accounted for by the equity method 6,361 9,786
Investments in associated companies 34,645 27,218
Long-term investment securities 1,739 306
Other loans 21,829 19,879
Long-term guarantees and deposits given 8,945 3,894
Allowances (8,481) (3,307)
71,173 107,478
TOTAL FIXED AND OTHER NONCURRENT ASSETS 1,349,423 748,022
CONSOLIDATION GOODWILL 46,317 51,561
DEFERRED CHARGES 140,121 60,585
CURRENT ASSETS Inventories
Property products for sale 69,886 86,166
Embodiment items, fungibles and machinery replacement parts 33,714 28,317
Auxiliary shop work, site installations and precontract expenses 99,596 79,999
Advances to suppliers and subcontractors 15,421 20,367
Allowances (2,536) (3,137)
216,081 211,712
Accounts receivable
Trade receivables for sales and services 1,088,758 1,046,170
Receivable from Group companies 3,418 43,807
Receivable from associated companies 75,922 76,918
Sundry accounts receivable 256,787 273,548
Employee receivables 495 450
Tax receivables 179,393 102,195
Allowances (193,921) (191,542)
1,410,852 1,351,546
Short-term investments
Short-term investment securities 191,291 116,583
Other loans 23,458 16,815
Short-term guarantees and deposits given 4,847 4,106
219,596 137,504
-SHAREHOLDERS' EQUITY AND LIABILITIES 12/31/2003 12/31/2002
SHAREHOLDERS' EQUITY
Capital stock 53,726 53,726
Additional paid-in capital 254,365 254,365
Revaluation reserve 1,234 1,234
Legal reserve 10,763 10,763
Differences due to denomination of capital stock in euros 91 91
70,391 71,786
Other reserves
Reserves at consolidated companies 130,161 87,881
(76,165) (67,224)
Translation differences
Income attributed to the Parent Company 48,547 42,137
TOTAL SHAREHOLDERS' EQUITY 493,113 454,759
MINORITY INTERESTS 102,104 30,917
DEFERRED REVENUES 5,233 2,927
NEGATIVE CONSOLIDATION DIFFERENCE 9,014 10,363
PROVISIONS FOR CONTINGENCIES AND EXPENSES 70,481 64,261
LONG-TERM DEBT
Payable to credit institutions
Transferable mortgage loans and other loans 188,164 168,089
Loans from concession-holders 329,774 203,184
517,938 371,273
Other long-term debt
Bond issue 194,464 194,464
Bond issue of concession-holders 225,196
-10,952 15,047
Other payables 79,433 44,073
Capital payments payable 6,311 32,022
516,356 285,606
TOTAL LONG-TERM DEBT 1,034,294 656,879
CURRENT LIABILITIES
Payable to credit institutions
Loans received 70,244 27,341
Loans from concession-holders 30,032 46,869
Unmatured accrued interest payable 1,774 937
Unmatured accrued interest payable to concession-holders 1,894 1,854
103,944 77,001
Payable to Group companies 1,826 4,362
Payable to associated companies 39,393 32,548
Trade accounts payable
Advances received on orders 179,813 142,016
Payables for purchases and services 558,086 409,757
Notes payable 523,185 480,689
1,261,084 1,032,462 Other nontrade payables
Bond issue 5,313 5,313
Bond issue of concession-holders 7,360
-Taxes payable 183,468 129,079
Compensation payable 5,967 4,890
Other nontrade payables 92,732 60,671
Short-term guarantees and deposits received 2,649 5,175
297,489 205,128
D E B I T 12/31/2003 12/31/2002 EXPENSES
Decrease in inventories of auxiliary shops,
site installations and pre-contract expenses 4,462.0 -
Procurements
Cost of property products for sale 9,599 10,009
Cost of materials used, fungibles and machinery replacement parts 367,309 329,215
Other external expenses 998,656 821,829
Personnel expenses
Wages, salaries and similar expenses 218,078 202,288
Employee welfare expenses 57,819 52,163
Depreciation and amortization expense 59,646 38,852
Variation in other allowances 23,102 72,789
Other operating expenses
Outside services 247,341 239,327
Taxes other than income tax 24,757 20,816
Other current operating expenses 12,181 10,721
OPERATING INCOME 142,982 73,453
2,165,932 1,871,462
Financial expenses
On lease transactions and deferred
purchase of fixed assets 640 877
On financing of current operations 56,273 44,787
Variation in investment valuation allowances 482 636
Exchange losses 22,871 12,271
FINANCIAL INCOME
80,266 58,571
Amortization of consolidation goodwill 3,315 3,422
Share in losses of companies accounted for by the equity method - 92
INCOME FROM ORDINARY ACTIVITIES 88,613 40,889
Extraordinary expenses
Variation in intangible asset, tangible
fixed asset and control portfolio allowances 7,100 861
Losses on disposal of intangible assets,
tangible fixed assets and control portfolio 3,008 3,759
Extraordinary expenses 30,205 13,260
Prior years' expenses and losses 1,702 1,915
EXTRAORDINARY INCOME - 7,801
42,015 27,596
INCOME BEFORE TAXES 60,741 48,690
Impuesto sobre sociedadesCorporate income tax 9,701 4,231
CONSOLIDATED INCOME FOR THE YEAR 51,040 44,459
Income attributed to minority interests 2,493 2,322
INCOME ATTRIBUTED TO THE PARENT COMPANY 48,547 42,137
Note: The accompanying Notes 1 to 27 are an integral part of the consolidated statements of income as of December 31, 2003.
C R E D I T 12/31/2003 12/31/2002 REVENUES
Net sales
Sales 1,470,498 1,270,930
Joint venture sales (based on % of ownership) 641,307 501,036
2,111,805 1,771,966 Increase in inventories of auxiliary shops,
site installations and precontract expenses - 27,758
Capitalized expenses of in-house work on fixed assets 14,411 13,080
Other operating revenues
Non-core and other current operating revenues 39,086 57,611
Subsidies 630 1,047
OPERATING LOSS
2,165,932 1,871,462
Revenues from equity investments 18 4,898
Revenues from interest received from other companies 14,050 14,297
Exchange gains 13,514 10,326
FINANCIAL LOSS 52,684 29,050
80,266 58,571
Share in the income of companies accounted for by the equity method 485 -
Reversal of negative consolidation differences 1,145 -
LOSS ON ORDINARY ACTIVITIES
Extraordinary revenues
4,241 23,978
Gains on disposal of Parent Company shares 2,397 -
Extraordinary revenues 7,196 3,005
Prior years' revenues and income 309 613
EXTRAORDINARY LOSS 27,872 -
42,015 27,596
LOSS BEFORE TAXES
CONSOLIDATED LOSS FOR THE YEAR
Loss attributed to minority interests
LOSS ATTRIBUTED TO THE PARENT COMPANY
Note: The accompanying Notes 1 to 27 are an integral part of the consolidated statements of income as of December 31, 2003. Gains on disposal of intangible assets, tangible fixed assets and
control portfolio
The consolidated financial statements of Obrascón Huarte Lain, S.A. and subsidiaries are presented on the basis of Royal Decree 1815/1991 enacting the regulations for preparation of consolidated financial statements, and of the provisions of Royal Decree 1643/1990 enacting the Spanish National Chart of Accounts, and the provisions of an Order of the Ministry of Economy and Finance dated January 27, 1993, enacting the regula-tions for the adaptation of the Spanish National Chart of Accounts that are applicable to the various activities carried on by the Group (construction, toll roads and water).
