FORM 6-K

 

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

 

Dated November 1, 2012

 

Commission File Number [·]

 

GERDAU S.A.

(Exact Name as Specified in its Charter)

 

N/A

(Translation of Registrant’s Name)

 

Av. Farrapos 1811

Porto Alegre, Rio Grande do Sul - Brazil CEP 90220-005

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F x

Form 40-F o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

 

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes o

No x

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):  Not applicable.

 

 

 



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date:  November 1, 2012

 

 

GERDAU S.A.

 

 

 

 

 

By:

/s/ Osvaldo Burgos Schirmer

 

Name:

Osvaldo Burgos Schirmer

 

Title:

Chief Financial Officer

 

2



 

EXHIBIT INDEX

 

Exhibit

 

Description of Exhibit

 

 

 

99.1

 

Gerdau S.A. Condensed consolidated interim financial statements as of September 30, 2012

 

3



 

GERDAU S.A.

 

Condensed consolidated interim financial statements as of September 30, 2012

 



 

GERDAU S.A.

CONDENSED CONSOLIDATED BALANCE SHEETS

In thousands of Brazilian Reais (R$)

(Unaudited)

 

 

 

Note

 

September 30, 2012

 

December 31, 2011

 

CURRENT ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

4

 

1,665,561

 

1,476,599

 

Short-term investments

 

 

 

 

 

 

 

Held for Trading

 

4

 

1,333,850

 

3,095,359

 

Available for sale

 

4

 

 

6,290

 

Trade accounts receivable - net

 

5

 

4,275,875

 

3,602,748

 

Inventories

 

6

 

9,125,445

 

8,059,427

 

Tax credits

 

 

 

909,442

 

815,983

 

Unrealized gains on financial instruments

 

13

 

116

 

140

 

Other current assets

 

 

 

236,046

 

262,603

 

 

 

 

 

17,546,335

 

17,319,149

 

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS

 

 

 

 

 

 

 

Tax credits

 

 

 

127,458

 

389,035

 

Deferred income taxes

 

 

 

2,143,565

 

1,547,967

 

Unrealized gains on financial instruments

 

 

 

1,417

 

 

Related parties

 

15

 

112,880

 

111,955

 

Judicial deposits

 

 

 

879,624

 

713,480

 

Other non-current assets

 

 

 

211,820

 

201,989

 

Prepaid pension cost

 

 

 

526,313

 

533,740

 

Advance for capital increase in jointly-controlled entity

 

8

 

 

65,254

 

Investments in associates and jointly-controlled entities

 

8

 

1,436,241

 

1,355,291

 

Other investments

 

 

 

25,902

 

19,366

 

Goodwill

 

10

 

9,951,542

 

9,155,789

 

Other Intangibles

 

 

 

1,345,987

 

1,273,708

 

Property, plant and equipment, net

 

9

 

19,289,442

 

17,295,071

 

 

 

 

 

36,052,191

 

32,662,645

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

 

53,598,526

 

49,981,794

 

 

The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements

 



 

GERDAU S.A.

CONDENSED CONSOLIDATED BALANCE SHEETS

In thousands of Brazilian Reais (R$)

(Unaudited)

 

 

 

Note

 

September 30, 2012

 

December 31, 2011

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

Trade accounts payable

 

 

 

3,325,649

 

3,212,163

 

Short-term debt

 

11

 

2,756,469

 

1,715,305

 

Debentures

 

12

 

336,005

 

41,688

 

Taxes payable

 

 

 

592,416

 

591,983

 

Payroll and related liabilities

 

 

 

644,958

 

617,432

 

Dividends payable

 

 

 

 

136,391

 

Environmental liabilities

 

 

 

28,767

 

31,798

 

Unrealized losses on financial instruments

 

13

 

9,990

 

314

 

Other current liabilities

 

 

 

375,335

 

429,927

 

 

 

 

 

8,069,589

 

6,777,001

 

 

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES

 

 

 

 

 

 

 

Long-term debt

 

11

 

11,571,333

 

11,182,290

 

Debentures

 

12

 

303,867

 

744,245

 

Related parties

 

15

 

5

 

6

 

Deferred income taxes

 

 

 

1,750,163

 

1,858,725

 

Unrealized losses on financial instruments

 

13

 

9,985

 

5,013

 

Provision for tax, civil and labor liabilities

 

14

 

1,049,397

 

907,718

 

Environmental liabilities

 

 

 

44,286

 

36,621

 

Employee benefits

 

 

 

1,015,913

 

1,089,784

 

Put options on non-controlling interest

 

13.f

 

589,134

 

533,544

 

Other non-current liabilities

 

 

 

308,802

 

327,044

 

 

 

 

 

16,642,885

 

16,684,990

 

 

 

 

 

 

 

 

 

EQUITY

 

16

 

 

 

 

 

Capital

 

 

 

19,249,181

 

19,249,181

 

Treasury stocks

 

 

 

(280,873

)

(237,199

)

Legal reserve

 

 

 

407,615

 

407,615

 

Stock option

 

 

 

54,032

 

36,339

 

Other reserves

 

 

 

633,648

 

(701,399

)

Retained earnings

 

 

 

7,259,070

 

6,242,932

 

EQUITY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT

 

 

 

27,322,673

 

24,997,469

 

 

 

 

 

 

 

 

 

NON-CONTROLLING INTERESTS

 

 

 

1,563,379

 

1,522,334

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

28,886,052

 

26,519,803

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

 

 

 

53,598,526

 

49,981,794

 

 

The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements

 



 

GERDAU S.A.

