Cemex S.A.B. de C.V.
Annual Report 2015

Plain-text annual report

Building a better future 2015 ANNUAL REPORT We strive to build a better future for our em- ployees, our customers, our shareholders, and the communities in which we live and work. That’s why we work hard to develop and deliver the best construction products and solutions to satisfy our customers’ and society’s growing needs. By transforming ideas into reality, we build the homes people live in, the roads that connect them, and the infrastructure that makes their cities vibrant. 1 Letter to our stockholders 2015 was a challenging year for any company operating in an increasingly volatile global envi- ronment. The slowing of the Chinese economy, falling oil and other commodity prices, weaker than expected growth in many countries, capital outflows from emerging markets, and the outsized appreciation of the dollar translated into important headwinds for our business. Despite that environment, we are pleased to report that CEMEX delivered strong underlying operational and financial results. We grew volumes in our core businesses; increased prices in local currency terms in excess of yearly input inflation; contained costs across the company; and continued to strengthen our balance sheet by lowering working capital use, selling assets valued at close to US$700 million, and executing a series of targeted financial transactions. We improved our EBITDA margin to the highest level in six years and dramatically increased free cash flow, as well as the rate at which we converted EBITDA into free cash. The result was a 9% increase in EBITDA on a like-to-like basis, net income of US$75 million— positive for the first time in six years—free cash after total capex of US$628 million, and a total debt reduction of close to US$1 billion. Rogelio Zambrano, Chairman of the Board Dear fellow shareholders: CEMEX delivered strong underlying operational and financial results, despite a challenging environment. Fernando A. González, Chief Executive Officer Those are not only important milestones on the road to once again producing sustainable returns for our investors, but also indicators of the resilience we have built into our oper- ating and financial models. Of course, we could not avoid the winds that buffeted the global economy. In our case, the biggest impact was currency translation: the super strong dollar adversely affected our oper- ating EBITDA by more than US$300 million, resulting in total EBITDA of US$2.6 billion for the year. The currency effect contributed to the perfor- mance of our stock during 2015. We want to be clear: as investors ourselves, the fall in the stock price deeply disappointed us. However, we manage the company to produce long-run value, knowing that macro and market fluc- tuations can affect results along the way. The obvious question is whether we are on the right track to produce the results that you, our fellow shareholders, expect. We are confident that we are. In our first joint letter to you a year ago, we told you that our strategy is focused on leveraging our global portfolio of integrated cement, aggregates, and ready-mix concrete assets, developing the inherent power of our 2 global networks, sustaining our drive to be a hyper-efficient (but also hyper-safe) operator, and actively managing our worldwide asset base. That strategy remains intact, because it is producing tangible results, even if they were partially obscured by the noise in the marketplace. We have the right strategy; our challenge is to intensify and to accelerate its execution. CEMEX is global, and we believe this is an important and abiding source of advantage in the market and of benefit to our customers. We leverage our knowledge and scale to establish best practices and common processes worldwide. But best practices do not just spread themselves, which is why our senior operators now have both geographic and business process responsibilities. We leverage our knowledge and scale to establish best practices and common processes worldwide. We have established six global networks that cut across geographies: Customer Centricity to assure that we fully understand and serve the needs of our customers; Grow the Pie to increase the market penetration of our prod- ucts; Cement Operations and Supply Chain to improve productivity and to realize the operating leverage inherent in our business portfolio; Ready-Mix and Aggregates to guar- antee that the operating knowledge and skills we generate in any one market are spread throughout the CEMEX world. These initiatives allow us to manage the business as a global enterprise, assuring that CEMEX is much more than the sum of its parts. They also make us more efficient. During 2015, we delivered on our cost savings pledge of US$150 million. We aspire to be an efficient, lean operator. Over the past year, we reduced cost of sales and operating expenses as a share of sales by 1.1 percentage points, leading to an operating EBITDA margin of 18.7%. That’s good by industry standards, but we know we can do better. We also know that there is no trade off between efficiency and safety. When it comes to safety, we refuse to compromise. Our goal is zero injuries. This is a moral necessity, and it is the standard by which we want to be measured. In this regard, our performance in 2015 was good, putting us in a better position to achieve our high standards. Ninety-five percent of our operations were fatality and lost-time-injury free for the year; the 5% that did experience such injuries are aware of the need to improve and have plans to achieve that. But the overall direction is encouraging: during 2015, time lost to injuries fell to best- in-industry levels. We expect to report to you next year that we are within reach of—or have met—our Zero for Life goal. An integral element of CEMEX’s strategy is our deep commitment to sustainability—in our operations, in our communities, and in the products and services we provide our customers. For example, in 2015, our alterna- tive fuel usage, clinker factor reduction, and clean energy efforts reduced our CO2 emis- sions by 6.5 million tons, equivalent to the amount produced by 1.2 million cars. During the year, we installed 7.3 million square meters of resilient concrete pavement, equiv- alent to a 450-kilometer, four-lane concrete road, while roughly one-third of our ready-mix concrete sales derived from products with outstanding sustainability attributes. US$150 million cost savings in 2015 3 During 2015, we continued to deleverage our balance sheet, while reducing financial costs and improving the maturity profile of our debt. Finally, shareholders invest in growth: how are we going to increase shareholder value over the long term? Our long-term strategy rests on two main value creation drivers: CEMEX is a strong company with a solid future. Markets will go up and down and currencies will fluctuate—sometimes wildly— but we are confident that sound strategy and good execution by talented, dedicated people will always win in the end. Another element of our commitment to a sustainable future is our support for local infrastructure and housing development, in part by establishing community centers for construction training and also by empow- ering customers at the bottom of the socio- economic pyramid through self-construction assistance initiatives. During 2015, we estab- lished a goal of benefitting more than 3 million people between 2015 and 2020, on top of the 7 million we have helped since 1998. In terms of financial management, as we already mentioned, during 2015 we continued to deleverage our balance sheet, while reducing financial costs and improving the maturity profile of our debt. The result is that we essentially have no maturities due in 2016 or 2017 and only 3% of our debt is exposed to potentially rising rates. Coupled with suffi- cient liquidity and continuing strong cash flow generation, we are confident that we are well prepared for whatever stresses might come from turbulent financial markets. Maximizing EBITDA growth. We will sustain our Value before Volume strategy, drive ourselves to find ways to be the most efficient producer in all our businesses in all our markets, and grow our volumes. Although we can’t make our markets grow faster, we can create more demand for the products we produce; that’s the principal idea behind Grow the Pie. We also can expand our footprint in high-growth markets, especially ones where we are already present. Improving our capital structure. 2015’s big increase in free cash flow was not an accident, but the result of focused action. We expect to continue to convert a growing share of EBITDA into cash. Of course, we will continue to pay down debt and to deleverage, as we work towards an investment-grade quality balance sheet. We have set aggressive operating and finan- cial goals for ourselves. Although market developments will define exactly when we achieve those goals, we are fully confident that we are on the right track with the right tools to succeed—with success defined as delivering increasing value to our share- holders well into the future. Thank you for your continuing support. Sincerely, Rogelio Zambrano Chairman of the Board Fernando A. González Chief Executive Officer Our long-term strategy rests on two main value creation drivers: maximizing EBITDA growth and improving our capital structure. 4 Financial highlights In millions of US dollars1, except earnings (loss) per ADS Net sales3 (billions of US dollars) 20.89 20.13 18.25 2015 2014 % 14.54 14.02 15.22 14.98 14.81 15.29 14.13 Net sales 14,127 15,288 (8%) Operating earnings before other expenses, net 1,674 1,637 2% Operating EBITDA 2,636 2,696 (2%) 06 07 08 09 10 11 12 13 14 15 Controlling interest net income (loss) 75 (507) n/a Operating earnings before other expenses, net3 (billions of US dollars) Earnings (loss) per ADS2 0.06 (0.39) n/a 2.95 2.90 Free cash flow after maintenance capital 2.33 expenditures Total assets 881 401 120% 31,472 34,936 (10%) Total debt and perpetual notes 15,327 16,291 (6%) 1.64 1.67 1.50 1.29 1.17 0.95 0.85 Total controlling stockholders’ equity 8,327 8,894 (6%) 06 07 08 09 10 11 12 13 14 15 1 For the reader´s convenience, figures are presented in US dollars. For statements of operations accounts, these figures result from translating the local currency amounts into US dollars at the average exchange rate for the year, which approximates a convenience translation of the Mexican peso results for 2015 and 2014 using the aver- age exchange rates of the year of 15.98 MXN/US$ and 13.37 MXN/US$, respectively. For balance sheet accounts, US dollar figures result from translating the local currency amounts into US dollars at the closing exchange rate for the year, which approximates a convenience translation of the Mexican peso amounts at the end of each year using the end-of-year exchange rate of 17.23 MXN/US$ and 14.74 MXN/US$, respectively. 2 Based on an average of 1,353 and 1,256 million American Depositary Shares (ADSs) for 2015 and 2014, respectively. 3 2015, 2014, 2013, 2012, 2011, and 2010 figures are under IFRS, refer to page 23 for further details. Total assets3 (billions of US dollars) 49.66 45.39 44.48 40.85 38.80 37.26 38.02 34.94 31.47 29.97 06 07 08 09 10 11 12 13 14 15 5 Differentiated, leading-edge innovation Offer our customers superior performing building products Integral solutions Address our clients’ complex, evolving construction needs Industry forefront Integrate digital technologies into our service and business offerings Speed, continuous improvement Benefit our customers’ business Delivering better products and solutions When our customers succeed, we succeed. Accordingly, our core strategic goal is to become the most customer- oriented company in our industry—serving as our clients’ best option in all of our markets. Ultimately, we aim to create solid relationships with our customers, creating the foundations for long-lasting partnerships. To this end, we leverage our leading-edge innovation and agility to develop superior build- ing products and solutions that perform at the highest standards across all applications. As the only global building materials company with its own admixtures business, our researchers are able to design and develop novel, tailor-made concrete technologies through the development of proprietary construction chemicals. Moreover, our experts in fields such as geology, chemistry, materials science, and various other engineering disciplines work alongside behavioral scientists, cultural anthropologists, and commercial strat- egists to anticipate and understand society’s trends to create innovative, sustainable construc- tion solutions that satisfy our customers’ current and future needs, while truly challenging the current state of the art. Led by CEMEX Research Group in Switzerland, our team of experts works in close collaboration With My CEMEX, a new mobile applica- tion, our customers will enjoy the ability to interface with us at any place and with any device. The iconic Torre Reforma corporate tower—the tallest building in Mexico City—was built with our specialty For- tis® brand concrete. In Germany, we are par- ticipating in the construc- tion of the new Uferkrone seven-building residential complex. with our customers to offer them unique, inte- grated, cost-effective solutions that fulfill their specific performance requirements, including a growing portfolio of value-added concretes. Build- ing on our favorable client results in the U.S., we recently successfully tested our durable, low-cost Roller Compacted Concrete (RCC) pavement so- lution on a demanding, heavy use stretch of road- way in the Baltic States. Suitable for the most difficult conditions, RCC combines the strength and performance of concrete with asphalt’s relatively fast and simple application technique. Requiring no forms, reinforcing rods, or dowels, RCC’s lower installation and maintenance costs and long-term durability make it especially useful for industrial and heavy-duty pavements, as well as a base for conventional pavements. Notably, the walls that serve as the backbone of the iconic Torre Reforma corporate tower—the tallest building in Mexico City—were built with our ultra high strength Fortis® concrete brand technology. The properties of this special con- crete enable it to bear the weight of the slabs, which were conceived without interior columns in order to maximize the use of space, utilizing the support of the intertwined metallic structure. We further enable the success of our custom- ers by creating and delivering holistic solutions for their complex, evolving construction chal- lenges. In 2015, we contributed to the construc- tion of an enormous floating concrete cais- son at the Grand Port Maritime de Marseille, France’s largest port with connections to every continent. Our technical experts worked for six months to successfully develop a high-perfor- mance concrete that is resistant to seawater 8 Golden 1 Center: A monumental sports venue We participated in the construction of the 19,000-seat, multi-purpose Golden 1 Center in Sacramento, California. Among the largest construction projects in California’s state capital in nearly a decade, this monumental entertain- ment venue has already brought over 2,000 construction jobs to downtown Sacramento, an area hungry for revitalization. An interactive, smart, and frictionless structure, the arena will utilize enhanced Wi-Fi architecture and sensors to ensure connectivity. Building on our proven global track record with multiple sports complexes, we efficiently and effectively satisfied the project’s strict quality control and intensive scheduling requirements. We not only developed a specially designed high-early-strength ready-mix concrete that no one else in the region could offer, but also pro- vided around-the-clock service to facilitate the timely construction of one of the most impor- tant structures in the state’s capital city. Better products and solutions corrosion, as well as impacts from the large oil tankers that enter the port. In Germany, we are participating in the construction of the new Uferkrone seven-building residential complex on the banks of the Spree River in Berlin’s green- est, most water-rich district. Because the com- plex is located directly on the water, the outer walls and floor slabs of the basement required the use of our highly water-resistant concretes, for which we employed truck-mounted concrete pumps with 42- or 52-meter masts. Moreover, in Panama, we are playing an important role in the extension of the country’s Manzanillo Inter- national Terminal, providing tailor-made concrete for one of the largest and most productive con- tainer transshipment terminals in Latin America. We further look to position ourselves at the forefront of the industry by integrating digital technologies into our service and business offerings. With My CEMEX, a new mobile ap- plication, our customers will enjoy the ability to interface with us at any place and with any device. Among its features, My CEMEX will en- able our customers to buy our products online, consult their credit information, account state- ments, invoices, and referrals, and review the status of their orders. Similarly, with Sales 360°, a complementary new mobile application, we improve our customer experience by providing our sales force with access to real-time client information—from order status to contracts and loyalty programs—thereby enabling them to avoid multiple trips to the office and perform analysis virtually everywhere quickly and easily. Through these innovative applications, we are transforming our commercial processes into mobile experiences that will increase our cus- tomers’ satisfaction. Value-added ready-mix concrete products CEMEX global value-added, ready-mix concrete products Rapid hardening concrete that allows for at least 90 minutes of workability Fiber-reinforced concrete with hyper strength and ductility that can replace steel reinforcements in concrete Self-curing concrete that tolerates extreme condi- tions (e.g., wind, heat, direct sunlight) through seal- ing, water-retention, and low-shrinkage mechanisms During 2015, our value-added products ac- counted for approximately 40% of our total consolidated ready-mix concrete sales. A 100% concrete solution for thermal insulation, acoustic insulation, and fire resistance that elimi- nates thermal bridges “The project had a lot of challenges. Placing large pours that had to be done continuously, and we couldn’t stop in the middle of the pour so having CEMEX here to provide concrete at the rate required and at the times required was crucial. CEMEX was always flexible in their start times and always delivered as scheduled when we needed it. Whether it be nights, weekends, day time, any time.” Structural pervious concrete (>4 MPa Tensile strength) that can manage water permeation to of- fer drainage solutions for pavements, even in high traffic areas Rick Rice, Senior Project Manager, Urata and Sons Concrete. A highly flowable concrete that can spread into place under its own weight to achieve excellent consolidation without vibration or exhibiting de- fects due to segregation and blocking 9 Superior products Perform at the highest standards across all applications Talented, energetic teams Passionate about our construction materials, their applications, and our customers’ success Wide, solid, growing market reach Serve our customers accurately, consistently, and rapidly Transparent, responsive actions Ensure our customers’ satisfaction Offering a better customer experience Beyond delivering superior products and solutions, we continually endeavor to get even closer to our customers. By listening to their needs, comprehending their challenges, and appreciating what success means to them, we are devoted to ensur- ing that doing business with us is easy and a delight for our customers. With this in mind, our talented teams of profes- sionals are passionate about our construction materials, their applications, and our customers’ success. Through our Commercial Academy, we offer a unique approach to prepare our people to make the key choices required to create the best customer experience. By virtue of our Commercial Academy and related initiatives, we are reinforcing customer centricity as a core organizational capability built around a deep understanding of who our customers are, what is important to them, and how to serve them in a way that meets both their and our need for growth and profitability. To date, we have trained approximately 3,000 of our company’s professionals through the Academy, including 1,935 people over the course of 2015. Additionally, we enjoy a solid, wide reach in the markets where we operate, with the facilities and logistical capabilities to serve our customers accu- rately, consistently, and rapidly. For example, our logistical skills enabled us to meet the demand- ing deadlines of the city of Saint- Étienne, France, as they repaired Our Commercial Academy’s decision-making framework focuses on: COMMERCIAL ACADEMY The commercial and business objectives to set the direction for our choices WHAT ARE OUR OBJECTIVES The delivery of these products, services, and solutions to the market WHAT TO DO The sets of customers and channels to focus on to achieve our objectives WHERE TO PLAY HOW TO WIN The products, services, and solutions to provide for each customer and channel set Our Smart Delivery Truck (SDT) solution increases the efficiency, health and safety, and management of our transportation fleet across the countries where we operate. Our logistical skills enabled us to meet the demanding deadlines of the city of Saint- Étienne, France, as they repaired one of the oldest tramlines in the country. one of the oldest tramlines in the country. Close coordination between our company and the site managers was required for us to deliver the ready-mix concrete for the track’s foundation. Beyond specific temperature requirements, the city needed to restart tram traffic as rapidly as possible and quickly free up the lane occupied by the pump and mixer trucks, while ensuring continuous concrete pouring. Indeed, on the first day, five semi-trailers of aggregates, three cement trucks, and seven concrete mixer trucks combined to accomplish non-stop production on all of the tracks. Likewise, across the world in the United States, we solved a complex logistical challenge in the construction of the new, state- of-the-art intermodal Transbay Transit Center in San Francisco, California. Because the Center is located in an extremely busy neighborhood, the tight logistical window meant that we could only dispatch our trucks starting at 11:00 p.m. on Friday through Saturday afternoon to complete the 15 large, continuous pours of up to 5,000 cubic yards of tailor-made concrete designed for this intricate urban project. Moreover, we are strategically expanding our manufacturing and distribution capabilities to serve our customers’ and communities’ increas- ing demand for high quality public infrastructure, commercial, and housing projects more effi- ciently, effectively, and reliably. For example, in the Philippines, we officially inaugurated a range of investments, including the expansion of the largest cement plant in the country, a network of logistics centers in Visayas and Mindanao, and additional terminals in Iloilo and Davao. Through these investments, we not only partner with our customers, but also with the Philippine govern- ment and business community to ensure the economic growth of the nation. 12 Better customer experience We also deliver on our promises, acting transpar- ently and responsively to ensure our custom- ers’ satisfaction. On top of our many day-to-day personal interactions, we gain valuable insights by carefully listening to our customers through interviews, commercial events, service centers, help lines, and other feedback channels. To this end, 85% of our countries conducted customer satisfaction surveys in 2015. Additionally, we implemented more than 190 initiatives to identify customers’ needs and concerns and to maintain a high level of satisfaction. Such measures include newsletters, loyalty programs, sales force skills development, and enhanced customer service standards. Through these and other actions, we continue to focus on improving customer satisfaction in our industry. We further thrive on speed and continuous improvement to benefit our customers’ busi- ness. Recognizing that transportation and logistics play an important role in fulfilling our customer service commitments, we developed Smart Delivery Truck (SDT). Through a standard centralized methodology, our SDT solution evalu- ates a range of cutting-edge technologies and innovative approaches to increase the efficiency, health and safety, and management of our transportation fleet across the countries where we operate to serve our customers better. SDT adopts technology that already adds value in some of our countries, complements it with advanced technology from the market, uniformly tests it, and shares it with our countries through the CEMEX network. These kinds of initiatives exemplify the ways in which we constantly innovate to enhance our customers’ and our company’s business. KOI Tower: Tallest building in Mexico Great history is being written in northern Mexico, and our company is a proud protagonist. We are contributing to the construction of the KOI Tower, which will become the tallest building in the country at a height of 917 feet when its 64 stories are completed. Located in the Monterrey metro- politan area, the skyscraper is in the process of obtaining LEED certification due to its sustainable characteristics. With the breathtaking local moun- tains as inspiration, KOI blends aesthetic and func- tional elements to achieve an attractive harmony of innovation, design, proportion, and sustainability. As clearly exemplified by KOI, conquering heights requires sound, long-lasting founda- tions. In fact, the skyscraper’s massive 26-hour concrete pouring is the second largest ever performed by us in a Mexican urban area. To build the foundations of this great building, 7,070 cubic meters of ready-mix concrete were poured continuously at a rate of 270 cubic +190 initiatives were implemented during 2015 to identify customers’ needs and concerns and to sustain a high satisfaction level. meters per hour. Taking advantage of our exper- tise and operational capacity, we undertook an exceptional logistical effort, involving 340 employees, seven ready-mix concrete plants, 98 revolving trucks making 1,010 trips, seven boom pumps, and 5,000 blocks of ice to control the heat produced by concrete hydration. Furthermore, we capitalized on the experience of our Cement and Concrete Technology Center, along with the support of international advisors, to design a custom concrete with a strength of 700 kgf/cm2, which was used for the columns at the lower level of the skyscraper. “If we had not had access to these high- strength concretes, such as the ones devel- oped by CEMEX, the KOI tower, as currently conceived, would simply not have been possible.” Juan Andrés Vergara and Luis Fernández de Ortega, responsible architects from V&FO. 13 Global muscle, local touch Identify and replicate the world’s best practices to deliver greater value Transparent, open relationships Generate trust across every business in which we engage Tomorrow’s leaders today Recruit, develop, and propel the best talent globally Proactive, collaborative partners Build strategic relationships around the world to deliver the best solutions Cultivating better closer personal relationships Our success is directly dependent upon the success of our stakeholders—including our customers, suppliers, and employees—across our entire value chain. Hence, we invest considerable time and effort into building strong, personal partnerships in everything we do. Consistent with this commitment, we build transparent, open relationships that generate trust across every business in which we en- gage. Architects constitute an influential group of customers, who inspire and constantly chal- lenge the possibilities of our cutting-edge build- ing materials. Accordingly, we continually foster collaborative relationships with this important constituency, from academic outreach to our annual CEMEX Building Award. During 2015, architecture professors and their students from the Syracuse University School of Architecture in New York partnered with CEMEX Research Group on an exciting project—the creation of a “tower of tiles”—a modern re-interpretation of an ancient column decorating technique known as fluting. The successful construction of the “tower of tiles” highlights the importance of our ongoing collaboration between architects and our construction engineers to bridge the gap between design and materiality. Employee engagement Close to 29,000 employees responded to our “Voices Into Action” 2015 Engage- ment Survey—a 75% response rate. The survey collects input on a number of topics including development, compensation, leadership communication, and work-life balance. Through our annual CEMEX Building Award, we encourage creativity in the application of new concrete technology. The successful construc- tion of the “tower of tiles” highlights the importance of our ongoing collabo- ration to bridge the gap between design and materiality. Moreover, through our annual CEMEX Building Award, one of the most renowned competitions in the construction field, we not only honor engi- neers, architects, and other building professionals, but also encourage creativity in the application of new concrete technology to improve our com- munities. For the XXIV Edition, customers from 16 countries submitted more than 700 projects for consideration. In addition to the Domestic Edition, the CEMEX Building Award recognizes the finest international buildings in three different catego- ries—housing, institutional-industrial, and infra- structure and urbanism, as well as two special prizes for accessible and sustainable building. We are good listeners who move swiftly into action. As a global leader in the building materi- als industry and the largest producer of con- crete in the world, we are uniquely positioned to meet the challenges cities are facing. Over the past few years, we’ve played a leading role in delivering solutions to the complex and inter-connected challenges faced by an increas- ingly urban society, developing products and services that promote sustainable economic growth, preserve the environment, and improve the quality of life for cities around the world. By getting involved at the planning stage, we help to bring a city’s vision into focus by jointly ex- ploring and identifying solutions for sustainable infrastructure and urbanization. We proactively and collaboratively build strate- gic partnerships around the world to offer the best solutions. Through our Global Suppliers Innovation Program, “Integrate Your Ideas,” we promote innovation alongside our suppliers: a process that fosters the continuous improve- ment of our supply chain, identifies better 16 Closer personal relationships solutions for our customers, suppliers, and our company’s businesses, and strengthens our relationships with all of our stakeholders. In the second edition of “Integrate Your Ideas,” we invited more than 50 suppliers to share their innovative ideas. In 2015, we selected three winning solutions for their innovation, potential financial contribution, ease of implementation, and scalability across different countries. In first place, we recognized GE Industrial Solutions for its “Electrical Products Bundle for Constru- rama® Stores” idea, featuring a complete and integrated offer of electrical safety switches, load centers, and breakers for customers at our Construrama® retail building materials network. We give our global muscle a local touch, iden- tifying and replicating best practices to deliver greater value. After first being put into practice in Mexico and Egypt, we installed CEMEX LINK, our ready-mix web-based management tool, in the Dominican Republic during 2015. Thanks to this shared knowledge transfer, our Dominican ready-mix team is reaping the benefits of this tool in the maintenance of their trucks. Among its multiple benefits, CEMEX LINK offers imme- diate assessment of every truck in our ready- mix fleet, reduced maintenance times from a better scheduling system, and a database of valuable information about our ready-mix trucks that enhances our safety, environmental, main- tenance, and asset decision-making process. By sharing our know-how across our company, we take advantage of our collective strength, harnessing our ability to work together as one global organization. Amber Highway: A concrete solution We contributed to the construction of the Autostrada A1—the Amber Highway—a major roadway that will connect the major Baltic coast ports with the southern and central parts of Poland. The Autostrada A1 is part of the trans- European corridor linking Scandinavia with countries in Southern Europe. This important stretch of the Amber Highway was constructed in sections from 1,000 to 2,200 meters long, performed within 30- to 72-hour windows. Key to the success of this project was our close cooperation with the cli- ent to coordinate a specialized technical, logisti- cal solution. Because each section was paved in two layers, we erected two mobile ready-mix plants at each section, which could indepen- dently produce 4,000 to 7,000 cubic meters of ready-mix concrete for each layer. Additionally, we recruit, develop, and propel the best local talent globally. Our strong portfolio of leadership development programs features two initiatives: ACHIEVE, focused on middle manag- ers, and Leader-to-Leader, focused on develop- ing senior-level mentors. Through ACHIEVE, top-tier managers and newly appointed direc- tors develop an idea focusing on customer-cen- tricity—an essential element of our company’s strategy—while reinforcing their own leadership skills. To date, 240 of our executives have suc- cessfully participated in this global leadership development program. In 2015, 60 participants from 19 countries enhanced their leadership skills, while placed on teams designed to de- velop and, ultimately, present projects aligned with our company’s priorities. The participants were coached by 45 senior management lead- ers via the Leader-to-Leader program, a unique initiative that provides mentorship and a con- nection between current and future CEMEX leaders. Thanks to these programs, we ensure the continuous development of leaders who are prepared to guide our company into the future. 17 Industry leading Use of alternative energy and management of natural resources Sustainable solutions Address the world’s sustainability challenges Community development Build key infrastructure and develop shared value initiatives Health and safety Possess our industry’s highest standards Building a better world We are responsible global citi- zens. As a global company, we are engaged and committed to building a better world by developing products and solu- tions that promote sustainable economic growth, preserve the environment, and improve the quality of life for commu- nities around the world. By understanding our key priorities, we align our time, resources, and investments accordingly. Hence, we committed considerable effort into the development of CEMEX Sustainability Materiality Matrix. Through detailed analysis, we identified the economic, social, environmental, and govern- ance issues that are of greatest concern to our stakeholders. To this end, we surveyed more than 11,000 stakeholders, including employees, cus- tomers, analysts, suppliers, investors, community leaders, government officials, and NGO repre- sentatives across all of our regions. This analysis allowed us to construct our Materiality Matrix to encompass the 20 most important issues impact- ing our company, classified according to three categories: high, higher, and highest materiality. This matrix will be reviewed, updated, and shared as part of our year-end 2016 priorities. With these priorities in mind, we develop in- novative solutions that help address the world’s sustainability challenges. Leveraging years of Concrete: A sustainable solution Key sustainable attributes of concrete include: 4 Strength and durability 4 Low maintenance 4 Affordability 4 Fire-resistance 4 Low heat conductivity 4 Local production and use 4 Less solar heat absorption 4 Water management Enhanced operating efficiency 88% 84% Our Cement Operations Global Network sig- nificantly improved the efficiency of our cement kilns worldwide, from 84% in 2014 to 88% in 2015. 14 15 We are committed to build a better world, from our leadership in the use of alternative fuels to our “Zero for Life” goal to achieve zero injuries. experience, a worldwide pool of knowledge, and state-of-the-art expertise, we offer a variety of cutting-edge products, services, and solu- tions that meet our society’s need for hous- ing, schools, and infrastructure development. Thanks to its many sustainable attributes, our concrete is a key component in the construction of durable, energy-efficient buildings. Among its benefits, our portfolio of concrete solutions helps improve land use and water management, reduce electricity consumption, and lower buildings’ carbon footprint. In 2015, this portfo- lio of concrete products—with its outstanding sustainability attributes—accounted for approxi- mately 33% of our ready-mix revenues. To preserve precious reserves, reduce construc- tion waste, and lower transport costs, we are increasing our use of recycled concrete aggre- gates, especially in urban areas where the supply of natural aggregates is limited. For example, the new research and laboratory building for life sci- ences on the north campus of Berlin’s Humboldt University showcases our specialty ready-mix concrete produced with aggregates from recy- cled concrete. The final result meets the technical requirements of demanding building projects just as well as conventional concrete with the added benefit of conserving natural resources. 19 countries where we were involved in the construction of infrastructure projects during 2015. 20 A better world Alternative fuels In 2015, alternatives fuels repre- sented 26.6% of our total fuel mix. We contribute to flagship infrastructure pro- jects worldwide that withstand intensive use and extreme conditions. Our broad experience, highly skilled professionals, and some of the best technology in the industry enable us to serve the demands of every kind of project, from state-of- the-art transit systems to urban rail systems and small town roadways. In Silicon Valley, California, we worked closely with the client to deliver 35 tailor-made concrete mixes to meet the varied groundwater levels and sustainability require- ments of each section of the 10-mile, two-station “Berryessa Extension,” part of an ambitious effort to expand the Bay Area’s Rapid Transit rail sys- tem. In Lyon, France, we provided fiber-reinforced concrete, utilizing 21 metric tons of metal fibers, to fill in the bed under the 800 meters of rails comprising the city’s major tramline extension. In Trzebinia, Poland, we served as the main contrac- tor for the design and reconstruction of a stretch of roadway, which was open to heavy vehicle traffic just five days after the placement of the concrete mix. In 2015, we were involved in the Rural Roads to Panama: A special pavement solution Among the 9,000 inhabitants of Parita, Panama, is Miguel Villareal, a farmer who grew up in the region and witnessed his town’s development. “Even if we have machines, even if we have whatever, if the ac- cess roads aren’t functional, we can’t walk,” he says. As part of our efforts to provide innovative solutions for all types of infrastructure needs, we brought Unicapa, our special pavement ap- plication for rural and difficult access roads, to Panama. It involves placing cement bags in a chessboard pattern on a rural road and mixing the cement with the road’s existing material to create a single 17 to 25-centimeter thick layer of pavement. The initial project for Unicapa in The potential benefits of this solution for rural communities are significant. A robust infrastruc- ture that supports mobility and independence is indispensible for rural communities sustain- ability because it enables economic exchange and access to different social services. Adapted to local needs, Unicapa offers a more affordable, sustainable solution for country roads that are difficult to enter. For his part, Villarreal says he is pleased. “I think it’s been a very good help for us, the farmers. I never thought it would turn out the way it did. I trust that it will greatly help our economy.” Panama was the rehabilitation of the Camino El Limón, a road that Villarreal says he has known “since I was born.” This road was chosen be- cause it serves various farms in the region and could potentially serve an entire community. With our technology, the goal is to keep this road trafficable year-round. Camino El Limón road, before and after rehabilitation works (from left to right). construction of infrastructure projects across 19 countries, encompassing more than 7.32 million square meters of installed concrete pavement. We are industry leaders in the use of alternative energy and the management of natural resources. To reduce our environmental impact, we continue to convert society’s waste into more economi- cal, eco-friendly alternative fuels for our cement plants. Through our use of alternative fuels—from used tires to processed municipal solid waste to biomass—we divert waste from landfills, lower our energy costs, decrease our consumption of fossil fuels, and thus reduce our overall carbon footprint. For example, in the UK, we opened a technologically advanced solid recovered fuel facility that will utilize regionally sourced waste to produce up to 200,000 metric tons of alternative fuel annually for our Rugby cement plant. Overall, in 2015, alternative fuels represented 26.6% of our total fuel mix, yielding annual savings of more than US$100 million. At year-end, 92% of our ce- ment plants burned alternative fuels, avoiding the use of 1.9 million tons of coal. To further minimize our carbon footprint, we continue our efforts to replace clinker with alterna- tive cementitious materials and to increase our power consumption from clean energy sources. As a result of our carbon dioxide (CO2) reduction initiatives, we avoided more than 6.5 million tons of CO2 emissions during 2015. Additionally, we are leveraging our industry- leading technical expertise and skills to build a strong renewable energy portfolio. In 2015, more than 16% of our cement operations’ pow- er consumption was derived from clean sources of energy. Furthermore, we created CEMEX Energía, a division that is devoted to the de- velopment of a portfolio of sustainable power 21 projects in Mexico with no significant capital commitments. The first milestone achieved by CEMEX Energía is a joint venture agreement with Pattern Development, a leader in develop- ing renewable energy and transmission assets. The joint venture expects to build a portfolio of at least 1,000 megawatts of renewable energy projects over the next five years. We protect biodiversity by responsibly manag- ing the habitat within and around our global operations. Consistent with our common vision of integrating biodiversity conservation into our daily business operations, we renewed our global alliance with Birdlife International for three more years. Through our ongoing initiatives, we deliver meaningful, long-term benefits within and outside of our quarries for nature conservation. In Mexico, one of our successful projects identified priorities for biodiversity management and furthered scien- tific knowledge of the emblematic Golden Eagle. On the other side of the globe, a conservation project in the UK aims to reverse the fortunes of the Turtle Dove, an iconic bird whose population is currently halving every six years. Consistent with our commitment to corporate social responsibility, we are partners in the devel- opment of our communities through our shared value initiatives. After reaching close to 7 million beneficiaries through our social and inclusive business programs, our goal is to benefit more than 10 million people by the year 2020. Among our efforts, we establish community centers for construction training and education and empower our neighbors at the bottom of the socio-eco- nomic pyramid through different home improve- ment and self-construction assistance initiatives such as our Assisted Self-Construction Integral Program, Construapoyo, Productive Centers of Self-Employment, and Patrimonio Hoy. Many low- income families not only lack access to financing to purchase building materials, but also require the technical skills needed to build safe, sustain- able houses. Based on public-private partnerships involving local governments, non-profit organi- zations, and universities, these programs are designed to improve access to safe and afford- able housing for low-income families by offering savings and credit support, training, and technical assistance to construct their own homes. Wherever we operate, we strive to build mutually beneficial relationships with neighboring com- munities and other key stakeholders. Through our efforts, we avoid operational disruptions that might result from community grievances or employee injuries. In the process, we derive savings from reduced medical expenses, avoided health and safety related penalties, and lowered costs to train replacement employees and con- duct accident investigations. Additionally, efficient human resource development not only builds a qualified workforce, but also diminishes employee turnover—decreasing our hiring and training costs while minimizing inefficiencies. Thanks to our Patrimonio Hoy program, our com- pany was included in Fortune’s first “Change the World” list, a ranking that recognizes 50 compa- nies worldwide that have made a sizable impact on major global or environmental problems as part of their competitive strategy. In 16th place, we are not only the only Latin American based company, but also the only company from the construction materials sector selected for the list. Our Patri- monio Hoy program provides low-income families living in urban and semi-urban areas with access to building materials, as well as microfinancing, technical advice, and logistical support to assist participants in building their own homes. Since 1998, Patrimonio Hoy has provided affordable housing solutions to approximately 525,000 low- income families throughout Latin America, while representing a source of revenue for our compa- ny. As of 2015, Patrimonio Hoy has enabled more than US$300 million in household micro credits. Furthermore, we possess the highest health and safety standards in our industry. Safety is our company’s top priority. Every country where we operate has a plan designed to achieve our com- mon goal of zero injuries, “Zero for Life.” During 2015, we made positive advances, including a 30% reduction in fatalities and a 50% reduction in the frequency rate of employee lost-time injuries. However, we can do much better, and cannot ac- cept anything short of a perfect safety record. Local governments and organizations have recog- nized our safety initiatives across our operations. In the UK, we were recently awarded the Mineral Products Association’s highest honor for our out- standing employee health and safety practices. We also earned the Chartered Institute of Logis- tics and Transport Annual Award for Excellence in Vulnerable Road Users Safety. Similarly, in Nicara- gua, the National Council of Hygiene and Safety at Work for the sixth time recognized us as the “Leading Company” for our preventive health and safety management systems. Likewise, in France, we received an award for our risk-prevention action plan, which was so comprehensive that the awards organization produced a video about our efforts to teach best practices in our indus- try. Spurred by these initiatives, we will continue building a better, safer future for our employees, customers, and communities. Sustainability Recognition CDP Outstanding Carbon Disclosure in Latin America CEMEX ranked second in the Latin American Climate Disclosure Leadership Index—the fourth consecutive year that CEMEX was included in CDP’s ranking of leading companies in the disclo- sure of environmental data and CO2 emissions performance. Mexican Stock Exchange Sustainability Index Since its inception in 2011, CEMEX has been one of only 30 companies chosen for the exclusive Mexican Stock Exchange Sustainability Index. UNGC 100 Index CEMEX remains the sole Mexico-based company selected for the United Nations Global Compact 100, a global stock index that combines sustain- ability and financial performance. Thanks to our Patrimonio Hoy program, our company was included in Fortune’s first “Change the World” list. 22 Selected consolidated financial information* CEMEX, S.A.B. de C.V. and subsidiaries (In millions of US dollars, except per-ADS amounts) Operating results Net sales Cost of sales(1) Gross profit Operating expenses 2006 2007 2008 2009 18,249 20,893 20,131 14,544 2010(i) 14,021 2011(i) 15,215 2012(i) 14,984 2013(i,4) 14,815 2014(i,4) 15,288 (11,649) (13,868) (13,735) (10,270) (10,090) (10,912) (10,548) (10,170) (10,356) 6,600 7,025 6,396 4,274 3,930 4,303 4,436 4,645 4,932 2015(i,4) 14,127 (9,410) 4,717 (3,655) (4,130) (4,069) (3,109) (3,083) (3,353) (3,143) (3,144) (3,295) (3,043) Operating earnings before other expenses, net 2,945 2,895 2,327 1,165 (49) (494) 462 2,989 - 110 2,378 718 3.31 (273) (807) 900 2,851 26 77 2,391 743 3.21 (1,909) (910) (1,617) (2,031) 187 4 203 838 0.24 (407) (994) (117) (341) (314) 18 104 893 0.11 847 (500) 951 (419) 1,293 (418) 1,501 (378) 1,637 (378) 1,674 (190) (1,164) (1,353) (1,408) (1,549) (1,607) (1,238) (41) (897) (177) (1,025) - 4 - 2 (1,064) (1,999) 1,104 (0.96) 1,109 (1.80) 74 (403) - 50 (913) 1,117 (0.82) 134 (276) 8 95 (843) 1,170 (0.71) 190 (137) 8 82 (507) 1,256 (0.39) Other expenses, net Financial expense Other financial (expense) income, net (2) Earnings (loss) before income taxes Discontinued Operations, net of tax (3,4) Non-controlling interest net income (5) Controlling interest net income (loss) Millions of average ADSs outstanding (6,7) Earnings (loss) per ADS (4,7,8) Earnings (loss) per ADS of continuing operations (4,7,8) Earnings (loss) per ADS of discontinuing operations (4,7,8) Dividends per ADS (6,7,9) Balance sheet information Cash and cash equivalents Net working capital (10) Assets from operations held for sale (4) Property, plant, and equipment, net (11) Total assets Liabilities from operations held for sale (4) Short-term debt & other financial obligations (12) Long-term debt & other financial obligations (12) Total liabilities Non-controlling interest and perpetual debentures (5) Total controlling interest Total stockholders’ equity Book value per ADS (6,7) Other financial data 0.90 0.83 n.a n.a n.a n.a n.a n.a n.a 1,579 887 743 1,383 939 1,191 1,077 946 676 1,512 1,155 1,697 971 1,530 1,163 1,591 854 1,377 17,196 29,972 22,895 49,662 19,671 45,387 19,776 44,483 17,902 40,848 16,787 38,800 16,582 37,260 15,764 38,018 13,767 34,936 1,252 6,290 15,193 1,920 12,859 14,779 17.55 3,311 16,542 30,967 3,753 14,942 18,695 19.90 6,934 11,849 28,119 3,390 13,879 17,268 16.34 565 15,565 24,806 3,338 16,339 19,677 16.37 826 16,214 26,027 1,573 13,248 14,821 12.00 887 16,976 26,501 1,189 11,111 12,300 10.02 589 16,378 25,149 1,127 10,984 12,111 9.83 730 16,917 26,652 1,145 10,221 11,366 8.74 1,765 14,818 24,884 1,158 8,894 10,052 7.08 Operating margin Operating EBITDA margin (10) Operating EBITDA (10) Free cash flow after maintenance capital expenditures (10) 16.1% 22.7% 4,138 2,689 13.9% 21.6% 4,512 2,455 11.6% 20.3% 4,080 2,600 8.0% 18.3% 2,657 1,215 6.0% 16.8% 2,355 455 6.2% 15.6% 2,381 191 8.6% 17.5% 2,624 167 10.1% 17.6% 2,603 (89) 10.7% 17.6% 2,696 401 (77) 215 61 58 75 1,353 0.06 0.02 0.04 n.a 887 974 200 12,428 31,472 39 917 14,648 21,967 1,178 8,327 9,505 6.15 11.8% 18.7% 2,636 881 23 Notes to selected consolidated financial information 1. Cost of sales includes depreciation, amortization and de- pletion of assets involved in production, expenses related to storage in production plants, and beginning in 2008, freight expenses of raw material in plants and delivery expenses of CEMEX’s ready-mix concrete business. 