1. REGISTERED OFFICE AND CORPORATE NAME
Obrascón Huarte Lain, S.A., formerly Sociedad General de Obras y Construcciones Obrascón, S.A., the Parent Company, was incorporated on May 15, 1911, and has its registered office in Madrid at calle Gobelas, 35-37. 2. LINES OF BUSINESS
The main business activities carried on by the companies composing the Obrascón Huarte Lain Group are classified as follows:
Construction
• Construction of all manner of civil engineering works and buildings for public authorities and private cus-tomers, both in Spain and abroad.
Concessions
• Operation of infrastructure administrative concessions relating mainly to transport, parking lots and ports.
Services
• Services related to management, operation, upkeep and maintenance of urban infrastructure (roads, railways and buildings) and equipment.
• Projects related to the full water cycle and technical and scientific counseling, operation and maintenance of waste water treatment plants and engineering services for water supply and treatment facilities.
• Treatment of urban solid waste, including collection, treatment of industrial and toxic waste, biomass and landfills.
• Services related to environmental restoration. • Operation of water and environmental concessions.
3. SCOPE OF CONSOLIDATION
For the purpose of preparing the consolidated financial statements, the companies composing the consoli-dated Group were classified as follows:
a) Subsidiaries: those in which effective direct or indirect control is exercised, which are fully consoli-dated.
b) Associated companies: those in which a Group company does not have effective control but a stake of at least 20%, or 3% if the investee is listed, which are accounted for by the equity method or proportionally consolidated in the event of joint management.
The companies composing the consolidated Group as of December 31, 2003, were as follows:
Subsidiaries (fully consolidated)
COMPANIES LOCATED IN SPAIN COMPANIES LOCATED ABROAD
Construction: Construction:
- Agrupación Guinovart Obras y Servicios Hispania, S.A. - A.Z. Servis, s.r.o. (1)
- Asfaltos y Construcciones Elsan, S.A. - Empresa Constructora Huarte Andina, S.A. - Construcciones Adolfo Sobrino, S.A. - Empresa Constructora Huarte San José, Ltda. - Construcciones Enrique de Luis, S.A. - Huartemex, S.A. de C.V.
- Electrificaciones y Montajes Guinovart, S.A. - OHL Central Europe, a.s. (1)
- Ferrocivil, S.A. - OHL, México SC, S.A. de C.V.
- José Malvar Construcciones, S.A. - Rentia Invest, a.s. (1)
- Morkaitz, S.A. - ZPSV Caña, a.s. (1)
- Obras y Servicios Hispania Galicia, S.A. - ZPSV Uhersky Ostroh, a.s. (1) - S.A. Trabajos y Obras - ZS Bratislava, a.s. (1) - Trabajos de Carpintería Especializados, S.L. (1) - ZS Brno, a.s. (1) - Talleres Mecánicos Mollabao, S.L. (1)
Concessions:
Concessions: - Autopista Ezeiza Cañuelas, S.A.
- Aeropistas, S.L. (1) - Autovías, S.A.
- Autopista Eje Aeropuerto Concesionaria Española, S.A. (1) - Centrovías Sistemas Rodoviários, S.A. - Euroglosa 45 Concesionaria de la Comunidad de Madrid, S.A. - Concesionaria Mexiquense, S.A. de C.V. (1) - Marina Urola, S.A. - Estacionamientos Providencia, S.A. - Nautic Palamós, S.A. - Inecsa Dos Mil, S.A. (1)
- OHL Concesiones, S.L. - Infraestructura Dos Mil, S.A. (1) - Pachira, S.L. (1) - Latina Infraestructuras, S.A.
- OHL Brasil, Ltda.
Services: - OHL Brasil Participaçoes en Infraestructura, Ltda.
- Alcora Gestión Hotelera, S.A. (1) - OHL Concesiones Chile, S.A.
- Aljarafe Stars Hoteles, S.A. - Seconmex Administración, S.A. de C.V. (1) - Aparcamientos Justicia, S.L. (1) - Sociedad Concesionaria Autopista del Sol, S.A. (1) - Desarrollo de Tecnologías de Depuración, S.A. - Sociedad Concesionaria Autopista Los Andes, S.A. (1) - Elsan–Pacsa, S.A. - Sociedad Concesionaria Autopista Los Libertadores, S.A. (1) - Ingeniería de los Recursos Naturales, S.A.
- Inima, Servicios Europeos de Medio Ambiente, S.A. Services:
- Inmolain, S.L. - Ambient Serviços Ambientais de Riberao Preto, S.A. - Consultores Premier A.I.E. (1) - Desalinizadora Arica, Ltda. (2)
- Sacova Centros Residenciales, S.L. (1) - Desalant, S.A. (1) - Técnicas y Gestión Medioambiental, S.A. - Huaribe, S.A. de C.V. - Tecnología, Servicios Logísticos y Aplicaciones, S.A. - Huaribe Servicios, S.A. de C.V. (1) - Tractament Metropolitá de Fangs, S.L. - Inima USA Corporation (1)
Associated companies
(proportionally consolidated)
COMPANIES LOCATED IN SPAIN COMPANIES LOCATED ABROAD
Construction: Concessions:
- Inoxosha Gas, A.I.E. (1) - Constructora e Inmobiliaria Xalitic, S.A. de C.V. (1) - Inmobiliaria Fumisa, S.A. de C.V. (1)
Concessions: - Prestadora de Servicios Fumisa, S.A. de C.V. (1)
- Autovía del Noroeste de la Comunidad Autónoma de la Región de Murcia, S.A.
- Operadora y Comercializadora Aeroportuaria, S.A. de C.V. (1).
- Terminales Marítimas del Sureste, S.A. (1)
Services:
Services: - Gastronómica Santa Fé, S.A. de C.V. (1)
- Asfaltos del Tajo, A.I.E. - International Business Club de México, S.A. de C.V. (1) - Asfaltos Elsan–Pacsa Torrescámara, A.I.E. (1) - Pabellón Cuauhtemoc, S.A. de C.V.
- Plaza Misterios, S.A. de C.V. (1) - Plaza el Rosario, S.A. de C.V.
- Plus Arrendamientos Inmobiliarios, S.A. de C.V. (1) - Proyecto Sevilla Plus, S.A. de C.V. (1)
- Sociedad Consultora Proyecto Plus, S.A. de C.V. (1) - San Francisco Plus, S.A. de C.V. (1)
Assoicated companies
(accounted for by the equity method)
COMPANIES LOCATED IN SPAIN COMPANIES LOCATED ABROAD
Concessions: Construction:
- Muelles y Espacios Portuarios, S.A. - KPM Consult, a.s. (1) - Nautic Tarragona, S.A. - Sanre, s.r.o. (1) - Port Torredembarra, S.A. - Tomi Remont, a.s. (1)
- Slovenské Tunely, a.s. (1) Services:
- Cádiz San Fernando, A.I.E. (1) Services:
- Avalora, Soluciones Informáticas de Gestión, S.A.(2) - Islas de Mayakoba, S.A. de C.V. (1) - E.M.V. Alcalá de Henares, S.A.
- Portal de Diseño, Cálculo y Formación para la Construcción Structuralia, S.A. (1)
(1) Companies included in consolidation in 2003.
(2) Companies accounted for by the equity method in 2003 that were fully consolidated in 2002.
The detail of the lines of business, registered offices, information on equity and net cost of the investment of the companies composing the consolidated Group is included in Exhibits I and II.
In 2003 the exclusions from the consolidated Group were as follows: Due to sale (fully consolidated in 2002):
• Agua y Medio Ambiente, S.A.
Due to merger (fully consolidated in 2002):
Due to liquidation (fully consolidated in 2002): • Grupo Sobrino, S.A.
Due to sale (accounted for by the equity method in 2002): • Ingeniería de Suelos y Explotación de Recursos, S.A.
Due to liquidation (accounted for by the equity method in 2002): • Clifton, S.A.
Due to inactivity (accounted for by the equity method in 2002): • Desaladora de la Costa del Sol, S.A.
In 2003 the following companies were included in the consolidated Group: Fully consolidated companies:
• Aeropistas, S.L. • AZ Servis, s.r.o.
• Alcora Gestión Hotelera, S.A. • Aparcamientos Justicia, S.L.
• Autopista Eje Aeropuerto Concesionaria Española, S.A. • Concesionaria Mexiquense, S.A. de C.V.
• Consultores Premier, A.I.E. • Desalant, S.A.
• Huaribe Servicios, S.A. de C.V. • Inecsa Dos Mil, S.A.
• Infraestructura Dos Mil, S.A. • Inima USA Corporation
• Lagunas de Mayakoba, S.A. de C.V. • OHL Central Europe, a.s.
• Operadora Mayakoba, S.A. de C.V.
• Operadora Hotelera del Corredor Mayakoba, S.A. de C.V. • Pachira, S.L.
• Rentia Invest, a.s.
• Sacova Centros Residenciales, S.L. • Seconmex Administración, S.A. de C.V. • Sociedad Concesionaria Autopista del Sol, S.A. • Sociedad Concesionaria Autopista Los Andes, S.A. • Sociedad Concesionaria Autopista Los Libertadores, S.A. • Talleres Mecánicos Mollabao, S.L.
• Trabajos de Carpintería Especializados, S.L. • ŽPSV Caña, a.s.
• ZS Bratislava, a.s. • ZS Brno, a.s.
Proportionally consolidated companies: • Asfaltos Elsan – Pacsa Torrescámara, A.I.E. • Constructora e Inmobiliaria Xalitic, S.A. de C.V. • Gastronómica Santa Fé, S.A. de C.V.
• Inmobiliaria Fumisa, S.A. de C.V. • Inoxosha Gas, A.I.E.
• International Business Club México, S.A. de C.V.
• Operadora y Comercializadora Aeroportuaria, S.A. de C.V. • Plaza Misterios, S.A. de C.V.
• Plus Arrendamientos Inmobiliarios, S.A. de C.V. • Prestadora de Servicios Fumisa, S.A. de C.V. • Proyecto Sevilla Plus, S.A. de C.V.
• Sociedad Consultora Proyecto Plus, S.A. de C.V. • San Francisco Plus, S.A. de C.V.
• Teminales Marítimas del Sureste, S.A.
Companies accounted for by the equity method: • Cádiz San Fernando, A.I.E.
• Islas de Mayakoba, S.A. de C.V. • KPM Consult, a.s.
• Portal de Diseño, Cálculo y Formación para la Construcción Structuralia, S.A. • Sanre, s.r.o.
• Slovenske Tunely, a.s. • Tomi Remont, a.s.
The main companies consolidated in 2002 whose method of consolidation changed in 2003 were as follows: • Desalinizadora Arica, Ltda., was proportionally consolidated in 2002, as the Parent Company owned a direct and indirect holding of 50%. In 2003 an additional 50% holding was acquired, so that full control was taken and the company was fully consolidated.
• Avalora, Soluciones Informáticas de Gestión, S.A., was fully consolidated in 2002, as it was directly and indirectly 57.24% owned by the Parent Company. In 2003, the stake dropped to 45% and the company was accounted for by the equity method.
4. BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS True and fair view
The consolidated financial statements of the Obrascón Huarte Lain Group, which are presented in accord-ance with current accounting regulations, were prepared from the accounting records of Obrascón Huarte Lain, S.A. and its subsidiaries and, accordingly, give a true and fair view of the Group’s net worth, financial position, and results of operations and of the funds obtained and applied in its operations.
The 2003 consolidated financial statements and the individual financial statements of the companies consoli-dated, which were prepared by the directors of the respective companies, will be submitted for approval by the respective Shareholders’ Meetings and it is considered that they will be approved without any changes. Accounting policies
The consolidated balance sheet and consolidated statement of income were prepared in accordance with the accounting principles of prudence, going concern, recording, cost, accrual, revenue and expense matching, no-offset, consistency and materiality required under current corporate law. All the captions which, because of their nature or relative importance, deserve additional explanation are clarified in these notes to consoli-dated financial statements.
Consolidation principles
The consolidation methods used were as follows:
• The companies directly and indirectly more than 50% owned by Obrascón Huarte Lain, S.A., or 50% or less owned by it but over which it has effective control, were fully consolidated.
• Companies which are directly and indirectly between 20% and 50% owned by Obrascón Huarte Lain, S.A. over which it does not have effective control were accounted for by the equity method or propor-tionally consolidated.
• Listed companies which are directly and indirectly between 3% and 50% owned by Obrascón Huarte Lain, S.A. over which it does not have effective control were accounted for by the equity method. The fiscal and tax year of all the consolidated companies coincides with the calendar year, except in the case of José Malvar Construcciones, S.A. at which two fiscal years were taken into account: that running from January 1, 2003, through June 30, 2003, and that running from July 1, 2003, through December 31, 2003. In order to uniformly present the various items comprising the consolidated financial statements, the ac-counting principles and valuation methods applied by the Parent Company and other regulations applicable
in Spain, particularly the industry adaptation of the Spanish National Chart of Accounts for concession-holder companies, were also applied to the consolidated subsidiaries.
The positive and negative differences between the cost of the investments in consolidated companies and their underlying book value at the date they were included in consolidation are reflected in the consolidated balance sheet under the “Consolidation Goodwill” and “Negative Consolidation Differences” captions, respectively. The positive differences are reduced by allocation to certain asset accounts up to the limit of the difference between the book value of the asset in question and its market value on the date of first-time consolidation. The negative differences may likewise be reduced or taken to income if they relate to a realized loss. The assets and liabilities of the consolidated companies abroad were generally translated to euros at the year-end exchange rates, their revenue and expense accounts at the average exchange rates for the year and their equity accounts at historical exchange rates. The revenue and expense accounts of companies in countries with high inflation rates, or which were restated locally due to the effect of inflation, were translated to euros at the year-end exchange rates instead of at the average exchange rates for the year.
The differences arising from application of the aforementioned translation methods were recorded under the “Shareholders’ Equity - Translation Differences” caption on the liability side of the consolidated balance sheet. As of December 31, 2003, there were negative translation differences of €76,165 thousand.
5. PROPOSED DISTRIBUTION OF INCOME AND DIVIDEND
The proposed distribution of 2003 income that the Parent Company’s directors will submit for approval by the Shareholders’ Meeting is as follows:
Thousands of euros Concept
Distributable income for the year 23,045
Distribution to:
Dividend 12,133
Voluntary reserves 10,912
23,045
The directors of Obrascón Huarte Lain, S.A. will propose to the Shareholders’ Meeting the payment of a total gross dividend of �€12,133 thousand, equal to �€0.1355 per share, with a charge to income for the year. The distribution of income proposed by the directors does not include any appropriation to the legal reserve, since the legal minimum for this reserve had been fully covered in prior years (see Note 16).
6. VALUATION STANDARDS
The main valuation methods applied in preparing the consolidated financial statements were as follows: a) Start-up expenses
Start-up expenses, which comprise preoperating, capital increase and flotation expenses, relate basically to expenses incurred for professional service fees and study, public deed and registration expenses. These expenses are recorded at cost and are amortized by the straight-line method over a maximum period of five years. They are recorded in the consolidated balance sheet net of amortization.
b) Intangible assets Rights on leased assets
The rights under financial lease contracts are recorded as intangible assets at the cost of the related assets, revalued, where applicable, pursuant to Royal Decree-Law 7/1996. The total debt for lease payments plus the amount of the purchase option is recorded as a liability. The difference between the total debt and the cash value of the asset, which represents the interest expenses on the transaction, is recorded as a deferred charge and is allocated to income each year by the interest method.
