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 May 6, 2015
Commission File Number 1-14878
GERDAU S.A.
(Exact Name as Specified in its Charter)
N/A
(Translation of Registrants 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: May 6, 2015
|
GERDAU S.A. |
|
|
|
|
|
By: |
/s/ André Pires de Oliveira Dias |
|
Name: |
André Pires de Oliveira Dias |
|
Title: |
Executive Vice President Investor Relations Officer |
2
EXHIBIT INDEX
Exhibit |
|
Description of Exhibit |
|
|
|
|
|
99.1 |
|
GERDAU S.A. Condensed consolidated interim financial statements as of March 31, 2015 |
|
3
Exhibit 99.1
GERDAU S.A.
Condensed consolidated interim financial statements
as of March 31, 2015
GERDAU S.A.
CONSOLIDATED BALANCE SHEETS
In thousands of Brazilian reais (R$)
(Unaudited)
|
|
Note |
|
March 31, 2015 |
|
December 31, 2014 |
|
CURRENT ASSETS |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
4 |
|
3,596,164 |
|
3,049,971 |
|
Short-term investments Held for Trading |
|
4 |
|
2,251,062 |
|
2,798,834 |
|
Trade accounts receivable - net |
|
5 |
|
5,271,932 |
|
4,438,676 |
|
Inventories |
|
6 |
|
10,190,200 |
|
8,866,888 |
|
Tax credits |
|
|
|
747,480 |
|
686,958 |
|
Income and social contribution taxes recoverable |
|
|
|
397,118 |
|
468,309 |
|
Unrealized gains on financial instruments |
|
13 |
|
64,358 |
|
41,751 |
|
Other current assets |
|
|
|
388,710 |
|
331,352 |
|
|
|
|
|
22,907,024 |
|
20,682,739 |
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS |
|
|
|
|
|
|
|
Tax credits |
|
|
|
80,775 |
|
78,412 |
|
Deferred income taxes |
|
|
|
3,551,951 |
|
2,567,189 |
|
Related parties |
|
15 |
|
121,420 |
|
80,920 |
|
Judicial deposits |
|
14 |
|
1,501,326 |
|
1,430,865 |
|
Other non-current assets |
|
|
|
393,325 |
|
375,732 |
|
Prepaid pension cost |
|
|
|
163,017 |
|
196,799 |
|
Investments in associates and jointly-controlled entities |
|
8 |
|
1,667,710 |
|
1,394,383 |
|
Goodwill |
|
10 |
|
14,969,925 |
|
12,556,404 |
|
Other Intangibles |
|
|
|
1,715,533 |
|
1,547,098 |
|
Property, plant and equipment, net |
|
|
|
23,771,383 |
|
22,131,789 |
|
|
|
|
|
47,936,365 |
|
42,359,591 |
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
|
70,843,389 |
|
63,042,330 |
|
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements
GERDAU S.A.
CONSOLIDATED BALANCE SHEETS
In thousands of Brazilian reais (R$)
(Unaudited)
|
|
Note |
|
March 31, 2015 |
|
December 31, 2014 |
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
Trade accounts payable |
|
|
|
3,745,251 |
|
3,236,356 |
|
Short-term debt |
|
11 |
|
2,365,802 |
|
2,037,869 |
|
Taxes payable |
|
|
|
461,249 |
|
405,490 |
|
Income and social contribution taxes payable |
|
|
|
182,425 |
|
388,920 |
|
Payroll and related liabilities |
|
|
|
532,908 |
|
668,699 |
|
Dividends payable |
|
|
|
|
|
119,318 |
|
Employee benefits |
|
|
|
36,811 |
|
34,218 |
|
Environmental liabilities |
|
|
|
22,118 |
|
23,025 |
|
Other current liabilities |
|
|
|
713,278 |
|
858,901 |
|
|
|
|
|
8,059,842 |
|
7,772,796 |
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES |
|
|
|
|
|
|
|
Long-term debt |
|
11 |
|
20,587,831 |
|
17,148,580 |
|
Debentures |
|
12 |
|
328,595 |
|
335,036 |
|
Deferred income taxes |
|
|
|
1,243,095 |
|
944,546 |
|
Unrealized losses on financial instruments |
|
13 |
|
7,376 |
|
8,999 |
|
Provision for tax, civil and labor liabilities |
|
14 |
|
1,653,653 |
|
1,576,355 |
|
Environmental liabilities |
|
|
|
102,165 |
|
93,396 |
|
Employee benefits |
|
|
|
1,516,903 |
|
1,272,631 |
|
Other non-current liabilities |
|
|
|
904,352 |
|
635,457 |
|
|
|
|
|
26,343,970 |
|
22,015,000 |
|
|
|
|
|
|
|
|
|
EQUITY |
|
16 |
|
|
|
|
|
Capital |
|
|
|
19,249,181 |
|
19,249,181 |
|
Treasury stocks |
|
|
|
(363,507 |
) |
(233,142 |
) |
Capital reserves |
|
|
|
11,597 |
|
11,597 |
|
Retained earnings |
|
|
|
11,658,949 |
|
11,366,957 |
|
Operations with non-controlling interests |
|
|
|
(1,732,962 |
) |
(1,732,962 |
) |
Other reserves |
|
|
|
6,490,083 |
|
3,539,188 |
|
EQUITY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT |
|
|
|
35,313,341 |
|
32,200,819 |
|
|
|
|
|
|
|
|
|
NON-CONTROLLING INTERESTS |
|
|
|
1,126,236 |
|
1,053,715 |
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
36,439,577 |
|
33,254,534 |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY |
|
|
|
70,843,389 |
|
63,042,330 |
|
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$)
(Unaudited)
|
|
|
|
For the three-month period ended |
|
|
|
Note |
|
March 31, 2015 |
|
March 31, 2014 |
|
|
|
|
|
|
|
|
|
NET SALES |
|
|
|
10,447,376 |
|
10,553,776 |
|
|
|
|
|
|
|
|
|
Cost of sales |
|
19 |
|
(9,335,523 |
) |
(9,238,024 |
) |
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
|
|
1,111,853 |
|
1,315,752 |
|
|
|
|
|
|
|
|
|
Selling expenses |
|
19 |
|
(179,519 |
) |
(173,583 |
) |
General and administrative expenses |
|
19 |
|
(480,442 |
) |
(533,805 |
) |
Other operating income |
|
19 |
|
56,851 |
|
46,866 |
|
Other operating expenses |
|
19 |
|
(30,038 |
) |
(27,681 |
) |
Equity in earnings of unconsolidated companies |
|
8 |
|
6,535 |
|
26,633 |
|
|
|
|
|
|
|
|
|
INCOME BEFORE FINANCIAL INCOME (EXPENSES) AND TAXES |
|
|
|
485,240 |
|
654,182 |
|
|
|
|
|
|
|
|
|
Financial income |
|
20 |
|
109,116 |
|
62,048 |
|
Financial expenses |
|
20 |
|
(372,064 |
) |
(288,726 |
) |
Exchange variations, net |
|
20 |
|
(651,254 |
) |
127,678 |
|
Gain and losses on financial instruments, net |
|
20 |
|
15,637 |
|
(2,470 |
) |
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE TAXES |
|
|
|
(413,325 |
) |
552,712 |
|
|
|
|
|
|
|
|
|
Current |
|
7 |
|
(45,385 |
) |
(105,563 |
) |
Deferred |
|
7 |
|
726,071 |
|
(7,058 |
) |
Income and social contribution taxes |
|
|
|
680,686 |
|
(112,621 |
) |
|
|
|
|
|
|
|
|
NET INCOME |
|
|
|
267,361 |
|
440,091 |
|
|
|
|
|
|
|
|
|
ATTRIBUTABLE TO: |
|
|
|
|
|
|
|
Owners of the parent |
|
|
|
293,062 |
|
397,224 |
|
Non-controlling interests |
|
|
|
(25,701 |
) |
42,867 |
|
|
|
|
|
267,361 |
|
440,091 |
|
|
|
|
|
|
|
|
|
Basic earnings per share - preferred and common - (R$) |
|
17 |
|
0.17 |
|
0.23 |
|
|
|
|
|
|
|
|
|
Diluted earnings per share - preferred and common - (R$) |
|
17 |
|
0.17 |
|
0.23 |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements
GERDAU S.A.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In thousands of Brazilian reais (R$)
(Unaudited)
|
|
For the three-month period ended |
|
|
|
March 31, 2015 |
|
March 31, 2014 |
|
Net income for the period |
|
267,361 |
|
440,091 |
|
Items that may be reclassified subsequently to profit or loss |
|
|
|
|
|
Other comprehensive income from associates and jointly-controlled entities |
|
226,268 |
|
(50,138 |
) |
Cumulative translation adjustment |
|
4,446,034 |
|
(966,108 |
) |
Unrealized (Losses) Gains on net investment hedge |
|
(1,601,878 |
) |
202,852 |
|
Cash flow hedges |
|
|
|
|
|
Unrealized Gains (Losses) |
|
3,579 |
|
(1,341 |
) |
|
|
3,074,003 |
|
(814,735 |
) |
Items that will not be reclassified to profit or loss |
|
|
|
|
|
Net unrealized gains on defined benefit pension plan |
|
|
|
620 |
|
|
|
|
|
620 |
|
Other comprehensive income, net of tax |
|
3,074,003 |
|
(814,115 |
) |
|
|
|
|
|
|
Total comprehensive income for the period, net of tax |
|
3,341,364 |
|
(374,024 |
) |
|
|
|
|
|
|
Total comprehensive income attributable to: |
|
|
|
|
|
Owners of the parent |
|
3,267,680 |
|
(387,742 |
) |
Non-controlling interests |
|
73,684 |
|
13,718 |
|
|
|
3,341,364 |
|
(374,024 |
) |
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements
GERDAU S.A.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
in thousands of Brazilian reais (R$)
(Unaudited)
|
|
Attributed to parent companys interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings |
|
|
|
Other Reserves |
|
|
|
|
|
|
|
|
|
Capital |
|
Treasury stocks |
|
Capital Reserve |
|
Legal reserve |
|
Tax Incentives Reserve |
|
Investments and working capital reserve |
|
Pension Plan |
|
Retained earnings |
|
Operations with non- controlling interests |
|
Gains and losses on available for sale securities |
|
Gains and losses on net investment hedge |
|
Gains and losses on derivatives |
|
Cumulative translation adjustment |
|
Stock Option |
|
Total parent companys interest |
|
Non-controlling interests |
|
Total Shareholders Equity |
|
Balance as of January 1, 2014 |
|
19,249,181 |
|
(238,971 |
) |
11,597 |
|
558,084 |
|
560,405 |
|
9,620,293 |
|
(266,030 |
) |
|
|
(1,732,962 |
) |
1,620 |
|
(1,525,652 |
) |
3,281 |
|
3,994,567 |
|
103,666 |
|
30,339,079 |
|
1,681,678 |
|
32,020,757 |
|
2014 Changes in Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
397,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
397,224 |
|
42,867 |
|
440,091 |
|
Other comprehensive income (loss) recognized in the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
608 |
|
|
|
|
|
|
|
202,366 |
|
(1,305 |
) |
(986,635 |
) |
|
|
(784,966 |
) |
(29,149 |
) |
(814,115 |
) |
Total comprehensive income (loss) recognized in the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
608 |
|
397,224 |
|
|
|
|
|
202,366 |
|
(1,305 |
) |
(986,635 |
) |
|
|
(387,742 |
) |
13,718 |
|
(374,024 |
) |
Shareholders transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary dividend |
|
|
|
|
|
|
|
|
|
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12 |
) |
|
|
(12 |
) |
Stock option expenses recognized in the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,468 |
|
6,468 |
|
76 |
|
6,544 |
|
Stock option exercised during the period |
|
|
|
3,577 |
|
|
|
|
|
|
|
(357 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,220 |
|
58 |
|
3,278 |
|
Effects of interest changes in subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,377 |
) |
(5,377 |
) |
Dividends/interest on capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,855 |
) |
(7,855 |
) |
Balance as of March 31, 2014 (Note 16) |
|
19,249,181 |
|
(235,394 |
) |
11,597 |
|
558,084 |
|
560,405 |
|
9,619,924 |
|
(265,422 |
) |
397,224 |
|
(1,732,962 |
) |
1,620 |
|
(1,323,286 |
) |
1,976 |
|
3,007,932 |
|
110,134 |
|
29,961,013 |
|
1,682,298 |
|
31,643,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2015 |
|
19,249,181 |
|
(233,142 |
) |
11,597 |
|
628,228 |
|
611,531 |
|
10,475,045 |
|
(347,847 |
) |
|
|
(1,732,962 |
) |
1,620 |
|
(2,472,853 |
) |
(2,543 |
) |
5,874,714 |
|
138,250 |
|
32,200,819 |
|
1,053,715 |
|
33,254,534 |
|
2015 Changes in Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
293,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
293,062 |
|
(25,701 |
) |
267,361 |
|
Other comprehensive income (loss) recognized in the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,599,186 |
) |
3,478 |
|
4,570,326 |
|
|
|
2,974,618 |
|
99,385 |
|
3,074,003 |
|
Total comprehensive income (loss) recognized in the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
293,062 |
|
|
|
|
|
(1,599,186 |
) |
3,478 |
|
4,570,326 |
|
|
|
3,267,680 |
|
73,684 |
|
3,341,364 |
|
Shareholders transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments of dividends after repurchase/exercise of shares |
|
|
|
|
|
|
|
|
|
|
|
944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
944 |
|
|
|
944 |
|
Stock option expenses recognized in the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,723 |
) |
(23,723 |
) |
467 |
|
(23,256 |
) |
Treasury stocks |
|
|
|
(161,278 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(161,278 |
) |
|
|
(161,278 |
) |
Stock option exercised during the period |
|
|
|
30,913 |
|
|
|
|
|
|
|
(2,014 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,899 |
|
(54 |
) |
28,845 |
|
Effects of interest changes in subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(531 |
) |
(531 |
) |
Dividends/interest on capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,045 |
) |
(1,045 |
) |
Balance as of March 31, 2015 (Note 16) |
|
19,249,181 |
|
(363,507 |
) |
11,597 |
|
628,228 |
|
611,531 |
|
10,473,975 |
|
(347,847 |
) |
293,062 |
|
(1,732,962 |
) |
1,620 |
|
(4,072,039 |
) |
935 |
|
10,445,040 |
|
114,527 |
|
35,313,341 |
|
1,126,236 |
|
36,439,577 |
|
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements
GERDAU S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands of Brazilian reais (R$)
(Unaudited)
|
|
|
|
For the three-month period ended |
|
|
|
Note |
|
March 31, 2015 |
|
March 31, 2014 |
|
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
Net income for the period |
|
|
|
267,361 |
|
440,091 |
|
Adjustments to reconcile net income for the period to net cash provided by operating activities |
|
|
|
|
|
|
|
Depreciation and amortization |
|
19 |
|
603,272 |
|
541,660 |
|
Equity in earnings of unconsolidated companies |
|
8 |
|
(6,535 |
) |
(26,633 |
) |
Exchange variation, net |
|
20 |
|
651,254 |
|
(127,678 |
) |
(Gains) Losses on financial instruments, net |
|
20 |
|
(15,637 |
) |
2,470 |
|
Post-employment benefits |
|
|
|
66,072 |
|
56,626 |
|
Stock based remuneration |
|
|
|
5,224 |
|
9,222 |
|
Income and social contribution taxes |
|
7 |
|
(680,686 |
) |
112,621 |
|
(Gains) Losses on disposal of property, plant and equipment and investments, net |
|
|
|
(1,732 |
) |
372 |
|
Allowance for doubtful accounts |
|
|
|
18,432 |
|
9,536 |
|
Provision for tax, labor and civil claims |
|
|
|
73,998 |
|
76,929 |
|
Interest income on trading investments |
|
20 |
|
(59,016 |
) |
(42,629 |
) |
Interest expense on loans |
|
20 |
|
318,929 |
|
250,066 |
|
Interest on loans with related parties |
|
15 |
|
(649 |
) |
(1,757 |
) |
Provision (Reversal) for net realizable value adjustment in inventory |
|
|
|
1,110 |
|
1,880 |
|
|
|
|
|
1,241,397 |
|
1,302,776 |
|
Changes in assets and liabilities |
|
|
|
|
|
|
|
Increase in trade accounts receivable |
|
|
|
(228,810 |
) |
(546,540 |
) |
Increase in inventories |
|
|
|
(318,686 |
) |
(452,956 |
) |
Increase in trade accounts payable |
|
|
|
33,721 |
|
20,754 |
|
