building a STRONGER foundation - Cemex
building a STRONGER foundation - Cemex
building a STRONGER foundation - Cemex
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(U.S.$735 million) and Ps9,968 million (U.S.$807 million), respectively, of which, the funded amount as of December 31, 2010 was<br />
Ps6,662 (U.S.$539 million). Unfunded amounts of receivables sold are not derecognized but are reclassified from trade receivables to<br />
other accounts receivable in the balance sheet (see notes 5 and 6 to our consolidated financial statements included elsewhere in this<br />
annual report). The accounts receivable qualifying for sale do not include amounts over specified days past due or concentrations over<br />
specified limits to any one customer, according to the terms of the programs. Expenses incurred under these programs, originated by<br />
the discount granted to the acquirers of the accounts receivable, are recognized in the statement of operations as financial expense and<br />
were approximately Ps656 million (U.S.$58 million) in 2008, Ps645 million (U.S.$47 million) in 2009 and Ps368 million (U.S.$29<br />
million) in 2010. The proceeds obtained through these programs have been used primarily to reduce net debt. On May 5, 2011, we<br />
extended for five years our securitization program for accounts receivable for our operations in Spain until May 5, 2016. On May 17,<br />
2011, we extended for two years our accounts receivable securitization program for our U.S. operations until May 17, 2013.<br />
Stock Repurchase Program<br />
Under Mexican law, our shareholders may authorize a stock repurchase program at our annual shareholders’ meeting. Unless<br />
otherwise instructed by our shareholders, we are not required to purchase any minimum number of shares pursuant to such program.<br />
In connection with our 2008, 2009 and 2010 annual shareholders’ meetings held on April 23, 2009, April 29, 2010 and<br />
February 24, 2011, respectively, no stock repurchase program was proposed between April 2009 and April 2010, between April 2010<br />
and April 2011 and between February 2011 and February 2012, respectively. Subject to certain exceptions, we are not permitted to<br />
repurchase shares of our capital stock under the Financing Agreement.<br />
Research and Development, Patents and Licenses, etc.<br />
Our research and development, or R&D, efforts help us in achieving our goal of increasing market share in the markets in which<br />
we operate. The department of the Vice President of Technology is responsible for developing new products for our cement and<br />
ready-mix concrete businesses that respond to our clients’ needs. The department of the Vice President of Energy has the<br />
responsibility for developing new processes, equipment and methods to optimize operational efficiencies and reduce our costs. For<br />
example, we have developed processes and products that allow us to reduce heat consumption in our kilns, which in turn reduces<br />
energy costs. Other products have also been developed to provide our customers a better and broader offering of products in a<br />
sustainable manner. We believe this has helped us to keep or increase our market share in many of the markets in which we operate.<br />
We have 10 laboratories dedicated to our R&D efforts. Nine of these laboratories are strategically located in close proximity to<br />
our plants to assist our operating subsidiaries with troubleshooting, optimization techniques and quality assurance methods. One of our<br />
laboratories is located in Switzerland, where we are continually improving and consolidating our research and development efforts in<br />
the areas of cement, concrete, aggregates, admixtures, mortar and asphalt technology, as well as in information technology and energy<br />
management. We have several patent registrations and pending applications in many of the countries in which we operate. These<br />
patent registrations and applications relate primarily to different materials used in the construction industry and the production<br />
processes related to them, as well as processes to improve our use of alternative fuels and raw materials.<br />
Our Information Technology divisions have developed information management systems and software relating to cement and<br />
ready-mix concrete operational practices, automation and maintenance. These systems have helped us to better serve our clients with<br />
respect to purchasing, delivery and payment.<br />
R&D activities comprise part of the daily routine of the departments and divisions mentioned above; therefore, the costs<br />
associated with such activities are expensed as incurred. However, the costs incurred in the development of software for internal use<br />
are capitalized and amortized in operating results over the estimated useful life of the software, which is approximately four years.<br />
In 2008, 2009 and 2010, the combined total expense of the departments of the Vice President of Energy and the Vice President<br />
of Technology, which includes R&D activities, amounted to approximately Ps348 million (U.S.$31 million), Ps408 million (U.S.$30<br />
million) and Ps519 million (U.S.$41 million), respectively.<br />
Summary of Material Contractual Obligations and Commercial Commitments<br />
The Financing Agreement<br />
On August 14, 2009, we entered into the Financing Agreement. The Financing Agreement extended the maturities of<br />
approximately U.S.$15.1 billion in syndicated and bilateral bank facilities and private placement obligations, providing for a semiannual<br />
amortization schedule, with a final amortization payment of approximately U.S.$6.8 billion on February 14, 2014, based on<br />
prevailing exchange rates as of December 31, 2010. The Financing Agreement is secured by a first-priority security interest over the<br />
Collateral and all proceeds of such Collateral.<br />
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