building a STRONGER foundation - Cemex

17. EXECUTIVE STOCK-BASED COMPENSATION
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)
CEMEX has a long-term compensation program providing for the grant of CEMEX’s CPOs to a group of executives. Beginning in 2009,
CEMEX issues new CPOs under each annual program over a 4 year period. By agreement with the executives, the CPOs of the annual grant,
which is equivalent to 25% of the CPOs related to each plan, are placed in a trust established for the benefit of the executives (the
“executives’ trust”) to comply with a 1 year restriction on sale. Under these plans, CEMEX granted approximately 25.7 million CPOs in 2010
and 13.7 million CPOs in 2009 that were subscribed and pending for payment in CEMEX’s treasury, corresponding in 2010 to the first 25%
of the 2010 program and the second 25% of the 2009 program, and in 2009 to the first 25% of the 2009 program. The remaining shares will
be issued during the following years representing approximately 50.7 million CPOs. During 2008, under this program, the eligible executives
received cash bonuses, which were used by the executives to simultaneously acquire CPOs in the market through the executives’ trust. Such
CPOs were placed in the executives’ trust to comply with a restriction on sale period of 4 years, which vests up to 25% at the end of each
year. The compensation expense related to the grants in 2010 and 2009 represented the fair value of CPOs as of the grant date considering a
weighted average price per CPO of Ps12.54 and Ps11.86, respectively. In 2008, the fair value of CPOs at acquisition date equaled the cash
bonuses. The expense recognized in the statements of operations in connection with these programs during 2010, 2009 and 2008 amounted to
Ps536, Ps606 and Ps725, respectively.
Until 2005, CEMEX granted stock options to executives based on CEMEX’s CPOs. Options outstanding under CEMEX’s programs represent
liability instruments, except for those of its “Fixed program,” which was designated as equity instruments (note 2T). The information related
to options granted in respect of CEMEX, S.A.B. de C.V. CPOs is as follows:
Options Fixed program (A)
F-50
Variable program
(B)
Restricted program
(C) Special program (D)
Options outstanding at the beginning of 2008 .............. 898,470 1,376,347 15,022,272 845,424
Changes in 2008:
Options cancelled and adjustments............................... (63,352) – – –
Options exercised ......................................................... (87,873) (17,427) – (99,425)
Options outstanding at the end of 2008 ........................ 747,245 1,358,920 15,022,272 745,999
Changes in 2009:
Options exercised ......................................................... (133,606) – – (23,381)
Options at the end of 2009............................................ 613,639 1,358,920 15,022,272 722,618
Changes in 2010:
Options cancelled and adjustments............................... (57,933) – – –
Options exercised ......................................................... (106,963) – – (8,000)
Options at the end of 2010............................................ 448,743 1,358,920 15,022,272 714,618
Underlying CPOs 1 ....................................................... 2,760,842 7,119,529 70,481,496 14,292,360
Exercise prices:
Options outstanding at the beginning of 2010 1, 2......... Ps6.49 US$1.43 US$2.00 US$1.36
Options exercised in the year 1, 2 .................................. Ps7.53 – – US$0.97
Options outstanding at the end of 2010 1, 2................... Ps5.85 US$1.52 US$2.00 US$1.36
Average life of options: 0.5 years 1.3 years 1.5 years 2.8 years
Number of options per exercise price: 266,385 – Ps4.5 886,170 – US$1.6 15,022,272 – US$2.0 81,826 – US$1.1
182,358 – Ps7.8 141,679 – US$1.7 – 125,345 – US$1.4
– 67,295 – US$1.4 – 135,751 – US$1.0
– 205,034 – US$1.2 – 257,291 – US$1.4
– 58,742 – US$1.5 – 114,405 – US$1.9
Percent of options fully vested: 100% 100% 100% 100%
1 Exercise prices and the number of underlying CPOs are technically adjusted for the dilutive effect of stock dividends and recapitalization of retained
earnings.
2 Weighted average exercise prices per CPO.
A) Fixed program
From June 1995 through June 2001, CEMEX granted stock options with a fixed exercise price in pesos, equivalent to the market price of the
CPO at the grant date and with tenure of 10 years. The employees’ option rights vested up to 25% annually during the first 4 years after
having been granted.