Rights on leased assets are amortized by the straight-line method at rates based on the years of useful life of the leased assets, which are similar to those used to depreciate tangible fixed assets. When the purchase option is exercised, the value of these assets and the related accumulated amortization are transferred to the “Tangible Fixed Assets” caption”.
Computer software
This caption includes basically the expenses arising from the installation and acquisition of computer software, which is amortized on a straight-line basis over a maximum period of five years.
Other intangible assets
This caption includes mainly concession operating rights, research and development expenses and intellectual property expenses, which are amortized on a straight-line basis over a maximum period of five years, except for concession operating rights, which are amortized on a straight-line basis over the concession term. c) Tangible fixed assets
Tangible fixed assets are carried at cost revalued, where appropriate, pursuant to the applicable enabling legislation, including Royal Decree-Law 7/1996 (see Note 16).
The costs of expansion, modernization or improvements leading to increased productivity, capacity or ef-ficiency or to a lengthening of the useful life of the assets are capitalized.
Upkeep and maintenance expenses are expensed currently.
The Group depreciates its tangible fixed assets by the straight-line method at rates based on the years of useful life of the assets.
The estimated years of useful life for each asset group are as follows:
Structures 25-50
Machinery 6-16
Other fixtures, tools and furniture 10
Other tangible fixed assets 3-5
Years of estimated useful life
The surpluses or net increases in value resulting from the revaluations are depreciated over the tax periods in the remaining useful lives of the revalued assets.
In view of the importance of the concession-holder companies, the balances contributed by them to the Group are disclosed in the “Tangible Fixed Assets” and “Long-Term Debt – Payable to Credit Institutions” and “Cur-rent Liabilities – Payable to Credit Institutions” captions.
Investments in administrative concessions
The administrative concessions being operated by Group companies as of December 31, 2003, were as fol-lows:
Company operating the concession Description of concession Location
CONCESSIONS Toll road operation
Autopista Eje Aeropuerto Concesionaria Española, S.A. Barajas airport highway Madrid (Spain) 80.00 343 24 Euroglosa 45, Concesionaria de la Comunidad de Madrid, S.A. M-45 highway. N-V to N-IV section Madrid (Spain) 67.00 113 24 Autovía del Noroeste Concesionaria de la Comunidad
Autónoma de la Región de Murcia, S.A. C-415 highway. Caravaca-Alcantarilla section Murcia (Spain) 45.00 119 23 Accesos de Madrid Concesionaria Española, S.A. (1) R-III and R-V and M-50 section Madrid (Spain) 6.75 1354 46 Autopista Central Gallega Concesionaria Española, S.A. (1) Santiago-Alto Santo Domingo toll road Santiago de Compostela (Spain) 5.99 367 71
Autovías, S.A. Sao Paulo toll road Sao Paulo (Brazil) 100.00 221 15
Centrovías Sistemas Rodoviários, S.A. Sao Paulo toll road Sao Paulo (Brazil) 100.00 242 15
Autopista Ezeiza Cañuelas, S.A. Ezeiza Cañuelas toll road Buenos Aires (Argentina) 68.67 49 17
Sociedad Concesionaria Autopista del Sol, S.A. Santiago – San Antonio toll road Chile 60.04 135 15
Sociedad Concesionaria Autopista Los Libertadores, S.A. Chile 58.36 115 22
Sociedad Concesionaria Autopista Los Andes, S.A. Santiago – Los Andes toll road Chile 100.00 225 30
Concesionaria Mexiquense, S.A. de C.V. Ruta 60 toll road State of Mexico 100.00 301 29
Operation of marinas and commercial ports
Nautic Palamós, S.A. Marina Palamós (Spain) 96.67 9 16
Marina Urola, S.A. Marina Zumaia (Spain) 78.34 3 24
Nautic Tarragona, S.A. (1) Marina Tarragona (Spain) 25.00 13 21
Port Torredembarra, S.A. (1) Marina Torredembarra (Spain) 24.08 6 20
Muelles y Espacios Portuarios, S.A. (1) Barcelona flammables dock Barcelona (Spain) 20.00 27 21
Terminales Marítimas del Sureste, S.A. Operating of terminal Alicante (Spain) 50.00 56 29
Operation of parking lots
Autopark, S.A. (1) Underground parking lot Río de Janeiro (Brazil) 32.80 7 33
Estacionamientos Providencia, S.A. Underground parking lot Santiago de Chile (Chile) 100.00 32 33
Obrascón Huarte Lain, S.A. Virgen de Luján parking lot Sevilla (Spain) 100.00 6 48
Obrascón Huarte Lain, S.A. Arona parking lot Los Cristianos-Sta. Cruz de Tenerife (Spain) 100.00 3 48
Obrascón Huarte Lain, S.A. Pza. Dchos. Hmnos parking lot Almería (Spain) 1.00 5 66
Operation of airports
Inmobiliaria Fumisa, S.A. de C.V. (1) Airport parking lots, commercial premises and passenger boarding bridges Mexico D.F. (Mexico) 50.00 129 10 WATER
Inima, Servicios Europeos de Medio Ambiente, S.A. (2) Water supply Vélez (Málaga) 100.00 - 10
Cádiz – San Fernando, A.I.E.. Drinking water plant San Fernando (Cádiz) 21.80 20 20
Inima, Servicios Europeos de Medio Ambiente, S.A. (2) Drinking water plant Trapiche (Málaga) 100.00 - 21 Inima, Servicios Europeos de Medio Ambiente, S.A. (2) Water supply Churriana de la Vega (Granada) 100.00 - 2 Inima, Servicios Europeos de Medio Ambiente, S.A. (2) Desalination plant Carboneras (Almería) 25.00 - 24 Ambient, Serviços Ambientais de Riberao Preto, S.A. Desalination plant Riberao Preto (Brazil) 74.91 35 16
Desalinizadora Arica, Ltda. Desalination plant Arica (Chile) 100.00 4 5
Desalant, S.A. Desalination plant Antofagasta (Chile) 100.00 52 18
Aquaria Water LLC (1) Desalination plant Massachussets (USA) 80.00 50 20
Tractament Metropolitá de Fangs, S.L. Thermal mud-drying plant Sant Adriá de Besós (Barcelona) 50.40 50 13
Obrascón Huarte Lain, S.A. Thermal mud-drying plant Butarque (Madrid) 30.00 18 26
Promoaqua Desalación de Los Cabos, S.A. de C.V.(1) Desalination plant Los Cabos- Mexico 90.00 14 20 Inima, Servicios Europeos de Medio Ambiente, S.A. Desalination plant Ashdod - Israel 25.00 59 23 WASTE
Biorreciclaje de Cádiz, S.A (1) Urban solid waste Medina Sedonia (Cádiz) 16.33 37 19
WELFARE SERVICES
Sacova Centros Residenciales, S.L.. Retirement homes Valencia Aut. Community 84.92 78 15
(1) Companies included under the "Long-Term Investments" caption. (2) Operation of investments. % Total Planned Investment Millions of euros Remaining period (in years)
d) Marketable securities and other similar investments
Investments in short- and long-term marketable fixed-income and equity securities are recorded as follows: 1. Listed securities: at the lower of cost or market. The market value was taken to be the lower of aver-age market price in the last quarter of the year or closing market price on the last day of trading in the year.
