| 20) | STOCKHOLDERS’ EQUITY |
As of December 31,2017 and 2016, stockholders’ equity excludes investments in CPOs of the Parent Company held by subsidiaries of Ps301 (20,541,277 CPOs) and Ps327 (19,751,229 CPOs), respectively, which were eliminated within “Other equity reserves.”
| 20.1) | COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL |
As of December 31, 2017 and 2016, the breakdown of common stock and additional paid-in capital was as follows:
| 2017 | 2016 | |||||||||||
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Common stock |
Ps | 4,171 | 4,162 | |||||||||
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Additional paid-in capital |
140,483 | 123,174 | ||||||||||
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| Ps | 144,654 | 127,336 | ||||||||||
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As of December 31, 2017 and 2016 the common stock of CEMEX, S.A.B. de C.V. was presented as follows:
| 2017 | 2016 | |||||||||||||||
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Shares 1 |
Series A2 | Series B2 | Series A2 | Series B2 | ||||||||||||
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Subscribed and paid shares |
30,214,469,912 | 15,107,234,956 | 28,121,583,148 | 14,060,791,574 | ||||||||||||
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Unissued shares authorized for executives’ stock compensation programs |
531,739,616 | 265,869,808 | 638,468,154 | 319,234,077 | ||||||||||||
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Shares that guarantee the issuance of convertible securities3 |
4,529,605,020 | 2,264,802,510 | 5,218,899,920 | 2,609,449,960 | ||||||||||||
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| 35,275,814,548 | 17,637,907,274 | 33,978,951,222 | 16,989,475,611 | |||||||||||||
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| 1 | As of December 31, 2017 and 2016, 13,068,000,000 shares correspond to the fixed portion, and 39,845,721,822 shares in 2017 and 37,900,426,833 shares in 2016, correspond to the variable portion. |
| 2 | Series “A” or Mexican shares must represent at least 64% of CEMEX’s capital stock; meanwhile, Series “B” or free subscription shares must represent at most 36% of CEMEX’s capital stock. |
| 3 | Shares that guarantee the conversion of both the outstanding voluntary and mandatorily convertible securities and new securities issues (note 16.2). |
On March 30, 2017, stockholders at the annual ordinary shareholders’ meeting approved resolutions to: (i) increase the variable common stock through the capitalization of retained earnings by issuing up to 1,687 million shares (562 million CPOs), which shares were issued, representing an increase in common stock of Ps5, considering a nominal value of Ps0.00833 per CPO, and additional paid-in capital of Ps9,459; (ii) increase the variable common stock by issuing up to 258 million shares (86 million CPOs), which will be kept in the Parent Company’s treasury to be used to preserve the anti-dilutive rights of note holders pursuant CEMEX’s convertible securities (note 16.2).
On March 31, 2016, stockholders at the annual ordinary shareholders’ meeting approved resolutions to: (i) increase the variable common stock through the capitalization of retained earnings by issuing up to 1,616 million shares (539 million CPOs), which shares were issued, representing an increase in common stock of Ps4, considering a nominal value of Ps0.00833 per CPO, and additional paid-in capital of Ps6,966; (ii) increase the variable common stock by issuing up to 297 million shares (99 million CPOs), which will be kept in the Parent Company’s treasury to be used to preserve the anti-dilutive rights of note holders pursuant CEMEX’s convertible securities (note 16.2).
On March 26, 2015, stockholders at the annual ordinary shareholders’ meeting approved resolutions to: (i) increase the variable common stock through the capitalization of retained earnings by issuing up to 1,500 million shares (500 million CPOs), which shares were issued, representing an increase in common stock of Ps4, considering a nominal value of Ps0.00833 per CPO, and additional paid-in capital of Ps7,613; (ii) increase the variable common stock by issuing up to 297 million shares (99 million CPOs), which will be kept in the Parent Company’s treasury to be used to preserve the anti-dilutive rights of note holders pursuant CEMEX’s convertible securities (note 16.2).
In connection with the long-term executive share-based compensation program (note 21) in 2017, 2016 and 2015, CEMEX issued approximately 53.2 million CPOs, 53.9 million CPOs and 49.2 million, respectively, generating an additional paid-in capital of Ps817 in 2017, Ps742 in 2016 and Ps655 in 2015 associated with the fair value of the compensation received by executives.
| 20.2) | OTHER EQUITY RESERVES |
As of December 31, 2017 and 2016 other equity reserves are summarized as follows:
| 2017 | 2016 | |||||||||||
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Cumulative translation effect, net of effects from perpetual debentures and deferred income taxes recognized directly in equity (notes 19.2 and 20.4) |
Ps | 21,288 | 31,293 | |||||||||
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Cumulative actuarial losses |
(10,931 | ) | (10,934 | ) | ||||||||
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Effects associated with CEMEX´s convertible securities1 |
3,427 | 4,761 | ||||||||||
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Treasury shares held by subsidiaries |
(301 | ) | (327 | ) | ||||||||
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| Ps | 13,483 | 24,793 | ||||||||||
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| 1 | Represents the equity component upon the issuance of CEMEX’s convertible securities described in note 16.2, as well as the effects associated with such securities in connection with the change in the Parent Company’s functional currency (note 2.4). Upon conversion of these securities, the balances have been correspondingly reclassified to common stock and/or additional paid-in capital (note 16.1). |
For the years ended December 31, 2017, 2016 and 2015, the translation effects of foreign subsidiaries included in the statements of comprehensive income were as follows:
| 2017 | 2016 | 2015 | ||||||||||||||
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Foreign currency translation result1 |
Ps | (3,116 | ) | 20,648 | 12,869 | |||||||||||
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Foreign exchange fluctuations from debt2 |
(4,160 | ) | 1,367 | 908 | ||||||||||||
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Foreign exchange fluctuations from intercompany balances3 |
(2,243 | ) | (10,385 | ) | (5,801 | ) | ||||||||||
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| Ps | (9,519 | ) | 11,630 | 7,976 | ||||||||||||
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| 1 | These effects refer to the result from the translation of the financial statements of foreign subsidiaries and include the changes in fair value of foreign exchange forward contracts designated as hedge of a net investment (note 16.4). |
| 2 | Generated by foreign exchange fluctuations over a notional amount of debt in CEMEX, S.A.B. de C.V., associated with the acquisition of foreign subsidiaries and designated as a hedge of the net investment in foreign subsidiaries (note 2.4). |
| 3 | Refers to foreign exchange fluctuations arising from balances with related parties in foreign currencies that are of a long-term investment nature considering that their liquidation is not anticipated in the foreseeable future and foreign exchange fluctuations over a notional amount of debt of a subsidiary of CEMEX España identified and designated as a hedge of the net investment in foreign subsidiaries. |
| 20.3) | RETAINED EARNINGS |
The Parent Company’s net income for the year is subject to a 5% allocation toward a legal reserve until such reserve equals one fifth of the common stock. As of December 31, 2017, the legal reserve amounted to Ps1,804.
