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Gerdau S.A. 6-K 2012
FORM 6-K
U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
Dated November 1, 2012
Commission File Number [·]
GERDAU S.A. (Exact Name as Specified in its Charter)
N/A (Translation of Registrant’s Name)
Av. Farrapos 1811 Porto Alegre, Rio Grande do Sul - Brazil CEP 90220-005 (Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
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.
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 1, 2012
EXHIBIT INDEX
GERDAU S.A.
Condensed consolidated interim financial statements as of September 30, 2012
GERDAU S.A. CONDENSED CONSOLIDATED BALANCE SHEETS In thousands of Brazilian Reais (R$) (Unaudited)
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements
GERDAU S.A. CONDENSED CONSOLIDATED BALANCE SHEETS In thousands of Brazilian Reais (R$) (Unaudited)
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$) (Unaudited)
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements
GERDAU S.A. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME in thousands of Brazilian Reais (R$) (Unaudited)
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements
GERDAU S.A. CONDENSED STATEMENTS OF CHANGES IN EQUITY in thousands of Brazilian Reais (R$) (Unaudited)
The accompanying notes are an integral part of these Consolidated Financial Statements.
GERDAU S.A. CONSOLIDATED STATEMENTS OF CASH FLOWS In thousands of Brazilian Reais (R$) (Unaudited)
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements
GERDAU S.A. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS as of September 30, 2012 (In thousands of Brazilian Reais – R$, unless otherwise stated) (Unaudited)
NOTE 1 - GENERAL INFORMATION
Gerdau S.A. is a publicly traded corporation (sociedade anônima) with its corporate domicile in the city of Rio de Janeiro, Brazil. Gerdau S.A and subsidiaries (collectively referred to as the “Company”) are engaged in the production and sale of steel products from plants located in Brazil, Argentina, Chile, Colombia, Guatemala, Mexico, Peru, Dominican Republic, Uruguay, Venezuela, United States, Canada, Spain, and India. The Company started its path of expansion over a century ago and it is one of the main players in the process of consolidating the global steel industry. The Company produces common long steel, specialty steels and flat steels, primarily through a production process which utilizes electric furnaces along with scrap and pig iron that are mostly purchased in the region in which each plant operates (mini-mill concept), but also produces steel from iron ore (through blast furnaces and direct reduction). The Company’s products serve the sectors of civil construction, industry, automotive and agriculture.
The Condensed Consolidated Interim Financial Statements of the Company were approved by the Disclosure Committee on October 31, 2012.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
2.1 - Basis of Presentation
The Company’s Condensed Consolidated Interim Financial Statements for the three-month and nine-month periods ended September 30, 2012 have been prepared in accordance with the International Accounting Standard (IAS) Nº 34, whichestablishes the content of condensed interim financial statements. These Condensed Consolidated Interim Financial Statements should be read in conjunction with the Consolidated Financial Statements of Gerdau S.A., as of December 31, 2011, which were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board - IASB.
The preparation of the Condensed Consolidated Interim Financial Statements in accordance with IAS 34 requires Management to make accounting estimates. The Condensed Consolidated Interim Financial Statements have been prepared using the historical cost as its basis, except for the valuation of certain financial instruments and biological assets, which are measured at fair value.
The same accounting policies and methods of calculation were used in these Condensed Consolidated Interim Financial Statements as they were applied in the Consolidated Financial Statements as of December 31, 2011, except, where applicable, for the impact of the adoption of standards and interpretations of rules described below:
2.2 – New IFRS and Interpretations of the IFRIC (International Financial Reporting Interpretations Committee)
Some new IASB accounting procedures and IFRIC interpretations were issued and/or reviewed and have their optional or mandatory adoption for the period beginning on January 1, 2012. The Company’s assessment on the impact of these new procedures and interpretations is as follows:
Standards and Interpretations in force
IFRS 7 - Disclosure - Transfers of Financial Assets
In October 2010, the IASB revised IFRS 7. This amendment has the objective of adding disclosures that enable users of financial statements to assess the risk of exposure over transfers of financial assets and the effects of these risks on the entity’s financial position. The change in the standard IFRS 7 is effective for annual periods beginning on or after July 01, 2011. The adoption of this revised standard did not have an impact in the Company’s Consolidated Financial Statements.
