Cemex 2012 Annual Report Download - page 151

Notes to the
financial
statements
151
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14C) Other commitments
In April 2008, Citibank entered into put option transactions on CEMEX’s CPOs with a Mexican trust that CEMEX established
on behalf of its Mexican pension fund and certain of CEMEX’s directors and current and former employees (the “participating
individuals”). The transaction was structured with two main components. Under the first component, the trust sold, for the benefit
of CEMEX’s Mexican pension fund, put options to Citibank in exchange for a premium of approximately US$38. The premium
was deposited into the trust and was used to purchase, on a prepaid forward basis, securities that track the performance of the
Mexican Stock Exchange. Under the second component, the trust sold, on behalf of the participating individuals, additional put
options to Citibank in exchange for a premium of approximately US$38, which was used to purchase prepaid forward CPOs. These
prepaid forward CPOs, together with additional CPOs representing an equal amount in U.S. dollars, were deposited into the trust by
the participating individuals as security for their obligations, and represent the maximum exposure of the participating individuals
under this transaction. The put options gave Citibank the right to require the trust to purchase, in April 2013, approximately
136 million CPOs at a price of US$2.6498 per CPO (120% of initial CPO price in dollars), as adjusted as of December 31, 2012.
If the value of the assets held in the trust (34.7 million CPOs and the securities that track the performance of the Mexican Stock
Exchange) were insucient to cover the obligations of the trust, a guarantee would be triggered and CEMEX, S.A.B. de C.V. would
be required to purchase, in April 2013, the total CPOs at a price per CPO equal to the difference between US$2.6498 and the
market value of the assets of the trust. The purchase price per CPO in dollars and the corresponding number of CPOs under this
transaction are subject to dividend adjustments. CEMEX recognizes a liability for the fair value of the guarantee, and changes in
valuation were recorded in the statements of operations (note 10D).
14D) Contractual obligations
As of December 31, 2012 and 2011, CEMEX, S.A.B. de C.V. had the following contractual obligations:
(U.S. dollars millions) 2012 2011
Less than 1-3 3-5 More than
Obligations 1 year Years Years 5 Years Total Total
Long-term debt 1 US$ 5 803 1,156 2,116 4,080 4,634
Convertible notes 2 12 683 878 604 2,177 2,102
Total debt and other
financial obligations 17 1,486 2,034 2,720 6,257 6,736
Interest payments on debt 3 221 427 354 72 1,074 1,377
Total contractual obligations US$ 238 1,913 2,388 2,792 7,331 8,113
$ 3,058 24,582 30,686 35,877 94,203 113,252
1 The schedule of debt payments, which includes current maturities, does not consider the effect of any refinancing of debt that may occur during the
following years. In the past, CEMEX, S.A.B. de C.V. has replaced its long-term obligations for others of a similar nature.
2 Refers to the convertible notes described in note 10 and assumes repayment at maturity and no conversion of the notes.
3 For the determination of the future estimated interest payments on floating rate denominated debt, CEMEX used the floating interest rates in effect
as of December 31, 2012 and 2011.
15) Tax credits and legal proceedings
On January 21, 2011, the Mexican tax authority notified CEMEX, S.A.B. de C.V., of a tax assessment for approximately $996
(US$77) pertaining to the tax year 2005. The tax assessment is related to the corporate income tax in connection with the
tax consolidation regime. As a result of a tax reform in 2005, the law allows the cost of goods sold to be deducted, instead
of deducting purchases. Since there were inventories as of December 31, 2004, in a transition provision, the law allowed the
inventory to be accumulated as income (thus reversing the deduction via purchases) and then be deducted from 2005 onwards
as cost of goods sold. In order to compute the income resulting from the inventories in 2004, the law allowed this income to be
offset against accumulated tax losses of some of CEMEX S.A.B. de C.V.’s subsidiaries. The authorities argued that because of this
offsetting, the right to use such losses at the consolidated level had been lost; therefore, CEMEX, S.A.B. de C.V. had to increase its
consolidated income or decrease its consolidated losses. CEMEX believes that there is no legal support for the conclusion of the
Mexican tax authority and, on March 29, 2011, CEMEX, S.A.B. de C.V. challenged the assessment before the tax court.