CONSOLIDATED STATEMENTS OF INCOME

In thousands of Brazilian Reais (R$)

(Unaudited)

 

 

 

 

 

For the three-month period ended

 

For the nine-month period ended

 

 

 

Note

 

September 30, 2012

 

September 30, 2011

 

September 30, 2012

 

September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

NET SALES

 

 

 

9,819,092

 

8,967,321

 

28,993,964

 

26,340,979

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

20

 

(8,621,389

)

(7,628,291

)

(25,264,844

)

(22,433,669

)

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

 

1,197,703

 

1,339,030

 

3,729,120

 

3,907,310

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling expenses

 

20

 

(150,338

)

(150,466

)

(431,053

)

(445,837

)

General and administrative expenses

 

20

 

(480,084

)

(440,854

)

(1,433,829

)

(1,313,774

)

Other operating income

 

20

 

53,551

 

57,073

 

126,431

 

159,522

 

Other operating expenses

 

20

 

(49,934

)

(32,847

)

(82,102

)

(82,214

)

Equity in earnings of unconsolidated companies

 

 

 

(3,144

)

5,424

 

14,187

 

84,877

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE FINANCIAL INCOME (EXPENSES) AND TAXES

 

 

 

567,754

 

777,360

 

1,922,754

 

2,309,884

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial income

 

21

 

66,309

 

158,859

 

248,070

 

323,606

 

Financial expenses

 

21

 

(216,710

)

(230,393

)

(680,828

)

(739,338

)

Exchange variations, net

 

21

 

21,017

 

11,690

 

(119,898

)

37,373

 

Gain and losses on financial instruments, net

 

21

 

(4,554

)

1,529

 

(13,711

)

(67,994

)

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE TAXES

 

 

 

433,816

 

719,045

 

1,356,387

 

1,863,531

 

 

 

 

 

 

 

 

 

 

 

 

 

Income and social contribution taxes

 

 

 

 

 

 

 

 

 

 

 

Current

 

7

 

(93,287

)

(225,069

)

(342,003

)

(522,028

)

Deferred

 

7

 

67,888

 

219,370

 

339,195

 

284,479

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

 

 

408,417

 

713,346

 

1,353,579

 

1,625,982

 

 

 

 

 

 

 

 

 

 

 

 

 

ATTRIBUTABLE TO:

 

 

 

 

 

 

 

 

 

 

 

Owners of the parent

 

 

 

389,176

 

707,126

 

1,294,611

 

1,566,925

 

Non-controlling interests

 

 

 

19,241

 

6,220

 

58,968

 

59,057

 

 

 

 

 

408,417

 

713,346

 

1,353,579

 

1,625,982

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share - preferred and common - R$

 

17

 

0.23

 

0.41

 

0.76

 

0.96

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share - preferred and common - R$

 

17

 

0.23

 

0.41

 

0.76

 

0.96

 

 

The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements

 



 

GERDAU S.A.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

in thousands of Brazilian Reais (R$)

(Unaudited)

 

 

 

For the three-month period ended

 

For the nine-month period ended

 

 

 

September 30, 2012

 

September 30, 2011

 

September 30, 2012

 

September 30, 2011

 

Net income for the period

 

 

 

408,417

 

 

 

713,346

 

 

 

1,353,579

 

 

 

1,625,982

 

Net unrealized losses (gains) with pension plan, gross of tax R$ 0, R$ (520), R$ (12,803) and R$ 20,982, respectively

 

 

 

 

 

 

(23,032

)

 

 

(37,656

)

 

 

61,712

 

Other comprehensive income from associates and jointly-controlled entities

 

 

 

19,951

 

 

 

122,661

 

 

 

101,744

 

 

 

82,654

 

Cumulative translation difference

 

 

 

195,220

 

 

 

2,286,018

 

 

 

1,623,714

 

 

 

1,622,102

 

Unrealized (losses) gains on net investment hedge, gross of taxes of R$ (5,919), R$ 0, R$ (37,166) and R$ 0, respectively

 

 

 

(35,626

)

 

 

(870,862

)

 

 

(370,495

)

 

 

(572,920

)

Cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized losses, gross of tax of R$ (1,626), R$ 0, R$ (1,626) and R$ (8,530), respectively

 

(5,004

)

 

 

 

 

 

(5,004

)

 

 

(22,156

)

 

 

Reduced by: reclassifications adjustments of gains included in net income, gross of tax of R$ 0, R$ 0, R$ 165 and R$ 29,970, respectively

 

 

(5,004

)

 

 

 

706

 

(4,298

)

77,844

 

55,688

 

Unrealized losses on available for sale securities, gross of tax of R$ (450)

 

 

 

 

 

 

 

 

 

 

 

 

(1,294

)

Income tax relating to components of other comprehensive income

 

 

 

7,545

 

 

 

520

 

 

 

51,430

 

 

 

(41,972

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period, net of tax

 

 

 

590,503

 

 

 

2,228,651

 

 

 

2,718,018

 

 

 

2,831,952

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owners of the parent

 

 

 

561,150

 

 

 

2,166,258

 

 

 

2,606,250

 

 

 

2,729,182

 

Non-controlling interests

 

 

 

29,353

 

 

 

62,393

 

 

 

111,768

 

 

 

102,770

 

 

 

 

 

590,503

 

 

 

2,228,651

 

 

 

2,718,018

 

 

 

2,831,952

 

 

The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements

 



 

GERDAU S.A.

CONDENSED STATEMENTS OF CHANGES IN EQUITY

in thousands of  Brazilian Reais (R$)

(Unaudited)

 

 

 

Attributed to parent company’s interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other reserves

 

 

 

 

 

 

 

 

 

Capital

 

Treasury 
stocks

 

Legal reserve

 

Stock
options

 

Retained
earnings

 

Gains and
losses on
available for 
sale
securities

 

Gains and
losses on net 
investment
hedge

 

Gains and
losses on
derivatives

 

Cumulative
translation 
adjustment

 

Total parent
company’s interest

 

Non-controlling
interests

 

Total
Shareholder’s Equity

 

Balance as of January 01, 2011

 

15,651,352

 

(161,405

)

307,329

 

22,700

 

5,534,468

 

2,706

 

390,400

 

(33,733

)

(2,243,375

)

19,470,442

 

677,173

 

20,147,615

 

2011 Changes in Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income for the period

 

 

 

 

 

1,566,925

 

 

 

 

 

1,566,925

 

59,057

 

1,625,982

 

Other comprehensive income (loss) recognized in the period

 

 

 

 

 

39,661

 

(844

)

(564,776

)

33,733

 

1,654,483

 

1,162,257

 

43,713

 

1,205,970

 

Total comprehensive income (loss) recognized in the period

 

 

 

 

 

1,606,586

 

(844

)

(564,776

)

33,733

 

1,654,483

 

2,729,182

 

102,770

 

2,831,952

 

Capital increase by issuance of shares

 

3,597,829

 

 

 

 

 

 

 

 

 

3,597,829

 

 

3,597,829

 

Dividends/interest on capital

 

 

 

 

 

(255,754

)

 

 

 

 

(255,754

)

(15,964

)

(271,718

)

Stock option expenses recognized in the period

 

 

 

 

18,011

 

 

 

 

 

 

18,011

 

160

 

18,171

 

Stock option exercised during the period

 

 

8,710

 