2. Unlisted securities: generally at acquisition or incorporation cost net, where appropriate, of the required allowance for decline in value if cost was higher than the underlying book value of the hold-ing at year-end, considerhold-ing whether the possible diminutions in net worth are permanent or not and whether or not unrealized gains were disclosed at the time of the acquisition which still exist at the date of subsequent valuation.
e) Consolidation goodwill
Consolidation goodwill was calculated as the positive difference between the investment in each consolidated company and their underlying book values per the available balance sheets at the closest date to the date of first-time consolidation.
In cases in which this positive difference relates to unrealized gains in the assets of the investee, it is recorded as an addition to the value of those assets.
The goodwill recorded in the consolidated balance sheet relates to the remaining amount, which cannot be allocated to specific assets, and is amortized on a straight-line basis in the period over which it is estimated that it will contribute to the obtainment of income for the Group, not exceeding 20 years. Accordingly, the projected income for the companies with goodwill, over the period of amortization, is higher than the amounts recorded as goodwill.
f) Deferred charges
Arising from the financing for concessions of toll roads and other toll ways
The Group capitalizes the interest accrued until each section of the infrastructure is in operating condition, since there is reasonable evidence that it will be recovered through future year toll rates. Upon commence-ment of operation, these expenses are charged to income as follows:
- Interest expenses are charged to income each year for the proportion of toll revenues for the year to total projected toll revenues over the concession term, applied to total projected interest expenses, based
- The positive difference between the accrued interest expense and the interest expense that should be charged to income as explained above is capitalized to the “Deferred Charges” caption. Any negative difference arising in this connection is charged to income as indicated above.
Arising from financial lease contracts and debt arrangement
Deferred interest expenses on financial lease contracts or debt arrangement are transferred to income by the interest method during the term of the related debt.
g) Nontrade loans
Nontrade loans to third parties are valued at the amount delivered plus the unmatured interest accrued at the balance sheet date. Debts maturing in under 12 months from the balance sheet date are classified as short term and those maturing at over 12 months as long term. The related value adjustments are made as and when required and an allowance is recorded for loans which are doubtfully collectible.
h) Inventories
Inventories are valued by the Group as follows:
1) Raw materials and supplies, consumables, replacement parts and land and building lots for real estate developments are valued at the lower of acquisition cost or net realizable or replacement value.
2) Products and work-in-process are valued at production cost (materials, labor and direct production expenses, and the interest accrued over the construction period).
3) Assets received in settlement of receivables are recorded at the amount of the debt so settled, plus all the necessary expenses arising from each transaction. If the realizable value is lower, the related al-lowance for decline in value is recorded to adjust the net book value to the realizable value.
4) Real estate developments for sale and in progress basically include the costs incurred in the building lots, site development, design, permits, construction and the financial expenses incurred during the construction period, net of the allowance required to adjust their value to market value.
5) Building lots for sale include the costs incurred in their purchase net of the allowance required to adjust their value to market value.
6) Initial expenses on awarded contracts, including those of studies and projects, are recorded at the costs actually incurred and are expensed over the project execution period on the basis of the percent-age of completion.
i) Trade receivables, trade notes receivable and construction certificates receivable
In keeping with standard commercial practice, a substantial portion of the sales made by the Group is instru-mented in construction certificates accepted by customers and in trade notes receivable. The balance of the “Accounts Receivable” caption in the consolidated balance sheet as of December 31, 2003, includes trade notes and construction certificates not matured as of December 31, even if they were discounted, in which case a balancing entry is recorded under the “Current Liabilities – Payable to Credit Institutions” caption. The construction certificates and trade notes assigned without recourse to financial institutions under the factoring system are presented as a reduction of the balances of these captions.
The Group records provisions to the allowance for bad debts to cover past-due balances or balances for which the circumstances justify their classification as doubtfully collectible.
j) Short-term investments
This caption includes the holdings (net of payments outstanding) in, the participating loans to and the provi-sions for investees that are intended for disposal at short term.
The remaining short-term investments are recorded at their face value or at the amount actually paid, as appropriate.
k) Provisions for contingencies and expenses
Provision for contingencies: this relates to the estimated amount of debts or commitments whose exact amount cannot be determined or whose date of payment is uncertain, since it is dependent on the fulfillment of certain conditions which are beyond the Group’s control.
Provision for party liability: this relates to the estimated amount required for probable or certain third-party liability and for outstanding obligations of undetermined amount. This provision is recorded when the liability or obligation giving rise to the indemnity or payment arises.
Reversion reserve: the Group records a reversion reserve for assets assigned to administrative concessions that revert on expiration of the related concession term. The reserve is calculated to supplement the depre-ciation of the related assets so that their net book value is zero at the expiration date of the concession term. The Group companies consider that the periodic maintenance plans, the cost of which is expensed currently, are sufficient to ensure that the revertible assets are returned in good working condition on expiration of the concession term and, accordingly, that no material expenses will arise as a result of the reversion.
l) Classification of debt
Debts are recorded at face value. Debts maturing in under 12 months from the date of the consolidated balance sheet are classified as current liabilities and those maturing at over 12 months as long-term debt.
These debts are increased by the amount of unmatured accrued interest, which is classified by the same method as that used to classify the principal debt. Interest is expensed currently.
Transferable mortgage loans are classified as long- or short-term based on the estimated period in which subrogation will occur, as required by the Spanish National Chart of Accounts as adapted for real estate companies.
m) Operating allowances
Operating allowances mainly include:
Provision for project completion: this allowance is intended to cover the expenses arising from completion of a project until its definitive settlement. The estimated costs under this heading are accrued over the construc-tion period on the basis of producconstruc-tion volumes.
Provision for management fees and other fees: this allowance relates to the amount incurred for project man-agement and inspection fees, laboratory, redesign and other fees not paid at the date of the balance sheet. The amounts of these fees are set in the project specifications and in current legislation. The estimated costs under this heading are accrued over the duration of the project, based on production volumes.
Provision for temporary site employees: this allowance reflects the liability incurred for temporary site employ-ees, on the basis of the average wage rate and the average years of service at the balance sheet date. n) Corporate income tax
The expense for corporate income tax of each year is calculated on the basis of book income before taxes, increased or decreased, as appropriate, by the permanent differences from taxable income, net of tax relief and tax credits, excluding tax withholdings and prepayments.
As of December 31, 2003, certain Spanish Group Companies filed consolidated tax returns.
The expense for corporate income tax recorded in the consolidated statement of income relates to the total tax expense of the companies in the consolidated tax group whose financial statements are consolidated, and of the individual amounts of corporate income tax expense of each Group company not included in the consolidated tax group.
ñ) Revenues and expenses
Under the regulations for adaptation of the Spanish National Chart of Accounts for construction companies, the income recorded on projects is that obtained using the percentage-of-completion method.
Under this method, in projects that foreseeably will finally generate a profit, the income arising during the execution of the project is calculated by applying to the foreseeable income the percentage resulting from comparison of the actual costs incurred up to that date with the total foreseeable costs through completion of the project.
In accordance with standard practice in the industry, the estimates used to calculate the percentage of com-pletion include the possible effect on income from projects of the net margin on certain contract revisions, modifications, addenda and settlements which are being processed, and which the Group considers to be reasonably realizable.
The “Completed Construction Work Pending Certification” caption represents the difference between the amount of the completed work recorded, including the adjustment to the margin recorded by application of the percentage of completion, and the amount of certified completed work through the balance sheet date. If the amount of production from inception is lower than the amount certified, the difference is recorded under the “Customer Advances” caption on the liability side of the consolidated balance sheet.
