building a STRONGER foundation - Cemex

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CEMEX, S.A.B. DE C.V. AND SUBSIDIARIES Notes to the Consolidated Financial Statements – (Continued) As of December 31, 2010, 2009 and 2008 (Millions of Mexican pesos) On April 23, 2009, stockholders at the annual ordinary stockholders’ meeting approved resolutions to increase the variable common stock through the capitalization of retained earnings, issuing up to 1,004 million shares (335 million CPOs) based on a price of Ps13.07 per CPO. Stockholders received 3 new shares for each 75 shares held (1 new CPO for each 25 CPOs held), through the capitalization of retained earnings. As a result, shares equivalent to approximately 334 million CPOs were issued, representing an increase in common stock of approximately Ps3, considering a nominal value of Ps0.00833 per CPO, and additional paid-in capital of approximately Ps4,370. In addition, stockholders approved resolutions to cancel the corresponding shares held in CEMEX’s treasury. There was no cash distribution and no entitlement to fractional shares. On April 24, 2008, stockholders at the annual ordinary stockholders’ meeting approved resolutions to: (i) create a reserve for share repurchases of up to Ps6,000; and (ii) increase the variable common stock through the capitalization of retained earnings of up to Ps7,500, issuing up to 1,500 million shares (500 million CPOs), based on a price of Ps23.92 pesos per CPO or instead, stockholders could have chosen to receive a cash dividend of US$0.0835 per CPO (approximately Ps0.8677 pesos for each CPO considering the exchange rate of Ps10.3925 per dollar). As a result, shares equivalent to approximately 284 million CPOs were issued, representing an increase in common stock of approximately Ps2, considering a nominal value of Ps0.00833 per CPO, and additional paid-in capital of approximately Ps6,792, while a cash dividend payment was made for approximately Ps214. In addition, stockholders approved the cancellation of the corresponding shares held in CEMEX’s treasury. The CPOs issued pursuant to the exercise of options under the “Fixed program” (note 17A) generated additional paid-in capital of approximately Ps5 in 2010, Ps5 in 2009 and Ps4 in 2008, and increased the number of shares outstanding. Likewise, in connection with the long-term compensation program (note 17) in 2010 and 2009, CEMEX issued approximately 25.7 and 13.7 million CPOs, generating an additional paid-in capital of approximately Ps312 and Ps163, respectively, associated with the fair value of the compensation received by executives. B) OTHER EQUITY RESERVES As of December 31, 2010 and 2009, the balance of other equity reserves is summarized as follows: 2010 2009 Cumulative translation effect, net of effects from perpetual debentures and deferred income taxes recognized directly in equity (notes 15B and 16D) 1 ..........................................................Ps 19,197 26,700 Issuance of convertible securities 2.................................................................................................... 3,203 1,971 Treasury shares held by subsidiaries ................................................................................................. (220) (187) Ps 22,180 28,484 1 In 2010, includes a gain of approximately Ps5,401, resulting from the exchange of perpetual debentures (note 12A). 2 Represents the equity components associated with the issuances of convertible securities into shares of CEMEX, S.A.B. de C.V. described in note 12A. Upon mandatory or voluntary conversion of these securities, these balances will be correspondingly reclassified to common stock and/or additional paid-in capital. For the years ended December 31, 2010, 2009 and 2008, the translation effects of foreign subsidiaries included in the statement of changes in stockholders’ equity were as follows: 2010 2009 2008 Foreign currency translation adjustment 1.........................................................Ps 6,123 (17,716) 106,190 Foreign exchange fluctuations from debt 2........................................................ 1,886 2,158 (9,407) Foreign exchange fluctuations from intercompany balances 3 .......................... (20,059) 14,654 (65,796) Ps (12,050) (904) 30,987 1 These effects refer to the result from the translation of the financial statements of foreign subsidiaries. 2 Generated by foreign exchange fluctuations over a notional amount of debt in CEMEX, S.A.B. de C.V. associated with the acquisition of foreign subsidiaries and designated as hedge of the net investment in foreign subsidiaries. The average amount of such debt was approximately US$2,829 in 2010, US$3,200 in 2009 and US$3,656 in 2008. 3 Refers to foreign exchange fluctuations arising from balances with related parties in foreign currencies that are of a long-term investment nature considering that their liquidation is not anticipated in the foreseeable future, of which a loss of Ps4,857 in 2008 was recognized in CEMEX, S.A.B. de C.V. F-48
C) RETAINED EARNINGS CEMEX, S.A.B. DE C.V. AND SUBSIDIARIES Notes to the Consolidated Financial Statements – (Continued) As of December 31, 2010, 2009 and 2008 (Millions of Mexican pesos) In 2009, a charge for a portion of the liability resulting from changes in the Mexican tax consolidation rules of approximately Ps2,245 was included (note 15A). Nonetheless, in 2010, due to recent modifications to the income tax law in Mexico, in accordance to Interpretation 18, CEMEX reduced its estimated tax payable by approximately Ps2,911 against a credit to “Retained earnings.” In addition, in connection with the initial adoption of MFRS C-3 in 2010, CEMEX reduced its retained earnings by approximately Ps105 (note 2G). In 2008, the caption includes the effects associated with the adoption of several MFRS: a) the reclassification of the accumulated results from holding non-monetary assets (note 2A); b) the reclassification of the cumulative initial deferred income tax effect (note 2N); c) the cumulative initial deferred income tax recognition in investments in associates; and d) the cumulative initial deferred income tax recognition based on the assets and liabilities method (note 2M), which decreased retained earnings by Ps97,722, Ps6,918, Ps920 and Ps2,283, respectively. Net income for the year is subject to a 5% allocation toward a legal reserve until such reserve equals one fifth of the common stock. As of December 31, 2010, the