building a STRONGER foundation - Cemex

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Dividends At the annual ordinary general shareholders’ meeting, our board of directors submits, for approval by our shareholders, our financial statements together with a report on them prepared by our board of directors and the statutory auditors. Our shareholders, once they have approved the financial statements, determine the allocation of our net income, after provision for income taxes, legal reserve and statutory employee profit sharing payments, for the preceding year. All shares of our capital stock outstanding at the time a dividend or other distribution is declared are entitled to share equally in that dividend or other distribution. Liquidation Rights In the event we are liquidated, the surplus assets remaining after payment of all our creditors will be divided among our shareholders in proportion to the respective shares held by them. The liquidator may, with the approval of our shareholders, distribute the surplus assets in kind among our shareholders, sell the surplus assets and divide the proceeds among our shareholders or put the surplus assets to any other uses agreed to by a majority of our shareholders voting at an extraordinary shareholders’ meeting. Differences Between Our Corporate Governance Practices and NYSE Standards for Domestic Companies For a description of significant ways in which our corporate governance practices differ from those required of domestic companies under NYSE standards, please visit our website at www.cemex.com (under the heading “Investor Center/Corporate Governance”). Material Contracts On March 17, 2006, we registered a Ps5 billion revolving promissory note program (programa dual revolvente de certificados burstátiles) with the Mexican securities authority. We have subsequently increased the authorized amount under this program. On March 31, 2010, we received authorization from the Mexican securities authority for a Ps10 billion revolving promissory note program. For a description of recent activity under this program, see “Item 5 — Operating and Financial Review and Prospects — Liquidity and Capital Resources — Financing Activities.” On December 6, 2006, CEMEX España entered into a U.S.$9 billion committed facilities agreement, to partially fund the acquisition of Rinker. The first facility was a U.S.$3 billion 364-day multicurrency revolving loan denominated in Dollars or Euros with two optional 6-month extensions. The second facility is a multicurrency three-year U.S.$3 billion term loan denominated in Dollars or Euros. The third facility is a multicurrency five-year U.S.$3 billion term loan denominated in Dollars or Euros. On December 21, 2006, the facilities agreement was amended to include new lenders. The first facility was canceled on June 19, 2007, effective as of June 22, 2007. The facilities agreement was amended and restated on December 19, 2008, to incorporate, among other things, amendments to the leverage ratios and other technical amendments as well as to extend part of the maturities under the second facility; the facilities agreement was further amended and restated on January 27, 2009, to extend, re-tranche and re-denominate commitments under the second facility. On August 14, 2009, the facilities agreement was overridden by the Financing Agreement. On December 18, 2006, CEMEX, through two special purpose vehicles, issued two tranches of fixed-to-floating rate callable Perpetual Debentures. C5 Capital (SPV) Limited issued U.S.$350 million in Perpetual Debentures under the first tranche, with the issuer having the option to redeem the debentures on December 31, 2011 and on each interest payment date thereafter. C10 Capital (SPV) Limited issued U.S.$900 million in original principal amount of Perpetual Debentures under the second tranche, with the issuer having the option to redeem the debentures on December 31, 2016 and on each interest payment date thereafter. Both tranches pay coupons denominated in Dollars at a fixed rate until the call date and at a floating rate thereafter. On February 12, 2007, CEMEX, through a special purpose vehicle, issued a third tranche of fixed-to-floating rate callable Perpetual Debentures. C8 Capital (SPV) Limited issued U.S.