Cemex 2013 Annual Report Download - page 116

Notes to the consolidated financial statements
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rstcomponent,thetrustsold,forthebenet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represented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).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)wasinsufcient
tocovertheobligationsofthetrust,aguaranteewouldbetriggeredandCEMEX,S.A.B.deC.V.wouldberequiredsettle,inApril2013,the
differencebetweenthetotalnumberofCPOsatapriceofUS$2.6498perCPOandthemarketvalueoftheassetsofthetrust.Duringthe
tenureofthetransaction,thepurchasepriceperCPOindollarsandthecorrespondingnumberofCPOsunderthistransactionweresubject
todividendadjustments.Moreover,CEMEXrecognizedaliabilityforthefairvalueoftheguarantee,andchangesinvaluationwererecorded
inthestatementsofoperations(note16D).BetweenJanuaryandApril2013,the136millionputoptionsweregraduallyunwounded,and
cashdepositsinmarginaccounts,afterdeductingthevalueofthetrust’assets,wereusedinanaggregateamountofapproximatelyUS$112.
OnJuly30,2012,CEMEXsigneda10-yearstrategicagreementwithInternationalBusinessMachinesCorporation(“IBM”)pursuantto
whichIBMprovidesbusinessprocessesservicesandinformationtechnology(“IT”).Moreover,IBMprovidesbusinessconsultingtodetectand
promotesustainableimprovementsinCEMEX’sprotability.The10-yearcontractsignedwithIBMisexpectedtogeneratecostreductions
toCEMEXoversuchperiod,andincludes:dataprocessingservices(backofce)innance,accountingandhumanresources;aswellasIT
infrastructureservices,supportandmaintenanceofITapplicationsinthecountriesinwhichCEMEXoperates.
InconnectionwiththeagreementinprincipleenteredintobyCEMEXandHolciminAugust2013describedinnote15B,andthatiscurrently
subject(i)tothereviewandauthorizationoftheAuthoritiesand(ii)nalbindingagreements,inrespecttothepartofthetransactionin
Spain,ifexecuted,CEMEXanticipatesthatanydenitiveagreementsrelatingtothetransactionwillcontaincustomaryprovisionsregarding
Holcim’srightsasaminorityshareholderinCEMEXEspañaOperaciones.
23D) Commitments from employee benets
In some countries, CEMEX has self-insured health care benets plans for its active employees, which are managed on cost plus fee
arrangementswithmajorinsurancecompaniesorprovidedthroughhealthmaintenanceorganizations.AsofDecember31,2013,incertain
plans,CEMEXhasestablishedstop-losslimitsforcontinuedmedicalassistancederivedfromaspeciccause(e.g.,anautomobileaccident,
illness,etc.)rangingfrom23thousanddollarsto400thousanddollars.Inotherplans,CEMEXhasestablishedstop-losslimitsperemployee
regardlessofthenumberofeventsrangingfrom350thousanddollarsto2milliondollars.ThecontingencyforCEMEXifallemployees
qualifyingforhealthcarebenetsrequiredmedicalservicessimultaneouslyaresignicantlylarger.However,thisscenarioisremote.The
amountexpensedthroughself-insuredhealthcarebenetswasapproximatelyUS$70($914)in2013,US$72($925)in2012andUS$62
($866)in2011.
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