Increase in other receivables |
|
|
|
(96,355 |
) |
(222,337 |
) |
Increase (Decrease) in other payables |
|
|
|
76,691 |
|
(124,658 |
) |
Dividends from associates and jointly-controlled entities |
|
|
|
|
|
12,254 |
|
Purchases of trading securities |
|
|
|
(255,290 |
) |
(761,128 |
) |
Proceeds from maturities and sales of trading securities |
|
|
|
973,361 |
|
1,271,185 |
|
Cash provided by operating activities |
|
|
|
1,426,029 |
|
499,350 |
|
|
|
|
|
|
|
|
|
Interest paid on loans and financing |
|
|
|
(194,720 |
) |
(241,842 |
) |
Income and social contribution taxes paid |
|
|
|
(287,306 |
) |
(90,534 |
) |
Net cash provided by operating activities |
|
|
|
944,003 |
|
166,974 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
Additions to property, plant and equipment |
|
9 |
|
(612,344 |
) |
(676,755 |
) |
Proceeds from sales of property, plant and equipment, investments and other intangibles |
|
|
|
3,974 |
|
3,461 |
|
Additions to other intangibles |
|
|
|
(23,649 |
) |
(49,813 |
) |
Capital increase in jointly-controlled entity |
|
|
|
(40,524 |
) |
|
|
Net cash used in investing activities |
|
|
|
(672,543 |
) |
(723,107 |
) |
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
Purchase of treasury shares |
|
|
|
(161,278 |
) |
|
|
Proceeds from exercise of shares |
|
|
|
|
|
3,220 |
|
Dividends and interest on capital paid |
|
|
|
(120,888 |
) |
(124,368 |
) |
Proceeds from loans and financing |
|
|
|
913,026 |
|
747,190 |
|
Repayment of loans and financing |
|
|
|
(670,699 |
) |
(227,433 |
) |
Intercompany loans, net |
|
|
|
(39,851 |
) |
(547 |
) |
Net cash (used) provided in financing activities |
|
|
|
(79,690 |
) |
398,062 |
|
|
|
|
|
|
|
|
|
Exchange variation on cash and cash equivalents |
|
|
|
354,423 |
|
(70,254 |
) |
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
|
|
546,193 |
|
(228,325 |
) |
Cash and cash equivalents at beginning of period |
|
|
|
3,049,971 |
|
2,099,224 |
|
Cash and cash equivalents at end of period |
|
|
|
3,596,164 |
|
1,870,899 |
|
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 March 31, 2015
(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) is a leading producer of long steel in the Americas and one of the largest suppliers of special steel in the world. In Brazil, also produces flat steel and iron ore, activities which expanded the product mix and made its operations even more competitive. Gerdau has industrial operations in 14 countries in the Americas, Europe and Asia, which together represent installed capacity of over 25 million tons of steel per year. It is the largest recycler in Latin America and around the world it transforms each year millions of tons of scrap into steel, reinforcing its commitment to sustainable development of the regions where it operates. With more than 120 thousand shareholders, Gerdau is listed on the São Paulo, New York and Madrid stock exchanges.
The Condensed Consolidated Interim Financial Statements of the Company were approved by the Disclosure Committee on May 5, 2015.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
2.1 - Basis of Presentation
The Companys Condensed Consolidated Interim Financial Statements for the three-month period ended March 31, 2015 have been prepared in accordance with International Accounting Standard (IAS) Nº 34, which establishes 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, 2014, 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, 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, 2014, 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 mandatory adoption for the period beginning on January 1, 2015 and/or after.
The following IFRS standards were not yet effective until March 31, 2015:
· IFRS 9 - Financial Instruments. Has the objective to replace the standard IAS 39 Financial Instruments: Recognition and Measurement, in three stages. This standard is the first part of stage 1 of the 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, 2018.
· Amendments to IFRS 9 and IFRS 7 - Mandatory Effective Date and Transition Disclosures. The amendment of IFRS 9 deals with the extension of the adoption date. 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. This revised standards are effective for annual reporting periods beginning on or after January 1, 2018.
· IFRS 14 Regulatory Deferral Accounts. Determine the recognition of regulatory assets and liabilities at the first adoption of the IFRS. This standard is effective for annual periods beginning on or after January 1, 2016. The Company does not expect any impact from adopting this revised standard on its Consolidated Financial Statements.
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
· Amendments to IFRS 11 Joint Arrangements. The amendment of IFRS 11 seek to provide guidance on the accounting for acquisitions of interests in joint operations in which the activity constitutes a business, as defined in IFRS 3. The revised standard is effective for years beginning on or after January 1, 2016. The Company does not expect any impact from adopting this revised standard on its Consolidated Financial Statements.
· Amendments to IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortization. The amendment of IAS 16 and IAS 38 seek to clarify the depreciation and amortization methods, aligned with the concept of expected future economic benefits from the use of the asset over its economic useful life. These revised standards are effective for years beginning on or after January 1, 2016. The Company does not expect any impact from adopting this revised standard on its Consolidated Financial Statements.
· IFRS 15 - Revenue from Contracts with Customers. The objective of IFRS 15 is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. This standard is effective for years beginning on or after January 1, 2017. The Company is assessing the potential impacts from the adoption of this standard on the Companys Financial Statements.
· Amendments to IAS 16 and IAS 41- Agriculture: Bearer Plants. The amendment of IAS 16 and IAS 41 has the objective to include in IAS 16 the concept of bearer plants and determine their recognition as fixed assets. These revised standards are effective for years beginning on or after January 1, 2016. The Company does not expect any impact from adopting this revised standard on its Consolidated Financial Statements.
· IFRS 9 - Financial Instruments. Has the objective of replacing the standard IAS 39 and addresses some application questions and introduced a fair value through other comprehensive income measurement category for particular simple debt instruments. Also, the IASB added to IFRS 9 the impairment requirements relating to the accounting for an entitys expected credit losses on its financial assets and commitments to extend credit. This standard is effective for annual reporting periods beginning on or after January 1, 2018. The Company is assessing the potential impacts from the adoption of this standard on the Companys Financial Statements.
· Amendments to IFRS 10 and IAS 28 - Sale or Contribution of Assets between and Investor and its Associate or Joint Venture. Has the objective to establish accounting treatment for transactions with assets between an investor and associate or jointly controlled entity. These revised standards are effective for annual periods beginning on or after January 1, 2016. The Company is assessing the potential impacts from the adoption of this standard on the Companys Financial Statements.
· Amendments to IFRS 5, IFRS 7, IAS 19 and IAS 34 - Annual Improvements to IFRSs. These revised standards are effective for years beginning on or after January 1, 2016. The Company is assessing the potential impacts from the adoption of this standard on the Companys Financial Statements.
· Amendments to IAS 1 Disclosure Initiative. Provides guidance related to changes in the set of financial statements of an entity. This revised standard is effective for years beginning on or after January 1, 2016. The Company is assessing the potential impacts from the adoption of this standard on the Companys Financial Statements.
· Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception. Provides disclosure requirements of financial statements for investment entities. These revised standards are effective for annual periods beginning on or after January 1, 2016. The Company does not expect any impact from adopting this revised standard 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 on March 31, 2015, compared to those existing on December 31, 2014.
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
3.2 - Jointly-Controlled Entities
The Company did not have material changes of participation in jointly-controlled entities for the period ended on March 31, 2015, compared to those existing on December 31, 2014.
3.3 Associate companies
The Company did not have material changes in investments in associated companies for the period ended on March 31, 2015, compared to those existing on December 31, 2014.
3.4 Total cash paid for business combinations and interest increases in already controlled subsidiaries
There were no amounts paid in business combinations for the periods ended March 31, 2015 and March 31, 2014.
NOTE 4 CASH AND CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS
Cash and cash equivalents
|
|
March 31, 2015 |
|
December 31, 2014 |
|
Cash |
|
7,876 |
|
7,155 |
|
Banks and immediately available investments |
|
3,588,288 |
|
3,042,816 |
|
Cash and cash equivalents |
|
3,596,164 |
|
3,049,971 |
|
Short term investments
|
|
March 31, 2015 |
|
December 31, 2014 |
|
Held for trading |
|
2,251,062 |
|
2,798,834 |
|
Short-term investments |
|
2,251,062 |
|
2,798,834 |
|
Held for Trading
Held for trading securities include Bank Deposit Certificates and marketable securities investments, which are stated at their fair value. Income generated by these investments is recorded as financial income.
NOTE 5 ACCOUNTS RECEIVABLE
|
|
March 31, 2015 |
|
December 31, 2014 |
|
Trade accounts receivable - in Brazil |
|
1,795,261 |
|
1,513,449 |
|
Trade accounts receivable - exports from Brazil |
|
203,189 |
|
247,772 |
|
Trade accounts receivable - foreign subsidiaries |
|
3,401,261 |
|
2,776,269 |
|
(-) Allowance for doubtful accounts |
|
(127,779 |
) |
(98,814 |
) |
|
|
5,271,932 |
|
4,438,676 |
|
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
NOTE 6 - INVENTORIES
|
|
March 31, 2015 |
|
December 31, 2014 |
|
Finished products |
|
4,836,011 |
|
4,039,615 |
|
Work in progress |
|
2,062,438 |
|
1,799,380 |
|
Raw materials |
|
1,790,119 |
|
1,873,287 |
|
Storeroom supplies |
|
746,268 |
|
656,459 |
|
Advances to suppliers |
|
261,112 |
|
285,146 |
|
Imports in transit |
|
569,097 |
|
279,364 |
|
(-) Allowance for adjustments to net realizable value |
|
(74,845 |
) |
(66,363 |
) |
|
|
10,190,200 |
|
8,866,888 |
|
The allowance for adjustment to net realizable value of inventories, on which the provision and reversal of provision are registered with impact on cost of sales, is as follows:
Balance as of January 1, 2014 |
|
(73,276 |
) |
Provision for adjustments to net realizable value |
|
(63,440 |
) |
Reversal of adjustments to net realizable value |
|
69,502 |
|
Exchange rate variation |
|
851 |
|
Balance as of December 31, 2014 |
|
(66,363 |
) |
Provision for adjustments to net realizable value |
|
(5,139 |
) |
Reversal of adjustments to net realizable value |
|
4,029 |
|
Exchange rate variation |
|
(7,372 |
) |
Balance as of March 31, 2015 |
|
(74,845 |
) |
NOTE 7 INCOME AND SOCIAL CONTRIBUTION TAXES
In Brazil, income taxes include federal income tax (IR) and social contribution (CS), which represents an additional federal income tax. The statutory rates for income tax and social contribution are 25% and 9%, respectively, and are applicable for the periods ended March 31, 2015 and 2014. The foreign subsidiaries of the Company are subject to taxation at rates ranging between 21% and 38.5%. The differences between the Brazilian tax rates and the rates of other countries are presented under Difference in tax rates in foreign companies in the reconciliation of income tax and social contribution below.
a) Reconciliations of income and social contribution taxes at statutory rates to amounts presented in the Statement of Income are as follows:
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
|
|
For the three-month period ended |
|
|
|
March 31, 2015 |
|
March 31, 2014 |
|
Income before income taxes |
|
(413,325 |
) |
552,712 |
|
Statutory tax rates |
|
34 |
% |
34 |
% |
Income and social contribution taxes at statutory rates |
|
140,531 |
|
(187,922 |
) |
Tax adjustment with respect to: |
|
|
|
|
|
- Difference in tax rates in foreign companies |
|
426,812 |
|
(27,611 |
) |
- Equity in earnings of unconsolidated companies |
|
2,222 |
|
9,055 |
|
- Interest on equity |
|
355 |
|
2,671 |
|
- Tax credits and incentives |
|
3,364 |
|
9,638 |
|
- Tax deductible goodwill recorded in statutory books |
|
89,707 |
|
89,707 |
|
- Other permanent differences, net |
|
17,695 |
|
(8,159 |
) |
Income and social contribution taxes |
|
680,686 |
|
(112,621 |
) |
Current |
|
(45,385 |
) |
(105,563 |
) |
Deferred |
|
726,071 |
|
(7,058 |
) |
b) Tax Assets not booked:
The Company has not recorded a portion of tax assets arising from its operations in Brazil of R$ 312,917 (R$ 300,964 as of December 31, 2014), and negative basis of social contribution in subsidiaries, which do not have an expiration date. The subsidiaries in North America had R$ 379,362 (R$ 232,213 as of December 31, 2014) of tax credits on capital losses which deferred tax assets have not been booked and which expire in 2029 and also several tax losses of state credits in the amount of R$ 686,332 (R$ 496,359 as of December 31, 2014), which expire at various dates between 2015 and 2035.
