Cemex 2009 Annual Report Download - page 74

72
18. EXECUTIVE STOCK-BASED COMPENSATION
CEMEX has a long-term compensation program providing for the grant of the Company’s CPOs to a group of executives. Beginning in 2009, under this
program, CEMEX granted new shares equivalent to approximately 13.7 million CPOs that were subscribed and pending for payment in CEMEX’s treasury,
corresponding to the first 25% of the 2009 program. The remaining 75% will be issued during the following 3 years, representing approximately 37.2 million
CPOs. The compensation expense related to the grant in 2009 represented the fair value of CPOs as of the grant date. During 2008 and 2007, under this
program, the eligible executives received cash bonuses, which were used by the executives to simultaneously acquire CPOs in the market through a trust
established for the benefit of the executives (“the executives’ trust”). The expense recognized in the income statement in connection with these programs
during 2009, 2008 and 2007 amounted to $606, $725 and $645, respectively. In 2008 and 2007, the fair value of CPOs at acquisition date equaled the cash
bonuses. Pursuant to an agreement between CEMEX and the executives, any CPOs granted or acquired during the period are 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.
As mentioned in note 3T, in connection with its stock option programs qualifying as equity instruments, in which new shares are issued through the exercise
of options, CEMEX determines the fair value of the awards as of the grant date, and recognizes such fair value through earnings over the options’ vesting
period. Likewise, in connection with its stock options programs qualifying as liability instruments, comprised by those awards in which CEMEX incurs an
obligation by committing to pay the executive, through the exercise of the option, an amount in cash or in other financial assets, CEMEX determined the fair
value of the awards at each reporting date, recognizing the changes in valuation in the income statement. CEMEX’s outstanding options, other than those
of its “Fixed program,” represent liability instruments.
The information related to options granted in respect of CEMEX, S.A.B. de C.V. shares is as follows:
Fixed Variable Restricted Special
Options program (A) program (B) program (C) 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
Underlying CPOs 1 3,580,993 7,119,529 70,481,496 14,452,360
Exercise prices:
Options outstanding at the beginning of 2009 1, 2 $6.72 US$1.43 US$2.00 US$1.35
Options exercised in the year 1, 2 $6.42 – – US$1.00
Options outstanding at the end of 2009 1, 2 $6.49 US$1.43 US$2.00 US$1.36
Average life of options: 0.6 years 2.3 years 5.0 years 3.8 years
Number of options per exercise price: 266,385 – $4.7 886,170 – US$1.5 15,022,272 – US$2.0 82,326 – US$1.1
11,543 – $6.3 141,679 – US$1.6 – 125,345 – US$1.4
141,983 – $7.7 67,295 – US$1.3 – 143,251 – US$1.0
193,728 – $8.1 205,034 – US$1.2 – 257,291 – US$1.4
58,742 – US$1.4 – 114,405 – US$1.9
Percent of options fully vested: 100% 100% 100% 95.4%
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.
B) Variable program
This program started in November 2001, through an exchange of fixed program options, with exercise prices denominated in dollars increasing annually
at a 7% rate.
C) Restricted program
This program started in February 2004 through a voluntary exchange of options mainly from the variable program. These options have an exercise price
denominated in dollars which, depending on the program, increase annually at a 5.5% rate or at a 7% rate. Executives’ gains under these options are
settled in the form of CPOs, which are restricted for sale for an approximate period of 4 years from the exercise date.
D) Special program
From June 2001 through June 2005, CEMEX’s subsidiary in the United States granted to a group of its employees a stock option program to purchase
CEMEX ADSs. The options granted have a fixed exercise price denominated in dollars and tenure of 10 years. The employees’ option rights vested up to
25% annually after having been granted. The option exercises are hedged using ADSs currently owned by subsidiaries, which increases stockholders’
equity and the number of shares outstanding. The amounts of these ADS programs are presented in terms of equivalent CPOs (ten CPOs represent one
ADS).