The estimated site clearance costs and the expenses which may arise from completion of a project until its definitive settlement are accrued over the construction period on the basis of production volumes, and are recorded under the “Operating Allowances” caption on the liability side of the consolidated balance sheet. In the real estate line of business, sales are recognized for the amount of the contracts signed, for both com-pleted properties and properties substantially comcom-pleted (i.e. more than 80% comcom-pleted) at year-end. For the remaining lines of business, revenues are recognized on an accrual basis, i.e. when the actual flow of the related goods and services occurs, regardless of when the resulting monetary or financial flow arises. Additionally, in accordance with the accounting principle of prudence in valuation, only realized income is recorded at year-end, whereas foreseeable contingencies and losses, including possible losses, are recorded as soon as they become known.
o) Temporary joint ventures
In accordance with standard practice in the construction industry, certain projects are carried out by tempo-rary joint ventures with one or more companies.
The results on projects carried out by joint ventures are recorded by the same method as that used for projects carried out directly by the Group, as explained in Note 6-ñ above.
Expenses paid on behalf of joint ventures and other services rendered to them are recorded when paid or rendered. These amounts are recorded as “Non-Core and Other Current Operating Revenues” on the credit side of the consolidated statement of income.
In accordance with the regulations for the adaptation of the Spanish National Chart of Accounts for construc-tion companies, the consolidated financial statements reflect the effect of proporconstruc-tionally integrating the joint ventures in which the Group was participating at year-end, by including the portion corresponding to its participation in the joint ventures under the various captions of the consolidated statement of income and consolidated balance sheet. These balances, where material, are shown in the following notes.
p) Severance costs
Under current regional collective labor agreements, the companies are required to pay severance to employees terminated under certain conditions.
A provision was recorded under the “Operating Allowances” caption on the liability side of the consolidated balance sheet for the liability incurred for terminations of temporary site employees, on the basis of the aver-age waver-age rate and the averaver-age years of service at the balance sheet date.
The directors of the Parent Company consider that, based on possible terminations in the future of permanent employees under normal conditions, and on the amounts payable in this connection, the accrued liability for severance pay is not material and, accordingly, no provision was recorded in this connection in the 2003 consolidated financial statements.
q) Transactions in currencies other than the euro
Transactions in currencies other than the euro are recorded at their equivalent euro value at the exchange rates prevailing at the transaction date. Exchange gains or losses arising from the cancellation of balances in currencies other than the euro are recorded in the consolidated statement of income as soon as they arise. Balances receivable and payable in currencies other than the euro as of December 31 are translated to euros at the year-end exchange rates. Unrealized net exchange losses are recognized as an expense, whereas un-realized net gains are deferred until maturity.
r) Activities with environmental impact
An environmental activity is defined as being any operation the main purpose of which is to prevent, reduce or repair environmental damage.
However, the business activities carried on by the Obrascón Huarte Lain Group include street cleaning, collec-tion and treatment of urban solid waste, water treatment and quality control, river cleaning and the eliminacollec-tion of uncontrolled dumping points, reforestation and other activities involving the provision of environmental services to third parties. Similarly, many construction contracts include environmental impact studies and the performance of work to preserve, maintain and restore the environment.
The Group does not treat as environmental assets and expenses those relating to the provision of the afore-mentioned services, since these services are provided to third parties. However, environmental claims and obligations are included, regardless of whether they relate to in-house operations or to operations performed for third parties.
Investments arising from environmental activities are valued at cost and capitalized as an addition to fixed assets in the year in which they are incurred.
Environmental protection and improvement expenses are charged to income in the year in which they are incurred, regardless of when the resulting monetary or financial flow occurs.
Provisions for probable or certain third-party liability, litigation in progress and outstanding indemnity pay-ments or obligations of undetermined amount of an environmental nature, which are not covered by the insurance policies taken out by the Group, are recorded when the liability or obligation giving rise to the indemnity or payment arises.
7. START-UP EXPENSES
The variations in 2003 in start-up expense accounts were as follows:
Thousands of euros
Reclassifications and transfers
Preoperating expenses 6,968 157 4,775 - (852) 11,048
Capital increase and flotation
expenses 470 (2) 1,573 - (158) 1,883
Total start-up expenses 7,438 155 6,348 - (1,010) 12,931
Amortization balanceEnding Begining Balance Variations in the scope of consolidation Additions Concept
8. INTANGIBLE ASSETS
The variations in 2003 in intangible asset accounts and in the related accumulated amortization were as follows:
-Thousands of euros
Cost:
Rights on leased assets:
Machinery 29,604 (991) 3,071 211 (118) - (3,778) 27,999
Other fixtures, tools and furniture 394 - (211) 1 (11) 173
Other fixed assets 824 - 141 - (13) 5 (13) 944
Computer software 6,217 1,927 884 (358) - 9,629
Other intangible assets 40,079 15,266 2,791 (1,437) 740 (30) 56,451
Total cost 77,118 16,202 6,887 - (1,926) 746 (3,832) 95,195 Accumulated amortization:
Rights on leased assets:
Machinery 4,857 (216) 2,689 - (29) - (1,387) 5,914
Other fixtures, tools and furniture 58 - 36 - - (6) 88
Other fixed assets 100 - 91 - (13) 1 (5) 174
Computer software 2,736 1,864 1,412 - (353) - - 5,659
Other intangible assets 12,457 3,271 3,201 - (929) 166 - 18,166
Total accumulated amortization 20,208 4,919 7,429 - (1,324) 167 (1,398) 30,001 Total intangible assets 56,910 11,283 (542) - (602) 579 (2,434) 65,194
Begining balance Variations in the scope of consolidation Additions or
provisions Reclassifications and transfers Retirements differencesExchange
Transfers to tangible fixed assets Ending balance Concept 958 (958)
-The “Other Intangible Assets” caption includes mainly the fees relating to the Group’s concession-holder companies.
As of December 31, 2003, cost and accumulated amortization included �€1,137 thousand and �€100 thousand, respectively, relating to temporary joint ventures
The amount of the lease contract purchase options exercised in 2003 is recorded under the “Transfers to Tangible Fixed Assets” column.
The average term of financial lease contracts is 60 months. The total figures relating to financial lease transac-tions are summarized below:
Thousands of euros Concept
Value recorded in intangible assets:
Original cost, excluding purchase option 28,501
Value of purchase option 615
Total value of leased assets 29,116
Lease payments (including interest):
Lease payments made in prior years 9,265
Lease payments made in 2003 5,966
9. TANGIBLE FIXED ASSETS
The variations in 2003 in tangible fixed asset accounts and in the related accumulated depreciation were as follows:
-Thousands of euros
Cost:
Land and structures 28,928 57,977 2,491 1 (1,381) (981) - 87,035
Machinery 78,958 28,428 8,966 9,078 (11,673) (1) 3,778 117,534
Fixed assets of concession holders 526,142 302,132 320,790 (2) (10,546) 1,092 - 1,139,608
Other fixtures, tools and furniture 49,357 6,632 3,060 (7,672) (3,658) (40) 11 47,690
Advances and construction in progress 9,822 2,881 11,989 (1,391) (3,406) (1,389) - 18,506
Other tangible fixed assets 15,678 396 3,232 14 (3,791) (97) 43 15,447
Total cost 708,885 398,446 350,528 - (34,455) (1,416) 3,832 1,425,820
Accumulated depreciation:
Structures 4,748 10,848 1,786 35 (567) (78) - 16,772
Machinery 53,958 22,452 9,460 23 (5,837) (10) 1,387 81,433
Fixed assets of concession holders 35,493 18,806 30,351 - (188) 97 - 84,559
Other fixtures, tools and furniture 27,894 4,047 3,629 (22) (2,653) (9) 6 32,892
Other tangible fixed assets 10,596 12 2,297 (36) (2,672) (163) 5 10,039
Total accumulated depreciation 132,689 56,165 47,523 - (11,917) (163) 1,398 225,695 Total tangible fixed assets 576,196 342,281 303,005 - (22,538) (1,253) 2,434 1,200,125
Exchange differences Transfers to tangible fixed assets Ending balance Retirements Begining balance Variations in the scope of consolidation Additions or
provisions Reclassifications and transfers Concept
As of December 31, 2003, cost and accumulated depreciation included �€22,592 thousand and �€5,861 thou-sand, respectively, relating to temporary joint ventures.