 

(1,805

)

 

 

 

 

 

6,905

 

 

6,905

 

Effects of interest changes in subsidiaries

 

 

 

 

 

(371,592

)

 

 

 

 

(371,592

)

748,432

 

376,840

 

Put options

 

 

 

 

 

 

 

 

 

 

0

 

8,063

 

8,063

 

Treasury stock

 

 

(84,927

)

 

 

 

 

 

 

 

(84,927

)

(335

)

(85,262

)

Balance as of September 30, 2011

 

19,249,181

 

(237,622

)

307,329

 

38,906

 

6,513,708

 

1,862

 

(174,376

)

 

(588,892

)

25,110,096

 

1,520,299

 

26,630,395

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 01, 2012

 

19,249,181

 

(237,199

)

407,615

 

36,339

 

6,242,932

 

1,696

 

(317,066

)

 

(386,029

)

24,997,469

 

1,522,334

 

26,519,803

 

2012 Changes in Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income for the period

 

 

 

 

 

1,294,611

 

 

 

 

 

1,294,611

 

58,968

 

1,353,579

 

Other comprehensive income (loss) recognized in the period

 

 

 

 

 

(23,408

)

 

(328,988

)

(2,854

)

1,666,889

 

1,311,639

 

52,800

 

1,364,439

 

Total comprehensive income (loss) recognized in the period

 

 

 

 

 

1,271,203

 

 

(328,988

)

(2,854

)

1,666,889

 

2,606,250

 

111,768

 

2,718,018

 

Stock option expenses recognized in the period

 

 

 

 

21,950

 

 

 

 

 

 

21,950

 

206

 

22,156

 

Stock option exercised during the period

 

 

22,196

 

 

(4,257

)

 

 

 

 

 

17,939

 

 

17,939

 

Dividends/interest on capital

 

 

 

 

 

(254,953

)

 

 

 

 

(254,953

)

(6,032

)

(260,985

)

Effects of interest changes in subsidiaries

 

 

 

 

 

(112

)

 

 

 

 

(112

)

(64,457

)

(64,569

)

Treasury stocks

 

 

(65,870

)

 

 

 

 

 

 

 

(65,870

)

(440

)

(66,310

)

Balance as of September 30, 2012

 

19,249,181

 

(280,873

)

407,615

 

54,032

 

7,259,070

 

1,696

 

(646,054

)

(2,854

)

1,280,860

 

27,322,673

 

1,563,379

 

28,886,052

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 



 

GERDAU S.A.

CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands of  Brazilian Reais (R$)

(Unaudited)

 

 

 

 

 

For the nine month period ended

 

 

 

Note

 

September 30, 2012

 

September 30, 2011

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net income for the period

 

 

 

1,353,579

 

1,625,982

 

Adjustments to reconcile net income for the year to net cash provided by operating activities

 

 

 

 

 

 

 

Depreciation and amortization

 

20

 

1,362,084

 

1,315,788

 

Equity in earnings of unconsolidated companies

 

8

 

(14,187

)

(84,877

)

Exchange variation, net

 

21

 

119,898

 

(37,373

)

Losses on financial instruments, net

 

21

 

13,711

 

67,994

 

Post-employment benefits

 

 

 

137,951

 

45,601

 

Stock based remuneration

 

 

 

30,857

 

4,057

 

Income tax

 

7

 

2,808

 

237,549

 

(Gain) Loss on disposal of property, plant and equipment and investments

 

 

 

(6,184

)

17,358

 

Losses on available for sale securities

 

 

 

 

(28,073

)

Allowance for doubtful accounts

 

 

 

31,915

 

29,270

 

Provision for tax, labor and civil claims

 

 

 

141,730

 

172,694

 

Interest income on investments

 

21

 

(132,362

)

(183,031

)

Interest expense on loans

 

21

 

592,059

 

622,379

 

Interest on loans with related parties

 

15

 

(729

)

3,686

 

Provision for net realisable value adjustment in inventory

 

6

 

86,901

 

46,376

 

Reversal of net realisable value adjustment in inventory

 

6

 

(37,321

)

(85,227

)

 

 

 

 

3,682,710

 

3,770,153

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

Increase in trade accounts receivable

 

 

 

(409,914

)

(750,810

)

Increase in inventories

 

 

 

(469,336

)

(567,975

)

(Decrease) Increase in trade accounts payable

 

 

 

(217,923

)

1,147,620

 

Increase in other receivables

 

 

 

(603,421

)

(240,942

)

Decrease in other payables

 

 

 

(77,706

)

(359,101

)

Distributions from jointly-controlled entities

 

 

 

46,614

 

56,734

 

Purchases of trading securities

 

 

 

(1,561,682

)

(5,327,885

)

Proceeds from maturities and sales of trading securities

 

 

 

3,539,548

 

3,532,511

 

Cash provided by operating activities

 

 

 

3,928,890

 

1,260,305

 

 

 

 

 

 

 

 

 

Interest paid on loans and financing

 

 

 

(481,351

)

(548,960

)

Income and social contribution taxes paid

 

 

 

(275,701

)

(334,581

)

Net cash provided by operating activities

 

 

 

3,171,838

 

376,764

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

9

 

(2,445,274

)

(1,289,108

)

Proceeds from sales of property, plant and equipment, investments and other intangibles

 

 

 

34,578

 

9,394

 

Additions to other intangibles

 

 

 

(104,865

)

(115,610

)

Advance for capital increase in jointly-controlled entity

 

8

 

(206,214

)

(74,785

)

Purchases of available for sale securities

 

 

 

 

(723,285

)

Proceeds from sales of available for sale securities

 

 

 

 

776,458

 

Cash obtained in acquisition of control

 

 

 

16,916

 

 

Net cash used in investing activities

 

 

 

(2,704,859

)

(1,416,936

)

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Capital Increase

 

 

 

 

3,874,329

 

Effects of capital decrease in subsidiary

 

 

 

(76,623

)

 

Purchase of treasury shares

 

 

 

(48,371

)

(78,357

)

Dividends and interest on capital paid

 

 

 

(416,342

)

(341,127

)

Payment of loans and financing fees

 

 

 

 

(25,530

)

Proceeds from loans and financing

 

 

 

1,196,308

 

1,074,843

 

Repayment of loans and financing

 

 

 

(1,023,333

)

(3,151,404

)

Intercompany loans, net

 

 

 

(267

)

(192,975

)

Net cash (used) provided by financing activities

 

 

 