NOTE 8 INVESTMENTS
|
|
Joint Ventures |
|
Associate companies |
|
|
|
|
|
Joint Ventures North America |
|
Gerdau Corsa S.A.P.I. de C.V. |
|
Gerdau Metaldom Corp. |
|
Dona Francisca Energética S.A. |
|
Armacero Ind. Com. Ltda. |
|
Grupo Multisteel Business Holdings Corp. |
|
Corsa Controladora S.A. de C.V. |
|
Corporación Centro Americana del Acero, S.A. |
|
Others |
|
Total |
|
Balance as of January 01, 2014 |
|
326,764 |
|
129,391 |
|
|
|
132,917 |
|
26,120 |
|
286,768 |
|
296,203 |
|
390,578 |
|
1,290 |
|
1,590,031 |
|
Equity in earnings |
|
71,518 |
|
(11,507 |
) |
7,389 |
|
23,765 |
|
(5,062 |
) |
17,923 |
|
1,029 |
|
(3,180 |
) |
|
|
101,875 |
|
Cumulative Translation Adjustment |
|
(8,405 |
) |
(7,954 |
) |
30,942 |
|
|
|
(807 |
) |
15,502 |
|
1,177 |
|
50,269 |
|
291 |
|
81,015 |
|
Capital increase |
|
|
|
|
|
37,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
37,678 |
|
Mergers |
|
|
|
|
|
288,272 |
|
|
|
|
|
(288,272 |
) |
|
|
|
|
|
|
|
|
Impairment of assets |
|
|
|
|
|
|
|
|
|
|
|
(31,921 |
) |
|
|
|
|
|
|
(31,921 |
) |
Disposal of investment |
|
(288,695 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(288,695 |
) |
Dividends/Interest on equity |
|
(61,030 |
) |
|
|
|
|
(32,471 |
) |
|
|
|
|
|
|
(2,099 |
) |
|
|
(95,600 |
) |
Balance as of December 31, 2014 |
|
40,152 |
|
109,930 |
|
364,281 |
|
124,211 |
|
20,251 |
|
|
|
298,409 |
|
435,568 |
|
1,581 |
|
1,394,383 |
|
Equity in earnings |
|
2,553 |
|
(5,173 |
) |
4,257 |
|
5,007 |
|
(1,273 |
) |
|
|
2,551 |
|
(1,387 |
) |
|
|
6,535 |
|
Cumulative Translation Adjustment |
|
4,724 |
|
17,633 |
|
75,145 |
|
|
|
3,314 |
|
|
|
45,691 |
|
79,654 |
|
107 |
|
226,268 |
|
Capital increase |
|
|
|
40,524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,524 |
|
Balance as of March 31, 2015 |
|
47,429 |
|
162,914 |
|
443,683 |
|
129,218 |
|
22,292 |
|
|
|
346,651 |
|
513,835 |
|
1,688 |
|
1,667,710 |
|
Goodwill
|
|
March 31, 2015 |
|
December 31, 2014 |
|
Dona Francisca Energética S.A. |
|
17,071 |
|
17,071 |
|
Corsa Controladora S.A. de C.V. |
|
219,120 |
|
187,981 |
|
Corporación Centroamericana del Acero, S.A. |
|
315,657 |
|
261,362 |
|
|
|
551,848 |
|
466,414 |
|
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
NOTE 9 PROPERTY, PLANT AND EQUIPMENT
a) Summary of changes in property, plant and equipment during the three-month period ended on March 31, 2015, acquisitions amounted to R$ 612,344 (R$ 676,755 as of March 31, 2014), and disposals amounted to R$ 2,243 (R$ 3,833 as of March 31, 2014).
b) Capitalized borrowing costs borrowing costs capitalized during the three-month period ended on September 30, 2014 amounted to R$ 38,058 (R$ 30,664 as of March 31, 2014).
c) Guarantees property, plant and equipment have been pledged as collateral for loans and financing in the amount of R$ 876,358 as of March 31, 2015 (R$ 862,244 as of December 31, 2014).
NOTE 10 GOODWILL
|
|
Goodwill |
|
Accumulated impairment losses |
|
Goodwill after Impairment losses |
|
Balance as of January 1, 2014 |
|
11,617,330 |
|
(264,285 |
) |
11,353,045 |
|
(+/-) Foreign exchange effect |
|
1,217,668 |
|
(14,309 |
) |
1,203,359 |
|
Balance as of December 31, 2014 |
|
12,834,998 |
|
(278,594 |
) |
12,556,404 |
|
(+/-) Foreign exchange effect |
|
2,452,184 |
|
(38,663 |
) |
2,413,521 |
|
Balance as of March 31, 2015 |
|
15,287,182 |
|
(317,257 |
) |
14,969,925 |
|
|
|
March 31, 2015 |
|
December 31, 2014 |
|
Brazil |
|
589,538 |
|
553,607 |
|
Special Steels |
|
3,382,712 |
|
2,852,631 |
|
Latin America |
|
802,167 |
|
701,434 |
|
North America |
|
10,195,508 |
|
8,448,732 |
|
|
|
14,969,925 |
|
12,556,404 |
|
NOTE 11 LOANS AND FINANCING
Loans and financing are as follows:
|
|
Annual interest rate (*) |
|
March 31, 2015 |
|
December 31, 2014 |
|
Short term financing in Brazilian reais |
|
|
|
|
|
|
|
Working capital |
|
11.78 |
% |
692,443 |
|
74,598 |
|
Financing of investment |
|
8.60 |
% |
19,884 |
|
4,217 |
|
Short term financing in foreign currency |
|
|
|
|
|
|
|
Working capital (US$) |
|
2.08 |
% |
434,098 |
|
606,979 |
|
Working capital () |
|
1.37 |
% |
165,994 |
|
130,975 |
|
Working capital (Cop$) |
|
6.88 |
% |
170,411 |
|
159,698 |
|
Working capital (PA$) |
|
17.74 |
% |
48,963 |
|
29,829 |
|
Working capital (Uyu$) |
|
2.00 |
% |
17 |
|
|
|
Working capital (Mxn$) |
|
4.50 |
% |
63 |
|
40 |
|
Financing of property, plant and equipment and others (US$) |
|
6.82 |
% |
166,706 |
|
1,648 |
|
Financing of property, plant and equipment and others (INR) |
|
9.05 |
% |
84,873 |
|
150,029 |
|
Financing of property, plant and equipment and others (Mxn$) |
|
4.50 |
% |
212,478 |
|
198,437 |
|
|
|
|
|
1,995,930 |
|
1,356,450 |
|
Plus current portion of long-term financing |
|
|
|
369,872 |
|
681,419 |
|
Short term financing plus current portion of long-term financing |
|
|
|
2,365,802 |
|
2,037,869 |
|
|
|
|
|
|
|
|
|
Long-term financing in Brazilian reais |
|
|
|
|
|
|
|
Working capital |
|
12.75 |
% |
2,557,231 |
|
2,101,327 |
|
Financing of property, plant and equipment |
|
6.03 |
% |
396,584 |
|
1,241,207 |
|
Financing of investment |
|
8.37 |
% |
67,691 |
|
60,011 |
|
Long-term financing in foreign currency |
|
|
|
|
|
|
|
Working capital (US$) |
|
1.83 |
% |
413,214 |
|
645,330 |
|
Working capital () |
|
1.37 |
% |
115,809 |
|
38,455 |
|
Working capital (COP$) |
|
6.88 |
% |
185,797 |
|
166,848 |
|
Working capital (PA$) |
|
17.74 |
% |
203,946 |
|
106,105 |
|
Working capital (Uyu$) |
|
2.00 |
% |
22,369 |
|
|
|
Working capital (INR) |
|
9.05 |
% |
157,166 |
|
2,252 |
|
Ten/Thirty Years Bonds (US$) |
|
6.38 |
% |
15,789,711 |
|
13,059,526 |
|
Financing of investment (US$) |
|
5.11 |
% |
225,607 |
|
184,166 |
|
Financing of property, plant and equipment and others (INR) |
|
9.05 |
% |
16,784 |
|
13,800 |
|
Financing of property, plant and equipment and others (US$) |
|
6.32 |
% |
746,882 |
|
210,972 |
|
Financing of property, plant and equipment and others (Mxn$) |
|
4.50 |
% |
58,912 |
|
|
|
|
|
|
|
20,957,703 |
|
17,829,999 |
|
Less: current portion |
|
|
|
(369,872 |
) |
(681,419 |
) |
Long term financing minus current portion |
|
|
|
20,587,831 |
|
17,148,580 |
|
Total financing |
|
|
|
22,953,633 |
|
19,186,449 |
|
|
|
|
|
|
|
|
|
Principal amount of the financing |
|
|
|
22,553,287 |
|
18,843,000 |
|
Interest amount of the financing |
|
|
|
400,346 |
|
343,449 |
|
Total financing |
|
|
|
22,953,633 |
|
19,186,449 |
|
(*) Weighted average effective interest costs on March 31, 2015.
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
Loans and financing denominated in Brazilian Reais are indexed at fixed rates or to the following indicators: 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), CDI (Interbank Deposit Certificate), the IGP-M (general market price index, a Brazilian inflation rate measured by Fundação Getúlio Vargas) and IPCA (Extended National Consumer Price Index).
Summary of loans and financing by currency:
|
|
March 31, 2015 |
|
December 31, 2014 |
|
Brazilian Real (R$) |
|
3,733,833 |
|
3,481,360 |
|
U.S. Dollar (US$) |
|
17,776,218 |
|
14,708,621 |
|
Euro () |
|
281,803 |
|
169,430 |
|
Colombian Peso (Cop$) |
|
356,208 |
|
326,546 |
|
Argentine Peso (PA$) |
|
252,909 |
|
135,934 |
|
Uruguayan Peso (Uyu$) |
|
22,386 |
|
|
|
Mexican Peso (Mxn$) |
|
271,453 |
|
198,477 |
|
Indian Rupee (INR) |
|
258,823 |
|
166,081 |
|
|
|
22,953,633 |
|
19,186,449 |
|
Timeline of installment payments of long-term loans and financing is as follows:
|
|
March 31, 2015 |
|
December 31, 2014 |
|
2016* |
|
733,823 |
|
893,003 |
|
2017 |
|
3,987,388 |
|
3,151,662 |
|
2018 |
|
816,755 |
|
754,884 |
|
2019 |
|
858,540 |
|
671,039 |
|
2020 |
|
5,115,931 |
|
3,498,457 |
|
2021 on |
|
9,075,394 |
|
8,179,535 |
|
|
|
20,587,831 |
|
17,148,580 |
|
(*) For the period as of March 31, 2015, the amounts represents payments from April 01, 2016 to December 31, 2016.
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
a) Main funding in the period ended March 31, 2015
In January and February 2015, the Company obtained a total amount of R$ 350 million in a working capital credit line with Santander Bank with maturity in 12 months.
b) Covenants
Certain debt agreements contain financial covenants as a tool used by creditors to monitor the Companys financial position. The following is a brief description of the financial covenants required under the Companys debt agreements.
I) Net Interest Coverage Ratio - measures the ability to pay net financial expenses in relation to EBITDA, as defined in the bank agreements (Earnings before Interest, Taxes, Depreciation, Amortization, Impairment). The contractual ratio indicates that the EBITDA for the last 12 months should represent at least 3 times the net financial expense of the same period for Gerdau S.A.. On March 31, 2015, the current ratio was 4.3 times.
II) Net Leverage Ratio - measures the level of net debt (considers the outstanding principal of the debt, less cash, cash equivalents and short-term investments) to EBITDA, as defined in the bank agreements. The contractual ratio indicates that the net debt should not surpass 4 times the EBITDA for the last 12 months. As of March 31, 2015, the current ratio was 3.6 times.
III) Current Ratio measures the companys ability in fulfilling its short term obligations. The contractual terms indicate that the ratio of Current Assets divided by Current Liabilities must be greater than 0.8 times. As of March 31, 2015 the current ratio was 2.8 times.
Based on the Companys internal forecasts, the Company does not expect to be in breach of any of the financial covenants over the next twelve months. Nevertheless, this forecast can be affected positive or negatively by global economics and the steel market.
c) Guarantees
All loans contracted under the FINAME/BNDES program, totaling R$ 97.9 million on the balance sheet date, are guaranteed by the assets being financed.
Certain other loans are guaranteed by the controlling shareholders, for which the Company pays a fee of 0.95% per year, of the amounts guaranteed.
d) Credit Lines
In June 2009, certain subsidiaries of the Company (Gerdau Açominas S.A., Gerdau Aços Longos S.A., Gerdau Aços Especiais S.A. and the former subsidiary Aços Villares S.A.) obtained a pre-approved credit line with BNDES in the total amount of R$ 1.5 billion to be used for the revamp and modernization of several areas, an increase in the production capacity of certain product lines, investment in logistics and energy generation, and also environmental and sustainability projects. The funds are made available at the time each subsidiary starts its specific investment and presents to BNDES the evidence of the investment made. The interest rate for this credit line is determined at the time of each disbursement, and is composed by indexes linked to of TJLP + 2.16% p.a. As of March 31, 2015, the outstanding balance of this credit facility was R$ 916.2 million.