2. Other financial (expense) income, net, includes finan- cial income, realized and unrealized gains and losses from financial instruments, foreign exchange results and the effects of net present value on assets and liabilities. 3. In October 2009, CEMEX completed the sale of its Australian operations for an amount then equivalent to approximately US$1,700 million. Australia’s operating results, net of income tax, for the years ended 2007, 2008 and 2009, were presented in a single line item as “Discontinued Operations” in our consolidated state- ment of operations. 4. In August 2015, CEMEX signed an agreement with Duna-Dráva Cement for the sale of its operations in Croatia for an amount then equivalent to approximately US$251 million, which is expected to be finalized during the first quarter of 2016. In November 2015, CEMEX also completed the sale of its Austria and Hungary operations for an amount then equivalent to approximately US$179 million. Croatia, Austria and Hungary’s operating results, net of income tax, for the years ended 2013, 2014 and 2015, were presented in a single line item as “Discon- tinued Operations” in our consolidated statement of operations. In 2015, Croatian operations were reclassi- fied to current assets and current liabilities held for sale. CEMEX balance sheet for 2014 was not restated as a result of the sale of its operations in Austria and Hungary. See note 4A to our consolidated financial statements included elsewhere in this annual report. 5. From 2008 through 2015, non-controlling interest includes US$3,020 million, US$3,045 million, US$1,320 million, US$938 million, US$473 million, US$477 million, US$466 million and US$440 million, respectively, of ag- gregate notional amounts of perpetual debentures issued by consolidated entities. For accounting purposes, these debentures represent equity instruments (See note 20D to the 2015 Annual Report’s Financial Statements). 6. The number of ADSs outstanding, stated in millions of ADSs: (i) represents the total average amount of ADS equivalent units outstanding of each year, (ii) includes the total number of ADS equivalents issued in underlying derivative transactions, and (iii) excludes the total number of ADS equivalents issued by CEMEX and owned by its subsidiaries. Each ADS listed on the New York Stock Exchange represents 10 CPOs. held. There was no cash distribution and no entitlement to fractional shares. (See note 20A to the 2015 Annual Report’s Financial Statements). 7. Our shareholders approved stock splits in 2005 and 2006. Consequently, each of our existing CPOs was sur- rendered in exchange for two new CPOs. The propor- tional equity interest participation of the stockholders in CEMEX’s common stock did not change as a result of the stock splits mentioned above. The number of our ADSs outstanding did not change as a result of the stock splits in 2005. Instead, the ratio of CPOs to ADSs was modified so that each ADS represented 10 new CPOs. As a result of the stock split approved during 2006, one additional ADS was issued in exchange for each existing ADS, each ADS representing 10 new CPOs. Earnings per ADS and the number of ADSs outstanding for the years ending December 31, 2005 and 2006, were adjusted to make the effect of the stock splits retroactive for the corresponding years. In the Consolidated Financial Statements, earnings (loss) per share are presented on a per-share basis (See note 22 to the 2015 Annual Report’s Financial Statements). 8. For purposes of the selected financial information for the periods ended December 31, 2006 through 2015, the earnings (loss)-per-ADS amounts were determined by considering the average amount of balance number of ADS equivalent units outstanding during each year. These numbers of ADSs outstanding were not restated retrospectively neither to give effect to stock dividends occurring during the period nor to present the earnings (loss)-per-ADS of continuing and discontinuing opera- tions, as would be required under MFRS and IFRS for their disclosure in the consolidated financial statements. 9. Dividends declared at each year’s annual stockholders’ meeting for each period are reflected as dividends for the preceding year. We did not declare a dividend for the years 2008 to 2014. Instead, at our 2009 through 2015 annual shareholders’ meetings, CEMEX’s stockholders approved a capitalization of retained earnings. New CPOs issued pursuant to the capitalization were allocated to shareholders on a pro-rata basis. As a result, shares equivalent to approximately 384 million CPOs, 401 million CPOs, 419 million CPOs, 437 million CPOs, 468 million CPOs and 500 million CPOs were issued and paid each year from 2010 through 2015, respectively. CPO hold- ers received one new CPO for each 25 CPOs held, and ADS holders received one new ADS for each 25 ADSs 10. This item was not restated to give the effect of discontinued operations. Please refer to page 123 for the definition of terms. 11. In 2014, property, plant, and equipment, net, ex- cludes the assets of the western region of Germany and Andorra, Spain, that were classified as held for sale, as mentioned in note 15B to the 2015 Annual Report’s Financial Statements. 12. From 2010 through 2015, other financial obliga- tions include the liability components associated with CEMEX’s financial instruments convertible into CEMEX’s CPOs, liabilities secured with accounts receivable as well as CEMEX’s capital leases (See note 16B to the 2015 Annual Report’s Financial Statements). Prior to 2010, there were no significant transactions concerning capital leases or convertible financial instruments. (i) As a result of requirements by the National Banking and Exchange Commission, CEMEX prepares its consoli- dated financial statements using International Financial Reporting Standards (“IFRS”), as issued by the Interna- tional Accounting Standards Board. Accordingly, CE- MEX’s consolidated financial statements as of December 31, 2015, 2014, 2013, 2012, 2011 and 2010 and for the years ended December 31, 2015, 2014, 2013, 2012, 2011 and 2010, were prepared and presented in accordance with IFRS. Prior years were prepared and presented in accordance with Mexican Financial Reporting Standards (“MFRS”). Reconciling one-time adjustments between IFRS and MFRS were recognized in the opening balance sheet under IFRS as of January 1, 2010 against stock- holders’ equity. (*) The effects associated with newly issued IFRS are recognized in the year when they become mandatory and are applied retrospectively only for comparative prior periods presented in the set of financial statements issued in the year of adoption. Earlier periods are not restated to give retroactive effect to such new standards. 24 Company overview Business CEMEX is a global building materials company that pro- vides high-quality products and reliable service to custom- ers and communities in more than 50 countries throughout the world. CEMEX has a rich history of improving the well- being of those it serves through its efforts to pursue innovative industry solutions and effi- ciency advancements and to promote a sustain- able future. Our company was founded in Mexico in 1906, and we have grown from a local player to one of the top global companies in our industry, with approximately 43,000 employees worldwide. Today, we are strategically positioned in the Americas, Europe, Africa, the Middle East, and Asia. Our operations network produces, distrib- utes, and markets cement, ready-mix concrete, aggregates, and related building materials to customers in over 50 countries, and we maintain trade relationships in over 100 nations. Mission Our mission is to create sustainable value by providing industry-leading products and solutions to satisfy the construction needs of our custom- ers around the world. Business Strategy To achieve our mission, our strategy is to create value by building and managing a global portfolio of integrated cement, aggregates, ready-mix concrete, and related businesses. We accom- plish this by making certain we: • Value our people as our main competitive advantage; • Help our customers succeed; • Pursue markets that offer long-term profit- ability; and • Ensure sustainability is fully embedded in our business. Value our people as our main competitive advantage Our people are our competitive advantage. That is why we hire the best and the brightest, and we take care of them. Indeed, employee health and safety is our company’s top priority. Ulti- mately, our goal is to achieve zero injuries each and every day. We foster our people’s professional growth, help- ing them to fulfill their career ambitions. To this end, we provide continuous training and develop- ment opportunities that enhance our employees’ skills and enable them to work smartly, safely, and effectively. Moreover, we provide our em- ployees with assignments that enhance their personal and professional growth, facilitate the exchange of best practices, and strengthen our shared corporate culture. We also identify future leaders and foster their development: teaching them, coaching them, and empowering them to succeed. To prepare the leaders who will successfully guide our or- ganization, we offer a portfolio of inter-connected leadership development initiatives. 25 Company overview We further encourage our people to speak up, to provide ideas, and to help solve problems. By truly valuing our people, we advance the culture we strive to achieve at CEMEX. Help our customers succeed At CEMEX, our core strategic goal is to become the most customer-oriented company in our industry. To accomplish this, we must continue to get closer to our customers, build lasting relationships, and listen carefully to understand their needs. With this in mind, we are investing considerable time and effort to maximize our commercial excel- lence across our worldwide organization. We want CEMEX to be the supplier and partner of choice for our customers—whether global construction com- panies, governmental entities, or individuals build- ing or expanding their family’s first home. We look to provide them with the most efficient and effec- tive building solutions for their construction project, large or small. To this end, we help our customers succeed by delivering quality products, innovative solutions, and great customer service in all major construction segments, including the residential, commercial, industrial, and infrastructure sectors. As a solutions-driven company, we continually do more to understand and satisfy our customers’ evolving needs. By constantly asking ourselves: What are the challenges our customers are facing? What success means to them? What are the prod- ucts they need not just today, but in the future? We are all driven to drill even deeper to solve our customers’ important challenges and ensure that they succeed. We help our customers succeed by delivering quality products, innovative solutions, and great customer service in all major construction segments. We will continue to optimize our portfolio to ensure that we are in the right businesses in the right markets with the right returns. We provide continuous training and develop- ment opportunities that enhance our employees’ skills and enable them to work smartly, safely, and effectively. Pursue markets that offer long-term profitability We do business in markets where we can add value for our employees, our customers, and our shareholders. We will operate only in those markets that offer long-term profitability. Our geographically diverse portfolio of assets pro- vides us with the opportunity for significant profit- able organic growth over the medium to long term. Consequently, we will remain selective and strategic about where we do business, and will not chase growth simply for the sake of growth. We will also continue to optimize our portfolio to ensure that we are in the right businesses in the right markets with the right returns. Leveraging our global presence and extensive operations worldwide, we will further continue to focus on what we do best: our core cement, aggre- gates, ready-mix concrete, and related businesses. By managing our core operations as one vertically integrated business, we not only capture a greater portion of the cement value chain, but also get closer to our customers by offering comprehensive building solutions. This strategic focus historically enables us to grow our existing businesses, particu- larly in high-growth markets and specialized, higher- margin products. We will only venture beyond our core strengths when it is essential to better market our products, and it is aligned with our strategy. Ensure sustainability is fully embedded in our business At CEMEX, we ensure sustainability is fully embedded in our business strategy and day-to- day operations. Our goal is to provide building solutions that meet the needs of a resource- constrained world, to minimize the ecological footprint of our operations, and to foster closer relationships with all of our relevant stakeholders. 26 Company overview Among our priorities, we look to take the lead in sustainable construction through the develop- ment of products, services, and building solu- tions for a low-carbon economy. We also active- ly participate in low-income housing programs and high-scale infrastructure projects. Moreover, as part of our efforts to reduce our eco- logical footprint, we increase our use of alternative fuels and raw materials, improve our energy ef- ficiency, and contract renewable power where fea- sible. Additionally, we optimize air quality, waste management, and recycling; diminish disturbances from noise and dust; and implement biodiversity action plans at our quarries. Furthermore, we engage our key stakeholders. In particular, we place a top priority on the health and safety of our employees, our contractors, and our communities. We are committed to playing a re- sponsible role in the social and economic develop- ment of our local communities, and we collaborate with governments, NGOs, and opinion leaders to anticipate and address emerging social demands. Financial Position One of our main priorities is to reach an invest- ment-grade capital structure as soon as possible. To this end, we continue to focus on strengthening our financial position by improving our cash flow generation, selling assets, reducing our debt, and extending our maturities through different strate- gic initiatives. As a result of our efforts, we reduced total debt plus perpetual securities by close to US$1 billion during 2015 and by approximately US$6.9 billion since June 2009. We increase our use of alternative fuels and raw materials, improve our energy efficiency, and contract renewable power where feasible. We look to take the lead in sustainable construction through the development of products, services, and building solutions for a low-carbon economy. In March 2015, we issued €550 million of 4.375% notes maturing in 2023 and US$750 million of 6.125% notes maturing in 2025. The proceeds of these transactions were used to pay higher coupon debt and to fund the redemption of the floating rate senior secured notes maturing in 2015. We reached commitments to refinance the remaining approximately US$1.94 billion of our 2012 Facilities Agreement. • Twenty-one financial institutions participated in the syndicated bank loan facility, which has an amortization profile of approximately 10% in 2017, 25% in 2018, 25% in 2019, and 40% in 2020. • All tranches under the syndicated bank loan facil- ity have substantially the same terms, including a spread over LIBOR of between 250 and 400 basis points, depending on our debt leverage ratio. We further early converted approximately US$511 million of our 4.875% convertible subordinated notes due 2015, and issued contingent convertible units for the remaining US$200 million of these notes outstanding, eliminating refinancing risk. These transactions achieved annual cash inter- est savings of approximately US$120 million during the year. In March 2015, the US$200 million of contin- gent convertible units were exercised. As a result of the exercise, we issued US$200 mil- lion of 3.72% convertible subordinated notes maturing in 2020. The proceeds of this transac- tion were used to finance, in part, the payment of our convertible subordinated notes maturing in 2015. In May 2015, we entered into a series of private agreements with certain institutional investors to exchange approximately US$626 27 Company overview million of 3.25% convertible subordinated notes due 2016 for US$321 million of newly issued 3.72% convertible subordinated notes due 2020 and approximately US$42 million of ADSs. As a result of our liability management initiatives, our financial expenses decreased by US$184 mil- lion. We have no significant debt maturities in 2016 and 2017 other than the approximately US$352 million of convertible subordinated notes due March 2016 and approximately US$373 million due September 2017—corresponding to the first amor- tization under the syndicated bank loan facility. For the year, we extended the average life of our debt to 5.1 years from 4.6 years at the end of 2014. We also maintained more than adequate liquidity to support our operations and continued to comply with our financial obligations. In addition to our financial expense reduction, we delivered on our free cash flow initiatives to improve working capital, which translated into a record low 20 working capital days. Moreover, we continued to optimize our maintenance and strategic capital expenditures to maximize our free cash flow generation. In 2015, we limited our total capital expenditures (“CAPEX”) to approximately US$762 million, including approximately US$252 million in strategic CAPEX. corresponding securities authorities in Mexico. Moreover, in compliance with applicable re- quirements under SOX, we have established: 1) a system to ensure that relevant information reaches senior management in a timely man- ner; 2) a system for anonymously and confiden- tially communicating to the audit committee complaints and concerns regarding accounting and audit issues; 3) a process for anonymously and confidentially submitting complaints related to unethical conduct and misuse of assets; and 4) a task force to follow legal requirements and best corporate-governance practices and, when appropriate, propose further improvements. Our code of ethics reflects the requirements of SOX. We are in compliance with the applicable sections of SOX, including section 404. US$184 million decrease of our financial expenses as a result of our liability management initiatives Alignment with Investor Interests Employee stock-ownership plan To better align our executives’ interests with those of our shareholders, we began offering executives a new stock-ownership program in 2005. The plan moves our company’s long-term incentives from stock option grants to restricted stock awards. As of December 31, 2015, our executives held 30,056,793 restricted CPOs, rep- resenting 0.2% of our total CPOs outstanding. Corporate governance We are committed to the highest standards of corporate governance. Our corporate governance practices are governed by our bylaws and all appli- cable provisions in both Mexican and U.S. securities laws. On a voluntarily basis, we also comply with the Mexican Code of Best Practices, which provides recommendations for better corporate practices for listed companies in Mexico. Our company’s board of directors is composed of qualified direc- tors who provide appropriate oversight and meet the independence criteria under applicable laws. The requirement of independence of our audit committee members satisfies the independence and other requirements under applicable law, and one member of our audit committee meets the requirements of a “financial expert” as defined by the Sarbanes-Oxley Act of 2002 (SOX). We also have designed and deployed a formal internal process to support the certification by our Chief Executive Officer and our Chief Finan- cial Officer of the information that we present in CEMEX’s periodic reports to the U.S. Securities and Exchange Commission, as well as to the We delivered on our free cash flow initiatives to improve working capital and optimize our capital expenditures. 28 Management dicussion and analysis Operational results and financial condition of the company Consolidated Results Consolidated net sales decreased 8% to US$14.2 billion in 2015. On a like-to-like basis for our ongoing operations and for foreign exchange fluctuations compared with 2014, consolidated net sales increased 5% for the year. The increase on a like-to-like basis was the result of higher prices of our products, in local currency terms, in most of our operations, as well as higher volumes in Mexico, the U.S., and Asia region. Cost of sales as a percentage of net sales decreased 1.1 percentage points, from 67.7% in 2014 to 66.6% in 2015. The decrease in cost of sales as a percentage of net sales was mainly driven by our cost-reduction initiatives. Operating expenses as a percentage of net sales decreased 0.1 percentage points, from 21.6% in 2014 to 21.5% in 2015, mainly driven by lower distribution expenses, as well as our cost- reduction initiatives. Operating EBITDA decreased 2% to US$2.6 billion in 2015. On a like-to-like basis, operating EBITDA increased 9% for the year. The increase on a like-to-like basis was due mainly to higher contributions from our Mexico, U.S., Northern Europe, and Asia regions. Operating EBITDA margin increased 1.1 per- centage points, from 17.6% in 2014 to 18.7% in 2015. Net sales and operating EBITDA (billions of US dollars) Free cash flow after maintenance capital expenditures (millions of US dollars) 15.2 14.9 15.3 14.8 14.1 881 401 2.38 2.62 2.60 2.69 2.64 191 167 (89) 11 12 13 14 15 11 12 13 14 15 We reported a loss on financial instruments of US$171 million in 2015. This loss resulted mainly from our equity derivatives related to CEMEX shares. We reported a foreign exchange gain of US$130 million in 2015, resulting mainly from the fluctua- tion of the Mexican peso versus the U.S. dollar, partially offset by the fluctuation of the euro ver- sus the U.S. dollar. We reported controlling interest net income of US$75 million in 2015 versus a loss of US$507 million in 2014. The annual income primarily reflects higher operating earnings, lower financial expenses, lower income tax, and increased dis- continued operations, partially offset by a higher loss on financial instruments and a lower foreign exchange gain. Total debt plus perpetual notes decreased US$964 million to US$15.3 billion at the end of 2015. 5% and 9% increase in net sales and EBITDA, respectively, on a like-to-like basis in 2015 29 Global review of operations Global operations MEXICO UNITED STATES1 NORTHERN EUROPE2 MEDITER- RANEAN3 SOUTH, CENTRAL AMERICA AND THE CARIBBEAN4 ASIA5 OTHER TOTAL Net sales 2,843 3,935 3,057 1,436 1,894 665 297 14,127 Operating earnings before other expenses, net Operating EBITDA 815 966 169 565 149 325 170 257 492 571 Assets6 4,391 15,210 4,079 2,734 2,393 142 175 715 (264) (223) 1,674 2,636 1,951 31,472 millions of US dollars as of December 31, 2015 Capacity per region7 Cement production capacity (million metric tons/year) Cement plants (controlled) Cement plants (minority part.) Ready-mix plants Aggregates quarries Land distribution centers Marine terminals as of December 31, 2015 28.3 15 3 276 17 78 7 17.1 13 5 356 67 41 5 11.1 18.2 12.5 5.7 7 1 664 167 37 21 11 0 167 30 37 12 7 3 133 21 29 12 3 0 12 3 20 4 92.9 56 12 1,608 305 242 61 1. Beginning March 31, 2011, includes the operations of Ready Mix USA LLC. 2. Includes operations in Czech Republic, Finland, France, Germany, Latvia, Lithuania, Norway, Poland, Sweden, and the United Kingdom. 3. Includes operations in Croatia, Egypt, Israel, Spain and the United Arab Emirates. Net sales, operating earnings before other expenses, net, and operating EBITDA exclude Croatia. 4. Includes operations in Argentina, Colombia, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Jamaica, Nicaragua, Panama, Peru, Puerto Rico, as well as other operations in South, Central America and the Caribbean region. 5. Includes operations in Bangladesh, Malaysia, the Philippines, and Thailand. 6. Includes assets in associated participation. 7. Includes active and inactive operations that are leased, owned, or with a minority participation; aggregates quarries with depleted reserves are excluded. Sales distribution by product (percentage) l Cement 46% l Ready-mix 39% l Aggregates 15% Sales distribution by region (percentage) l Mexico 20% l United States 28% l South, Central America and the Caribbean 14% l Northern Europe 22% l Mediterranean 11% l Asia 5% 30 Global review of operations Mexico In 2015, our Mexican operations’ net sales decreased 11% year over year to US$2.8 bil- lion, and operating EBITDA declined 3% to US$966 million. On a like-to-like basis, net sales and operating EBITDA increased 7% and 16%, respectively. Our domestic gray cement volumes increased 1%, while our ready-mix concrete and aggregates volumes declined 5% and 9%, respectively, for the year. Our slower-than-indus- try growth in cement and ready-mix concrete volumes reflects the implementation of our pric- ing strategy. Our cement and ready-mix prices in local-currency terms increased by 10% and 7%, respectively, during 2015. The industrial-and-commercial sector was the main driver of our cement volumes during 2015, aligned with improved retail sales and general commercial activity. The formal residential sector also performed positively, supported by credit growth from private banks and public entities. The infrastructure sector saw delays in the execution of the budget. The self-construc- tion sector benefited from improved job crea- tion and remittances. United States Our U.S. operations’ net sales increased 7% year over year to US$3.9 billion in 2015. Operating EBITDA rose 34% to US$565 million during the year. Our U.S. operations’ domestic gray cement, ready-mix concrete, and aggregates volumes increased 2%, 13%, and 6%, respectively, for 2015. Adjusted for our acquisition of ready-mix plants in California, our like-to-like ready-mix con- crete volumes grew 10% year over year. The residential sector was the main driver of cement demand during the year, driven by low inventory levels, stronger job creation, and In Mexico, the industrial- and-commercial sector was the main driver of our cement volumes during 2015, aligned with improved retail sales and general commercial activity. 7% growth in our U.S. operations' net sales driven by higher volumes for our three core products The residential sector was the main driver of cement demand in our U.S. operations during the year, driven by low inventory levels, stronger job creation, and household formation. household formation. During 2015, housing starts increased 11%, and importantly, single- family construction improved significantly with double-digit growth after remaining relatively flat in 2014. Infrastructure sector activity picked up during the second half of the year, driven by state spending and TIFIA funding. Moreover, industrial-and-commercial sector growth, exclud- ing oil well activity, was supported by lodging and office construction spending. Northern Europe Our Northern European operations’ net sales de- creased 21% year over year to US$3.1 billion, and operating EBITDA declined 6% to US$325 million in 2015. On a like-to-like basis, regional net sales and EBITDA increased 2% and 13%, respectively. For the full year, our domestic gray cement, ready- mix concrete, and aggregates volumes decreased 3%, 12% and 18%, respectively. Adjusting for the transactions with Holcim closed at the beginning of the year, our like-to-like domestic gray cement volumes increased 9% for 2015. In Germany, our operations’ domestic gray ce- ment volumes increased 6% on a like-to-like basis during 2015. The residential sector remained the main driver of cement consumption during the year, despite supply-side restrictions such as land availability and regulatory caps on rental increas- es. The sector benefited from low unemployment, low mortgage rates, rising purchasing power, and growing immigration. In Poland, our operations’ domestic gray cement volumes increased 15% for the year. During 2015, our volume growth reflected our efforts to main- tain a stable market position amid slower-than-an- ticipated demand and challenging market dynam- ics. The infrastructure and residential sectors 31 Global review of operations were the main drivers of demand for the year. Infrastructure sector demand developed slower than anticipated during the year due to delays in announced projects. In Poland, the infrastruc- ture and residential sec- tors were the main drivers of demand for the year. In Spain, increased mort- gages, improved credit conditions, and higher consumer income and em- ployment levels positively affected the residential sector. In France, our operations’ domestic ready-mix concrete and aggregates volumes decreased 5% and 2%, respectively, in 2015. During the year, we experienced greater activity in traded aggregates volumes. Our full-year volumes were affected by macroeconomic weakness; however, residential sector activity picked up during the fourth quarter. Increased housing sales during the year reflected governmental initiatives, including a buy-to-let program and a stimulus package. In the United Kingdom, our operations’ domestic gray cement and aggregates volumes increased 7%, and 5%, respectively, while our ready-mix concrete volumes declined 2% for the year. Our cement volume growth was driven by improved demand from all of our main construction sectors. The residential sector was supported by low un- employment, low inflation, and increased wages. The industrial-and-commercial sector performed favorably, reflecting improved consumer confi- dence and a better business environment. The decline in ready-mix concrete volumes reflected our focus on profitability. Mediterranean In the Mediterranean region, our operations’ net sales decreased 5% year over year to US$1.4 billion, while operating EBITDA declined 17% to US$257 million in 2015. On a like-to-like basis, regional net sales increased 3% while operating EBITDA declined 12%. As a whole, our regional operations’ ready-mix concrete volumes increased 5%, while our domestic gray cement and aggregates volumes decreased 2% and 4%, respectively, for the year. On a like-to- like basis, our domestic gray cement volumes declined 9% during 2015. Our Spanish operations’ domestic gray cement volumes increased 35%, while our ready-mix concrete volumes declined 18% for the year. On a like-to-like basis, our domestic gray cement volumes decreased 9% in 2015. Our like-to-like cement volumes mainly reflected a decline from a strong first half during 2014, when we enjoyed a more advantageous market position result- ing from favorable market dynamics, as well as our focus on profitability. For the year, increased mortgages, improved credit conditions, and higher consumer income and employment levels posi- tively affected the residential sector. The infra- structure sector benefited from lower pressure for fiscal austerity measures, favorable financing conditions, and growth in public biddings. In Egypt, our operations’ domestic gray cement volumes decreased 9% in 2015. The decline in our year-over-year cement volumes primarily resulted from a relatively high base in 2014, when we dispatched additional volumes in light of the then prevalent energy shortage. During the year, the informal sector experienced lower activity. How- ever, increased formal residential and infrastruc- ture activity led to growth in our bulk cement and ready-mix concrete volumes. South/Central America and Caribbean In 2015, our net sales in the region decreased 14% to US$1.9 billion, while our operating EBITDA declined 22% to US$571 million. On a like-to-like basis, net sales increased 1% while operating EBITDA declined 9%. Our regional operations’ domestic gray cement, ready-mix concrete, and aggregates volumes decreased 4%, 3%, and 2%, respectively, for the year. 32 In Colombia, the residential sector benefited from various government sponsored initiatives. Global review of operations Our Colombian operations’ domestic gray ce- ment, ready-mix concrete, and aggregates vol- umes declined 9%, 3%, and 6%, respectively, in 2015. While national cement volumes increased during the year, the decline in our cement volumes mainly reflected a high comparable base in 2014, as well as our pricing strategy. Our domestic gray cement prices increased 8% in 2015. During the year, the residential sector con- tinued its positive trend, benefiting from various government-sponsored housing initiatives. The infrastructure sector also remained an important driver of demand thanks to the improved execu- tion of projects developed by departmental and municipal administrations. Asia Our Asian operations’ net sales increased 9% year over year to US$665 million, while our operating EBITDA grew 23% to US$175 million in 2015. As a whole, our regional domestic gray cement and aggregates volumes increased 15% and 2%, respectively, while our ready-mix con- crete volumes declined 6%, for the year. In the Philippines, our operations’ domestic gray cement volumes increased 21% in 2015. Our volumes during the year benefited from our improved ability to serve our markets through the introduction of our new cement-grinding mill in late 2014, along with increased demand from our main construction sectors. The industrial-and- commercial sector continued its growth momen- tum driven by office space demand. Also, the residential sector remained strong as developers continued to expand housing projects, supported by stable inflation, low mortgage rates, and higher housing demand from Filipinos overseas. Our Asian operations’ net sales and EBITDA increased 9% and 23%, respectively, year over year. In the Philippines, our volumes benefited from increased demand in our main construction sectors. Trading Our global trading network is one of the largest in the industry. Our trading operations help us to optimize our worldwide production capac- ity, deliver excess cement to where it is most needed, and explore new markets without the necessity of making immediate capital invest- ments. Our worldwide network of strategically located marine terminals and broad third-party customer base also provide us with the added flexibility to fully place contracted supplies in an optimal way. In 2015, we enjoyed trading relationships in over 100 countries. Our trading volume totaled more than 10.6 million metric tons of cementitious materials, including approximately 8.8 million metric tons of cement and clinker. We also maintained a sizeable trading position of 1.2 million metric tons of granulated blast furnace slag, a non-clinker cementitious material, and 0.6 million tons of other products. Freight rates, which have been extremely vola- tile in recent years, account for a large share of our total import supply cost. However, we have obtained significant savings by timely contract- ing maritime transportation and by using our own and chartered fleets—which transported approximately 39% of our traded cement and clinker volume in 2015. In addition, we provide freight service to third parties when we have spare fleet capacity. This not only provides us with valuable shipping mar- ket information, but also generates additional profit for our operations. 33 Board of Directors Audit Committee José Manuel Rincón Gallardo Purón President Roberto Luis Zambrano Villarreal Rafael Rangel Sostmann Francisco Javier Fernández Carbajal Corporate Practices and Finance Committee Dionisio Garza Medina President Francisco Javier Fernández Carbajal Rodolfo García Muriel Armando Garza Sada Non-Independent Directors Rogelio Zambrano Lozano Chairman of the Board Fernando A. González Olivieri Tomás Milmo Santos Ian C. Armstrong Zambrano Independent Directors Armando J. García Segovia Rodolfo García Muriel Roberto Luis Zambrano Villarreal Dionisio Garza Medina José Manuel Rincón Gallardo Purón Rafael Rangel Sostmann Francisco Javier Fernández Carbajal Armando Garza Sada David Martínez Guzmán Secretary Ramiro G. Villarreal Morales (not a member of the board) 34 Executive Committee Fernando A. González (61) Chief Executive Officer Maher Al-Haffar (57) Executive Vice President of Investor Relations, Corporate Communications and Public Affairs Mauricio Doehner (41) Executive Vice President of Corporate Affairs and Enterprise Risk Management Jaime Elizondo (52) President CEMEX Europe* Since joining CEMEX in 1989, Fernando A. González has held several senior manage- ment positions, including President of major operations in South America, Europe, Mid- dle East, Africa and Asia. He also led several corporate areas including Finance, Planning, Administration and Human Resources. He was appointed Chief Executive Officer in 2014. Fernando holds a Bachelor’s Degree and a Master’s Degree in Business Administration from Tecnológico de Monterrey. Maher Al-Haffar has been with CEMEX since 2000. Prior to his current position, he was Vice President of Investor Relations, Corpo- rate Communications & Public Affairs. He also served as a Managing Director in Finance and Head of Investor Relations for the company. Before joining CEMEX, Maher spent 19 years with Citicorp Securities Inc. and Santander In- vestment Securities as an investment banker and capital markets professional. Maher holds a BS in Economics from the University of Texas and Master’s Degree in International Relations and Finance from Georgetown University. Mauricio Doehner joined CEMEX in 1996 and has held several executive positions in areas such as Strategic Planning and Enterprise Risk Management for Europe, Asia, the Middle East, South America and Mexico. He is currently in charge of Corporate Affairs and Enterprise Risk Management. Mauricio has also worked in the public sector within the Mexican Presidency. Mauricio earned his BA in Economics from Tecnológico de Monterrey and has an MBA from IESE/IPADE. He also has a Professional Certification in Competitive Intelligence from the FULD Academy of Competitive Intelligence in Boston, Massachusetts. Jaime Elizondo joined CEMEX in 1985, and since then, he has headed several opera- tions, including Panama, Colombia, Venezuela, Mexico, and more recently, our operations in South, Central America and the Caribbean. He is currently President of CEMEX Europe, and is also in charge of the company’s global Technology area. He graduated with a BS in Chemical and Sys- tems Engineering and an MBA from Tecno- logico de Monterrey. 35 Executive Committee Joaquín Estrada (52) President CEMEX Asia, Middle East and Africa* José Antonio González (45) Chief Financial Officer Luis Hernández (52) Executive Vice President of Administration and Organization Ignacio Madridejos (50) President CEMEX USA* Since he joined CEMEX in 1992, Joaquín Estrada has held several executive positions, including head of operations in Egypt, Spain, and more recently, our operations in Asia. He is currently President of CEMEX Asia, Mid- dle East, and Africa, and is also responsible for the company’s global Trading area. Joaquín graduated with a BA in Economics from the University of Zaragoza and holds an MBA from the Instituto de Empresa. José Antonio joined CEMEX in 1998. In 2014, he was appointed Chief Financial Officer for CEMEX. Previously, he has occupied the posi- tions of Vice President, Corporate Finance; Vice President, Corporate Communications and Public Affairs for CEMEX; and Vice Presi- dent Planning and Finance for CEMEX Aus- tralia. Before that, he occupied positions in the Finance and Strategic Planning functions of the company. José Antonio obtained an undergraduate degree in Industrial Engineering from Tec- nológico de Monterrey in 1991, and an MBA from Stanford University in 1998. Luis Hernández joined CEMEX in 1996, and has held senior management positions in the Strategic Planning and Human Resources areas. He is currently responsible for global Organi- zation and Human Resources, Processes and IT, Digital Innovation Development, Global Service Organization (GSO), Vendor Manage- ment Office (VMO) and Neoris. Luis graduated with a degree in Civil Engi- neering from Tecnológico de Monterrey, and holds a Master’s degree in Civil Engineering and an MBA from the University of Texas at Austin. Ignacio Madridejos joined CEMEX in 1996 and after holding management positions in the Strategic Planning area, he headed CEMEX operations in Egypt, Spain, Western Europe, and more recently, Northern Europe. He is currently President of CEMEX USA, and is also responsible for the company’s global Health & Safety, Energy, and Sustainability areas. Ignacio graduated with an MSc in Civil Engineering from the Polytechnic University of Madrid and holds an MBA from Stanford University. 36 Executive Committee Jaime Muguiro (47) President CEMEX South, Central America and the Caribbean* Juan Romero (59) President CEMEX Mexico Juan Pablo San Agustín (47) Executive Vice President of Strategic Plan- ning and New Business Development Ramiro Villarreal (68) Executive Vice President of Legal and Secretary of the Board of Directors Jaime Muguiro joined CEMEX in 1996, and held several executive positions in the areas of Strategic Planning, Business Development, Ready-Mix Concrete, Aggregates, and Human Resources. He headed CEMEX operations in Egypt, and more recently our operations in the Mediterranean region. He is currently President of CEMEX in South, Central America and the Caribbean. He graduated with a Management degree from San Pablo CEU University, and holds a Law degree from the Complutense University of Madrid and an MBA from the Massachu- setts Institute of Technology. Juan Romero joined CEMEX in 1989, and has held several high-ranking positions within the organization, including President of CEMEX operations in Colombia, Mexico, the South America and the Caribbean region, and the Europe, Middle East, Africa, and Asia region. He is currently President of CEMEX in Mex- ico, and is also in charge of the company’s global Procurement area. Juan Romero graduated from the University of Comillas, where he studied Law, Econom- ics, and Management. Juan Pablo San Agustín joined CEMEX in 1994 and has held executive positions in the Strategic Planning, Continuous Improvement, e-Business, and Marketing areas. He is currently Executive Vice President of Strategic Planning and New Business Devel- opment. He graduated with a BS from Metropolitan University, and holds an MBA from the Insti- tuto de Empresa. Ramiro Villarreal joined CEMEX in 1987 and served as General Counsel since then and Secretary of its Board of Directors since 1995. Prior to joining CEMEX, he served as Deputy General Director of Grupo Financiero Banpais. Ramiro is a member of the board of directors of Vinte Viviendas Integrales, S.A.P.I. de C.V., consulting member of the board of directors of Grupo Acosta Verde, and an alternate mem- ber of the boards of directors of Cementos Chihuahua and Axtel. Ramiro, until Febru- ary 2012, was the Secretary of the Board of Directors of ITESM. Ramiro is a graduate of the Universidad Au- tónoma de Nuevo León with a degree in Law and holds a Master’s Degree in Finance from the University of Wisconsin. * These titles are effective as of January 1, 2016. 37 Consolidated financial statements CEMEX, S.A.B. de C.V and subsidiaries 39 Independent auditor’s report 40 Consolidated statements of operations 41 Consolidated statements of comprehensive income (loss) 42 Consolidated balance sheets 43 Consolidated statements of cash flows 44 Statements of changes in stockholders’ equity 45 Notes to the consolidated financial statements 38 Independent auditor’s report The Board of Directors and Stockholders CEMEX, S.A.B. de C.V.: We have audited the accompanying consolidated financial statements of CEMEX, S.A.B. de C.V. and its subsidiaries (“the Company”), which comprise the consolidated balance sheets as at December 31, 2015 and 2014, the consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the years ended December 31, 2015, 2014 and 2013, and notes, comprising a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of CEMEX, S.A.B. de C.V. and its subsidiaries as at December 31, 2015 and 2014, and their consolidated financial performance and their consolidated cash flows for the years ended December 31, 2015, 2014 and 2013, in accordance with International Financial Reporting Standards. KPMG Cárdenas Dosal, S.C. Luis Gabriel Ortiz Esqueda Monterrey, N.L., Mexico January 28, 2016 39 Consolidated statements of operations Net sales Cost of sales Gross profit Administrative and selling expenses Distribution expenses CEMEX, S.A.B. de C.V. and subsidiaries Operating earnings before other expenses, net (Millions of Mexican pesos, except for earnings Other expenses, net (loss) per share) Operating earnings Financial expense Other financial (expense) income, net Equity in gain of associates NOTE YEARS ENDED DECEMBER 31, 2014 2013 2015 3 2P $ 225,742 (150,369) 204,402 (138,456) 190,370 (130,686) 75,373 65,946 59,684 (27,647) (20,976) (48,623) (25,036) (19,026) (44,062) (25,114) (15,290) (40,404) 26,750 21,884 19,280 (3,030) (5,051) (4,863) 23,720 16,833 14,417 (19,779) (1,237) 738 (21,491) 2,534 294 (19,911) 1,716 232 2P 2A 6 16 7 13A Earnings (loss) before income tax 3,442 (1,830) (3,546) Income tax 19 (2,276) (3,960) (6,162) Net income (loss) from continuing operations 1,166 (5,790) (9,708) Discontinued operations, net of tax 4A 967 110 97 CONSOLIDATED NET INCOME (LOSS) 2,133 (5,680) (9,611) Non-controlling interest net income 932 1,103 1,223 CONTROLLING INTEREST NET INCOME (LOSS) Basic earnings (loss) per share Basic earnings (loss) per share of continuing operations Diluted earnings (loss) per share Diluted earnings (loss) per share of continuing operations $ $ $ $ $ 22 22 22 22 1,201 (6,783) (10,834) 0.03 0.01 0.03 0.01 (0.17) (0.17) (0.17) (0.17) (0.28) (0.29) (0.28) (0.29) The accompanying notes are part of these consolidated financial statements. 40 CONSOLIDATED NET INCOME (LOSS) $ 2,133 (5,680) (9,611) NOTE YEARS ENDED DECEMBER 31, 2014 2013 2015 Consolidated statements of comprehensive income (loss) Items that will not be reclassified subsequently to profit or loss Actuarial losses Income tax recognized directly in other comprehensive income CEMEX, S.A.B. de C.V. and subsidiaries Items that will be reclassified subsequently to profit or loss when (Millions of Mexican pesos) specific conditions are met Effects from available-for-sale investments Currency translation of foreign subsidiaries Income tax recognized directly in other comprehensive income Total items of other comprehensive income (loss) TOTAL COMPREHENSIVE INCOME (LOSS) Non-controlling interest comprehensive income 18 19 13B 20B 19 (748) 183 (565) (3,025) 486 (2,539) (391) (122) (513) 80 952 (1,085) (53) (566) (94) 501 (85) 322 (2,217) 387 7,915 453 8,755 8,190 10,323 3,221 (7,897) (10,177) 2,129 892 CONTROLLING INTEREST COMPREHENSIVE INCOME (LOSS) $ 7,102 (10,026) (11,069) Out of which: COMPREHENSIVE INCOME (LOSS) OF DISCONTINUED OPERATIONS COMPREHENSIVE INCOME (LOSS) OF CONTINUING OPERATIONS $ $ 199 6,903 (78) 315 (9,948) (11,384) The accompanying notes are part of these consolidated financial statements. 41 Consolidated balance sheets CEMEX, S.A.B. de C.V. and subsidiaries (Millions of Mexican pesos) ASSETS CURRENT ASSETS Cash and cash equivalents Trade accounts receivables, net Other accounts receivable Inventories, net Other current assets Assets from operations held for sale Total current assets NON-CURRENT ASSETS Investments in associates Other investments and non-current accounts receivable Property, machinery and equipment, net Goodwill and intangible assets, net Deferred income taxes Total non-current assets TOTAL ASSETS LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Short-term debt including current maturities of long-term debt Other financial obligations Trade payables Income tax payable Other accounts payable and accrued expenses Liabilities from operations held for sale Total current liabilities NON-CURRENT LIABILITIES Long-term debt Other financial obligations Employee benefits Deferred income taxes Other non-current liabilities Total non-current liabilities TOTAL LIABILITIES STOCKHOLDERS’ EQUITY Controlling interest: Common stock and additional paid-in capital Other equity reserves Retained earnings Net income (loss) Total controlling interest Non-controlling interest and perpetual debentures TOTAL STOCKHOLDERS’ EQUITY TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY The accompanying notes are part of these consolidated financial statements. NOTE 2015 2014 DECEMBER 31, 8 9 10 11 12 4A 13A 13B 14 15 19B 16A 16B 17 4A 16A 16B 18 19B 17 20A 20B 20C 20D $ $ $ $ 15,280 27,774 4,817 17,716 4,632 3,446 73,665 12,150 6,549 214,133 220,318 15,449 468,599 542,264 218 15,587 28,709 6,619 20,769 673 72,575 229,125 23,268 18,269 20,385 14,874 305,921 378,496 119,624 15,273 7,381 1,201 143,479 20,289 163,768 542,264 12,589 26,954 4,435 18,074 8,906 – 70,958 9,560 10,317 202,928 193,484 27,714 444,003 514,961 14,507 11,512 24,271 9,890 20,045 – 80,225 191,327 27,083 16,881 19,783 31,491 286,565 366,790 105,367 10,738 21,781 (6,783) 131,103 17,068 148,171 514,961 42 Consolidated statements of cash flows CEMEX, S.A.B. de C.V. and subsidiaries (Millions of Mexican pesos) NOTES YEARS ENDED DECEMBER 31, 2014 2013 2015 OPERATING ACTIVITIES Consolidated net income (loss) Discontinued operations, net of tax Net income (loss) from continuing operations Non-cash items: Depreciation and amortization of assets Impairment losses and effects from assets held for sale Equity in gain of associates Other (income) expenses, net Financial items, net Income taxes Changes in working capital, excluding income taxes Net cash flow provided by operating activities from continuing operations before interest, coupons on perpetual debentures and income taxes Financial expense and coupons on perpetual debentures paid in cash Income taxes paid in cash Net cash flow provided by operating activities of continuing operations Net cash flow provided by operating activities of discontinued operations Net cash flows provided by operating activities INVESTING ACTIVITIES Property, machinery and equipment, net Disposal of subsidiaries and associates, net Intangible assets and other deferred charges Long-term assets and others, net Net cash flows used in investing activities of continuing operations Net cash flows used in investing activities of discontinued operations Net cash flows used in investing activities FINANCING ACTIVITIES Derivative instruments Issuance (repayment) of debt, net Securitization of trade receivables Non-current liabilities, net Net cash flows (used in) provided by financing activities Decrease in cash and cash equivalents of continuing operations Increase in cash and cash equivalents of discontinued operations Cash conversion effect, net Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF YEAR Changes in working capital, excluding income taxes: Trade receivables, net Other accounts receivable and other assets Inventories Trade payables Other accounts payable and accrued expenses Changes in working capital, excluding income taxes The accompanying notes are part of these consolidated financial statements. 