SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the month of February 27, 2003 Durango Corporation (f/k/a Grupo Industrial Durango, S.A. de C.V.) ------------------------------------------------------------------- (Translation of registrant's name into English) Torre Corporativa Durango, Potasio 150, Cuidad Industrial, Durango, Durango, Mexico ------------------------------------------------------------------- (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F [x] Form 40-F Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes No [x] If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-_____________. FOURTH QUARTER AND FULL YEAR 2002 RESULTS Durango, Mexico, February 27, 2002- Corporacion Durango, S.A. de C.V., (NYSE:CDG, BMV: CODUSA) ("Durango" or the "Company"), the largest integrated paper producer in Mexico today announced its results for the fourth quarter 2002 and full year 2002. Figures were prepared in constant Mexican pesos and converted into U.S. dollars using the exchange rate at the end of the period. COMPANY OVERVIEW During the year 2002, Corporacion Durango was severely affected by a combination of a significant decline in world paper pricing, a worldwide economic recession, a drastic reduction in demand for its products from the manufacturing sector, a strong peso, a flood of imported products, and increases in production costs in raw material, energy, oil and labor. SHIPMENTS Notwithstanding a very difficult economic environment, the Company increased production and shipments by 2% year over year, and 5% 4Q02 over 4Q01. Total production in paper and paper products for 2002 was 1,505,000 tons versus 1,480,000 tons in 2001, in spite of a decline in demand from our #1 customer, the Maquiladora industry and from our #2 customer, the export sector in Mexico, thus confirming Durango's competitive position as the largest paper producer in Mexico. PRICING Due to the decline in world paper pricing, weak demand in Mexico, an overvalued peso versus the US dollar and the strong competition from imported products boosted by a very cheap dollar, the average pricing for our finished products declined 18% during 2002, when compared to 2001. This represented a reduction of US$175 MM in sales, with a corresponding reduction in EBITDA for the Company. Quarter over quarter pricing fell 17%. NET SALES Even though shipments in 2002 were slightly higher than 2001, the reduction in pricing severely affected our total sales, decreasing 17% year over year, from US$952 MM in 2001 to US$792 MM in 2002. Quarter over quarter, the reduction in sales was 13%. COST OF SALES Notwithstanding inflationary increases in production costs and raw materials, the Company was able to lower its unit cost by 15%, a significant reduction from 2001. Quarter over quarter, the reduction in unit cost was 11%. This reflects the high competitiveness of the Company, as well as confirms its position as a low-cost producer. SG&A EXPENSES Under the conditions described above, in 2002 the Company was able to reduce its overhead by 12%, reflecting its capacity to react to adverse changes in the economic environment. CAPACITY UTILIZATION In spite of very difficult business conditions during 2002, the Company was able to increase its operating rate to 82% of its total capacity, 5 points higher than 2001. EBITDA EBITDA for the year 2002 was US$116 MM, a reduction of 32% from the US$171 MM realized in 2001. The reduction in EBITDA of US$55 MM was primarily due to US$175 MM from an 18% decrease in pricing, which was partially compensated by a reduction in cost of US$97 MM, a 2% increase in shipments which contributed with US$15MM, and a reduction in overhead of US$8 MM. INTERNATIONAL BENCHMARKING The Company's performance was better than that of the overall paper industry, where profitability fell 50% year over year across the comparable industry segments. The paper industry continues to be mired in an economic crisis that some Wall Street analysts predict may last into 2004 or early 2005. RELEVANT EVENTS In anticipation of a slower than expected economic recovery, thus a longer recession environment, and taking into account that we operate in a cyclical and capital-intensive industry requiring ample financial flexibility, the Company decided to proactively begin a financial restructuring process. The decision was made in order to achieve a stronger financial structure, as well as sufficient financial flexibility to continue maintaining its competitiveness and market leadership in spite of the adverse economic and