| 20.4) | NON-CONTROLLING INTEREST AND PERPETUAL DEBENTURES |
Non-controlling interest
Non-controlling interest represents the share of non-controlling stockholders in the equity and results of consolidated subsidiaries. As of December 31, 2017 and 2016, non-controlling interest in equity amounted to Ps22,095 and Ps19,876, respectively. In addition, in 2017, 2016 and 2015, non-controlling interests in consolidated net income were Ps1,417, Ps1,173 and Ps923, respectively. These non-controlling interests arise mainly from the following CEMEX’s subsidiaries:
| • | In February 2017, as described in note 4.1, CEMEX acquired a controlling interest in TCL, which shares trade in the Trinidad and Tobago Stock Exchange. As of December 31, 2017, there is a non-controlling interest in TCL of approximately 30.2% of its common shares (see note 4.4 for certain relevant condensed financial information). |
| • | In July 2016, CHP, an indirect wholly-owned subsidiary of CEMEX España, S.A., closed its initial offering of 2,337,927,954 new common shares, or 45% of CHP’s common shares, at a price of 10.75 Philippine Pesos per common share. The net proceeds from the offering of US$507 (considering an exchange rate of 46.932 Philippines pesos per U.S. dollar on June 30, 2016), after deducting commissions and other offering expenses, were used by CEMEX for general corporate purposes, including the repayment of existing debt. CHP’s assets consist primarily of CEMEX’s cement manufacturing assets in the Philippines. As of December 31, 2017 and 2016, there is a non-controlling interest in CHP of approximately 45% of its common shares in both years (see note 4.4 for certain relevant condensed financial information). |
| • | In November 2012, pursuant to a public offering in Colombia and an international private placement, CLH, a direct subsidiary of CEMEX España, S.A., concluded its initial offering of common shares. CLH’s assets include substantially all of CEMEX’s assets in Colombia, Panama, Costa Rica, Brazil, Guatemala and El Salvador. As of December 31, 2017 and 2016, there is a non-controlling interest in CLH of approximately 26.75% and 26.72%, respectively, of CLH’s outstanding common shares, excluding shares held in treasury (see note 4.4 for certain relevant condensed financial information). |
Perpetual debentures
As of December 31, 2017, 2016 and 2015, the balances of the non-controlling interest included US$447 (Ps8,784), US$438 (Ps9,075) and US$440 (Ps7,581), respectively, representing the notional amount of perpetual debentures, which exclude any perpetual debentures held by subsidiaries.
Interest expense on the perpetual debentures, was included within “Other equity reserves” and amounted to Ps482 in 2017, Ps507 in 2016 and Ps432 in 2015, excluding in all the periods the amount of interest accrued by perpetual debentures held by subsidiaries.
CEMEX’s perpetual debentures have no fixed maturity date and there are no contractual obligations for CEMEX to exchange any series of its outstanding perpetual debentures for financial assets or financial liabilities. As a result, these debentures, issued entirely by Special Purpose Vehicles (“SPVs”), qualify as equity instruments and are classified within non-controlling interest, as they were issued by consolidated entities. In addition, subject to certain conditions, CEMEX has the unilateral right to defer indefinitely the payment of interest due on the debentures. The classification of the debentures as equity instruments was made under applicable IFRS. The different SPVs were established solely for purposes of issuing the perpetual debentures and were included in CEMEX’s consolidated financial statements.
As of December 31, 2017 and 2016, the detail of CEMEX’s perpetual debentures, excluding the perpetual debentures held by subsidiaries, was as follows:
| 2017 | 2016 | Repurchase option |
Interest rate | |||||||||||
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Issuer |
Issuance date | Nominal amount | Nominal amount | |||||||||||
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C10-EUR Capital (SPV) Ltd |
May 2007 | € | 64 | € | 64 | Tenth anniversary | EURIBOR + 4.79% | |||||||
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C8 Capital (SPV) Ltd |
February 2007 | US$ | 135 | US$ | 135 | Eighth anniversary | LIBOR + 4.40% | |||||||
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C5 Capital (SPV) Ltd1 |
December 2006 | US$ | 61 | US$ | 61 | Fifth anniversary | LIBOR + 4.277% | |||||||
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C10 Capital (SPV) Ltd |
December 2006 | US$ | 175 | US$ | 175 | Tenth anniversary | LIBOR + 4.71% | |||||||
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| 1 | Under the 2017 Credit Agreement, and previously under the 2014 Credit Agreement, CEMEX is not permitted to call these debentures. |