GERDAU S.A. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS as of September 30, 2012 (In thousands of Brazilian Reais – R$, unless otherwise stated) (Unaudited)
Standards and Interpretations of standards not yet effective
IFRS 9 – Financial Instruments
In November 2009, the IASB issued IFRS 9, which has the objective of replacing the standard IAS 39 Financial Instruments: Recognition and Measurement, in three stages. This standard is the first part of stage 1 of IAS 39 replacement and addresses the classification and measurement of financial assets. In October 2010, the IASB added to this standard the requirements for classification and measurement of financial liabilities. This standard and its subsequent change are effective for annual reporting periods beginning on or after January 1, 2015. The Company is assessing the impacts from the adoption of this standard and possible differences compared to IAS 39.
IFRS 10 — Consolidated Financial Statements
In May 2011, the IASB issued IFRS 10. This standard establishes the principles for presentation and preparation of consolidated financial statements when an entity control one or more entities. This standard is effective for annual reporting periods beginning on or after January 1, 2013. The Company is assessing the impact of adopting this standard on its Consolidated Financial Statements.
IFRS 11 — Joint Arrangements
In May 2011, the IASB issued IFRS 11. This standard addresses aspects related to the accounting treatment for jointly-controlled entities and joint operations. This standard also limits the use of proportional consolidation just for joint operations, and also establishes the equity accounting method as the only method acceptable for joint ventures. This standard is effective for annual reporting periods beginning on or after January 1, 2013. The Company has already adopted the equity accounting method for investments in associates and jointly-controlled entities and it is currently assessing the impact of adopting this standard on its Consolidated Financial Statements.
IFRS 12 — Disclosure of Interests in Other Entities
In May 2011, the IASB issued IFRS 12. This standard addresses aspects related to the disclosure of nature of risks related to interests owned in subsidiaries, jointly-controlled entities and associate companies. This standard is effective for annual reporting periods beginning on or after January 1, 2013. The Company is assessing the impact of adopting this standard on its Consolidated Financial Statements.
IFRS 13 — Fair Value Measurement
In May 2011, the IASB issued IFRS 13. This standard establishes fair value and consolidates in a single standard the aspects of fair value measurement and establishes the requirements of disclosure related to fair value. This standard is effective for annual reporting periods beginning on or after January 1, 2013. The Company is assessing the impact of adopting this standard on its Consolidated Financial Statements.
IAS 28 — Investments in Associates and Joint Ventures
In May 2011, the IASB revised IAS 28. The change in IAS 28 addresses aspects related to investments in associate companies and establishes the rules for using the equity accounting method for investments in associate companies and jointly-controlled entities. The revised standard is effective for annual reporting periods beginning on or after January 1, 2013. The Company already adopted the equity accounting method for its investments in associate companies and jointly-controlled entities and is assessing the impact of the other changes of this standard on its Consolidated Financial Statements.
IAS 19 – Employee Benefits
In June 2011, the IASB revised IAS 19. The most significant modification refers to recognizing the changes on defined benefit obligations and plan assets. The modifications require the recognition of changes in defined benefit obligations and fair value of plan assets as they occur, and therefore the elimination of the “corridor approach” allowed in the previous version of IAS 19 and the advanced recognition of past service costs. Additionally, the amendments require that all actuarial gains and losses be recognized immediately through other comprehensive income so that the net asset or liability of the pension plan is recognized in its Consolidated Financial Statements to reflect the full amount of the plan deficit or surplus. The revised standard is effective for annual reporting periods beginning on or after January 1, 2013. The Company is assessing the impact of adopting this standard on its Consolidated Financial Statements.
GERDAU S.A. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS as of September 30, 2012 (In thousands of Brazilian Reais – R$, unless otherwise stated) (Unaudited)
IAS 1 — Presentation of Items of Other Comprehensive Income
In June 2011, the IASB revised IAS 1. The change in IAS 1 addresses aspects related to disclosure of other comprehensive income items and establishes the need to separate items which will not be further reclassified to the net income and items that can be further reclassified to the net income. The revised standard is effective for annual reporting periods beginning on or after July 1, 2012. The Company is assessing the impact of adopting this standard on its Consolidated Financial Statements.