5 6 13A 19 20D 14 13, 15 15 16A 8 $ $ 2,133 967 1,166 15,376 1,527 (738) (208) 21,016 2,276 3,541 43,956 (17,865) (7,437) 18,654 441 19,095 (8,872) 2,722 (908) (766) (7,824) (153) (7,977) 1,098 (11,296) (506) (1,763) (12,467) (1,637) 288 4,040 12,589 15,280 (3,384) (1,961) (1,299) 7,208 2,977 3,541 $ $ $ (5,680) 110 (5,790) 14,167 3,862 (294) (396) 18,957 3,960 1,475 35,941 (16,844) (7,678) 11,419 572 11,991 (5,965) 167 (902) 200 (6,500) (161) (6,661) 1,561 (11,110) 2,052 (1,128) (8,625) (3,706) 411 708 15,176 12,589 (3,348) 1,255 (2,716) 3,807 2,477 1,475 (9,611) 97 (9,708) 14,167 1,568 (232) 485 18,195 6,162 (4,237) 26,400 (19,110) (6,665) 625 645 1,270 (5,404) 1,259 (1,203) 97 (5,251) (142) (5,393) (256) 5,933 (1,854) (570) 3,253 (1,373) 503 3,568 12,478 15,176 (1,557) (948) (309) 861 (2,284) (4,237) 43 Notes Common stock Additional paid-in capital Other equity reserves Statements of changes in stockholders’ equity Balance as of December 31, 2012 $ 4,139 113,929 Net loss Total other items of comprehensive loss Change in the Parent Company’s functional currency 2D Restitution of retained earnings Capitalization of retained earnings Stock-based compensation Effects of perpetual debentures Changes in non-controlling interest 20A 20A, 21 20D 20D – – – – 4 – – – – – – (35,667) 5,987 551 – – CEMEX, S.A.B. de C.V. and subsidiaries Balance as of December 31, 2013 4,143 84,800 (Millions of Mexican pesos) Net loss Total other items of comprehensive loss Effects of early conversion of convertible subordinated notes Capitalization of retained earnings Stock-based compensation Effects of perpetual debentures 16B 20A 20A, 21 20D – – 4 4 – – – – 8,037 7,614 765 – Balance as of December 31, 2014 4,151 101,216 Net income Total other items of comprehensive income Effects of early conversion and issuance of convertible subordinated notes Capitalization of retained earnings Stock-based compensation Effects of perpetual debentures 16B 20A 20A, 21 20D – – 3 4 – – – – 5,982 7,613 655 – 12,514 – (235) 3,027 – – 136 (405) – 15,037 – (3,243) (601) – (35) (420) 10,738 – 5,901 (934) – – (432) Retained earnings 10,557 (10,834) – – 35,667 (5,991) – – – 29,399 (6,783) – – (7,618) – – 14,998 1,201 – – (7,617) – – Total controlling interest Non-controlling interest Total stockholders’ equity 141,139 (10,834) (235) 3,027 – – 687 (405) – 133,379 (6,783) (3,243) 7,440 – 730 (420) 131,103 1,201 5,901 5,051 – 655 (432) 14,488 1,223 (331) – – – – – (441) 155,627 (9,611) (566) 3,027 – – 687 (405) (441) 14,939 148,318 1,103 1,026 (5,680) (2,217) – – – – 7,440 – 730 (420) 17,068 932 2,289 148,171 2,133 8,190 – – – – 5,051 – 655 (432) Balance as of December 31, 2015 $ 4,158 115,466 15,273 8,582 143,479 20,289 163,768 The accompanying notes are part of these consolidated financial statements. 44 Notes to the consolidated financial statements CEMEX, S.A.B. de C.V. and subsidiaries As of December 31, 2015, 2014 and 2013 (Millions of Mexican pesos) 1) Description of business CEMEX, S.A.B. de C.V., a public stock corporation with variable capital (S.A.B. de C.V.) organized under the laws of the United Mexican States, or Mexico, is an operating and holding company (parent) of entities whose main activities are oriented to the construction industry, through the production, marketing, distribution and sale of cement, ready-mix concrete, aggregates and other construction materials. In addition, in order to facilitate the acquisition of financing and to run its operations in Mexico more efficiently considering that there are efficiency and improvement opportunities by shifting from a platform where its customers were served from different entities according to its line of business (i.e. cement, ready-mix concrete, aggregates), into a platform where customers, sorted by end- user segment (i.e. distributor, builder, manufacturer) are now serviced from a single entity; beginning on April 1, 2014, CEMEX, S.A.B de C.V. integrated and carried out all businesses and operational activities of the cement and aggregates sectors in Mexico. Moreover, beginning on January 1, 2015, CEMEX, S.A.B. de C.V. completed the transition and integrated all operating activities related to the sale of ready-mix concrete in Mexico. CEMEX, S.A.B. de C.V. was founded in 1906 and was registered in the Public Register of Property and Commerce in Monterrey, N.L., Mexico in 1920 for a period of 99 years. In 2002, this period was extended to the year 2100. The shares of CEMEX, S.A.B. de C.V. are listed on the Mexican Stock Exchange (“MSE”) as Ordinary Participation Certificates (“CPOs”) under the symbol “CEMEXCPO”. Each CPO represents two series “A” shares and one series “B” share of common stock of CEMEX, S.A.B. de C.V. In addition, CEMEX, S.A.B. de C.V.’s shares are listed on the New York Stock Exchange (“NYSE”) as American Depositary Shares (“ADSs”) under the symbol “CX.” Each ADS represents ten CPOs. The terms “CEMEX, S.A.B. de C.V..” and/or the “Parent Company” used in these accompanying notes to the financial statements refer to CEMEX, S.A.B. de C.V. without its consolidated subsidiaries. The terms the “Company” or “CEMEX” refer to CEMEX, S.A.B. de C.V. together with its consolidated subsidiaries. The issuance of these consolidated financial statements was authorized by the management of CEMEX, S.A.B. de C.V. on January 28, 2016. 2) Significant accounting policies 2A) Basis of presentation and disclosure The consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013, were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Presentation currency and definition of terms The presentation currency of the consolidated financial statements is the Mexican peso, currency in which the Company reports periodically to the MSE. When reference is made to pesos or “$” it means Mexican pesos. The amounts in the financial statements and the accompanying notes are stated in millions, except when references are made to income (loss) per share and/or prices per share. When reference is made to “US$” or “dollars”, it means dollars of the United States of America (“United States”). When reference is made to “€” or “euros”, it means the currency in circulation in a significant number of European Union (“EU”) countries. When it is deemed relevant, certain amounts presented in the notes to the financial statements include between parentheses a convenience translation into dollars or into pesos, as applicable. These translations should not be construed as representations that the amounts in pesos or dollars, as applicable, actually represent those peso or dollar amounts or could be converted into pesos or dollars at the rate indicated. As of December 31, 2015 and 2014, translations of pesos into dollars and dollars into pesos, were determined for balance sheet amounts using the closing exchange rates of $17.23 and $14.74 pesos per dollar, respectively, and for statements of operations amounts, using the average exchange rates of $15.98, $13.37 and $12.85 pesos per dollar for 2015, 2014 and 2013, respectively. When the amounts between parentheses are the peso and the dollar, the amounts were determined by translating the euro amount into dollars using the closing exchange rates at year-end and then translating the dollars into pesos as previously described. Amounts disclosed in the notes in connection with tax or legal proceedings (notes 19D and 24), which are originated in jurisdictions which currencies are different to the peso or the dollar, are presented in dollar equivalents as of the closing of the most recent year presented. Consequently, without any change in the original currency, such dollar amounts will fluctuate over time due to changes in exchange rates. 45 Statements of operations CEMEX includes the line item titled “Operating earnings before other expenses, net” considering that it is a relevant measure for CEMEX’s management as explained in note 4B. Under IFRS, the inclusion of certain subtotals such as “Operating earnings before other expenses, net” and the display of the statement of operations, varies significantly by industry and company according to specific needs. The line item “Other income (expenses), net” in the statements of operations consists primarily of revenues and expenses not directly related to CEMEX’s main activities, or which are of an unusual and/or non-recurring nature, including impairment losses of long-lived assets, results on disposal of assets and restructuring costs, among others (note 6). For the years 2015, 2014 and 2013, considering the disposal of entire reportable operating segments, the Company presents in a single line as discontinued operations, the results of its operations in Austria and Hungary, sold in October 2015, as well as its operations in Croatia, expected to be sold during 2016 (notes 4A and 15). As a result, the statements of operations of 2014 and 2013 were reformulated. Statements of comprehensive income (loss) The statements of comprehensive loss for 2014 and 2013 were restated in order to give effect to the discontinued operations mentioned above. Statements of cash flows The statements of cash flows for 2014 and 2013 were restated in order to give effect to the discontinued operations mentioned above. The statements of cash flows present cash inflows and outflows, excluding unrealized foreign exchange effects, as well as the following transactions that did not represent sources or uses of cash: • In 2015, the decrease in debt for $4,517, the net decrease in other equity reserves for $934, the increase in common stock for $3 and the increase in additional paid-in capital for $5,982, in connection with the issuance optional convertible subordinated notes due in 2020, which involved, among others, the exchange and early conversion of optional convertible subordinated notes due in 2016, as well as the issuance of approximately 42 million ADSs (note 16B); • In 2014, the decrease in debt for $6,483, the decrease in other equity reserves for $601, the increase in common stock for $4 and the increase in additional paid-in capital for $8,037, in connection with several early conversions of optional convertible subordinated notes due in 2015, incurred in different dates during the year (note 16B); • In 2015, the decrease in other current and non-current liabilities and in deferred tax assets in connection with changes in the tax legislation in Mexico effective as of December 31, 2015 (notes 19C and 19D); • In 2015, 2014 and 2013, the increases in common stock and additional paid-in capital associated with: (i) the capitalization of retained earnings for $7,617, $7,618 and $5,991, respectively (note 20A); and (ii) CPOs issued as part of the executive stock-based compensation programs for $655, $765 and $551, respectively (note 20A); • In 2015, 2014 and 2013, the increases in property, plant and equipment for approximately $63, $108 and $141, respectively, associated with the negotiation of capital leases during the year (note 16B); • In 2013, the increase in investments in associates for $712, related to CEMEX´s joint arrangement in Concrete Supply Co., LLC (note 13A); and • In 2013, the decrease in other non-current liabilities and the increase in other equity reserves as a result of the change in the functional currency of the Parent Company’s financial division as of January 1, 2013 (note 2D). 46 Notes to the consolidated financial statements2B) Principles of consolidation The consolidated financial statements include those of CEMEX, S.A.B. de C.V. and those of the entities, including Special Purpose Entities (“SPEs”), in which the Parent Company exercises control, by means of which the Parent Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Among other factors, control is evidenced when the Parent Company: a) holds directly or through subsidiaries, more than 50% of an entity’s common stock; b) has the power, directly or indirectly, to govern the administrative, financial and operating policies of an entity; or c) is the primary receptor of the risks and rewards of a SPE. Balances and operations between related parties are eliminated in consolidation. Investments in associates are accounted for by the equity method when CEMEX has significant influence, which is generally presumed with a minimum equity interest of 20%, unless it is proven in unusual cases that CEMEX has significant influence with a lower percentage. The equity method reflects in the financial statements, the investment’s original cost and the proportional interest of CEMEX in the associate’s equity and earnings after acquisition. The financial statements of joint ventures, those arrangements in which CEMEX and other third-party investors have agreed to exercise joint control and have rights to the net assets of the arrangements, are recognized under the equity method, whereas, the financial statements of joint operations, those in which the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities relating to the arrangement, are proportionally consolidated line-by-line. The equity method is discontinued when the carrying amount of the investment, including any long-term interest in the associate or joint venture, is reduced to zero, unless CEMEX has incurred or guaranteed additional obligations of the associate or joint venture. Other permanent investments where CEMEX holds equity interests of less than 20% and/or there is no significant influence are carried at their historical cost. 2C) Use of estimates and critical assumptions The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the period. These assumptions are reviewed on an ongoing basis using available information. Actual results could differ from these estimates. The main items subject to estimates and assumptions by management include, among others, impairment tests of long-lived assets, allowances for doubtful accounts and obsolescence of inventories, recognition of deferred income tax assets, as well as the measurement of financial instruments at fair value, and the assets and liabilities related to employee benefits. Significant judgment is required by management to appropriately assess the amounts of these concepts. 2D) Foreign currency transactions and translation of foreign currency financial statements Transactions denominated in foreign currencies are recorded in the functional currency at the exchange rates prevailing on the dates of their execution. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date, and the resulting foreign exchange fluctuations are recognized in earnings, except for exchange fluctuations arising from: 1) foreign currency indebtedness associated to the acquisition of foreign entities; and 2) fluctuations associated with related parties’ balances denominated in foreign currency, which settlement is neither planned nor likely to occur in the foreseeable future and as a result, such balances are of a permanent investment nature. These fluctuations are recorded against “Other equity reserves,” as part of the foreign currency translation adjustment (note 20B) until the disposal of the foreign net investment, at which time, the accumulated amount is recycled through the statement of operations as part of the gain or loss on disposal. The financial statements of foreign subsidiaries, as determined using their respective functional currency, are translated to pesos at the closing exchange rate for balance sheet accounts and at the closing exchange rates of each month within the period for statements of operations accounts. The functional currency is that in which each consolidated entity primarily generates and expends cash. The corresponding translation effect is included within “Other equity reserves” and is presented in the statement of other comprehensive income (loss) for the period as part of the foreign currency translation adjustment (note 20B) until the disposal of the net investment in the foreign subsidiary. 47 Notes to the consolidated financial statementsConsidering its integrated activities, beginning January 1, 2013, for purposes of functional currency, the Parent Company is considered to have two divisions, one related with its financial and holding company activities, in which the functional currency is the dollar for all assets, liabilities and transactions associated with these activities, and another division related with the Parent Company’s operating activities in Mexico, in which the functional currency is the peso for all assets, liabilities and transactions associated with these activities. In connection with the change of the Parent Company’s financial division functional currency from the peso to the dollar, which among other effects aligned the functional currency of the issuer with the currency of the dollar-denominated subordinated convertible notes (note 16B), the conversion options embedded in the several series of such convertible notes, ceased to be treated as stand-alone derivatives at fair value through profit or loss. The aggregate liability accrued until December 31, 2012 for approximately $4,325 before a deferred tax liability of approximately $1,298, was cancelled against stockholders’ equity. During the reported periods, there were no subsidiaries whose functional currency was the currency of a hyperinflationary economy, which is generally considered to exist when the cumulative inflation rate over the last three years is approaching, or exceeds, 100%. In a hyperinflationary economy, the accounts of the subsidiary’s statements of operations should be restated to constant amounts as of the reporting date, in which case, both the balance sheet accounts and the statements of operations accounts would be translated to pesos at the closing exchange rates of the year. The most significant closing exchange rates and the approximate average exchange rates for balance sheet accounts and statement of operations accounts as of December 31, 2015, 2014 and 2013, were as follows: Currency Dollar Euro British Pound Sterling Colombian Peso Egyptian Pound Philippine Peso 2015 2014 2013 Closing Average Closing Average Closing Average 17.2300 18.7181 25.4130 0.0055 2.2036 0.3661 15.9800 17.6041 24.3638 0.0058 2.0670 0.3504 14.7400 17.8386 22.9738 0.0062 2.0584 0.3296 13.3700 17.6306 21.9931 0.0066 1.8824 0.3009 13.0500 17.9554 21.6167 0.0068 1.8750 0.2940 12.8500 17.1079 20.1106 0.0068 1.8600 0.3014 The financial statements of foreign subsidiaries are initially translated from their functional currencies into dollars and subsequently into pesos. Therefore, the foreign exchange rates presented in the table above between the functional currency and the peso represent the implied exchange rates resulting from this methodology. The peso to U.S. dollar exchange rate used by CEMEX is an average of free market rates available to settle its foreign currency transactions. No significant differences exist, in any case, between the foreign exchange rates used by CEMEX and those exchange rates published by the Mexican Central Bank. 2E) Cash and cash equivalents (note 8) The balance in this caption is comprised of available amounts of cash and cash equivalents, mainly represented by highly-liquid short- term investments, which are easily convertible into cash, and which are not subject to significant risks of changes in their values, including overnight investments, which yield fixed returns and have maturities of less than three months from the investment date. These fixed-income investments are recorded at cost plus accrued interest. Other investments which are easily convertible into cash are recorded at their market value. Gains or losses resulting from changes in market values and accrued interest are included in the statements of operations as part of “Other financial (expense) income, net.” The amount of cash and cash equivalents in the balance sheet includes restricted cash and investments, comprised of deposits in margin accounts that guarantee certain of CEMEX’s obligations, to the extent that the restriction will be lifted in less than three months from the balance sheet date. When the restriction period is greater than three months, such restricted cash and investments are not considered cash equivalents and are included within short-term or long-term “Other accounts receivable,” as appropriate. When contracts contain provisions for net settlement, these restricted amounts of cash and cash equivalents are offset against the liabilities that CEMEX has with its counterparties. 48 Notes to the consolidated financial statements 2F) Financial instruments Trade accounts receivable and other current accounts receivable (notes 9 and 10) Items under this caption are classified as “loans and receivables”, with no explicit cost, which are recorded at their amortized cost, which is represented by the net present value of the consideration receivable or payable as of the transaction date. Due to their short- term nature, CEMEX initially recognizes these receivables at the original invoiced amount less an estimate of doubtful accounts. Allowances for doubtful accounts as well as impairment of other current accounts receivable, are recognized against administrative and selling expenses. Trade receivables sold under securitization programs, in which CEMEX maintains a residual interest in the trade accounts receivable sold in case of recovery failure, as well as continued involvement in such assets, do not qualify for derecognition and are maintained on the balance sheet. Other investments and non-current receivables (note 13B) As part of the category of “loans and receivables,” non-current accounts receivable, as well as investments classified as held to maturity are initially recognized at their amortized cost. Subsequent changes in net present value are recognized in the statements of operations as part of “Other financial (expense) income, net.” Investments in financial instruments held for trading, as well as those investments available for sale, are recognized at their estimated fair value, in the first case through the statements of operations as part of “Other financial (expense) income, net”, and in the second case, changes in valuation are recognized as part of “Other comprehensive income (loss) of the period” within “Other equity reserves” until their time of disposition, when all valuation effects accrued in equity are reclassified to “Other financial (expense) income net”, in the statements of operations. These investments are tested for impairment upon the occurrence of a significant adverse change or at least once a year during the last quarter. Financial liabilities (notes 16A and 16B) Bank loans and notes payable are recognized at their amortized cost. Interest accrued on financial instruments is recognized in the balance sheet within “Other accounts payable and accrued expenses” against financial expense. During the reported periods, CEMEX did not have financial liabilities voluntarily recognized at fair value or associated to fair value hedge strategies with derivative financial instruments. Direct costs incurred in debt issuances or borrowings, as well as debt refinancing or non-substantial modifications to debt agreements that did not represent an extinguishment of debt, by considering: a) that the relevant economic terms of the new instrument are not substantially different to the replaced instrument; and b) the proportion in which the final holders of the new instrument are the same of the replaced instrument, adjust the carrying amount of related debt are amortized as interest expense as part of the effective interest rate of each transaction over its maturity. These costs include commissions and professional fees. Costs incurred in the extinguishment of debt, as well as debt refinancing or modifications to debt agreements when the new instrument is substantially different to the old instrument according to a qualitative and quantitative analysis, are recognized in the statements of operations within “Financial expense” as incurred. Capital leases, in which CEMEX has substantially all risks and rewards associated with the ownership of an asset, are recognized as financing liabilities against a corresponding fixed asset for the lesser of the market value of the leased asset and the net present value of future minimum payments, using the contract’s implicit interest rate to the extent available, or the incremental borrowing cost. Among other elements, the main factors that determine a capital lease are: a) if ownership title of the asset is transferred to CEMEX at the expiration of the contract; b) if CEMEX has a bargain purchase option to acquire the asset at the end of the lease term; c) if the lease term covers the majority of the useful life of the asset; and/or d) if the net present value of minimum payments represents substantially all the fair value of the related asset at the beginning of the lease. 49 Notes to the consolidated financial statementsFinancial instruments with components of both liabilities and equity (note 16B) The financial instrument that contains components of both liability and equity, such as a note that at maturity is convertible into a fixed number of CEMEX’s shares and the currency in which the instrument is denominated is the same as the functional currency of the issuer, each component is recognized separately in the balance sheet according to the specific characteristics of each transaction. In the case of instruments mandatorily convertible into shares of the issuer, the liability component represents the net present value of interest payments on the principal amount using a market interest rate, without assuming any early conversion, and is recognized within “Other financial obligations,” whereas the equity component represents the difference between the principal amount and the liability component, and is recognized within “Other equity reserves” net of commissions. In the case of instruments that are optionally convertible into a fixed number of shares, the liability component represents the difference between the principal amount and the fair value of the conversion option premium, which reflects the equity component (note 2N). When the transaction is denominated in a currency different than the functional currency of the issuer, the conversion option is accounted for as a derivative financial instrument at fair value in the statement of operations. Derivative financial instruments (note 16D) CEMEX recognizes all derivative instruments as assets or liabilities in the balance sheet at their estimated fair values, and the changes in such fair values are recognized in the statements of operations within “Other financial (expense) income, net” for the period in which they occur, except for changes in fair value of derivative instruments associated with cash flow hedges, in which case, such changes in fair value are recognized in stockholders’ equity, and are reclassified to earnings as the interest expense of the related debt is accrued, in the case of interest rate swaps, or when the underlying products are consumed in the case of contracts on the price of raw materials and commodities. Likewise, in hedges of the net investment in foreign subsidiaries, changes in fair value are recognized in stockholders’ equity as part of the foreign currency translation result (note 2D), which reversal to earnings would take place upon disposal of the foreign investment. During the reported periods, CEMEX has not designated any derivative instruments in fair value hedges. Derivative instruments are negotiated with institutions with significant financial capacity; therefore, CEMEX believes the risk of non-performance of the obligations agreed to by such counterparties to be minimal. Accrued interest generated by interest rate derivative instruments, when applicable, is recognized as financial expense in the relevant period, adjusting the effective interest rate of the related debt. CEMEX reviews its different contracts to identify the existence of embedded derivatives. Identified embedded derivatives are analyzed to determine if they need to be separated from the host contract and recognized in the balance sheet as assets or liabilities, applying the same valuation rules used for other derivative instruments. Put options granted for the purchase of non-controlling interests and associates Represent agreements by means of which CEMEX commits to acquire, in case the counterparty exercises its right to sell at a future date at a predefined price formula or at fair market value, the shares of a non-controlling interest in a subsidiary of CEMEX or an associate. In respect of a put option granted for the purchase of a non-controlling interest in a CEMEX subsidiary, to the extent CEMEX should settle the obligation in cash or through the delivery of other financial asset CEMEX recognizes a liability for the net present value of the redemption amount as of the financial statements’ date against the controlling interest within stockholders’ equity. A liability is not recognized as a result of an option granted for the purchase of a non-controlling interest when the redemption amount is determined at fair market value at the exercise date and CEMEX has the election to settle using its own shares. In respect of a put option granted for the purchase of an associate, CEMEX would recognize a liability against a loss in the statements of operations whenever the estimated purchase price exceeds the fair value of the net assets to be acquired by CEMEX, had the counterparty exercised its right to sell. 50 Notes to the consolidated financial statementsFair value measurements (note 16C) CEMEX applies the guidance of IFRS 13, Fair value measurements (“IFRS 13”) for its fair value measurements of financial assets and financial liabilities recognized or disclosed at fair value. IFRS 13 does not require fair value measurements in addition to those already required or permitted by other IFRSs and is not intended to establish valuation standards or affect valuation practices outside financial reporting. Under IFRS 13, fair value represents an “Exit Value”, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, considering the counterparty’s credit risk in the valuation. The concept of Exit Value is premised on the existence of a market and market participants for the specific asset or liability. When there is no market and/or market participants willing to make a market, IFRS 13 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that CEMEX has the ability to access at the measurement date. A quote price in an active market provides the most reliable evidence of fair value and is used without adjustment to measure fair value whenever available. • Level 2 inputs are other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly, and are used mainly to determine the fair value of securities, investments or loans that are not actively traded. Level 2 inputs included equity prices, certain interest rates and yield curves, implied volatility, credit spreads and other market corroborated inputs, including inputs extrapolated from other observable inputs. In the absence of Level 1 inputs CEMEX determined fair values by iteration of the applicable Level 2 inputs, the number of securities and/or the other relevant terms of the contract, as applicable. • Level 3 inputs are unobservable inputs for the asset or liability. CEMEX used unobservable inputs to determine fair values, to the extent there are no Level 1 or Level 2 inputs, in valuation models such as Black-Scholes, binomial, discounted cash flows or multiples of Operative EBITDA, including risk assumptions consistent with what market participants would use to arrive at fair value. 2G) Inventories (note 11) Inventories are valued using the lower of cost or net realizable value. The cost of inventories includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. CEMEX analyzes its inventory balances to determine if, as a result of internal events, such as physical damage, or external events, such as technological changes or market conditions, certain portions of such balances have become obsolete or impaired. When an impairment situation arises, the inventory balance is adjusted to its net realizable value, whereas, if an obsolescence situation occurs, the inventory obsolescence reserve is increased. In both cases, these adjustments are recognized against the results of the period. Advances to suppliers of inventory are presented as part of other current assets. 2H) Property, machinery and equipment (note 14) Property, machinery and equipment are recognized at their acquisition or construction cost, as applicable, less accumulated depreciation and accumulated impairment losses. Depreciation of fixed assets is recognized as part of cost and operating expenses (note 5), and is calculated using the straight-line method over the estimated useful lives of the assets, except for mineral reserves, which are depleted using the units-of-production method. 51 Notes to the consolidated financial statementsAs of December 31, 2015, the maximum average useful lives by category of fixed assets were as follows: Administrative buildings Industrial buildings Machinery and equipment in plant Ready-mix trucks and motor vehicles Office equipment and other assets Years 34 32 18 7 6 CEMEX capitalizes, as part of the related cost of fixed assets, interest expense from existing debt during the construction or installation period of significant fixed assets, considering CEMEX’s corporate average interest rate and the average balance of investments in process for the period. All waste removal costs or stripping costs incurred in the operative phase of a surface mine that result in improved access to mineral reserves are recognized as part of the carrying amount of the related quarries. The capitalized amounts are further amortized over the expected useful life of exposed ore body based on the units of production method. Costs incurred in respect of operating fixed assets that result in future economic benefits, such as an extension in their useful lives, an increase in their production capacity or in safety, as well as those costs incurred to mitigate or prevent environmental damage, are capitalized as part of the carrying amount of the related assets. The capitalized costs are depreciated over the remaining useful lives of such fixed assets. Periodic maintenance on fixed assets is expensed as incurred. Advances to suppliers of fixed assets are presented as part of other long-term accounts receivable. 2I) Business combinations, goodwill, other intangible assets and deferred charges (note 15) Business combinations are recognized using the purchase method, by allocating the consideration transferred to assume control of the entity to all assets acquired and liabilities assumed, based on their estimated fair values as of the acquisition date. Intangible assets acquired are identified and recognized at fair value. Any unallocated portion of the purchase price represents goodwill, which is not amortized and is subject to periodic impairment tests (note 2J), can be adjusted for any correction to the preliminary assessment given to the assets acquired and/or liabilities assumed within the twelve-month period after purchase. Costs associated with the acquisition are expensed in the statements of operations as incurred. CEMEX capitalizes intangible assets acquired, as well as costs incurred in the development of intangible assets, when future economic benefits associated with the assets are identified and there is evidence of control over such benefits. Intangible assets are presented at their acquisition or development cost. Such assets are classified as having a definite or indefinite life, the latter are not amortized since the period cannot be accurately established in which the benefits associated with such intangibles will terminate. Amortization of intangible assets of definite life is calculated under the straight-line method and recognized as part of costs and operating expenses (note 5). Startup costs are recognized in the statements of operations as they are incurred. Costs associated with research and development activities (“R&D activities”), performed by CEMEX to create products and services, as well as to develop processes, equipment and methods to optimize operational efficiency and reduce costs, are recognized in the operating results as incurred. The Technology and Energy departments in CEMEX undertake all significant R&D activities as part of their daily activities. In 2015, 2014 and 2013, total combined expenses of these departments were approximately $660 (US$41), $538 (US$36) and $494 (US$38), respectively. Development costs are capitalized only if they meet the definition of intangible asset mentioned above. Direct costs incurred in the development stage of computer software for internal use are capitalized and amortized through the operating results over the useful life of the software, which on average is approximately 5 years. 52 Notes to the consolidated financial statements Costs incurred in exploration activities such as payments for rights to explore, topographical and geological studies, as well as trenching, among other items incurred to assess the technical and commercial feasibility of extracting a mineral resource, which are not significant to CEMEX, are capitalized when future economic benefits associated with such activities are identified. When extraction begins, these costs are amortized during the useful life of the quarry based on the estimated tons of material to be extracted. When future economic benefits are not achieved, any capitalized costs are subject to impairment. CEMEX’s extraction rights have maximum useful lives that range from 30 to 100 years, depending on the sector, and the expected life of the related reserves. As of December 31, 2015, except for extraction rights and/or as otherwise indicated, CEMEX’s intangible assets are amortized on a straight line basis over their useful lives that range on average from 3 to 20 years. 2J) Impairment of long lived assets (notes 14 and 15) Impairment of property, machinery and equipment, intangible assets of definite life and other investments Property, machinery and equipment, intangible assets of definite life and other investments are tested for impairment upon the occurrence of factors such as the occurrence of a significant adverse event, changes in CEMEX’s operating environment, changes in projected use or in technology, as well as expectations of lower operating results for each cash generating unit, in order to determine whether their carrying amounts may not be recovered. In such cases, an impairment loss is recorded in the statements of operations for the period when such determination is made within “Other expenses, net.” The impairment loss of an asset results from the excess of the asset’s carrying amount over its recoverable amount, corresponding to the higher of the fair value of the asset, less costs to sell such asset, and the asset’s value in use, the latter represented by the net present value of estimated cash flows related to the use and eventual disposal of the asset. The main assumptions utilized to develop estimates of value in use are a discount rate that reflects the risk of the cash flows associated with the assets evaluated and the estimations of generation of future income. Those assumptions are evaluated for reasonableness by comparing such discount rates to available market information and by comparing to third-party expectations of industry growth, such as governmental agencies or industry chambers. When impairment indicators exist, for each intangible asset, CEMEX determines its projected revenue streams over the estimated useful life of the asset. In order to obtain discounted cash flows attributable to each intangible asset, such revenues are adjusted for operating expenses, changes in working capital and other expenditures, as applicable, and discounted to net present value using the risk adjusted discount rate of return. The most significant economic assumptions are: a) the useful life of the asset; b) the risk adjusted discount rate of return; c) royalty rates; and d) growth rates. Assumptions used for these cash flows are consistent with internal forecasts and industry practices. The fair values of intangible assets are very sensitive to changes in the significant assumptions used in their calculation. Certain key assumptions are more subjective than others. In respect of trademarks, CEMEX considers that the most subjective key assumption in the determination of revenue streams is the royalty rate. In respect of extraction rights and customer relationships, the most subjective assumptions are revenue growth rates and estimated useful lives. CEMEX validates its assumptions through benchmarking with industry practices and the corroboration of third party valuation advisors. Significant judgment by management is required to appropriately assess the fair values and values in use of the related assets, as well as to determine the appropriate valuation method and select the significant economic assumptions. 53 Notes to the consolidated financial statementsGoodwill Goodwill is tested for impairment when required due to significant adverse changes or at least once a year, during the last quarter of such year, by determining the recoverable amount of the group of cash-generating units (“CGUs”) to which goodwill balances were allocated, which consists of the higher of such group of CGUs fair value, less cost to sell and its value in use, represented by the discounted amount of estimated future cash flows to be generated by such CGUs to which goodwill was allocated, which are generally determined over periods of 5 years. In specific circumstances, when CEMEX considers that actual results for a given CGU do not fairly reflect historical performance and most external economic variables provide confidence that a reasonably determinable improvement in the mid-term is expected in their operating results, management uses cash flow projections over a period of up to 10 years, to the point in which future expected average performance resembles the historical average performance, to the extent CEMEX has detailed, explicit and reliable financial forecasts and is confident and can demonstrate its ability, based on past experience, to forecast cash flows accurately over that longer period. If the value in use of a group of CGUs to which goodwill has been allocated is lower than its corresponding carrying amount, CEMEX determines the fair value of such group of CGUs using methodologies generally accepted in the market to determine the value of entities, such as multiples of Operating EBITDA and by reference to other market transactions, among others. An impairment loss is recognized within other expenses, net, if the recoverable amount is lower than the net book value of the group of CGUs to which goodwill has been allocated. Impairment charges recognized on goodwill are not reversed in subsequent periods. The geographic operating segments reported by CEMEX (note 4), represent CEMEX’s groups of CGUs to which goodwill has been allocated for purposes of testing goodwill for impairment, considering: a) that after the acquisition, goodwill was allocated at the level of the geographic operating segment; b) that the operating components that comprise the reported segment have similar economic characteristics; c) that the reported segments are used by CEMEX to organize and evaluate its activities in its internal information system; d) the homogeneous nature of the items produced and traded in each operative component, which are all used by the construction industry; e) the vertical integration in the value chain of the products comprising each component; f) the type of clients, which are substantially similar in all components; g) the operative integration among components; and h) that the compensation system of a specific country is based on the consolidated results of the geographic segment and not on the particular results of the components. In addition, the country level represents the lowest level within CEMEX at which goodwill is monitored for internal management purposes. Impairment tests are significantly sensitive to, among other factors, the estimation of future prices of CEMEX’s products, the development of operating expenses, local and international economic trends in the construction industry, the long-term growth expectations in the different markets, as well as the discount rates and the growth rates in perpetuity applied. For purposes of estimating future prices, CEMEX uses, to the extent available, historical data plus the expected increase or decrease according to information issued by trusted external sources, such as national construction or cement producer chambers and/or in governmental economic expectations. Operating expenses are normally measured as a constant proportion of revenues, following past experience. However, such operating expenses are also reviewed considering external information sources in respect to inputs that behave according to international prices, such as gas and oil. CEMEX uses specific pre-tax discount rates for each group of CGUs to which goodwill is allocated, which are applied to discount pre-tax cash flows. The amounts of estimated undiscounted cash flows are significantly sensitive to the growth rate in perpetuity applied. Likewise, the amounts of discounted estimated future cash flows are significantly sensitive to the weighted average cost of capital (discount rate) applied. The higher the growth rate in perpetuity applied, the higher the amount of undiscounted future cash flows by group of CGUs obtained. Conversely, the higher the discount rate applied, the lower the amount of discounted estimated future cash flows by group of CGUs obtained. 54 Notes to the consolidated financial statements2K) Provisions CEMEX recognizes provisions when it has a legal or constructive obligation resulting from past events, whose resolution would imply cash outflows or the delivery of other resources owned by the Company. As of December 31, 2015 and 2014 some significant proceedings that gave rise to a portion of the carrying amount of CEMEX’s other current and non-current liabilities and provisions are detailed in note 24A. Considering guidance under IFRS, CEMEX does not have a constructive obligation to pay levies imposed by governments that will be triggered by operating in a future period; consequently, provisions for such levies imposed by governments are recognized until the critical event or the activity that triggers the payment of the levy has occurred, as defined in the legislation. Restructuring (note 17) CEMEX recognizes provisions for restructuring costs only when the restructuring plans have been properly finalized and authorized by management, and have been communicated to the third parties involved and/or affected by the restructuring prior to the balance sheet date. These provisions may include costs not associated with CEMEX’s ongoing activities. Asset retirement obligations (note 17) Unavoidable obligations, legal or constructive, to restore operating sites upon retirement of long-lived assets at the end of their useful lives are measured at the net present value of estimated future cash flows to be incurred in the restoration process, and are initially recognized against the related assets’ book value. The increase to the assets’ book value is depreciated during its remaining useful life. The increase in the liability related to adjustments to net present value by the passage of time is charged to the line item “Other financial (expense) income, net.” Adjustments to the liability for changes in estimations are recognized against fixed assets, and depreciation is modified prospectively. These obligations are related mainly to future costs of demolition, cleaning and reforestation, so that quarries, maritime terminals and other production sites are left in acceptable condition at the end of their operation. Costs related to remediation of the environment (notes 17 and 24) Provisions associated with environmental damage represent the estimated future cost of remediation, which are recognized at their nominal value when the time schedule for the disbursement is not clear, or when the economic effect for the passage of time is not significant; otherwise, such provisions are recognized at their discounted values. Reimbursements from insurance companies are recognized as assets only when their recovery is practically certain. In that case, such reimbursement assets are not offset against the provision for remediation costs. Contingencies and commitments (notes 23 and 24) Obligations or losses related to contingencies are recognized as liabilities in the balance sheet only when present obligations exist resulting from past events that are expected to result in an outflow of resources and the amount can be measured reliably. Otherwise, a qualitative disclosure is included in the notes to the financial statements. The effects of long-term commitments established with third parties, such as supply contracts with suppliers or customers, are recognized in the financial statements on an incurred or accrued basis, after taking into consideration the substance of the agreements. Relevant commitments are disclosed in the notes to the financial statements. The Company does not recognize contingent revenues, income or assets, unless their realization is virtually certain. 2L) Pensions and postretirement employee benefits (note 18) Defined contribution pension plans The costs of defined contribution pension plans are recognized in the operating results as they are incurred. Liabilities arising from such plans are settled through cash transfers to the employees’ retirement accounts, without generating future obligations. 