market conditions that prevail today and which could continue to deteriorate. The Company has achieved positive results in the negotiations with its principal national and international creditors. Important and significant agreements have been reached, which will allow Durango to continue with further negotiations in the restructuring plan. Corporacion Durango is the largest producer of paper in Mexico, one of the lowest-cost producers on a worldwide basis and the leader in 90% of its market segments. CEO's STATEMENT Miguel Rincon, CEO of Corporacion Durango stated . . . "As a result of macroeconomic conditions affecting the Mexican economy in general and the paper industry in particular, the Company experienced a significant decline in cash flow during the latter half of 2002. In view of its debt service requirements, the Company decided to undertake a restructuring process in late November 2002 and hired PriceWaterhouseCoopers and Rothschild, Inc., as financial advisors, to assist in such restructuring. Soon thereafter, Durango initiated discussions with its creditors, including holders of its bonds, with a view toward an eventual consensual restructuring of the Company's indebtedness. The results of these discussions thus far have been encouraging, as the Company's creditors have shown a willingness to cooperate with the Company in pursuing options that will produce a positive outcome for all parties. I am confident that the Company will emerge from any such restructuring with a strong financial foundation which will benefit all of its stakeholders." NOTE: On October 7, 2002, the Company transferred Durango Georgia Paper Company to an affiliate. Consistent with Mexican GAAP, the results of operations to Georgia mill are included in operating income of 2002 and 2001. Highlights FY02 FY01 % 4Q02 4Q01 % Total Shipments ('000 S/T) 1,505.8 1,479.7 2% 356.0 339.4 5% Pricing (US$/S-Ton) 526 644 -18% 507 611 -17% Net Sales (US$Million) 792.3 952.4 -17% 180.6 207.3 -13% Unit Cost (US$/S-Ton) 441 517 -15% 422 473 -11% EBITDA (US$Million) 116.0 171.1 -32% 25.6 44.9 -43% EBITDA Margin 15% 18% -17% 14% 22% -36% Shipments (000 Short tons) FY02 FY01 % 4Q02 4Q01 % Paper 744.3 762.1 -2% 162.7 165.9 -2% Packaging 670.0 667.9 0% 169.4 163.3 4% Other 91.5 49.7 84% 23.9 10.2 134% Total 1,505.8 1,479.7 2% 356.0 339.4 5% Prices (US$/Short ton) FY02 FY01 % 4Q02 4Q01 % Paper 507 596 -15% 466 566 -18% Packaging 581 710 -18% 579 664 -13% Other 278 485 -43% 288 477 -40% Total 526 644 -18% 507 611 -17% Net Sales (US$ million) FY02 FY01 % 4Q02 4Q01 % Paper 377.4 454.1 -17% 75.7 94.0 -19% Packaging 389.4 474.3 -18% 98.0 108.5 -10% Other 25.5 24.1 6% 6.9 4.9 41% Total 792.3 952.4 -17% 180.6 207.3 -13% Unit Cost (US$/ short ton) FY02 FY01 % 4Q02 4Q01 % Total 441 517 -15% 422 473 -11% EBITDA (US$ million) FY02 Margin FY01 Margin 4Q02 Margin 4Q01 Margin Paper 43.6 12% 95.8 21% 9.4 12% 23.3 25% Packaging 67.3 17% 69.5 15% 14.9 15% 21.1 19% Other 5.1 20% 5.9 25% 1.3 19% 0.5 10% Total 116.0 15% 171.1 18% 25.6 14% 44.9 22% This release contains forward-looking statements that involve risks and uncertainties. The actual results achieved by the Company may differ significantly from the results discussed in the forward looking statements. Factors that may cause such differences include general economic, market, or business conditions, the opportunities (or lack thereof) that may be presented to and pursued by the Company and its subsidiaries, the availability of raw materials used by the Company and its subsidiaries, competitive actions by other companies, changes in laws or regulations, and other factors, many of which are beyond the control of the Company and its subsidiaries. CORPORACION DURANGO, S.A. DE C.V. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS AS OF DECEMBER 31, 2001 AND DECEMBER 31, 2002 (UNAUDITED) EXPRESSED IN TERMS OF THE PURCHASING POWER OF MEXICAN PESOS AS OF DECEMBER 31, 2002 (Stated in thousands of Pesos and Dollars) US$ DLLS. December 31, December 31, December 31, 2001 2002 2002 (Audited) (Unaudited) (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents ........................ $508,894 $252,997 24,235 Accounts receivable, net ......................... 2,230,610 1,939,188 185,758 Taxes recoverable and other assets ............... 29,688 36,947 3,539 Inventories, net ................................. 1,459,597 1,276,202 122,250 Prepaids ......................................... 26,850 28,773 2,756 Total current assets ................... 4,255,639 3,534,107 338,539 PROPERTY, PLANT AND EQUIPMENT, net ................. 