IFRIC 20 — Stripping Costs in the Production Phase of a Surface Mine
In October 2011, the IASB issued the IFRIC 20. This interpretation addresses aspects related to the accounting treatment of stripping costs in the production phase of a surface mine. This interpretation is effective for annual reporting periods beginning on or after January 1, 2013. The Company is assessing the impact of adopting this interpretation on its Consolidated Financial Statements.
IFRS 9 and IFRS 7 – Mandatory Effective Date and Transition Disclosures – Amendments to IFRS 9 and IFRS 7
In December 2011 the IASB revised IFRS 9 and 7. The amendment of IFRS 9 addresses the extension of the adoption date from January 1, 2013 to January 1, 2015. The amendment of IFRS 7 addresses issues relating to disclosure about the transition from IAS 39 to IFRS 9 and aspects related to the restatement of the comparative periods at the date of adoption of this statement. The Company is evaluating the impact of the adoption of these amendments in its Consolidated Financial Statements.
IFRS 7 – Disclosures – Offsetting Financial Assets and Financial Liabilities – Amendments to IFRS 7
In December 2011, the IASB revised IFRS 7. This amendment addresses disclosure issues related to the offsetting of financial assets and liabilities including rights and evaluates its effects. This standard is effective for annual periods beginning on or after January 1, 2013. The Company is evaluating the impact of the adoption of this amendment in its Consolidated Financial Statements.
IAS 32 – Offsetting Financial Assets and Financial Liabilities – Amendments to IAS 32
In December 2011, the IASB revised IAS 32. The amendment of this standard addresses issues related to the offsetting of financial assets and liabilities. This standard is effective for annual periods beginning on or after January 1, 2014. The Company is evaluating the impact of the adoption of this amendment in its Consolidated Financial Statements.
IFRS 1 — First-time Adoption of International Financial Reporting Standards – Government Loans
In March 2012, the IASB revised IFRS 1. This change of IFRS 1 addresses an exception for the retrospective adoption of requirements of IFRS 9 and IAS 20 in government loans that are in place in the IFRS transition date. This standard is effective for annual reporting periods beginning on or after January 1, 2013. The Company believes that these changes will not impact its Consolidated Financial Statements since it already adopts IFRS 1.
IFRS Annual improvements of May 2012
In May 2012, the IASB revised the standards IFRS 1, IAS 1, IAS 16, IAS 32, IFRIC 2 and IAS 34. These revised standards are effective for years beginning on or after January 1, 2013. The Company is assessing the impact of adopting these changes on its Consolidated Financial Statements.
IFRS 10, IFRS 11 e IFRS 12 – Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance – Amendments to IFRS 10, IFRS 11 and IFRS 12
In June 2012, the IASB revised IFRS 10, IFRS 11 and IFRS 12, which address aspects related to the first time adoption of these standards and aspects related to adjustments to comparative disclosures. These revised standards are effective for years
GERDAU S.A. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS as of September 30, 2012 (In thousands of Brazilian Reais – R$, unless otherwise stated) (Unaudited)
beginning on or after January 1, 2013. The Company is assessing the impact of adopting these changes on its Consolidated Financial Statements.
NOTE 3 – CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
3.1 - Subsidiaries
The Company did not have material changes of participation in subsidiaries for the period ended September 30, 2012, compared to those existing on December 31, 2011, except by the operation described at Note 3.4.
3.2 - Jointly-Controlled Entities
The Company did not have material changes of participation in jointly-controlled entities for the period ended September 30, 2012, compared to those existing on December 31, 2011, except by the operation described at Note 3.4.
3.3 – Associate companies
The Company did not have material changes of participation in associate companies for the period ended September 30, 2012, compared to those existing on December 31, 2011.
3.4 – Acquisition of control of an entity
On July 7, 2012, the Company obtained control of its jointly-controlled entity Kalyani Gerdau Steel Ltds (KGS), which is a specialty steel entity based in India and which the Company had an interest of 91.28% as of the control acquisition date. The control was obtained by the expiration of the KGS partner veto power and the right of recovering its original interest in KGS. As a result of the business combination, the Company reclassified the non deductible for tax purposes goodwill, previously recognized in the amount of R$ 28,389, from the Investments in associates and jointly-controlled entities account to the Goodwill account. The company has not concluded the fair value assessment of the assets and liabilities of KGS up to September 30, 2012, but the Company does not expect material adjustments in the amounts consolidated as of September 30, 2012. The following table summarizes the KGS book value as of the control acquisition date.
