Cemex 2013 Annual Report Download - page 155

Notes to the financial statements
The estimated fair value of derivative instruments uctuates over time and is determined by measuring the effect of future relevant
economicvariablesaccordingtotheyieldcurvesshowninthemarketasofthereportingdate.Thesevaluesshouldbeanalyzedinrelation
tothefairvaluesoftheunderlyingtransactionsandaspartofCEMEXS.A.B.deC.V.,overallexposureattributabletouctuationsininterest
ratesandforeignexchangerates.Thenotionalamountsofderivativeinstrumentsdonotrepresentamountsexchangedbytheparties,and
consequently,thereisnodirectmeasureofCEMEXS.A.B.deC.V.,exposuretotheuseofthesederivatives.Theamountsexchangedare
determinedbasedonthenotionalamountsandothertermsincludedinthederivativeinstruments.
I. Interest rate swap contracts
As of December 31, 2013 and 2012, CEMEX S.A.B. de C.V. had an interest rate swap maturing in September 2022 associated with
agreements enteredintoby CEMEXfortheacquisition ofelectricenergy inMexico(note14C),whichfairvaluerepresentedassetsof
approximatelyUS$33andUS$49,respectively.Pursuanttothisinstrument,duringthetenureoftheswapandbasedonitsnotionalamount,
CEMEXwillreceiveaxedrateof5.4%andwillpayLIBOR,whichistheinternationalreferenceratefordebtdenominatedinU.S.dollars.As
ofDecember31,2013and2012,LIBORwas0.3480%and0.50825%,respectively.Changesinthefairvalueofthisinterestrateswap
generatedlossesofapproximatelyUS$16($207)in2013,US$2($35)in2012andUS$12($150)in2011,recognizedinthestatements
ofoperationsforeachyear.
II. Derivative instruments on the price of CPO
OnMarch15,2011,inconnectionwiththeofferingofthe2016ConvertibleNotesandthe2018ConvertibleNotesandtoeffectively
increase theconversionprice forCEMEX’sCPOsunder suchnotes,CEMEX,S.A.B.de C.V.entered intoa cappedcalltransaction,after
antidilutionadjustments, overapproximately166 millionADSs (97million ADSmaturing inMarch2016and 69million ADSsmaturing
inMarch2018),bymeansofwhich,forthe2016ConvertibleNotes,atmaturityofthenotesin March2016,ifthepriceperADSis
aboveUS$10.0314,CEMEXwillreceiveincashthedifferencebetweenthemarketpriceoftheADSandUS$10.0314,withamaximum
appreciationperADSofUS$4.6299.Likewise,forthe2018ConvertibleNotes,atmaturityofthenotesinMarch2018,ifthepriceperADS
isaboveUS$10.0314,CEMEXwillreceiveincashthedifferencebetweenthemarketpriceoftheADSandUS$10.0314,withamaximum
appreciationperADSofUS$6.1732.CEMEXpaidatotalpremiumofapproximatelyUS$222.AsofDecember31,2013and2012,thefair
valueofsuchoptionsrepresentedanassetofapproximatelyUS$353($4,607)andUS$226($2,899),respectively.During2013,2012
and2011,changesinthefairvalueoftheseinstrumentsgeneratedagainofapproximatelyUS$127($1,663)andagainofapproximately
US$155($1,973)andalossofapproximatelyUS$153($1,906),respectively,recognizedwithin“Othernancialincome(expense),net”
inthestatementsofoperations.Inaddition,untilDecember31,2012consideringthatthecurrencyinwhichthenotesaredenominated
andthefunctionalcurrencyoftheissuerdiffered,CEMEXseparatedtheconversionoptionsembeddedinthe2016ConvertibleNotesand
theConvertible2018Notesandrecognizedthematfairvalue,whichasofDecember31,2012,resultedinaliabilityofapproximately
US$301($3,862).Changesinfairvalueoftheconversionoptionsgeneratedalossin2012forapproximatelyUS$243($3,078)anda
gainin2011ofapproximatelyUS$279($3,482).EffectiveJanuary1,2013,inconnectionwiththechangeofthefunctionalcurrency
describedinnote2D,whichamongothereffectsalignedthefunctionalcurrencyoftheissuerwiththecurrencyinwhichtheinstruments
aredenominated,theconversionoptionsembeddedinthe2016ConvertibleNotesandthe2018ConvertibleNotesceasedtobetreated
asstand-alonederivativesatfairvaluethroughthestatementofoperations.TheliabilityaccrueduntilDecember31,2012wascancelled
againststockholders’equity.
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