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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 January 21, 2011, the Mexican tax authority notified CEMEX, S.A.B. de C.V., of a tax assessment for approximately Ps996 (US$81)
pertaining to the tax year 2005. The tax assessment is related to the corporate income tax in connection with the tax consolidation regime. As
a result of a tax reform in 2005, the law allows the cost of goods sold to be deducted, instead of deducting purchases. Since there were
inventories as of December 31, 2004, in a transition provision, the law allowed the inventory to be accumulated as income (thus reversing the
deduction via purchases) and then be deducted from 2005 onwards as cost of goods sold. In order to compute the income resulting from the
inventories in 2004, the law allowed this income to be offset against accumulated tax losses of some of CEMEX’s subsidiaries. The
authorities argued that because of this offsetting, the right to use such losses at the consolidated level had been lost; therefore, CEMEX had to
increase its consolidated income or decrease its consolidated losses. CEMEX believes that there is no legal support for the conclusion of the
Mexican tax authority and will proceed to challenge the assessment before the tax court.
In February 2011, in connection with the tax matter in Colombia related to CEMEX’s 2008 year end tax return, CEMEX Colombia presented
its arguments to the Colombian Tax Authority. The Colombian Tax Authority has six months from the time CEMEX Colombia presented
such arguments to send a “Liquidación Oficial,” or final determination, that CEMEX may appeal, if necessary.
On February 10, 2011, CEMEX made a prepayment of US$50 to reduce the principal amount due under the Financing Agreement. The
prepayment satisfied in full the June 2012 amortization amount.
On February 24, 2011, stockholders at the extraordinary stockholders’ meeting approved an increase in the variable portion of our capital
stock of up to 6 billion shares (equivalent to 2 billion CPOs). Pursuant to the resolution approved by CEMEX’s stockholders, the subscription
and payment of the new shares represented by CPOs may occur through a public offer of CPOs and/or issuance of convertible bonds and,
until then, these shares will be kept in CEMEX’s treasury.
On February 24, 2011, stockholders at the 2010 annual ordinary stockholders’ meeting approved resolutions: (i) to increase the variable
common stock through the capitalization of retained earnings, issuing up to 1,202.6 million shares (400.9 million CPOs) based on a price of
Ps10.52 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 401 million CPOs were issued and paid. There was no cash distribution
and no entitlement to fractional shares; and (ii) to increase the variable common stock by up to 60 million shares (20 million CPOs) issuable
as a result of antidilution adjustments upon conversion of CEMEX’s 2010 Optional Convertible Subordinated Notes and the Mandatorily
Convertible Securities. These shares will be kept in CEMEX’s treasury and will be used to preserve the rights of note holders pursuant to the
company’s issuance of convertible notes.
On March 4, 2011, CEMEX closed a private exchange transaction of approximately €119 aggregate principal amount of 6.277% Fixed-to-
Floating Rate Callable Perpetual Debentures for approximately US$125 aggregate principal amount of new 9.25% U.S. Dollar-Denominated
Senior Secured Notes due 2020, issued by CEMEX España, and guaranteed by CEMEX S.A.B. de C.V., CEMEX México, S.A. de C.V., and
New Sunward Holding B.V.. As a result of such private exchange, approximately €119 in aggregate principal amount of the 6.277%
Perpetual Debentures and an equal corresponding aggregate principal amount of underlying dual-currency notes were cancelled.
On March 15, 2011, CEMEX finalized the offering of US$977.5 aggregate principal amount of 3.25% convertible subordinated notes due in
2016 (the “2016 Notes”) and US$690 aggregate principal amount of 3.75% convertible subordinated notes due in 2018 (the “2018 Notes”
and, together with the 2016 Notes, the “2011 Optional Convertible Subordinated Notes”). The aggregate principal amounts reflect the full
exercise of the US$177.5 and US$90 over-allotment option granted to the relevant initial purchasers related to the 2016 Notes and the 2018
Notes, respectively. The initial conversion price was equivalent to an approximate 30% premium to the closing price of CEMEX’s ADSs on
March 9, 2011, and are convertible into CEMEX’s ADSs, at any time after June 30, 2011. The net proceeds from this transaction were used to
fund the purchase of capped call transactions, which are generally expected to reduce the potential cost to CEMEX upon future conversion of
the 2011 Optional Convertible Subordinated Notes, improve CEMEX’s debt maturity profile by prepaying outstanding amounts under the
Financing Agreement. This prepayment satisfied in full the December 2012 amortization amount and reduced the June 2013 amortization
amount to US$294 million. As a result of the issuance, substantially all the new shares approved at CEMEX’s extraordinary stockholders’
meeting on February 24, 2011 are being reserved by CEMEX to satisfy conversion of these notes.
On April 1, 2011, the Colombian Tax Authority (Dirección de Impuestos) notified CEMEX Colombia of a proceeding in which the Colombian
Tax Authority rejected certain deductions taken by CEMEX Colombia in its 2009 year-end tax return. In addition, the Colombian Tax Authority
seeks to increase the taxes to be paid by CEMEX Colombia in the amount of approximately 90 billion Colombian pesos (US$48) and to impose a
penalty in the amount of approximately 144 billion Colombian pesos (US$77). The Colombian Tax Authority argues that certain expenses are not
deductible for fiscal purposes because they are not linked to direct revenues recorded in the same fiscal year, without take into considerations that
future revenue will be taxed with income tax in Colombia. At this stage, CEMEX is not able to assess the likelihood of an adverse result or
potential damages which could be borne by CEMEX Colombia.
On April 5, 2011, CEMEX closed the offering of US$800 aggregate principal amount of Floating Rate Senior Secured Notes due in 2015,
which were issued at 99.001% of face value. The April 2011 Notes are unconditionally guaranteed by CEMEX México, S.A. de C.V., New
Sunward Holding B.V. and CEMEX España, S.A. The net proceeds from the offering, approximately US$788, were used to repay
indebtedness under the Financing Agreement.
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