(368,628

)

1,159,779

 

 

 

 

 

 

 

 

 

Exchange variation on cash and cash equivalents

 

 

 

90,611

 

97,954

 

 

 

 

 

 

 

Increase in cash and cash equivalents

 

 

 

188,962

 

217,561

 

Cash and cash equivalents at beginning of period

 

 

 

1,476,599

 

1,061,034

 

Cash and cash equivalents at end of period

 

 

 

1,665,561

 

1,278,595

 

 

The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements

 



 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2012

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

NOTE 1 - GENERAL INFORMATION

 

Gerdau S.A. is a publicly traded corporation (sociedade anônima) with its corporate domicile in the city of Rio de Janeiro, Brazil. Gerdau S.A and subsidiaries (collectively referred to as the “Company”) are engaged in the production and sale of steel products from plants located in Brazil, Argentina, Chile, Colombia, Guatemala, Mexico, Peru, Dominican Republic, Uruguay, Venezuela, United States, Canada, Spain, and India. The Company started its path of expansion over a century ago and it is one of the main players in the process of consolidating the global steel industry. The Company produces common long steel, specialty steels and flat steels, primarily through a production process which utilizes electric furnaces along with scrap and pig iron that are mostly purchased in the region in which each plant operates (mini-mill concept), but also produces steel from iron ore (through blast furnaces and direct reduction).  The Company’s products serve the sectors of civil construction, industry, automotive and agriculture.

 

The Condensed Consolidated Interim Financial Statements of the Company were approved by the Disclosure Committee on October 31, 2012.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

 

2.1 - Basis of Presentation

 

The Company’s Condensed Consolidated Interim Financial Statements for the three-month and nine-month periods ended September 30, 2012 have been prepared in accordance with the International Accounting Standard (IAS) Nº 34, whichestablishes the content of condensed interim financial statements. These Condensed Consolidated Interim Financial Statements should be read in conjunction with the Consolidated Financial Statements of Gerdau S.A., as of December 31, 2011, which were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board - IASB.

 

The preparation of the Condensed Consolidated Interim Financial Statements in accordance with IAS 34 requires Management to make accounting estimates. The Condensed Consolidated Interim Financial Statements have been prepared using the historical cost as its basis, except for the valuation of certain financial instruments and biological assets, which are measured at fair value.

 

The same accounting policies and methods of calculation were used in these Condensed Consolidated Interim Financial Statements as they were applied in the Consolidated Financial Statements as of December 31, 2011, except, where applicable, for the impact of the adoption of standards and interpretations of rules described below:

 

2.2 – New IFRS and Interpretations of the IFRIC (International Financial Reporting Interpretations Committee)

 

Some new IASB accounting procedures and IFRIC interpretations were issued and/or reviewed and have their optional or mandatory adoption for the period beginning on January 1, 2012. The Company’s assessment on the impact of these new procedures and interpretations is as follows:

 

Standards and Interpretations in force

 

IFRS 7 - Disclosure - Transfers of Financial Assets

 

In October 2010, the IASB revised IFRS 7. This amendment has the objective of adding disclosures that enable users of financial statements to assess the risk of exposure over transfers of financial assets and the effects of these risks on the entity’s financial position. The change in the standard IFRS 7 is effective for annual periods beginning on or after July 01, 2011. The adoption of this revised standard did not have an impact in the Company’s Consolidated Financial Statements.

 



 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2012

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

Standards and Interpretations of standards not yet effective

 

IFRS 9 – Financial Instruments

 

In November 2009, the IASB issued IFRS 9, which has the objective of replacing the standard IAS 39 Financial Instruments: Recognition and Measurement, in three stages. This standard is the first part of stage 1 of IAS 39 replacement and addresses the classification and measurement of financial assets. In October 2010, the IASB added to this standard the requirements for classification and measurement of financial liabilities. This standard and its subsequent change are effective for annual reporting periods beginning on or after January 1, 2015. The Company is assessing the impacts from the adoption of this standard and possible differences compared to IAS 39.

 

IFRS 10 — Consolidated Financial Statements

 

In May 2011, the IASB issued IFRS 10. This standard establishes the principles for presentation and preparation of consolidated financial statements when an entity control one or more entities. This standard is effective for annual reporting periods beginning on or after January 1, 2013. The Company is assessing the impact of adopting this standard on its Consolidated Financial Statements.

 

IFRS 11 — Joint Arrangements

 

In May 2011, the IASB issued IFRS 11. This standard addresses aspects related to the accounting treatment for jointly-controlled entities and joint operations. This standard also limits the use of proportional consolidation just for joint operations, and also establishes the equity accounting method as the only method acceptable for joint ventures. This standard is effective for annual reporting periods beginning on or after January 1, 2013. The Company has already adopted the equity accounting method for investments in associates and jointly-controlled entities and it is currently assessing the impact of adopting this standard on its Consolidated Financial Statements.

 

IFRS 12 — Disclosure of Interests in Other Entities

 

In May 2011, the IASB issued IFRS 12. This standard addresses aspects related to the disclosure of nature of risks related to interests owned in subsidiaries, jointly-controlled entities and associate companies. This standard is effective for annual reporting periods beginning on or after January 1, 2013. The Company is assessing the impact of adopting this standard on its Consolidated Financial Statements.

 

IFRS 13 — Fair Value Measurement

 

In May 2011, the IASB issued IFRS 13. This standard establishes fair value and consolidates in a single standard the aspects of fair value measurement and establishes the requirements of disclosure related to fair value. This standard is effective for annual reporting periods beginning on or after January 1, 2013. The Company is assessing the impact of adopting this standard on its Consolidated Financial Statements.

 

IAS 28 — Investments in Associates and Joint Ventures

 

In May 2011, the IASB revised IAS 28. The change in IAS 28 addresses aspects related to investments in associate companies and establishes the rules for using the equity accounting method for investments in associate companies and jointly-controlled entities. The revised standard is effective for annual reporting periods beginning on or after January 1, 2013. The Company already adopted the equity accounting method for its investments in associate companies and jointly-controlled entities and is assessing the impact of the other changes of this standard on its Consolidated Financial Statements.