In December, 2013, the Company concluded the renewal of the Senior Unsecured Global Working Capital Credit Agreement, which is a US$ 1.5 billion revolving credit line with the purpose of providing liquidity to its subsidiaries. The line is divided into two tranches, US$ 500 million destined for Gerdaus North American subsidiaries borrowing needs and US$ 1 billion for Gerdaus Latin American and Spanish subsidiaries borrowing needs. The following companies guarantee this agreement: Gerdau S.A., Gerdau Açominas S.A., Gerdau Aços Longos S.A. and Gerdau Aços Especiais S.A. This transaction has a 3 year term. As of March 31, 2015, the outstanding loans under the line totaled US$ 305.9 million (R$ 981.3 million as of March 31, 2015) and are classified as working capital (US$).
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
NOTE 12 DEBENTURES
|
|
|
|
Quantity as of March 31, 2015 |
|
|
|
|
|
|
|
Issuance |
|
General Meeting |
|
Issued |
|
Held in treasury |
|
Maturity |
|
March 31, 2015 |
|
December 31, 2014 |
|
3rd- A and B |
|
May 27,1982 |
|
144,000 |
|
125,907 |
|
06/01/2021 |
|
84,741 |
|
81,834 |
|
7th |
|
July 14, 1982 |
|
68,400 |
|
60,246 |
|
07/01/2022 |
|
49,313 |
|
51,787 |
|
8th |
|
November 11, 1982 |
|
179,964 |
|
152,122 |
|
05/02/2023 |
|
106,057 |
|
107,144 |
|
9th |
|
June 10, 1983 |
|
125,640 |
|
123,258 |
|
09/01/2024 |
|
14,406 |
|
14,154 |
|
11th - A and B |
|
June 29, 1990 |
|
150,000 |
|
140,314 |
|
06/01/2020 |
|
55,531 |
|
55,863 |
|
14th |
|
August 26, 2014 |
|
20,000 |
|
19,652 |
|
08/30/2024 |
|
18,547 |
|
24,254 |
|
Total Consolidated |
|
|
|
|
|
|
|
|
|
328,595 |
|
335,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current |
|
|
|
|
|
|
|
|
|
328,595 |
|
335,036 |
|
Maturities of long-term amounts are as follows:
|
|
March 31, 2015 |
|
December 31, 2014 |
|
2020 on |
|
328,595 |
|
335,036 |
|
|
|
328,595 |
|
335,036 |
|
The debentures are denominated in Brazilian Reais, are nonconvertible, and pay variable interest as a percentage of the CDI Interbank Deposit Certificate. The average notional annual interest rate was 11.26% and 10.81% for the three month period ended on March 31, 2015 and year ended on December 31, 2014, respectively.
NOTE 13 - FINANCIAL INSTRUMENTS
a) General considerations - Gerdau S.A. and its subsidiaries enter into transactions with financial instruments whose risks are managed by means of strategies and exposure limit controls. All financial instruments are recorded in the accounting books and presented as cash and cash equivalents, short-term investments, trade accounts receivable, trade accounts payable, Loans and financing, debentures, related-party transactions, unrealized gains on derivatives, unrealized losses on derivatives, other current assets, other non-current assets, other current liabilities and other non-current liabilities.
The Company has derivatives and non-derivative instruments, such as the hedge for some operations under hedge accounting. These operations are non-speculative in nature and are intended to protect the company against exchange rate fluctuations on foreign currency loans and against interest rate fluctuations.
b) Market value the market value of the aforementioned financial instruments is as follows:
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
|
|
March 31, 2015 |
|
December 31, 2014 |
|
|
|
Book |
|
Fair |
|
Book |
|
Fair |
|
|
|
value |
|
value |
|
value |
|
value |
|
Assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
3,596,164 |
|
3,596,164 |
|
3,049,971 |
|
3,049,971 |
|
Short-term investments |
|
2,251,062 |
|
2,251,062 |
|
2,798,834 |
|
2,798,834 |
|
Trade accounts receivable |
|
5,271,932 |
|
5,271,932 |
|
4,438,676 |
|
4,438,676 |
|
Related parties |
|
121,420 |
|
121,420 |
|
80,920 |
|
80,920 |
|
Unrealized gains on derivatives |
|
64,358 |
|
64,358 |
|
41,751 |
|
41,751 |
|
Other current assets |
|
388,710 |
|
388,710 |
|
331,352 |
|
331,352 |
|
Other non-current assets |
|
393,325 |
|
393,325 |
|
375,732 |
|
375,732 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
Trade accounts payable |
|
3,745,251 |
|
3,745,251 |
|
3,236,356 |
|
3,236,356 |
|
Loans and Financing |
|
22,953,633 |
|
23,121,725 |
|
19,186,449 |
|
19,533,676 |
|
Debentures |
|
328,595 |
|
328,595 |
|
335,036 |
|
335,036 |
|
Other current liabilities |
|
713,278 |
|
713,278 |
|
858,901 |
|
858,901 |
|
Other non-current liabilities |
|
904,352 |
|
904,352 |
|
635,457 |
|
635,457 |
|
Unrealized losses on derivatives |
|
7,376 |
|
7,376 |
|
8,999 |
|
8,999 |
|
The fair values of Loans and Financing are based on market premises, which may take into consideration discounted cash flows using equivalent market rates and credit rating. All other financial instruments, which are recognized in the Consolidated Financial Statements at their carrying amount, are substantially similar to those that would be obtained if they were traded in the market. However, because there is no active market for these instruments, differences could exist if they were settled in advance.
c) Risk factors that could affect the Companys and its subsidiaries businesses:
Price risk of commodities: this risk is related to the possibility of changes in prices of the products sold by the Company or in prices of raw materials and other inputs used in the productive process. Since the Company operates in a commodity market, net sales and cost of sales may be affected by changes in the international prices of their products or materials. In order to minimize this risk, the Company constantly monitors the price variations in the domestic and international markets.
Interest rate risk: this risk arises from the effects of the fluctuations in interest rates applied to the Companys financial liabilities or assets and future cash flows and income. The Company evaluates its exposure to these risks: (i) comparing financial assets and liabilities denominated at fixed and floating interest rates and (ii) monitoring the variations of interest rates like Libor and CDI. Accordingly, the Company may enter into interest rate swaps in order to reduce this risk.
Exchange rate risk: this risk is related to the possibility of fluctuations in exchange rates affecting the amounts of financial assets or liabilities or of future cash flows and income. The Company assesses its exposure to the exchange rate by measuring the difference between the amount of its assets and liabilities in foreign currency. The Company believes that the accounts receivables originated from exports, its cash and cash equivalents denominated in foreign currencies and its investments abroad are more than equivalent to its liabilities denominated in foreign currency. Since the management of these exposures occurs at each operation level, if there is a mismatch between assets and liabilities denominated in foreign currency, the Company may employ derivative financial instruments in order to mitigate the effect of exchange rate fluctuations.
Credit risk: this risk arises from the possibility of the subsidiaries not receiving amounts arising from sales to customers or investments made with financial institutions. In order to minimize this risk, the subsidiaries adopt the procedure of analyzing in details of the financial position of their customers, establishing a credit limit and constantly monitoring their balances. Regarding cash investments, the Company invests solely in financial institutions with low credit risk, as assessed by rating agencies. In addition, each financial institution has a maximum limit for investment, determined by the Companys Credit Committee.
Capital management risk: this risk comes from the Companys choice in adopting a financing structure for its operations. The Company manages its capital structure, which consists of a ratio between the financial debts and its own capital
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
(Equity) based on internal policies and benchmarks. The KPIs (Key Performance Indicators) related to the objective Capital Structure Management are: WACC (Weighted Average Cost of Capital), Net Debt/ EBITDA, Net Financial Expenses Coverage Ratio, and Indebtedness/Equity Ratio. The Net Debt is composed of the outstanding principal of the debt, less cash, cash equivalents and short-term investments (notes 4, 11 and 12). The total capitalization is formed by Total Debt (composed by the outstanding principal of the debt) and equity (note 16). The Company may change its capital structure, as economic and financial conditions to optimize its financial leverage and its debt management. At the same time, the Company seeks to improve its ROCE (Return on Capital Employed) by implementing a working capital management and an efficient program of capital expenditures. In the long-term, the Company seeks to remain between the parameters below, admitting specific short-term variations:
WACC |
|
between 10% to 13% a year |
|
Net debt/EBITDA |
|
less than or equal to 2.5 times |
|
Net Financial Expenses Coverage Ratio |
|
greater than 5.5 times |
|
Debt/Equity Ratio |
|
less than or equal to 60% |
|
These key indicators are used to monitor objectives described above and may not necessarily be used as indicators for other purposes, such as impairment tests.
Liquidity risk: the Companys management policy of indebtedness and cash on hand is based on using the committed lines and the currently available credit lines with or without a guarantee in export receivables for maintaining adequate levels of short, medium, and long-term liquidity. The maturity of long-term loans, financing, and debentures are presented in Notes 11 and 12, respectively.
Sensitivity analysis:
The Company performed a sensitivity analysis, which can be summarized as follows:
|
|
Impacts on Statements of Income |
|
Assumptions |
|
Percentage of change |
|
March 31, 2015 |
|
March 31, 2014 |
|
Foreign currency sensitivity analysis |
|
5 |
% |
225,346 |
|
162,266 |
|
Interest rate changes sensitivity analysis |
|
10 |
bps |
92,852 |
|
59,893 |
|
Sensitivity analysis of changes in prices of products sold |
|
1 |
% |
104,474 |
|
105,538 |
|
Sensitivity analysis of changes in raw material and commodity prices |
|
1 |
% |
60,441 |
|
65,042 |
|
Currency Swaps |
|
10 |
bps |
10,738 |
|
9,032 |
|
Sensitivity analysis of NDFs (Non Deliverable Forwards) |
|
5 |
% |
9,052 |
|
6,180 |
|
Foreign currency sensitivity analysis: As of March 31, 2015, the Company is mainly exposed to variations between the Brazilian real and US Dollar. The sensitivity analysis made by the Company considers the effects of an increase or a reduction of 5% between the Brazilian real and the US Dollar on debts that do not have hedge operations. The impact calculated considering such variation in the foreign exchange rate totals R$ 225,346 and R$ 142,245 after the effects of changes in the net investment hedge described in note 13.f, as of March 31, 2015 (R$ 162,266 and R$ 72,148 of March 31, 2014, respectively) and represents income if appreciation of the Brazilian real against the US Dollar occurs or an expense in the case of a depreciation of the Brazilian real against the US Dollar, however due to the investment hedge these effects would be mitigated when considered the income tax and exchange rate variance accounts.
The net amounts of trade accounts receivable and trade accounts payable denominated in foreign currency do not represent any relevant risk in the case of any fluctuation of exchange rates.
Interest rate sensitivity analysis: The interest rate sensitivity analysis made by the Company considers the effects of an increase or reduction of 10 basis point (bps) on the average interest rate applicable to the floating part of its debt. The impact calculated, considering this variation in the interest rate totals R$ 92,852 as of March 31, 2015 (R$ 59,893 as of March 31, 2014) and would impact the Financial expenses account in the Consolidated Statements of Income. The specific interest rates to which the Company is exposed are related to the loans, financing, and debentures presented in Notes 11 and 12, and are mainly comprised by Libor and CDI Interbank Deposit Certificate.
Sensitivity analysis of changes in sales price of products and price of raw materials and other inputs used in production: the Company is exposed to changes in the price of its products. This exposure is associated with the
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
fluctuation of the sale price of the Companys products and the price of raw materials and other inputs used in the production process, mainly for operating in a commodity market. The sensitivity analysis made by the Company considers the effects of an increase or of a reduction of 1% on both prices. The impact measured considering this variation in the price of products sold, considering the net income and costs of the three month period ended on March 31, 2015, totals R$ 104,474 (R$ 105,538 as of March 31, 2014) and the variation in the price of raw materials and other inputs totals R$ 60,441 as of March 31, 2015 (R$ 65,042 as of March 31, 2014). The impact in the price of products sold and raw materials would be recorded in the accounts Net Sales and Cost of Sales, respectively, in the Consolidated Statements of Income. The Company does not expect to be more vulnerable to a change in one or more specific product or raw material.
Sensitivity analysis of currency swaps: the Company has exposure to interest rate swaps for some of its loans and financing. The sensitivity analysis calculated by the Company considers the effects of either an increase or a decrease of 10 bps in the interest curve (Libor), and its impacts in the swaps mark to market. An increase of 10 bps in the interest curve represents an income of R$ 10,738 (income of R$ 9,032 as of March 31, 2014) and a decrease of 10 bps in the interest curve represents an expense in the same amounts as presented above. These effects would be recognized in the statement of comprehensive income. The interest rate swaps to which the Company is exposed to are presented in note 13.e.
