building a STRONGER foundation - Cemex

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On October 8, 2010, we announced that, pursuant to the exercise of a put option by Ready Mix USA, we will acquire our joint venture partner’s interests in the two joint ventures between CEMEX and Ready Mix USA which have cement, aggregates, ready-mix and block assets located in the southeast region of the U.S. The purchase price will be determined jointly by CEMEX and Ready Mix USA based on a pre-determined methodology. We currently estimate the purchase price for our partner’s interests will be approximately U.S.$355 million. At closing, we will also consolidate the net debt held by one of the joint ventures, which was approximately U.S.$27 million as of December 31, 2010. Closing is expected to take place in September 2011. The exercise of the put option by Ready Mix USA represents a commitment of CEMEX to acquire its joint venture partner’s interests in CEMEX Southeast LLC and Ready Mix USA LLC. However, as prescribed in the agreements with Ready Mix USA, CEMEX has not transferred the consideration or acquired the ownership interests, which is anticipated to occur at a closing date on or before September 30, 2011. As of December 31, 2010, the estimated fair value of the net assets to be acquired exceeds the expected purchase price; therefore, CEMEX has not recognized a liability. CEMEX will recognize the acquisition at the closing date of the transaction. In the meantime, CEMEX will monitor the estimated fair value of the related net assets and will record a loss to the extent the expected purchase price exceeds the fair value of the net assets to be assumed. See note 9A to our consolidated financial statements included elsewhere in this annual report. Some of our major subsidiaries provide guarantees of certain of our indebtedness, as indicated in the table below. Amount outstanding as of December 31, 2010(4) .................... April 2011 Notes U.S.$ 0.8 billion (Ps9.9 billion) January 2011 Notes U.S.$ 1.0 billion (Ps12.4 billion) May 2010 Notes U.S.$ 1.3 billion (Ps16.6 billion) 114 December 2009 Notes U.S.$ 2.2 billion (Ps27.4 billion) Financing Agreement U.S.$ 7.5 billion (Ps92.3 billion) Perpetual Debentures(1) CBs(2) U.S.$ 1.2 billion (Ps14.3 billion) U.S.$ 0.4 billion (Ps5.1 billion) CEMEX España Euro Notes(3) U.S.$ 1.2 billion (Ps14.8 billion) CEMEX, S.A.B. de C.V........................ CEMEX México.................................... New Sunward ........................................ CEMEX España. ................................... CEMEX Corp........................................ CEMEX Finance LLC........................... CEMEX Concretos, S.A. de C.V. ......... Empresas Tolteca de México, S.A. de C.V. ............................................ (1) CEMEX, S.A.B. de C.V., CEMEX México, and New Sunward provide guarantees in connection with approximately U.S.$1.2 billion (approximately Ps14.3 billion as of December 31, 2010, after giving pro forma effect to the 2011 Private Exchange) in Perpetual Debentures issued by special purpose vehicles, which are accounted for as noncontrolling interest under MFRS, but which are considered to be debt for purposes of U.S. GAAP and under the Financing Agreement and the indentures governing the Senior Secured Notes. (2) Includes short-term unsecured CBs, long-term secured CBs maturing during 2011 and long-term secured CBs maturing thereafter. (3) Issued by CEMEX Finance Europe B.V., a special purpose vehicle and wholly-owned subsidiary of CEMEX España, the sole guarantor of the CEMEX España Euro Notes. (4) After giving pro forma effect to (1) the issuance of the January 2011 Notes, the 2011 Optional Convertible Subordinated Notes and the April 2011 Notes, (2) the 2011 Prepayments, and (3) the 2011 Private Exchange. From time to time, as part of our financing activities, we and our subsidiaries have entered into various financing agreements, including bank loans, credit facilities, sale-leaseback transactions, forward contracts, forward lending facilities and equity swap transactions. Additionally, we and our subsidiaries have issued notes, commercial paper, bonds, preferred equity and puttable capital securities. Most of our outstanding indebtedness has been incurred to finance our acquisitions and to finance our capital expenditure programs. CEMEX México, our principal Mexican subsidiary and indirect owner of our international operations, has indebtedness or has provided guarantees of our indebtedness, including under the Financing Agreement and the Senior Secured Notes, but excluding under the perpetual debentures, in the amount of approximately Ps166,000 million (U.S.$13,430 million) as of December 31, 2010, after giving pro forma effect to (1) the issuance of the January 2011 Notes and the April 2011 Notes, (2) the 2011 Prepayments and (3) the 2011 Private Exchange. CEMEX España, a holding company for most of our international operations outside Mexico and our main operating subsidiary in Spain, has indebtedness or has provided guarantees of our indebtedness, including under the Financing Agreement, the Senior Secured Notes and the CEMEX España Euro Notes, but excluding the Perpetual Debentures, in the amount of approximately Ps173,594 million (U.S.$14,045 million) as of December 31, 2010, after giving pro forma effect to (1) the issuance of the January 2011 Notes and the April 2011 Notes, (2) the 2011 Prepayments and (3) the 2011 Private Exchange. Historically, we have addressed our liquidity needs (including funds required to make scheduled principal and interest payments, refinance debt, and fund working capital and planned capital expenditures) with operating cash flow, borrowings under credit facilities, proceeds of debt and equity offerings and proceeds from asset sales.