 

IAS 19 – Employee Benefits

 

In June 2011, the IASB revised IAS 19. The most significant modification refers to recognizing the changes on defined benefit obligations and plan assets. The modifications require the recognition of changes in defined benefit obligations and fair value of plan assets as they occur, and therefore the elimination of the “corridor approach” allowed in the previous version of IAS 19 and the advanced recognition of past service costs. Additionally, the amendments require that all actuarial gains and losses be recognized immediately through other comprehensive income so that the net asset or liability of the pension plan is recognized in its Consolidated Financial Statements to reflect the full amount of the plan deficit or surplus. The revised standard is effective for annual reporting periods beginning on or after January 1, 2013. The Company is assessing the impact of adopting this standard on its Consolidated Financial Statements.

 



 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2012

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

IAS 1 — Presentation of Items of Other Comprehensive Income

 

In June 2011, the IASB revised IAS 1. The change in IAS 1 addresses aspects related to disclosure of other comprehensive income items and establishes the need to separate items which will not be further reclassified to the net income and items that can be further reclassified to the net income. The revised standard is effective for annual reporting periods beginning on or after July 1, 2012. The Company is assessing the impact of adopting this standard on its Consolidated Financial Statements.

 

IFRIC 20 — Stripping Costs in the Production Phase of a Surface Mine

 

In October 2011, the IASB issued the IFRIC 20. This interpretation addresses aspects related to the accounting treatment of stripping costs in the production phase of a surface mine. This interpretation is effective for annual reporting periods beginning on or after January 1, 2013. The Company is assessing the impact of adopting this interpretation on its Consolidated Financial Statements.

 

IFRS 9 and IFRS 7 – Mandatory Effective Date and Transition Disclosures – Amendments to IFRS 9 and IFRS 7

 

In December 2011 the IASB revised IFRS 9 and 7. The amendment of IFRS 9 addresses the extension of the adoption date from January 1, 2013 to January 1, 2015. The amendment of IFRS 7 addresses issues relating to disclosure about the transition from IAS 39 to IFRS 9 and aspects related to the restatement of the comparative periods at the date of adoption of this statement. The Company is evaluating the impact of the adoption of these amendments in its Consolidated Financial Statements.

 

IFRS 7 – Disclosures – Offsetting Financial Assets and Financial Liabilities – Amendments to IFRS 7

 

In December 2011, the IASB revised IFRS 7. This amendment addresses disclosure issues related to the offsetting of financial assets and liabilities including rights and evaluates its effects. This standard is effective for annual periods beginning on or after January 1, 2013. The Company is evaluating the impact of the adoption of this amendment in its Consolidated Financial Statements.

 

IAS 32 – Offsetting Financial Assets and Financial Liabilities – Amendments to IAS 32

 

In December 2011, the IASB revised IAS 32. The amendment of this standard addresses issues related to the offsetting of financial assets and liabilities. This standard is effective for annual periods beginning on or after January 1, 2014. The Company is evaluating the impact of the adoption of this amendment in its Consolidated Financial Statements.

 

IFRS 1 — First-time Adoption of International Financial Reporting Standards – Government Loans

 

In March 2012, the IASB revised IFRS 1. This change of IFRS 1 addresses an exception for the retrospective adoption of requirements of IFRS 9 and IAS 20 in government loans that are in place in the IFRS transition date. This standard is effective for annual reporting periods beginning on or after January 1, 2013. The Company believes that these changes will not impact its Consolidated Financial Statements since it already adopts IFRS 1.

 

IFRS Annual improvements of May 2012

 

In May 2012, the IASB revised the standards IFRS 1, IAS 1, IAS 16, IAS 32, IFRIC 2 and IAS 34. These revised standards are effective for years beginning on or after January 1, 2013. The Company is assessing the impact of adopting these changes on its Consolidated Financial Statements.

 

IFRS 10, IFRS 11 e IFRS 12 – Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance – Amendments to IFRS 10, IFRS 11 and IFRS 12

 

In June 2012, the IASB revised IFRS 10, IFRS 11 and IFRS 12, which address aspects related to the first time adoption of these standards and aspects related to adjustments to comparative disclosures. These revised standards are effective for years

 



 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2012

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

beginning on or after January 1, 2013. The Company is assessing the impact of adopting these changes on its Consolidated Financial Statements.

 

NOTE 3 – CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

3.1 - Subsidiaries

 

The Company did not have material changes of participation in subsidiaries for the period ended September 30, 2012, compared to those existing on December 31, 2011, except by the operation described at Note 3.4.

 

3.2 - Jointly-Controlled Entities

 

The Company did not have material changes of participation in jointly-controlled entities for the period ended September 30, 2012, compared to those existing on December 31, 2011, except by the operation described at Note 3.4.

 

3.3 – Associate companies

 

The Company did not have material changes of participation in associate companies for the period ended September 30, 2012, compared to those existing on December 31, 2011.

 

3.4 – Acquisition of control of an entity

 

On July 7, 2012, the Company obtained control of its jointly-controlled entity Kalyani Gerdau Steel Ltds (KGS), which is a specialty steel entity based in India and which the Company had an interest of 91.28% as of the control acquisition date. The control was obtained by the expiration of the KGS partner veto power and the right of recovering its original interest in KGS. As a result of the business combination, the Company reclassified the non deductible for tax purposes goodwill, previously recognized in the amount of R$ 28,389, from the Investments in associates and jointly-controlled entities account to the Goodwill account. The company has not concluded the fair value assessment of the assets and liabilities of KGS up to September 30, 2012, but the Company does not expect material adjustments in the amounts consolidated as of September 30, 2012. The following table summarizes the KGS book value as of the control acquisition date.

 

 

 

Book value

 

Current assets

 

228,820

 

Property, plant and equipment, net

 

294,088

 

Goodwill

 

28,389

 

Other non-current assets

 

35,610

 

Current liabilities

 

(201,561

)

Non-current liabilities

 

(227,320

)

Non-controlling interests

 

(11,306

)

Consolidated Assets (Liabilities), net

 

146,720

 

 

The amounts recognized as Net sales and Trade accounts receivable, attributed to KGS, included in the Condensed Consolidated Financial Statements of the Company as from the control acquisition date of this subsidiary are not material. KGS, as from the control acquisition date and up to September 30, 2012 generated a Net loss of R$ 27,155. In addition, the amounts of Net Sales and Net income (loss) that would have been generated by KGS for the nine-month period ended on September 30, 2012, in case this entity had been acquired as from the beginning of the period, would not be expected to be material.