Sensitivity analysis of forward contracts in US Dollar: the Company has exposure in forward contracts in US Dollar to some of its assets and liabilities. The sensitivity analysis calculated by the Company considers an effect of a 5% US Dollar depreciation or appreciation against the Colombian Peso and corresponds to the effects on the mark to market of such transactions. An increase of 5% on the US Dollar against the Colombian Peso represents a gain of R$ 9,052 as of March 31, 2015 (R$ 6,180 as of March, 31 2014) and a decrease of 5% on the US Dollar against the Colombian Peso represents a loss in the same amount presented above. The Dollar/Colombian Peso forward contracts were entered into to hedge liabilities (debt) and these effects in the mark to market would be recognized in the Consolidated Statement of Income. The forward contracts in US Dollar, in which the Company is exposed, are presented in note 13.e.
d) Financial Instruments per Category
Summary of the financial instruments per category:
March 31, 2015 Assets |
|
Loans and receivables |
|
Assets at fair value with gains and losses recognized in income |
|
Assets at fair value with gains and losses recognized in shareholders equity |
|
Total |
|
Cash and cash equivalents |
|
3,596,164 |
|
|
|
|
|
3,596,164 |
|
Short-term investments |
|
|
|
2,251,062 |
|
|
|
2,251,062 |
|
Unrealized gains on financial instruments |
|
|
|
|
|
64,358 |
|
64,358 |
|
Trade accounts receivable |
|
5,271,932 |
|
|
|
|
|
5,271,932 |
|
Related parties |
|
121,420 |
|
|
|
|
|
121,420 |
|
Other current assets |
|
388,710 |
|
|
|
|
|
388,710 |
|
Other non-current assets |
|
393,325 |
|
|
|
|
|
393,325 |
|
Total |
|
9,771,551 |
|
2,251,062 |
|
64,358 |
|
12,086,971 |
|
Financial result for the three-month period ended on March 31, 2015 |
|
241,433 |
|
94,003 |
|
|
|
335,436 |
|
Liabilities |
|
Liabilities at market value with gains and losses recognized in income |
|
Other financial liabilities at amortized cost |
|
Total |
|
Trade accounts payable |
|
|
|
3,745,251 |
|
3,745,251 |
|
Loans and Financing |
|
|
|
22,953,633 |
|
22,953,633 |
|
Debentures |
|
|
|
328,595 |
|
328,595 |
|
Related parties |
|
|
|
|
|
|
|
Other current liabilities |
|
|
|
713,278 |
|
713,278 |
|
Other non-current liabilities |
|
|
|
904,352 |
|
904,352 |
|
Unrealized losses on financial instruments |
|
7,376 |
|
|
|
7,376 |
|
Total |
|
7,376 |
|
28,645,109 |
|
28,652,485 |
|
Financial result for the three-month period ended on March 31, 2015 |
|
(1,029 |
) |
(1,232,972 |
) |
(1,234,001 |
) |
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
December 31, 2014 Assets |
|
Loans and receivables |
|
Assets at fair value with gains and losses recognized in income |
|
Assets at fair value with gains and losses recognized in shareholders equity |
|
Total |
|
Cash and cash equivalents |
|
3,049,971 |
|
|
|
|
|
3,049,971 |
|
Short-term investments |
|
|
|
2,798,834 |
|
|
|
2,798,834 |
|
Unrealized gains on financial instruments |
|
|
|
|
|
41,751 |
|
41,751 |
|
Trade accounts receivable |
|
4,438,676 |
|
|
|
|
|
4,438,676 |
|
Related parties |
|
80,920 |
|
|
|
|
|
80,920 |
|
Other current assets |
|
331,352 |
|
|
|
|
|
331,352 |
|
Other non-current assets |
|
375,732 |
|
|
|
|
|
375,732 |
|
Total |
|
8,276,651 |
|
2,798,834 |
|
41,751 |
|
11,117,236 |
|
Financial result for the three-month period ended on March 31, 2014 |
|
25,028 |
|
43,367 |
|
|
|
68,395 |
|
Liabilities |
|
Liabilities at market value with gains and losses recognized in income |
|
Other financial liabilities at amortized cost |
|
Total |
|
Trade accounts payable |
|
|
|
3,236,356 |
|
3,236,356 |
|
Loans and Financing |
|
|
|
19,186,449 |
|
19,186,449 |
|
Debentures |
|
|
|
335,036 |
|
335,036 |
|
Related parties |
|
|
|
|
|
|
|
Other current liabilities |
|
|
|
858,901 |
|
858,901 |
|
Other non-current liabilities |
|
|
|
635,457 |
|
635,457 |
|
Unrealized losses on financial instruments |
|
8,999 |
|
|
|
8,999 |
|
Total |
|
8,999 |
|
24,252,199 |
|
24,261,198 |
|
Financial result for the three-month period ended on March 31, 2014 |
|
(3,235 |
) |
(166,629 |
) |
(169,865 |
) |
As of March 31, 2015, the Company has derivative financial instruments such as currency swaps and forward contracts in US Dollar. Part of these instruments is classified as cash flow hedges and their effectiveness can be measured, having their unrealized losses and /or gains classified directly in Other Comprehensive Income. The other derivative financial instruments have their realized and unrealized losses and/or gains presented in the account Gains and losses on derivatives, net in the Consolidated Statement of Income.
e) Operations with derivative financial instruments
Risk management objectives and strategies: In order to execute its strategy of sustainable growth, the Company implements risk management strategies in order to mitigate market risks.
The objective of derivative transactions is always related to mitigating market risks as stated in our policies and guidelines. The monitoring of the effects of these transactions is performed monthly by the Cash Management and Debt Committee, which validates the mark to market of these transactions. All derivative financial instruments are recognized at fair value in the Consolidated Financial Statements of the Company.
Policy for use of derivatives: The Company is exposed to various market risks, including changes in exchange rates, commodities and interest rates. The Company uses derivatives and other financial instruments to reduce the impact of such risks on the fair value of its assets and liabilities or in future cash flows and results. The Company has established policies to evaluate the market risks and to approve the use of derivative transactions related to these risks. The Company enters into derivative financial instruments solely to manage market risks as mentioned above and never for speculative purposes. Derivative financial instruments are used only when they have a related position (asset or liability exposure) resulting from business operations, investments and financing.
Policy for determining fair value: the fair value of derivative financial instruments is determined using models and other valuation techniques, including future prices and market curves.
The derivative transactions may include: interest rate swaps, (both in the Libor dollar, as in other currencies), currency swaps and currency forward contracts.
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
Forward Contracts in US Dollar
The Company has entered into NDFs (Non Deliverable Forward) in order to mitigate the exchange variance risk on liabilities denominated in foreign currencies, mainly US dollar. The counterparties of these transactions are financial institutions with a low credit risk.
Swap Contracts
The Company entered into cross currency swap, designated as a cash flow hedge, contract whereby it receives a variable interest rate based on LIBOR in US dollars and pays a fixed interest rate based in the local currency. The counterparties to these transactions are financial institutions with low credit risk.
The derivatives instruments can be summarized and categorized as follows:
|
|
|
|
|
Notional value |
|
Amount receivable |
|
Amount payable |
|
Contracts |
|
|
|
Position |
|
March 31, 2015 |
|
December 31, 2014 |
|
March 31, 2015 |
|
December 31, 2014 |
|
March 31, 2015 |
|
December 31, 2014 |
|
Forward |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity at 2015 |
|
|
|
|
|
US$60.0 million |
|
US$80.0 million |
|
64,358 |
|
41,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swap contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity between 2017 and 2018 |
|
receivable under the swap |
|
Libor 6M +2%-2.25% |
|
US$25.0 million |
|
US$25.0 million |
|
|
|
|
|
|
|
|
|
|
|
payable under the swap |
|
10.17%-11.02% |
|
US$40.0 million |
|
US$40.0 million |
|
|
|
|
|
(7,376 |
) |
(8,999 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value of financial instruments |
|
|
|
|
|
|
|
|
|
64,358 |
|
41,751 |
|
(7,376 |
) |
(8,999 |
) |
Prospective and retrospective tests demonstrated the effectiveness of these instruments.
|
|
March 31, 2015 |
|
December 31, 2014 |
|
Unrealized gains on financial instruments |
|
|
|
|
|
Current assets |
|
64,358 |
|
41,751 |
|
|
|
64,358 |
|
41,751 |
|
Unrealized losses on financial instruments |
|
|
|
|
|
Non-current liabilities |
|
(7,376 |
) |
(8,999 |
) |
|
|
(7,376 |
) |
(8,999 |
) |
|
|
March 31, 2015 |
|
March 31, 2014 |
|
Net Income |
|
|
|
|
|
Gains on financial instruments |
|
16,666 |
|
765 |
|
Losses on financial instruments |
|
(1,029 |
) |
(3,235 |
) |
|
|
15,637 |
|
(2,470 |
) |
Other comprehensive income |
|
|
|
|
|
Gains (Loss) on financial instruments |
|
3,579 |
|
(1,341 |
) |
|
|
3,579 |
|
(1,341 |
) |
f) Net investment hedge
The Company designated as hedge of part of its net investments in subsidiaries abroad the operations of Ten/Thirty Years Bonds. As a consequence, the effect of exchange rate changes on these debts has been recognized in the Statement of Comprehensive Income.
The exchange variation generated on the operations of Ten/Thirty Years Bonds in the amount of US$ 2.7 billion (designated as hedges) is recognized in the Statement of Comprehensive Income, while the exchange rate on the portion of US$ 1.0 billion (not designated as hedges) is recognized in income. Additionally, the Company opted to designate as hedge of the net investment financing operations held by the subsidiary Gerdau Açominas SA, in the amount of US$ 0.2 billion, which were made in order to provide part of the funds to purchase these investments abroad.
Based on the standard and interpretation mentioned above, the Company has proven the effectiveness of the hedge from its designation dates and demonstrated high effectiveness of the hedge as from the debt hiring for acquisition of these companies abroad, whose effects were measured and recognized directly in the Statement of Comprehensive Income as an unrealized loss, net of taxes, in the amount R$ 1,601,878 for the three month period ended on December 31, 2014, respectively (loss of R$ 202,852 on March 31, 2014).
The objective of the hedge is to protect, during the existence of the debt, the amount of part of the Companys investment in the subsidiaries mentioned above against positive and negative oscillations in the exchange rate. This objective is consistent
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
with the Companys risk management strategy. Prospective and retrospective tests demonstrated the effectiveness of these instruments.
g) Measurement of fair value:
The IFRS defines fair value as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arms length transaction. The standard also establishes a three level hierarchy for the fair value, which prioritizes information when measuring the fair value by the company, to maximize the use of observable information and minimize the use of non-observable information. This IFRS describes the three levels of information to be used to measure fair value:
Level 1 - quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2 - Inputs other than quoted prices included in Level 1 available, where (unadjusted) quoted prices are for similar assets and liabilities in non-active markets, or other data that is available or may be corroborated by market data for substantially the full term of the asset or liability.
Level 3 - Inputs for the asset or liability that are not based on observable market data, because market activity is insignificant or does not exist.
As of March 31, 2015, the Company had some assets which the fair value measurement is required on a recurring basis. These assets include investments in private securities and derivative instruments.
Financial assets and liabilities of the Company, measured at fair value on a recurring basis and subject to disclosure requirements of IFRS 7 as of March 31, 2015 and December 31, 2014, are as follows:
|
|
Fair Value Measurements at Reporting Date Using |
|
|
|
|
|
|
|
Quoted Prices Active Markets for Identical Assets (Level 1) |
|
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) |
|
|
|
March 31, 2015 |
|
December 31, 2014 |
|
March 31, 2015 |
|
December 31, 2014 |
|
March 31, 2015 |
|
December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
3,596,164 |
|
3,049,971 |
|
|
|
|
|
3,596,164 |
|
3,049,971 |
|
Short-term investments Trading |
|
2,251,062 |
|
2,798,834 |
|
936,400 |
|
978,840 |
|
1,314,662 |
|
1,819,994 |
|
Trade accounts receivable |
|
5,271,932 |
|
4,438,676 |
|
|
|
|
|
5,271,932 |
|
4,438,676 |
|
Swap contracts and others |
|
64,358 |
|
41,751 |
|
|
|
|
|
64,358 |
|
41,751 |
|
Other current assets |
|
388,710 |
|
331,352 |
|
|
|
|
|
388,710 |
|
331,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Related parties |
|
121,420 |
|
80,920 |
|
|
|
|
|
121,420 |
|
80,920 |
|
Other non-current assets |
|
393,325 |
|
375,732 |
|
|
|
|
|
393,325 |
|
375,732 |
|
|
|
12,086,971 |
|
11,117,236 |
|
936,400 |
|
978,840 |
|
11,150,571 |
|
10,138,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable |
|
3,745,251 |
|
3,236,356 |
|
|
|
|
|
3,745,251 |
|
3,236,356 |
|
Loans and Financing |
|
2,365,802 |
|
2,037,869 |
|
|
|
|
|
2,365,802 |
|
2,037,869 |
|
Other current liabilities |
|
713,278 |
|
858,901 |
|
|
|
|
|
713,278 |
|
858,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and Financing |
|
20,587,831 |
|
17,148,580 |
|
|
|
|
|
20,587,831 |
|
17,148,580 |
|
Debentures |
|
328,595 |
|
335,036 |
|
|
|
|
|
328,595 |
|
335,036 |
|
Swap contracts and others |
|
7,376 |
|
8,999 |
|
|
|
|
|
7,376 |
|
8,999 |
|
Other non-current liabilities |
|
904,352 |
|
635,457 |
|
|
|
|
|
904,352 |
|
635,457 |
|
|
|
28,652,485 |
|
24,261,198 |
|
|
|
|
|
28,652,485 |
|
24,261,198 |
|
|
|
40,739,456 |
|
35,378,434 |
|
936,400 |
|
978,840 |
|
39,803,056 |
|
34,399,594 |
|
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
NOTE 14 PROVISIONS FOR TAX, CIVIL AND LABOR CLAIMS
The Company and its subsidiaries are party in judicial and administrative proceedings involving labor, civil and tax matters. Based on the opinion of its legal counsel, Management believes that the provisions recorded for these judicial and administrative proceedings is sufficient to cover probable and reasonably estimable losses from unfavorable court decisions, and that the final decisions will not have significant effects on the financial position and operational results of the Company and its subsidiaries.