$750 million in original principal amount of Perpetual Debentures under this third tranche, with the issuer having the option to redeem the debentures on December 31, 2014 and on each interest payment date thereafter. This third tranche also pays coupons denominated in Dollars at a fixed rate until the call date and at a floating rate thereafter. On May 9, 2007, CEMEX, through a special purpose vehicle, issued a fourth tranche of fixed-to-floating rate callable Perpetual Debentures. C10-EUR Capital (SPV) Limited issued €730 million in original principal amount of Perpetual Debentures under this fourth tranche, with the issuer having the option to redeem the debentures on June 30, 2017 and on each interest payment date thereafter. This fourth tranche pays coupons denominated in Euros at a fixed rate until the call date and at a floating rate thereafter. Due to their perpetual nature and optional deferral of coupons, these transactions, in accordance with MFRS, qualify as equity. On May 22, 2009, we notified the debenture holders of our decision to exercise our option to defer, by one day, the scheduled interest payments otherwise due and payable on June 30, 2009. See “Item 5 — Operating and Financial Review and Prospects — Liquidity and Capital Resources — Our Perpetual Debentures.” On March 5, 2007, CEMEX Finance Europe B.V., issued €900 million in notes paying a fixed coupon of 4.75% and maturing in 2014. The notes have been listed for trading on the London Stock Exchange’s Professional Securities Market. The notes are guaranteed by CEMEX España. 152
On June 2, 2008, CEMEX, through one of its subsidiaries, closed two identical U.S.$525 million facilities with a group of relationship banks. Each facility allowed the principal amount to be automatically extended for consecutive six month periods indefinitely after a period of three years by CEMEX and included an option of CEMEX to defer interest at any time (except in limited situations), subject to the absence of an event of default under the facility. The amounts outstanding under the facilities, because of the interest deferral provision and the option of CEMEX to extend the maturity of the principal amounts indefinitely, had been treated as equity for accounting purposes in accordance with MFRS and as debt under U.S. GAAP, in the same manner as CEMEX’s outstanding Perpetual Debentures. Obligations of CEMEX under each facility rank pari-passu with CEMEX’s obligations under the Perpetual Debentures and its senior unsecured indebtedness. Within the first three years that each facility is in place, CEMEX, subject to the satisfaction of specified conditions, had options to convert all (and not part) of the respective amounts outstanding under the respective facilities into maturity loans, each with a fixed maturity date of June 30, 2011. CEMEX exercised its conversion options under both facilities on December 31, 2008. The two facilities were amended on January 22, 2009. On August 14, 2009, the two facilities were overridden by the Financing Agreement. In June 2008, CEMEX entered into a structured transaction comprised of: (i) a U.S.$500 million Credit Agreement, dated June 25, 2008 and amended on December 18, 2008 and January 22, 2009, among CEMEX, S.A.B. de C.V., as borrower, CEMEX México, as guarantor, and Banco Bilbao Vizcaya Argentaria, S.A. New York Branch, as lender; (ii) a U.S.$500 million aggregate notional amount of Put Spread Option Confirmations, dated June 3, 2008 and June 5, 2008, between Centro Distribuidor de Cemento, S.A. de C.V. and Banco Santander, S.A., Institución de Banca Múltiple, Grupo Financiero Santander; and (iii) a Framework Agreement, dated June 25, 2008, by and among CEMEX, S.A.B. de C.V., CEMEX México, Banco Santander (Mexico), S.A., Institución de Banca Múltiple, Grupo Financiero Santander and Banco Bilbao Vizcaya Argentaria, S.A. New York Branch. On August 14, 2009, the structured transaction was overridden by the Financing Agreement. On January 27, 2009, CEMEX entered into a U.S.$437.50 million and Ps4.77 billion joint bilateral facility. The credit agreement is guaranteed by CEMEX México and CEMEX Concretos, S.A. de C.V. On August 14, 2009, the joint bilateral facility was overridden by the Financing Agreement. On January 27, 2009, CEMEX España, entered into a U.S.$617.5 million and €587.5 million joint bilateral facility. The joint bilateral facility is guaranteed by CEMEX, Inc. The joint bilateral facility was amended on January 30, 2009 to incorporate a number of minor technical modifications. On August 14, 2009, the joint bilateral facility was overridden by the Financing Agreement. On August 14, 2009, we entered into the Financing Agreement. The Financing Agreement extended the maturities of approximately U.S.$15.1 billion in syndicated and bilateral bank facilities and private placement obligations, providing for a semiannual amortization schedule, with a final amortization payment of approximately U.S.$6.8 billion on February 14, 2014, based on prevailing exchange rates as of December 31, 2010. For a description of recent activity with respect to the Financing Agreement. See “Item 5 — Operating and Financial Review and Prospects — Recent Developments — Recent Developments Relating to Our Indebtedness.” On September 28, 2009, we sold a total of 1,495 million CPOs, directly or in the form of ADSs, in a global offering for approximately U.S.$1.8 billion in net proceeds. On November 11, 2009, we launched an exchange offer in Mexico, in transactions exempt from registration pursuant to Regulation S under the Securities Act, directed to holders of CBs maturing on or before December 31, 2012, in order to exchange such CBs for the Mandatory Convertible Securities. Pursuant to the exchange offer, on December 10, 2009, we issued approximately Ps4.1 billion (approximately U.S.