As of December 31, 2010, we had U.S.$561 million in outstanding short-term working capital and receivables financing facilities, which consisted of four securitization programs with a combined funded amount of U.S.$539 million and U.S.$22 million outstanding in short-term CBs. Our accounts receivable securitization program in Spain, which had a funded amount of U.S.$117 million as of December 31, 2010, was extended for five years on May 5, 2011 and now expires on May 5, 2016. On May 19, 2010, we entered into a one-year accounts receivable securitization program for our U.S. operations for up to U.S.$300 million in funded amounts. As of December 31, 2010, we had U.S.$231million in funded amounts under this program. On May 17, 2011, we extended this program for two years and now expires on May 17, 2013. The scheduled maturity for the securitization program in France, which had a funded amount of U.S.$57 million as of December 31, 2010, has been extended to September 30, 2011. The securitization program in Mexico, which had a funded amount of U.S.$134 million at December 31, 2010, expires on December 29, 2011, with the first principal payment (equal to approximately 16.66% of the program) due in August 2011 and the remainder in five equal monthly installments through the program’s expiration date. We cannot ensure that, going forward, we will be able to roll over or renew these programs, which could adversely affect our liquidity. The global equity and credit markets in the last few years have experienced significant price volatility, dislocations and liquidity disruptions, which have caused market prices of many stocks to fluctuate substantially and the spreads on prospective and outstanding debt financings to widen considerably. This volatility and illiquidity has materially and adversely affected a broad range of fixed income securities. As a result, the market for fixed income securities has experienced decreased liquidity, increased price volatility, credit downgrade events and increased defaults. Global equity markets have also been experiencing heightened volatility and turmoil, with issuers exposed to the credit markets being most seriously affected. The disruptions in the financial and credit markets may continue to adversely affect our credit rating and the market value of our common stock, our CPOs and our ADSs. If the current pressures on credit continue or worsen, and alternative sources of financing continue to be limited, we may be dependent on the issuance of equity as a source to repay our existing indebtedness, including meeting amortization requirements under the Financing Agreement. Although we have been able to raise debt, equity and equity linked capital following our entry into the Financing Agreement in August 2009, as capital markets recovered, previous conditions in the capital markets in 2008 and 2009 were such that traditional sources of capital were not available to us on reasonable terms or at all. As a result, there is no guarantee that we will be able to successfully raise additional debt or equity capital at all or on terms that are favorable. See “Item 3 — Key Information — Risk Factors — We may not be able to generate sufficient cash to service all of our indebtedness or satisfy our short-term liquidity needs and we may be forced to take other actions to satisfy our obligations under our indebtedness and our short-term liquidity needs, which may not be successful.” If the economic environment in the countries where we operate deteriorates and our operating results worsen significantly, we are unable to complete debt or equity offerings or our planned divestitures and/or our cash flow or capital resources prove inadequate, we could face liquidity problems and may not be able to comply with our upcoming principal payment maturities under our indebtedness or refinance our indebtedness. We and our subsidiaries have sought and obtained waivers and amendments to several of our debt instruments relating to a number of financial ratios in the past. Our ability to comply with these ratios may be affected by current global economic conditions and high volatility in foreign exchange rates and the financial and capital markets. We may need to seek waivers or amendments in the future. However, we cannot assure you that any future waivers, if requested, will be obtained. If we or our subsidiaries are unable to comply with the provisions of our debt instruments, and are unable to obtain a waiver or amendment, the indebtedness outstanding under such debt instruments could be accelerated. Acceleration of these debt instruments would have a material adverse effect on our financial condition. Financing Activities As of December 31, 2010, after giving pro forma effect to (1) the issuance of the January 2011 Notes, the 2011 Optional Convertible Subordinated Notes and the April 2011 Notes, (2) the 2011 Prepayments and (3) the 2011 Private Exchange, we had approximately Ps208,100 (U.S.$16,837 million) of total outstanding debt, not including approximately Ps14,342 million (U.S.$1,160 million) of Perpetual Debentures issued by special purpose vehicles, which are not accounted for as debt under MFRS but are considered to be debt for purposes of U.S. GAAP. Our financing activities through December 31, 2009 are described in our 2009 annual report. The following is a description of our financings in 2010: On December 22, 2010, the required lenders and our major creditors under the Financing Agreement consented to extend the CB Prepayment Period so that we are permitted to allocate proceeds from the offering of the January 2011 Notes to a CB reserve to be used to repay, prepay or early redeem the January 2012 CBs. On December 15, 2010, we made a voluntary prepayment of U.S.$100 million to reduce the principal amount due under the Financing Agreement. On October 25, 2010, the required lenders and our major creditors under the Financing Agreement consented to amendments that will provide us with increased flexibility in relation to our activities going forward and that we believe will assist us in refinancing existing financial indebtedness and reducing leverage. 115
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CEMEX 2010 20F REPORT building a ST
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Securities registered or to be regi
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Qualitative and Quantitative Market
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INTRODUCTION CEMEX, S.A.B. de C.V.