For claims whose expected loss is considered probable, the provisions have been recorded considering the judgment of the Companys legal advisors and of Management and the provisions are considered sufficient to cover expected probable losses. The balances of the provisions are as follows:
I) Provisions
|
|
March 31, 2015 |
|
December 31, 2014 |
|
a) Tax provisions |
|
|
|
|
|
ICMS (state VAT) |
|
26,069 |
|
25,825 |
|
Corporate Income Tax and Social Contribution Tax |
|
34,628 |
|
34,038 |
|
Emergency Capacity Charge and Extraordinary Tariff Adjustment |
|
32,709 |
|
32,853 |
|
Financing of social integration program and Social security financing |
|
1,241,350 |
|
1,177,200 |
|
Other tax provisions and Social security contributions |
|
38,653 |
|
38,171 |
|
b) Labor provisions |
|
238,893 |
|
228,475 |
|
c) Civil provisions |
|
41,351 |
|
39,793 |
|
|
|
1,653,653 |
|
1,576,355 |
|
a) Tax Provisions
The tax provisions relate mainly to the discussions concerning the compensation of PIS credits, PIS and COFINS on other revenues and exclusion of ICMS from the PIS and COFINS tax base. With respect to proceedings dealing with the exclusion of ICMS from the calculation basis of PIS and COFINS, the Company and its subsidiaries are judicially depositing the amounts involved.
b) Labor Provisions
The Company and its subsidiaries are party to labor claims. None of these claims involve individually significant amounts and corresponds mainly to overtime pay, health hazard premium, and hazardous duty premium, among others.
c) Civil Provisions
The Company and its subsidiaries are also a party to civil lawsuits arising in the normal course of its business, which totaled as of March 31, 2015 the amount shown as provision liabilities.
The changes in the tax, labor and civil provisions are shown below:
|
|
March 31, 2015 |
|
December 31, 2014 |
|
Balance at the beginning of the year |
|
1,576,355 |
|
1,294,598 |
|
(+) Additions |
|
70,552 |
|
213,285 |
|
(+) Monetary variation |
|
32,417 |
|
128,305 |
|
(-) Reversal of accrued amounts |
|
(27,457 |
) |
(59,714 |
) |
(+) Foreign exchange effect on provisions in foreign currency |
|
1,786 |
|
(119 |
) |
Balance at the end of the year |
|
1,653,653 |
|
1,576,355 |
|
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
II) Contingent liabilities for which provisions were not recorded
a) Tax contingencies
a.1) The Company and its subsidiary Gerdau Aços Longos S.A. and Gerdau Açominas S.A. have other lawsuits related to the ICMS (state VAT) which are mostly related to credit rights and rate differences, whose demands totaled R$ 1,013,421.
a.2) The subsidiaries Gerdau Internacional Empreendimentos Ltda. and Gerdau Aços Especiais S.A., have a discussion related to IRPJ Corporate Income Tax and CSLL Social Contribution Tax in an updated amount of R$ 376,918, related to profits abroad.
a.3) The Company and its subsidiaries Gerdau Açominas S.A., Gerdau Aços Longos S.A. and Gerdau Aços Especiais S.A., are parties to the lawsuits relating to other taxes. The total amount of these lawsuits is R$ 376,918.
a.4) The subsidiaries Gerdau Aços Longos S.A., Gerdau Aços Especiais S.A. and Gerdau Açominas S.A., discuss, administratively, the disallowance of the deductibility for income tax and social contribution purposes of goodwill related to the reorganization carried out in 2004/2005, pursuant to article 7 and 8 of Law 9532/97. The total updated amount of the discussions is R$ 3,449,136.
b) Civil contingencies
b.1) A lawsuit arising from the request by two civil construction unions in the state of São Paulo alleging that Gerdau S.A. and other long steel producers in Brazil share customers, thus, violating the antitrust legislation. After investigations carried out by the Economic Law Department (SDE), the final opinion was that a cartel exists. The lawsuit was therefore forwarded to the Administrative Council for Economic Defense (CADE) for judgment.
In May 2004, Gerdau S.A. filed a new lawsuit with the purpose of annulling the administrative proceeding grounded on formal irregularities found during the discovery.
CADE, irrespective of the request for submission of evidence that a cartel does not exist made by Gerdau S.A., judged the merits of the administrative proceedings on September 23, 2005 and, by a majority of votes, fined the Company, for formation of a cartel and other long steel producers an amount equivalent to 7% of gross revenues in the year before the Administrative Proceeding was commenced, excluding taxes.
Despite the CADE decision, the legal action filed by Gerdau S.A. follows its normal course and, currently, awaits judgment in the lower court. In the event the irregularities in the process alleged by Gerdau are recognized by the court, the CADE decision may be annulled.
Furthermore, in order to reverse the terms of the decision by CADE, Gerdau appealed to the Judiciary on July 26, 2006 by bringing a new ordinary suit that not only ratifies the request of the first suit begun by Gerdau, but also indicates irregularities found during the course of the administrative proceeding. On August 30, 2006, Gerdau was successful in obtaining legal protection in order to suspend the effects of CADEs decision (R$ 245,070 fine equal to 7% of the gross revenue in 1999, excluding taxes) until final court decision be reached, being offered a guarantee through a bank guarantee letter.
It should be noted that just prior to the CADE decision, the Public Prosecution Office of the state of Minas Gerais filed a Public Civil Action, based on the above-mentioned SDE decision, and, without mentioning any new elements, alleged that the Company was involved in activities which violated the antitrust legislation. Gerdau S.A. contested this allegation on July 22, 2005.
The Company denies having been engaged in any type of anti-competitive conduct and believes based on information available, including the opinion of its legal counsel, that the administrative proceeding presents irregularities, some of which are impossible to be remediated. With respect to the merit, Gerdau is certain that it did not practice the alleged conduct and, supported by the opinion of renowned experts, believes that it is more likely than not that the decision will be reverted.
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
b.2) The Company and its subsidiaries are parties to other demands of a civil nature that collectively have a discussion amount of approximately R$ 89,310. For these demands was not performed accounting accrual, since they were considered as possible losses, based on the opinion of its legal counsel.
Management considers that the risk of losses from other contingencies affecting the results or the consolidated financial position of the Company is not more likely than not.
III) Judicial deposits
The Company has judicial deposits related to tax, labor and civil lawsuits as listed below:
|
|
March 31, 2015 |
|
December 31, 2014 |
|
Tax |
|
1,342,425 |
|
1,286,651 |
|
Labor |
|
71,522 |
|
66,608 |
|
Civil |
|
87,379 |
|
77,606 |
|
|
|
1,501,326 |
|
1,430,865 |
|
NOTE 15 - RELATED-PARTY TRANSACTIONS
a) Intercompany loans
|
|
March 31, 2015 |
|
December 31, 2014 |
|
Assets |
|
|
|
|
|
Associate companies |
|
|
|
|
|
Armacero Ind. Com. Ltda. |
|
14,680 |
|
9,198 |
|
Aceros Corsa, S.A. de C.V. |
|
1 |
|
7,729 |
|
|
|
|
|
|
|
Jointly-controlled entities |
|
|
|
|
|
Gerdau Corsa SAPI de C.V. |
|
59,600 |
|
13,634 |
|
|
|
|
|
|
|
Others |
|
|
|
|
|
Fundação Gerdau |
|
45,970 |
|
50,342 |
|
Metalúrgica Gerdau S.A. |
|
1,163 |
|
|
|
Others |
|
6 |
|
17 |
|
|
|
121,420 |
|
80,920 |
|
|
|
For the three-month period ended |
|
|
|
March 31, 2015 |
|
March 31, 2014 |
|
Net financial income |
|
649 |
|
1,757 |
|
Commercial operations
During the three-month period ended on March 31, 2015 and 2014, the Company, through its subsidiaries, performed commercial operations with some of its associated companies and jointly controlled entities in sales of R$ 130,991 as of March 31, 2015 (R$ 144,110 as of March 31, 2014) and purchases in the amount of R$ 103,603 as of March 31, 2015 (R$ 111,484 as of March 31, 2014). The net balance of accounts payable totals R$ 75,149 as of March 31, 2015 (R$ 98,561 of accounts receivable as of December 31, 2014).
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
b) Financial operations
|
|
(Expenses)/Income |
|
|
|
For the three-month period ended |
|
|
|
March 31, 2015 |
|
March 31, 2014 |
|
Shareholders |
|
|
|
|
|
Indac - Ind. Adm. e Comércio S.A. (*) |
|
(963 |
) |
(1,899 |
) |
Grupo Gerdau Empreendimentos Ltda. (**) |
|
232 |
|
222 |
|
(*) Guarantees of certain financing in the amount of R$ 225,307 at March 31, 2015, for which the Company pays a fee of 0.95% of the amount guranteed .
(**) Rental agreement
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
c) Guarantees granted
Related Party |
|
Relationship |
|
Type |
|
Object |
|
Original Amount |
|
Maturity |
|
Balance |
|
Dona Francisca Energética S.A |
|
Associate |
|
Guarantee |
|
Financing Agreements |
|
152,020 |
|
Dec/14 |
|
1,386 |
|
Gerdau Açominas S.A. |
|
Subsidiary |
|
Guarantee |
|
Financing Agreements |
|
437,387 |
|
Jul/15 |
|
603,134 |
|
Empresa Siderúrgica Del Peru S.A.A |
|
Subsidiary |
|
Guarantee |
|
Financing Agreements |
|
560,138 |
|
April/16 - Mar/18 |
|
461,150 |
|
GTL Trade Finance Inc. |
|
Subsidiary |
|
Guarantee |
|
10-year Bond |
|
1,744,000 |
|
Oct/17 |
|
2,792,744 |
|
GTL Trade Finance Inc. |
|
Subsidiary |
|
Guarantee |
|
30-year Bond |
|
1,118,000 |
|
Apr/44 |
|
1,604,000 |
|
Diaco S.A. |
|
Subsidiary |
|
Guarantee |
|
Financing Agreements |
|
470,492 |
|
May/15 - Oct/16 |
|
547,437 |
|
Gerdau Holding Inc. |
|
Subsidiary |
|
Guarantee |
|
10-year Bond |
|
2,188,125 |
|
Jan/20 |
|
2,016,558 |
|
Gerdau Metaldom Corp. |
|
Joint-venture |
|
Guarantee |
|
Financing Agreements |
|
238,156 |
|
Jun/15 - Dec/17 |
|
211,178 |
|
Gerdau Trade Inc. |
|
Subsidiary |
|
Guarantee |
|
10-year Bond |
|
2,117,750 |
|
Jan/21 |
|
3,806,292 |
|
Gerdau Corsa S.A.P.I. de C.V. |
|
Jointly-controlled entity |
|
Guarantee |
|
Financing Agreements |
|
1,508,672 |
|
Jun/15 - Mar/19 |
|
1,772,113 |
|
GTL Trade Finance Inc., Gerdau Holdings Inc. |
|
Subsidiary |
|
Guarantee |
|
10-year Bond |
|
2,606,346 |
|
Apr/24 |
|
3,739,338 |
|
Sipar Gerdau Inversiones |
|
Subsidiary |
|
Guarantee |
|
Financing Agreements |
|
1,665 |
|
Jun/17 |
|
18,182 |
|
Coquecol S.A.C.I. |
|
Subsidiary |
|
Guarantee |
|
Financing Agreements |
|
59,207 |
|
Feb/15 - Apr/19 |
|
83,408 |
|
Steelchem Trading Corporation |
|
Associate |
|
Guarantee |
|
Financing Agreements |
|
80,964 |
|
Mar/15 - Jun/15 |
|
128,320 |
|
Gerdau Trade Inc. |
|
Subsidiary |
|
Guarantee |
|
10-year Bond |
|
1,501,275 |
|
Apr/23 |
|
1,998,436 |
|
Gerdau Steel India Ltd. |
|
Subsidiary |
|
Guarantee |
|
Financing Agreements |
|
348,595 |
|
Jun/15 - Feb/19 |
|
388,065 |
|
Gerdau Steel India Ltd. |
|
Subsidiary |
|
Guarantee |
|
Financing Agreements |
|
208,520 |
|
Undetermined |
|
58,069 |
|
Aceros Corsa S.A. de C.V. |
|
Associate |
|
Guarantee |
|
Financing Agreements |
|
44,050 |
|
Jun/15 |
|
54,495 |
|
Comercial Gerdau Bolivia |
|
Subsidiary |
|
Guarantee |
|
Financing Agreements |
|
9,804 |
|
Sep/2015 |
|
12,832 |
|
Gerdau Açominas S.A. |
|
Subsidiary |
|
Guarantee |
|
Financing Agreements |
|
1,506,629 |
|
Jan/20 - Aug/20 |
|
1,629,577 |
|
Gerdau Ameristeel US. Inc. |
|
Subsidiary |
|
Guarantee |
|
25-year Bond |
|
103,596 |
|
Oct/37 |
|
163,608 |
|
Gerdau Aços Longos S.A. |
|
Subsidiary |
|
Guarantee |
|
Financing Agreements |
|
426,098 |
|
Oct/24 - Dec/30 |
|
380,630 |
|
Gerdau Aços Longos S.A. |
|
Subsidiary |
|
Guarantee |
|
Financing Agreements |
|
38,501 |
|
May/15 - Dec/15 |
|
52,119 |
|
Siderurgica Zuliana, C.A. |
|
Subsidiary |
|
Guarantee |
|
Financing Agreements |
|
33,038 |
|
Jun/15 |
|
48,120 |
|
Sidertul, S.A. de C.V. |
|
Subsidiary |
|
Guarantee |
|
Financing Agreements |
|
176,200 |
|
Aug/15 |
|
120,981 |
|
Gerdau Aços Especiais S.A. |
|
Subsidiary |
|
Guarantee |
|
Financing Agreements |
|
70,000 |
|
Feb/20 |
|
78,021 |
|
Gerdau Açominas S.A., Gerdau Aços Longos S.A., Gerdau Aços Especiais S.A. |
|
Subsidiary |
|
Guarantee |
|
Financing Agreements |
|
78,571 |
|
Jul/16 |
|
17,193 |
|
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
d) Debentures
Debentures are held by parent companies, directly or indirectly, in the amount of R$ 0 as of March 31, 2015 (R$ 62,989 as of December 31, 2014), which corresponds to 0 debentures (1,215 as of December 31, 2014). Debentures are held by controlling shareholders, directly or indirectly, in the amount of R$ 100,126 as of March 31, 2015 (R$ 110,840 as of December 31, 2014), which corresponds to 16,687 debentures (18,304 as of December 31, 2014).
e) Price conditions and charges
Loan agreements between Brazilian companies carry interest based on the CDI (Interbank Deposit Certificate) and Libor rate plus exchange variance, when applicable. Sales of products and purchases of inputs are made under terms and conditions agreed between the parties.
f) Management compensation
The Company paid to its management salaries and variable compensation totaling R$ 25,450 for the three-month period ended on March 31, 2015 (R$ 25,215 for the three-month period ended on March 31, 2014). The contributions for pension plan, related to the management of the Company, totaled R$ 349 Defined contribution plan for the three-month period ended March 31, 2015 (R$ 295 in March 31, 2014).
