EX-2 3 d865398dex2.htm EX-2

EX-2

Exhibit 2

2014 FOURTH QUARTER RESULTS n Stock Listing Information Colombian Stock Exchange S.A. Ticker: CLH n Investor Relations Patricio Treviño Garza +57 (1) 603-9823 E-mail: patricio.trevinog@cemex.com

OPERATING AND FINANCIAL HIGHLIGHTS January _ December Fourth Quarter 2014 2013 % Var. 2014 2013 % Var. Consolidated cement volume 7,910 7,357 1,924 1,821 6% (thousand of metric tons) 8% Consolidated domestic gray cement 7,074 6,721 1,747 1,727 1% volume (thousand of metric tons) 5% Consolidated ready-mix volume 3,497 3,237 872 795 10% (thousand of cubic meters) 8% Consolidated aggregates volume 8,671 7,376 2,172 1,920 13% (thousand of metric tons) 18% Net sales 1,725 1,750 (1%) 400 462 (13%) Gross profit 855 898 (5%) 199 230 (13%) Gross profit margin 49.6% 51.3% (1.7pp) 49.8% 49.8% 0.0pp Operating earnings before other 481 535 (10%) 109 130 (16%) expenses, net Operating earnings before other 27.9% 30.6% (2.7pp) 27.3% 28.1% (0.8pp) expenses, net, margin Controlling interest net income 273 264 4% 64 26 144% Operating EBITDA 577 633 (9%) 134 158 (15%) Operating EBITDA margin 33.5% 36.2% (2.7pp) 33.5% 34.2% (0.7pp) Free cash flow after maintenance 252 299 (16%) (1) 66 N/A capital expenditures Free cash flow 172 256 (33%) (40) 54 N/A Net debt 1,140 1,304 (13%) 1,140 1,304 (13%) Total debt 1,191 1,381 (14%) 1,191 1,381 (14%) Earnings per share 0.49 0.47 4% 0.12 0.05 144% Shares outstanding at end of period 556 556 0% 556 556 0% Employees 4,915 4,383 12% 4,915 4,383 12% In millions of US dollars, except percentages, employees, and per-share amounts. Shares outstanding at the end of period are presented in millions. Consolidated net sales during the fourth quarter of 2014 declined by 13% compared to the fourth quarter of 2013, mainly as a result of foreign exchange fluctuations and the effect of lower revenue from our housing initiatives in Colombia. Cost of sales as a percentage of net sales during the fourth quarter of 2014 remained stable at 50.2%, compared to the same period in 2013. Operating expenses as a percentage of net sales during the fourth quarter increased by 0.8pp from 21.7% to 22.5% compared to the same period in 2013. Operating EBITDA during the fourth quarter reached US$134 million, declining by 15% compared to the fourth quarter of 2013. This decline is mainly explained by foreign exchange fluctuations and the effect of lower EBITDA contribution from our housing initiatives in Colombia. Operating EBITDA margin during the fourth quarter of 2014 declined by 0.7pp, compared to the fourth quarter of 2013. Controlling interest net income during the fourth quarter of 2014 reached US$64 million, increasing by 144% compared to the fourth quarter of 2013. Total debt at the end of the fourth quarter of 2014 reached US$1,191 million. Please refer to definition of terms and disclosure for presentation of financial and operating information. 2014 Fourth Quarter Results