A net balance of �€1,055,048 thousand is also included relating to fixed assets of concession-holders, which are depreciated on the basis of their estimated useful life, which does not exceed the concession term. €44,345 thousand of tangible fixed assets had been fully depreciated as of December 31, 2003.
As of December 31, 2003, certain land lots and structures, with a book value of �€39,793 thousand, were mort-gaged as security for loans against which �€23,270 thousand had been drawn down (see Note 19).
The Group companies take out the insurance policies necessary to cover the possible risks to which its tan-gible fixed asstes are subject.
Investments in Group companies include the acquisition cost of the holdings in companies over which the Parent Company, directly or indirectly, has effective control and which are not consolidated, either because they are inactive or because they are scantly significant.
Investments in associated companies include the acquisition cost of the holdings in companies of which the Parent Company directly or indirectly owns between 20% and 50% (or between 3% and 50% in the case of listed investees), over which it does not have effective control and which are not proportionally consolidated or ac-counted for by the equity method, either because they are inactive or because they are scantly significant. 11. CONSOLIDATION GOODWILL
The variations in 2003 in this caption of the consolidated balance sheet were as follows: 10. LONG-TERM INVESTMENTS
The variations in 2003 in the “Long-Term Investments” accounts were as follows:
Thousands of euros
Cost
Investments in Group companies 49,702 (41,910) - (1,660) 3 6,135
Investments in companies accounted for by the equity method9,786 (4,473) 1,644 (596) - 6,361
Investments in associated companies 27,218 (7,854) 15,787 (506) - 34,645
Long-term investment securities 306 14 151 (49) 1,317 1,739
Other loans 19,879 2,457 5,328 (1,890) (3,945) 21,829
Long-term deposits and guarantees given 3,894 656 5,081 (686) - 8,945
Total cost 110,785 (51,110) 27,991 (5,387) (2,625) 79,654
Allowances 3,307 126 5,474 (426) - 8,481
Total long-term investments 107,478 (51,236) 22,517 (4,961) (2,625) 71,173
Begining balance Variations in the scope of consolidation Ending balance Transfers Retirements Additions or provisions Concept Thousands of euros
Companies giving rise to goodwill
José Malvar Construcciones, S.A. 29,827 - (1,649) 28,178
Inima, Servicios Europeos de Medio Ambiente, S.A. 10,254 - (586) 9,668
Construcciones Adolfo Sobrino, S.A. 4,088 - (340) 3,748
Agrupación Guinovart Obras y Servicios Hispania, S.A. 2,840 - (245) 2,595
Desaladora de la Costa del Sol, S.A. 1,665 (1,665) -
-Asfaltos y Construcciones Elsan, S.A. 1,409 - (418) 991
Inmobiliaria Mayaluum, S.A. de C.V. 398 - (24) 374
Avalora, Soluciones Informáticas de Gestión, S.A. 310 (56) (16) 238
Clifton, S.A. 208 (208) -
-Construcciones Enrique de Luis, S.A. 158 - (8) 150
Huartemex, S.A. de C.V. 150 - (9) 141 Begining balance Variations in the scope of consolidation Amortization Ending balance
The breakdown of the ending balance of the goodwill and of the related accumulated amortization is as fol-lows:
Thousands of euros Companies giving rise to goodwill balanceGross
José Malvar Construcciones, S.A. 32,988 (4,810) 28,178
Inima, Servicios Europeos de Medio Ambiente, S.A. 11,715 (2,047) 9,668
Construcciones Adolfo Sobrino, S.A. 6,797 (3,049) 3,748
Agrupación Guinovart Obras y Servicios Hispania, S.A. 4,892 (2,297) 2,595
Asfaltos y Construcciones Elsan, S.A. 4,176 (3,185) 991
Inmobiliaria Mayaluum, S.A. de C.V. 483 (109) 374
Avalora, Soluciones Informáticas de Gestión, S.A. 258 (20) 238
Construcciones Enrique de Luis, S.A. 164 (14) 150
Huartemex, S.A. de C.V. 177 (36) 141
Electrificaciones y Montajes Guinovart, S.A. 193 (84) 109
Ingeniería de los Recursos Naturales, S.A. 114 (42) 72
Morkaitz, S.A. 66 (21) 45 Ferrocivil, S.A. 12 (4) 8 Total goodwill 62,035 (15,718) 46,317 Accumulated amortization Net balance 12. INVENTORIES
The detail of this caption as of December 31, 2003, is as follows:
Thousands of euros
Gross balance
Property products for sale 69,886 (1,986) 67,900
Embodiment items, fungibles and machinery replacement parts 33,714 (550) 33,164 Auxiliary shop work, site installations and precontract expenses 99,596 - 99,596
Advances to suppliers and subcontractors 15,421 - 15,421
Total inventories 218,617 (2,536) 216,081 Net balance Allowances for decline in value Concept
€43,859 thousand of the net balance related to temporary joint ventures.
Thousands of euros
Assets received in payment of debts:
Residential buildings 1,979 - (44) - (731) 1,204 Nonresidential buildings 333 - - - (197) 136 Other buildings 149 - 44 - (26) 167 Building lots 712 - - - (659) 53 Moorings 733 - - - (51) 682 Allowance (32) - - - - (32) Subtotal 3,874 - - - (1,664) 2,210
Construction work in progress:
Residential buildings 90 - - - (90)
Other buildings 3,605 - - 971 - 4,576
Allowance - - -
-Subtotal 3,695 - - 971 (90) 4,576
Completed construction work:
Residential buildings 7,890 - - 2 (155) 7,737 Nonresidential buildings 5,190 - - 24 (4,741) 473 Other buildings 13,577 1,058 - - (8,084) 6,551 Allowance (573) (59) - (56) 361 (327) Subtotal 26,084 999 - (30) (12,619) 14,434 Building lots 51,908 - - 5 (3,606) 48,307 Allowance (1,790) - - - 163 (1,627) Allowance 50,118 - - 5 (3,443) 46,680 Total 83,771 999 - 946 (17,816) 67,900
Retirements balanceEnding Begining balance Variation in consolidation scope Transfers Additions or provisions Concept Building lots:
As of December 31, 2003, property products for sale with a book value of €629 thousand were mortgaged as security for loans against which €74 thousand had been drawn down (see Note 19).
13. TRADE RECEIVABLES FOR SALES AND SERVICES AND ADVANCES RECEIVED ON ORDERS The detail of these captions as of December 31, 2003, is as follows:
Thousands of euros Concept
Trade receivables for sales and services:
Construction work or services pending certification or invoicing 545,697
Construction certificates receivable 470,196
Notes receivable 17,350
The detail of the balance of the “Trade Receivables for Sales and Services” caption, by type of customer, is as follows: Thousands of euros Concept Spanish customers 984,717 Public sector: 588,471 Central government 306,263
Autonomous Community governments 146,855
Local governments 100,738
Other agencies 34,615
Private sector: 396,246
Customers abroad 104,041
Total 1,088,758
€303,431 thousand of the total net balance of “Trade Receivables for Sales and Services” and “Advances Received on Orders” related to temporary joint ventures.
The average age of the balances receivable relating to construction certificates, notes and retentions is ap-proximately 93 days.
As of December 31, 2003, the balance of the “Trade Receivables for Sales and Services” caption was net of €334,228 thousand relating to the accounts receivable from customers assigned without recourse to credit institutions. Since these assignments are without recourse in the event of nonpayment, they are treated as a reduction of customer receivables. These transactions earn interest at normal market rates through the date stipulated in the related assignment agreement.
14. SUNDRY ACCOUNTS RECEIVABLE
The detail of the “Sundry Accounts Receivable” caption as of December 31, 2003, is as follows: Thousands of euros
Receivable from Hasa Group 146,062 (146,062)
-Sundry accounts receivable from Group companies 14,676 (9,634) 5,042
Sundry accounts receivable 96,049 (7,115) 88,934
Total sundry accounts receivable 256,787 (162,811) 93,976
Allowances balanceNet Gross
balance
Concept
15. TAXES RECEIVABLE
The detail of the balance of the “Taxes receivable” caption as of December 31, 2003, is as follows: Thousands of euros
Concept
Public Treasury 179,377
VAT/Canary Islands general indirect tax 76,624
Prepaid taxes and tax assets 51,019
Tax credits 33,950
Sales tax refund 9,299
Corporate income tax withholdings and
prepayments 6,399
Other taxes 2,086
Social security 16
Total taxes receivable 179,393
The Parent Company has claimed from the tax authorities the refund of sales tax on construction work for community infrastructure projects, together with interest for the period between the tax payment or with-holding date and the date of resolution of the related appeal.
16. SHAREHOLDERS’ EQUITY
The variations in 2003 in equity accounts were as follows:
Thousands of euros
Balance at December 31, 2002 53,726 254,365 1,234 10,763 91 71,786 87,881 (67,224) 42,137 454,759
Distribution of 2002 income - - - (1,395) 33,002 - (42,137) (10,530) (*)
Variation due to translation differences - - - (8,941) - (8,941)
Variations in the scope of consolidation - - - 9,278 - - 9,278
2003 income - - - 48,547 48,547 Balance at December 31, 2003 53,726 254,365 1,234 10,763 91 70,391 130,161 (76,165) 48,457 493,113 (*) Dividend distributed in 2003. Capital stock Additional paid-in capital Revaluation reserve Legal reserve income attributed to Parent Company Total Differences due to redenomination of capital in euros Other reserves Reserves at consolidated companies Translation differences Concept a) Capital stock
As of December 31, 2003, the capital stock of the Parent Company consisted of 89,543,898 fully subscribed and paid bearer shares of €0.60 par value each.
On March 8, 2004, Inmobiliaria Espacio, S.A. notified the National Securities Market Commission of its 45% indirect stake in the Parent Company.
The shares representing the capital stock of Obrascón Huarte Lain, S.A. are listed on the Madrid and Barcelona Stock Exchanges and are traded on the Spanish computerized trading system (Continuous Market).
b) Legal reserve
Under the revised Corporations Law, at least 10% of income for each year must be transferred to the legal reserve until the balance of this reserve reaches at least 20% of capital stock. This legal reserve can be used to increase capital provided that the remaining reserve balance does not fall below 10% of the increased capital stock amount. Otherwise, until the legal reserve exceeds 20% of capital stock, it can only be used to offset losses, provided that sufficient other reserves are not available for this purpose.
The distribution of 2003 income proposed by the directors does not include any appropriation to the legal reserve, since the legal minimum amount was fully covered in prior years.
c) Additional paid-in capital
The revised Corporations Law expressly permits the use of the additional paid-in capital balance to increase capital and establishes no specific restrictions as to its use.
d) Revaluation reserve
The balance of the “Revaluation Reserve” account can be used, free of tax, to offset recorded losses (both prior years’ accumulated losses and current year losses) or losses which might arise in the future, and to increase capital stock.
From January 1, 2007 (ten years from the revalued balance sheet date), the balance of this account can be taken to unrestricted reserves, provided that the monetary surplus has been realized.
The surplus will be deemed to have been realized in respect of the portion on which depreciation has been taken for accounting purposes or if the revalued assets have been sold or retired from the accounting records. Also, if leased assets are revalued, the aforementioned use of the “Revaluation Reserve” balance may not take place before the purchase option has been exercised.
If this balance were used in a manner other than as provided for in Royal Decree-Law 7/1996, it would be subject to tax.
e) Reserves at consolidated companies
The detail, by company, of the contribution to “Reserves at Consolidated Companies” as of December 31, 2003, is as follows:
Thousands of euros Companies
Autopista Ezeiza Cañuelas, S.A. 28,312
Autovías, S.A. 18,329
Empresa Constructora Huarte Andina, S.A. 17,273
Infraestructura Dos Mil, S.A. 12,190
Aljarafe Stars Hoteles, S.A. 10,573
OHL Brasil Participaçoes en Infraestructura, Ltda. 6,314
Centrovías Sistemas Rodioviarios, S.A. 5,828
Agrupación Guinovart Obras y Servicios Hispania, S.A. 5,493
Latina Infraestructuras, S.A. 5,407
Asfaltos y Construcciones Elsan, S.A. 4,284
OHL Concesiones, S.L. 4,274
Urbanizadora Hispano Belga, S.A. 3,094
Nautic Palamós, S.A. 1,482
Huartemex, S.A. de C.V. 1,475
E.M.V. Alcalá de Henares, S.A. 1,178
Construcciones Enrique de Luis, S.A. 1,165
Euroglosa 45 Concesionaria de la Comunidad de Madrid, S.A. 1,080
Elsan-Pacsa, S.A. 846
Técnicas y Gestión Medioambiental, S.A. 638
Electrificaciones y Montajes Guinovart, S.A. 633
Tractament Metropolitá de Fangs, S.L. 487
Autovía del Noroeste de la Comunidad Autónoma de la Región de Murcia, S.A. 374
Ambient Serviços Ambientais de Riberao Preto, S.A. 362
Desalinizadora Arica Ltda. 307
Avalora Soluciones Informáticas de Gestión, S.A. 306
Empresa Constructora Huarte San José, S.A. 287
Inmobiliaria Mayaluum, S.A. de C.V. 217
OHL Finance, S.à.r.l. 207
Ingeniería de los Recursos Naturales, S.A. 77
Morkaitz, S.A. 51
Gastronómica Santa Fé, S.A. de C.V. 48
ZPSV Uherrsky Ostroh, a.s. 48
Alcora Gestión Hotelera, S.A. 44
Consultores Premier, A.I.E. 43
Proyecto Sevilla Plus, S.A. de C.V. 37
Inmobiliaria Fumisa, S.A. de C.V. 17
Muelles y Espacios Portuarios, S.A. 14
Cádiz San Fernando, A.I.E. 12
Desarrollo de Tecnologías de Depuración, S.A. 7
Asfaltos del Tajo, A.I.E. 6
Nautic Tarragona, S.A. 6
Ferrocivil, S.A. 5
Pachira, S.L. 4
Inima, Servicios Europeos de Medio Ambiente, S.A. 2
Port Torredembarra, S.A. 2
Trabajos de Carpintería Especializados, S.L. 1
Construcciones Adolfo Sobrino, S.A. (1)
Inmolain, S.L. (1)
Obras y Servicios Hipania Galicia, S.A. (1)
Operadora Hotelera del Corredor Mayakoba, S.A. de C.V. (1)
Operadora Mayakoba, S.A. de C.V. (1)
Portal de Diseño, Cálculo y Formación para la Construcción Structuralia, S.A. (1)
Tecnología, Servicios Logísticos y Aplicaciones, S.A. (1)
ZS Brno, a.s. (1)
José Malvar Construcciones, S.A. (3)
OHL México, S.A. de C.V. (3)
OHL Central Europe, a.s. (6)