 



 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2012

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

NOTE 4 – CASH AND CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS

 

Cash and cash equivalents

 

 

 

September 30, 2012

 

December 31, 2011

 

Cash

 

19,595

 

7,766

 

Banks and short-term investments

 

1,645,966

 

1,468,833

 

Cash and cash equivalents

 

1,665,561

 

1,476,599

 

 

Short term investments

 

 

 

September 30, 2012

 

December 31, 2011

 

Held for trading

 

1,333,850

 

3,095,359

 

Available for sale securities

 

0

 

6,290

 

Short term investments

 

1,333,850

 

3,101,649

 

 

Held for trading securities include Bank Deposit Certificates and marketable securities investments, which are stated at their fair value. Income generated by these investments is recorded as financial income.

 

NOTE 5 – ACCOUNTS RECEIVABLE

 

 

 

September 30, 2012

 

December 31, 2011

 

Trade accounts receivable - in Brazil

 

1,459,786

 

1,170,564

 

Trade accounts receivable - exports from Brazil

 

125,654

 

252,377

 

Trade accounts receivable - foreign subsidiaries

 

2,780,890

 

2,242,043

 

(-) Allowance for doubtful accounts

 

(90,455

)

(62,236

)

 

 

4,275,875

 

3,602,748

 

 

NOTE 6 - INVENTORIES

 

 

 

September 30, 2012

 

December 31, 2011

 

Finished products

 

3,699,958

 

3,108,332

 

Work in progress

 

2,064,627

 

1,573,066

 

Raw materials

 

1,943,943

 

1,986,669

 

Storeroom supplies

 

1,013,899

 

976,030

 

Advances to suppliers

 

253,834

 

138,952

 

Imports in transit

 

309,819

 

375,089

 

(-) Provision for market value adjustment

 

(160,635

)

(98,711

)

 

 

9,125,445

 

8,059,427

 

 

The changes in the provision for market value adjustment are as follows:

 

Balance as of January 1, 2011

 

(152,388

)

Provision for the year

 

(56,999

)

Write-offs

 

122,877

 

Exchange rate variation

 

(12,201

)

Balance as of December 31, 2011

 

(98,711

)

Provision for the period

 

(86,901

)

Write-offs

 

37,321

 

Exchange rate variation

 

(12,344

)

Balance as of September 30, 2012

 

(160,635

)

 



 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2012

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

Inventories are insured against fire and flooding. The insurance coverage is based on the amounts and risks involved.

 

During the three-month period ended on September 30, 2012 the amounts of R$ 8,621,389 and R$ 489,904 (R$ 7,628,291 and R$ 460,952 as of September 30, 2011), respectively were recognized as cost of sales and freights in the condensed consolidated interim financial statements. During the nine-month period ended on September 30, 2012 the amounts of R$ 25,264,844 and R$ 1,443,430 (R$ 22,433,669 and R$ 1,354,602 as of September 30, 2011), respectively were recognized as cost of sales and freights in the condensed consolidated interim financial statements.

 

For the nine-month period ended on September 30, 2012, the cost of sales include the amounts of R$ 37,321 (R$ 85,227 as of September 30, 2011) related to inventories permanently written off and R$ 86,901 (R$ 46,376 as of September 30, 2011) related to the recognition of a provision for marktet value adjustments of inventories.

 

NOTE 7 – INCOME AND SOCIAL CONTRIBUTION TAXES

 

The Company’s subsidiaries in Brazil used R$ 6,930 and R$ 11,882 for the three-month and nine-month periods ended on September 30, 2012, respectively, (R$ (1,716) and R$ 6,382 for the three-month and nine-month periods ended on September 30, 2011, respectively) of tax incentives in the form of income tax credits, related to technological innovation, funds for the rights of children and adolescents, PAT (Workers’ Meal Program), and cultural and artistic activities. The units of the subsidiary Gerdau Aços Longos S.A., located in the northeast region of Brazil, will receive until 2013, a 75% reduction in income tax on operating profit, which represents R$ 5,177 and R$ 6,673for the three-month and nine-month period ended on September 30, 2012 (R$ (6,345) and R$ 0 for the three-month and nine-month periods ended on September 30, 2011). The respective tax incentives were recorded directly in the income and social contribution tax account in the statement of income.

 

As of September 30, 2012, the Company had  tax loss carryforwards arising from its operations in Brazil of R$ 540,075 for income tax (R$ 606,139 as of December 31, 2011) and R$ 1,406,705 for social contribution tax (R$ 1,291,616 as of December 31, 2011), representing a deferred tax asset of R$ 261,622 (R$ 267,780 as of December 31, 2011). The Company believes that the amounts will be realized based on future taxable income. In addition to these deferred tax assets, the Company has not recorded a portion of the tax asset of R$ 176,795 (R$ 172,556 as of December 31, 2011), due to the Company’s inability to use the tax loss carryforwards in its subsidiaries. Notwithstanding, these tax loss carryforwards do not have an expiration date.

 

As of September 30, 2012, the subsidiary Gerdau Ameristeel has a deferred tax asset from tax losses in its operation in Canada in the amount of R$ 138,599 related to income tax (R$ 123,572 as of December 31, 2011). These credits expire on various dates between 2025 and 2031. The subsidiary believes the amounts will be used with future taxable income, and historically the subsidiary has generated enough taxable income to the use of these assets.

 

As of September 30, 2012, the subsidiary Gerdau Ameristeel had R$ 144,353 (R$ 133,881 as of December 31, 2011) of capital losses that had not been recognized in the Company’s condensed consolidated interim balance sheets. These losses are primarily related to the write-down of the subsidiary’s long-term investments and none of these losses currently have an expiration date except for R$ 66,939 and R$ 1,854 included in the condensed consolidated interim balance sheets as of September 30, 2012 which expires in 2015 and 2016, respectively (R$ 61,836 and R$ 1,713 as of December 31, 2011). The subsidiary had various state tax losses totaling R$ 118,898 (R$ 208,060 as of December 31, 2011) which had not been recognized in the Company’s condensed interim financial statements and which expires between 2012 and 2031. The subsidiary also had R$ 82,920 of state tax credits for the period ended September 30, 2012 (R$ 76,771 as of December 31, 2011), that were not recognized in the Company’s condensed consolidated interim balance sheet. These credits will expire on various dates between 2015 and 2018 with the exception of a portion of R$ 9,130 (R$ 13,147 as of December 31, 2011), which has no expiration date.

