Cemex 1999 Annual Report Download - page 52

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CEMEX, S.A. DE C.V. AND CEMEX, S.A. DE C.V. AND SUBSIDIARIES
DECEMBER 31, 1999, 1998 AND 1997
(THOUSANDS OF CONSTANT MEXICAN PESOS AS OF DECEMBER 31, 1999)
NOTES TO CONSOLIDATED AND PARENT COMPANY ONLY FINANCIAL STATEMENTS
1.- DESCRIPTION OF BUSINESS
Cemex, S.A. de C.V. (Cemex or the Company) is a Mexican parent company of entities engaged in the production
and marketing of cement and concrete in the construction industry. The Company also has subsidiaries that
participate in the tourism industry.
2.- OUTSTANDING EVENTS DURING 1999
A) EXCHANGE OF SHARES FOR THE NEW ORDINARY PARTICIPATION CERTIFICATE (“CPO”)
On September 14, 1999, the Company concluded an exchange offer of its old series “A” and “B” shares, and its old
Ordinary Participation Certificates (“CPO’s”), for new CPO’s. As a result, most of the holders of the old series “A”
and “B” shares and old CPO’s, received for each one of their titles a new CPO, which represents, the participation in
two new series “A” shares and one new series “B” share of the Company. As a part of the exchange offer, on
September 15, 1999, the Company effected a stock split of two series “A” shares and one series “B” share, for each
of the old shares of any series. The proportional equity interest participation of the shareholders in the Company’s
common stock did not change as a result of the exchange offer and the stock split mentioned above.
Earnings per share, prices per share, and the number of shares outstanding disclosed in these notes to the financial
statements for the years ended December 31, 1998 and 1997, as well as the transactions occurred in 1999 prior to
September 14, have been restated to give effect the stock split mentioned in the preceding paragraph.
B) REGISTRATION IN THE NEW YORK STOCK EXCHANGE
On September 15, 1999, the Company successfully completed its registration before the United States Securities and
Exchange Commission (“SEC”) and the listing of the new American Depositary Share (“ADS”) in the New York Stock
Exchange (“NYSE”), as well as the exchange process of the new CPO mentioned in note 2A. On the same date, began
the trading of the new CPO’s in the Mexican Stock Exchange (“BMV”) and of the new ADS’s in the NYSE under the
stock symbol CX. Each new ADS represents 5 new CPO’s. As a result of the registration before the SEC and the listing
of the new ADS in the NYSE, beginning in the year 2000, the Company is required to file before the SEC, financial
information according to the rules established by such Commission, including the annual financial statements with
the reconciliation of stockholders’ equity and net income to Generally Accepted Accounting Principles in the United
States (“US GAAP”).
C) PUBLIC OFFER OF WARRANTS
During December 1999, through a simultaneous public offer in the Mexican Stock Exchange (“BMV”) and the New
York Stock Exchange (“NYSE”), the Company issued 105 million warrants at a subscription price of $3.2808 pesos
per warrant. The warrants allow the holder to benefit from the future increment in the market price of the Company’s
CPO above the strike price of U.S. dollars 6.20 per warrant, within certain limits. The benefit, should any exist, will
be paid in CPO’s of the Company. The warrants were issued for a term of three years and their exercise is at maturity.
The warrants were subscribed as American Depositary Warrants (“ADW’s”) in the NYSE, each ADW is equivalent to
5 warrants.
As part of the same transaction, the Company carried out a hedge transaction in order to cover the future obligations
for the warrants exercise. Through this transaction, 105 million CPO’s of the Company and 33,751,566 shares of
Compañía Valenciana de Cementos Portland, S.A. (“Valenciana”), subsidiary of the Company in Spain, were sold to
a group of foreign banks. Simultaneously, a subsidiary of the Company entered into forward contracts with the same
group of banks, to repurchase the basket of shares with a three-year maturity and paid in advance of the forward final
price, approximately U.S. dollars 439.9 million to the banks.
As a result of the overall transaction, the Company received resources for the subscription of the warrants and the
sale of the basket of shares for approximately U.S. dollars 490.9 million, after applying the prepayment to the banks
under the forward, fees and other expenses related to this transaction.
3.- SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION AND DISCLOSURE
The accompanying Parent Company-only financial statements have been prepared in order to comply with legal
requirements in Mexico. The Company also presents consolidated financial statements.
The accompanying financial statements have been prepared in accordance with Generally Accepted Accounting
Principles in Mexico (“Mexican GAAP”), which include the recognition of the effects of inflation on the financial
information.