55 Notes to the consolidated financial statementsDefined benefit pension plans, other postretirement benefits and termination benefits The costs associated with employees’ benefits for: a) defined benefit pension plans; and b) other postretirement benefits, basically comprised of health care benefits, life insurance and seniority premiums, granted by CEMEX and/or pursuant to applicable law, are recognized as services are rendered, based on actuarial estimations of the benefits’ present value with the advice of external actuaries. For certain pension plans, CEMEX has created irrevocable trust funds to cover future benefit payments (“plan assets”). These plan assets are valued at their estimated fair value at the balance sheet date. The actuarial assumptions and accounting policy consider: a) the use of nominal rates; b) a single rate is used for the determination of the expected return on plan assets and the discount of the benefits obligation to present value; c) a net interest is recognized on the net defined benefit liability (liability minus plan assets); and d) all actuarial gains and losses for the period, related to differences between the projected and real actuarial assumptions at the end of the period, as well as the difference between the expected and real return on plan assets, are recognized as part of “Other comprehensive income or loss” within stockholders’ equity. The service cost, corresponding to the increase in the obligation for additional benefits earned by employees during the period, is recognized within operating costs and expenses. The net interest cost, resulting from the increase in obligations for changes in net present value and the change during the period in the estimated fair value of plan assets, is recognized within “Other financial (expense) income, net.” The effects from modifications to the pension plans that affect the cost of past services are recognized within operating costs and expenses during the period in which such modifications become effective with respect to the employees or without delay if changes are effective immediately. Likewise, the effects from curtailments and/or settlements of obligations occurring during the period, associated with events that significantly reduce the cost of future services and/or reduce significantly the population subject to pension benefits, respectively, are recognized within operating costs and expenses. Termination benefits, not associated with a restructuring event, which mainly represent severance payments by law, are recognized in the operating results for the period in which they are incurred. 2M) Income taxes (note 19) The effects reflected in the statements of operations for income taxes include the amounts incurred during the period and the amounts of deferred income taxes, determined according to the income tax law applicable to each subsidiary. Consolidated deferred income taxes represent the addition of the amounts determined in each subsidiary by applying the enacted statutory income tax rate to the total temporary differences resulting from comparing the book and taxable values of assets and liabilities, considering tax loss carryforwards as well as other recoverable taxes and tax credits, to the extent that it is probable that future taxable profits will be available against which they can be utilized. The measurement of deferred income taxes reflects the tax consequences that follow the manner in which CEMEX expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred income taxes for the period represent the difference between balances of deferred income at the beginning and the end of the period. Deferred income tax assets and liabilities relating to different tax jurisdictions are not offset. According to IFRS, all items charged or credited directly in stockholders’ equity or as part of other comprehensive income or loss for the period are recognized net of their current and deferred income tax effects. The effect of a change in enacted statutory tax rates is recognized in the period in which the change is officially enacted. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is not considered probable that the related tax benefit will be realized. In conducting such assessment, CEMEX analyzes the aggregate amount of self-determined tax loss carryforwards included in its income tax returns in each country where CEMEX believes, based on available evidence, that the tax authorities would not reject such tax loss carryforwards; and the likelihood of the recoverability of such tax loss carryforwards prior to their expiration through an analysis of estimated future taxable income. If CEMEX believes that it is probable that the tax authorities would reject a self-determined deferred tax asset, it would decrease such asset. Likewise, if CEMEX believes that it would not be able to use a tax loss carryforward before its expiration or any other deferred tax asset, CEMEX would cancel such deferred tax asset. Both situations would result in additional income tax expense for the period in which such determination is made. In order to determine whether it is probable that deferred tax assets will ultimately be recovered, CEMEX takes into consideration all available positive and negative evidence, including factors such as market conditions, industry analysis, expansion plans, projected taxable income, carryforward periods, current tax structure, potential changes or adjustments in tax structure, tax planning strategies, future reversals of existing temporary differences, etc. Likewise, every reporting period, CEMEX analyzes its actual results versus the Company’s estimates, and adjusts, as necessary, its tax asset valuations. If actual results vary from CEMEX’s estimates, the deferred tax asset and/or valuations may be affected and necessary adjustments will be made based on relevant information. Any adjustments recorded will affect CEMEX’s statements of operations in such period. 56 Notes to the consolidated financial statementsThe income tax effects from an uncertain tax position are recognized when there is high probability that the position will be sustained based on its technical merits and assuming that the tax authorities will examine each position and have full knowledge of all relevant information, and they are measured using a cumulative probability model. Each position has been considered on its own, regardless of its relation to any other broader tax settlement. The high probability threshold represents a positive assertion by management that CEMEX is entitled to the economic benefits of a tax position. If a tax position is considered to have low probability to be sustained, no benefits of the position are recognized. Interest and penalties related to unrecognized tax benefits are recorded as part of the income tax in the consolidated statements of operations. CEMEX effective income tax rate is determined by dividing the line item “Income Tax,” in the statements of operations, which is comprised by current and deferred income tax benefit or expense for the period, into the line item “Earnings (loss) before income tax.” This effective tax rate is further reconciled to CEMEX’s statutory tax rate applicable in Mexico and is presented in note 19C. During 2014 and 2013, CEMEX has experienced consolidated losses before income tax. In any given period whereas a loss before income tax is reported, the reference statutory tax rate applicable in Mexico to which CEMEX reconciles its effective income tax rate is shown as a negative percentage. A significant effect in CEMEX’s effective tax rate and consequently in the aforementioned reconciliation of CEMEX’s effective tax rate, relates to the difference between the statutory income tax rate in Mexico of 30% against the applicable income tax rates of each country where CEMEX operates. For the years ended December 31, 2015, 2014 and 2013, the statutory tax rates in CEMEX’s main operations were as follows: Country Mexico United States United Kingdom France Germany Spain Philippines Colombia Egypt Switzerland Others 2015 2014 2013 30.0% 35.0% 20.3% 38.0% 29.8% 28.0% 30.0% 39.0% 22.5% 9.6% 7.8% - 39.0% 30.0% 35.0% 21.5% 38.0% 29.8% 30.0% 30.0% 34.0% 30.0% 9.6% 10.0% - 39.0% 30.0% 35.0% 23.3% 38.0% 29.8% 30.0% 30.0% 34.0% 25.0% 23.5% 10.0% - 39.0% CEMEX’s current and deferred income tax amounts included in the statements of operations for the period are highly variable, and are subject, among other factors, to taxable income determined in each jurisdiction in which CEMEX operates. Such amounts of taxable income depend on factors such as sale volumes and prices, costs and expenses, exchange rates fluctuations and interest on debt, among others, as well as to the estimated tax assets at the end of the period due to the expected future generation of taxable gains in each jurisdiction. 2N) Stockholders’ equity Common stock and additional paid-in capital (note 20A) These items represent the value of stockholders’ contributions, and include increases related to the capitalization of retained earnings and the recognition of executive compensation programs in CEMEX’s CPOs as well as decreases associated with the restitution of retained earnings. Other equity reserves (note 20B) This caption groups the cumulative effects of items and transactions that are, temporarily or permanently, recognized directly to stockholders’ equity, and includes the elements presented in the statements of comprehensive income (loss). Comprehensive income (loss) for the period includes, in addition to net income (loss), certain changes in stockholders’ equity during a period that do not result from investments by owners and distributions to owners. The most significant items within “Other equity reserves” during the reported periods are as follows: 57 Notes to the consolidated financial statements Items of “Other equity reserves” included within other comprehensive income (loss): • Currency translation effects from the translation of foreign subsidiaries’ financial statements, net of: a) exchange results from foreign currency debt directly related to the acquisition of foreign subsidiaries; and b) exchange results from foreign currency related parties balances that are of a long-term investment nature (note 2D); • The effective portion of the valuation and liquidation effects from derivative instruments under cash flow hedging relationships, which are recorded temporarily in stockholders’ equity (note 2F); • Changes in fair value during the tenure of available-for-sale investments until their disposal (note 2F); and • Current and deferred income taxes during the period arising from items whose effects are directly recognized in stockholders’ equity. Items of “Other equity reserves” not included in comprehensive income (loss): • Effects related to controlling stockholders’ equity for changes or transactions affecting non-controlling interest stockholders in CEMEX’s consolidated subsidiaries; • Effects attributable to controlling stockholders’ equity for financial instruments issued by consolidated subsidiaries that qualify for accounting purposes as equity instruments, such as the interest expense paid on perpetual debentures; • The equity component determined upon issuance of convertible securities or upon classification, which are mandatorily or optionally convertible into shares of the Parent Company (note 16B) and that qualify under IFRS as instruments having components of liability and equity (note 2F). Upon conversion, this amount will be reclassified to common stock and additional paid-in capital; and • The cancellation of the Parent Company’s shares held by consolidated entities. Retained earnings (note 20C) Retained earnings represent the cumulative net results of prior accounting periods, net of: a) dividends declared to stockholders; b) recapitalizations of retained earnings; c) the effects generated form initial adoption of IFRS as of January 1, 2010; and d) when applicable, the restitution of retained earnings from other line items within stockholder´s equity. Non-controlling interest and perpetual debentures (note 20D) This caption includes the share of non-controlling stockholders in the results and equity of consolidated subsidiaries. This caption also includes the nominal amount as of the balance sheet date of financial instruments (perpetual notes) issued by consolidated entities that qualify as equity instruments considering that there is: a) no contractual obligation to deliver cash or another financial asset; b) no predefined maturity date; and c) an unilateral option to defer interest payments or preferred dividends for indeterminate periods. 2O) Revenue recognition (note 3) CEMEX’s consolidated net sales represent the value, before tax on sales, of revenues originated by products and services sold by consolidated subsidiaries as a result of their ordinary activities, after the elimination of transactions between related parties, and are quantified at the fair value of the consideration received or receivable, decreased by any trade discounts or volume rebates granted to customers. Revenue from the sale of goods and services is recognized when goods are delivered or services are rendered to customers, there is no condition or uncertainty implying a reversal thereof, and they have assumed the risk of loss. Revenue from trading activities, in which CEMEX acquires finished goods from a third party and subsequently sells the goods to another third-party, are recognized on a gross basis, considering that CEMEX assumes the total risk on the goods purchased, not acting as agent or broker. 58 Notes to the consolidated financial statementsRevenue and costs associated with construction contracts are recognized in the period in which the work is performed by reference to the percentage or stage of completion of the contract at the end of the period, considering that the following have been defined: a) each party’s enforceable rights regarding the asset to be constructed; b) the consideration to be exchanged; c) the manner and terms of settlement; d) actual costs incurred and contract costs required to complete the asset are effectively controlled; and e) it is probable that the economic benefits associated with the contract will flow to the entity. The percentage of completion of construction contracts represents the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs or the surveys of work performed or the physical proportion of the contract work completed, whichever better reflects the percentage of completion under the specific circumstances. Progress payments and advances received from customers do not reflect the work performed and are recognized as a short or long term advanced payments, as appropriate. 2P) Cost of sales, administrative and selling expenses and distribution expenses Cost of sales represents the production cost of inventories at the moment of sale. Such cost of sales includes depreciation, amortization and depletion of assets involved in production, expenses related to storage in production plants and freight expenses of raw material in plants and delivery expenses of CEMEX’s ready-mix concrete business. Cost of sales excludes expenses related to personnel, equipment and services involved in sale activities and storage of product at points of sales, which are included as part of the administrative and selling expenses, as well as freight expenses of finished products between plants and points of sale and freight expenses between points of sales and the customers’ facilities, which are included as part of the distribution expenses line item. For the years ended December 31, 2015, 2014 and 2013, selling expenses included as part of the selling and administrative expenses line item amounted to $6,369, $6,030 and $7,863, respectively. 2Q) Executive stock-based compensation (note 21) Stock awards based on shares of the Parent Company and/or a subsidiary granted to executives are defined as equity instruments when services received from employees are settled by delivering CEMEX’s shares; or as liability instruments when CEMEX commits to make cash payments to the executives on the exercise date of the awards based on changes in CEMEX’s own stock (intrinsic value). The cost of equity instruments represents their estimated fair value at the date of grant and is recognized in the statements of operations during the period in which the exercise rights of the employees become vested. In respect of liability instruments, these instruments are valued at their estimated fair value at each reporting date, recognizing the changes in fair value through the operating results. CEMEX determines the estimated fair value of options using the binomial financial option-pricing model. 2R) Emission rights In some of the countries where CEMEX operates, such as EU countries, governments have established mechanisms aimed at reducing carbon dioxide emissions (“CO2”) by means of which industries releasing CO2 must submit to the environmental authorities at the end of a compliance period emission rights for a volume equivalent to the tons of CO2 released. Since the mechanism for emissions reduction in the EU has been in operation, a certain number of emission rights based on historical levels have been granted by the relevant environmental authorities to the different industries free of cost. Therefore, companies have to buy additional emission rights to meet deficits between actual CO2 emissions during the compliance period and emission rights actually held, or they can dispose of any surplus of emission rights in the market. In addition, the United Nations Framework Convention on Climate Change (“UNFCCC”) grants Certified Emission Reductions (“CERs”) to qualified CO2 emission reduction projects. CERs may be used in specified proportions to settle emission rights obligations in the EU. CEMEX actively participates in the development of projects aimed to reduce CO2 emissions. Some of these projects have been awarded with CERs. 59 Notes to the consolidated financial statementsCEMEX does not maintain emission rights, CERs and/or enter into forward transactions with trading purposes. In the absence of an IFRS that defines an accounting treatment for these schemes, CEMEX accounts for the effects associated with CO2 emission reduction mechanisms as follows: • Emission rights granted by governments are not recognized in the balance sheet considering that their cost is zero. • Revenues from the sale of any surplus of emission rights are recognized by decreasing cost of sales; in the case of forward sale transactions, revenues are recognized upon physical delivery of the emission certificates. • Emission rights and/or CERs acquired to hedge current CO2 emissions are recognized as intangible assets at cost, and are further amortized to cost of sales during the compliance period. In the case of forward purchases, assets are recognized upon physical reception of the emission certificates. • CEMEX accrues a provision against cost of sales when the estimated annual emissions of CO2 are expected to exceed the number of emission rights, net of any benefit obtained through swap transactions of emission rights for CERs. • CERs received from the UNFCCC are recognized as intangible assets at their development cost, which are attributable mainly to legal expenses incurred in the process of obtaining such CERs. During 2015, 2014 and 2013, there were no sales of emission rights to third parties. 2S) Concentration of credit CEMEX sells its products primarily to distributors in the construction industry, with no specific geographic concentration within the countries in which CEMEX operates. As of and for the years ended December 31, 2015, 2014 and 2013, no single customer individually accounted for a significant amount of the reported amounts of sales or in the balances of trade receivables. In addition, there is no significant concentration of a specific supplier relating to the purchase of raw materials. 2T) Newly issued ifrs not yet adopted There are a number of IFRS issued as of the date of issuance of these financial statements but which have not yet been adopted, which are listed below. Except as otherwise indicated, CEMEX expects to adopt these IFRS when they become effective. • IFRS 9, Financial instruments: classification and measurement (“IFRS 9”). IFRS 9 sets forth the guidance relating to the classification and measurement of financial assets and liabilities, to the accounting for expected credit losses on an entity’s financial assets and commitments to extend credits, as well as the requirements related to hedge accounting, and will replace IAS 39, Financial instruments: recognition and measurement (“IAS 39”) in its entirety. IFRS 9 requires an entity to recognize a financial asset or a financial liability when, and only when, the entity becomes party to the contractual provisions of the instrument. At initial recognition, an entity shall measure a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability, and includes a category of financial assets at fair value through other comprehensive income for simple debt instruments. In respect to impairment requirements, IFRS 9 eliminates the threshold set forth in IAS 39 for the recognition of credit losses. Under the impairment approach in IFRS 9 it is no longer necessary for a credit event to have occurred before credit losses are recognized, instead, an entity always accounts for expected credit losses, and changes in those expected losses through profit or loss. In respect to hedging activities, the requirements of IFRS 9 align hedge accounting more closely with an entity’s risk management through a principles-based approach. Nonetheless, the IASB provided entities with an accounting policy choice between applying the hedge accounting requirements of IFRS 9 or continuing to apply the existing hedge accounting requirements in IAS 39 until the IASB completes its project on the accounting for macro hedging. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. If an entity elects to apply IFRS 9 early, it must apply all of the requirements in this standard at the same time. CEMEX is currently evaluating the impact that IFRS 9 will have on the classification and measurement of its financial assets and financial liabilities, impairment of financial assets and hedging activities. Preliminarily, CEMEX does not expect a significant effect. Nonetheless, CEMEX is not considering an early application of IFRS 9. 60 Notes to the consolidated financial statements• In May 2014, the IASB issued IFRS 15, Revenue from contracts with customers (“IFRS 15”). Under IFRS 15, an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, following a five step model: Step 1: Identify the contract(s) with a customer, which is an agreement between two or more parties that creates enforceable rights and obligations; Step 2: Identify the performance obligations in the contract, considering that if a contract includes promises to transfer distinct goods or services to a customer, the promises are performance obligations and are accounted for separately; Step 3: Determine the transaction price, which is the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer; Step 4: Allocate the transaction price to the performance obligations in the contract, on the basis of the relative stand-alone selling prices of each distinct good or service promised in the contract; and Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation, by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). A performance obligation may be satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to transfer services to a customer). IFRS 15 also includes disclosure requirements that would provide users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. IFRS 15 will supersede all existing guidance on revenue recognition. IFRS 15 is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted considering certain additional disclosure requirements. CEMEX started to evaluate the impact that IFRS 15 will have on the recognition of revenue from its contracts with customers. Preliminarily, due to the nature of its business, main transactions and current accounting policies, whereas the transaction price is allocated to goods delivered or services rendered to customers where there is no condition or uncertainty implying a reversal thereof, and customers have assumed the risk of loss, CEMEX does not expect a significant effect. Nonetheless, CEMEX will continue in 2016 its evaluation of current product warranty policies, customer loyalty programs and construction contracts in order to conclude if certain portion of revenue that currently is being recognized at the transaction date or deferred during time, as applicable, should otherwise be recognized differently. CEMEX is not considering the early application of IFRS 15. • On January 13, 2016, the IASB issued IFRS 16, Leases (“IFRS 16”), which will supersede all current standards and interpretations related to lease accounting. IFRS 16, defines leases as any contract or part of a contract that conveys to the lessee the right to use an asset for a period of time in exchange for consideration and the lessee directs the use of the identified asset throughout that period. In summary, IFRS 16 introduces a single lessee accounting model, and requires a lessee to recognize, for all leases with a term of more than 12 months, unless the underlying asset is of low value, assets for the “right-of-use” the underlying asset against a corresponding financial liability, representing the net present value of estimated lease payments under the contract, with a single income statement model in which a lessee recognizes depreciation of the right-of-use asset and interest on the lease liability. A lessee shall present either in the balance sheet, or disclose in the notes, right-of-use assets separately from other assets, as well as, lease liabilities separately from other liabilities. IFRS 16 is effective beginning January 1, 2019, with early adoption permitted considering certain requirements. CEMEX is evaluating the impact that IFRS 16 will have on the recognition of its lease contracts. Preliminarily, it is considered that upon adoption of IFRS 16, most of operating leases will be recognized on balance sheet increasing assets and liabilities, with no significant initial effect on CEMEX’s net assets. CEMEX is not considering the early application of IFRS 16. 61 Notes to the consolidated financial statements3) Revenues and construction contracts For the years ended December 31, 2015, 2014 and 2013, net sales, after sales and eliminations between related parties resulting from consolidation, were as follows: From the sale of goods associated to CEMEX’s main activities 1 From the sale of services 2 From the sale of other goods and services 3 2015 2014 2013 $ 217,435 2,811 5,496 $ 225,742 196,976 2,618 4,808 204,402 182,099 2,523 5,748 190,370 1 Includes in each period those revenues generated under construction contracts that are presented in the table below. 2 Refers mainly to revenues generated by Neoris N.V., a subsidiary involved in providing information technology solutions and services. 3 Refers mainly to revenues generated by subsidiaries not individually significant operating in different lines of business. For the years ended December 31, 2015, 2014 and 2013, revenues and costs related to construction contracts in progress were as follows: Revenue from construction contracts included in consolidated net sales 2 Costs incurred in construction contracts included in consolidated cost of sales 3 Construction contracts operating profit Recognized to date 1 2015 2014 2013 $ 4,215 (3,182) $ 1,033 189 (196) (7) 328 (291) 37 1,319 (1,144) 175 1 Revenues and costs recognized from inception of the contracts until December 31, 2015 in connection with those projects still in progress. 2 Revenues from construction contracts during 2015, 2014 and 2013, determined under the percentage of completion method, were mainly obtained in Mexico and Colombia. 3 Refers to actual costs incurred during the periods. The oldest contract in progress as of December 31, 2015 started in 2010. As of December 31, 2015 and 2014, amounts receivable for progress billings to customers of construction contracts and/or advances received by CEMEX from these customers were not significant. 4) Discontinued operations and selected financial information by geographic operating segment 4A) Discontinued operations With effective date October 31, 2015, after all agreed upon conditions precedent were satisfied, CEMEX completed the process for the sale of its operations in Austria and Hungary that started on August 12, 2015 to the Rohrdorfer Group for approximately €165.1 (US$179 or $3,090), after final adjustments negotiated for changes in cash and working capital balances as of the transfer date. The combined operations in Austria and Hungary consisted of 29 aggregate quarries and 68 ready-mix plants. The operations in Austria and Hungary for the ten-month period ended October 31, 2015 and the years ended December 31, 2014 and 2013, included in CEMEX’s statements of operations, were reclassified to the single line item “Discontinued operations,” which includes, in 2015, a gain on sale of approximately US$45 ($741). Such gain on sale includes the reclassification to the statement of operations of foreign currency translation effects accrued in equity until October 31, 2015 for an amount of approximately $215. In addition, on August 12, 2015, CEMEX agreed with Duna-Dráva Cement, the sale of its Croatia operations, including assets in Bosnia and Herzegovina, Montenegro and Serbia, for approximately €230.9 (US$251 or $4,322), amount that is subject to final adjustments negotiated for changes in cash and working capital balances as of the change of control date. The operations in Croatia, including assets in Bosnia and Herzegovina, Montenegro and Serbia, mainly consist of three cement plants with aggregate annual production capacity of approximately 2.4 million tons of cement, two aggregates quarries and seven ready-mix plants. As of December 31, 2015, the closing of this transaction is subject to customary conditions precedent, which includes the approval from the relevant authorities. CEMEX expects to conclude the sale of its operations in Croatia, including assets in Bosnia and Herzegovina, Montenegro and Serbia, during the first half of 2016. The operations in Croatia, including assets in Bosnia and Herzegovina, Montenegro and Serbia, for the years ended December 31, 2015, 2014 and 2013, included in CEMEX’s statements of operations were reclassified to the single line item “Discontinued Operations, net of tax.”. 62 Notes to the consolidated financial statements The following table presents condensed combined information of the statement of operations of CEMEX discontinued operations in Austria and Hungary for the ten-months period ended October 31, 2015 and the years ended December 31, 2014 and 2013, as well as of CEMEX’s operations in Croatia, including assets in Bosnia and Herzegovina, Montenegro and Serbia, for the years ended December 31, 2015, 2014 and 2013: Sales Cost of sales and operating expenses Other products (expenses), net Interest expenses, net and others Gain before income tax Income tax Net income Net income (loss) of non-controlling interest Net income of controlling interest 2015 2014 2013 $ $ 5,446 (5,096) 21 (54) 317 (85) 232 6 226 5,621 (5,321) (77) (50) 173 (63) 110 – 110 5,291 (5,067) (40) (39) 145 (48) 97 – 97 As of December 31, 2015, the balance sheet of CEMEX’s Croatian operations, including its assets in Bosnia and Herzegovina, Montenegro and Serbia, was reclassified to current assets and current liabilities held for sale. Selected combined condensed financial information of balance sheet at this date of these operations was as follows: Current assets Property, machinery and equipment, net Intangible assets, net and other non-current assets Total assets held for sale Current liabilities Non-current liabilities Total liabilities held for sale Net assets held for sale 2015 438 2,562 446 3,446 442 231 673 2,773 $ $ The balance sheet of CEMEX as of December 31, 2014 was not restated as a result of the sale of its operations in Austria and Hungary. Selected combined condensed financial information of balance sheet at this date of CEMEX’s discontinued operations in Austria and Hungary was as follows: Current assets Property, machinery and equipment, net Intangible assets, net and other non-current assets Total assets held for sale Current liabilities Non-current liabilities Total liabilities held for sale Net assets held for sale 2014 622 1,931 542 3,095 735 716 1,451 1,644 $ $ 63 Notes to the consolidated financial statements 4B) Selected financial information by geographic operating segment Geographic operating segments represent the components of CEMEX that engage in business activities from which CEMEX may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity’s top management to make decisions about resources to be allocated to the segments and assess their performance, and for which discrete financial information is available. CEMEX’s main activities are oriented to the construction industry segment through the production, distribution, marketing and sale of cement, ready-mix concrete, aggregates and other construction materials. CEMEX operates geographically on a regional basis. Until December 31, 2015, CEMEX’s operations were organized into six geographical regions, each under the supervision of a regional president: 1) Mexico, 2) United States, 3) Northern Europe, 4) Mediterranean, 5) South, Central America and the Caribbean, and 6) Asia. Each regional president supervises and is responsible for all the business activities in the countries comprising the region. These activities refer to the production, distribution, marketing and sale of cement, ready-mix concrete, aggregates and other construction materials, the allocation of resources and the review of their performance and operating results. All regional presidents report directly to CEMEX’s Chief Executive Officer (“CEO”). The country manager, who is one level below the regional president in the organizational structure, reports the performance and operating results of its country to the regional president, including all the operating sectors. CEMEX’s top management internally evaluates the results and performance of each country and region for decision-making purposes and allocation of resources, following a vertical integration approach considering: a) that the operating components that comprise the reported segment have similar economic characteristics; b) that the reported segments are used by CEMEX to organize and evaluate its activities in its internal information system; c) the homogeneous nature of the items produced and traded in each operative component, which are all used by the construction industry; d) the vertical integration in the value chain of the products comprising each component; e) the type of clients, which are substantially similar in all components; f) the operative integration among components; and g) that the compensation system of a specific country is based on the consolidated results of the geographic segment and not on the particular results of the components. In accordance with this approach, in CEMEX’s daily operations, management allocates economic resources and evaluates operating results on a country basis rather than on an operating component basis. The financial information by geographic operating segment reported in the tables below for the years ended December 31, 2014 and 2013 has been restated in order to give effect to the discontinued operations described in note 4A. Effective January 1, 2016, according to an announcement made by CEMEX’s CEO on December 1, 2015, the Company’s operations will be reorganized into five geographical regions, also each under the supervision of a regional president, as follows: 1) Mexico, 2) United States, 3) Europe, 4) South, Central America and the Caribbean, and 5) Asia, Middle East and Africa. Under the new organization, the geographical operating segments under the current Mediterranean region will be incorporated to the Europe region or the Asia, Middle East and Africa region, as correspond. Considering the financial information that is regularly reviewed by CEMEX’s top management, each of the six geographic regions in which CEMEX operated until December 31, 2015 and the countries that comprise such regions represent reportable operating segments. However, for disclosure purposes in the notes to the financial statements, considering similar regional and economic characteristics and/or the fact that certain countries do not exceed certain materiality thresholds to be reported separately, such countries have been aggregated and presented as single line items as follows: a) “Rest of Northern Europe” is mainly comprised of CEMEX’s operations in the Czech Republic, Poland and Latvia, as well as trading activities in Scandinavia and Finland; b) “Rest of Mediterranean” is mainly comprised of CEMEX’s operations in the United Arab Emirates and Israel; c) “Rest of South, Central America and the Caribbean” is mainly comprised of CEMEX’s operations in Costa Rica, Panama, Puerto Rico, the Dominican Republic, Nicaragua, Jamaica and other countries in the Caribbean, Guatemala, and small ready-mix concrete operations in Argentina; and d) “Rest of Asia” is mainly comprised of CEMEX’s operations in Thailand, Bangladesh, China and Malaysia. The segment “Others” refers to: 1) cement trade maritime operations, 2) Neoris N.V., CEMEX’s subsidiary involved in the development of information technology solutions, 3) the Parent Company and other corporate entities, and 4) other minor subsidiaries with different lines of business. 64 Notes to the consolidated financial statementsThe main indicator used by CEMEX’s management to evaluate the performance of each country is “Operating EBITDA” representing operating earnings before other expenses, net, plus depreciation and amortization, considering that such amount represents a relevant measure for CEMEX’s management as an indicator of the ability to internally fund capital expenditures, as well as a widely accepted financial indicator to measure CEMEX’s ability to service or incur debt (note 16). Operating EBITDA should not be considered as an indicator of CEMEX’s financial performance, as an alternative to cash flow, as a measure of liquidity, or as being comparable to other similarly titled measures of other companies. This indicator, which is presented in the selected financial information by geographic operating segment, is consistent with the information used by CEMEX’s management for decision-making purposes. The accounting policies applied to determine the financial information by geographic operating segment are consistent with those described in note 2. CEMEX recognizes sales and other transactions between related parties based on market values. Selected information of the consolidated statements of operations by geographic operating segment for the years ended December 31, 2015, 2014 and 2013 was as follows: Less: Depreciation and amortization Operating earnings before other expenses, net Other expenses, net Financial Expense Other financing items, net 2015 Mexico United States Northern Europe United Kingdom Germany France Rest of Northern Europe Mediterranean Spain Egypt Rest of Mediterranean South, Central America and the Caribbean (“SAC”) Colombia Rest of SAC Asia Philippines Rest of Asia Others Continuing operations Discontinued operations Total Net sales (including related parties) Less: Related parties Net sales $ 50,260 63,002 (5,648) (18) 44,612 62,984 20,227 8,285 12,064 10,010 6,151 6,923 9,929 – (1,276) – (767) (755) (5) – 20,227 7,009 12,064 9,243 5,396 6,918 9,929 Operating EBITDA 15,362 8,764 2,705 542 670 1,419 1,031 1,777 1,194 11,562 19,169 (2) (2,285) 11,560 16,884 4,041 5,211 2,399 6,328 1,004 389 438 972 604 536 244 500 844 8,436 2,178 17,058 245,254 5,502 $ 250,756 (4) – (8,752) (19,512) (56) (19,568) 8,432 2,178 8,306 225,742 5,446 231,188 2,206 156 (2,952) 42,126 610 42,736 447 81 590 15,376 260 15,636 12,963 2,436 1,701 153 232 447 427 1,241 950 3,541 4,367 1,759 75 (3,542) 26,750 350 27,100 (684) 264 (147) 49 (8) (182) (735) (254) (53) (88) (267) (210) (442) (95) (14) (48) (57) (72) (115) (22) (50) (43) 915 (156) (299) (61) (10) (75) (2) 114 5 (570) (113) (12) (15) (898) (3,030) 21 (3,009) (20) (8) (18,583) (19,779) (25) (19,804) 19 87 (1,091) (1,237) (29) (1,266) 65 Notes to the consolidated financial statements 2014 Mexico United States Northern Europe United Kingdom Germany France Rest of Northern Europe Mediterranean Spain Egypt Rest of Mediterranean South, Central America and the Caribbean (“SAC”) Colombia Rest of SAC Asia Philippines Rest of Asia Others Continuing operations Discontinued operations Total 2013 Mexico United States Northern Europe United Kingdom Germany France Rest of Northern Europe Mediterranean Spain Egypt Rest of Mediterranean South, Central America and the Caribbean (“SAC”) Colombia Rest of SAC Asia Philippines Rest of Asia Others Continuing operations Discontinued operations Total Net sales (including related parties) Less: Related parties Net sales $ 51,412 49,127 (10,143) (32) 41,269 49,095 17,071 14,138 12,914 9,101 4,717 7,123 8,454 – (1,247) – (921) (559) (12) (6) 17,071 12,891 12,914 8,180 4,158 7,111 8,448 Operating EBITDA 13,480 5,337 1,672 869 852 1,080 363 2,664 1,046 13,242 16,292 (1) (1,865) 13,241 14,427 4,838 4,767 5,912 2,263 13,533 225,299 5,673 $ 230,972 (2) – (6,109) (20,897) (52) (20,949) 5,910 2,263 7,424 204,402 5,621 210,023 1,374 170 (2,461) 36,051 589 36,640 Less: Depreciation and amortization Operating earnings before other expenses, net Other expenses, net 2,420 5,718 1,004 625 516 667 571 474 224 476 688 338 71 375 14,167 290 14,457 11,060 (381) 668 244 336 413 (208) 2,190 822 4,362 4,079 1,036 99 (2,836) 21,884 299 22,183 734 (346) 1,062 (797) (94) (367) (2,107) (209) 15 52 (101) 40 (174) (2,759) (5,051) (77) (5,128) Financial Expense (262) (417) (33) (29) (72) (26) (29) (28) (19) (90) (44) (5) (6) (20,431) (21,491) (10) (21,501) Other financing items, net 481 (122) (378) (122) (4) (56) (4) 15 (7) (353) 9 (8) 36 3,047 2,534 (39) 2,495 Net sales (including related parties) Less: Related parties Net sales Operating EBITDA Less: Depreciation and amortization Operating earnings before other expenses, net Other expenses, net Financial Expense Other financing items, net $ 40,932 42,582 (1,507) (128) 39,425 42,454 12,740 2,979 2,493 5,885 10,247 (2,906) 14,368 13,715 13,393 8,720 3,856 6,162 7,699 – (976) – (800) (203) 3 – 14,368 12,739 13,393 7,920 3,653 6,165 7,699 1,005 826 1,274 1,110 360 2,373 1,012 13,203 15,527 – (1,843) 13,203 13,684 5,449 4,518 882 643 532 647 629 462 174 485 675 5,067 2,330 16,548 204,102 5,404 $ 209,506 – – (8,278) (13,732) (113) (13,845) 5,067 2,330 8,270 190,370 5,291 195,661 1,173 153 (1,525) 33,447 516 33,963 320 80 260 14,167 292 14,459 (721) (359) (258) (80) (160) (98) 123 183 742 463 (269) 1,911 838 (1,439) (144) 10 (337) (501) (113) (11) (61) (15) (55) (15) (22) 4,964 3,843 853 73 (1,785) 19,280 224 19,504 (87) (345) (177) (49) 12 57 (1,251) (4,863) (40) (4,903) (3) (12) (18,540) (19,911) (29) (19,940) 206 (129) (220) (125) (22) (115) 11 55 15 (183) (11) 38 29 2,167 1,716 (10) 1,706 The information of equity in income of associates by geographic operating segment for the years ended December 31, 2015, 2014 and 2013 is included in the note 13A. 66 Notes to the consolidated financial statements As of December 31, 2015 and 2014, selected balance sheet information by geographic segment was as follows: 2015 Mexico United States Northern Europe United Kingdom Germany France Rest of Northern Europe Mediterranean Spain Egypt Rest of Mediterranean South, Central America and the Caribbean (“SAC”) Colombia Rest of SAC Asia Philippines Rest of Asia Others Continuing operations Discontinued operations Total 2014 Mexico United States Northern Europe United Kingdom Germany France Rest of Northern Europe Mediterranean Spain Egypt Rest of Mediterranean South, Central America and the Caribbean (“SAC”) Colombia Rest of SAC Asia Philippines Rest of Asia Others Total Investments in Other segment associates assets Total assets Total liabilities Net assets by segment Additions to fixed assets 1 $ 438 1,228 75,215 260,847 75,653 262,075 16,936 22,832 58,717 239,243 1,177 3,453 103 64 582 291 94 11 – – 24 32,339 7,278 14,577 15,043 24,025 9,310 10,196 32,442 7,342 15,159 15,334 24,119 9,321 10,196 19,499 21,714 19,499 21,738 19,054 5,988 6,704 4,025 2,810 4,499 5,436 8,959 5,110 13,388 1,354 8,455 11,309 21,309 4,822 4,760 10,540 16,628 6 – 9,309 12,150 4 $ 12,154 10,447 1,859 24,319 526,668 3,442 530,110 10,453 1,859 33,628 538,818 3,446 542,264 2,907 769 271,794 377,823 673 378,496 7,546 1,090 (238,166) 160,995 2,773 163,768 925 362 515 594 281 762 246 2,601 965 329 42 61 12,313 154 12,467 Investments in Other segment associates assets Total assets Total liabilities Net assets by segment Additions to fixed assets 1 $ 855 1,007 75,739 228,068 76,594 229,075 17,367 15,420 59,227 213,655 1,177 2,738 104 61 544 73 77 – 5 – 24 29,780 12,383 14,019 16,791 21,343 7,914 11,364 29,884 12,444 14,563 16,864 21,420 7,914 11,369 15,949 18,341 15,949 18,365 16,736 7,683 5,960 4,541 2,583 4,182 4,518 9,447 3,361 13,148 4,761 8,603 12,323 18,837 3,732 6,851 6,502 15,004 3 – 6,807 9,560 9,567 1,871 42,272 505,401 9,570 1,871 49,079 514,961 1,931 751 272,310 366,790 7,639 1,120 (223,231) 148,171 $ 626 389 362 353 166 418 289 1,378 766 705 49 70 9,486 1 In 2015 and 2014, the total “Additions to fixed assets “includes capital expenditures of approximately $11,454 and $8,866, respectively (note 14). Total consolidated liabilities as of December 31, 2015 and 2014 included debt of $229,343 and $205,834, respectively. Of such balances, as of December 31, 2015 and 2014, approximately 71% and 59% was in the Parent Company, less than 1% and 8% was in Spain, 27% and 32% was in finance subsidiaries in the Netherlands, Luxembourg and the United States, and 1% and 1% was in other countries, respectively. The Parent Company and the finance subsidiaries mentioned above are included within the segment “Others.” 67 Notes to the consolidated financial statements Net sales by product and geographic segment for the years ended December 31, 2015, 2014 and 2013 were as follows: 2015 Cement Concrete Aggregates Others Eliminations Net sales Mexico United States Northern Europe United Kingdom Germany France Rest of Northern Europe Mediterranean Spain Egypt Rest of Mediterranean South, Central America and the Caribbean (“SAC”) Colombia Rest of SAC Asia Philippines Rest of Asia Others Continuing operations Discontinued operations Total $ 30,384 23,358 13,163 30,575 2,860 12,524 9,956 13,093 (11,751) (16,566) 44,612 62,984 4,705 3,098 – 5,966 5,265 6,052 880 8,158 14,846 8,270 1,046 – 112,028 1,741 $ 113,769 7,729 3,749 10,026 3,623 721 975 7,956 4,428 3,850 115 989 – 87,899 2,678 90,577 7,614 1,790 4,410 1,191 150 36 1,931 1,329 898 – 49 – 34,782 1,391 36,173 7,859 2,103 224 519 392 236 1,115 (7,680) (3,731) (2,596) (2,056) (1,132) (381) (1,953) 20,227 7,009 12,064 9,243 5,396 6,918 9,929 1,345 731 (3,700) (3,441) 11,560 16,884 62 100 17,057 54,792 515 55,307 (15) (6) (8,751) (63,759) (879) (64,638) 8,432 2,178 8,306 225,742 5,446 231,188 2014 Cement Concrete Aggregates Others Eliminations Net sales Mexico United States Northern Europe United Kingdom Germany France Rest of Northern Europe Mediterranean Spain Egypt Rest of Mediterranean South, Central America and the Caribbean (“SAC”) Colombia Rest of SAC Asia Philippines Rest of Asia Others Continuing operations Discontinued operations Total $ 27,667 17,937 12,855 21,490 3,824 4,883 – 5,305 3,856 6,402 593 9,544 13,123 5,849 998 – 99,981 1,696 $ 101,677 6,666 6,600 10,826 3,154 783 542 6,854 4,964 3,417 48 1,099 – 79,298 2,827 82,125 2,963 9,886 6,128 4,042 4,585 1,089 168 19 1,736 1,547 712 – 95 – 32,970 1,356 34,326 9,056 12,294 (11,272) (12,512) 41,269 49,095 7,929 2,434 215 341 359 318 992 770 690 27 101 11,607 47,133 555 47,688 (7,476) (5,068) (2,712) (1,709) (1,008) (170) (1,727) 17,071 12,891 12,914 8,180 4,158 7,111 8,448 (3,584) (3,515) 13,241 14,427 (14) (30) (4,183) (54,980) (813) (55,793) 5,910 2,263 7,424 204,402 5,621 210,023 68 Notes to the consolidated financial statements 2013 Cement Concrete Aggregates Others Eliminations Net sales Mexico United States Northern Europe United Kingdom Germany France Rest of Northern Europe Mediterranean Spain Egypt Rest of Mediterranean South, Central America and the Caribbean (“SAC”) Colombia Rest of SAC Asia Philippines Rest of Asia Others Continuing operations Discontinued operations Total $ 26,497 15,296 12,228 18,589 3,387 4,460 – 5,377 3,057 5,718 424 8,847 12,677 5,040 977 – 91,757 1,698 $ 93,455 5,699 6,386 11,244 3,358 678 403 6,022 4,474 3,240 10 1,166 – 73,497 2,609 76,106 2,580 8,764 4,856 3,972 4,378 964 174 18 1,435 1,358 651 9,924 10,793 (11,804) (10,988) 39,425 42,454 6,952 2,524 189 322 368 128 898 630 552 (6,526) (4,603) (2,418) (2,101) (624) (102) (1,080) 14,368 12,739 13,393 7,920 3,653 6,165 7,699 (2,106) (3,436) 13,203 13,684 – 143 – 29,293 1,225 30,518 23 101 16,796 50,200 119 50,319 (6) (57) (8,526) (54,377) (360) (54,737) 5,067 2,330 8,270 190,370 5,291 195,661 5) Depreciation and amortization Depreciation and amortization recognized during 2015, 2014 and 2013 is detailed as follows: Depreciation and amortization expense related to assets used in the production process Depreciation and amortization expense related to assets used in administrative and selling activities 6) Other expenses, net “Other expenses, net” in 2015, 2014 and 2013, consisted of the following: Impairment losses and effects from assets held for sale (notes 12, 13B, 14 and 15A) 1 Restructuring costs 2 Charitable contributions Results from the sale of assets and others, net 2015 2014 2013 $ 13,592 1,784 $ 15,376 12,630 1,537 14,167 12,766 1,401 14,167 2015 2014 2013 $ $ (1,527) (845) (60) (598) (3,030) (3,862) (544) (18) (627) (5,051) (1,568) (948) (25) (2,322) (4,863) 1 In 2014, includes impairment losses on inventory of $292, as well as aggregate impairment losses from assets reclassified to other assets held for sale for approximately $2,392, both in connection with the sale of assets in the western region of Germany and the expected sale of assets in Andorra, Spain (notes 11, 12 and 15B). 2 In 2015, 2014 and 2013, restructuring costs mainly refer to severance payments. 69 Notes to the consolidated financial statements 7) Other financial (expense) income, net “Other financial (expense) income, net” in 2015, 2014 and 2013, is detailed as follows: Financial income Results from financial instruments, net (notes 13B and 16D) Foreign exchange results Effects of net present value on assets and liabilities and others, net 8) Cash and cash equivalents As of December 31, 2015 and 2014, consolidated cash and cash equivalents consisted of: Cash and bank accounts Fixed-income securities and other cash equivalents 2015 2014 2013 $ $ 322 (2,729) 2,074 (904) (1,237) 320 (880) 3,934 (840) 2,534 404 2,074 54 (816) 1,716 2015 2014 $ 11,395 3,885 $ 15,280 9,577 3,012 12,589 Based on net settlement agreements, the balance of cash and cash equivalents excludes deposits in margin accounts that guarantee several obligations of CEMEX of approximately $258 in 2015 and $695 in 2014, which were offset against the corresponding obligations of CEMEX with the counterparties, considering CEMEX’s right, ability and intention to settle the amounts on a net basis. 