Colombia January _ December Fourth Quarter 2014 2013 % Var. 2014 2013 % Var. Net sales 993 1,025 (3%) 225 291 (23%) Operating EBITDA 363 424 (14%) 82 119 (31%) Operating EBITDA margin 36.5% 41.3% (4.8pp) 36.6% 40.9% (4.3pp) In millions of US dollars, except percentages. Domestic gray cement Ready-mix Aggregates Year-over-year percentage January _ December Fourth Quarter January _ December Fourth Quarter January _ December Fourth Quarter variation 2014 2014 2014 2014 2014 2014 Volume 16% 10% 14% 12% 20% 9% Price (USD) (10%) (18%) (5%) (13%) (5%) (7%) Price (local currency) (4%) (6%) 1% 1% 1% 7% In Colombia, during the fourth quarter our domestic gray cement, ready-mix and aggregates volumes increased by 10%, 12% and 9%, respectively, compared to the fourth quarter of 2013. For the full year, our domestic gray cement, ready-mix and aggregates volumes increased by 16%, 14% and 20%, respectively, compared to 2013. Construction activity in the fourth quarter was supported by a positive performance in all demand segments. The residential sector, including self-construction and formal housing, continued its positive trend. Infrastructure remained also an important driver for demand of our products with the execution of several ongoing highway projects. The industrial and commercial sectors continued with a strong performance driven by office and commercial buildings. OPERATING RESULTS Panama January _ December Fourth Quarter 2014 2013 % Var. 2014 2013 % Var. Net sales 315 310 2% 74 72 2% Operating EBITDA 140 139 0% 31 25 25% Operating EBITDA margin 44.3% 44.9% (0.6pp) 42.5% 34.8% 7.7pp In millions of US dollars, except percentages. Domestic gray cement Ready-mix Aggregates Year-over-year percentage January _ December Fourth Quarter January _ December Fourth Quarter January _ December Fourth Quarter variation 2014 2014 2014 2014 2014 2014 Volume (15%) (16%) (1%) 6% 4% 21% Price (USD) 12% 11% 0% 1% (1%) 1% Price (local currency) 12% 11% 0% 1% (1%) 1% In Panama during the fourth quarter our domestic gray cement declined by 16% while our ready-mix and aggregates volumes increased by 6% and 21%, respectively, compared to the fourth quarter of 2013. During 2014, our domestic gray cement and ready-mix volumes declined by 15% and 1%, respectively, while our aggregates volumes increased by 4% compared to 2013. The decline in our cement volumes during the quarter, on a year-over-year basis, was attributed to lower consumption from the Panama Canal expansion project and the conclusion of infrastructure projects like Cinta Costera 3. The residential sector remained the main driver for demand of our products. Please refer to definition of terms and disclosure for presentation of financial and operating information. 2014 Fourth Quarter Results Page 3

OPERATING RESULTS Costa Rica January _ December Fourth Quarter 2014 2013 % Var. 2014 2013 % Var. Net sales 153 155 (1%) 39 38 3% Operating EBITDA 69 69 0% 18 17 6% Operating EBITDA margin 45.4% 44.6% 0.8pp 46.9% 45.7% 1.2pp In millions of US dollars, except percentages. Domestic gray cement Ready-mix Aggregates Year-over-year percentage January _December Fourth Quarter January _ December Fourth Quarter January _ December Fourth Quarter variation 2014 2014 2014 2014 2014 2014 Volume (2%) (12%) (22%) (14%) 5% 24% Price (USD) (2%) 3% (5%) (10%) (11%) (10%) Price (local currency) 6% 11% 3% (3%) (4%) (4%) In Costa Rica, during the fourth quarter our domestic gray cement and ready-mix volumes declined by 12% and 14%, respectively, while our aggregates volumes increased by 24%, compared to the fourth quarter of 2013. For the full year 2014, our domestic gray cement and ready-mix volumes decreased by 2% and by 22%, respectively, while our aggregates volumes increased by 5%, compared to 2013. Construction activity in Costa Rica during the quarter was affected by delays in the start of new projects. Infrastructure was the main driver of cement demand during the fourth quarter. Rest of CLH January _ December Fourth Quarter 2014 2013 % Var. 2014 2013 % Var. Net sales 277 275 1% 67 64 3% Operating EBITDA 78 77 2% 18 18 3% Operating EBITDA margin 28.3% 28.0% 0.3pp 27.5% 27.6% (0.1pp) In millions of US dollars, except percentages. Domestic gray cement Ready-mix Aggregates Year-over-year percentage January _ December Fourth Quarter January _ December Fourth Quarter January _ December Fourth Quarter variation 2014 2014 2014 2014 2014 2014 Volume (1%) (3%) 2% 8% 56% 50% Price (USD) (1%) 1% 6% 8% (6%) 9% Price (local currency) 2% 4% 7% 8% (1%) 14% In the Rest of CLH region, which includes our operations in Nicaragua, Guatemala, El Salvador and Brazil, during the fourth quarter of 2014 our domestic gray cement decreased by 3%, while our ready-mix and aggregates volumes increased by 8% and 50%, respectively, compared to the fourth quarter of 2013. During 2014, our domestic gray cement volume declined by 1%, while our ready-mix and aggregates volumes increased by 2% and 56%, respectively, compared to 2013. Ongoing infrastructure projects like the Izapa-Nejapa highway in Nicaragua, along with the commercial sector in Guatemala, remained the main drivers for demand of our products. Please refer to definition of terms and disclosure for presentation of financial and operating information. 2014 Fourth Quarter Results Page 4