NOTE 16 EQUITY
a) Capital The Board of Directors may, without need to change the bylaws, issue new shares (authorized capital), including the capitalization of profits and reserves up to the authorized limit of 1,500,000,000 common shares and 3,000,000,000 preferred shares, all without nominal value. In the case of capital increase through subscription of new shares, the right of preference shall be exercised in up to 30 days, except in the case of a public offering, when the limit is not less than 10 days.
Reconciliation of common and preferred outstanding shares is presented below:
|
|
March 31, 2015 |
|
December 31, 2014 |
|
|
|
Common shares |
|
Preferred shares |
|
Common shares |
|
Preferred shares |
|
Balance at the beginning of the period |
|
571,929,945 |
|
1,132,613,562 |
|
571,929,945 |
|
1,132,285,402 |
|
Repurchase of Shares |
|
|
|
(17,162,100 |
) |
|
|
|
|
Exercise of stock option |
|
|
|
1,686,088 |
|
|
|
328,160 |
|
Balance at the end of the period |
|
571,929,945 |
|
1,117,137,550 |
|
571,929,945 |
|
1,132,613,562 |
|
On March 31, 2015, 573,627,483 common shares and 1,146,031,245 preferred shares are subscribed and paid up, with a total capital of R$ 19,249,181 (net of share issuance costs). Ownership of the shares is presented below:
|
|
Shareholders |
|
|
|
March 31, 2015 |
|
December 31, 2014 |
|
Shareholders |
|
Common |
|
% |
|
Pref. |
|
% |
|
Total |
|
% |
|
Common |
|
% |
|
Pref. |
|
% |
|
Total |
|
% |
|
Metalúrgica Gerdau S.A. and subsidiary* |
|
449,712,654 |
|
78.4 |
|
252,841,484 |
|
22.1 |
|
702,554,138 |
|
40.9 |
|
449,712,654 |
|
78.4 |
|
252,841,484 |
|
22.1 |
|
702,554,138 |
|
40.9 |
|
Brazilian institutional investors |
|
30,103,837 |
|
5.2 |
|
152,013,820 |
|
13.3 |
|
182,117,657 |
|
10.6 |
|
30,103,837 |
|
5.2 |
|
152,013,820 |
|
13.3 |
|
182,117,657 |
|
10.6 |
|
Foreign institutional investors |
|
21,604,383 |
|
3.8 |
|
579,232,262 |
|
50.5 |
|
600,836,645 |
|
34.9 |
|
21,604,383 |
|
3.8 |
|
578,731,779 |
|
50.4 |
|
600,336,162 |
|
34.9 |
|
Other shareholders |
|
70,509,071 |
|
12.3 |
|
133,049,984 |
|
11.6 |
|
203,559,055 |
|
11.8 |
|
70,509,071 |
|
12.3 |
|
149,026,479 |
|
13.0 |
|
219,535,550 |
|
12.8 |
|
Treasury stock |
|
1,697,538 |
|
0.3 |
|
28,893,695 |
|
2.5 |
|
30,591,233 |
|
1.8 |
|
1,697,538 |
|
0.3 |
|
13,417,683 |
|
1.2 |
|
15,115,221 |
|
0.8 |
|
|
|
573,627,483 |
|
100.0 |
|
1,146,031,245 |
|
100.0 |
|
1,719,658,728 |
|
100.0 |
|
573,627,483 |
|
100.0 |
|
1,146,031,245 |
|
100.0 |
|
1,719,658,728 |
|
100.0 |
|
*Metalurgica Gerdau S.A. is the controlling shareholder and Stichting Gerdau Johannpeter is the ultimate controlling shareholder of the Company.
Preferred shares do not have voting rights and cannot be redeemed but have the same rights as common shares in the distribution of dividends and also priority in the capital distribution in case of liquidation of the Company.
b) Treasury stocks
Changes in treasury shares are as follows:
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
|
|
March 31, 2015 |
|
December 31, 2014 |
|
|
|
Common |
|
R$ |
|
Preferred shares |
|
R$ |
|
Common |
|
R$ |
|
Preferred shares |
|
R$ |
|
Balance at the beginning of the period |
|
1,697,538 |
|
557 |
|
13,417,683 |
|
232,585 |
|
1,697,538 |
|
557 |
|
13,745,843 |
|
238,414 |
|
Repurchase of shares |
|
|
|
|
|
17,162,100 |
|
161,278 |
|
|
|
|
|
|
|
|
|
Exercise of stock option |
|
|
|
|
|
(1,686,088 |
) |
(30,913 |
) |
|
|
|
|
(328,160 |
) |
(5,829 |
) |
Balance at the end of the period |
|
1,697,538 |
|
557 |
|
28,893,695 |
|
362,950 |
|
1,697,538 |
|
557 |
|
13,417,683 |
|
232,585 |
|
These shares will be held in treasury for subsequent cancelling or will service the long-term incentive plan of the Company and its subsidiaries or subsequently sold on the market. The average acquisition cost of the treasury preferred shares was R$ 12.56.
c) Capital reserves - consists of premium on issuance of shares.
d) Retained earnings
I) Legal reserves - under Brazilian Corporate Law, the Company must transfer 5% of the annual net income determined on its statutory books in accordance with Brazilian accounting practices to the legal reserve until this reserve equals 20% of the paid-in capital. The legal reserve can be utilized to increase capital or to absorb losses, but cannot be used for dividend purposes.
II) Tax incentive reserve - under Brazilian Corporate Law, the Company may transfer to this account part of net income resulting from government benefits which can be excluded from the basis for dividend calculation.
III) Investments and working capital reserve - consists of earnings not distributed to shareholders and includes the reserves required by the Companys by-laws. The Board of Directors may propose to the shareholders the transfer of at least 5% of the profit for each year determined in its statutory books in accordance with accounting practices adopted in Brazil to this reserve. Amount can be allocated to the reserve only after the minimum dividend requirements have been met and its balance cannot exceed the amount of paid-in capital. The reserve can be used to absorb losses, if necessary, for capitalization, for payment of dividends or for the repurchase of shares.
IV) Pension Plan - actuarial gains and losses on postretirement benefits.
e) Operations with non-controlling interests correspond to amounts recognized in equity for changes in non-controlling interests.
f) Other reserves - Includes gains and losses on available for sale securities, gains and losses on net investment hedge, gains and losses on derivatives accounted as cash flow hedge, cumulative translation adjustments and expenses recorded for stock option plans.
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
NOTE 17 EARNINGS PER SHARE (EPS)
Basic
|
|
For the three-month period ended on |
|
|
|
March 31, 2015 |
|
March 31, 2014 |
|
|
|
Common |
|
Preferred |
|
Total |
|
Common |
|
Preferred |
|
Total |
|
|
|
(in thousands, except share and per share data) |
|
(in thousands, except share and per share data) |
|
Basic numerator |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated net income available to Common and Preferred shareholders |
|
98,908 |
|
194,154 |
|
293,062 |
|
133,300 |
|
263,924 |
|
397,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic denominator |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average outstanding shares, after deducting the average of treasury shares |
|
571,929,945 |
|
1,122,679,347 |
|
|
|
571,929,945 |
|
1,132,375,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (in R$) Basic |
|
0.17 |
|
0.17 |
|
|
|
0.23 |
|
0.23 |
|
|
|
Diluted
|
|
For the three-month period ended on |
|
|
|
March 31, 2015 |
|
March 31, 2014 |
|
Diluted numerator |
|
|
|
|
|
Allocated net income available to Common and Preferred shareholders |
|
|
|
|
|
Net income allocated to preferred shareholders |
|
194,154 |
|
263,924 |
|
Add: |
|
|
|
|
|
Adjustment to net income allocated to preferred shareholders in respect to the potential increase in number of preferred shares outstanding, as a result of options granted to acquire stock of Gerdau. |
|
455 |
|
420 |
|
|
|
194,609 |
|
264,344 |
|
|
|
|
|
|
|
Net income allocated to common shareholders |
|
98,908 |
|
133,300 |
|
Less: |
|
|
|
|
|
Adjustment to net income allocated to common shareholders in respect to the potential increase in number of preferred shares outstanding, as a result of options granted to acquire stock of Gerdau. |
|
(455 |
) |
(420 |
) |
|
|
98,453 |
|
132,880 |
|
|
|
|
|
|
|
Diluted denominator |
|
|
|
|
|
Weighted - average number of shares outstanding |
|
|
|
|
|
Common Shares |
|
571,929,945 |
|
571,929,945 |
|
Preferred Shares |
|
|
|
|
|
Weighted-average number of preferred shares outstanding |
|
1,122,679,347 |
|
1,132,375,848 |
|
Potential increase in number of preferred shares outstanding in respect of stock option plan |
|
7,841,588 |
|
5,384,912 |
|
Total |
|
1,130,520,935 |
|
1,137,760,760 |
|
|
|
|
|
|
|
Earnings per share Diluted (Common and Preferred Shares) - in R$ |
|
0.17 |
|
0.23 |
|
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
NOTE 18 LONG-TERM INCENTIVE PLANS
a) Stock Options Plan:
|
|
March 31, 2015 |
|
December 31, 2014 |
|
|
|
Number of shares |
|
Average exercise price in the year |
|
Number of shares |
|
Average exercise price in the year |
|
|
|
|
|
R$ |
|
|
|
R$ |
|
Available at beginning of the year |
|
2,448,973 |
|
19.53 |
|
2,793,495 |
|
19.44 |
|
Options Exercised |
|
(25,210 |
) |
19.56 |
|
(52,340 |
) |
17.34 |
|
Options Forfeited |
|
(416,177 |
) |
27.95 |
|
(292,182 |
) |
19.47 |
|
Available at the end of the year |
|
2,007,586 |
|
17.97 |
|
2,448,973 |
|
19.53 |
|
The average market price of the share in the three month period ended March 31, 2015 was R$ 9.97 (R$ 13.31 in the year ended December 31, 2014).
As of March 31, 2015 the Company has a total of 28,893,695 preferred shares in treasury. These shares may be used for serving this plan. The exercise of the options before the grace period end was due to retirement or death.
Exercise price |
|
Quantity |
|
Average period of grace (in years) |
|
Average exercise price |
|
Number exercisable at March 31, 2015* |
|
|
|
|
|
|
|
R$ |
|
|
|
R$ 10.66 |
|
80,742 |
|
3.9 |
|
12.49 |
|
80,742 |
|
R$ 33.43 |
|
12,581 |
|
1.9 |
|
39.15 |
|
12,581 |
|
R$ 48.63 |
|
8,953 |
|
2.9 |
|
56.94 |
|
8,953 |
|
R$ 10,58 to R$ 29,12 |
|
1,905,310 |
|
5.0 |
|
17.87 |
|
25,623 |
|
|
|
2,007,586 |
|
|
|
|
|
127,899 |
|
*The total of options vested that are exercisable on March 31, 2015 is 127,899 (176,891 on December 31, 2014).
During the three month periods ended March 31, 2015 and 2014, the long-term incentive plans costs recognized in income were R$ 6,542 and R$ 9,091, respectively.
The Company recognizes costs of employee compensation based on the fair value of the options granted, considering their fair value on the date of granting. The Company uses the Black-Scholes model for determining the fair value of the options. There were no options granted for this plan in 2015.
b) Restricted Shares and Performance Shares Summary:
Quantity on January 01, 2014 |
|
7,371,215 |
|
Granted |
|
3,981,219 |
|
Forfeited/Canceled |
|
(739,017 |
) |
Exercised |
|
(527,183 |
) |
Quantity on December 31, 2014 |
|
10,086,234 |
|
Granted |
|
6,488,298 |
|
Forfeited/Canceled |
|
(412,292 |
) |
Exercised |
|
(2,026,388 |
) |
Quantity on March 31, 2015 |
|
14,135,852 |
|
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
c) Other Plans North America
In February 2010, the Board of Directors approved the adoption of the Equity Incentive Plan (the EIP). Awards under the EIP may take the form of stock options, SARs, deferred share units (DSUs), restricted share units (RSUs), performance share units (PSUs), restricted stock, and/or other share-based awards. Except for stock options, which must be settled in common shares, awards may be settled in cash or common shares as determined by the Company at the time of grant.
For the portion of any award which is payable in options or SARs, the exercise price of the options or SARs will be no less than the fair market value of a common share on the date of the award. The vesting period for all awards (including RSUs, DSUs and PSUs) is determined by the Company at the time of grant. Options and SARs have a maximum term of 10 years.
In 2015, an award of approximately US$ 10.3 million (R$ 33.0 million) was granted to participants under the EIP. The Company issued 1,294,587 RSUs, and 1,721,305 PSUs under this plan. This award has being accrued over the vesting period of 5 years.
In 2014, an award of approximately US$ 11.7 million (R$ 31.1 million) was granted to participants under the EIP. The Company issued 767,027 RSUs, and 1,150,541 PSUs under this plan. This award has being accrued over the vesting period of 5 years.
In connection with the adoption of the EIP, the Company terminated the existing long-term incentive plan (LTIP), and no further awards will be granted under the LTIP. All outstanding awards under the LTIP will remain outstanding until either exercised, forfeited or they expire. On March 31, 2015, there were 706,706 SARs and 102,276 stock options outstanding under the LTIP. These awards have been accrued over the vesting period of 4 years.
As of March 31, 2015 and December 31, 2014, the outstanding liability for share-based payment transactions included in other non-current liabilities of the subsidiaries in North America was US$ 21 thousand (R$ 67.4 thousand) and US$ 370 thousand (R$ 983 thousand), respectively.
NOTE 19 EXPENSES BY NATURE
The Company opted to present its Consolidated Statement of Income by function. As required by IAS 1, the Consolidated Statement of Income by nature is as follows:
|
|
For the three-month periods ended |
|
|
|
March 31, 2015 |
|
March 31, 2014 |
|
Depreciation and amortization |
|
(603,272 |
) |
(541,660 |
) |
Labor expenses |
|
(1,715,404 |
) |
(1,626,407 |
) |
Raw material and consumption material |
|
(6,454,058 |
) |
(6,504,162 |
) |
Freight |
|
(562,789 |
) |
(565,795 |
) |
Other expenses/income, net |
|
(633,148 |
) |
(688,203 |
) |
|
|
(9,968,671 |
) |
(9,926,227 |
) |
|
|
|
|
|
|
Classified as: |
|
|
|
|
|
Cost of sales |
|
(9,335,523 |
) |
(9,238,024 |
) |
Selling expenses |
|
(179,519 |
) |
(173,583 |
) |
General and administrative expenses |
|
(480,442 |
) |
(533,805 |
) |
Other operating income |
|
56,851 |
|
46,866 |
|
Other operating expenses |
|
(30,038 |
) |
(27,681 |
) |
|
|
(9,968,671 |
) |
(9,926,227 |
) |
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
NOTE 20 FINANCIAL INCOME
|
|
For the three-month periods ended |
|
|
|
March 31, 2015 |
|
March 31, 2014 |
|
Income from short-term investments |
|
59,016 |
|
42,602 |
|
Interest income and other financial incomes |
|
50,100 |
|
19,446 |
|
Financial income total |
|
109,116 |
|
62,048 |
|
|
|
|
|
|
|
Interest on debts |
|
(318,929 |
) |
(250,073 |
) |
Monetary variation and other financial expenses |
|
(53,135 |
) |
(38,653 |
) |
Financial expenses total |
|
(372,064 |
) |
(288,726 |
) |
|
|
|
|
|
|
Exchange variations, net |
|
(651,254 |
) |
127,678 |
|
Gains and Losses on derivatives, net |
|
15,637 |
|
(2,470 |
) |
Financial result, net |
|
(898,565 |
) |
(101,470 |
) |
NOTE 21 SEGMENT REPORTING
Information by business segment:
|
|
For the three-month periods ended |
|
|
|
Brazil Operation |
|
Iron Ore |
|
North America Operation |
|
Latin America Operation |
|
Special Steels Operation |
|
Eliminations and Adjustments |
|
Consolidated |
|
|
|
March 31, 2015 |
|
March 31, 2014 |
|
March 31, 2015 |
|
March 31, 2014 |
|
March 31, 2015 |
|
March 31, 2014 |
|
March 31, 2015 |
|
March 31, 2014 |
|
March 31, 2015 |
|
March 31, 2014 |
|
March 31, 2015 |
|
March 31, 2014 |
|
March 31, 2015 |
|
March 31, 2014 |
|
Net sales |
|
3,265,835 |
|
3,655,351 |
|
124,672 |
|
316,261 |
|
3,647,625 |
|
3,257,738 |
|
1,508,647 |
|
1,399,370 |
|
2,245,720 |
|
2,262,760 |
|
(345,123 |
) |
(337,704 |
) |
10,447,376 |
|
10,553,776 |
|
Cost of sales |
|
(2,762,632 |
) |
(2,905,951 |
) |
(118,968 |
) |
(196,900 |
) |
(3,422,723 |
) |
(3,158,526 |
) |
(1,340,514 |
) |
(1,214,162 |
) |
(2,035,826 |
) |
(2,101,394 |
) |
345,140 |
|
338,909 |
|
(9,335,523 |
) |
(9,238,024 |
) |
Gross profit |
|
503,203 |
|
749,400 |
|
5,704 |
|
119,361 |
|
224,902 |
|
99,212 |
|
168,133 |
|
185,208 |
|
209,894 |
|
161,366 |
|
17 |
|
1,205 |
|
1,111,853 |
|
1,315,752 |
|
Selling, general and administrative expenses |
|
(211,508 |
) |
(228,935 |
) |
(9,757 |
) |
(9,467 |
) |
(174,802 |
) |
(185,969 |
) |
(85,817 |
) |
(89,868 |
) |
(96,857 |
) |
(103,067 |
) |
(81,220 |
) |
(90,082 |
) |
(659,961 |
) |
(707,388 |
) |
Other operating income (expenses) |
|
4,859 |
|
10,474 |
|
|
|
|
|
1,775 |
|
2,177 |
|
(875 |
) |
(5,067 |
) |
3,221 |
|
2,280 |
|
17,833 |
|
9,321 |
|
26,813 |
|
19,185 |
|
Equity in earnings of unconsolidated companies |
|
|
|
|
|
|
|
|
|
2,554 |
|
19,160 |
|
(1,026 |
) |
1,482 |
|
|
|
|
|
5,007 |
|
5,991 |
|
6,535 |
|
26,633 |
|
Operational income (Loss) before financial income (expenses) and taxes |
|
296,554 |
|
530,939 |
|
(4,053 |
) |
109,894 |
|
54,429 |
|
(65,420 |
) |
80,415 |
|
91,755 |
|
116,258 |
|
60,579 |
|
(58,363 |
) |
(73,565 |
) |
485,240 |
|
654,182 |
|
Finacial result, net |
|
(131,231 |
) |
(97,737 |
) |
(11,216 |
) |
(6,785 |
) |
(25,187 |
) |
(39,817 |
) |
(20,332 |
) |
7,933 |
|
(58,265 |
) |
(34,485 |
) |
(652,334 |
) |
69,421 |
|
(898,565 |
) |
(101,470 |
) |
Income (Loss) before taxes |
|
165,323 |
|
433,202 |
|
(15,269 |
) |
103,109 |
|
29,242 |
|
(105,237 |
) |
60,083 |
|
99,688 |
|
57,993 |
|
26,094 |
|
(710,697 |
) |
(4,144 |
) |
(413,325 |
) |
552,712 |
|
Income and social contribution taxes |
|
(39,308 |
) |
(109,646 |
) |
2,772 |
|
(25,777 |
) |
35,479 |
|
65,909 |
|
(35,246 |
) |
(44,125 |
) |
(22,145 |
) |
(10,479 |
) |
739,134 |
|
11,497 |
|
680,686 |
|
(112,621 |
) |
Net income (Loss) |
|
126,015 |
|
323,556 |
|
(12,497 |
) |
77,332 |
|
64,721 |
|
(39,328 |
) |
24,837 |
|
55,563 |
|
35,848 |
|
15,615 |
|
28,437 |
|
7,353 |
|
267,361 |
|
440,091 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales between segments |
|
221,412 |
|
165,016 |
|
78,834 |
|
105,399 |
|
15,829 |
|
24,344 |
|
11 |
|
|
|
29,037 |
|
42,945 |
|
|
|
|
|
345,123 |
|
337,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational Income (Loss) before financial income (expenses) and taxes |
|
296,554 |
|
530,939 |
|
(4,053 |
) |
109,894 |
|
54,429 |
|
(65,420 |
) |
80,415 |
|
91,755 |
|
116,258 |
|
60,579 |
|
(58,363 |
) |
(73,565 |
) |
485,240 |
|
654,182 |
|
Depreciation/amortization |
|
218,137 |
|
200,302 |
|
10,095 |
|
11,552 |
|
171,585 |
|
135,770 |
|
59,710 |
|
51,650 |
|
143,745 |
|
142,386 |
|
|
|
|
|
603,272 |
|
541,660 |
|
Earnings before interest, taxes, depreciation and amortization (EBITDA) |
|
514,691 |
|
731,241 |
|
6,042 |
|
121,446 |
|
226,014 |
|
70,350 |
|
140,125 |
|
143,405 |
|
260,003 |
|
202,965 |
|
(58,363 |
) |
(73,565 |
) |
1,088,512 |
|
1,195,842 |
|
The main products by business segment are:
Brazil Operation: rebar, bars, shapes, drawn products, billets, blooms, slabs, wire rod and structural shapes.
North America Operation: rebar, bars, wire rod, light and heavy structural shapes.
Latin America Operation: rebar, bars and drawn products.
Special Steel Operation: stainless steel, round, square and flat bars, wire rod.
Iron Ore Operation: Iron Ore
The column of eliminations and adjustments includes the elimination of sales between segments applicable to the Company in the context of the Condensed Consolidated Interim Financial Statements.
The Companys geographic information with net sales classified according to the geographical region where the products were shipped is as follows:
Information by geographic area:
|
|
For the three-month periods ended |
|
|
|
Brazil |
|
Latin America (1) |
|
North America (2) |
|
Europe/Asia |
|
Consolidated |
|
|
|
March 31, 2015 |
|
March 31, 2014 |
|
March 31, 2015 |
|
March 31, 2014 |
|
March 31, 2015 |
|
March 31, 2014 |
|
March 31, 2015 |
|
March 31, 2014 |
|
March 31, 2015 |
|
March 31, 2014 |
|
Net sales |
|
3,614,155 |
|
4,200,358 |
|
1,607,576 |
|
1,489,310 |
|
4,479,384 |
|
4,095,353 |
|
746,261 |
|
768,755 |
|
10,447,376 |
|
10,553,776 |
|
|
|
March 31, 2015 |
|
December 31, 2014 |
|
March 31, 2015 |
|
December 31, 2014 |
|
March 31, 2015 |
|
December 31, 2014 |
|
March 31, 2015 |
|
December 31, 2014 |
|
March 31, 2015 |
|
December 31, 2014 |
|
Total assets |
|
25,294,018 |
|
24,503,901 |
|
10,191,145 |
|
8,409,583 |
|
31,066,431 |
|
26,288,644 |
|
4,291,794 |
|
3,840,202 |
|
70,843,389 |
|
63,042,330 |
|
(1) Does not include operations of Brazil
(2) Does not include operations of Mexico
IFRSs require that the Company discloses the net sales per product unless the information is not available and the cost to obtain it would be excessive. Accordingly, management does not consider this information useful for its decision making process, because it would entail aggregating sales for different markets with different currencies, subject to the effects of exchange differences. Steel consumption patterns and the pricing dynamics of each product or group of products in different countries and different markets within these countries are poorly correlated, and thus the information would not be useful and would not serve to conclude on historical trends and progresses. In light of this scenario and considering that the information on net sales by product is not maintained on a consolidated basis and the cost to obtain net sales per product
GERDAU S.A.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of March 31, 2015
(In thousands of Brazilian Reais R$, unless otherwise stated)
(Unaudited)
would be excessive compared to the benefits that would be derived from this information, the Company is not presenting the breakdown of net sales by product.
NOTE 22 IMPAIRMENT OF ASSETS
The impairment test of goodwill and other long-lived assets is tested based on the analysis and identification of facts or circumstances that may involve the need to perform the impairment test. The Company performs impairment tests of goodwill and other long-lived assets, based on projections of discounted cash flows, which take into account assumptions such as: cost of capital, growth rate and adjustments applied to flows in perpetuity, methodology for working capital determination, investment plans, and long-term economic-financial forecasts.
To determine the recoverable amount of each business segment, the Company uses the discounted cash flow method, taking as basis, financial and economic projections for each segment. The projections are updated to take into consideration any observed changes in the economic environment of the market in which the Company operates, as well as premises of expected results and historical profitability of each segment.
The goodwill impairment test allocated to business segments is performed annually in December, also being performed at interim reporting dates if events or circumstances indicate possible impairment. In the impairment test in December 2014, the Company performed a sensitivity analysis of the variables discount rates and perpetuity growth rate, given its potential impacts on the cash flows. A combination of sensitivity analysis above mentioned in the tests performed in December 2014 would result in a recoverable amount lower than the book value by R$ 458 million for the North America segment and R$ 122 million for the Latin America segment. A combination of sensitivity analysis above mentioned in the tests performed in December 2014 would result in a recoverable amount that would exceed the book value by R$ 1,436 million in the Brazil segment and R$ 262 million for the Special Steel segment.
The Company concluded that there are no indications that an impairment test of goodwill and other long-lived assets for the period ended on March 31, 2015 is required.
The Company will maintain over 2015 its constant monitoring of the steel market in order to identify any deterioration, significant drop in demand from steel consuming sectors (notably automotive and construction), stoppage of industrial plants or activities relevant changes in the economy or financial market that result in increased perception of risk or reduction of liquidity and refinancing capacity. Although the projections made by the Company provide a more challenging scenario than that in recent years, the events mentioned above, if manifested in a greater intensity than that anticipated in the assumptions made by management, may lead the Company to revise its projections of value in use and eventually result in impairment losses.
NOTE 23 - SUBSEQUENT EVENTS
I) On April 6, 2015, the Company received Official Letter n° 134/2015/CVM/SEP/GEA-2 of the Brazilian Securities and Exchange Commission with request for clarification on news related to inquisition in the Tax administrative appeal board. In response to the Letter, the Company clarifies that, up to this date, has not been contacted by any public authority about the operation Zelotes. The Company also reiterates that have strict ethical standards in conducting their pleas with public agencies.
I) On April 17, 2015, the three months period for the Company to purchase of shares of its own issuance ended. The Company acquired 19,923,200 preferred shares in the total amount of R$ 189,174. This acquisition had the following objectives: (i) supply the long-term incentive plan for the Company and its subsidiaries; (ii) held in treasury; (iii) cancelation; or (iv) subsequent sale to the market.
II) On April 30, 2015, the Company proposed to anticipate the payment of dividends on income for the quarter ended on March 31, 2015, in the form of interest on equity, which will be calculated and credited on the shareholding interest owned on May 21, 2015, in the amount of R$ 101.2 million (R$ 0.06 per common and preferred share), with payment on June 2, 2015. These amounts will be considered as payment in advance of the minimum dividends established by the Companys by-laws, and will be submitted to the approval of the Board of Directors on May 6, 2015.
********************************
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