9) Trade accounts receivable, net As of December 31, 2015 and 2014, consolidated trade accounts receivable consisted of: Trade accounts receivable Allowances for doubtful accounts 2015 2014 $ 29,773 (1,999) 27,774 $ 28,810 (1,856) 26,954 As of December 31, 2015 and 2014, trade accounts receivable include receivables of $12,858 (US$746) and $11,538 (US$783), respectively, that were sold under outstanding securitization programs for the sale of trade accounts receivable and/or factoring programs with recourse in Mexico, the United States, France and the United Kingdom. Under the outstanding securitization programs, CEMEX effectively surrenders control associated with the trade accounts receivable sold and there is no guarantee or obligation to reacquire the assets. However, CEMEX retains certain residual interest in the programs and/or maintains continuing involvement with the accounts receivable; therefore, the amounts received are recognized within “Other financial obligations.” Trade accounts receivable qualifying for sale exclude amounts over certain days past due or concentrations over certain limits to any one customer, according to the terms of the programs. The portion of the accounts receivable sold maintained as reserves amounted to $2,357 in 2015 and $1,775 in 2014. Therefore, the funded amount to CEMEX was $10,501 (US$609) in 2015 and $9,763 (US$662) in 2014, representing the amounts recognized within the line item of “Other financial obligations.” The discount granted to the acquirers of the trade accounts receivable is recorded as financial expense and amounted to approximately $249 (US$16) in 2015, $298 (US$22) in 2014 and $317 (US$25) in 2013. CEMEX’s securitization programs are negotiated for specific periods and may be renewed at their maturity. The securitization programs outstanding as of December 31, 2015 in Mexico, the United States, France and the United Kingdom mature in March 2017, March 2016, March 2016 and March 2016, respectively. Allowances for doubtful accounts are established according to the credit history and risk profile of each customer. Changes in the valuation of this caption allowance for doubtful accounts in 2015, 2014 and 2013, were as follows: Allowances for doubtful accounts at beginning of period Charged to selling expenses Deductions Foreign currency translation effects Allowances for doubtful accounts at end of period 2015 2014 2013 $ $ 1,856 439 (270) (26) 1,999 1,804 442 (394) 4 1,856 1,766 561 (587) 64 1,804 70 Notes to the consolidated financial statements 10) Other accounts receivable As of December 31, 2015 and 2014, consolidated other accounts receivable consisted of: Non-trade accounts receivable 1 Interest and notes receivable 2 Loans to employees and others Refundable taxes 2015 2014 $ $ 2,332 1,332 177 976 4,817 2,143 1,313 155 824 4,435 1 Non-trade accounts receivable are mainly attributable to the sale of assets. 2 Includes $148 in 2015 and $161 in 2014, representing the short-term portion of a restricted investment related to coupon payments under CEMEX’s perpetual debentures (note 20D). 11) Inventories As of December 31, 2015 and 2014, the consolidated balance of inventories was summarized as follows: Finished goods Work-in-process Raw materials Materials and spare parts Inventory in transit Allowance for obsolescence 2015 2014 $ $ 6,439 3,160 3,217 4,822 525 (447) 17,716 6,588 3,278 3,019 4,768 839 (418) 18,074 For the years ended December 31, 2015, 2014 and 2013, CEMEX recognized within “Cost of sales” in the statements of operations, inventory impairment losses of approximately $49, $36 and $6, respectively. In addition, in 2014, CEMEX recognized as part of “Other expenses, net,”, impairment losses related to inventories of raw materials of approximately $292 that become obsolete as a result of the decision of divesting assets in the western region of Germany (note 15B). 12) Other current assets As of December 31, 2015 and 2014, consolidated other current assets consisted of: Advance payments Other assets held for sale 2015 2014 $ $ 2,687 1,945 4,632 2,791 6,115 8,906 Other assets held for sale are stated at their estimated realizable value and include real estate properties received in payment of trade receivables as well as other diverse assets held for sale, different than those corresponding to discontinued operations, which are presented in the face of the balance sheet (note 4A). In 2015 and 2014, other assets held for sale include idle operating assets in Andorra, Spain for $481 and $451, respectively, and in 2014, include: those assets that were divested in the western region of Germany on January 5, 2015 for $4,658 (note 15B). The related assets in the western region of Germany and in Andorra, Spain were recognized at their estimated realizable value, net of costs to sell, and the reclassification from fixed assets to assets held for sale resulted in losses of approximately $242, which includes a loss of approximately $210 from the proportional reclassification to earnings of currency translation adjustments of the net investment in Germany accrued in equity (note 2D), and $2,150, respectively, recognized both in 2014 within “Other expenses, net.” As of December 31, 2015 and 2014, CEMEX was still in negotiations to sell these assets in Andorra, Spain. During 2014 and 2013, CEMEX recognized within “Other expenses, net” impairment losses in connection with other assets held for sale for approximately $55 and $56, respectively. 71 Notes to the consolidated financial statements 13) Investments in associates and other investments and non-current accounts receivable 13A) Investments in associates As of December 31, 2015 and 2014, the main investments in common shares of associates were as follows: Control Administrativo Mexicano, S.A. de C.V. Trinidad Cement Limited Concrete Supply Co., LLC Camcem, S.A. de C.V. Akmenes Cementas AB ABC Capital, S.A. Institución de Banca Múltiple Lehigh White Cement Company Société Méridionale de Carrières Société d’Exploitation de Carrières Industrias Básicas, S.A. Société des Ciments Antillais Other companies Out of which: Book value at acquisition date Changes in stockholders’ equity Activity Country Cement Cement Concrete Cement Cement Financing Cement Aggregates Aggregates Cement Cement — Mexico Trinidad and Tobago United States Mexico Lithuania Mexico United States France France Panama French Antilles — % 49.0 39.5 40.0 10.3 37.8 43.3 24.5 33.3 50.0 25.0 26.0 — 2015 2014 $ 5,613 1,543 932 600 560 385 276 241 202 133 78 1,587 $ 12,150 $ $ 4,683 7,467 4,826 286 765 476 546 371 223 221 179 127 74 1,466 9,560 3,334 6,226 As of December 31, 2015 and 2014, there were no written put options for the purchase of investments in associates. During 2015, CEMEX, through the exercise of its preemptive rights in Trinidad Cement Limited (“TCL”) rights issuance and the purchase of shares not subscribed and fully paid up by other eligible TCL shareholders in the rights issuance, increased its participation in TCL from 20% to 39.5% for approximately $774 (US$45). In April 2015, CEMEX and TCL entered into a Technical Services Agreement (the “TSA”) pursuant to which CEMEX will provide TCL with technical, managerial and other assistance from May 1, 2015 to May 1, 2018, unless earlier terminated. The TSA was entered into at arm’s length terms. Equity in gain of associates by geographic operating segment in 2015, 2014 and 2013 is detailed as follows: Mexico United States Northern Europe Mediterranean Corporate and others 2015 2014 2013 1 $ $ 330 92 51 289 (24) 738 242 4 58 16 (26) 294 (6) 91 113 18 16 232 Combined condensed balance sheet information of CEMEX’s associates as of December 31, 2015 and 2014 is set forth below: Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Total net assets 2015 2014 $ 19,658 45,272 64,930 8,547 21,201 29,748 $ 35,182 15,548 39,436 54,984 5,838 18,596 24,434 30,550 72 Notes to the consolidated financial statements Combined selected information of the statements of operations of CEMEX’s associates in 2015, 2014 and 2013 is set forth below: Sales Operating earnings Income before income tax Net income 2015 2014 $ 14,753 3,977 3,842 1,602 20,551 2,786 1,620 945 2013 1 19,966 2,024 928 455 1 In 2013, the combined condensed selected information of the statements of operations of associates presented in the tables above did not include the operations of Concrete Supply Company LLC, associate formed through the contribution of operating assets in September 2013 with the purpose of engaging in the production, sale and distribution of ready-mix concrete within North and South Carolina, United States for the three-month period ended December 31, 2013. 13B) Other investments and non-current accounts receivable As of December 31, 2015 and 2014, consolidated other investments and non-current accounts receivable were summarized as follows: Non-current portion of valuation of derivative financial instruments Non-current accounts receivable and other investments 1 Investments available-for-sale 2 Investments held for trading 3 2015 2014 $ $ 869 4,731 632 317 6,549 4,816 4,933 246 322 10,317 1 Includes, among other items: a) advances to suppliers of fixed assets of approximately $54 in 2015 and $143 in 2014; and b) the non-current portion of a restricted investment used to pay coupons under the perpetual debentures (note 20D) of approximately $83 in 2015 and $200 in 2014. CEMEX recognized impairment losses of non-current accounts receivable in Egypt and Colombia of approximately $71 and $22 in 2015, respectively; the United Kingdom of approximately $16 in 2014, and the United States of approximately $14 in 2013. 2 This line item refers to an investment in CPOs of Axtel, S.A.B. de C.V. (“Axtel”). This investment is recognized as available for sale at fair value and changes in valuation are recorded in other comprehensive loss until its disposal. 3 This line item refers to investments in private funds. In 2015 and 2014, no contributions were made to such private funds. 73 Notes to the consolidated financial statements 14) Property, machinery and equipment, net As of December 31, 2015 and 2014, consolidated property, machinery and equipment, net and the changes in such line item during 2015, 2014 and 2013, were as follows: Cost at beginning of period Accumulated depreciation and depletion Net book value at beginning of period Capital expenditures Additions through capital leases Capitalization of financial expense Stripping costs Total capital expenditures Disposals 4 Reclassifications 5 Business combinations Depreciation and depletion for the period Impairment losses Foreign currency translation effects Cost at end of period Accumulated depreciation and depletion Net book value at end of period Cost at beginning of period Accumulated depreciation and depletion Net book value at beginning of period Capital expenditures Additions through capital leases Stripping costs Total capital expenditures Disposals 4 Reclassifications 5 Depreciation and depletion for the period Impairment losses Foreign currency translation effects Cost at end of period Accumulated depreciation and depletion Net book value at end of period Land and mineral reserves 1 $ 78,511 (9,836) 68,675 1,429 – – 723 2,152 (713) (1,147) 1,372 (2,007) (338) 5,575 85,763 (12,194) $ 73,569 Land and mineral reserves 1 $ 75,415 (8,675) 66,740 675 – 512 1,187 (548) (1,116) (1,888) (271) 4,571 78,511 (9,836) $ 68,675 Building 1 41,531 (14,657) 26,874 566 – – 566 (367) (257) (1,778) (202) 1,667 43,473 (16,970) 26,503 2015 Machinery and equipment 2 185,629 (91,359) 94,270 8,827 63 – – 8,890 (987) (929) 1,869 (9,552) (693) 7,530 210,175 (109,777) 100,398 Construction in progress 3 13,480 – 13,480 – – 73 – 73 (3) (41) 6 – – 298 13,813 – 13,813 Total 321,093 (118,165) 202,928 11,454 63 73 723 12,313 (2,247) (3,099) 4,004 (13,528) (1,145) 14,907 356,956 (142,823) 214,133 Construction in progress 3 Total 2013 12,817 – 12,817 – – – – (252) (39) – – 954 13,480 – 13,480 309,668 (103,951) 205,717 8,866 108 512 9,486 (2,461) (6,828) (12,949) (589) 10,552 321,093 (118,165) 202,928 307,932 (94,857) 213,075 7,769 141 499 8,409 (2,960) (665) (13,132) (1,358) 2,348 309,668 (103,951) 205,717 Building 1 43,473 (16,970) 26,503 1,198 – – – 1,198 (544) (982) 757 (1,969) (114) 1,504 47,205 (20,852) 26,353 2014 Machinery and equipment 2 179,905 (80,619) 99,286 7,625 108 – 7,733 (1,294) (5,416) (9,283) (116) 3,360 185,629 (91,359) 94,270 1 Includes corporate buildings and related land sold to financial institutions during 2012 and 2011, which were leased back, without incurring any change in the carrying amount of such assets or gain or loss on the transactions. The aggregate carrying amount of these assets as of December 31, 2015 and 2014 was approximately $1,865 and $1,953, respectively. 2 Includes assets, mainly mobile equipment, acquired through capital leases, which carrying amount as of December 31, 2015 and 2014 was approximately $63 and $108, respectively. 74 Notes to the consolidated financial statements 3 In July 2014, CEMEX began the construction of a new cement plant in the municipality of Maceo in the Antioquia department in Colombia with an annual production capacity of approximately 1.1 million tons. The first phase included the construction of a cement mill, which is in testing and is considered to start commercial operations in the short term. The next phase is expected to be completed by the second half of 2016. CEMEX estimates a total investment of approximately US$340, of which as of December 31, 2015, approximately $185 has been incurred. 4 In 2015, includes the sales of non-strategic fixed assets in the United Kingdom, the United States and Spain for $584, $451 and $417, respectively. In 2014, includes the sales of non-strategic fixed assets in the United States, the United Kingdom and Ireland for $757, $539 and $537, respectively. In 2013, includes sales of non-strategic fixed assets in Mexico, the United States, and United Kingdom for $680, $702 and $920, respectively. 5 In 2015, refers to assets in Croatia reclassified to assets available for sale in the face of the balance sheet (note 4A) for $2,562, and in the United States reclassified to other assets held for sale (note 12) for $537. In 2014 refers primarily to the reclassification to other assets held for sale in connection with the sale of assets in the western region of Germany and the projected sale in Andorra, Spain (notes 12 and 15B) for $3,956 and $2,601, respectively. In 2013, as described in note 13A, CEMEX contributed fixed assets to its associate Concrete Supply Co., LLC for approximately $445. CEMEX has significant balances of property, machinery and equipment. As of December 31, 2015 and 2014, the consolidated balances of property, machinery and equipment, net, represented approximately 39.5% and 39.4%, respectively, of CEMEX’s total consolidated assets. As a result of impairment tests conducted on several CGUs considering certain triggering events, mainly: a) the closing and/ or reduction of operations of cement and ready-mix concrete plants resulting from adjusting the supply to current demand conditions; and b) the transferring of installed capacity to more efficient plants, for the years ended December 31, 2015, 2014 and 2013, CEMEX adjusted the related fixed assets to their estimated value in use in those circumstances in which the assets would continue in operation based on estimated cash flows during the remaining useful life, or to their realizable value, in case of permanent shut down, and recognized impairment losses (note 2J) during 2015, 2014 and 2013 in the following countries and for the following amounts: Spain United States Puerto Rico Latvia Panama Mexico United Kingdom Germany Bangladesh Other countries 2015 2014 2013 $ $ 392 269 172 126 118 46 19 – – 3 1,145 125 108 – – – 221 59 19 14 43 589 917 134 187 2 – 36 – 59 – – 1,335 75 Notes to the consolidated financial statements 15) Goodwill and intangible assets 15A) Balances and changes during the period As of December 31, 2015 and 2014, consolidated goodwill, intangible assets and deferred charges were summarized as follows: Intangible assets of indefinite useful life: Goodwill Intangible assets of definite useful life: Extraction rights Industrial property and trademarks Customer relationships Mining projects Others intangible assets 2015 2014 Cost Accumulated amortization Carrying amount Cost Accumulated amortization Carrying Amount $ 183,752 – 183,752 $ 160,544 – 160,544 34,927 822 6,166 992 10,900 $ 237,559 (4,600) (200) (5,162) (187) (7,092) (17,241) 30,327 622 1,004 805 3,808 220,318 30,677 267 5,405 1,746 8,563 $ 207,202 (3,347) (145) (4,012) (245) (5,969) (13,718) 27,330 122 1,393 1,501 2,594 193,484 The amortization of intangible assets of definite useful life was approximately $1,848 in 2015, $1,508 in 2014 and $1,327 in 2013, and was recognized within operating costs and expenses. Goodwill Changes in consolidated goodwill in 2015, 2014 and 2013, were as follows: Balance at beginning of period Business combinations Reclassification to assets held for sale Disposals, net Foreign currency translation effects Balance at end of period 2015 2014 2013 $ 160,544 64 (404) (552) 24,100 $ 183,752 144,457 – – – 16,087 160,544 142,444 – – – 2,013 144,457 76 Notes to the consolidated financial statements Intangible assets of definite life Changes in intangible assets of definite life in 2015, 2014 and 2013, were as follows: Balance at beginning of period Business combinations Additions (disposals), net 1 Reclassification to assets held for sale Amortization Impairment losses Foreign currency translation effects Balance at the end of period Balance at beginning of period Additions (disposals), net 1 Reclassification to assets held for sale Amortization Impairment losses Foreign currency translation effects Balance at the end of period Extraction rights Industrial property and trademarks Customer relations Mining projects Others 1 Total 2015 $ 27,330 458 157 1 (813) (10) 3,204 $ 30,327 1,393 156 (1) – (601) – 57 1,004 122 – 133 – (132) – 499 622 2014 1,501 – (577) – (32) – (87) 805 2,594 2 102 – (270) – 1,380 3,808 32,940 616 (186) 1 (1,848) (10) 5,053 36,566 Extraction rights Industrial property and trademarks Customer relations Mining projects $ 24,996 118 – (624) – 2,840 27,330 $ 140 605 – (134) – (489) 122 1,739 – (5) (509) – 168 1,393 1,341 (19) – (45) – 224 1,501 Others 1 Total 2013 2,267 (51) – (196) – 574 2,594 30,483 653 (5) (1,508) – 3,317 32,940 30,546 534 (48) (1,327) (163) 941 30,483 1 As of December 31, 2015 and 2014, “Others” includes the carrying amount of internal-use software of approximately $2,077 and $1,560, respectively. Capitalized direct costs incurred in the development stage of internal-use software, such as professional fees, direct labor and related travel expenses, amounted to approximately $615 in 2015, $702 in 2014 and $562 in 2013. 15B) Main acquisitions and divestitures during the reported periods As mentioned in note 4A, during 2015, CEMEX sold its operations in Austria and Hungary, and committed to sell its operations in Croatia, the later transaction is expected to be concluded during the first half of 2016. As of December 31, 2015, the assets and liabilities of CEMEX’s operations in Croatia are presented in the face of the balance sheet in single line items as assets and liabilities held for sale, as correspond. Moreover, the operations in Austria and Hungary for the ten month period ended October 31, 2015, and in Croatia for the year ended December 31, 2015, as well as the operations in Austria, Hungary and Croatia for the years 2014 and 2013, have been presented in the statements of operations in a single line item as “Discontinued operations, net of tax”, including the results on sale of assets, and the reclassification to the statements of operations of currency translation effects from Austria and Hungary accrued in equity until disposal of the net assets. 77 Notes to the consolidated financial statements On October 31, 2014, CEMEX entered into binding agreements with Holcim Ltd. (“Holcim”), a global producer of building materials based in Switzerland, currently LafargeHolcim after the merger of Holcim with Lafarge, S.A. during 2015. Pursuant to these agreements, CEMEX and Holcim agreed to conduct a series of related transactions, finally executed on January 5, 2015 after customary conditions precedent were concluded, with retrospective effects as of January 1, 2015, by means of which: a) in the Czech Republic, CEMEX acquired all of Holcim’s assets, including a cement plant, four aggregates quarries and 17 ready-mix plants for approximately €115 (US$139 or $2,049); b) in Germany, CEMEX sold to Holcim its assets in the western region of the country, consisting of one cement plant, two cement grinding mills, one slag granulator, 22 aggregates quarries and 79 ready-mix plants for approximately €171 (US$207 or $3,047), while CEMEX maintained its operations in the north, east and south of the country; and c) in Spain, CEMEX acquired from Holcim one cement plant in the southern part of the country with a production capacity of 850 thousand tons, and one cement mill in the central part of the country with grinding capacity of 900 thousand tons, among other related assets for approximately €88 (US$106 or $1,562), after working capital adjustments; and d) CEMEX agreed a final payment in cash, after combined debt and working capital adjustments agreed with Holcim, of approximately €33 (US$40 or $594). Holcim kept its other operations in Spain. The aforementioned transactions were authorized by the European competition authority in the case of Germany and Spain, and by the Czech Republic authority in respect to the transaction in this country. As of December 31, 2014, the related CEMEX’s net assets in the western region of Germany were reclassified to other assets and liabilities held for sale at their expected selling price less certain costs for disposal (notes 12 and 17). As of January 1, 2015, after concluding the purchase price allocation to the fair values of the assets acquired and liabilities assumed, no goodwill was determined in respect of the Czech Republic, while in Spain, the fair value of the net assets acquired for approximately €106 (US$129 or $1,894) exceeded the purchase price in approximately €19 (US$22 or $328), mainly as a result of market conditions in Spain and production overcapacity in the region. After performing the required reassessment of fair values, this gain was recognized during 2015 in the statements of operations. The purchase price allocation was as follows: Current assets Property, machinery and equipment Other non-current assets Intangible assets Fair value of assets acquired Current liabilities Non-current liabilities Fair value of liabilities assumed Fair value of net assets acquired Czech Republic Spain Total $ $ 231 1,419 270 590 2,510 117 344 461 2,049 59 2,004 – 2 2,065 57 114 171 1,894 290 3,423 270 592 4,575 174 458 632 3,943 78 Notes to the consolidated financial statements In Germany, the operations of the net assets sold by CEMEX to Holcim were consolidated by CEMEX line-by-line for the years ended December 31, 2014 and 2013. Considering that this transaction did not represent the disposal of entire reportable operating segment, such as in the case of Austria, Hungary and Croatia, for purposes of the presentation of discontinued operations. CEMEX measured the materiality of such net assets using a threshold of 5% of consolidated net sales, operating earnings before other expenses, net gain (loss) and total assets. Considering the results of the quantitative tests and its remaining ongoing operations in its operating segment in Germany, CEMEX concluded that the net assets sold in Germany did not reach the materiality thresholds to be classified as discontinued operations. The results of CEMEX’s quantitative tests for the years ended December 31, 2014 and 2013 were as follows: Millions of U.S. dollars Net sales CEMEX consolidated German assets sold Operating earnings before other expenses, net CEMEX consolidated German assets sold Consolidated net loss CEMEX consolidated German assets sold Total assets CEMEX consolidated German assets sold US$ US$ US$ US$ 2014 2013 15,709 498 3.2% 15,227 474 3.1% 1,659 17 1.0% 1,518 8 0.5% (425) 9 N/A (748) (1) 0.1% 34,936 316 0.9% 38,018 374 1.0% For the years 2014 and 2013, selected combined statement of operations information of the assets sold in Germany was as follows: Net sales Operating earnings before other expenses, net Net income (loss) 2014 2013 $ 6,655 227 122 6,091 98 (14) As of December 31, 2014, the condensed combined balance sheet of the assets sold in Germany was as follows: Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Total net assets 2014 713 3,945 4,658 595 1,016 1,611 3,047 $ $ During 2014, CEMEX sold significantly all the operating assets of Readymix plc (“Readymix”), CEMEX’s main operating subsidiary in the Republic of Ireland, and an indirect subsidiary of CEMEX España, for €19 (US$23 or $339), recognizing a loss on sale of approximately €14 (US$17 or $250). 79 Notes to the consolidated financial statements 15C) Analysis of goodwill impairment As of December 31, 2015 and 2014, goodwill balances allocated by operating segment were as follows: United States Mexico Northern Europe United Kingdom France Czech Republic Mediterranean Spain United Arab Emirates Egypt SA&C Colombia Dominican Republic Rest of SA&C 1 Asia Philippines Others Other reporting segments 2 2015 2014 $ 146,161 7,015 125,447 6,648 5,330 3,860 488 10,659 1,562 232 5,236 215 877 4,905 3,717 456 9,577 1,460 231 5,225 208 786 1,660 1,478 457 $ 183,752 406 160,544 1 This caption refers to the operating segments in the Caribbean, Argentina, Costa Rica and Panama. 2 This caption is primarily associated with Neoris N.V., CEMEX’s subsidiary involved in the sale of information technology and services. For purposes of goodwill impairment tests, all cash-generating units within a country are aggregated, as goodwill is allocated at that level. Considering materiality for disclosure purposes, certain balances of goodwill were presented for Rest of South America and the Caribbean, but this does not represent that goodwill was tested at a higher level than for operations in an individual country. Impairment tests are significantly sensitive to, among other factors, the estimation of future prices of CEMEX’s products, the development of operating expenses, local and international economic trends in the construction industry, the long-term growth expectations in the different markets, as well as the discount rates and the long-term growth rates applied. CEMEX’s cash flow projections to determine the value in use of its CGUs to which goodwill has been allocated consider the use of long-term economic assumptions. CEMEX believes that its discounted cash flow projections and the discount rates used reasonably reflect current economic conditions at the time of the calculations, considering, among other factors that: a) the cost of capital reflects current risks and volatility in the markets; and b) the cost of debt represents the average of industry specific interest rates observed in recent transactions. Other key assumptions used to determine CEMEX’s discounted cash flows are volume and price increases or decreases by main product during the projected periods. Volume increases or decreases generally reflect forecasts issued by trustworthy external sources, occasionally adjusted based on CEMEX’s actual backlog, experience and judgment considering its concentration in certain sectors, while price changes normally reflect the expected inflation in the respective country. Operating costs and expenses during all periods are maintained as a fixed percent of revenues considering historic performance. During the last quarter of 2015, 2014 and 2013, CEMEX performed its annual goodwill impairment test. Based on these analyses, CEMEX did not determine impairment losses of goodwill in any of the reported periods. 80 Notes to the consolidated financial statements CEMEX’s pre-tax discount rates and long-term growth rates used to determine the discounted cash flows in the group of CGUs with the main goodwill balances were as follows: Discount rates Groups of CGUs 2015 2014 2013 2015 United States Spain Mexico Colombia France United Arab Emirates United Kingdom Egypt Range of rates in other countries 8.6% 9.9% 9.6% 9.8% 9.0% 10.2% 8.8% 12.5% 9.0% - 13.8% 8.7% 10.1% 9.7% 9.7% 9.2% 10.4% 9.0% 11.6% 9.2% - 14.0% 9.8% 11.4% 10.9% 10.9% 10.7% 12.2% 10.5% 13.0% 11.0% - 12.3% 2.5% 1.9% 3.5% 4.0% 1.6% 3.6% 2.3% 4.6% 2.4% - 4.3% Growth rates 2014 2.5% 2.0% 3.8% 3.0% 1.7% 3.4% 2.4% 4.0% 2.1% - 4.9% 2013 2.5% 2.3% 3.8% 4.2% 1.7% 3.4% 2.1% 4.0% 2.4% - 5.0% As of December 31, 2015, the discount rates used by CEMEX in its cash flows projections remained almost flat in most cases as compared to the values determined in 2014. Among other factors, the funding cost observed in industry increased from 6.1% in 2014 to 6.9% in 2015, and the risk free rate increased from approximately 3.1% in 2014 to 3.2% in 2015. Nonetheless, these increases were offset by reductions in 2015 in the country specific sovereign yields in the majority of the countries where CEMEX operates. As of December 31, 2014, the discount rates decreased mainly as a result of the reduction of the funding cost as compared to the prior year and the reduction in the risk free rate, significant assumptions in the determination of the discount rates. As of December 31, 2013, the discount rates changed slightly from the values determined in 2012, in each case mainly as a result of variations in the country specific sovereign yield as compared to the prior year. In respect to long-term growth rates, following general practice under IFRS, CEMEX uses country specific rates, which are mainly obtained from the Consensus Economics, a compilation of analysts’ forecast worldwide, or from the International Monetary Fund when the first are not available for a specific country. In connection with the assumptions included in the table above, CEMEX made sensitivity analyses to changes in assumptions, affecting the value in use of all groups of CGUs with an independent reasonable possible increase of 1% in the pre-tax discount rate, and an independent possible decrease of 1% in the long-term growth rate. In addition, CEMEX performed cross-check analyses for reasonableness of its results using multiples of Operating EBITDA. In order to arrive at these multiples, which represent a reasonableness check of the discounted cash flow models, CEMEX determined a weighted average multiple of Operating EBITDA to enterprise value observed in the industry. The average multiple was then applied to a stabilized amount of Operating EBITDA and the result was compared to the corresponding carrying amount for each group of CGUs to which goodwill has been allocated. CEMEX considered an industry weighted average Operating EBITDA multiple of 9.0 times in 2015, 9.5 times in 2014 and 10.3 times in 2013. CEMEX’s own Operating EBITDA multiple was 8.7 times in 2015, 10.9 times in 2014 and 11.6 times in 2013. The lowest multiple observed in CEMEX’s benchmark was 5.8 times in 2015, 6.0 times in 2014 and 7.2 times in 2013, and the highest being 18.0 times in 2015, 16.4 times in 2014 and 20.9 times in 2013. As of December 31, 2015, 2014 and 2013, none of CEMEX’s sensitivity analyses resulted in a relative impairment risk in CEMEX’s operating segments. CEMEX continually monitors the evolution of the specific CGUs to which goodwill has been allocated that have presented relative goodwill impairment risk in any of the reported periods and, in the event that the relevant economic variables and the related cash flows projections would be negatively affected, it may result in a goodwill impairment loss in the future. 81 Notes to the consolidated financial statements CEMEX maintains a market capitalization significantly lower than its levels prior to the 2008 global crisis, which CEMEX believes is due to several factors, among others: a) the slower recovery of the construction industry in the United States, one of CEMEX’s main markets, which suffered one of the most deepest recessions since the Great Depression, which also significantly affected CEMEX’s operations in key countries and regions such as Mexico, Northern Europe and Mediterranean, and consequently CEMEX’s overall generation of cash flows; b) CEMEX’s significant amount of consolidated debt, which generates uncertainty in the markets regarding CEMEX’s ability to meet its financial obligations; and c) the generalized capital outflows from Emerging Markets securities, such as Mexico and Colombia, mainly due to high volatility generated by risk-aversion in the global financial markets, to safer assets in developed countries such as the United States. In dollar terms, CEMEX’s market capitalization as of December 31, 2015 was approximately US$7.4 billion ($126.8 billion), reflecting a decrease of approximately 41% in 2015 as compared to 2014, mainly as a result of the continuing significant depreciation of the Emerging Markets currencies against the dollar in 2015, which intensified in the second half of the year, driven by the material reduction in the international oil prices, uncertainty generated by the pace and timing of actions to increase interest rates in the United States, China growth concerns, lower global growth expectations and the uncertainty of CEMEX’s income in US Dollar terms from its operations in Emerging Markets such as Mexico and Colombia, countries with important dependence of oil revenues in its government budgets, which may result in the cancellation or delay of government infrastructure projects. CEMEX market capitalization decreased approximately 6% in 2014 compared to 2013 to approximately US$12.7 billion ($186.8 billion), also due to a significant depreciation of the peso against the dollar during the last quarter of 2014, then as part of a general appreciation of the dollar against all major currencies in the world during such period. As of December 31, 2015 and 2014, goodwill allocated to the United States accounted for approximately 80% and 78%, respectively, of CEMEX’s total amount of consolidated goodwill. In connection with CEMEX’s determination of value in use relative to its groups of CGUs in the United States in the reported periods, CEMEX has considered several factors, such as the historical performance of such operating segment, including operating losses in recent years, the long-term nature of CEMEX’s investment, the signs of recovery in the construction industry over the last three years, the significant economic barriers for new potential competitors considering the high investment required, and the lack of susceptibility of the industry to technology improvements or alternate construction products, among other factors. CEMEX has also considered recent developments in its operations in the United States, such as the increases in ready-mix concrete volumes of approximately 13% in 2015, 2% in 2014 and 8% in 2013, and the increases in ready-mix concrete prices of approximately 5% in 2015, 8% in 2014 and 6% in 2013, which are key drivers for cement consumption and CEMEX’s profitability, and which trends are expected to continue over the next few years, as anticipated in CEMEX’s cash flow projections. 82 Notes to the consolidated financial statements16) Financial instruments 16A) Short-term and long-term debt As of December 31, 2015 and 2014, CEMEX´s consolidated debt summarized by interest rates and currencies, was as follow: Floating rate debt Fixed rate debt Effective rate 1 Floating rate Fixed rate Currency Dollars Euros Pesos Other currencies 2015 2014 Short-term Long-term Total Short-term Long-term Total $ $ 176 42 218 62,319 166,806 229,125 62,495 166,848 229,343 $ 11,042 3,465 $ 14,507 54,529 136,798 191,327 65,571 140,263 205,834 5.5% 1.5% 4.0% 7.0% Short- term 87 38 – 93 218 Long- term 187,427 40,954 627 117 229,125 $ $ 2015 Total 187,514 40,992 627 210 229,343 Effective rate 1 6.5% 4.8% 4.4% 6.3% 5.2% 8.8% 4.4% 7.3% 2014 Short- Term Long- Term $ 14,439 23 – 45 $ 14,507 165,999 23,783 1,495 50 191,327 Total 180,438 23,806 1,495 95 205,834 Effective rate 1 6.6% 5.5% 6.5% 4.8% 1 In 2015 and 2014, represents the weighted average interest rate of the related debt agreements. As of December 31, 2015 and 2014, CEMEX´s consolidated debt summarized by type of instrument, was as follow: 2015 Short- term Long- term 2014 Short- term Long- term Bank loans Loans in foreign countries, 2016 to 2022 Syndicated loans, 2016 to 2020 $ Notes payable Notes payable in Mexico, 2016 to 2017 Medium-term notes, 2016 to 2025 Other notes payable, 2016 to 2025 Total bank loans and notes payable Current maturities $ 78 31 109 – – 23 23 132 86 218 996 52,825 53,821 627 171,988 2,775 175,390 229,211 (86) 229,125 Bank loans Loans in foreign countries, 2015 to 2018 Syndicated loans, 2015 to 2019 $ 7 – 7 223 47,018 47,241 Notes payable Notes payable in Mexico, 2015 to 2017 Medium-term notes, 2015 to 2025 Other notes payable, 2015 to 2025 Total bank loans and notes payable Current maturities – – 94 94 101 14,406 $ 14,507 614 155,470 2,408 158,492 205,733 (14,406) 191,327 As of December 31, 2015 and 2014, discounts, fees and other direct costs incurred in the issuance of CEMEX’s outstanding notes payable for approximately US$108 and US$155, respectively, adjust the balance of payable instruments, and are amortized to financing expense over the maturity of the related debt instruments. 83 Notes to the consolidated financial statements Changes in consolidated debt for the years ended December 31, 2015, 2014 and 2013 were as follows: Debt at beginning of year Proceeds from new debt instruments Debt repayments Foreign currency translation and inflation effects Debt at end of year 2015 2014 2013 $ 205,834 52,764 (64,237) 34,982 $ 229,343 190,980 72,534 (79,248) 21,568 205,834 178,135 40,661 (31,913) 4,097 190,980 As of December 31, 2015 and 2014, as presented in the table above of debt by type of instrument, approximately 24% and 23%, respectively, of CEMEX’s total indebtedness, was represented by bank loans, of which, in 2014, the most significant portion corresponded to those balances under CEMEX’s financing agreement entered into on September 29, 2014 as amended on July 23, 2015 (the “Credit Agreement”) of approximately US$1,286 ($18,957) and the financing agreement entered into on September 17, 2012, as amended several times including on October 31, 2014 (the “Facilities Agreement”) of approximately US$1,904 ($28,061), both agreements described elsewhere in this note, and in 2015, approximately US$3,062 ($52,763) corresponded to debt under CEMEX’s Credit Agreement, which was increased in August 2015 with new funds from 21 financial institutions in order to fully repay the total amount outstanding under the Facilities Agreement. Additionally on September 21, 2015 the principal amount of the Credit Agreement was further increased by three financial institutions in an amount to approximately US$30 ($517). In addition, as of December 31, 2015 and 2014, as presented in the table above of debt by type of instrument, approximately 76% and 77%, respectively, of CEMEX’s total indebtedness, was represented by notes payable, of which, the most significant portion was long- term in both periods. As of December 31, 2015 and 2014, CEMEX’s long-term notes payable are detailed as follows: Description Date of issuance Issuer 1, 2 Principal Currency amount Rate 1 Maturity date Repurchased Outstanding amount 3 US$ amount US$ 2015 2014 02/Apr/03 CEMEX Materials, LLC Dollar 08/Jul/15 CEMEX Colombia S.A. July 2025 Notes July 2025 Notes March 2025 Notes 4 January 2025 Notes 5, 6 April 2024 Notes March 2023 Notes 4 October 2022 Notes January 2022 Notes 5 January 2021 Notes April 2021 Notes May 2020 Notes 4, 6, 7 December 2019 Notes April 2019 USD Notes April 2019 Euro Notes March 2019 Notes October 2018 Variable Notes June 2018 Notes January 2018 Notes 4, 5, 6, 7 November 2017 Notes Peso September 2015 Variable Notes 4 05/Apr/11 CEMEX, S.A.B. de C.V. Dollar Other notes payable 7.70% 21/Jul/25 150 8.30% 08/Jul/25 COP 10,000 6.125% 05/May/25 750 03/Mar/15 CEMEX, S.A.B. de C.V. Dollar 5.70% 11/Jan/25 11/Sep/14 CEMEX, S.A.B. de C.V. Dollar 1,100 6.00% 01/Apr/24 Dollar 1,000 01/Apr/14 CEMEX Finance LLC 4.375% 05/Mar/23 Euro 03/Mar/15 CEMEX, S.A.B. de C.V. 550 9.375% 12/Oct/22 Dollar 1,500 12/Oct/12 CEMEX Finance LLC 4.75% 11/Jan/22 11/Sep/14 CEMEX, S.A.B. de C.V. 400 Euro 7.25% 15/Jan/21 02/Oct/13 CEMEX, S.A.B. de C.V. Dollar 1,000 5.25% 01/Apr/21 Euro 01/Apr/14 CEMEX Finance LLC 400 9.25% 12/May/20 12/May/10 CEMEX España, S.A. Dollar 1,193 6.50% 10/Dec/19 12/Aug/13 CEMEX, S.A.B. de C.V. Dollar 1,000 9.875% 30/Apr/19 704 Dollar 28/Mar/12 CEMEX España, S.A. 9.875% 30/Apr/19 179 28/Mar/12 CEMEX España, S.A. Euro 25/Mar/13 CEMEX, S.A.B. de C.V. Dollar 600 5.875% 25/Mar/19 500 L+475bps 15/Oct/18 02/Oct/13 CEMEX, S.A.B. de C.V. Dollar 9.50% 15/Jun/18 500 17/Sep/12 CEMEX, S.A.B. de C.V. Dollar 9.00% 11/Jan/18 11/Jan/11 CEMEX, S.A.B. de C.V. Dollar 1,650 4.40% 17/Nov/17 30/Nov/07 CEMEX, S.A.B. de C.V. 627 800 L+500bps 30/Sep/15 – – 7,462 – – – 3 750 (29) 1,071 1,000 598 (25) 1,475 435 1,000 435 – 989 621 194 600 500 448 – 36 – 2,344 150 $ 2,720 – 55 – 12,866 18,382 16,142 16,483 14,203 10,251 – 24,634 21,942 7,106 17,009 14,512 7,096 7,448 3,124 – 16,764 14,461 10,702 10,375 3,197 8,798 7,348 7,335 8,317 614 – 10,968 610 64 $ 175,390 158,492 3,355 10,302 8,564 7,702 – 627 – – – (1,193) (11) (83) – – – (52) (1,650) – (800) 1 In all applicable cases the issuer refers to CEMEX España, S.A. acting through its Luxembourg Branch. The letter “L” included above refers to LIBOR, which represents the London Inter-Bank Offered Rate, variable rate used in international markets for debt denominated in U.S. dollars. As of December 31, 2015 and 2014, 3-Month LIBOR rate was 0.6127% and 0.2556%, respectively. The contraction “bps” means basis points. One hundred basis points equal 1%. 84 Notes to the consolidated financial statements 2 Unless otherwise indicated, all issuances are fully and unconditionally guaranteed by CEMEX, S.A.B. de C.V., CEMEX México, S.A. de C.V., CEMEX Concretos, S.A. de C.V., Empresas Tolteca de México, S.A. de C.V., New Sunward Holding, B.V., CEMEX España, S.A., CEMEX Asia, B.V., CEMEX Corp., CEMEX Egyptian Investments, B.V., CEMEX Egyptian Investments II, B.V., CEMEX Finance LLC, CEMEX France Gestion, (S.A.S.), CEMEX Research Group AG, CEMEX Shipping B.V. and CEMEX UK. 3 Presented net of all outstanding notes held by CEMEX’s subsidiaries. 4 On March 30, 2015, in relation with the issuance of the March 2023 Notes and the March 2025 Notes, CEMEX completed the purchase for US$344 of the remaining principal amount of the January 2018 Notes. On May 15, 2015, CEMEX completed the purchase for US$213 of the remaining principal amount of the May 2020 Notes and on June 30, 2015, the purchase of the remaining principal amount for US$746 of the September 2015 Variable Notes. 5 On January 11, 2015, in relation with the issuance of the January 2025 Notes and the January 2022 Notes, CEMEX completed the purchase of US$217 principal amount of the January 2018 Notes. 6 On October 1, 2014, expired a cash tender offer to purchase up to US$1,175 aggregate principal amount of the January 2018 Notes and of the May 2020 Notes. Pursuant to this tender offer and using a portion of the proceeds from the issuance of the January 2025 Notes, CEMEX completed the purchase of approximately US$593 aggregate principal amount of the January 2018 Notes and approximately US$365 aggregate principal amount of the May 2020 Notes. 7 On April 9, 2014, through a cash tender offer using a portion of the proceeds from the issuance of the April 2024 Notes, CEMEX completed the purchase of US$483 aggregate principal amount of the January 2018 Notes and US$597 aggregate principal amount of the May 2020 Notes. During 2015, 2014 and 2013, as a result of the debt transactions incurred by CEMEX mentioned above, including exchange offers and tender offers to replace and/or repurchase existing debt instruments, CEMEX paid combined premiums, fees and issuance costs for approximately US$61 ($1,047), US$232 ($3,107) and US$155 ($1,988), respectively, of which approximately US$35 ($604) in 2015, US$167 ($2,236) in 2014 and US$110 ($1,410) in 2013, associated with the extinguished portion of the exchanged or repurchased notes, were recognized in the statement of operations in each year within “Financial expense.” In addition, approximately US$26 ($443) in 2015, US$65 ($871) in 2014 and US$45 ($578) in 2013, corresponding to issuance costs of new debt and/or the portion of the combined premiums, fees and issuance costs treated as a refinancing of the old instruments by considering that: a) the relevant economic terms of the old and new notes were not substantially different; and b) the final holders of the new notes were the same of such portion of the old notes; adjusted the carrying amount of the new debt instruments, and are amortized over the remaining term of each instrument. Moreover, proportional fees and issuance costs related to the extinguished debt instruments for approximately US$31 ($541) in 2015, US$87 ($1,161) in 2014 and US$34 ($436) in 2013 that were pending for amortization were recognized in the statement of operations of each year as part of “Financial expense.” The maturities of consolidated long-term debt as of December 31, 2015, were as follows: 2017 2018 2019 2020 2021 and thereafter 2015 $ 7,217 31,257 55,897 16,601 118,153 $ 229,125 As of December 31, 2015, CEMEX had the following lines of credit, the majority of which are subject to the banks’ availability, at annual interest rates ranging between 2.70% and 7.25%, depending on the negotiated currency: Other lines of credit in foreign subsidiaries Other lines of credit from banks Lines of credit Available $ 6,454 3,678 $ 10,132 4,762 3,678 8,440 85 Notes to the consolidated financial statements Credit Agreement, Facilities Agreement and Financing Agreement On September 29, 2014, CEMEX entered into the Credit Agreement for US$1,350, with nine of the main participating banks under its Facilities Agreement. The proceeds from the Credit Agreement were used to repay US$1,350 of debt under the Facilities Agreement. Following such repayment, and along with the repayment on September 12, 2014 of US$350 of debt under the Facilities Agreement using the proceeds from the January 2025 Notes, CEMEX reduced the total outstanding amount under the Facilities Agreement to approximately US$2,475. Moreover, on November 3, 2014, CEMEX received US$515 of additional commitments from banks that agreed to join the Credit Agreement, increasing the total principal amount to US$1,865. The incremental amount was applied to partially prepay the Facilities Agreement and other debt. As a result, as of December 31, 2014, the remaining outstanding amount under the Facilities Agreement was reduced to approximately US$2,050, scheduled to mature in 2017. On July 30, 2015, CEMEX repaid in full the total amount outstanding of approximately US$1,937 ($33,375) under the Facilities Agreement with new funds from 21 financial institutions, which joined the Credit Agreement under new tranches, allowing CEMEX to increase the average life of its syndicated bank debt to approximately 4 years as of such date. On September 21, 2015 three additional financial institutions provided additional commitments for approximately US$30. As a result, total commitments under the Credit Agreement include approximately €621 (US$675 or $11,624) and approximately US$3,149 ($54,257), out of which about US$735 ($12,664) are in a revolving credit facility. The Credit Agreement now has an amortization profile, considering all commitments, of approximately 10% in 2017; 25% in 2018; 25% in 2019; and 40% in 2020. The new tranches share the same guarantors and collateral package as the original tranches under the Credit Agreement. As a result of this refinancing, CEMEX has no significant debt maturities in 2016 and 2017 other than the approximately US$352 ($6,065) of Convertible Subordinated Notes due March 2016 (note 16B) and approximately US$373 ($6,427) corresponding to the first amortization under the Credit Agreement in September 2017. On August 14, 2009, CEMEX entered into a financing with its major creditors, as amended from time to time during 2009, 2010, 2011 and 2012 (the “Financing Agreement”), by means of which CEMEX extended the maturities of US$14,961 of syndicated loans, private placement notes and other obligations. After the application of the proceeds from several refinancing transactions, the application of the net proceeds obtained from the sale of assets, and an equity offering of the Parent Company in 2009, on September 17, 2012, CEMEX entered into the Facilities Agreement pursuant to an invitation to the creditors under the Financing Agreement to exchange their existing loans and private placement notes under the Financing Agreement for new loans and new private placement notes of approximately US$6,155 maturing in February 2017, US$500 of the June 2018 Notes and approximately US$525 aggregate principal amount of loans and private placement notes remained outstanding after the Exchange Offer under the existing Financing Agreement, as amended. Subsequently, after the application of proceeds resulting from the October 2022 Notes, the aggregate principal amount of loans and U.S. dollar private placement notes under the amended Financing Agreement was US$55 ($707), with a final maturity on February 14, 2014. This amount was repaid in full in March 2013 with proceeds from the issuance of the March 2019 Notes. All tranches under the Credit Agreement have substantially the same terms, including an applicable margin over LIBOR of between 250 to 400 basis points, depending on the leverage ratio (as defined below) of CEMEX, as follows: Consolidated leverage ratio Applicable margin > 5.50x < 5.50x > 5.00 < 5.00x > 4.50 < 4.50x > 4.00 < 4.00x > 3.50 < 3.50x 400 bps 350 bps 325 bps 300 bps 275 bps 250 bps 86 Notes to the consolidated financial statements As of December 31, 2015, under the Credit Agreement, CEMEX must observe the following thresholds: (a) the aggregate amount allowed for capital expenditures cannot exceed US$1,000 per year excluding certain capital expenditures, and, joint venture investments and acquisitions by CEMEX Latam Holdings, S.A. and its subsidiaries, which capital expenditures, joint venture investments and acquisitions at any time then incurred are subject to a separate aggregate limit of US$500 (or its equivalent); and (b) the amounts allowed for permitted acquisitions and investments in joint ventures cannot exceed US$400 per year. Nonetheless, such limitations do not apply if capital expenditures or acquisitions are funded with equity, equity-like issuances or asset disposals proceeds. Under the Credit Agreement there are no restrictions on asset swaps or mandatory prepayments of debt with excess cash held above certain amounts. On October 31, 2014, CEMEX obtained the required consents to amend certain provisions of the Facilities Agreement to substantially conform such agreement to the Credit Agreement. The debt under the Credit Agreement and previously under the Facilities Agreement is guaranteed by CEMEX México, S.A. de C.V., CEMEX Concretos, S.A. de C.V., Empresas Tolteca de México, S.A. de C.V., New Sunward Holding, B.V., CEMEX España, S.A., CEMEX Asia, B.V., CEMEX Corp., CEMEX Egyptian Investments, B.V., CEMEX Egyptian Investments II, B.V., CEMEX Finance LLC, CEMEX France Gestion, (S.A.S.), CEMEX Research Group AG, CEMEX Shipping B.V. and CEMEX UK. In addition, the debt under such agreements (together with all other senior capital markets debt issued or guaranteed by CEMEX, and certain other precedent facilities) is also secured by a first-priority security interest in: (a) substantially all the shares of CEMEX México, S.A. de C.V., CEMEX Operaciones México, S.A. de C.V, New Sunward Holding, B.V., CEMEX Trademarks Holding Ltd. and CEMEX España, S.A. (the “Collateral”); and (b) all proceeds of such Collateral. In addition to the restrictions mentioned above, and subject in each case to the permitted negotiated amounts and other exceptions, CEMEX is also subject to a number of negative covenants that, among other things, restrict or limit its ability to: (i) create liens; (ii) incur additional debt; (iii) change CEMEX’s business or the business of any obligor or material subsidiary (in each case, as defined in the Credit Agreement and the Facilities Agreement); (iv) enter into mergers; (v) enter into agreements that restrict its subsidiaries’ ability to pay dividends or repay intercompany debt; (vi) acquire assets; (vii) enter into or invest in joint venture agreements; (viii) dispose of certain assets; (ix) grant additional guarantees or indemnities; (x) declare or pay cash dividends or make share redemptions; (xi) enter into certain derivatives transactions; and (xii) exercise any call option in relation to any perpetual bonds CEMEX issues unless the exercise of the call options does not have a materially negative impact on its cash flow. The Credit Agreement contains a number of affirmative covenants that, among other things, require CEMEX to provide periodic financial information to its lenders. However, a number of those covenants and restrictions will automatically cease to apply or become less restrictive if CEMEX so elects when (i) CEMEX’s Leverage Ratio (as defined hereinafter) for the two most recently completed quarterly testing periods is less than or equal to 4.0 times; and (ii) no default under the Credit Agreement is continuing. At that point the Leverage Ratio must not exceed 4.25 times. Restrictions that will cease to apply when CEMEX satisfies such conditions include the capital expenditure limitations mentioned above and several negative covenants, including limitations on CEMEX’s ability to declare or pay cash dividends and distributions to shareholders, limitations on CEMEX’s ability to repay existing financial indebtedness, certain asset sale restrictions, certain mandatory prepayment provisions, and restrictions on exercising call options in relation to any perpetual bonds CEMEX issues. At such time, several baskets and caps relating to negative covenants will also increase, including permitted financial indebtedness, permitted guarantees and limitations on liens. However, CEMEX cannot assure that it will be able to meet the conditions for these restrictions to cease to apply prior to the final maturity date under the Credit Agreement. In addition, the Credit Agreement, and previously the Facilities Agreement, contains events of default, some of which may be outside of CEMEX’s control. As of December 31, 2015, CEMEX is not aware of any event of default. CEMEX cannot assure that it will be able to comply with the restrictive covenants and limitations contained in the Credit Agreement. CEMEX’s failure to comply with such covenants and limitations could result in an event of default, which could materially and adversely affect CEMEX’s business and financial condition. 87 Notes to the consolidated financial statementsFinancial Covenants The Credit Agreement and previously the Facilities Agreement requires CEMEX the compliance with financial ratios, which mainly include: a) the consolidated ratio of debt to Operating EBITDA (the “Leverage Ratio”); and b) the consolidated ratio of Operating EBITDA to interest expense (the “Coverage Ratio”). These financial ratios are calculated according to the formulas established in the debt contracts using the consolidated amounts under IFRS. CEMEX must comply with a Coverage Ratio and a Leverage Ratio for each period of four consecutive fiscal quarters as follows: Period Coverage Ratio Period Leverage Ratio For the period ending on December 31, 2012 up to and including the period ending on September 30, 2014 For the period ending on December 31, 2014 up to and including the period ending on September 30, 2015 > = 1.50 > = 1.75 For the period ending on December 31, 2015 up to and including the period ending on March 31, 2016 > = 1.85 For the period ending on June 30, 2016 up to and including the period ending on September 30, 2016 > = 2.00 For the period ending on December 31, 2016 and each subsequent reference period > = 2.25 For the period ending on December 31, 2012 up to and including the period ending on December 31, 2013 For the period ending on September 30, 2014 For the period ending on December 31, 2014 up to and including the period ending on March 31, 2015 For the period ending on June 30, 2015 up to and including the period ending on March 31, 2016 For the period ending on June 30, 2016 up to and including the period ending on September 30, 2016 For the period ending on December 31, 2016 up to and including the period ending on March 31, 2017 For the period ending on June 30, 2017 up to and including the period ending on September 30, 2017 For the period ending on December 31, 2017 up to and including the period ending on March 31, 2018 For the period ending on June 30, 2018 up to and including the period ending on September 30, 2018 For the period ending on December 31, 2018 up to and including the period ending on March 31, 2019 For the period ending on June 30, 2019 and each subsequent reference period < = 7.00 < = 6.75 < = 6.50 < = 6.00 < = 5.75 < = 5.50 < = 5.25 < = 5.00 < = 4.50 < = 4.25 < = 4.00 CEMEX’s ability to comply with these ratios may be affected by economic conditions and volatility in foreign exchange rates, as well as by overall conditions in the financial and capital markets. For the compliance periods ended as of December 31, 2015, 2014 and 2013, taking into account the Credit Agreement, the Facilities Agreement and the Financing Agreement, as applicable, CEMEX was in compliance with the financial covenants imposed by its debt contracts. The main consolidated financial ratios as of December 31, 2015, 2014 and 2013 were as follows: Leverage ratio 1, 2 Coverage ratio 3 Consolidated financial ratios 2015 2014 2013 Limit Calculation =< 6.00 5.21 Limit Calculation => 1.85 2.61 =< 6.50 5.19 => 1.75 2.34 =< 7.00 5.49 > 1.50 2.11 1 The leverage ratio is calculated in pesos by dividing “Funded debt” by pro forma Operating EBITDA for the last twelve-months as of the calculation date. Funded debt equals debt, as reported in the balance sheet excluding finance leases, components of liability of convertible subordinated notes, plus perpetual debentures and guarantees, plus or minus the fair value of derivative financial instruments, as applicable, among other adjustments. 2 Pro forma Operating EBITDA represents, all calculated in pesos, Operating EBITDA for the last twelve months as of the calculation date, plus the portion of Operating EBITDA referring to such twelve-month period of any significant acquisition made in the period before its consolidation in CEMEX, minus Operating EBITDA referring to such twelve-month period of any significant disposal that had already been liquidated. 3 The coverage ratio is calculated in pesos using the amounts from the financial statements, by dividing the pro forma Operating EBITDA by the financial expense for the last twelve months as of the calculation date. Financial expense includes interest accrued on the perpetual debentures. 88 Notes to the consolidated financial statements CEMEX will classify all of its outstanding debt as current debt in its balance sheet if: 1) as of any measurement date CEMEX fails to comply with the aforementioned financial ratios; or 2) the cross default clause that is part of the Credit Agreement is triggered by the provisions contained therein; 3) as of any date prior to a subsequent measurement date CEMEX expects not to be in compliance with such financial ratios in the absence of: a) amendments and/or waivers covering the next succeeding 12 months; b) high probability that the violation will be cured during any agreed upon remediation period and be sustained for the next succeeding 12 months; and/or c) a signed refinancing agreement to refinance the relevant debt on a long-term basis. Moreover, concurrent with the aforementioned classification of debt in the short-term, the noncompliance of CEMEX with the financial ratios agreed upon pursuant to the Credit Agreement or, in such event, the absence of a waiver of compliance or a negotiation thereof, after certain procedures upon CEMEX’s lenders’ request, they would call for the acceleration of payments due under the Credit Agreement. That scenario will have a material adverse effect on CEMEX’s liquidity, capital resources and financial position. 16B) Other financial obligations As of December 31, 2015 and 2014, other financial obligations in the consolidated balance sheet are detailed as follows: I. Convertible subordinated notes due 2020 II. Convertible subordinated notes due 2018 II. Convertible subordinated notes due 2016 III. Convertible subordinated notes due 2015 IV. Mandatory convertible securities 2019 V. Liabilities secured with accounts receivable VI. Capital leases 2015 2014 Short-term Long-term Total Short-term Long-term Total $ – – 6,007 – 239 9,071 270 $ 15,587 8,569 10,826 – – 961 1,430 1,482 23,268 8,569 10,826 6,007 – 1,200 10,501 1,752 38,855 $ $ – – – 2,983 206 8,063 260 11,512 – 8,891 13,642 – 1,194 1,700 1,656 27,083 – 8,891 13,642 2,983 1,400 9,763 1,916 38,595 Financial instruments convertible into CEMEX’s shares contain components of liability and equity, which are recognized differently depending upon the currency in which the instrument is denominated and the functional currency of the issuer (note 2F). I. Optional convertible subordinated notes due 2020 During 2015, the Parent Company issued US$521 ($8,977) aggregate principal amount of 3.72% convertible subordinated notes due in March 2020 (the “2020 Convertible Notes”). The 2020 Convertible Notes were issued: a) US$200 as a result of the exercise in March 13, 2015 of US$200 notional amount of Contingent Convertible Units (“CCUs”) described below, and b) US$321 as a result of the exchange with certain institutional investors in May 21, 2015, which together with early conversions, resulted in a total of approximately US$626 aggregate principal amount of 3.25% convertible subordinated notes due in 2016 (the “2016 Convertible Notes”) held by such investors and the issuance and delivery by CEMEX of an estimated 42 million ADSs, which included a number of additional ADSs issued to the holders as non-cash inducement premiums. The 2020 Convertible Notes, which are subordinated to all of CEMEX’s liabilities and commitments, are convertible into a fixed number of CEMEX’s ADSs at any time at the holder’s election and are subject to antidilution adjustments. The difference at the exchange date between the fair value of the 2016 Convertible Notes and the 42 million ADSs against the fair value of the 2020 Convertible Notes, represented a loss of approximately $365 recognized in 2015 as part of other financial (expense) income, net. As of December 31, 2015, the conversion price per ADS was approximately 11.90 dollars. The aggregate fair value of the conversion option as of the issuance dates which amounted to approximately $199 was recognized in other equity reserves. After antidilution adjustments, the conversion rate as of December 31, 2015 was 84.0044 ADS per each 1 thousand dollars principal amount of such notes. 89 Notes to the consolidated financial statements II. Optional convertible subordinated notes due in 2016 and 2018 On March 15, 2011, CEMEX, S.A.B. de C.V. closed the offering of US$978 ($11,632) aggregate principal amount of the 2016 Convertible Notes and US$690 ($8,211) principal amount of 3.75% convertible subordinated notes due in 2018 (the “2018 Convertible Notes”). The notes are subordinated to all of CEMEX’s liabilities and commitments. The notes are convertible into a fixed number of CEMEX’s ADSs, and are subject to antidilution adjustments. As of December 31, 2015 and 2014, the conversion price per ADS was approximately 9.27 dollars and 9.65 dollars, respectively. After antidilution adjustments, the conversion rate as of December 31, 2015 and 2014 was 107.8211 ADS and 103.6741 ADS, respectively, per each 1 thousand dollars principal amount of such notes. Concurrent with the offering, a portion of the net proceeds from this transaction were used to fund the purchase of capped call options, which are generally expected to reduce the potential dilution cost to CEMEX upon the potential conversion of such notes (note 16D). After the exchange of notes described in the paragraph above, as of December 31, 2015, US$352 of the 2016 Convertible Notes due in March 2016 remain outstanding. III. Optional convertible subordinated notes due in 2015 On March 30, 2010, CEMEX, S.A.B. de C.V. issued US$715 ($8,837) aggregate principal amount of 4.875% Optional Convertible Subordinated Notes due 2015 (the “2015 Convertible Notes”), which were subordinated to all of CEMEX’s liabilities and commitments, and were convertible into a fixed number of CEMEX’s ADSs, at the holder’s election considering antidilution adjustments. As described above, in March 2015 CEMEX repaid at maturity the remaining balance of these notes. As of December 31, 2014, the conversion price per ADS was approximately 11.18 dollars. After antidilution adjustments, the conversion rate as of December 31, 2014 was 89.4729 ADS, per each 1 thousand dollars principal amount of such notes. Concurrent with the offering, a portion of the proceeds were used to enter into a capped call transaction that was expected to generally reduce the potential dilution cost to CEMEX upon the potential conversion of the notes (note 16D). On several dates during 2014, CEMEX agreed with certain institutional holders the early conversion of approximately US$511 in aggregate principal amount of the 2015 Convertible Notes in exchange for approximately 50.4 million ADSs, which included the number of additional ADSs issued to the holders as non-cash inducement premiums. As a result of the early conversion agreements the liability component of the converted notes of approximately $6,483, was reclassified from other financial obligations to other equity reserves. In addition, considering the issuance of shares, CEMEX increased common stock for $4 and additional paid-in capital for $8,037 against other equity reserves, and recognized expense for the inducement premiums of approximately $957, representing the fair value of the ADSs at the issuance dates, in the statement of operations in 2014 within “Other financial (expense) income, net.” As of December 31, 2014, the outstanding principal amount of the 2015 Convertible Notes was of approximately US$204. On October 3, 2014, pursuant to a private offer, CEMEX, S.A.B. de C.V issued US$200 ($2,948) “CCUs” in connection with the 2015 Convertible Notes, by means of which, in exchange for monthly payments by CEMEX to the holders of the CCUs at the annual rate of 3.0% on the notional amount, CEMEX secured the refinancing for any of the 2015 Convertible Notes that would mature without conversion up to US$200 of the principal amount. Based on the contract of the CCUs, the holders invested the US$200 in treasury bonds of the United States, and irrevocably agreed that such investment would be applied, if necessary, in March 2015, to subscribe new convertible notes of the Parent Company for up to US$200. As previously mentioned, in March 13, 2015, CEMEX exercised the CCUs and issued US$200 aggregate principal amount of the 2020 Convertible Notes to the holders of such CCUs. CEMEX used the proceeds from the exercise of CCUs and the corresponding issuance of US$200 of the 2020 Convertible Notes to partially repay at their maturity in March 15, 2015, US$204 of the remaining aggregate principal amount of the 2015 Convertible Notes described above. 90 Notes to the consolidated financial statementsIV. Mandatorily convertible securities due in 2019 In December 2009, CEMEX, S.A.B. de C.V. completed an exchange offer of debt into mandatorily convertible securities in pesos for approximately US$315 ($4,126) with maturity in 2019 and annual rate of 10% (the “2019 Mandatorily Convertible Securities”). Reflecting antidilution adjustments, the notes will be converted at maturity or earlier if the price of the CPO reaches approximately $29.50 into approximately 210 million CPOs at a conversion price of approximately $19.66 per CPO. During their tenure, holders have an option to voluntarily convert their securities, on any interest payment date into CPOs. Considering the currency in which the notes are denominated and the functional currency of the Parent Company’s financing division (note 2D) the conversion option embedded in these securities is treated as a stand-alone derivative liability at fair value through the statement of operations, recognizing an initial effect of $365. Changes in fair value of the conversion option generated gains for approximately US$18 ($310) in 2015, gains of approximately US$11($159) in 2014 and losses of approximately US$10 ($135) in 2013. V. Liabilities secured with accounts receivable As mentioned in note 9, as of December 31, 2015 and 2014, CEMEX maintained securitization programs for the sale of trade accounts receivable established in Mexico, the United States, France and the United Kingdom, by means of which, CEMEX effectively surrenders control associated with the trade accounts receivable sold and there is no guarantee or obligation to reacquire the assets. However, considering that CEMEX retains certain residual interest in the programs and/or maintains continuing involvement with the accounts receivable, the funded amounts of the trade receivables sold are recognized in “Other financial obligations,” and the receivables sold are maintained in the balance sheet. VI. Capital leases CEMEX has several operating and administrative assets, including buildings and mobile equipment, under capital lease contracts. Future payments associated with these contracts are presented in note 23E. 16C) Fair value of financial instruments Financial assets and liabilities The carrying amounts of cash, trade accounts receivable, other accounts receivable, trade accounts payable, other accounts payable and accrued expenses, as well as short-term debt, approximate their corresponding estimated fair values due to the short-term maturity and revolving nature of these financial assets and liabilities. Cash equivalents and certain long-term investments are recognized at fair value, considering to the extent available, quoted market prices for the same or similar instruments. The estimated fair value of CEMEX´s long-term debt is level 2, and is either based on estimated market prices for such or similar instruments, considering interest rates currently available for CEMEX to negotiate debt with the same maturities, or determined by discounting future cash flows using market-based interest rates currently available to CEMEX. As of December 31, 2015 and 2014, the carrying amounts of financial assets and liabilities and their respective fair values were as follows: Financial assets Derivative instruments (notes 13B and 16D) Other investments and non-current accounts receivable (note 13B) Financial liabilities Long-term debt (note 16A) Other financial obligations (note 16B) Derivative instruments (notes 16D and 17) 2015 2014 Carrying amount Fair value Carrying amount Fair value $ $ 869 5,680 6,549 869 5,537 6,406 $ 229,125 23,268 178 $ 252,571 220,662 24,863 178 245,703 $ 4,816 5,501 $ 10,317 4,816 5,252 10,068 $ 191,327 27,083 413 $ 218,823 200,366 37,329 413 238,108 91 Notes to the consolidated financial statements Fair Value Hierarchy As of December 31, 2015 and 2014, assets and liabilities carried at fair value in the consolidated balance sheets are included in the following fair value hierarchy categories: 2015 Level 1 Level 2 Level 3 Total Assets measured at fair value Derivative instruments (notes 13B and 16D) Investments available-for-sale (note 13B) Investments held for trading (note 13B) Liabilities measured at fair value Derivative instruments (notes 16D and 17) 2014 Assets measured at fair value Derivative instruments (notes 13B and 16D) Investments available-for-sale (note 13B) Investments held for trading (note 13B) Liabilities measured at fair value Derivative instruments (notes 16D and 17) $ $ $ $ $ $ – 632 – 632 869 – 317 1,186 – 178 – – – – – 869 632 317 1,818 178 Level 1 Level 2 Level 3 Total – 246 – 246 4,816 – 322 5,138 – 413 – – – – – 4,816 246 322 5,384 413 16D) Derivative financial instruments During the reported periods, in compliance with the guidelines established by its Risk Management Committee and the restrictions set forth by its debt agreements, CEMEX held interest rate swaps, as well as forward contracts and other derivative instruments on CEMEX, S.A.B. de C.V.’s own CPOs and/or ADSs and third parties’ shares, with the objective of, as the case may be: a) changing the risk profile associated with the price of raw materials and other energy projects; and b) other corporate purposes. As of December 31, 2015 and 2014, the notional amounts and fair values of CEMEX’s derivative instruments were as follows: (U.S. dollars millions) I. Interest rate swaps II. Equity forwards on third party shares III. Options on the Parent Company’s own shares IV. Foreign exchange forward contracts 2015 2014 Notional amount Fair value Notional amount Fair value US$ US$ 157 24 1,145 173 1,499 28 6 12 (1) 45 165 27 1,668 – 1,860 33 – 266 – 299 The fair values determined by CEMEX for its derivative financial instruments are Level 2. There is no direct measure for the risk of CEMEX or its counterparties in connection with the derivative instruments. Therefore, the risk factors applied for CEMEX’s assets and liabilities originated by the valuation of such derivatives were extrapolated from publicly available risk discounts for other public debt instruments of CEMEX and its counterparties. The caption “Other financial (expense) income, net” includes gains and losses related to the recognition of changes in fair values of the derivative instruments during the applicable period and that represented net losses of $2,981 (US$173) and of $679 (US$46) in 2015 and 2014, respectively, and a gain of $2,126 (US$163) in 2013. As of December 31, 2014, pursuant to net balance settlement agreements, existed cash deposits in margin accounts that guaranteed obligations through derivative financial instruments were offset with the fair value of the derivative instruments for $206 (US$14). 92 Notes to the consolidated financial statements The estimated fair value of derivative instruments fluctuates 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 overall exposure attributable to fluctuations 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 exposure to the use of these derivatives. The amounts exchanged are determined based on the basis of the notional amounts and other terms included in the derivative instruments. I. Interest rate swap contracts As of December 31, 2015 and 2014, CEMEX had an interest rate swap maturing in September 2022 associated with an agreement entered into by CEMEX for the acquisition of electric energy in Mexico, which fair value represented assets of approximately US$28 ($482) and US$33 ($486), respectively. Pursuant to this instrument, during the tenure of the swap and based on its notional amount, CEMEX will receive a fixed rate of 5.4% and will pay LIBOR. Changes in the fair value of this interest rate swap generated losses of US$4 ($69) in 2015, of US$1 ($3) in 2014 and US$16 ($207) in 2013, recognized in the statements of operations for each year. II. Equity forwards in third party shares As of December 31, 2015 and 2014, CEMEX had a forward contract to be settled in cash maturing in October 2016 over the price, in both years, of 59.5 million CPOs of Axtel, a Mexican telecommunications company traded in the MSE. Changes in the fair value of this instrument generated gains of US$15 ($258) in 2015, losses of US$9 ($133) in 2014 and gains of US$6 ($76) in 2013 recognized in the statements of operations for each period. In October 2015, Axtel announced its merger with Alestra, a Mexican entity provider of information technology solutions and member of Alfa Group. The merger is expected to be effective beginning February 15, 2016. In connection with this merger, on January 6, 2016, CEMEX settled in cash the forward contract it maintained in shares of Axtel (note 26). III. Options on the Parent Company’s own shares On March 15, 2011, CEMEX, S.A.B. de C.V. entered into a capped call transaction, after antidilution adjustments, over approximately 173 million ADSs (101 million ADSs maturing in March 2016 and 72 million ADSs maturing in March 2018), in connection with the 2016 Convertible Notes and the 2018 Convertible Notes and to effectively increase the conversion price for CEMEX’s ADSs under such notes, by means of which, at maturity of the notes, if the market price per ADS is above the strike price of approximately 9.65 dollars, CEMEX will receive in cash the difference between the market price and the strike price, with a maximum appreciation per ADS of approximately 4.45 dollars for the 2016 Convertible Notes and 5.94 dollars for the 2018 Convertible Notes. CEMEX paid aggregate premiums of approximately US$222. As of December 31, 2015 and 2014, the fair value of such options represented an asset of approximately US$22 ($379) and US$294 ($4,335), respectively. Changes in the fair value of these instruments generated losses of US$228 ($3,928) in 2015, losses of US$65 ($962) in 2014 and gains of US$127 ($1,663) in 2013, recognized within “Other financial (expense) income, net” in the statements of operations. During 2015, CEMEX amended a portion of the capped calls relating to the 2016 Convertible Notes with the purpose of unwinding the position, as a result CEMEX received an aggregate amount of approximately US$44 ($758) in cash, equivalent to the unwind of 44.2% of the total notional amount of such capped call. On March 30, 2010, CEMEX, S.A.B. de C.V. entered into a capped call transaction, after antidilution adjustments, over approximately 64 million ADSs maturing in March 2015, in connection with the 2015 Convertible Notes and to effectively increase the conversion price for CEMEX’s ADSs under such notes, by means of which, at maturity of the notes, if the market price per ADS was above the strike price of approximately 11.18 dollars, CEMEX would receive in cash the difference between the market price and the strike price, with a maximum appreciation per ADS of approximately 4.30 dollars. CEMEX paid a premium of approximately US$105. In January, 2014, CEMEX initiated a process to amend the terms of this capped call transaction, pursuant to which, using the existing market valuation of the instrument, CEMEX received approximately 7.7 million zero-strike call options over a same number of ADSs. In July 2014, CEMEX amended the zero-strike call options to fix a minimum value of approximately US$94. As part of the amendment, CEMEX also retained the economic value of approximately 1 million ADSs. During December 2014, CEMEX further amended and unwound the zero-strike call options, monetizing the remainder value of the approximately 1 million ADSs it had retained, pursuant to which CEMEX received a total payment of approximately US$105. During 2014 and 2013, changes in the fair value of these options generated gains of approximately US$17 ($253) and US$36 ($465), respectively, which were recognized within “Other financial (expense) income, net” in the statements of operations. 93 Notes to the consolidated financial statementsIn addition, in connection with the 2019 Mandatorily Convertible Securities (note 16B); that the securities are denominated in pesos and the functional currency of the Parent Company’s division that issued the securities is the dollar, CEMEX separated the conversion option embedded in such instruments and recognized it at fair value through profit or loss, which as of December 31, 2015 and 2014, resulted in a liability of US$10 ($178) and US$28 ($413), respectively. Changes in fair value generated gains of US$18 ($310) in 2015, gains of US$11 ($159) in 2014 and losses of US$10 ($135) in 2013. IV. Foreign exchange forward contracts As of December 31, 2015, CEMEX held foreign exchange forward contracts maturing in April 2016 for a notional amount of approximately US$173, negotiated to hedge financial risks associated with variations in foreign exchange rates of certain net investments in foreign subsidiaries which functional currencies are the Euro and the Dollar. As of December 31, 2015, the estimated fair value of these contracts resulted in a liability of approximately US$1 ($17). Changes in the fair value of this instrument, including the effects resulting from positions settled during the year, generated in 2015 gains of approximately US$26 ($448), recognized within “Other financial (expense) income, net” in the statements of operations. During 2013, the notional amount of the guarantee CEMEX had granted for a notional amount of approximately US$360, in connection with put option transactions on CEMEX’s CPOs entered into by Citibank with a Mexican trust, was gradually unwound. Changes in fair value were recognized in the statements of operations within “Other financial (expense) income, net,” representing losses of US$22 ($284) in 2013. Other derivative instruments In addition to the table above, as of December 31, 2015, CEMEX had a forward contract with a notional amount of approximately US$16 ($276), negotiated to hedge the price of diesel fuel in the United Kingdom. By means of this contract, CEMEX fixed the fuel component of the market price of diesel over certain volume representing a portion of the estimated diesel consumption in such operations. This contract has been documented as a cash flow hedge of fuel consumption, and as such, changes in fair value are recognized through other comprehensive income. As of December 31, 2015, the fair value of this contract represented a liability of approximately US$3 ($52). 16E) Risk management In recent years, with the exception of the capped call transactions entered into in March 2010 and March 2011 mentioned above (notes 16B and 16D), CEMEX has significantly decreased its use of derivatives instruments related to debt, both currency and interest rate derivatives, thereby reducing the risk of cash margin calls. In addition, the Credit and the Facilities Agreement significantly restrict CEMEX’s ability to enter into certain derivative transactions. Credit risk Credit risk is the risk of financial loss faced by CEMEX if a customer or counterpart of a financial instrument does not meet its contractual obligations and originates mainly from trade accounts receivable. As of December 31, 2015 and 2014, the maximum exposure to credit risk is represented by the balance of financial assets. Management has developed policies for the authorization of credit to customers. The exposure to credit risk is monitored constantly according to the behavior of payment of the debtors. Credit is assigned on a customer-by-customer basis and is subject to assessments which consider the customers’ payment capacity, as well as past behavior regarding due dates, balances past due and delinquent accounts. In cases deemed necessary, CEMEX’s management requires guarantees from its customers and financial counterparties with regard to financial assets. The Company’s management has established a policy of low risk which analyzes the creditworthiness of each new client individually before offering the general conditions of payment terms and delivery, the review includes external ratings, when references are available, and in some cases bank references. Threshold of purchase limits are established for each client, which represent the maximum purchase amounts that require different levels of approval. Customers that do not meet the levels of solvency requirements imposed by CEMEX can only carry out transactions by paying cash in advance. As of December 31, 2015, considering CEMEX’s best estimate of potential losses based on an analysis of age and considering recovery efforts, the allowance for doubtful accounts was $1,999. 94 Notes to the consolidated financial statementsInterest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates, which only affects CEMEX’s results if the fixed-rate long-term debt is measured at fair value. All of CEMEX’s fixed-rate long-term debt is carried at amortized cost and therefore is not subject to interest rate risk. CEMEX’s exposure to the risk of changes in market interest rates relates primarily to its long-term debt obligations with floating interest rates. As of December 31, 2015 and 2014, CEMEX was subject to the volatility of floating interest rates, which, if such rates were to increase, may adversely affect its financing cost and the results for the period. CEMEX manages its interest rate risk by balancing its exposure to fixed and variable rates while attempting to reduce its interest costs. As of December 31, 2015 and 2014, approximately 27% and 29%, respectively, of CEMEX’s long-term debt was denominated in floating rates at a weighted average interest rate of LIBOR plus 367 basis points in 2015 and 428 basis points in 2014. As of December 31, 2015 and 2014, if interest rates at that date had been 0.5% higher, with all other variables held constant, CEMEX’s net income for 2015 would have reduced by approximately US$18 ($312) and CEMEX’s net loss for 2014 would have increased by approximately US$2 ($32), as a result of higher interest expense on variable rate denominated debt. This analysis does not include the interest rate swaps held by CEMEX during 2015 and 2014. Foreign currency risk Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. CEMEX’s exposure to the risk of changes in foreign exchange rates relates primarily to its operating activities. Due to its geographic diversification, CEMEX’s revenues and costs are generated and settled in various countries and in different currencies. For the year ended December 31, 2015, approximately 20% of CEMEX’s net sales, before eliminations resulting from consolidation, were generated in Mexico, 26% in the United States, 8% in the United Kingdom, 3% in Germany, 5% in France, 4% in the Rest of Northern Europe region, 3% in Spain, 3% in Egypt, 4% in the Rest of Mediterranean region, 5% in Colombia, 8% in the Rest of South America and the Caribbean region, 4% in Asia and 7% in CEMEX’s other operations. Foreign exchange gains and losses occur by monetary assets or liabilities in a currency different from its functional currency, and are recorded in the consolidated statements of operations, except for exchange fluctuations associated with foreign currency indebtedness directly related to the acquisition of foreign entities and related parties’ long-term balances denominated in foreign currency, for which are reported in the statement of other comprehensive income (loss). As of December 31, 2015 and 2014, excluding from the sensitivity analysis the impact of translating the net assets of foreign operations into CEMEX’s reporting currency, considering a hypothetic 10% strengthening of the U.S. dollar against the Mexican peso, with all other variables held constant, CEMEX’s net loss for 2015 and 2014 would have increased by approximately US$232 ($3,998) and US$216 ($3,186), respectively, as a result of higher foreign exchange losses on CEMEX’s dollar-denominated net monetary liabilities held in consolidated entities with other functional currencies. Conversely, a hypothetic 10% weakening of the U.S. dollar against the Mexican peso would have the opposite effect. As of December 31, 2015, approximately 82% of CEMEX’s financial debt was Dollar-denominated, approximately 18% was Euro- denominated, less than 1% was Peso-denominated and immaterial amounts were denominated in other currencies; therefore, CEMEX had a foreign currency exposure arising from the Dollar-denominated financial debt, and the Euro-denominated financial debt, versus the currencies in which CEMEX’s revenues are settled in most countries in which it operates. CEMEX cannot guarantee that it will generate sufficient revenues in Dollars and Euros from its operations to service these obligations. As of December 31, 2015 and 2014, CEMEX had not implemented any derivative financing hedging strategy to address this foreign currency risk. 95 Notes to the consolidated financial statementsAs of December 31, 2015 and 2014, CEMEX’s consolidated net monetary assets (liabilities) by currency are as follows: Monetary assets Monetary liabilities Net monetary assets (liabilities) Out of which: Dollars Pesos Euros Other currencies Monetary assets Monetary liabilities Net monetary assets (liabilities) Out of which: Dollars Pesos Euros Other currencies Mexico USA $ 13,418 12,690 728 $ 10,266 22,593 (12,327) $ $ (69) 797 – – 728 (12,334) 9 – (2) (12,327) Mexico USA $ 15,565 12,389 3,176 $ $ $ (136) 3,312 – – 3,176 8,319 14,876 (6,557) (6,560) 3 – – (6,557) Northern Europe 13,058 33,583 (20,525) – – (7,874) (12,651) (20,525) Northern Europe 15,954 32,619 (16,665) – – (4,155) (12,510) (16,665) 2015 Mediterranean SAC Asia Others Total 9,616 11,592 (1,976) 58 – (1,790) (244) (1,976) 5,646 6,697 (1,051) 604 – – (1,655) (1,051) 2014 2,346 2,789 (443) 7,748 268,058 (260,310) 62,098 358,002 (295,904) 188 – – (631) (443) (187,553) (29,407) (45,183) 1,833 (260,310) (199,106) (28,601) (54,847) (13,350) (295,904) Mediterranean SAC Asia Others Total 7,315 9,336 (2,021) 10 – (2,178) 147 (2,021) 5,245 5,839 (594) 598 – (25) (1,167) (594) 2,126 2,251 (125) 8,677 269,141 (260,464) 63,201 346,451 (283,250) 111 – – (236) (125) (193,772) (35,141) (42,685) 11,134 (260,464) (199,749) (31,826) (49,043) (2,632) (283,250) Equity risk Equity risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in the market price of CEMEX’s and/or third party’s shares. As described in note 16D, CEMEX has entered into equity forward contracts on Axtel CPOs, as well as capped call options based on the price of CEMEX’s own ADSs. Under these equity derivative instruments, there is a direct relationship in the change in the fair value of the derivative with the change in price of the underlying share. All changes in fair value of such derivative instruments are recognized in profit or loss as part of “Other financial (expense) income, net.” A significant decrease in the market price of CEMEX’s ADSs would negatively affect CEMEX’s liquidity and financial position. As of December 31, 2015 and 2014, the potential change in the fair value of CEMEX’s forward contracts in Axtel’s shares that would result from a hypothetical, instantaneous decrease of 10% in the market price of Axtel’s CPO, with all other variables held constant, CEMEX’s net income for 2015 would have reduced in approximately US$3 ($51) and CEMEX’s net loss for 2014 would have increased by approximately US$1 ($15), as a result of additional negative changes in fair value associated with such forward contracts. A 10% hypothetical increase in the Axtel CPO price would generate approximately the opposite effects. As of December 31, 2015 and 2014, the potential change in the fair value of CEMEX’s options (capped calls) that would result from a hypothetical, instantaneous decrease of 10% in the market price of CEMEX’s ADSs, with all other variables held constant, CEMEX’s net income for 2015 would have reduced in approximately US$8 ($137) and CEMEX’s net loss for 2014 would have increased by approximately US$73 ($1,076), as a result of additional negative changes in fair value associated with these contracts. A 10% hypothetical increase in CEMEX’s ADS price would generate approximately the opposite effect. 96 Notes to the consolidated financial statements In addition, even though the changes in fair value of CEMEX’s embedded conversion option in the Mandatorily Convertible Notes 2019 denominated in a currency other than the functional issuer’s currency affect the statements of operations, they do not imply any risk or variability in cash flows, considering that through their exercise, CEMEX will settle a fixed amount of debt with a fixed amount of shares. As of December 31, 2015 and 2014, the potential change in the fair value of the embedded conversion options in the Mandatorily Convertible Notes 2019 that would result from a hypothetical, instantaneous decrease of 10% in the market price of CEMEX’s CPOs, with all other variables held constant, would have increased CEMEX’s net income for 2015 by approximately US$3 ($47) and would have decreased CEMEX’s net loss for 2014 by approximately US$8 ($113), as a result of additional positive changes in fair value associated with this option. A 10% hypothetical increase in the CEMEX CPO price would generate approximately the opposite effect. Liquidity risk Liquidity risk is the risk that CEMEX will not have sufficient funds available to meet its obligations. In addition to cash flows provided by its operating activities, in order to meet CEMEX’s overall liquidity needs for operations, servicing debt and funding capital expenditures and acquisitions, CEMEX relies on cost-cutting and operating improvements to optimize capacity utilization and maximize profitability, as well as borrowing under credit facilities, proceeds of debt and equity offerings, and proceeds from asset sales. CEMEX is exposed to risks from changes in foreign currency exchange rates, prices and currency controls, interest rates, inflation, governmental spending, social instability and other political, economic and/or social developments in the countries in which it operates, any one of which may materially affect CEMEX’s results and reduce cash from operations. The maturities of CEMEX’s contractual obligations are included in note 23E. As of December 31, 2015, CEMEX has approximately US$735 ($12,664) available in its committed revolving credit tranche under its Credit Agreement (note 16A). As of December 31, 2015 and 2014, the potential requirement for additional margin calls under our different commitments is not significant. 17) Other current and non-current liabilities As of December 31, 2015 and 2014, consolidated other current accounts payable and accrued expenses were as follows: Provisions 1 Interest payable Advances from customers Other accounts payable and accrued expenses Liabilities held for sale (note 15B) 2015 2014 $ 10,438 3,421 2,606 4,304 – $ 20,769 10,341 3,106 2,595 2,392 1,611 20,045 1 Current provisions primarily consist of accrued employee benefits, insurance payments, and accruals for legal assessments, among others. These amounts are revolving in nature and are expected to be settled and replaced by similar amounts within the next 12 months. As of December 31, 2015 and 2014, consolidated other non-current liabilities were as follows: Asset retirement obligations 1 Accruals for legal assessments and other responsibilities 2 Non-current liabilities for valuation of derivative instruments Environmental liabilities 3 Other non-current liabilities and provisions 4 2015 2014 $ $ 7,036 2,984 178 827 3,849 14,874 7,630 3,499 413 365 19,584 31,491 1 Provisions for asset retirement include future estimated costs for demolition, cleaning and reforestation of production sites at the end of their operation, which are initially recognized against the related assets and are depreciated over their estimated useful life. 2 Provisions for legal claims and other responsibilities include items related to tax contingencies. 3 Environmental liabilities include future estimated costs arising from legal or constructive obligations, related to cleaning, reforestation and other remedial actions to remediate damage caused to the environment. The expected average period to settle these obligations is greater than 15 years. 4 As of December 31, 2015 and 2014, includes approximately $3,131 and $16,264, respectively, of the non-current portion of taxes payable recognized since 2009 as a result of the changes to the tax consolidation regime in Mexico approved in 2009 and 2013 as described in note 19D. Approximately $840 and $5,165 as of December 31, 2015 and 2014 respectively, were included within current taxes payable. 97 Notes to the consolidated financial statements Changes in consolidated other non-current liabilities for the years ended December 31, 2015 and 2014, were as follows: Balance at beginning of period Business combinations Additions or increase in estimates Releases or decrease in estimates Reclassifications Accretion expense Foreign currency translation Balance at the end of period Out of which: Current provisions Asset retirement obligations Environmental liabilities Accruals for legal proceedings Valuation of derivative instruments 2015 7,630 46 345 (770) (135) – (80) 7,036 365 44 67 (42) 99 – 294 827 3,499 – 1 (944) (6) – 434 2,984 413 – 53 (304) – – 69 231 Other Provisions 29,925 539 45,942 (65,544) (3,712) (904) 7,988 14,234 Total 2014 41,832 629 46,408 (67,604) (3,754) (904) 8,705 25,312 45,277 – 19,892 (29,969) (17) (875) 7,524 41,832 – – – 53 10,385 10,438 10,341 $ $ $ 18) Pensions and postretirement employee benefits Defined contribution pension plans The costs of defined contribution plans for the years ended December 31, 2015, 2014 and 2013 were approximately $706, $497 and $455, respectively. CEMEX contributes periodically the amounts offered by the pension plan to the employee’s individual accounts, not retaining any remaining liability as of the balance sheet date. Defined benefit pension plans Actuarial results related to pension and other post retirement benefits are recognized in the results and/or in “Other comprehensive income (loss) for the period” in which they are generated, as correspond. For the years ended December 31, 2015, 2014 and 2013, the effects of pension plans and other postretirement benefits are summarized as follows: Net period cost (revenue): 2015 2014 2013 2015 2014 2013 2015 Pensions Other benefits Total 2014 2013 Recorded in operating costs and expenses Service cost Past service cost Loss (gain) for settlements and curtailments Recorded in other financial expenses Net interest cost Recorded in other comprehensive income (loss) for the period Actuarial (gains) losses for the period $ 128 12 – 140 108 4 – 112 111 (40) (18) 53 30 (20) (13) (3) 32 – (110) (78) 30 (90) – (60) 158 (8) (13) 137 140 4 (110) 34 141 (130) (18) (7) 596 527 516 56 54 67 652 581 583 872 $ 1,608 3,014 3,653 727 1,296 (124) (71) (13) (37) (341) (334) 748 1,537 3,001 3,616 386 962 98 Notes to the consolidated financial statements The reconciliations of the actuarial benefits obligations, pension plan assets, and liabilities recognized in the balance sheet as of December 31, 2015 and 2014 are presented as follows: Change in benefits obligation: Projected benefit obligation at beginning of year Service cost Interest cost Actuarial (gains) losses for the period Reduction for disposal of assets (note 15B) Settlements and curtailments Plan amendments Benefits paid Foreign currency translation Projected benefit obligation at end of year Change in plan assets: Fair value of plan assets at beginning of year Return on plan assets Actuarial results Employer contributions Reduction for disposal of assets (note 15B) Benefits paid Foreign currency translation Fair value of plan assets at end of year Pensions Other benefits Total 2015 2014 2015 2014 2015 2014 $ 40,285 128 1,561 (693) (196) – 12 (2,186) 3,829 42,740 24,698 965 (1,565) 1,031 (79) (2,186) 2,683 25,547 35,089 109 1,529 3,714 (421) – – (1,811) 2,076 40,285 22,349 1,000 690 982 (85) (1,811) 1,573 24,698 1,321 30 58 (129) (161) (13) (20) (60) 74 1,100 27 2 (5) 60 – (60) – 24 1,357 38 62 2 – (110) – (77) 49 1,321 24 2 1 77 – (77) – 27 41,606 158 1,619 (822) (357) (13) (8) (2,246) 3,903 43,840 24,725 967 (1,570) 1,091 (79) (2,246) 2,683 25,571 36,446 147 1,591 3,716 (421) (110) – (1,888) 2,125 41,606 22,373 1,002 691 1,059 (85) (1,888) 1,573 24,725 Amounts recognized in the balance sheets: Net projected liability recognized in the balance sheet $ 17,193 15,587 1,076 1,294 18,269 16,881 Most CEMEX’s defined benefit plans have been closed to new participants for several years. Actuarial losses during 2014 were mainly generated by a reduction in the discount rates applicable to the obligations at the end of the period in the United Kingdom, Germany and the United States, and to a lesser extent by the increase in the expected life assumption in the United States. As of December 31, 2015 and 2014, plan assets were measured at their estimated fair value and consisted of: Cash Investments in corporate bonds Investments in government bonds Total fixed-income securities Investment in marketable securities Other investments and private funds Total variable-income securities Total plan assets 2015 2014 $ 1,533 3,511 9,275 14,319 6,944 4,308 11,252 $ 25,571 1,682 2,731 8,788 13,201 7,137 4,387 11,524 24,725 99 Notes to the consolidated financial statements As of December 31, 2015 and 2014, based on the hierarchy of fair values (note 2F), investments in plan assets are summarized as follows: Cash Investments in corporate bonds Investments in government bonds Total fixed-income securities Investment in marketable securities Other investments and private funds Total variable-income securities Total plan assets 2015 2014 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total $ $ 649 896 153 1,698 1,503 618 2,121 3,819 884 2,615 9,122 12,621 5,441 3,244 8,685 21,306 – – – – – 446 446 446 1,533 3,511 9,275 14,319 6,944 4,308 11,252 25,571 1,569 2,099 8,788 12,456 5,547 1,773 7,320 19,776 113 632 – 745 1,590 2,586 4,176 4,921 – – – – – 28 28 28 1,682 2,731 8,788 13,201 7,137 4,387 11,524 24,725 As of December 31, 2015, estimated payments for pensions and other postretirement benefits over the next 10 years were as follows: 2016 2017 2018 2019 2020 2021 - 2025 2015 2,532 2,536 2,571 2,636 2,554 14,189 The most significant assumptions used in the determination of the net periodic cost were as follows: Discount rates Rate of return on plan assets Rate of salary increases 2015 2014 United States United Kingdom Range of rates in other countries 4.0% 4.0% – 3.7% 1.2% – 6.8% 3.7% 1.2% – 6.8% 3.1% 1.5% – 5.0% Mexico 5.5% 5.5% 4.0% United States United Kingdom Range of rates in other countries 4.8% 4.8% – 4.4% 2.3% – 7.5% 4.4% 2.3% – 7.5% 3.4% 2.0% – 5.0% Mexico 6.8% 6.8% 4.0% As of December 31, 2015 and 2014, the aggregate projected benefit obligation (“PBO”) for pension plans and other postretirement benefits and the plan assets by country were as follows: Mexico United States United Kingdom Germany Other countries PBO $ 3,699 5,988 27,522 3,700 2,931 $ 43,840 2015 Assets 538 3,552 20,042 205 1,234 25,571 Deficit PBO 3,161 2,436 7,480 3,495 1,697 18,269 3,760 5,501 25,635 3,634 3,076 41,606 2014 Assets 799 3,569 18,953 196 1,208 24,725 Deficit 2,961 1,932 6,682 3,438 1,868 16,881 In some countries, CEMEX has established health care benefits for retired personnel limited to a certain number of years after retirement. As of December 31, 2015 and 2014, the projected benefits obligation related to these benefits was approximately $786 and $842, respectively. The medical inflation rates used to determine the projected benefits obligation of these benefits in 2015 and 2014 for Mexico were 7.0% in both periods, for Puerto Rico 4.5% and 4.7%, respectively, and for the United Kingdom were 6.6% in both periods. Eligibility for retiree medical in the United States has been terminated for all new employees on December 31, 2014, and remaining participants are under a capped group and future health care cost trend rates are not applicable. The medical inflation rate for 2014 in the United States was 4.4%. 