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As a result of the foregoing transa
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In the U.S., the recession was long
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The Financing Agreement contains ev
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The Financing Agreement restricts u
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During 2009, we reduced the aggrega
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The instruments governing our debt
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On the legislative front, during th
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Our operations in South America, Ce
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the depositary to vote the CPOs und
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Beginning in 2008, MFRS B-10 has el
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(1) Cost of sales includes deprecia
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Item 4 - Information on the Company
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As a condition to closing the RMC a
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Provide our customers with the best
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In connection with the implementati
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In 2010, as a result of our efforts
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In addition, we are one of the worl
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(2) Our cement raw materials operat
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Our Corporate Structure We are a ho
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Cement in Mexico is sold principall
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Aggregates. Our aggregates operatio
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Beginning on June 30, 2008, Ready M
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Products and Distribution Channels
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On December 26, 2008, we sold our C
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Ready-Mix Concrete. Our ready-mix c
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Aggregates. In 2010, we reduced fix
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Our Operating Network in France Des
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In April 2006, we initiated an expa
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Our Operating Network in Colombia P
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Our Operations in Nicaragua Overvie
Page 71 and 72: Our Operations in the United Arab E
Page 73 and 74: Our Trading Operations In 2010, we
Page 75 and 76: On December 10, 2010, after receivi
Page 77 and 78: To prevent, control and remediate e
Page 79 and 80: As required by the directive, each
Page 81 and 82: For the 2010 fiscal year, CEMEX wil
Page 83 and 84: Separately, the government of Venez
Page 85 and 86: and CEMEX was required by August 11
Page 87 and 88: January 1, 2008, however, under MFR
Page 89 and 90: foreign subsidiaries. These instrum
Page 91 and 92: Valuation reserves on accounts rece
Page 93 and 94: Stage 1. Communication to the organ
Page 95 and 96: Year Ended December 31, 2010 Compar
Page 97 and 98: Geographic Segment 89 Variations in
Page 99 and 100: United Kingdom Our domestic cement
Page 101 and 102: ended December 31, 2010, Africa and
Page 103 and 104: Operating Income. For the reasons m
Page 105 and 106: Our comprehensive financing result
Page 107 and 108: The following tables present select
Page 109 and 110: Mexico Our domestic cement sales vo
Page 111 and 112: As a result of the decreases in dom
Page 113 and 114: For the year ended December 31, 200
Page 115 and 116: South America, Central America and
Page 121: On August 14, 2009, we entered into
Page 125 and 126: Our Perpetual Debentures As of Dece
Page 127 and 128: The Financing Agreement, as amended
Page 129 and 130: In 1999, CEMEX entered into an agre
Page 131 and 132: Our Equity Derivative Forward Contr
Page 133 and 134: As of December 31, 2009 and 2010, C
Page 135 and 136: In addition, we have entered into f
Page 137 and 138: Private Cash Tender Offer to Holder
Page 139 and 140: Name, Position (Age) Experience Jai
Page 141 and 142: Name, Position (Age) Experience Ram
Page 143 and 144: Tomás Milmo Santos (46) Has been a
Page 145 and 146: Set forth below are the names of th
Page 147 and 148: Consolidated ESOP Information Stock
Page 149 and 150: Item 7 - Major Shareholders and Rel
Page 151 and 152: The following table sets forth the
Page 153 and 154: Item 10 - Additional Information Ar
Page 155 and 156: exempt from registration pursuant t
Page 157 and 158: Our board of directors shall prepar
Page 159 and 160: Under our by-laws, shareholders rep
Page 161 and 162: On June 2, 2008, CEMEX, through one
Page 163 and 164: Exchange Controls See “Item 3 —
Page 165 and 166: The gross amount of any dividends p
Page 167 and 168: We have agreed to pay some of the o
Page 169 and 170: Item 16G - Corporate Governance Sec
Page 171 and 172: Item 17 - Financial Statements Not
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4.17 Debenture Purchase Agreement,
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4.27.3 Amendment No. 1 to U.S.$525,
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4.41.4 Accession Letter, dated Janu
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4.57 Amended and Restated Dealer Ma
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SIGNATURES CEMEX, S.A.B. de C.V. he
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The Board of Directors and Stockhol
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CEMEX, S.A.B. DE C.V. AND SUBSIDIAR
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1. DESCRIPTION OF BUSINESS CEMEX, S
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C) USE OF ESTIMATES CEMEX, S.A.B. D
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J) IMPAIRMENT OF LONG LIVED ASSETS
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Contingencies and commitments (note
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V) CONCENTRATION OF CREDIT CEMEX, S
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Net sales by product and geographic
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4. CASH AND INVESTMENTS CEMEX, S.A.
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II. Equity forwards in third party
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14. EMPLOYEE BENEFITS Defined contr
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17. EXECUTIVE STOCK-BASED COMPENSAT
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18. EARNINGS (LOSS) PER SHARE CEMEX
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D) CONTRACTUAL OBLIGATIONS CEMEX, S
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Reconciliation of stockholders’ e
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(k) Other U.S. GAAP Adjustments Def
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