 

In Brazil, income taxes include the federal income tax (IR) and social contribution (CS), which represent an additional federal income tax. The applicable tax rates for income tax and social contribution are 25% and 9%, respectively, for the periods of three and nine months ended on September 30, 2012 and 2011. Beyond the domestic tax rates mentioned above, the Company is also subject to taxes on income in its subsidiaries abroad, which tax rate ranges between 20% and 38.5%. The difference between the tax rates in Brazil and the tax rates in other countries are presented in the reconciliation of income tax and social contribution adjustments on net income in the row “difference in tax rates in foreign companies”.

 



 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2012

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

Reconciliation of income tax (IR) and social contribution (CS) adjustments on the net income:

 

 

 

For the three-month period ended

 

 

 

September 30, 2012

 

September 30, 2011

 

 

 

Total

 

Total

 

Income before income taxes

 

433,816

 

719,045

 

Statutory tax rates

 

34

%

34

%

Income and social contribution taxes at statutory rates

 

(147,498

)

(244,476

)

Tax adjustment with respect to:

 

 

 

 

 

- difference in tax rates in foreign companies

 

6,275

 

88,910

 

- equity in earnings of unconsolidated companies

 

(1,069

)

1,844

 

- interest on equity

 

(9,649

)

52,358

 

- tax incentives

 

12,107

 

(8,061

)

- tax deductible goodwill recorded in statutory books

 

89,708

 

89,708

 

- permanent differences (net)

 

24,727

 

14,018

 

Income and social contribution taxes

 

(25,399

)

(5,699

)

Current

 

(93,287

)

(225,069

)

Deferred

 

67,888

 

219,370

 

 

 

 

 

 

 

 

 

For the nine-month period ended

 

 

 

September 30, 2012

 

September 30, 2011

 

 

 

Total

 

Total

 

Income before income taxes

 

1,356,387

 

1,863,531

 

Statutory tax rates

 

34

%

34

%

Income and social contribution taxes at statutory rates

 

(461,172

)

(633,601

)

Tax adjustment with respect to:

 

 

 

 

 

- difference in tax rates in foreign companies

 

119,061

 

28,345

 

- equity in earnings of unconsolidated companies

 

4,824

 

28,858

 

- interest on equity

 

(9,329

)

52,358

 

- tax incentives

 

18,555

 

6,382

 

- tax deductible goodwill recorded in statutory books

 

269,126

 

269,126

 

- permanent differences (net)

 

56,127

 

10,983

 

Income and social contribution taxes

 

(2,808

)

(237,549

)

Current

 

(342,003

)

(522,028

)

Deferred

 

339,195

 

284,479

 

 

The credits recognized under tax loss carry-forwards are supported in projections of taxable future incomes discounted to present value, which are based on technical analysis of feasibility, which are annually presented to the board of the Company. These analyses take into account the historical of the Company profitability and the outlook for maintenance of current profitability in the future, allowing an estimation of credits recovery. The other credits, which are based on temporary differences, mainly tax contingencies, as well as provision for losses, were recognized according to their expectation of use.

 



 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2012

(In thousands of Brazilian Reais — R$, unless otherwise stated)

(Unaudited)

 

NOTE 8 — INVESTMENTS

 

I) Associates and jointly-controlled entities

 

 

 

Jointly-controlled entities

 

Associates

 

 

 

 

 

 

 

Joint Ventures
North America
(a)

 

Gerdau Corsa
S.A.P.I. de
C.V.

 

Kalyani
Gerdau Steel
Ltd.

 

Dona Francisca
Energética S.A.

 

Armacero
Ind. Com. Ltda.

 

Grupo Multisteel
Business
Holdings Corp.

 

Corsa
Controladora
S.A. de C.V.

 

Corporación
Centroamericana
del Acero, S.A.

 

Maco
Holdings
Ltda.

 

Others

 

Goodwill (b)

 

Total

 

Balance as of January 01, 2011

 

217,643

 

57,200

 

25,704

 

100,196

 

17,913

 

167,046

 

98,899

 

122,055

 

97,786

 

1,290

 

358,788

 

1,264,520

 

Equity in earnings

 

75,013

 

(7,582

)

(34,172

)

18,019

 

727

 

(4,297

)

11,114

 

2,669

 

1,171

 

 

 

62,662

 

Amounts recognized in Other comprehensive income

 

31,737

 

(130

)

3,358

 

 

1,144

 

20,884

 

(3,229

)

13,642

 

15,241

 

 

24,887

 

107,534

 

Acquisition/disposal of investment

 

 

 

 

 

 

 

 

 

(2,773

)

 

 

(2,773

)

Capital increase

 

 

 

387

 

 

 

 

 

 

 

 

26,468

 

26,855

 

Dividends/Interest on Equity

 

(57,873

)

 

 

(11,489

)

 

(3,672

)

(23,093

)

 

(7,380

)

 

 

(103,507

)

Balance as of December 31, 2011

 

266,520

 

49,488

 

(4,723

)

106,726

 

19,784

 

179,961

 

83,691

 

138,366

 

104,045

 

1,290

 

410,143

 

1,355,291

 

Equity in earnings

 

29,469

 

(2,226

)

(17,102

)

12,565

 

(680

)

(7,839

)

6,952

 

(8,156

)

1,204

 

 

 

14,187

 

Amounts recognized in Other comprehensive income

 

23,990

 

8,794

 

(19,436

)

 

3,984

 

14,527

 

15,033

 

10,779

 

 

 

44,073

 

108,536

 

Capital increase

 

 

 

159,592

 

 

 

 

 

 

 

 

 

159,592

 

Dividends/Interest on Equity

 

(41,432

)

 

 

 

 

 

 

 

(6,421

)

 

 

(47,853

)

Goodwill reclassification from acquisition of control

 

 

 

28,389

 

 

 

 

 

 

 

 

(28,389

)

 

 

Acquisition of control (Note 3.4)

 

 

 

(146,720

)

 

 

 

 

 

 

 

 

(153,512

)

Balance as of September 30, 2012

 

278,547

 

56,056

 

 

119,291

 

23,088

 

186,649

 

105,676

 

140,989

 

98,828

 

1,290

 

425,827

 

1,436,241

 

 

a) Joint Ventures North America

 

Companies: Gallatin Steel Company, Bradley Steel Processors e MRM Guide Rail.

 

b) Goodwill

 

 

 

September 30, 2012

 

December 31, 2011

 

Dona Francisca Energética S.A.

 

17,071

 

17,071

 

Grupo Multisteel Business Holdings Corp.

 

45,880

 

42,096

 

Corsa Controladora S.A. de C.V.

 

164,310

 

140,045

 

Corporación Centroamericana del Acero, S.A.