100 Notes to the consolidated financial statements Significant events related to employees’ pension benefits and other postretirement benefits During 2015, CEMEX in the United States terminated the retiree medical coverage for certain participants not yet retired. In addition, during 2014, CEMEX in the United States terminated the retiree medical and life insurance coverage for most new retirees, and changed the existing retirees program effective January 1, 2015, where participants will cease their current plans and instead receive a Health Reimbursement Account (HRA) contribution, if they become eligible. These curtailment events resulted in an adjustment to past service cost which generated gains of approximately $13 (US$1) in 2015 and $110 (US$8) in 2014, recognized immediately through the benefit cost of the respective year. Effective December 31, 2013, in connection with the closure in 2010 of the Davenport Plant in California, United States, all benefits under the Medical Plan ceased to former RMC Davenport employees and their spouses. This plan amendment resulted in an adjustment to past service cost which generated a gain of approximately $94 recognized in 2013 as part of the benefits cost. In addition, certain reductions in workforce affected CEMEX’s pension plans in Spain and the Philippines, which led to curtailment gains of approximately $18 also recognized in 2013 as part of the benefits cost. Applicable regulation in the United Kingdom requires entities to maintain plan assets at a level similar to that of the obligations. In November 2012, in order to better manage CEMEX’s obligations under its defined benefit pension schemes and future cash funding requirements thereof, CEMEX implemented an asset backed pension funding arrangement in its operations in the United Kingdom by means of which CEMEX transferred certain operating assets to a non-transferable limited partnership, owned, controlled and consolidated by CEMEX UK with a total value of approximately US$553 and entered into lease agreements for the use of such assets with the limited partnership, in which the pension schemes hold a limited interest. On an ongoing basis CEMEX UK will make annual rental payments of approximately US$20, increasing at annual rate of 5%, which will generate profits in the limited partnership that are then distributed to the pension schemes. As previously mentioned, the purpose of the structure, in addition to provide the pension schemes with secured assets producing an annual return over a period of 25 years, improves the security for the trustees of the pension schemes, and reduces the level of cash funding that CEMEX UK will have to make in future periods. In 2037, on expiry of the lease arrangements, the limited partnership will be terminated and under the terms of the agreement, the remaining assets will be distributed to CEMEX UK. Any future profit distribution from the limited partnership to the pension fund will be considered as an employer contribution to plan assets in the period in which they occur. Sensitivity analysis of pension and other postretirement benefits For the year ended December 31, 2015, CEMEX performed sensitivity analyses on the most significant assumptions that affect the PBO, considering reasonable independent changes of plus or minus 50 basis points in each of these assumptions. The increase (decrease) that would have resulted in the PBO of pensions and other postretirement benefits as of December 31, 2015 are shown below: Assumptions: Discount rate sensitivity Salary increase rate sensitivity Pension increase rate sensitivity Pensions Other benefits Total +50 bps -50 bps +50 bps -50 bps +50 bps -50 bps $ (2,782) 84 1,871 3,133 (77) (1,765) (49) 7 – 53 (6) – (2,831) 91 1,871 3,186 (83) (1,765) 101 Notes to the consolidated financial statements 19) Income taxes 19A) Income taxes for the period The amounts of income tax revenue (expense) in the statements of operations for 2015, 2014 and 2013 are summarized as follows: Current income taxes Deferred income taxes 2015 2014 2013 $ $ 6,099 (8,375) (2,276) (4,216) 256 (3,960) (14,240) 8,078 (6,162) 19B) Deferred income taxes As of December 31, 2015 and 2014, the main temporary differences that generated the consolidated deferred income tax assets and liabilities are presented below: Deferred tax assets: Tax loss carryforwards and other tax credits Accounts payable and accrued expenses Intangible assets and deferred charges, net Others Total deferred tax assets, net 1 Deferred tax liabilities: Property, machinery and equipment Investments and other assets Total deferred tax liabilities, net Net deferred tax (liability) asset 2015 2014 $ 16,658 8,220 5,487 130 30,495 25,720 8,694 8,086 216 42,716 (32,742) (2,689) (35,431) (4,936) $ (32,017) (2,768) (34,785) 7,931 1 The decrease in deferred tax assets in 2015 refers mainly to the use of tax loss carryforwards for the settlement of a portion of the liability associated with the termination of the tax consolidation regime in Mexico (note 19D). The breakdown of changes in consolidated deferred income taxes during 2015, 2014 and 2013 were as follows: Deferred income tax (charged) credited to the statements of operations 1 Deferred income tax (charged) credited to stockholders’ equity Reclassification to other captions in the balance sheet and in the statement of operations 2,3 Change in deferred income tax during the period 2015 2014 2013 $ $ (8,375) 1,089 (5,581) (12,867) 256 229 418 903 8,078 (1,167) (69) 6,842 1 In 2013, CEMEX recognized deferred income tax assets in Mexico for approximately $10,823, considering then the projections of estimated taxable income in the Parent Company resulting from the integration of the operations in Mexico that is described in note 1. 2 In 2015, 2014 and 2013, includes the effects of discounted operations (note 4A) and in 2015 the effects of the termination of tax consolidation regime. 3 In 2014, includes the effect of the divest assets in the western region of Germany (note 15B). 102 Notes to the consolidated financial statements Current and/or deferred income tax relative to items of other comprehensive income (loss) during 2015, 2014 and 2013 were as follows: Tax effects relative to foreign exchange fluctuations from debt (note 20B) Tax effects relative to foreign exchange fluctuations from intercompany balances (note 20B) Tax effects relative to actuarial (gains) and losses (note 20B) Foreign currency translation and other effects 2015 2014 2013 $ $ (272) (181) 183 906 636 (75) 247 486 (257) 401 – (1,338) (122) 253 (1,207) For the recognition of deferred tax assets, CEMEX analyzes the aggregate amount of self-determined tax loss carryforwards included in its income tax returns in each country where CEMEX believes, based on available evidence, that the tax authorities would not reject such tax loss carryforwards; and the likelihood of the recoverability of such tax loss carryforwards prior to their expiration through an analysis of estimated future taxable income. If CEMEX believes that it is probable that the tax authorities would reject a self-determined deferred tax asset, it would decrease such asset. Likewise, if CEMEX believes that it would not be able to use a tax loss carryforward before its expiration or any other tax asset, CEMEX would not recognize such asset. Both situations would result in additional income tax expense for the period in which such determination is made. In order to determine whether it is probable that deferred tax assets will ultimately be realized, CEMEX takes into consideration all available positive and negative evidence, including factors such as market conditions, industry analysis, expansion plans, projected taxable income, carryforward periods, current tax structure, potential changes or adjustments in tax structure, tax planning strategies, future reversals of existing temporary differences, etc. In addition, every reporting period, CEMEX analyzes its actual results versus its estimates, and adjusts, as necessary, its tax asset valuations. If actual results vary from CEMEX’s estimates, the deferred tax asset may be affected and necessary adjustments will be made based on relevant information, any adjustments recorded will affect CEMEX’s statements of operations in such period. As of December 31, 2015, consolidated tax loss and tax credits carryforwards expire as follows: 2016 2017 2018 2019 2020 and thereafter Amount of Amount of unreserved reserved carryforwards carryforwards carryforwards Amount of $ 1,295 2,557 6,028 5,888 358,069 $ 373,837 619 648 994 1,784 317,622 321,667 676 1,909 5,034 4,104 40,447 52,170 As of December 31, 2015, in connection with CEMEX’s deferred tax loss carryforwards presented in the table above, in order to realize the benefits associated with such deferred tax assets that have not been reserved, before their expiration, CEMEX would need to generate approximately $52,170 in consolidated pre-tax income in future periods. For the years ended December 31, 2014 and 2013, CEMEX reported pre-tax losses on a worldwide consolidated basis. Nonetheless, based on the same forecasts of future cash flows and operating results used by CEMEX’s management to allocate resources and evaluate performance in the countries in which CEMEX operates, which include expected growth in revenues and reductions in interest expense in several countries due to a reduction in intra- group debt balances, along with the implementation of feasible tax strategies, CEMEX believes that it will recover the balance of its tax loss carryforwards that have not been reserved before their expiration. In addition, CEMEX concluded that, the deferred tax liabilities that were considered in the analysis of recoverability of its deferred tax assets will reverse in the same period and tax jurisdiction of the related recognized deferred tax assets. Moreover, a certain amount of CEMEX’s deferred tax assets refer to operating segments and tax jurisdictions in which CEMEX is currently generating taxable income or in which, according to CEMEX’s management cash flow projections, will generate taxable income in the relevant periods before the expiration of the deferred tax assets. 103 Notes to the consolidated financial statements CEMEX, S.A.B. de C.V., has not provided for any deferred tax liability for the undistributed earnings generated by its subsidiaries recognized under the equity method, considering that such undistributed earnings are expected to be reinvested, and to not generate income tax in the foreseeable future. Likewise, CEMEX does not recognize a deferred income tax liability related to its investments in subsidiaries and interests in joint ventures, considering that CEMEX controls the reversal of the temporary differences arising from these investments. 19C) Effective tax rate For the years ended December 31, 2015, 2014 and 2013, the effective consolidated income tax rates were as follows: Income (loss) before income tax Income tax expense Effective consolidated income tax rate 1 2015 2014 2013 $ $ 3,442 (2,276) (66.1)% (1,830) (3,960) 216.4% (3,546) (6,162) 173.8% 1 The average effective tax rate equals the net amount of income tax revenue or expense divided by income or loss before income taxes, as these line items are reported in the statements of operations. Differences between the financial reporting and the corresponding tax basis of assets and liabilities and the different income tax rates and laws applicable to CEMEX, among other factors, give rise to permanent differences between the statutory tax rate applicable in Mexico, and the effective tax rate presented in the consolidated statements of operations, in which 2015, 2014 and 2013 were as follows: Mexican statutory tax rate Non-taxable dividend income Expenses and other non-deductible items Termination of tax consolidation regime Unrecognized effects during the year related to applicable tax consolidation regimes Non-taxable sale of marketable securities and fixed assets Difference between book and tax inflation Differences in the income tax rates in the countries where CEMEX operates 1 Changes in deferred tax assets 2 Changes in provisions for uncertain tax positions Others Effective consolidated tax rate 2015 2014 2013 % $ % $ % $ 30.0 (37.2) 82.3 (33.0) (8.5) (36.7) 26.8 (49.2) 100.9 (7.9) (1.4) 66.1 (1,033) 1,280 (2,833) 1,136 293 1,263 (922) 1,693 (3,473) 272 48 (2,276) (30.0) (4.0) 74.0 – 5.5 (47.6) 32.0 (397.8) 553.8 32.0 (1.5) 216.4 549 73 (1,354) – (101) 871 (586) 7,280 (10,135) (586) 29 (3,960) (30.0) (5.4) (8.5) 346.7 (36.3) (46.2) 38.3 (18.1) (71.1) 5.8 (1.4) 173.8 1,064 191 301 (12,294) 1,287 1,638 (1,358) 642 2,521 (206) 52 (6,162) 1 Refers mainly to the effects of the differences between the statutory income tax rate in Mexico of 30% against the applicable income tax rates of each country where CEMEX operates. 2 Refers to the effects in the effective income tax rate associated with changes during the period in the amount of deferred income tax assets related to CEMEX’s tax loss carryforwards. 104 Notes to the consolidated financial statements The following table compares variations between the line item “Changes in deferred tax assets” as presented in the table above against the changes in deferred tax assets in the balance sheet for the years ended December 31, 2015 and 2014: Tax loss carryforwards generated and not recognized during the year Utilization of deferred tax assets to settle liabilities (note 19D) Derecognition related to tax loss carryforwards recognized in prior years Recognition related to unrecognized tax loss carryforwards Foreign currency translation and other effects Changes in deferred tax assets 2015 2014 Changes in the Amounts in Changes in the Amounts in reconciliation reconciliation balance sheet balance sheet $ $ – (11,136) (2,554) 2,768 1,860 (9,062) (3,687) – (2,554) 2,768 – (3,473) – – (4,015) 3,677 (232) (570) (9,797) – (4,015) 3,677 – (10,135) 19D) Uncertain tax positions and significant tax proceedings As of December 31, 2015 and 2014, as part of short-term and long-term provisions and other liabilities (note 17), CEMEX has recognized provisions related to unrecognized tax benefits in connection with uncertain tax positions taken, in which it is deemed probable that the tax authority would differ from the position adopted by CEMEX. As of December 31, 2015, the tax returns submitted by some subsidiaries of CEMEX located in several countries are under review by the respective tax authorities in the ordinary course of business. CEMEX cannot anticipate if such reviews will result in new tax assessments, which would, should any arise, be appropriately disclosed and/or recognized in the financial statements. A summary of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2015, 2014 and 2013, excluding interest and penalties, is as follows: Balance of tax positions at beginning of year Additions for tax positions of prior years Additions for tax positions of current year Reductions for tax positions related to prior years and other items Settlements and reclassifications Expiration of the statute of limitations Foreign currency translation effects Balance of tax positions at end of year 2015 2014 2013 $ $ 1,396 134 71 (95) (204) (231) 119 1,190 1,283 216 278 (71) (317) (73) 80 1,396 1,235 207 68 (42) (81) (103) (1) 1,283 Tax examinations can involve complex issues, and the resolution of issues may span multiple years, particularly if subject to negotiation or litigation. Although CEMEX believes its estimates of the total unrecognized tax benefits are reasonable, uncertainties regarding the final determination of income tax audit settlements and any related litigation could affect the amount of total unrecognized tax benefits in future periods. It is difficult to estimate the timing and range of possible changes related to the uncertain tax positions, as finalizing audits with the income tax authorities may involve formal administrative and legal proceedings. Accordingly, it is not possible to reasonably estimate the expected changes to the total unrecognized tax benefits over the next 12 months, although any settlements or statute of limitations expirations may result in a significant increase or decrease in the total unrecognized tax benefits, including those positions related to tax examinations being currently conducted. As of December 31, 2015, certain significant proceedings associated with these tax positions are as follows: • As of December 31, 2015, the U.S. Internal Revenue Service (“IRS”) concluded its audit for the year 2013. The final findings did not alter the reserves CEMEX had set aside for these tax matters as they were not considered material to CEMEX’s financial results and, as such, the reserves have been reversed. On April 25, 2014, and April 24, 2015, the IRS commenced its audit of the 2014 and 2015 tax year, respectively, under the Compliance Assurance Process. CEMEX has not identified any material audit issues and, as such, no reserves are recorded for either the 2014 or 2015 audit in CEMEX’s financial statements, resulting from these IRS audits. 105 Notes to the consolidated financial statements • On July 7, 2011, the tax authorities in Spain notified CEMEX España of a tax audit process in Spain covering the tax years from and including 2006 to 2009. The tax authorities in Spain have challenged part of the tax losses reported by CEMEX España for such years. The tax authorities in Spain notified CEMEX España of fines in the aggregate amount of approximately €456 (US$552 or $8,134). The laws of Spain provide a number of appeals that could be filed against such penalty without making any payment until they are finally resolved. On April 22, 2014, CEMEX España filed appeals against such fines. At this stage, CEMEX is not able to assess the likelihood of an adverse result regarding this matter, and the appeals that CEMEX España has file could take an extended amount of time to be resolved, but if all appeals filed by CEMEX España are adversely resolved, it could have a material adverse impact on CEMEX’s results of operations, liquidity or financial position. • On December 17, 2012, the Mexican tax authorities published the Federation Revenues Law for the 2013 tax year that contained a transitory ruling (the “Amnesty Provision”) that granted the cancellation of up to 80% of certain tax proceedings originated before the 2007 tax year, and 100% of interest and penalties, as well as 100% of interest and penalties of tax proceedings originated in the 2007 tax year and thereafter. CEMEX was a beneficiary of such transitory amnesty provision in connection with several of the Mexican tax proceedings mentioned in the following paragraphs. • Effective January 1, 2005, Mexican companies with investments in foreign entities whose income tax liability is less than 75% of the income tax that would be payable in Mexico, are required to pay taxes in Mexico on net passive income, such as dividends, royalties, interest, capital gains and rental fees obtained by such entities, provided, however, that those revenues are not derived from entrepreneurial activities in such countries. CEMEX challenged the constitutionality of the amendments before the Mexican federal courts. In September 2008, the Supreme Court of Justice ruled the amendments were constitutional for tax years 2005 to 2007. In 2012, CEMEX self-assessed the taxes corresponding to the 2005 and 2006 tax years for a total amount, inclusive of surcharges and carry-forward charges, of $5,742, of which 20%, or approximately $1,149, was paid in connection with the submission of amended tax returns. On January 31, 2013 in connection with the Amnesty Provision, CEMEX reached a settlement agreement with the tax authorities for the remaining 80% consisting in a single final payment on February 1, 2013 according to the rules set forth by the transitory provision described above. • In November 2009, amendments to the income tax law effective on January 1, 2010 were approved in Mexico. Such amendments modified the tax consolidation regime by requiring entities to determine income taxes as if the tax consolidation rules did not exist from 1999 onward, specifically turning into taxable items: a) the difference between the sum of the equity of the controlled entities for tax purposes and the equity of the consolidated entity for tax purposes; b) dividends from the controlled entities for tax purposes to the Parent Company; and c) other transactions that represented the transfer of resources between the companies included in the tax consolidation. In December 2010, pursuant to miscellaneous rules, the tax authority in Mexico had granted the option to defer the calculation and payment of the income tax over the difference in equity explained above, until the subsidiary was desincorporated or the elimination the tax consolidation. Nonetheless, in December 2013 new amendments to the income tax law in Mexico were approved effective beginning January 1, 2014, which eliminated the tax consolidation regime in effect until December 31, 2013, and implemented prospectively a new voluntary integration regime that CEMEX not applied. As a result, beginning in 2014, each Mexican entity determines its income taxes based solely in its individual results. A period of up to 10 years was established for the settlement of the liability for income taxes related to the tax consolidation regime accrued until December 31, 2013, amount which considering the rules issued for the disconnection of the tax consolidation regime as well as payments made during 2013 amounted to approximately $24,804 as of December 31, 2013. In 2014, considering payments incurred net of inflation adjustments, as of December 31, 2014, the balance payable was reduced to approximately $21,429. Furthermore, in October 2015, a new tax reform approved by Congress (the “new tax reform”) granted entities the option to settle a portion of the liability for the exit of the tax consolidation regime using available tax loss carryforwards of the previously consolidated entities, considering a discount factor, and a tax credit to offset certain items of the aforementioned liability. Consequently, during 2015, as a result of payments made, the liability was further reduced to approximately $16,244, which after the application of tax credits and assets for tax loss carryforwards (as provided by the new tax reform) which had a book value for CEMEX before discount of approximately $11,136, as of December 31, 2015, the Parent Company’s liability was reduced to approximately $3,971. 106 Notes to the consolidated financial statements• On January 2011, the Mexican tax authority notified CEMEX, S.A.B. de C.V., of a tax assessment for approximately $996 (US$77) pertaining to changes to the income tax law approved in 2005 that permits the deductibility of the cost of goods sold deducted in the determination of income taxes, instead of using the amount of 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 subsidiaries. The authorities argued that because of this offsetting, the right to use such losses at the consolidated level had been lost; therefore, CEMEX had to increase its consolidated income or decrease its consolidated losses. During May 2013, CEMEX settled this tax assessment as part of the Amnesty Provision described above. • On November 16, 2011, the Mexican tax authorities notified Centro Distribuidor de Cemento, S.A. de C.V. and Mexcement Holdings, S.A. de C.V., subsidiaries of CEMEX in Mexico, of tax assessments related to direct and indirect investments in entities considered to be preferential tax regimes, in the amount of approximately $1,251 (US$101) and approximately $759 (US$59), respectively. In February 2013, CEMEX filed a claim against these assessments before the corresponding courts. During May 2013, CEMEX settled these tax assessments based on the Amnesty Provision previously described. • On April 1, 2011, the Colombian Tax Authority notified CEMEX Colombia S.A. (“CEMEX Colombia”) of a special proceeding in which the Colombian Tax Authority rejected certain deductions taken by CEMEX Colombia in its 2009 year-end tax return. The Colombian Tax Authority assessed an increase in taxes to be paid by CEMEX Colombia in an amount equivalent as of December 31, 2015 to approximately US$29 ($500) and imposed a penalty in an amount equivalent to approximately US$46 ($793). The Colombian Tax Authority argues that certain expenses are not deductible for fiscal purposes because they are not linked to direct revenues recorded in the same fiscal year, without considering that future revenue will be taxed under the income tax law in Colombia. CEMEX Colombia responded to the special proceeding notice June 25, 2011. On December 15, 2011, the Colombian Tax Authority issued its final determination, which confirmed the information in the special proceeding. CEMEX Colombia appealed the final determination on February 15, 2012. On January 17, 2013, CEMEX Colombia was notified of a resolution confirming the official liquidation. On May 10, 2013 CEMEX Colombia appealed the final determination before the Administrative Tribunal of Cundinamarca, which was admitted on June 21, 2013. On July 14, 2014, CEMEX Colombia was notified about an adverse resolution to its appeal, which confirms the official liquidation notified by the Colombian Tax Authority. On July 22, 2014, CEMEX Colombia filed an appeal against this resolution before the Colombian State Council (Consejo de Estado). At this stage of the proceeding, as of December 31, 2015, CEMEX is not able to assess the likelihood of an adverse result in the proceedings, but if adversely resolved, this proceeding could have a material adverse impact on CEMEX’s results of operations, liquidity or financial position. • On February 9, 2014, the Egyptian Ministry of Finance’s Appeals Committee (the “Appeals Committee”) notified a resolution to Assiut Cement Company (“ACC”), a subsidiary of CEMEX in Egypt, requiring the payment of a development levy on clay applied to the Egyptian cement industry in amounts equivalent as of December 31, 2015, of: (i) approximately US$41 ($706) for the period from May 5, 2008 to August 31, 2011; and (ii) approximately 6 thousand dollars (103 thousand pesos) for the period from September 1, 2011 to November 30, 2011. On March 10, 2014, ACC filed a claim before the North Cairo Court requesting the nullification of the Appeals Committee decision and requesting that the Egyptian tax authority is not entitled to require payment of the aforementioned amounts. On September 28, 2015, ACC was notified the decision by the Ministerial Committee (the Ministerial Committee’s Decision) pursuant to which the Egyptian tax authority be instructed to cease claiming payment of the levy on clay from ACC to the years from 2008 up to the issuance date of Law No. 73/2010. It was further decided that the levy on clay should not be imposed on imported clinker. At this stage, as of December 31, 2015, the Ministerial Committee’s Decision strongly supports ACC position in this case, given the fact that it is legally binding on the Egyptian tax authority. Subject to submission of the Ministerial Committee’s to the Egyptian tax authority and the issuance of a final release. ACC shall be in a position to be released from payment of the above mentioned levy on clay amounts and accordingly to withdraw from this case. While the final release is issued, as of December 31, 2015, CEMEX does not expect a material adverse impact due to this matter in its results of operations, liquidity or financial position. 107 Notes to the consolidated financial statements20) Stockholders’ equity As of December 31, 2015 and 2014, stockholders’ equity excludes investments in CPOs of CEMEX, S.A.B. de C.V. held by subsidiaries of approximately $179 (18,991,576 CPOs) and $264 (18,261,131 CPOs), respectively, which were eliminated within “Other equity reserves.” 20A) Common stock and additional paid-in capital As of December 31, 2015 and 2014, the breakdown of common stock and additional paid-in capital was as follows: Common stock Additional paid-in capital 2015 2014 $ 4,158 115,466 $ 119,624 4,151 101,216 105,367 As of December 31, 2015 and 2014 the common stock of CEMEX, S.A.B. de C.V. was presented as follows: Shares 1 Series A 2 Series B 2 Series A 2 Series B 2 2015 2014 Subscribed and paid shares Unissued shares authorized for stock compensation programs Shares that guarantee the issuance of convertible securities 3 26,935,196,072 747,447,386 5,020,899,920 32,703,543,378 13,467,598,036 373,723,693 2,510,449,960 16,351,771,689 24,913,159,536 933,604,310 5,658,760,600 31,505,524,446 12,456,579,768 466,802,155 2,829,380,300 15,752,762,223 1 As of December 31, 2015 and 2014, 13,068,000,000 shares correspond to the fixed portion, and 35,987,315,067 shares in 2015 and 34,190,286,669 shares in 2014, 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 (note 16B). 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 1,500.0 million shares (500 million CPOs), which shares were issued, representing an increase in common stock of approximately $4, considering a nominal value of $0.00833 per CPO, and additional paid-in capital of approximately $7,613; (ii) increase the variable common stock by issuing up to 297 million shares (99 million CPOs), which will be kept in CEMEX’s treasury to be used to preserve the anti-dilutive rights of note holders pursuant CEMEX’s convertible securities (note 16B). On March 20, 2014, 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 1,404.0 million shares (468 million CPOs), which shares were issued, representing an increase in common stock of approximately $4, considering a nominal value of $0.00833 per CPO, and additional paid-in capital of approximately $7,614; (ii) increase the variable common stock by issuing up to 387 million shares (129 million CPOs), which will be kept in CEMEX’s treasury to be used to preserve the anti-dilutive rights of note holders pursuant CEMEX’s convertible securities (note 16B). On March 21, 2013, 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 1,312.3 million shares (437.4 million CPOs), which shares were issued, representing an increase in common stock of approximately $4, considering a nominal value of $0.00833 per CPO, and additional paid-in capital of approximately $5,987; (ii) increase the variable common stock by issuing up to 369 million shares (123 million CPOs), which will be kept in CEMEX’s treasury to be used to preserve the anti-dilutive rights of note holders pursuant CEMEX’s convertible securities (note 16B). Also, on March 21, 2013, stockholders at the extraordinary shareholders’ meeting approved resolutions pursuant to which all or any part of the shares currently kept in CEMEX’s treasury as a guarantee for the potential issuance of shares through CEMEX’s convertible securities may be re-allocated to ensure the conversion rights of any new convertible securities if any new convertible securities are issued. 108 Notes to the consolidated financial statements In connection with the long-term executive stock-based compensation program (note 21) in 2015, 2014 and 2013, CEMEX issued approximately 49.2 million, 61.1 million and 49.6 million CPOs, respectively, generating an additional paid-in capital of approximately $655 in 2015, $765 in 2014 and $551 in 2013 associated with the fair value of the compensation received by executives. 20B) Other equity reserves As of December 31, 2015 and 2014 other equity reserves are summarized as follows: Cumulative translation effect, net of effects from perpetual debentures and deferred income taxes recognized directly in equity (notes 19B and 20D) Cumulative actuarial losses Effects associated with CEMEX´s convertible securities 1 Treasury shares held by subsidiaries 2015 2014 $ 17,606 (6,915) 4,761 (179) $ 15,273 11,474 (6,167) 5,695 (264) 10,738 1 Represents the equity component upon the issuance of CEMEX’s convertible securities described in note 16B, as well as the effects associated with such securities in connection with the change in the Parent Company’s functional currency (note 2D). Upon conversion of these securities, the balances have been correspondingly reclassified to common stock and/or additional paid-in capital (note 16A). For the years ended December 31, 2015, 2014 and 2013, the translation effects of foreign subsidiaries included in the statements of comprehensive loss were as follows: Foreign currency translation adjustment 1 Foreign exchange fluctuations from debt 2 Foreign exchange fluctuations from intercompany balances 3 2015 2014 2013 $ 12,808 908 (5,801) 7,915 $ 15,157 479 (15,135) 501 (4,187) – 5,139 952 1 These effects refer to the result from the translation of the financial statements of foreign subsidiaries. 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 2D). 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. 20C) Retained earnings 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, 2015, the legal reserve amounted to $1,804. 20D) Non-controlling interest and perpetual debentures Non-controlling interest Non-controlling interest represents the share of non-controlling stockholders in the results and equity of consolidated subsidiaries. As of December 31, 2015 and 2014, non-controlling interest in equity amounted to approximately $12,708 and $10,199, respectively. Perpetual debentures As of December 31, 2015 and 2014, the balances of the non-controlling interest included approximately US$440 ($7,581) and US$466 ($6,869), respectively, representing the notional amount of perpetual debentures, which exclude any perpetual debentures held by subsidiaries, acquired in 2012 through a series of voluntary exchange transactions agreed with the holders of each series of their then outstanding perpetual debentures for new secured notes or other financial instruments (note 16A). Interest expense on the perpetual debentures, was included within “Other equity reserves” and amounted to approximately $432 in 2015, $420 in 2014 and $405 in 2013, excluding in all the periods the amount of interest accrued by perpetual debentures held by subsidiaries. 109 Notes to the consolidated financial statements 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, 2015 and 2014, the detail of CEMEX’s perpetual debentures, excluding the perpetual debentures held by subsidiaries, was as follows: Issuer Issuance date Nominal amount Nominal amount Repurchase option Interest rate C10-EUR Capital (SPV) Ltd C8 Capital (SPV) Ltd C5 Capital (SPV) Ltd 1 C10 Capital (SPV) Ltd May 2007 February 2007 December 2006 December 2006 €64 US$135 US$61 US$175 €64 US$137 US$69 US$183 Tenth anniversary Eighth anniversary Fifth anniversary Tenth anniversary 6.277% LIBOR + 440% LIBOR+427.7% 6.772% 2015 2014 1 Under the Credit Agreement, and previously under the Facilities Agreement, CEMEX is not permitted to call these debentures. 21) Executive stock-based compensation CEMEX has long-term restricted stock-based compensation programs providing for the grant of CEMEX’s CPOs to a group of executives, pursuant to which, new CPOs are issued under each annual program over a service period of 4 years. By agreement with the executives, the CPOs of the annual grant (25% of each annual program) are placed at the beginning of the service period in a trust established for the benefit of the executives to comply with a one year restriction on sale. Under these programs, the Parent Company issued new shares for approximately 49.2 million CPOs in 2015, 61.1 million CPOs in 2014 and 49.6 million CPOs in 2013 that were subscribed and pending for payment in CEMEX’s treasury. Of the total CPOs granted in 2013, approximately 10.3 million CPOs were related to termination benefits associated with restructuring events (note 6). As of December 31, 2015, there are approximately 57 million CPOs associated with these annual programs that are expected to be issued in the following years as the executives render services. Beginning January 1, 2013, eligible executives belonging to the operations of CEMEX Latam Holding, S.A. (“CEMEX Latam”), indirect subsidiary of the Parent Company, which shares are traded in the Colombian Stock Exchange, ceased to receive CEMEX’s CPOs and instead started receiving shares of CEMEX Latam. During 2015 and 2014, CEMEX Latam physically delivered 242,618 shares and 79,316 shares, respectively, corresponding to the vested portion of prior years’ grants, which were subscribed and held in CEMEX Latam’s treasury. During 2013 there were no physical deliveries. As of December 31, 2015, there are approximately 434,408 shares of CEMEX Latam associated with these annual programs that are expected to be delivered in the following years as the executives render services. In addition, in 2012, CEMEX initiated a stock-based compensation program for a group of executives which was linked to both, internal performance conditions (increase in Operating EBITDA) and market conditions (increase in the price of CEMEX’s CPO), over a period of three years ending on December 31, 2014. Under this program, CEMEX granted awards over approximately 39.9 million CPOs, which became fully vested upon achievement of the annual internal and/or external performance conditions in each of the three years. CPOs vested were delivered, fully unrestricted, to active executives in March 2015. The combined compensation expense related to the programs described above in 2015, 2014 and 2013, recognized in the operating results, amounted to approximately $655, $730 and $687, respectively. The weighted average price per CPO granted during the period was approximately 13.34 pesos in 2015, 12.53 pesos in 2014 and 11.11 pesos in 2013. Moreover, the weighted average price per CEMEX Latam share granted during the period was approximately 14,291 colombian pesos in 2015 and 15,073 colombian pesos in 2014 and 12,700 colombian pesos in 2013. 110 Notes to the consolidated financial statements During 2015, the last 70,513 options outstanding granted to executives based on CEMEX’s ADSs expired unexercised. As of December 31, 2015, there are no remaining options or commitments to make payments in cash to the executives based on changes in the market price of the Parent Company’s shares or CEMEX Latam’s shares. 22) Earnings (loss) per share Basic earnings (loss) per share is be calculated by dividing profit or loss attributable to ordinary equity holders of the Parent Company (the numerator) by the weighted average number of shares outstanding (the denominator) during the period. Shares that would be issued depending only by the passage of time should be included in the determination of the basic weighted average number of shares outstanding. Diluted earnings (loss) per share should reflect in both, the numerator and denominator, the assumption that convertible instruments are converted, that options or warrants are exercised, or that ordinary shares are issued upon the satisfaction of specified conditions, to the extent that such assumption would led to a reduction in basic earnings per share or an increase in basic loss per share, otherwise, the effects of potential shares are not considered because they generate antidilution. The amounts considered for calculations of earnings (loss) per share in 2015, 2014 and 2013 were as follows: Denominator (thousands of shares) Weighted average number of shares outstanding 1 Capitalization of retained earnings 2 Effect of dilutive instruments – mandatorily convertible securities (note 16B) 3 Weighted average number of shares – basic Effect of dilutive instruments – stock-based compensation (note 21) 3 Effect of potentially dilutive instruments – optionally convertible securities (note 16B) 3 Weighted average number of shares – diluted Numerator Net income (loss) from continuing operations Less: non-controlling interest net income Controlling interest net income (loss) from continuing operations Plus: after tax interest expense on mandatorily convertible securities Controlling interest net income (loss) from continuing operations – for basic earnings per share calculations Plus: after tax interest expense on optionally convertible securities Controlling interest net income (loss) from continuing operations – for diluted earnings per share calculations Income from discontinued operations Basic Loss Per Share Controlling Interest Basic Earnings (Loss) Per Share Controlling Interest Basic Earnings (Loss) Per Share from continuing operations Controlling Interest Basic Earnings (Loss) Per Share from discontinued operations Controlling Interest Diluted Loss Per Share 4 Controlling Interest Diluted Earnings (Loss) Per Share Controlling Interest Diluted Earnings (Loss) Per Share from continuing operations Controlling Interest Diluted Earnings (Loss) Per Share from discontinued operations 2015 2014 2013 38,262,845 1,500,028 654,727 40,417,600 171,747 4,683,437 45,272,784 36,695,349 1,500,028 654,727 38,850,104 293,657 5,733,796 44,877,557 35,530,446 1,500,028 654,727 37,685,201 306,930 7,105,488 45,097,619 $ $ $ $ $ 1,166 932 234 144 378 1,288 1,666 967 0.03 0.01 0.02 0.03 0.01 0.02 (5,790) 1,103 (6,893) 164 (6,729) 1,424 (5,305) 110 (0.17) (0.17) – (0.17) (0.17) – (9,708) 1,223 (10,931) 181 (10,750) 1,494 (9,256) 97 (0.28) (0.29) 0.01 (0.28) (0.29) 0.01 1 The weighted average number of shares outstanding in 2014 and 2013 reflects the shares issued as a result of the capitalization of retained earnings declared on March 2014 and March 2013, as applicable (note 20A). 2 According to resolution of the stockholders’ meetings on March 26, 2015. 3 The number of CPO to be issued under the executive stock-based compensation programs, as well as the total amount of CPOs committed for issuance in the future under the mandatorily and optionally convertible securities, are computed from the beginning of the reporting period. The number of shares resulting from the executives’ stock option programs is determined under the inverse treasury method. 4 For 2015, 2014 and 2013, the effects on the denominator and numerator of potential dilutive shares generate antidilution; therefore, there is no change between the reported basic and diluted earning (loss) per share. 111 Notes to the consolidated financial statements 23) Commitments 23A) Guarantees As of December 31, 2015 and 2014, CEMEX, S.A.B. de C.V., had guaranteed loans of certain subsidiaries for approximately US$3,726 ($64,195) and US$5,589 ($82,383), respectively. 23B) Pledged assets CEMEX transferred to a guarantee trust the shares of its main subsidiaries, including CEMEX México, S.A. de C.V. and CEMEX España, S.A., and entered into pledge agreements in order to secure payment obligations under the Credit Agreement, the Facilities Agreement and other debt instruments entered into prior to the date of these agreements (note 16A). As of December 31, 2015 and 2014, there are no liabilities secured by property, machinery and equipment. 23C) Other commitments Between January and April 2013, CEMEX gradually unwounded the 136 million put options on CEMEX’s CPOs maintained for an aggregate amount of approximately US$112, after deducting the value of trust assets, in connection with a guarantee issued in put option transactions on CEMEX’s CPOs between Citibank and a Mexican trust that CEMEX established on behalf of its Mexican pension fund and certain of CEMEX’s directors and current and former employees. Under this transaction, in exchange for premiums for the sale of put options that were partially used by the trust to enter into prepaid forward contracts on CEMEX’s CPO, the put options gave Citibank the right for the trust to acquire, in April 2013, approximately 136 million CPOs at a price of US$2.6498 each (120% of initial CPO price in dollars). The amount of premiums represented the maximum exposure of the participating individuals under this transaction. 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 profitability. The 10-year contract signed with IBM is expected to generate cost reductions to CEMEX over such period, and includes: data processing services (back office) in finance, accounting and human resources; as well as IT infrastructure services, support and maintenance of IT applications in the countries in which CEMEX operates. 23D) Commitments from employee benefits In some countries, CEMEX has self-insured health care benefits 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, 2015, in certain plans, CEMEX has established stop-loss limits for continued medical assistance derived from a specific 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 100 thousand dollars to 2.5 million dollars. The contingency for CEMEX if all employees qualifying for health care benefits required medical services simultaneously is significantly. However, this scenario is remote. The amount expensed through self-insured health care benefits was approximately US$69 ($1,189) in 2015, US$64 ($943) in 2014 and US$70 ($914) in 2013. 112 Notes to the consolidated financial statements23E) Contractual obligations As of December 31, 2015 and 2014, CEMEX had the following contractual obligations: (U.S. dollars millions) Obligations Long-term debt Capital lease obligations 1 Convertible notes 2 Total debt and other financial obligations 3 Operating leases 4 Interest payments on debt 5 Pension plans and other benefits 6 Purchases of raw materials, fuel and energy 7 Total contractual obligations Less than 1 year 1-3 years US$ 5 23 362 390 99 851 147 483 1,970 $ 33,943 US$ 2,233 38 663 2,934 158 1,631 296 739 5,758 99,210 2015 3-5 years 4,208 32 518 4,758 109 1,104 301 609 6,881 118,560 More than 5 years 6,857 42 – 6,899 68 1,073 824 2,132 10,996 189,461 Total 13,303 135 1,543 14,981 434 4,659 1,568 3,963 25,605 441,174 2014 Total 13,964 215 1,826 16,005 393 5,048 1,604 4,814 27,864 410,715 1 Represent nominal cash flows. As of December 31, 2015, the net present value of future payments under such leases was US$102 ($1,752), of which, US$26 ($448) refers to payments from 1 to 3 years, US$23 ($389) refer to payments from 3 to 5 years, and US$37 ($646) refer payments of more than 5 years. 2 Refers to the components of liability of the convertible notes described in note 16B and assumes repayment at maturity and no conversion of the notes. 3 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 has replaced its long-term obligations for others of a similar nature. 4 The amounts represent nominal cash flows. CEMEX has operating leases, primarily for operating facilities, cement storage and distribution facilities and certain transportation and other equipment, under which annual rental payments are required plus the payment of certain operating expenses. Rental expense was US$114 ($1,967) in 2015, US$112 ($1,657) in 2014 and $126 ($1,647) in 2013. 5 Estimated cash flows on floating rate denominated debt were determined using the floating interest rates in effect as of December 31, 2015 and 2014. 6 Represents estimated annual payments under these benefits for the next 10 years (note 18), including the estimate of new retirees during such future years. 7 Future payments for the purchase of raw materials are presented on the basis of contractual nominal cash flows. Future nominal payments for energy were estimated for all contractual commitments on the basis of an aggregate average expected consumption of 3,124.1 GWh per year using the future prices of energy established in the contracts for each period. Future payments also include CEMEX’s commitments for the purchase of fuel. As of December 31, 2015 and 2014, in connection with the commitments for the purchase of fuel and energy included in the table above, a description of the most significant contracts is as follows: • In September 2006, CEMEX and the Spanish company ACCIONA agreed to develop a wind farm project for the generation of 250 Megawatts (“MW”) in the Mexican state of Oaxaca. CEMEX acted as promoter of the project, which was named EURUS. ACCIONA provided the required financing, constructed the facility and currently operates the wind farm. The installation of 167 wind turbines in the farm was finished in November 2009. The agreements established that CEMEX’s plants in Mexico will acquire a portion of the energy generated by the wind farm for a period of at least 20 years, which began in February 2010, when EURUS reached the committed limit capacity. For the years ended December 31, 2015, 2014 and 2013, EURUS supplied (unaudited) approximately 28.0%, 28.2% and 25.8%, respectively, of CEMEX’s overall electricity needs in Mexico during such year. This agreement is for CEMEX’s own use and there is no intention of trading in energy. • In 1999, CEMEX entered into agreements with an international partnership, which financed, built and operated an electrical energy generating plant in Mexico called Termoeléctrica del Golfo (“TEG”). In 2007, the original operator was replaced. Pursuant to the agreement, CEMEX would purchase the energy generated from TEG for a term of not less than 20 years, which started in April 2004 and that was further extended until 2027 with the change of operator. CEMEX committed to supply TEG and another third- party electrical energy generating plant adjacent to TEG all fuel necessary for their operations, a commitment that has been hedged through four 20-year agreements entered with Petróleos Mexicanos (“PEMEX”), which terminate in 2024. Consequently, for the last 3 years, CEMEX intends to purchase the required fuel in the market. For the years ended December 31, 2015, 2014 and 2013, TEG supplied (unaudited) approximately 69.3%, 69.6% and 70.9% respectively, of CEMEX’s overall electricity needs during such year for its cement plants in Mexico. 113 Notes to the consolidated financial statements • In regards with the above, in March 1998 and July 1999, CEMEX signed contracts with PEMEX providing that beginning in April 2004 PEMEX’s refineries in Cadereyta and Madero City would supply CEMEX with a combined volume of approximately 1.75 million tons of petroleum coke per year. As per the petroleum coke contracts with PEMEX, 1.2 million tons of the contracted volume will be allocated to TEG and the other energy producer and the remaining volume will be allocated to CEMEX’s operations in Mexico. By entering into the petroleum coke contracts with PEMEX, CEMEX expects to have a consistent source of petroleum coke throughout the 20-year term. • In 2007, CEMEX OstZement GmbH (“COZ”), CEMEX’s subsidiary in Germany, entered into a long-term energy supply contract with Vattenfall Europe New Energy Ecopower (“VENEE”), pursuant to which VENEE committed to supply energy to CEMEX’s Rüdersdorf plant for a period of 15 years starting on January 1, 2008. Based on the contract, each year COZ has the option to fix in advance the volume of energy in terms of MW that it will acquire from VENEE, with the option to adjust the purchase amount one time on a monthly and quarterly basis. According to the contract, COZ acquired (unaudited) approximately 27 MW in 2015, 2014 and 2013, and COZ expects to acquire between 26 and 28 MW per year starting in 2015 and thereafter. The contract, which establishes a price mechanism for the energy acquired, based on the price of energy future contracts quoted on the European Energy Exchange, did not require initial investments and was expected to be performed at a future date. Considering that the contract is for CEMEX’s own use and CEMEX sells any energy surplus as soon as actual energy requirements are known, regardless of changes in prices and thereby avoiding any intention of trading in energy, such contract is not recognized at its fair value. 24) Contingencies 24A) Provisions resulting from legal proceedings CEMEX is involved in various significant legal proceedings, the resolutions of which are deemed probable and imply cash outflows or the delivery of other resources owned by CEMEX. As a result, certain provisions have been recognized in the financial statements, representing the best estimate of the amounts payable. Therefore, CEMEX believes that it will not incur significant expenditure in excess of the amounts recorded. As of December 31, 2015, the details of the most significant events are as follows: • In January 2007, the Polish Competition and Consumers Protection Office (the “Protection Office”) notified CEMEX Polska Sp. Z.o.o.(“CEMEX Polska”), a subsidiary of CEMEX in Poland, about the initiation of an antitrust proceeding against all cement producers in the country, including CEMEX Polska and another of CEMEX’s indirect subsidiaries in Poland. The Protection Office alleged that there was an agreement between all cement producers in Poland regarding prices, market quotas and other sales conditions of cement, and that the producers exchanged confidential information, all of which limited competition in the Polish cement market. CEMEX Polska filed its response to the notification, denying that it had committed the practices listed by the Protection Office, and submitted formal comments and objections gathered during the proceeding, as well as facts supporting its position that its activities were in line with Polish competition law. In December 2009, the Protection Office issued a resolution imposing fines on a number of Polish cement producers, including CEMEX Polska for the period of 1998 to 2006. The fine imposed on CEMEX Polska amounted to the equivalent of approximately US$30 ($517) which represented 10% of CEMEX Polska’s total revenue for the calendar year preceding the imposition of the fine. On December 23, 2009, CEMEX Polska filed an appeal before the Polish Court of Competition and Consumer Protection in Warsaw (the “First Instance Court”). On December 13, 2013, the First Instance Court reduced the penalty imposed on CEMEX Polska to the equivalent of approximately US$24 ($414), or 8.125% of CEMEX Polska’s revenue in 2008. On May 8, 2014, CEMEX Polska filed an appeal against the First Instance Court judgment before the Appeals Court in Warsaw. Hearings took place on September 24, 2015 and December 3, 2015, and another hearing is scheduled for February 26, 2016. If the Appeals Court issues its final judgment and the penalty is maintained in the final resolution, then these will be payable within 14 calendar days of the announcement. As of December 31, 2015, CEMEX had accrued a provision equivalent to approximately US$24 ($414), representing the best estimate of the expected cash outflow in connection with this resolution. As of December 31, 2015, CEMEX does not expect this matter would have a material adverse impact on its results of operations, liquidity or financial condition. 114 Notes to the consolidated financial statements• In August 2005, Cartel Damages Claims, S.A. (“CDC”), a Belgian company established in the aftermath of the German cement cartel investigation that took place from July 2002 to April 2003 by Germany’s Federal Cartel Office, with the purpose of purchasing potential damage claims from cement consumers and pursuing those claims against the cartel participants, filed a lawsuit in the District Court in Düsseldorf, Germany, against CEMEX Deutschland AG, a subsidiary of CEMEX in Germany, and other German cement companies in respect of damage claims relating to alleged price and quota fixing by German cement companies between 1993 and 2002. CDC has brought claims for an amount equivalent of approximately US$142 ($2,447). After several resolutions by the District Court in Düsseldorf over the years, court hearings and appeals from the defendants, on December 17, 2013 the District Court in Düsseldorf issued a resolution by means of which all claims brought to court by CDC were dismissed on the grounds that the way CDC obtained the claims from 36 cement purchasers was illegal given the limited risk it faced for covering the litigation costs and that the acquisition of the claims also breached rules that make the provision of legal advice subject to public authorization. On January 15, 2014, CDC filed an appeal to the Higher Regional Court in Düsseldorf, and thereafter submitted reasons for their appeal. On February 18, 2015, the Court of Appeals in Düsseldorf fully rejected CDC’s appeal and maintained the first instance decision. The Court of Appeals in Düsseldorf expressly did not admit a second appeal against this decision which could have been challenged by CDC. The Court of Appeals decision is final and binding. Therefore, in 2015, CEMEX canceled the provision accrued as of December 31, 2014 of approximately US$36 ($535). • As of December 31, 2015, CEMEX had accrued environmental remediation liabilities in the United Kingdom pertaining to closed and current landfill sites for the confinement of waste, representing the net present value of such obligations for an equivalent of approximately US$193 ($3,325). Expenditure was assessed and quantified over the period in which the sites have the potential to cause environmental harm, which was accepted by the regulator as being up to 60 years from the date of closure. The assessed expenditure included the costs of monitoring the sites and the installation, repair and renewal of environmental infrastructure. • As of December 31, 2015, CEMEX had accrued environmental remediation liabilities in the United States for an amount of approximately US$27 ($465), related to: a) the disposal of various materials in accordance with past industry practice, which might currently be categorized as hazardous substances or wastes, and b) the cleanup of sites used or operated by CEMEX, including discontinued operations, regarding the disposal of hazardous substances or waste, either individually or jointly with other parties. Most of the proceedings are in the preliminary stages, and a final resolution might take several years. Based on the information developed to date, CEMEX’s does not believe that it will be required to spend significant sums on these matters in excess of the amounts previously recorded. The ultimate cost that may be incurred to resolve these environmental issues cannot be assured until all environmental studies, investigations, remediation work and negotiations with, or litigation against, potential sources of recovery have been completed. 115 Notes to the consolidated financial statements24B) Other contingencies from legal proceedings CEMEX is involved in various legal proceedings, which have not required the recognition of accruals, as CEMEX believes that the probability of loss is less than probable or remote. In certain cases, a negative resolution may represent the revocation of an operating license, in which case, CEMEX may experience a decrease in future revenues, an increase in operating costs or a loss. As of December 31, 2015, the most significant events with a quantification of the potential loss, when it is determinable and would not impair the outcome of the relevant proceeding, were as follows: • In connection with the construction of the new cement plant in the municipality of Maceo (Antioquia) in Colombia (note 14), on August 28, 2012, CEMEX Colombia signed a memorandum of understanding (“MOU”) with CI CALIZAS, S.A. for the acquisition of the land, the mining title and the free zone for the construction of such cement plant. After the execution of the MOU, one of CI CALIZAS, S.A.’s partners was linked to a legal process for expiration of property and, as a result, the Attorney General’s Office, among other measures, suspended CI CALIZAS, S.A.’s rights to dispose of the assets offered to CEMEX Colombia. In order to protect its interests, CEMEX Colombia presented to the competent authorities the information of the cement project under development and explained how this measure affected the transfer of full ownership rights of the related assets under negotiation. Considering CEMEX Colombia’s efforts, and as a temporary solution while the request for the revocation of the measures against CI CALIZAS is resolved, CEMEX Colombia entered into a lease contract with the authority acting as depository of the affected assets pursuant to which CEMEX Colombia is authorized to continue with the necessary works for the construction of the cement plant and consequently to protect all the infrastructure works and investments already made by CEMEX Colombia. Additionally, CEMEX Colombia became party in the legal proceeding to enforce its rights under the MOU and to conclude the negotiation once the proceeding is resolved. As of December 31, 2015, CEMEX Colombia considers that its investments in the development of the plant are protected by virtue of the lease contract. Nonetheless, if there is a final adverse resolution of the authority with respect to CI CALIZAS, S.A.’s rights to dispose of the land, the mining title and the free zone, and if CEMEX Colombia exhausts all legal resources available against the adverse resolution, in such event that the lease could not be extended, the resolution could have a material adverse effect on the Company’s results of operations, liquidity or financial condition. • In September 2014, the National Markets and Competition Commission (Comisión Nacional de los Mercados y la Competencia or the “CNMC”), in the context of an investigation of the Spanish cement, ready-mix concrete and related products industry regarding alleged anticompetitive practices, inspected one of CEMEX’s facilities in Spain. On January 12, 2015, CEMEX España Operaciones, S.L.U., was notified of the initiation by the CNMC of a disciplinary proceeding for alleged prohibited conducts. On November 19, 2015, CEMEX España Operaciones, S.L.U. was notified that the alleged anticompetitive practices in 2009 for the cement market and the years 2008, 2009, 2012, 2013 and 2014 for the ready-mix market. CEMEX España Operaciones, S.L.U. believes that it has not breached any applicable laws. As of December 31, 2015, considering the early stage of this matter, CEMEX cannot assess the likelihood of the CNMC issuing a decision imposing any penalties or remedies, if any, or the amount of the penalty or the scope of the remedies, if any. However, if the CNMC issues a decision imposing any penalty or remedy, CEMEX does not expect that it would have a material adverse impact on CEMEX’s results of operations, liquidity or financial condition. • On September 5, 2013, the Colombian Superintendency of Industry and Commerce (Superintendencia de Industria y Comercio the “SIC”) opened an investigation against five cement companies and 14 directors of those companies, including CEMEX Colombia, its former legal representative and the current President of CEMEX Colombia, for allegedly breaching rules which prohibit: a) to limit free competition and/or determining or maintaining unfair prices; b) direct or indirect price fixing agreements; and c) any market sharing agreements between producers or distributors. In connection with the 14 executives under investigation, the SIC may sanction any individual who collaborated, facilitated, authorized, executed or tolerated behavior that violates free competition rules. On October 7, 2013, CEMEX Colombia responded the resolution and submitted evidence in its relief. If the alleged infringements are substantiated, penalties may be imposed by the SIC against each company being declared in breach of the competition rules for an equivalent of up to US$19 ($327) for each violation, and an equivalent of up to US$1 ($17) against those individuals found responsible. CEMEX cannot determine when a final decision by the SIC would be issued. As of December 31, 2015, CEMEX is not able to assess the likelihood of the SIC imposing any measures and/or penalties against CEMEX Colombia, but if any penalties are imposed, would not have a material adverse effect on CEMEX’s results of operations, liquidity or financial condition. 116 Notes to the consolidated financial statements• On July 24, 2013, the South Louisiana Flood Protection Authority-East (“SLFPAE”) issued a petition for damages in the Civil District Court for the Parish of Orleans, Louisiana in the United States, against approximately 100 defendants including CEMEX, Inc., one of CEMEX´s subsidiaries in the United States, seeking compensation for and the restoration of certain coastal lands near New Orleans alleged to have been damaged by activities related to oil and gas exploration and production since the early 1900’s. CEMEX, Inc., which was previously named Southdown, Inc., may have acquired liabilities, to the extent there may be any, in connection with oil and gas operations that were divested in the late 1980’s. The matter was removed to the United States District Court for the Eastern District of Louisiana (the “Louisiana District Court”). On June 6, 2014, a new act (“Act 544”) was enacted which prohibits certain state or local governmental entities such as the SLFPAE from initiating certain causes of action including the claims asserted in this matter. The effects of Act 544 on the pending matter have yet to be determined by the Louisiana District Court. Further, CEMEX, Inc., was dismissed without prejudice by the plaintiffs. On February 13, 2015, the Louisiana District Court dismissed the plaintiffs’ claims with prejudice. On February 27, 2015, the plaintiffs appealed this ruling. As of December 31, 2015, CEMEX cannot assess the likelihood of an adverse result or, because of the number of defendants, the potential damages which could be borne by CEMEX, Inc., if any, or if such damages, would have or not a material adverse impact on CEMEX’s results of operations, liquidity or financial condition. • On June 21, 2012, one of CEMEX’s subsidiaries in Israel was notified about an application for the approval of a class action suit against it. The application, filed by a homeowner who built his house with concrete supplied by CEMEX in October of 2010 (same application was filed against three other companies by the same legal representative), claims that the concrete supplied to him did not meet with the Israeli ready-mix strength standard requirements and that as a result CEMEX acted unlawfully toward all of its customers who received concrete that did not comply with such standard requirements. As per the application, the plaintiff claims that the supply of the alleged non-conforming concrete has caused financial and non-financial damages to those customers, including the plaintiff. CEMEX presumes that the class action would represent the claim of all the clients who purchased the alleged non-conforming concrete from its subsidiary in Israel during the past 7 years, the limitation period according to applicable laws in Israel. The damages that could be sought amount and equivalent to approximately US$71 ($1,223). CEMEX’s subsidiary submitted a formal response to the corresponding court. The applicant requested the court to join all claims brought by him. In a hearing held on December 20, 2015, the preliminary proceeding was completed and the court set dates for hearing evidence on May 8, 10 and 16, 2016. Moreover, the court decided to join together all claims against all four companies, including CEMEX’s subsidiary in Israel, in order to simplify and shorten court proceedings, however, the court has not formally decided to join together all claims. As of December 31, 2015, CEMEX’s subsidiary in Israel is not able to assess the likelihood of the class action application being approved or, if approved, of an adverse result, such as an award for damages in the full amount that could be sought, but if adversely resolved CEMEX does not believe that the final resolutions would have a material adverse impact on its results of operations, liquidity or financial condition. • On January 20, 2012, the United Kingdom Competition Commission (the “UK Commission”), commenced a market investigation (“MIR”) into the supply or acquisition of cement, ready-mix concrete and aggregates. The referral to the UK Commission was made by the Office of Fair Trading, following an investigation by them of the aggregates sector. The UK Commission issued its full Provisional Findings Report on May 23, 2013, in which it provisionally found that there was a combination of structural and conduct features that gave rise to an adverse effect on competition in the Great Britain cement markets and an adverse effect on competition as a result of contracts involving certain major suppliers of granulated blast furnace slag and for the supply of ground granulated blast furnace slag. The UK Commission has not identified any problems with the markets for aggregates or ready mix concrete. The possible remedies the UK Commission listed include, among others, the divestiture of cement production capacity and/or ready-mix concrete plants by one or more of the top three cement producers and the creation of a cement buying group. On October 8, 2013 the UK Commission announced its provisional decision did not require CEMEX to divest assets in the United Kingdom. On January 14, 2014, the UK Commission published its final report, which followed the earlier provisional decision in regards CEMEX’s subsidiaries in the United Kingdom. However, the final report made changes regarding the supply of granulated blast furnace slag and for the supply of ground granulated blast furnace slag by the other major participants in the MIR. These resolutions did not affect CEMEX’s results of operations, liquidity or financial condition. 117 Notes to the consolidated financial statements• In connection with a lawsuit submitted to a first instance court in Assiut, Egypt and notified on May 23, 2011 to ACC, on September 13, 2012, the first instance court of Assiut issued a resolution in order to nullify the Share Purchase Agreement (the “SPA”) pursuant to which CEMEX acquired a controlling interest in ACC. In addition, on April 7, 2011 and March 6, 2012, lawsuits seeking, among other things, the annulment of the SPA were filed by different plaintiffs, including 25 former employees of ACC, before Cairo’s State Council. On January 20, 2014, the Appeals Court in Assiut, Egypt, issued a judgment revoking the court’s resolution and referring the matter to an administrative court in Assiut (the “Assiut Administrative Court”). Moreover, on February 23, 2014, in connection with the above, three plaintiffs filed a lawsuit before the Assiut Administrative Judiciary Court requesting the cancellation of the resolutions taken by the shareholders of Metallurgical Industries Company (“MIC”) in connection with the sale of ACC’s shares and negotiation of the SPA. In a related matter, on April 22, 2014, the Presidential Decree on Law No. 32 of 2014 (“Law 32/2014”), which regulates legal actions to challenge agreements entered into by the Egyptian State and third parties, become effective, but still subject to approval by the House of Representatives. On October 15, 2014, the Assiut Administrative Court referred the case to the Administrative Judiciary Court of Assiut. During March 2015, the Court’s State Commissioner Authority (“SCA”) recommended the 7th and 8th Circuits of Cairo’s State Council Administrative Judiciary Court to suspend the proceedings until the High Constitutional Court pronounces itself with regards to the challenges against the constitutionality of the Law 32/2014. At a session held on September 3, 2015, the 7th Circuit of Cairo’s State Council Administrative Judiciary Court accepted the SCA’s report recommendation and ruled for staying the proceedings until the High Constitutional Court pronounces itself with regards to the challenges against the constitutionality of Law No.32/2014. In a hearing held on October 13, 2015, the 8th Circuit of Cairo’s State Council Administrative Judiciary Court reviewed the SCA’s recommendations and the case was adjourned to January 26, 2016 for passing judgment. In October 2015, the SCA, recommended that due to the absence of geographical jurisdiction to review the case, it should be referred to the 7th Circuit of “Economic and Investment Disputes” of Cairo’s State Council Administrative Judiciary Court. The Assiut Administrative Judiciary Court scheduled a hearing for the case for February 24, 2016. During October and November 2015, parliamentary elections to the House of Representatives took place and as of December 31, 2015, it was expected that their first session took place on January 10, 2016. In consideration of the aforementioned, after several resolutions, hearings and appeals in these cases over the years, as of December 31, 2015, CEMEX is not able to assess the likelihood of an adverse resolution regarding these lawsuits nor is able to assess if the Constitutional Court will dismiss Law 32/2014 or if Law 32/2014 will not be ratified by the House of Representatives, but, regarding the lawsuits, if adversely resolved, CEMEX does not believe the resolutions in the first instance would have an immediate material adverse impact on CEMEX´s operations, liquidity and financial condition. However, if CEMEX exhausts all legal recourses available, a final adverse resolution of these lawsuits, or if the Constitutional Court dismisses Law 32/2014, or if Law 32/2014 is not ratified by the House of Representatives, this could adversely impact the ongoing matters regarding the SPA, which could have a material adverse impact on CEMEX’s operations, liquidity and financial condition. • On December 8, 2010, the European Commission (the “EC”) initiated an investigation in respect of possible anticompetitive practices in Austria, Belgium, the Czech Republic, France, Germany, Italy, Luxembourg, the Netherlands, Spain and the United Kingdom, which include CEMEX and seven other companies. After several requests of information by the EC to CEMEX during the audits process, hearings, appeals and replies by CEMEX over the years, on March 14, 2014, the General Court dismissed the appeal filed by CEMEX and confirmed the lawfulness of the request for information sent by the EC in all of its aspects. On May 23, 2014, CEMEX and several of its affiliates in Europe filed an appeal against the General Court’s judgment before the European Court of Justice. If the alleged infringements are substantiated, the EC may impose a maximum fine of up to 10% of the total turnover of the relevant companies for the last year preceding the imposition of the fine for which the financial statements have been approved. On July 31, 2015, the EC communicated that the formal proceedings initiated against CEMEX and other seven companies regarding anticompetitive practices were closed. As a result, CEMEX is not subject to any fines or penalties resulting from such proceedings. As a consequence, CEMEX and its affiliates also withdrew the appeal filed before the European Court of Justice. • On October 26, 2010, CEMEX, Inc., received an Antitrust Civil Investigative Demand from the Office of the Florida Attorney General, which seeks documents and information in connection with an antitrust investigation in the ready-mix concrete industry in Florida. As of December 31, 2015, CEMEX Inc., has complied with the Office of the Florida Attorney General with respect to the documents and information requested by the civil investigative demand and cannot determine if any formal proceeding will be initiated by such authority, however, if any proceeding is initiated, CEMEX, Inc., does not currently expect that any adverse decision against CEMEX resulting from the investigation would have a material adverse impact on CEMEX’s results of operations, liquidity or financial condition. 118 Notes to the consolidated financial statements• On June 5, 2010, the District of Bogota’s Environmental Secretary (Secretaría Distrital de Ambiente de Bogotá or the “Environmental Secretary”), ordered the suspension of CEMEX Colombia’s mining activities at El Tunjuelo quarry, located in Bogota, as well as those of other aggregates producers in the same area. The Environmental Secretary alleged that during the past 60 years, CEMEX Colombia and the other companies have illegally changed the course of the Tunjuelo River, have used the percolating waters without permission and have improperly used the edge of the river for mining activities. In connection with the injunction, on June 5, 2010, CEMEX Colombia received a notification from the Environmental Secretary informing the initiation of proceedings to impose fines against CEMEX Colombia based on the above mentioned alleged environmental violations. CEMEX Colombia responded to the injunction by requesting that it be revoked based on the fact that the mining activities at El Tunjuelo quarry are supported by the authorizations required by the applicable environmental laws and that all the environmental impact statements submitted by CEMEX Colombia have been reviewed and permanently authorized by the Ministry of Environment and Sustainable Development (Ministerio de Ambiente y Desarrollo Sostenible). On June 11, 2010, the local authorities in Bogota, in compliance with the Environmental Secretary’s decision, sealed off the mine to machinery and prohibited the removal of CEMEX’s aggregates inventory. Although there is not an official quantification of the possible fine, the Environmental Secretary has publicly declared that the fine could be up to the equivalent of approximately US$95 ($1,637). The temporary injunction does not currently compromise the production and supply of ready-mix concrete to CEMEX’s clients in Colombia. At this stage, CEMEX is not able to assess the likelihood of an adverse result or potential damages which could be borne by CEMEX Colombia. An adverse resolution on this case could have a material adverse impact on CEMEX’s results of operations, liquidity or financial condition. • In January 2009, in response to litigation brought by environmental groups concerning the manner in which certain federal quarry permits were granted to CEMEX Construction Materials Florida, LLC (“CEMEX Florida”), one of CEMEX´s subsidiaries in the United States , a judge from the U.S. District Court for the Southern District of Florida ordered the withdrawal of the federal quarry permits of CEMEX Florida’s SCL, FEC and Kendall Krome quarries, in the Lake Belt area in South Florida. The judge ruled that there were deficiencies in the procedures and analysis undertaken by the Army Corps of Engineers (the “Engineers”) in connection with the issuance of the permits. On January 29, 2010, the Engineers concluded a review and issued a decision supporting the issuance of new federal quarry permits for the SCL and FEC quarries. During February 2010, new quarry permits were granted to the SCL and FEC quarries. A number of potential environmental impacts must be addressed at the wetlands located at the Kendall Krome site before a new federal quarry permit may be issued for mining at that quarry. If CEMEX Florida is unable to maintain the new Lake Belt permits, CEMEX Florida would need to source aggregates, to the extent available, from other locations in Florida or import aggregates. The cessation or significant restriction of quarrying operations in the Lake Belt area could have a significant adverse impact on CEMEX’s results of operations, liquidity or financial condition. • In April 2006, the cities of Kaštela and Solin in Croatia published their respective development master plans, adversely impacting the mining concession granted to CEMEX Hrvatska d.d. (“CEMEX Croatia”), one of CEMEX’s subsidiaries in Croatia, by the Croatian government in September 2005. After several procedures and appeals filed by CEMEX over the years before the Constitutional Court and before the Administrative Court in Croatia, seeking prohibition of the implementation of the master plans and a declaration from the Croatian Government confirming its acquired rights under the mining concessions, and after several resolutions of the authorities thereof, on April 4, 2014, CEMEX Croatia was notified that the administrative court rejected its claims and found that its acquired rights or interests under the mining concessions had not been violated as a result of any act or decision made by the cities of Solin or Kaštela or any other governmental body. On April 29, 2014, CEMEX Croatia filed two claims before the Constitutional Court alleging that CEMEX Croatia’s constitutional rights to a fair trial and judicial protection had been violated. In order to alleviate the adverse impact of the aforementioned master plans, as of December 31, 2015, CEMEX Croatia is in the process of preparing all documentation necessary to comply with applicable rules and regulations in order to obtain a new concession. At this stage of the proceedings, as of December 31, 2015, we are not able to assess the likelihood of an adverse result to the claims filed before the Constitutional Court of the Republic of Croatia, but if adversely resolved, it should not have a material adverse impact on CEMEX’s results of operations, liquidity and financial condition. In addition, during May 2015, CEMEX Croatia obtained a new permit from the Croatian Ministry of Construction and Physical Planning for CEMEX Croatia’s Sveti Juraj-Sveti Kajo quarry. 119 Notes to the consolidated financial statements• In August 2005, a lawsuit was filed against CEMEX Colombia and other members of the Colombian Ready-mix Producers Association (Asociación Colombiana de Productores de Concreto or “ASOCRETO”). The lawsuit claimed that CEMEX Colombia and other ASOCRETO members were liable for the premature distress of the concrete slabs of the Autopista Norte trunk line of the Transmilenio bus rapid transit system in Bogota in which ready-mix concrete and flowable fill supplied by CEMEX Colombia and other ASOCRETO members was used. The plaintiffs alleged that the base material supplied for the road construction failed to meet the quality standards offered by CEMEX Colombia and the other ASOCRETO members and/or that they provided insufficient or inaccurate information in connection with the product. The plaintiffs seek compensation for damages for an equivalent of approximately US$32 ($551). On October 10, 2012, a court resolution convicted the former director of the Urban Development Institute (“UDI”), the legal representatives of the builder and the auditor to a prison term of 85 months and a fine equivalent to approximately 10 thousand dollars, and ordered a restart of the proceeding against the ASOCRETO officers. On August 30, 2013, after an appeal by the UDI, the Superior Court of Bogota issued a resolution that, among other matters, reduced the prison term imposed to the former UDI officers to 60 months, imposed the UDI officers to severally pay an amount equivalent to US$34 ($586), overturned the sentence imposed to the builder’s legal representatives and auditor because the criminal action against them was time barred, revoked the annulment in favor of the ASOCRETO officers and ordered the first instance judge to render a judgment regarding the ASOCRETO officers’ liability or lack thereof. On January 21, 2015, the Penal Circuit Court of Bogota issued a resolution regarding the application of the statute of limitations to the criminal investigation against the ASOCRETO officers acknowledging that the ASOCRETO officers were not public officers, and as a consequence, finalizing the process against the ASOCRETO officers and the civil responsibility claim against CEMEX Colombia. On July 28, 2015, the Superior Court of Bogota (Tribunal Superior de Bogotá) upheld this resolution and as such finalized the action brought against CEMEX Colombia for the premature distress of the concrete slabs of the Autopista Norte trunk. In addition, six actions related to the premature distress of the concrete slabs were brought against CEMEX Colombia. The Cundinamarca Administrative Court (Tribunal Administrativo de Cundinamarca) nullified five of these actions and currently, only one remains outstanding. In addition, the UDI filed another action alleging that CEMEX Colombia made deceiving advertisements on the characteristics of the flowable fill used in the construction of the line. CEMEX Colombia participated in this project solely and exclusively as supplier of the ready-mix concrete and flowable fill, which were delivered and received to the satisfaction of the contractor, fulfilling all the required technical specifications. CEMEX Colombia did not participate in nor had any responsibility on the design, sourcing of materials or their corresponding technical specifications or construction. The court’s resolution is subject to be appealed before the Superior Court of Bogota. As of December 31, 2015, CEMEX is not able to assess the likelihood of an adverse result, regarding the action filed before the Cundinamarca Administrative Court and the action filed by the UDI, but if adversely resolved, they could have a material adverse impact on CEMEX’s results of operations, liquidity or financial condition. In connection with the legal proceedings presented in notes 24A and 24B, the exchange rates as of December 31, 2015 used by CEMEX to convert the amounts in local currency to their equivalents in dollars were the official closing exchange rates of approximately 3.92 polish zloty per dollar, 0.92 euro per dollar, 0.68 british pound sterling per dollar, 3,149 colombian pesos per dollar and 3.9 israel shekel per dollar. In addition to the legal proceedings described above in notes 24A and 24B, as of December 31, 2015, CEMEX is involved in various legal proceedings of minor impact that have arisen in the ordinary course of business. These proceedings involve: 1) product warranty claims; 2) claims for environmental damages; 3) indemnification claims relating to acquisitions or divestitures; 4) claims to revoke permits and/or concessions; and 5) other diverse civil actions. CEMEX considers that in those instances in which obligations have been incurred, CEMEX has accrued adequate provisions to cover the related risks. CEMEX believes these matters will be resolved without any significant effect on its business, financial position or results of operations. In addition, in relation to certain ongoing legal proceedings, CEMEX is sometimes able to make and disclose reasonable estimates of the expected loss or range of possible loss, as well as disclose any provision accrued for such loss, but for a limited number of ongoing legal proceedings, CEMEX may not be able to make a reasonable estimate of the expected loss or range of possible loss or may be able to do so but believes that disclosure of such information on a case-by-case basis would seriously prejudice CEMEX’s position in the ongoing legal proceedings or in any related settlement discussions. Accordingly, in these cases, CEMEX has disclosed qualitative information with respect to the nature and characteristics of the contingency, but has not disclosed the estimate of the range of potential loss. 120 Notes to the consolidated financial statements25) Related parties All significant balances and transactions between the entities that constitute the CEMEX group have been eliminated in the preparation of the consolidated financial statements. These balances with related parties resulted primarily from: (i) the sale and purchase of goods between group entities; (ii) the sale and/or acquisition of subsidiaries’ shares within the CEMEX group; (iii) the invoicing of administrative services, rentals, trademarks and commercial name rights, royalties and other services rendered between group entities; and (iv) loans between related parties. Transactions between group entities are conducted on arm’s length terms based on market prices and conditions. When market prices and/or market conditions are not readily available, CEMEX conducts transfer pricing studies in the countries in which it operates to assure compliance with regulations applicable to transactions between related parties. The definition of related parties includes entities or individuals outside the CEMEX group, which, pursuant to their relationship with CEMEX, may take advantage of 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. As of December 31, 2015, CEMEX has identified the following transactions between related parties: • Mr. Karl H. Watson Jr. was the President of CEMEX USA up until December 31, 2015. In the ordinary course of business, CEMEX USA’ s operations pay fees for freight services to Florida Aggregate Transport, a Florida based vendor. Karl H. Watson Jr.’s stepbrother is part of Florida Aggregate Transport’s ownership and senior management. The amounts of these services, which are negotiated on market terms, are not material to CEMEX USA’ s operations and CEMEX is not able to determine if the amounts are material for Florida Aggregate Transport. • For the years ended December 31, 2015, 2014 and 2013, the aggregate amount of compensation of CEMEX board of directors, including alternate directors, and top management executives, was approximately US$36 ($579), US$68 ($909) and US$39 ($503), respectively. Of these amounts, approximately US$25 ($402) in 2015, US$35 ($464) in 2014 and US$25 ($320) in 2013, was paid as base compensation plus performance bonuses, including pension and postretirement benefits. In addition, approximately US$11 ($177) in 2015, US$33 ($444) in 2014 and US$14 ($183) in 2013 of the aggregate amount in each year, corresponded to allocations of CPOs under CEMEX’s executive stock-based compensation programs. In 2014 and 2013, the amount of CPOs allocated included approximately US$4 ($52) and US$3 ($38), respectively, of compensation earned under the program that is linked to the fulfillment of certain performance conditions and that was payable through March 2015 to then still active members of CEMEX, S.A.B. de C.V..’s board of directors and top management executives (note 21). 26) Subsequent events On January 6, 2016, in connection with the merger of Alestra and Axtel mentioned in note 16D that is expected to be effective beginning on February 15, 2016, the forward contract between a financial counterparty and CEMEX over the 59.5 million CPOs of Axtel was cash settled and as a result CEMEX received approximately US$4 million, net of transaction costs. In a separate transaction, considering that as of December 31, 2015, CEMEX held an investment in Axtel that upon completion of the Alestra and Axtel merger will be exchanged proportionately according to the new ownership interests for shares in the new merged entity that will remain public and the attractive business outlook of such new entity, after the settlement of the Axtel forward contract, CEMEX decided to purchase in the market the 59.5 million CPOs of Axtel and incorporate them to CEMEX’s investments available for sale (note 13B). 121 Notes to the consolidated financial statements27) Main subsidiaries The main subsidiaries as of December 31, 2015 and 2014 were as follows: Subsidiary CEMEX México, S. A. de C.V. 1 CEMEX España, S.A. 2 CEMEX, Inc. CEMEX Latam Holdings, S.A. 3 CEMEX (Costa Rica), S.A. CEMEX Nicaragua, S.A. Assiut Cement Company CEMEX Colombia S.A. 4 Cemento Bayano, S.A. 5 CEMEX Dominicana, S.A. CEMEX de Puerto Rico Inc. CEMEX France Gestion (S.A.S.) Solid Cement Corporation 6 APO Cement Corporation 7 CEMEX (Thailand) Co., Ltd. 7 CEMEX Holdings (Malaysia) Sdn Bhd CEMEX U.K. CEMEX Deutschland, AG. CEMEX Czech Republic, s.r.o. CEMEX Polska sp. Z.o.o. CEMEX Holdings (Israel) Ltd. CEMEX SIA CEMEX Topmix LLC, CEMEX Supermix LLC and CEMEX Falcon LLC 8 CEMEX AS Cimentos Vencemos do Amazonas, Ltda. Readymix Argentina, S.A. CEMEX Jamaica Neoris N.V. 9 CEMEX International Trading, LLC 10 Transenegy, Inc. 11 % Interest Country Mexico Spain United States of America Spain Costa Rica Nicaragua Egypt Colombia Panama Dominican Republic Puerto Rico France Philippines Philippines Thailand Malaysia United Kingdom Germany Czech Republic Poland Israel Latvia United Arab Emirates Norway Brazil Argentina Jamaica The Netherlands United States of America United States of America 2015 100.0 99.9 100.0 74.4 99.1 100.0 95.8 99.7 99.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.8 100.0 100.0 2014 100.0 99.9 100.0 74.4 99.1 100.0 95.8 99.7 99.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.8 100.0 100.0 1 CEMEX México, S.A. de C.V. is the indirect holding company of CEMEX España, S.A. and subsidiaries. 2 CEMEX España, S.A. is the indirect holding company of most of CEMEX’s international operations. 3 The interest reported includes treasury shares, CEMEX Latam Holdings, which is listed in the Colombian Stock Exchange, is a subsidiary of CEMEX España, S.A. and the indirect holding company of CEMEX’s operations in Colombia, Costa Rica, Panama, Brazil, Guatemala and El Salvador (note 20D). 4 Represents our 99.7% and 98.9% interest in ordinary and preferred shares, respectively. 5 Includes a 0.515% interest held on Cemento Bayano’s treasury. 6 Includes CEMEX Asia Holdings Ltd.’s 70% indirect economic interest and 30% indirect equity interest by CEMEX España, S.A. 7 Represents CEMEX Asia Holdings Ltd.’s indirect economic interest. 8 CEMEX owns a 49% equity interest in each of these entities and holds the remaining 51% of the economic benefits, through agreements with other shareholders. 9 Neoris N.V. is the holding company of the entities involved in the sale of information technology solutions and services. 10 CEMEX International Trading, LLC is involved in the international trading of CEMEX’s products. 11 This entity was formerly named Gulf Coast Portland Cement Co. it is engaged in the procurement of fuels, such as coal and petroleum coke, used in certain CEMEX’s operations. 122 Notes to the consolidated financial statements The terms we use Financial American Depositary Shares (ADSs) are a means for non-U.S.-based corporations to list their ordinary equity on an American stock exchange. Denominat- ed in US dollars, they confer full rights of ownership to the corporation’s underlying shares, which are held on deposit by a custodian bank in the compa- ny’s home country or territory. In relation to CEMEX, Citibank, N.A. is the depositary of CEMEX’s ADSs and each ADS represents 10 CPOs. The CEMEX ADSs are listed on the New York Stock Exchange. bps (Basis Point) is a unit of percentage measure equal to 0.01%, used to measure the changes to interest rates, equity indices, and fixed-income securities. Free cash flow CEMEX defines it as operating EBITDA minus net interest expense, maintenance capital expenditures, change in working capital, taxes paid, and other cash items (net other expens- es less proceeds from the disposal of obsolete and/ or substantially depleted operating fixed assets that are no longer in operation). Free cash flow is not a GAAP measure. LIBOR (London Interbank Offered Rate) is a reference rate based on the interest rates at which banks borrow unsecured funds from other banks in London. Maintenance capital expenditures CEMEX de- fines it as investments incurred with the purpose of ensuring the company’s operational continuity. These include capital expenditures on projects required to replace obsolete assets or maintain current opera- tional levels and mandatory capital expenditures, which are projects required to comply with govern- mental regulations or company policies. Mainte- nance capital expenditures is not a GAAP measure. Net working capital CEMEX defines it as operating accounts plus inventories minus operating accounts payable. Working capital is not a GAAP measure. Operating EBITDA CEMEX defines it as operating earnings before other expenses, net, plus deprecia- tion and amortization. Operating EBITDA does not include revenues and expenses that are not directly related to CEMEX’s main activity, or which are of an unusual or non-recurring nature under International Financial Reporting Standards (IFRS). Operating EBITDA is not a GAAP measure. Ordinary Participation Certificates (CPOs) are issued under the terms of a CPO Trust Agreement governed by Mexican law and represent two of CE- MEX’s series A shares and one of CEMEX’s series B shares. This instrument is listed on the Mexican Stock Exchange. pp equals percentage points. Strategic capital expenditures CEMEX defines it as investments incurred with the purpose of increas- ing the company’s profitability. These include capital expenditures on projects designed to increase profitability by expanding capacity, and margin im- provement capital expenditures, which are projects designed to increase profitability by reducing costs. Strategic capital expenditures is not a GAAP meas- ure. TIIE (Tasa de Interés Interbancaria de Equilibrio) is a measure of the average cost of funds in pesos in the Mexican interbank money market. Total debt CEMEX defines it as short-term and long-term debt plus convertible securities, liabilities secured with account receivables and capital leases. Total debt is not a GAAP measure. Industry Aggregates are sand and gravel, which are mined from quarries. They give ready-mix concrete its necessary volume and add to its overall strength. Under normal circumstances, one cubic meter of fresh concrete contains two metric tons of gravel and sand. Clean Development Mechanism (CDM) is a mech- anism under the Kyoto Protocol that allows Annex I countries to recognize greenhouse gas emission reductions from projects developed in Non-Annex I countries. Clinker is an intermediate cement product made by sintering limestone, clay, and iron oxide in a kiln at around 1,450 degrees Celsius. One metric ton of clinker is used to make approximately 1.1 metric tons of gray Portland cement. Fly ash is a combustion residue from coal-fired power plants that can be used as a non-clinker ce- mentitious material. Gray Portland cement is a hydraulic binding agent with a composition by weight of at least 95% clinker and 0–5% of a minor component (usually calcium sulfate). It can set and harden underwater and, when mixed with aggregates and water, produces concrete or mortar. Installed capacity is the theoretical annual produc- tion capacity of a plant; whereas effective capacity is a plant’s actual optimal annual production capacity, which can be 10–20% less than installed capacity. Metric ton is the equivalent of 1.102 short tons. Petroleum coke (petcoke) is a by-product of the oil refining coking process. Pozzolana is a fine, sandy volcanic ash. Ready-mix concrete is a mixture of cement, aggre- gates, and water. Slag is the by-product of smelting ore to purify metals. 123 Investor and media information Media relations contact mr@cemex.com Phone: (52-81) 8888-4334 Fax: (52-81) 8888-4417 Investor relations contact ir@cemex.com From the US: 1 877 7CX NYSE Mexico City office Av. Presidente Masarik 101-18 11570 México, D.F. México Phone: (52-55) 5726-9040 Fax: (52-55) 5203-2542 New York office 590 Madison Ave. 41st floor From other countries: (212) 317-6000 New York, NY 10022 USA Fax: (212) 317-6047 Web address www.cemex.com Headquarters Av. Ricardo Margáin Zozaya 325 Phone: (212) 317-6000 Fax: (212) 317-6047 Exchange listings Bolsa Mexicana de Valores (BMV) Mexico Ticker symbol: CEMEXCPO Share series: CPO (representing two A shares 66265 San Pedro Garza García, N.L. México and one B share) Phone: (52-81) 8888-8888 Fax: (52-81) 8888-4417 New York Stock Exchange (NYSE) United States Ticker symbol: CX Share series: ADS (representing 10 CPOs) Cautionary Statement Regarding Forward-Looking Statements This annual report contains forward-looking statements within the meaning of the U.S. federal securities laws. CEMEX, S.A.B. de C.V. and its direct and indirect subsidiar- ies (“CEMEX”) intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the U.S. federal securities laws. In some cases, these statements can be identified by the use of forward-looking words such as “may,” “should,” “could,” “anticipate,” “estimate,” “expect,” “plan,” “believe,” “predict,” “potential” and “intend” or other similar words. These forward-looking statements reflect CEMEX’s current expectations and projections about future events based on CEMEX’s knowledge of present facts and circumstances and assumptions about future events. These statements necessarily involve risks and uncertainties that could cause actual results to differ materially from CEMEX’s expectations. Some of the risks, uncertainties and other important factors that could cause results to differ, or that otherwise could have an impact on CEMEX or its subsidiaries, include, but are not limited to, the cyclical activity of the construction sector; CEMEX’s exposure to other sectors that impact CEMEX’s business, such as the energy sector; competition; gen- eral political, economic and business conditions in the markets in which CEMEX oper- ate; the regulatory environment, including environmental, tax, antitrust and acquisition- related rules and regulations; CEMEX’s ability to satisfy CEMEX’s obligations under its material debt agreements, the indentures that govern CEMEX’s senior secured notes and CEMEX’s other debt instruments; expected refinancing of existing indebted- ness; the impact of CEMEX’s below investment grade debt rating on CEMEX’s cost of capital; CEMEX’s ability to consummate asset sales, fully integrate newly acquired businesses, achieve cost-savings from CEMEX’s cost-reduction initiatives and imple- ment CEMEX’s global pricing initiatives for CEMEX’s products; the increasing reliance on information technology infrastructure for CEMEX’s invoicing, procurement, financial statements and other processes that can adversely affect operations in the event that the infrastructure does not work as intended, experiences technical difficulties or is subjected to cyber-attacks; weather conditions; natural disasters and other unforeseen events; and the other risks, uncertainties and other factors that affect CEMEX’s busi- ness described in the information CEMEX files with the Mexican Stock Exchange and/ or Mexican Banking and Securities Commission in Mexico and/or the Securities and Exchange Commission in the U.S. The information contained in this report is subject to change without notice, and CEMEX is not obligated to publicly update or revise for- ward-looking statements. Readers should review future reports filed by CEMEX with the Mexican Stock Exchange and/or Mexican Banking and Securities Commission in Mexico and/or the Securities and Exchange Commission in the U.S. This annual report also contains informational statistics related to the production, distribution, commer- cialization and sale of cement, ready-mix concrete, clinker and aggregates. Some of this information was generated internally by CEMEX, and other part of this information was obtained from independent publications and reports which CEMEX considers as reliable sources. CEMEX has not independently verified this information, and CEMEX has not obtained an authorization from any organization to include references to their reports into this annual report. 124 

Continue reading text version or see original annual report in PDF format above