16,488,984 13,595,992 1,302,385 OTHER ASSETS, net .................................. 532,908 713,722 68,369 Total assets .......................... $21,277,531 $17,843,821 1,709,293 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Bank loans and current portion of long-term debt . 617,396 7,388,442 707,753 Interest payable ................................. 302,083 449,072 43,017 Trade accounts payable ........................... 1,218,333 909,217 87,096 Notes payable .................................... 36,739 49,624 4,754 Accrued liabilities and other payables............ 468,876 480,170 45,996 Employee profit-sharing .......................... 9,020 6,274 601 Total current liabilities ............. 2,652,447 9,282,799 889,217 LONG-TERM DEBT ..................................... 7,243,673 1,271,278 121,778 NOTES PAYABLE ...................................... 86,363 136,932 13,117 OTHER LIABILITIES .................................. 16,199 0 0 DEFERRED TAXES...................................... 3,090,368 2,247,910 215,331 LIABILITY FOR EMPLOYEE BENEFITS..................... 239,654 182,346 17,467 DEFERRED CREDITS.................................... 72,157 0 0 Total long term liabilities ............ 10,748,414 3,838,466 367,694 Total liabilities ..................... 13,400,861 13,121,265 1,256,910 STOCKHOLDERS' EQUITY: Majority interest ................................ 7,834,816 4,654,145 445,829 Minority interest ................................ 41,854 68,411 6,553 Total stockholders' equity ............. 7,876,670 4,722,556 452,382 Total liabilities and stockholders' equi $21,277,531 $17,843,821 1,709,293 Exchange rate: $ 10.4393 per Dollar CORPORACION DURANGO, S.A. DE C.V. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN FINANCIAL POSITION EXPRESSED IN TERMS OF THE PURCHASING POWER OF MEXICAN PESOS AS OF DECEMBER 31, 2002 (Stated in thousands of Pesos and Dollars) * Full Year Acum.Dec Acum.Dec 2001 2002 US$ 2002 (Audited) (Unaudited) OPERATING ACTIVITIES: Net income (loss) .............................................. $829,327 $-3,407,105 -326,373 Add (deduct)- Charges (credits) to income which do not require (provide) cash- Depreciation and amortization ........................... 492,288 475,301 45,530 Provision for employee benefits ......................... 13,317 12,567 1,204 Amortization of negative goodwill ....................... -495,297 0 0 Amortization of Financial Comissions .................... 58,111 121,293 11,619 Provision for deferred taxes ............................ -267,291 -276,708 -26,506 Impairment .............................................. 0 815,455 78,114 Allowance for doubtful accounts ......................... 6,948 1,338,863 128,252 Other.................................................... 0 116,414 11,152 Total items which do not require cash.................... -191,924 2,603,185 249,364 Net resources generated from income .......................... 637,403 -803,920 -77,009 Changes in operating assets and liabilities: Decrease (Increase) in inventories ......................... 965,540 183,395 17,568 Decrease (Increase) in current assets ...................... 62,253 -9,182 -880 Decrease (increase) in account receivables, net ............ -62,858 291,422 27,916 (Decrease) increase in other accounts payable and accrued expenses ......................................... -696,186 -140,694 -13,477 Resources generated by operating activities .................. 906,152 -478,979 -45,882 FINANCING ACTIVITIES: Bank loans and others ................................... -650,480 827,203 79,239 Decrease in capital ..................................... 0 -17,261 -1,653 Loss on shares acquisition .............................. 0 -32,977 -3,159 Net resources generated from financing activities ............ -650,480 776,965 74,427 INVESTMENT ACTIVITIES: Additions to property, plant and equipment............... -345,591 -304,843 -29,201 Disposition of subsidiaries ............................. 0 117,445 11,250 Increase in deferred assets ............................. -205,717 -366,485 -35,106 Minority interest ....................................... -6,656 0 0 Net resources applied to investing activities ................ -557,964 -553,883 -53,057 INCREASE IN CASH AND CASH EQUIVALENTS .......................... -302,292 -255,897 -24,513 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD............ 811,186 508,894 48,748 CASH & CASH EQUIVALENTS AT END OF THE PERIOD ................... $508,894 $252,997 US24,235 * The exchange rate of 10.4393 was used for translation purposes. CORPORACION DURANGO, S.A. DE C.V. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) EXPRESSED IN TERMS OF THE PURCHASING POWER OF MEXICAN PESOS AS OF DECEMBER 31, 2002 Thousands of Pesos Thousands of Dollars 4Q 4Q 4Q 4Q 2001 2002 Var 2001 2002 Var (Audited) (Unaudited) (Audited) (Unaudited) NET SALES ............................... $2,036,259 $1,885,539 -7% 207,299 180,619 -13% COST OF SALES ........................... 1,578,769 1,569,782 -1% 160,510 150,372 -6% Gross profit........................ 457,490 315,757 -31% 46,789 30,247 -35% Selling and Administrative expenses 148,165 152,963 3% 15,169 14,653 -3% Operating income ................... 309,325 162,794 -47% 31,620 15,594 -51% FINANCIAL EXPENSE: Interest expense ........................ 219,007 278,566 27% 22,549 26,684 18% Interest income ......................... -8,333 -9,070 9% -783 -869 11% Exchange (gain) loss, net ............... -254,414 212,816 N/A -26,249 20,386 N/A Gain on monetary position ............... -64,909 -134,306 107% -6,679 -12,865 93% Total financial expense ............... -108,649 348,006 N/A -11,162 33,336 N/A OTHER INCOME (EXPENSES): Other income (expense), net ............. -81,561 -2,485 -97% -8,477 -238 -97% Total other income (expense) .......... -81,561 -2,485 -97% -8,477 -238 -97% Income (loss) before income and asset t 336,413 -187,697 N/A 34,304 -17,980 N/A Provisions for income and asset taxes ... 15,033 -26,377 N/A 1,480 -2,527 N/A Provision for deferred income taxes ..... -346,456 -10,347 N/A -35,739 -991 N/A Net income after taxes ................ 667,836 -150,973 N/A 68,564 -14,462 N/A Extraordinary items: Special items ........................... -20,483 -4 -100% -2,113 0 -100% Impairment .............................. 0 815,455 N/A 0 78,114 N/A Discontinued operations.................. 259,801 -11,669 N/A 24,311 -1,118 N/A Net income before minority interest...... $428,518 $-954,755 N/A 46,367 -91,458 N/A Minority interest...................... 4,611 4,629 0% 476 443 -7% Majority net income.................... $423,907 $-959,384 N/A 45,891 -91,901 N/A CORPORACION DURANGO, S.A. DE C.V. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) EXPRESSED IN TERMS OF THE PURCHASING POWER OF MEXICAN PESOS AS OF DECEMBER 31, 2002 Thousands of Pesos Thousands of Dollars Ac Ac Ac Ac 2001 2002 Var 2001 2002 Var (Audited) (Unaudited) (Audited) (Unaudited) NET SALES ............................... $9,485,615 $8,270,616 -13% 952,445 792,258 -17% COST OF SALES ........................... 7,654,232 6,937,360 -9% 765,452 664,543 -13% Gross profit........................ 1,831,383 1,333,256 -27% 186,994 127,715 -32% Selling and Administrative expenses 643,250 597,648 -7% 65,337 57,250 -12% Operating income ................... 1,188,133 735,608 -38% 121,657 70,465 -42% FINANCIAL EXPENSE: Interest expense ........................ 1,008,004 1,080,048 7% 103,091 103,460 0% Interest income ......................... -66,887 -39,127 -42% -6,770 -3,748 -45% Exchange (gain) loss, net ............... -313,372 1,047,994 N/A -32,333 100,389 N/A Gain on monetary position ............... -317,068 -408,111 29% -32,468 -39,094 20% Total financial expense ............... 310,677 1,680,804 441% 31,521 161,007 411% OTHER INCOME (EXPENSES): Other income (expense), net ............. 497,097 -52,822 N/A 46,318 -5,060 N/A Total other income (expense) .......... 497,097 -52,822 N/A 46,318 -5,060 N/A Income (loss) before income and asset t 1,374,553 -998,018 N/A 136,454 -95,602 N/A Provisions for income and asset taxes ... 233,419 119,491 -49% 23,700 11,446 -52% Provision for deferred income taxes ..... -233,829 -276,708 18% -24,942 -26,506 6% Net income after taxes ................ 1,374,963 -840,801 N/A 137,697 -80,542 N/A Extraordinary items: Special items ........................... 168,241 116,414 -31% 17,359 11,152 -36% Impairment .............................. 0 815,455 N/A 0 78,114 N/A Discontinued operations.................. 377,395 1,634,435 333% 35,314 156,566 343% Net income before minority interest...... $829,327$ -3,407,105 N/A 85,024 -326,373 N/A Minority interest...................... 4,029 6,594 64% 416 632 52% Majority net income.................... $825,298 $-3,413,699 N/A 84,608 -327,005 N/A SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CORPORACION DURANGO, S.A. DE C.V. Date: February 27, 2003 By /s/ Mayela Rincon de Velasco Durango, Mexico -------------------------------- Name: Mayela Rincon de Velasco Title: Chief Financial Officer