Cemex 1999 Annual Report Download - page 70

68
THOUSANDS OF
YEAR ENDING DECEMBER 31, U.S. DOLLARS
2000 32,811
2001 38,560
2002 32,891
2003 30,472
2004 27,272
2005 and thereafter 130,333
292,339
Rental expense for the years ended December 31, 1999, 1998 and 1997 was approximately US dollars 41, 25 and 22
million, respectively.
E) PLEDGE ASSETS
At December 31, 1999 there are liabilities amounting to US dollars 91 million secured by property, plant and
equipment.
F) COMMITMENTS
As of December 31, 1999, subsidiaries of the Company have future commitments for the purchase of raw material for
an approximate amount of US dollars 38 million.
As of December 31, 1999, the Company has entered into agreements with an international partnership, which will
build and operate an electrical energy generating plant. These agreements establish that when the plant begins
operations, the Company will acquire, starting the second half of 2002, all the electrical energy generated by such
plant for a term no less than 20 years. As part of these agreements, the Company has agreed to supply the electric
plant with enough fuel for its operation. This commitment will be covered through a 20 year agreement that the
Company has with Petróleos Mexicanos. By means of this transaction, the Company expects to have enough
decreases in the electrical energy costs, and the supply will be enough to cover approximately 60% of the electrical
energy usage of 12 cement plants in Mexico. For effect of these agreements, the Company is not required to make
capital investment in the project.
22.- YEAR 2000 PROGRAM
The CEMEX 2000 program was completed according to the schedule. The Company achieved the objective to
maintain continous operations in all its manufacturing plants, technological platforms and information systems
according to the work plan.
During the transition period to the year 2000, all operations have been performing normally and during the following
months, the Company will continue monitoring the performance of all Y2K sensitive elements in its worldwide
operations.
The Company invested approximately 400 thousand man-hours and a budget of US dollars 36 million ($342.4
million) in the Y2K preparation.
The Company has undertaken the necessary efforts to ensure business as usual during the year 2000 and beyond.
23.- SUBSEQUENT EVENTS
As a result of the natural disaster occurred in Venezuela, country where the Company operates, during December
1999, an approximate amount of US dollars 2.6 million was recorded in the results under the caption other expenses,
net. This provision corresponds to the book value of the portion of assets of the subsidiary in Venezuela, which as
of December 31, 1999 are estimated to be unrecoverable. These assets include accounts receivable from clients,
inventory, investments in shares, as well as fixed assets. As of the date of the financial statements, the Company
cannot assure that it will not be necessary to record extraordinary losses in addition to those recognized during 1999,
due to the effects of the natural disaster mentioned above, since some of the effects are not yet known.
Regarding the sale of shares mentioned in note 3D with effects as of December 31, 1999, Cemex México required
consent of 51% or more of the 8.375% Yankee Notes holders’, in order to modify certain restrictions in the contract
that limited the Company’s possibility to complete the transaction. For this purpose, on January 3, 2000, the Company
announced a purchase offer for the notes outstanding, through which the holders were offered a premium equivalent
to 2% of the value of the notes in exchange for their consent, and simultaneously the redemption of the notes at 98%
of their nominal value. In case the consent would not be obtained from most of the note holders, the trading of shares
would be invalid, since it was conditioned to such consent. The term to receive the consent expired January 14, while
the term for the purchase of the notes expires on February 2, 2000.
As of the date of the financial statements, the Company obtained consent of approximately 85% of the note holders,
and therefore validates the sale of shares with retroactive effects to December 31, 1999. For the Company, the consent
received from the note holders represents the redemption of notes for approximately US dollars 148.8 million before
the due date in 2003, however, such amount could be increased until the purchase offer expires on February 2, 2000.