The amounts recognized as Net sales and Trade accounts receivable, attributed to KGS, included in the Condensed Consolidated Financial Statements of the Company as from the control acquisition date of this subsidiary are not material. KGS, as from the control acquisition date and up to September 30, 2012 generated a Net loss of R$ 27,155. In addition, the amounts of Net Sales and Net income (loss) that would have been generated by KGS for the nine-month period ended on September 30, 2012, in case this entity had been acquired as from the beginning of the period, would not be expected to be material.
GERDAU S.A. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS as of September 30, 2012 (In thousands of Brazilian Reais – R$, unless otherwise stated) (Unaudited)
NOTE 4 – CASH AND CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS
Cash and cash equivalents
Short term investments
Held for trading securities include Bank Deposit Certificates and marketable securities investments, which are stated at their fair value. Income generated by these investments is recorded as financial income.
NOTE 5 – ACCOUNTS RECEIVABLE
NOTE 6 - INVENTORIES
The changes in the provision for market value adjustment are as follows:
GERDAU S.A. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS as of September 30, 2012 (In thousands of Brazilian Reais – R$, unless otherwise stated) (Unaudited)
Inventories are insured against fire and flooding. The insurance coverage is based on the amounts and risks involved.
During the three-month period ended on September 30, 2012 the amounts of R$ 8,621,389 and R$ 489,904 (R$ 7,628,291 and R$ 460,952 as of September 30, 2011), respectively were recognized as cost of sales and freights in the condensed consolidated interim financial statements. During the nine-month period ended on September 30, 2012 the amounts of R$ 25,264,844 and R$ 1,443,430 (R$ 22,433,669 and R$ 1,354,602 as of September 30, 2011), respectively were recognized as cost of sales and freights in the condensed consolidated interim financial statements.
For the nine-month period ended on September 30, 2012, the cost of sales include the amounts of R$ 37,321 (R$ 85,227 as of September 30, 2011) related to inventories permanently written off and R$ 86,901 (R$ 46,376 as of September 30, 2011) related to the recognition of a provision for marktet value adjustments of inventories.
NOTE 7 – INCOME AND SOCIAL CONTRIBUTION TAXES
The Company’s subsidiaries in Brazil used R$ 6,930 and R$ 11,882 for the three-month and nine-month periods ended on September 30, 2012, respectively, (R$ (1,716) and R$ 6,382 for the three-month and nine-month periods ended on September 30, 2011, respectively) of tax incentives in the form of income tax credits, related to technological innovation, funds for the rights of children and adolescents, PAT (Workers’ Meal Program), and cultural and artistic activities. The units of the subsidiary Gerdau Aços Longos S.A., located in the northeast region of Brazil, will receive until 2013, a 75% reduction in income tax on operating profit, which represents R$ 5,177 and R$ 6,673for the three-month and nine-month period ended on September 30, 2012 (R$ (6,345) and R$ 0 for the three-month and nine-month periods ended on September 30, 2011). The respective tax incentives were recorded directly in the income and social contribution tax account in the statement of income.
As of September 30, 2012, the Company had tax loss carryforwards arising from its operations in Brazil of R$ 540,075 for income tax (R$ 606,139 as of December 31, 2011) and R$ 1,406,705 for social contribution tax (R$ 1,291,616 as of December 31, 2011), representing a deferred tax asset of R$ 261,622 (R$ 267,780 as of December 31, 2011). The Company believes that the amounts will be realized based on future taxable income. In addition to these deferred tax assets, the Company has not recorded a portion of the tax asset of R$ 176,795 (R$ 172,556 as of December 31, 2011), due to the Company’s inability to use the tax loss carryforwards in its subsidiaries. Notwithstanding, these tax loss carryforwards do not have an expiration date.
As of September 30, 2012, the subsidiary Gerdau Ameristeel has a deferred tax asset from tax losses in its operation in Canada in the amount of R$ 138,599 related to income tax (R$ 123,572 as of December 31, 2011). These credits expire on various dates between 2025 and 2031. The subsidiary believes the amounts will be used with future taxable income, and historically the subsidiary has generated enough taxable income to the use of these assets.
As of September 30, 2012, the subsidiary Gerdau Ameristeel had R$ 144,353 (R$ 133,881 as of December 31, 2011) of capital losses that had not been recognized in the Company’s condensed consolidated interim balance sheets. These losses are primarily related to the write-down of the subsidiary’s long-term investments and none of these losses currently have an expiration date except for R$ 66,939 and R$ 1,854 included in the condensed consolidated interim balance sheets as of September 30, 2012 which expires in 2015 and 2016, respectively (R$ 61,836 and R$ 1,713 as of December 31, 2011). The subsidiary had various state tax losses totaling R$ 118,898 (R$ 208,060 as of December 31, 2011) which had not been recognized in the Company’s condensed interim financial statements and which expires between 2012 and 2031. The subsidiary also had R$ 82,920 of state tax credits for the period ended September 30, 2012 (R$ 76,771 as of December 31, 2011), that were not recognized in the Company’s condensed consolidated interim balance sheet. These credits will expire on various dates between 2015 and 2018 with the exception of a portion of R$ 9,130 (R$ 13,147 as of December 31, 2011), which has no expiration date.
In Brazil, income taxes include the federal income tax (IR) and social contribution (CS), which represent an additional federal income tax. The applicable tax rates for income tax and social contribution are 25% and 9%, respectively, for the periods of three and nine months ended on September 30, 2012 and 2011. Beyond the domestic tax rates mentioned above, the Company is also subject to taxes on income in its subsidiaries abroad, which tax rate ranges between 20% and 38.5%. The difference between the tax rates in Brazil and the tax rates in other countries are presented in the reconciliation of income tax and social contribution adjustments on net income in the row “difference in tax rates in foreign companies”.
GERDAU S.A. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS as of September 30, 2012 (In thousands of Brazilian Reais – R$, unless otherwise stated) (Unaudited)
Reconciliation of income tax (IR) and social contribution (CS) adjustments on the net income:
The credits recognized under tax loss carry-forwards are supported in projections of taxable future incomes discounted to present value, which are based on technical analysis of feasibility, which are annually presented to the board of the Company. These analyses take into account the historical of the Company profitability and the outlook for maintenance of current profitability in the future, allowing an estimation of credits recovery. The other credits, which are based on temporary differences, mainly tax contingencies, as well as provision for losses, were recognized according to their expectation of use.
GERDAU S.A. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS as of September 30, 2012 (In thousands of Brazilian Reais — R$, unless otherwise stated) (Unaudited)
NOTE 8 — INVESTMENTS
I) Associates and jointly-controlled entities
a) Joint Ventures North America
Companies: Gallatin Steel Company, Bradley Steel Processors e MRM Guide Rail.
b) Goodwill
NOTE 9 — PROPERTY, PLANT AND EQUIPMENT
a) Summary of changes in property, plant and equipment — during the three-month period ended on September 30, 2012, acquisitions amounted to R$ 903,901 (R$ 616,085 as of September 30, 2011), and disposals amounted to R$ 24,921 (R$ 3,738 as of September 30, 2011). During the nine-month period ended on September 30, 2012, acquisitions amounted to R$ 2,445,274 (R$ 1,289,108 as of September 30, 2011), and disposals amounted to R$ 28,078 (R$ 24,298 as of September 30, 2011).
b) Capitalized borrowing costs — borrowing costs capitalized during the three-month period ended September 30, 2012 amounted to R$ 26,718 (R$ 12,620 as of September 30, 2011). Borrowing costs capitalized during the nine-month period ended September 30, 2012 amounted to R$ 68,801 (R$ 36,195 as of September 30, 2011).
c) Guarantees — property, plant and equipment have been pledged as collateral for loans and financing in the amount of R$ 447,658 as of September 30, 2012 (R$ 119,289 as of December 31, 2011).
GERDAU S.A. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS as of September 30, 2012 (In thousands of Brazilian Reais — R$, unless otherwise stated) (Unaudited)
NOTE 10 — GOODWILL
The changes in goodwill are as follows:
The amount of goodwill by segment is as follows:
NOTE 11 — LOANS AND FINANCING
Loans and financing are as follows:
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