legal reserve amounted to Ps1,804. D) NON-CONTROLLING INTEREST AND PERPETUAL DEBENTURES Non-controlling interest Non-controlling interest represents the share of non-controlling stockholders in the results and equity of consolidated subsidiaries. As of December 31, 2010 and 2009, non-controlling interest in equity amounted to approximately Ps3,214 and Ps3,838, respectively. Perpetual debentures As of December 31, 2010 and 2009, consolidated balance sheets included approximately US$1,320 (Ps16,310) and US$3,045 (Ps39,859), respectively, representing the notional amount of perpetual debentures. On May 12, 2010, as mentioned in note 12A, following an exchange offer with the debenture holders, CEMEX exchanged amounts in excess of a majority of the then outstanding principal amount of each series of perpetual debentures for new secured notes. Interest expense on the perpetual debentures, which is accrued based on the principal amount, was included within “Other equity reserves” and represented expenses of approximately Ps1,624 in 2010, Ps2,704 in 2009 and Ps2,596 in 2008. These debentures have no fixed maturity date and do not represent a contractual payment obligation for CEMEX. As a result, these debentures, issued entirely by Special Purpose Vehicles (“SPVs”), qualify as equity instruments and are classified within non-controlling interest, as they were issued by consolidated entities. In addition, CEMEX has the unilateral right to defer indefinitely the payment of interest due on the debentures. The definition of the debentures as equity instruments was made under applicable IFRS, which were applied to these transactions in compliance with the supplementary application of IFRS in Mexico. The different SPVs were established solely for purposes of issuing the perpetual debentures and were included in CEMEX’s consolidated financial statements. As of December 31, 2010 and 2009, CEMEX’s perpetual debentures were as follows: Issuer Issuance date 2010 Nominal amount F-49 2009 Nominal amount Repurchase option Interest rate C10-EUR Capital (SPV) Ltd....... May 2007 € 266 € 730 Tenth anniversary 6.3% C8 Capital (SPV) Ltd. ................. February 2007 US$369 US$750 Eighth anniversary 6.6% C5 Capital (SPV) Ltd. 1............... December 2006 US$147 US$350 Fifth anniversary 6.2% C10 Capital (SPV) Ltd. ............... December 2006 US$449 US$900 Tenth anniversary 6.7% 1 If CEMEX does not exercise its repurchase option by December 31, 2011, the annual interest rate of this series will change to 3-month LIBOR plus 4.277%, which will be reset quarterly. Interest payments on this series will be made quarterly instead of semi-annually. CEMEX is not permitted to call these debentures under the Financing Agreement. As of December 31, 2010, 3-month LIBOR was approximately 0.30%. As mentioned in note 12C, as of December 31, 2008, there were derivative instruments associated with the perpetual debentures, through which CEMEX changed the risk profile associated with interest rates and foreign exchange rates in respect of the debentures from the U.S. dollar and euro to the Japanese yen. These derivative instruments were settled during 2009.
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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
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Mexico Our domestic cement sales vo
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As a result of the decreases in dom
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For the year ended December 31, 200
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South America, Central America and
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On August 14, 2009, we entered into
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As of December 31, 2010, we had U.S
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Our Perpetual Debentures As of Dece
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The Financing Agreement, as amended
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In 1999, CEMEX entered into an agre
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Our Equity Derivative Forward Contr
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As of December 31, 2009 and 2010, C
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In addition, we have entered into f
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Private Cash Tender Offer to Holder
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Name, Position (Age) Experience Jai
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Name, Position (Age) Experience Ram
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Tomás Milmo Santos (46) Has been a
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Set forth below are the names of th
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Consolidated ESOP Information Stock
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Item 7 - Major Shareholders and Rel
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The following table sets forth the
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Item 10 - Additional Information Ar
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exempt from registration pursuant t
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Our board of directors shall prepar
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Under our by-laws, shareholders rep
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On June 2, 2008, CEMEX, through one
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Exchange Controls See “Item 3 —
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The gross amount of any dividends p
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We have agreed to pay some of the o
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Item 16G - Corporate Governance Sec
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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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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
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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.
Page 222 and 223: II. Equity forwards in third party
Page 224 and 225: 14. EMPLOYEE BENEFITS Defined contr
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Page 246 and 247: Reconciliation of stockholders’ e
Page 258 and 259: (k) Other U.S. GAAP Adjustments Def
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