Cemex 2009 Annual Report Download - page 85

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On December 10, 2009, the Parent Company completed its offer to exchange CBs issued in Mexico with maturities between 2010 and 2012, into mandatorily
convertible securities for approximately $4,126 (US$315). At their mandatory scheduled conversion in ten years or earlier if the price of the CPO reaches
$35.88, the securities will be mandatorily convertible into approximately 172.5 million CPOs, at a conversion price of $23.92 per CPO. During their tenure, the
securities yield a 10% interest payable quarterly. Holders have an option to voluntarily convert their securities, after the first anniversary of their issuance,
on any interest payment date into CPOs. Based on MFRS, the convertible securities represent a compound instrument which has a liability component and
an equity component. The liability component, which amounted to $2,090, represents the net present value of interest payment on the principal amount,
without assuming any early conversion, and was recognized within “Other financial obligations.” The equity component, which represents the difference
between the principal amount and the liability component was recognized within “Other equity reserves” net of commissions (note 17B).
I. Balances and transactions with related parties
As of December 31, 2009 and 2008 the main accounts receivable and payable with related parties were as follows:
Assets Liabilities
2009 Short-term Long-term Short-term Long-term
CEMEX México, S.A. de C.V. $ 1,558 13,943 – –
CEMEX Central, S.A. de C.V. – – 519 –
CEMEX International Finance Co. 1,069 – – 31,423
CEMEX France Gestion. 34 – – –
TEG Energía, S.A. de C.V. – – – 353
Others 16 – 28 –
$ 2,677 13,943 547 31,776
Assets Liabilities
2008 Short-term Long-term Short-term Long-term
CEMEX México, S.A. de C.V. $ – 13,943 3,766 –
CEMEX Central, S.A. de C.V. 385 – – –
CEMEX International Finance Co. – – 226 17,736
CEMEX Concreto, S.A. de C.V. – – 227 –
TEG Energía, S.A. de C.V. – – – 740
Others 123 – 16 –
$ 508 13,943 4,235 18,476
The main operations with related parties are summarized as follows:
Parent Company 2009 2008 2007
Rental income $ 272 271 278
License fees 1,002 1,197 1,177
Financial expense (2,576) (1,316) (433)
Management service expenses (836) (753) (1,322)
Financial income 1,186 1,670 690
Results from financial instruments (4,067) 3,063 –
Other expenses, net (870) (809) (21)
Balances and transactions of the Parent Company with related parties result primarily from: (i) the sale and/or acquisition of subsidiaries’ shares within the
CEMEX group; (ii) the invoicing of administrative services, rentals, trademarks and commercial name rights, royalties and other services rendered between
group entities; and (iii) loans between related parties. Transactions between group entities are conducted on arm’s length terms based on market prices
and conditions.
The long-term account receivable with CEMEX Mexico is related to a loan bearing the TIIE rate plus 129 basis points. The account payable to TEG Energía,
S.A. de C.V., corresponds to the valuation of an interest rate swap related to energy projects negotiated between CEMEX and TEG Energía for a notional
amount of US$15 with maturity in September 2022. The account payable to CEMEX International Finance Co. bears interest at market rates and matures
in 2028.
In connection with sale contracts of EUAs and the exchange of EUAs for CERs that were liquidated during 2009 (note 3U), the Parent Company had acted as
a counterparty of third parties and maintained identical contracts with the subsidiaries in Europe owners of the EUAs, through which the Parent Company
hedged its obligations established in those contracts.
The loss on financial instruments during 2009 mainly refers to results incurred in hedging transactions with related parties using foreign currency options.
The definition of related parties includes entities or individuals outside the CEMEX group, which, pursuant to their relationship with CEMEX, may take
advantage from being in a privileged situation. Likewise, this applies to cases in which CEMEX may take advantage of such relationships and obtain
benefits in its financial position or operating results. CEMEX’s transactions with related parties are executed under market conditions. The Parent Company
has identified the following transactions between related parties:
Mr. Bernardo Quintana Isaac, a member of the board of directors at CEMEX, S.A.B. de C.V., is the current chairman of the board of directors of Empresas
ICA, S.A.B. de C.V. (“Empresas ICA”), and was its chief executive officer until December 31, 2006. Empresas ICA is one of the most important engineering
and construction companies in Mexico. In the ordinary course of business, CEMEX extends financing to Empresas ICA in connection with the purchase of
CEMEX’s products, on the same credit conditions that CEMEX awards to other customers.