 

198,566

 

184,463

 

Kalyani Gerdau Steel Ltd.

 

 

26,468

 

 

 

425,827

 

410,143

 

 

NOTE 9 — PROPERTY, PLANT AND EQUIPMENT

 

a) Summary of changes in property, plant and equipment — during the three-month period ended on September 30, 2012, acquisitions amounted to R$ 903,901 (R$ 616,085 as of September 30, 2011), and disposals amounted to R$ 24,921 (R$ 3,738 as of September 30, 2011). During the nine-month period ended on September 30, 2012, acquisitions amounted to R$ 2,445,274 (R$ 1,289,108 as of September 30, 2011), and disposals amounted to R$ 28,078 (R$ 24,298 as of September 30, 2011).

 

b) Capitalized borrowing costs — borrowing costs capitalized during the three-month period ended September 30, 2012 amounted to R$ 26,718 (R$ 12,620 as of September 30, 2011). Borrowing costs capitalized during the nine-month period ended September 30, 2012 amounted to R$ 68,801 (R$ 36,195 as of September 30, 2011).

 

c) Guarantees — property, plant and equipment have been pledged as collateral for loans and financing in the amount of R$ 447,658 as of September 30, 2012 (R$ 119,289 as of December 31, 2011).

 



 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2012

(In thousands of Brazilian Reais — R$, unless otherwise stated)

(Unaudited)

 

NOTE 10 — GOODWILL

 

The changes in goodwill are as follows:

 

 

 

Goodwill gross

 

Accumulated

 

Goodwill after

 

 

 

amount

 

Impairment losses

 

Impairment losses

 

Balances as of January 01, 2011

 

8,353,409

 

(195,311

)

8,158,098

 

(+/-) Exchange variation

 

996,827

 

(19,168

)

977,659

 

(+) Additions

 

20,032

 

 

20,032

 

Balances as of December 31, 2011

 

9,370,268

 

(214,479

)

9,155,789

 

(+) Additions

 

28,389

 

 

28,389

 

(+/-) Exchange variation

 

781,715

 

(14,351

)

767,364

 

Balances as of September 30, 2012

 

10,180,372

 

(228,830

)

9,951,542

 

 

The amount of goodwill by segment is as follows:

 

 

 

September 30, 2012

 

December 31, 2011

 

Brazil

 

512,870

 

504,253

 

Specialty Steels

 

2,205,497

 

2,016,847

 

Latin America

 

764,103

 

661,336

 

North America

 

6,469,072

 

5,973,353

 

 

 

9,951,542

 

9,155,789

 

 

NOTE 11 — LOANS AND FINANCING

 

Loans and financing are as follows:

 

 

 

Annual
charges (*)

 

September 30, 2012

 

December 31, 2011

 

Short term financing in Brazilian reais

 

 

 

 

 

 

 

Working capital

 

5.21

%

686,278

 

420,943

 

Financing of investment

 

11.09

%

 

5,103

 

Short term financing in foreign currency

 

 

 

 

 

 

 

Working capital (US$)

 

2.45

%

1,053,760

 

448,023

 

Working capital (€)

 

3.15

%

72,464

 

39,456

 

Working capital (Clp$)

 

1.74

%

10,889

 

2,710

 

Working capital (Cop$)

 

7.41

%

128,440

 

101,345

 

Working capital (PA$)

 

13.13

%

73,441

 

23,014

 

Working capital (Mxn$)

 

6.57

%

177,145

 

41,439

 

Financing of property, plant and equipment and others (US$)

 

2.65

%

20,911

 

17,240

 

Financing of investment (INR)

 

4.75

%

1,854

 

 

 

 

 

 

2,225,182

 

1,099,273

 

Plus current portion of long-term financing

 

 

 

531,287

 

616,032

 

Short term financing plus current portion of long-term financing

 

 

 

2,756,469

 

1,715,305

 

 



 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2012

(In thousands of Brazilian Reais — R$, unless otherwise stated)

(Unaudited)

 

Long-term financing in Brazilian reais

 

 

 

 

 

 

 

Working capital

 

9.26

%

270,129

 

568,340

 

Financing of property, plant and equipament

 

7.61

%

1,287,277

 

1,423,333

 

Financing of investment

 

7.51

%

5,062

 

 

Long-term financing in foreign currency

 

 

 

 

 

 

 

Working capital (US$)

 

3.07

%

1,245,486

 

1,465,818

 

Working capital (€)

 

3.15

%

60,278

 

82,329

 

Working capital (Mxn$)

 

6.57

%

23,732

 

20,175

 

Working capital (COP$)

 

7.42

%

254,280

 

169,373

 

Ten Year Bonds (US$)

 

6.71

%

8,193,121

 

7,582,966

 

Advances on export contracts (US$)

 

5.91

%

63,800

 

96,986

 

Financing of investment (US$)

 

4.53

%

83,919

 

27,542

 

Financing of investment (INR)

 

4.75

%

145,460

 

 

Financing of property, plant and equipament and others (US$)

 

3.52

%

470,076

 

361,460

 

 

 

 

 

12,102,620

 

11,798,322

 

Less: current portion

 

 

 

(531,287

)

(616,032

)

Long term financing minus current portion

 

 

 

11,571,333

 

11,182,290

 

Total financing

 

 

 

14,327,802

 

12,897,595

 

 


(*) Weighted average effective interest costs on September 30, 2012.

 

Loans and financing denominated in Brazilian Reais are indexed to the TJLP (long-term interest rate, which is established quarterly by the Federal Government for adjusting long-term loans granted by the BNDES - National Bank for Economic and Social Development), or to the IGP-M (general market price index, a Brazilian inflation rate measured by Fundação Getúlio Vargas).

 

Summary of loans and financing by currency:

 

 

 

September 30, 2012

 

December 31, 2011

 

Brazilian Real (R$)

 

2,248,746

 

2,417,719

 

U.S. Dollar (US$)

 

11,131,073

 

10,000,035

 

Euro (€)

 

132,742

 

121,785

 

Colombian Peso (Cop$)

 

382,720

 

270,718

 

Argentine Peso (PA$)

 

73,441

 

23,014

 

Chilean Peso (Clp$)

 

10,889

 

2,710

 

Mexican Peso (Mxn$)

 

200,877

 

61,614

 

Rupees (INR)

 

147,314

 

 

 

 

14,327,802

 

12,897,595

 

 

Timeline of installments payments of long term loans and financing is as follows: