View:
Mail Stop 7010
November 22, 2005
Via U.S. mail and facsimile
Mr. Lorenzo H. Zambrano
Chief Executive Officer, CEMEX, S.A. de C.V.
Av. Ricardo Margain Zozaya #325
Colonia Valle del Campestre
Garza Garcia, Nuevo Leon, Mexico 66265
RE: Form 20-F for the fiscal year ended December 31, 2004
File No. 1-14946
Dear Mr. Zambrano:
We have reviewed this filing and have the following
comments. If you disagree with a comment, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
FORM 20-F FOR THE YEAR ENDED DECEMBER 31, 2004
General
1. Where a comment below requests additional disclosures or other
revisions, please provide us with your proposed disclosure. Some
of
our comments refer to U.S. GAAP literature. If your accounting
under
Mexican GAAP differs from your accounting under U.S. GAAP, please
also show us the additional disclosures that will be included in
your
U.S. GAAP reconciliation footnote. These revisions should be
included in your future filings.
Item 5 - Operating and Financial Review and Prospects
Results of Operations, page 56
2. We note your disclosure relating to Results of Operations and
have
the following comments. Please refer to Item 5 of Form 20-F and
Release 33-8350.
* We note your analysis of net sales by geographic segment. You
should also provide an analysis of the components of operating
income
by geographic segment. Your analysis should also include your
Others
segment as disclosed in Note 20 to your financial statements.
* When you provide a segmental analysis of net sales and operating
earnings, you should quantify the net sales and operating income
of
each segment, either in tabular or narrative form. When you
analyze
the fluctuations in sales volume and average prices shown in your
table, you should quantify the sales volumes and average prices
for
your readers to make the discussion of variances more meaningful.
When you analyze the underlying factors that led to those
variances,
you should quantify the effect of each underlying factor that you
discuss to provide your readers with insight into the relative
impact
of each factor.
Summary of Material Contractual Obligations and Commercial
Commitments, page 77
3. Please revise your table of contractual cash obligations to
include the following:
* Estimated interest payments on your debt;
* Estimated payments under interest rate swap agreements; and
* Planned funding of pension and other postretirement benefit
obligations.
Because the table is aimed at increasing transparency of cash
flow,
we believe these payments should be included in the table. Please
also disclose any assumptions you made to derive these amounts.
Item 18 - Financial Statements for the Year Ended December 31,
2004
Note 3(F) - Significant Accounting Policies - Inventories and Cost
of
Sales, page F-9
4. We note that cost of sales reflects replacement cost of
inventories at the time of sale, and that replacement cost is
based
upon the latest purchase price or production cost. Please tell us
specifically how this method of costing your inventory differs
from
last-in, first-out ("LIFO"). If this method does not differ
significantly from LIFO, please disclose in Note 24 the excess of
replacement or current cost over the stated inventory value, as
required by Regulation S-X, Article 5-02(6)(c), and any applicable
disclosures required by Staff Accounting Bulletin Topic 5L or 11F.
Note 3(H) - Significant Accounting Policies - Properties,
Machinery
and Equipment, page F-9
5. The range of useful lives for your industrial buildings,
machinery
and equipment of 10 to 35 years is very broad. Please separately
discuss the types of assets that fall in each part of the range.
Note 15(f) - Stockholders` Equity - Other Equity Transactions,
page
F-31
6. Please tell us more regarding the purpose of the transaction
described in the last paragraph of this note. Please also tell us
the nature of the assets transferred and the basis for your
accounting for transaction under U.S. and Mexican GAAP.
Note 24 - Differences Between Mexican and United States Accounting
Principles, F-47
7. We note U.S. GAAP adjustment 14 entitled "Other U.S. GAAP
adjustments" which you further explain in Note 24(k). As these
adjustments affect multiple balance sheet captions, please
disclose
the impact on each caption in your reconciliation.
Note 24(c) - Differences Between Mexican and United States
Accounting
Principles - Other Employee Benefits, page F-50
8. We read that most of your health care benefits are self-
insured.
Please disclose your self-insurance limits, if any, for each type
of
loss for which the company is self-insured. In addition, if
material, disclose the amount you expensed for self-insured claims
during each period presented. If applicable, discuss the reasons
for
significant fluctuations in MD&A.
Note 24(c) - Differences Between Mexican and United States
Accounting
Principles - Other Employee Benefits - Pension and Other Benefits,
page F-51
9. We note your disclosure regarding pensions and other
postretirement benefits in Note 14. Please disclose the weighted
average rate of compensation increase under your significant
assumptions in accordance with paragraph 5(j) of SFAS 132(R).
Note 24(r) -Stock Option Programs, page F-58
10. Please provide each of the disclosures required by paragraphs
47-
48 of SFAS 123.
11. We note your statement that "[a]ccording to APB 25,
compensation
cost should be determined under the intrinsic cost method...for
all
plans that do not meet the following characteristics: (i) the
exercise price established in the option is equal to the quoted
market price of the stock at the measurement date, (ii) the
exercise
price is fixed for the option`s life, and (iii) the option`s
exercise
is hedged through the issuance of new shares of common stock."
Please tell us how you account for options that are not hedged
through the issuance of new shares and the basis in U.S. and
Mexican
GAAP for the change in your accounting. Please also address the
change in your accounting discussed in note 1 on page 3 of your
Form
6-K filed October 24, 2005. In that note you state that you will
now
account for your stock option programs using the fair value method
due of the elimination of the economic hedge on their exercise.
Note 24(s) - Differences Between Mexican and United States
Accounting
Principles - Impairment of Long Lived Assets, page F-60
12. We note your discussion of the impairment of goodwill in 2003
and
2004. Please provide a description of the facts and circumstances
leading to the impairment charge, in accordance with paragraph
47(a)
of SFAS 142.
Schedule I, page S-2
13. The presence of Schedule I in your filing implies that
restrictions exist on the ability of your subsidiaries to transfer
funds to the registrant in the form of dividends, loans or
advances.
If there are such restrictions, add appropriate disclosure,
including
the amount of restricted net assets. See Rules 4-08 (e)(3) and 5-
04
(c) of Regulation S-X.
* * * *
Please respond to these comments within 10 business
days,
or tell us when you will provide us with a response. Please
provide
us with a supplemental response letter that keys your responses to
our comments and provides any requested supplemental information.
Detailed letters greatly facilitate our review. Please file your
supplemental response on EDGAR as a correspondence file. Please
understand that we may have additional comments after reviewing
your
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in their filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement has access to all information you provide to the staff
of
the Division of Corporation Finance in our review of your filing
or
in response to our comments on your filing.
If you have any questions regarding these comments, please
direct them to Marie Trimeloni, Staff Accountant, at (202) 551-
3734
or, in her absence, to Scott Watkinson, Review Accountant, at
(202)
551-3741.
Sincerely,
Rufus Decker
Accounting Branch Chief
??
??
??
??
Mr. Lorenzo H. Zambrano
November 22, 2005
Page 1 of 5
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE