Cemex 1999 Annual Report Download - page 60

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As of December 31, 1999, the Company has interest rate swap contracts for up to US dollar 450 million ($4,279.5
million), exchanging fixed for floating rates. Additionally, the Company has interest rate collars for 2,500 million
pesetas ($143.6 million) in 1999 and 7,500 million pesetas ($430.7 million) and US dollars 50 million (475.5 millions)
in 1998, related to the debt negotiated at variable rates in a range of LIBOR and MIBOR. Furthermore, there are forward
range swap contracts covering up to US dollars 80 million ($760.8 million) and US dollars 405 million (3,851.6
million) in 1999 and 1998, respectively, to protect the financial cost of debt negotiated at variable rates.
The company has these interest rate hedge instruments and derivative instruments as part of its strategy to manage
the overall cost of borrowing. The results of these instruments are recognized as part of the financial expense.
As of December 31, 1999, the Company’s maturity dates, interest rates being hedged, current interest rates and
estimated market value related to debt hedge with interest rate collars and swaps as described above are presented as
follows:
INTEREST RATE EFFECTIVE ESTIMATED
MATURITY HEDGE OR INTEREST MARKET
DATE EXCHANGED RATE VALUE
Debt denominated in pesetas April 2000 3.11% 3.68% $ (466)
Debt denominated in US dollars March 2001 6.51% 6.33% (2,254)
Debt denominated in US dollars June 2002 9.25% 8.19% (54,540)
Debt denominated in US dollars October 2009 9.63% 8.47% (57,669)
$ (114,929)
As of December 31, 1998, the estimated market value of these instruments showed a loss of approximately $(218,820).
The estimated market value of the interest rate collars and swaps will fluctuate over time and is determined by the
market future pricing of the rates. Fair values should not be viewed in isolation, but rather in relation to the fair values
of the underlying transactions and the overall reduction in the Company’s exposure to fluctuations in interest rates.
The notional amounts of derivative instruments do not necessarily represent amounts exchanged by the parties and,
consequently, there is no direct measure of the Company’s exposure for the use of these derivatives. The amounts
exchanged are calculated on the basis of the notional amounts and the other items included in the derivative
instruments.
The maturities of long-term debt as of December 31, 1999 are as follows:
CONSOLIDATED PARENT
2001 $ 9,500,309 5,667,089
2002 8,253,834 4,755,448
2003 3,476,846 —
2004 3,137,349 —
2005 and thereafter 7,399,860 4,754,712
$ 31,768,198 15,177,249
As of December 31, 1999, Cemex México, S.A. de C.V. and Empresas Tolteca de México, S.A. de C.V., guarantee
indebtedness of the Company for an aggregate amount of US dollars 2,090 million. As of December 31, 1998, the
subsidiaries that guaranteed indebtedness of the Company for an aggregate amount of US dollars 2,010 million were:
Tolmex, S.A. de C.V., Serto Construcciones, S.A. de C.V., Cemento Portland Nacional, S.A. de C.V., Cementos
Mexicanos, S.A. de C.V. and Cemex Control, S.A. de C.V. The change of the subsidiaries, which guarantee the
Company’s indebtedness, resulted from the mergers mentioned in note 3D. The combined summarized financial
information of these guarantors as of December 31, 1999 and 1998 are as follows:
1999 1998
Total assets $ 46,577,555 63,016,437
Total liabilities 29,198,250 13,256,006
Stockholders’ equity 17,379,305 49,760,431
Net sales $ 19,255,634 8,535,071
Operating income 8,830,772 2,564,409
Net income 6,240,053 3,732,752