$315 million) in Mandatory Convertible Securities in exchange for CBs with original maturities of approximately Ps325 million, Ps1.7 billion and Ps2.1 billion in 2010, 2011 and 2012, respectively, that were canceled. The Mandatory Convertible Securities are mandatorily convertible into newly issued CPOs at an initial conversion price of Ps23.92 per CPO (calculated as the volume-weighted average price of the CPO for the ten trading days prior to the closing of the exchange offer multiplied by a conversion premium of approximately 1.65), accrue interest, payable in cash, at 10% per annum, provide for the payment of a cash penalty fee, equal to approximately one year of interest, upon the occurrence of certain anticipated conversion events, and mature on November 28, 2019. After giving effect to any dilution adjustments in respect of the recapitalization of earnings approved by shareholders at the 2010 shareholders’ meeting, the conversion price for the Mandatory Convertible Securities is approximately Ps22.12 (402.3552 CPOs per Ps8,900 of principal amount of Mandatory Convertible Securities), as of the date hereof. Under MFRS, the Mandatory Convertible Securities represent a combined instrument with liability and equity components. The liability component, approximately Ps1,994 million as of December 31, 2010, corresponds to the net present value of interest payments due under the Mandatory Convertible Securities, assuming no early conversion, and was recognized under “Other Financial Obligations” in our balance sheet. The equity component, approximately Ps1,971 million as of December 31, 2010, represents the difference between principal amount and the liability component and was recognized within “Other equity reserves” net of commissions in our balance sheet. See notes 12A and 16B in our consolidated financial statements included elsewhere in this annual report. 153
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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
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Our Operations in the United Arab E
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Our Trading Operations In 2010, we
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On December 10, 2010, after receivi
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To prevent, control and remediate e
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As required by the directive, each
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For the 2010 fiscal year, CEMEX wil
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Separately, the government of Venez
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and CEMEX was required by August 11
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January 1, 2008, however, under MFR
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foreign subsidiaries. These instrum
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Valuation reserves on accounts rece
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Stage 1. Communication to the organ
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Year Ended December 31, 2010 Compar
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Geographic Segment 89 Variations in
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United Kingdom Our domestic cement
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ended December 31, 2010, Africa and
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Operating Income. For the reasons m
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Our comprehensive financing result
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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 and 122: On August 14, 2009, we entered into
Page 123 and 124: As of December 31, 2010, we had U.S
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: Under our by-laws, shareholders rep
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
Page 173 and 174: 4.17 Debenture Purchase Agreement,
Page 175 and 176: 4.27.3 Amendment No. 1 to U.S.$525,
Page 177 and 178: 4.41.4 Accession Letter, dated Janu
Page 179 and 180: 4.57 Amended and Restated Dealer Ma
Page 181: SIGNATURES CEMEX, S.A.B. de C.V. he
Page 184 and 185: The Board of Directors and Stockhol
Page 186 and 187: CEMEX, S.A.B. DE C.V. AND SUBSIDIAR
Page 190 and 191: 1. DESCRIPTION OF BUSINESS CEMEX, S
Page 192 and 193: C) USE OF ESTIMATES CEMEX, S.A.B. D
Page 194 and 195: J) IMPAIRMENT OF LONG LIVED ASSETS
Page 196 and 197: Contingencies and commitments (note
Page 200 and 201: V) CONCENTRATION OF CREDIT CEMEX, S
Page 206 and 207: Net sales by product and geographic
Page 208 and 209: 4. CASH AND INVESTMENTS CEMEX, S.A.
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CEMEX, S.A.B. DE C.V. AND SUBSIDIAR
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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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