OPERATING EBITDA, FREE CASH FLOW AND DEBT RELATED INFORMATION Operating EBITDA and free cash flow January _ December Fourth Quarter 2014 2013 % Var 2014 2013 % Var Operating earnings before other expenses, net 481 535 (10%) 109 130 (16%) + Depreciation and operating amortization 96 98 25 28 Operating EBITDA 577 633 (9%) 134 158 (15%)—Net financial expense 90 114 15 27—Capital expenditures for maintenance 63 51 25 29—Change in working capital 64 35 68 (8)—Taxes paid 110 118 29 33—Other cash items (net) (2) 16 (2) 11 Free cash flow after maintenance capital expenditures 252 299 (16%) (1) 66 N/A—Strategic capital expenditures 80 43 40 12 Free cash flow 172 256 (33%) (40) 54 N/A In millions of US dollars. Free cash flow generated during 2014 was mainly used to reduce debt. Information on Debt Third Fourth Quarter Fourth Quarter Quarter 2014 2013 % Var 2014 2014 2013 Total debt (1)(2) 1,191 1,381 (14%) 1,142 Currency denomination Short- term 12% 19% 22% US dollar 99% 98% Long -term 88% 81% 78% Colombian peso 1% 2% Cash and cash equivalents 52 77 (33%) 54 Interest rate Net debt 1,140 1,304 (13%) 1,088 Fixed 79% 81% Variable 21%19% In millions of US dollars, except percentages. (1)Includes capital leases, in accordance with International Financial Reporting Standards (IFRS). (2)Represents the consolidated balances of CLH and subsidiaries. Please refer to definition of terms and disclosure for presentation of financial information. 2014 Fourth Quarter Results Page 5

OPERATING RESULTS Income statement & balance sheet CEMEX Latam Holdings, S.A. and Subsidiaries (Thousands of U.S. Dollars, except per share amounts) January _ December Fourth Quarter 2014 2013 % Var. 2014 2013 % Var. INCOME STATEMENT Net Sales 1,724,711 1,750,116 (1%) 400,413 462,351 (13%) Cost of Sales (869,388) (852,161) (2%) (201,091) (231,931) 13% Gross Profit 855,323 897,955 (5%) 199,321 230,420 (13%) Operating Expenses (374,191) (362,659) (3%) (90,109) (100,549) 10% Operating Earnings Before Other Expenses, Net 481,132 535,296 (10%) 109,212 129,871 (16%) Other expenses, Net (2,758) (15,742) 82% 1,104 (11,068) N/A Operating Earnings 478,374 519,554 (8%) 110,317 118,803 (7%) Financial Expenses (90,448) (113,763) 20% (15,226) (26,977) 44% Other Income (Expenses), Net 31,152 (3,228) N/A 25,587 1,681 1422% Net Income Before Income Taxes 419,078 402,563 4% 120,678 93,507 29% Income Tax (144,706) (137,837) (5%) (56,115) (67,350) 17% Consolidated Net Income 274,371 264,726 4% 64,563 26,157 147% Non-controlling Interest Net Income (974) (624) (56%) (124) 263 N/A CONTROLLING INTEREST NET INCOME 273,397 264,102 4% 64,439 26,420 144% Operating EBITDA 576,942 632,681 (9%) 134,100 158,268 (15%) Earnings per share 0.49 0.47 4% 0.12 0.05 144% As of December As of December 31 31 BALANCE SHEET 2014 2013 Total Assets 3,491,283 3,836,312 Cash and Temporary Investments 51,772 76,691 Trade Accounts Receivables 122,003 164,195 Other Receivables 33,753 86,022 Inventories 102,821 103,683 Other Current Assets 18,347 19,227 Current Assets 328,695 449,818 Fixed Assets 1,114,921 1,205,574 Other Assets 2,047,666 2,180,920 Total Liabilities 2,090,348 2,478,332 Current Liabilities 406,913 641,873 Long-Term Liabilities 1,672,060 1,824,316 Other Liabilities 11,375 12,143 Consolidated Stockholders’ Equity 1,400,934 1,357,980 Non-controlling Interest 5,762 14,989 Stockholders’ Equity Attributable to Controlling Interest 1,395,172 1,342,991 Please refer to definition of terms and disclosure for presentation of financial information. 2014 Fourth Quarter Results Page 6

OPERATING RESULTS Income statement & balance sheet CEMEX Latam Holdings, S.A. and Subsidiaries (Millions of Colombian Pesos in nominal terms, except per share amounts) January _ December Fourth Quarter 2014 2013 2014 INCOME STATEMENT % Var. 2013 % Var. Net Sales 3,480,196 3,289,388 6% 887,470 885,060 0% Cost of Sales (1,754,289) (1,601,659) (10%) (445,697) (443,976) (0%) Gross Profit 1,725,907 1,687,729 2% 441,774 441,084 0% Operating Expenses, net (755,058) (681,627) (11%) (199,717) (192,477) (4%) Operating Earnings Before Other Expenses, Net 970,849 1,006,102 (4%) 242,057 248,607 (3%) Other Expenses, Net (5,565) (29,587) 81% 2,448 (21,187) N/A Operating Earnings 965,284 976,515 (1%) 244,505 227,420 8% Financial Expenses (182,510) (213,820) 15% (33,746) (51,641) 35% Other Income (Expenses) Financial, net 62,859 (6,067) N/A 56,710 3,218 1662% Net Income Before Income Taxes 845,633 756,628 12% 267,469 178,997 49% Income Tax (291,995) (259,068) (13%) (124,372) (128,925) 4% Consolidated Net Income 553,638 497,560 11% 143,097 50,072 186% Non-controlling Interest Net Income (1,966) (1,173) (68%) (275) 503 N/A CONTROLLING INTEREST NET INCOME 551,672 496,387 11% 142,822 50,575 182% Operating EBITDA 1,164,178 1,189,140 (2%) 297,217 302,966 (2%) Earnings per share 995.51 892.69 12% 257.34 91.00 183% As of As of December 31 December 31 BALANCE SHEET 2014 2013 Total Assets 8,352,754 7,391,922 Cash and Temporary Investments 123,862 147,771 Trade Accounts Receivables 291,887 316,376 Other Receivables 80,752 165,750 Inventories 245,996 199,780 Other Current Assets 43,893 37,047 Current Assets 786,391 866,724 Fixed Assets 2,667,404 2,322,936 Other Assets 4,898,960 4,202,262 Total Liabilities 5,001,074 4,775,325 Current Liabilities 973,524 1,236,780 Long-Term Liabilities 4,000,337 3,515,147 Other Liabilities 27,214 23,398 Consolidated Stockholders’ Equity 3,351,680 2,616,597 Non-controlling Interest 13,786 28,882 Stockholders’ Equity Attributable to Controlling Interest 3,337,893 2,587,715 Please refer to definition of terms and disclosure for presentation of financial information. 2014 Fourth Quarter Results Page 7

OPERATING RESULTS Operating Summary per Country In thousands of U.S. dollars. EBITDA margin as a percentage of net sales. January _ December Fourth Quarter 2014 2013 2014 2013 NET SALES % Var. % Var. Colombia 993,322 1,025,201 (3%) 224,693 290,532 (23%) Panama 315,244 310,116 2% 73,983 72,462 2% Costa Rica 152,503 154,819 (1%) 38,774 37,578 3% Rest of CLH 276,729 275,062 1% 66,573 64,474 3% Others and intercompany eliminations (13,088) (15,082) 13% (3,610) (2,695) (34%) TOTAL 1,724,711 1,750,116 (1%) 400,413 462,351 (13%) GROSS PROFIT Colombia 499,268 550,730 (9%) 113,277 151,365 (25%) Panama 153,431 154,911 (1%) 35,078 30,193 16% Costa Rica 83,587 84,335 (1%) 22,027 20,801 6% Rest of CLH 99,990 96,886 3% 24,220 23,087 5% Others and intercompany eliminations 19,047 11,093 72% 4,719 4,974 (5%) TOTAL 855,323 897,955 (5%) 199,321 230,420 (13%) OPERATING EARNINGS BEFORE OTHER EXPENSES, NET Colombia 327,049 385,983 (15%) 73,184 104,921 (30%) Panama 122,196 121,574 1% 26,725 20,925 28% Costa Rica 62,345 61,447 1% 16,488 15,230 8% Rest of CLH 73,354 71,989 2% 17,147 16,548 4% Others and intercompany eliminations (103,812) (105,697) 2% (24,332) (27,753) 12% TOTAL 481,132 535,296 (10%) 109,213 129,871 (16%) OPERATING EBITDA Colombia 362,922 423,525 (14%) 82,244 118,842 (31%) Panama 139,785 139,182 0% 31,442 25,252 25% Costa Rica 69,297 69,054 0% 18,176 17,155 6% Rest of CLH 78,328 76,903 2% 18,319 17,779 3% Others and intercompany eliminations (73,390) (75,983) 3% (16,081) (20,760) 23% TOTAL 576,942 632,681 (9%) 134,100 158,268 (15%) OPERATING EBITDA MARGIN Colombia 36.5% 41.3% 36.6% 40.9% Panama 44.3% 44.9% 42.5% 34.8% Costa Rica 45.4% 44.6% 46.9% 45.7% Rest of CLH 28.3% 28.0% 27.5% 27.6% TOTAL 33.5% 36.2% 33.5% 34.2% Please refer to definition of terms and disclosure for presentation of financial information. 2014 Fourth Quarter Results Page 8

OPERATING RESULTS Volume Summary CLH volume summary Cement and aggregates: Thousands of metric tons. Ready-mix: Thousands of cubic meters. January _ December Fourth Quarter 2014 2013 % Var. 2014 2013 % Var. Total cement volume 1 7,910 7,357 8% 1,924 1,821 6% Total domestic gray cement volume 7,074 6,721 5% 1,747 1,727 1% Total ready-mix volume 3,497 3,237 8% 872 795 10% Total aggregates volume 8,671 7,376 18% 2,172 1,920 13% Per-country volume summary January—Fourth Quarter Fourth Quarter 2014 Vs. December DOMESTIC GRAY CEMENT VOLUME 2014 Vs. 2013 2014 Vs. 2013 Third Quarter 2014 Colombia 16% 10% (1%) Panama (15%) (16%) (22%) Costa Rica (2%) (12%) 1% Rest of CLH (1%) (3%) (1%) READY-MIX VOLUME Colombia 14% 12% (8%) Panama (1%) 6% (14%) Costa Rica (22%) (14%) (3%) Rest of CLH 2% 8% 3% AGGREGATES VOLUME Colombia 20% 9% (7%) Panama 4% 21% (3%) Costa Rica 5% 24% (6%) Rest of CLH 56% 50% (28%)

OPERATING RESULTS Price Summary Variation in U.S. Dollars January—December Fourth Quarter Fourth Quarter 2014 Vs. DOMESTIC GRAY CEMENT PRICE 2014 Vs. 2013 2014 Vs. 2013 Third Quarter 2014 Colombia (10%) (18%) (12%) Panama 12% 11% 1% Costa Rica (2%) 3% 2% Rest of CLH (*) (1%) 1% (2%) READY-MIX PRICE Colombia (5%) (13%) (12%) Panama 0% 1% (2%) Costa Rica (5%) (10%) (2%) Rest of CLH (*) 6% 8% (2%) AGGREGATES PRICE Colombia (5%) (7%) (12%) Panama (1%) 1% 4% Costa Rica (11%) (10%) (2%) Rest of CLH (*) (6%) 9% 10% Variation in Local Currency January—December Fourth Quarter Fourth Quarter 2014 Vs. DOMESTIC GRAY CEMENT PRICE 2014 Vs. 2013 2014 Vs. 2013 Third Quarter 2014 Colombia (4%) (6%) 0% Panama 12% 11% 1% Costa Rica 6% 11% 1% Rest of CLH (*) 2% 4% (0%) READY-MIX PRICE Colombia 1% 1% 0% Panama 0% 1% (2%) Costa Rica 3% (3%) (3%) Rest of CLH (*) 7% 8% (4%) AGGREGATES PRICE Colombia 1% 7% 1% Panama (1%) 1% 4% Costa Rica (4%) (4%) (2%) Rest of CLH (*) (1%) 14% 10% (*) Volume weighted-average price. Please refer to definition of terms and disclosure for presentation of operating results. 2014 Fourth Quarter Results Page 10

OTHER ACTIVITIES AND INFORMATION CLH to increase cement production capacity in Costa Rica CLH announced it is starting a project to increase cement production capacity in its plant located in Colorado, Costa Rica by approximately 25%, reaching an annual capacity of 1.1 million tons by 2017. The total investment is expected to be approximately US$35 million in a 3 year period and will include the construction of a new grinding mill, as well as several capacity enhancing projects in the clinker production line. _With this increased capacity we will strengthen our position in Costa Rica, reiterating our commitment to support the development of the country. We are confident that infrastructure projects will continue driving demand for building materials over the medium-term_, said Alejandro Ramirez, Director of CLH in Costa Rica. The Minister of Foreign Trade of Costa Rica, Alexander Mora, said that the CLH investment is a sign of the company_s commitment with the country and also an example of the good performance that foreign companies may experience in Costa Rica. The CLH investment project was presented by company representatives during a bilateral meeting with the President of the Republic of Costa Rica, Luis Guillermo Solís; the Minister of Foreign Trade of Costa Rica, Alexander Mora, and the General Director of CINDE, Jorge Sequeira; during a promotional visit to attract investment, made in Mexico City on December 10. Additionally, the expansion is expected to generate approximately 90 jobs during the construction phase and about 50 jobs once operations begin. Employee stock-ownership plan To better align our executives_ interests with those of our stockholders, on January 16, 2013, the CEMEX Latam Holdings_ Board of Directors, considering the positive report of the Board_s Nominating and Compensation Commission, approved, effective January 1, 2013, a long-term incentives plan to certain executives of CEMEX Latam Holdings, which consists of an annual compensation plan based on the CEMEX Latam Holdings_ shares. The underlying shares in this long-term incentives plan, which are held in the company_s treasury, are delivered fully vested under each annual program over a service period of four years. During 2014, the company delivered 79,316 shares to eligible executives under this long-term incentives plan. 2014 Fourth Quarter Results Page 11

DEFINITIONS OF TERMS AND DISCLOSURES Methodology for translation and presentation of results Under IFRS, CLH reports its consolidated results in its functional currency, which is the US Dollar, by translating the financial statements of foreign subsidiaries using the corresponding exchange rate at the reporting date for the balance sheet and the corresponding exchange rates at the end of each month for the income statement. For the reader_s convenience, Colombian peso amounts for the consolidated entity are calculated by converting the US dollar amounts using the closing COP/US$ exchange rate at the reporting date for balance sheet purposes, and the average COP/US$ exchange rate for the corresponding period for income statement purposes. The exchange rates used to convert: (i) the balance sheet as of December 31, 2014 and December 31, 2013 was $2,392.46 and $1,926.83 Colombian pesos per US dollar, respectively, and (ii) the consolidated results for the Fourth quarter of 2014 and for the Fourth quarter of 2013 were $2,216.39 and $1,914.26 Colombian pesos per US dollar, respectively. Per-country/region selected financial information of the income statement is presented before corporate charges and royalties which are included under _other and intercompany eliminations._ Consolidated financial information When reference is made to consolidated financial information means the financial information of CLH together with its consolidated subsidiaries. Presentation of financial and operating information Individual information is provided for Colombia, Panama and Costa Rica. Countries in Rest of CLH include Nicaragua, Guatemala, El Salvador and Brazil. Exchange rates January _ December January _ December Fourth quarter 2014 2013 2014 2013 2014 2013 Closing Closing Average Average Average Average Colombian peso 2,392.46 1,926.83 2,017.84 1,879.53 2,216.39 1,914.26 Panama balboa 1.00 1.00 1.00 1.00 1.00 1.00 Costa Rica colon 545.53 507.80 546.48 505.89 543.81 506.32 Euro 0.8263 0.7268 0.7583 0.7511 0.8071 0.7300 Amounts provided in units of local currency per US dollar. 2014 Fourth Quarter Results Page 12

DEFINITIONS OF TERMS AND DISCLOSURES Definition of terms Free cash flow equals operating EBITDA minus net interest expense, maintenance and strategic capital expenditures, change in working capital, taxes paid, and other cash items (net other expenses less proceeds from the disposal of obsolete and/or substantially depleted operating fixed assets that are no longer in operation). Maintenance capital expenditures investments incurred for the purpose of ensuring CLH_s operational continuity. These include capital expenditures on projects required to replace obsolete assets or maintain current operational levels, and mandatory capital expenditures, which are projects required to comply with governmental regulations or internal policies. Net debt equals total debt minus cash and cash equivalents. Operating EBITDA equals operating earnings before other expenses, net, plus depreciation and operating amortization. pp equals percentage points. Strategic capital expenditures investments incurred with the purpose of increasing CLH_s profitability. These include capital expenditures on projects designed to increase profitability by expanding capacity, and margin improvement capital expenditures, which are projects designed to increase profitability by reducing costs. Working capital equals operating accounts receivable (including other current assets received as payment in kind) plus historical inventories minus operating payables. 2014 Fourth Quarter Results Page 13