Gerdau Ameristeel Reports Profit For First Quarter of 2010
TAMPA, FL, May 6 /PRNewswire-FirstCall/ - Gerdau Ameristeel Corporation (NYSE: GNA; TSX: GNA) today reported net income of $25.2 million ($0.06 per share diluted) for the three months ended March 31, 2010, in comparison to a net loss of $31.5 million ($0.07 per share) for the three months ended March 31, 2009 and a net loss of $32.8 million ($0.08 per share) for the three months ended December 31, 2009. The Company has adopted International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board, as of January 1, 2010 and, as such, the comparative periods for fiscal year 2009 have been restated under IFRS.
Net sales for the three months ended March 31, 2010 increased 10% to $1.1 billion from $1.0 billion reported for each of the three months ended March 31, 2009 and December 31, 2009. For the three months ended March 31, 2010 weighted average mill selling price decreased 12% or $86 per ton in comparison to the three months ended March 31, 2009, but increased 6% or $37 per ton in comparison to the three months ended December 31, 2009. Finished steel shipments were 1.5 million tons for the three months ended March 31, 2010, an increase of 25% in comparison to the three months ended March 31, 2009 and an increase of 15% from the three months ended December 31, 2009.
EBITDA, as adjusted (see EBITDA section herein for an explanation of the EBITDA calculation), was $116.7 million for the three months ended March 31, 2010, compared to EBITDA of $41.8 million for the three months ended March 31, 2009 and $60.5 million for the three months ended December 31, 2009. The improvement in EBITDA from each comparative period was primarily due to the cost reduction initiatives undertaken by the Company in 2009. Increased shipment volumes were also a factor in the improvement of EBITDA. Scrap raw material cost used in production during the three months ended March 31, 2010 was $266 per ton compared to $200 per ton for the three months ended March 31, 2009 and $217 per ton for the three months ended December 31, 2009.
At March 31, 2010, the Company had $594.7 million of cash and short-term investments, a decrease of $61.6 million from December 31, 2009 as the Company's investment in working capital increased as a result of rising scrap costs and the increase in production and shipment levels. In addition to its cash and short-term investments, the Company had approximately $497.9 million available under secured credit facilities which resulted in a total liquidity position of approximately $1.1 billion at March 31, 2010.
As of March 31, 2010, the Company had 433,492,864 common shares outstanding.
CEO Comments
Mario Longhi, President and CEO of Gerdau Ameristeel, commented:
"I'm pleased to say that we reported a profitable first quarter. After a challenging 2009, where we intensely addressed everything under our control, we were able to benefit from a generally better than expected demand for our products during the quarter. We believe our customers are beginning to feel more confident in the U.S. economic recovery and this is translating into better activity in our end-markets.
First quarter performance certainly improved as a result of the numerous actions we undertook during the last 18 months to increase cost efficiency and lower our breakeven point. Those actions, along with increased production, led to the lowest manufacturing cost per ton we have experienced since 2007. Our improved operational effectiveness is a confirmation of our flexible business model.
Looking ahead, we believe that demand will continue to slowly improve during the second quarter as confidence in the recovery gradually grows and we continue to feel the effects of normal seasonality."
IFRS Conversion
As previously mentioned, the Company's Consolidated Financial Statements have been prepared under IFRS. The Company previously prepared its Consolidated Financial Statements under generally accepted accounting principles in the United States ("US GAAP"). In accordance with IFRS 1, First-Time Adoption of International Financial Reporting Standards, the Company's IFRS transition date was January 1, 2009 and the Company prepared its opening IFRS balance sheet as of that date. The Company has restated its comparative periods under IFRS and the Company's quarterly and annual filings will contain reconciliations between IFRS and previously reported amounts under US GAAP for 2009.
Forward Looking Statements
In this press release, "Gerdau Ameristeel" and "Company" refer to Gerdau Ameristeel Corporation and its subsidiaries and 50%-owned joint ventures. Certain statements in this press release, including, without limitation, the section entitled "CEO Comments" constitute forward-looking statements. Such statements describe the Company's assumptions, beliefs and expectations with respect to its operations, future financial results, business strategies and growth and expansion plans can often be identified by the words "anticipates," "believes," "estimates," "expects," "intends," "plans," and other words and terms of similar meaning. The Company cautions readers that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those currently projected by the Company. In addition to those noted in the statements themselves, any number of factors could affect actual results, including, without limitation:
Excess global steel industry capacity and the availability of competitive substitute materials; the cyclical nature of the steel industry and the industries served by the Company and economic conditions in North America and worldwide; increases in the cost of steel scrap, energy and other raw materials; steel imports and trade regulations; a change in China's steelmaking capacity or slowdown in China's steel consumption; the Company's participation in the consolidation of the steel industry; the substantial capital investment and similar expenditures required in the Company's business; unexpected equipment failures and plant interruptions or outages; the Company's level of indebtedness; the cost of compliance with environmental and occupational health and safety laws; the enactment of laws intended to reduce greenhouse gases and other air emissions; the Company's ability to fund its pension plans; the ability to renegotiate collective bargaining agreements and avoid labor disruptions; the Company's ability to successfully implement a new enterprise resource planning system; currency exchange rate fluctuations; actions or potential actions taken by the Company's principal stockholder, Gerdau S.A.; the liquidity of the Company's long-term investments, including investments in auction rate securities; and the Company's reliance on its 50% owned joint ventures that it does not control.
Any forward-looking statements in this press release are based on current information as of the date of this press release and the Company does not undertake any obligation to update any forward-looking statements to reflect new information, future developments or events, except as required by law.
Notice of Conference Call
Gerdau Ameristeel invites you to listen to a live broadcast of its fourth quarter conference call on Thursday, May 6, 2010, at 2:30 pm EST. The call will be hosted by Mario Longhi, President and CEO, and Barbara Smith, VP and CFO, and can be accessed via our Web site at www.gerdauameristeel.com or by calling 1-888-231-8191 (1-647-427-7450 if outside the United States) and using the reference number 69111319. Web cast attendees are welcome to listen to the conference in real-time or on-demand at your convenience.
About Gerdau Ameristeel
Gerdau Ameristeel is the second largest mini-mill steel producer in North America, with annual manufacturing capacity of approximately 12 million tons of mill finished steel products. Through its vertically integrated network of mini-mills, scrap recycling facilities and downstream operations, Gerdau Ameristeel serves customers throughout the United States and Canada. The Company's products are generally sold to steel service centers, steel fabricators, or directly to original equipment manufacturers for use in a variety of industries, including non-residential, infrastructure, commercial, industrial and residential construction, metal building, manufacturing, automotive, mining, cellular and electrical transmission and equipment manufacturing. Gerdau Ameristeel's majority shareholder is the Gerdau Group, a 100+ year old steel company, the leading company in the production of long steel in the Americas and one of the major specialty long steel suppliers in the world. Gerdau Ameristeel's common shares are traded on the New York Stock Exchange and the Toronto Stock Exchange under the ticker symbol GNA.
GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(US$ in thousands, except earnings per share data)
(Unaudited)
Three Months Ended
-----------------------------------------
March 31, December 31, March 31,
2010 2009 2009
------------- ------------- -------------
NET SALES $ 1,137,725 $ 975,926 $ 1,037,699
Cost of sales (1,031,828) (952,268) (989,779)
------------- ------------- -------------
GROSS PROFIT 105,897 23,658 47,920
OPERATING EXPENSES
Selling, general and
administrative expenses 60,427 64,557 62,409
Other operating (income)
expense, net (2,140) (21,602) 2,398
------------- ------------- -------------
58,287 42,955 64,807
INCOME (LOSS) FROM OPERATIONS 47,610 (19,297) (16,887)
INCOME (LOSS) FROM 50% OWNED
JOINT VENTURES 7,676 7,156 (10,244)
------------- ------------- -------------
INCOME (LOSS) BEFORE FINANCE
COSTS, NET AND INCOME TAXES 55,286 (12,141) (27,131)
FINANCE COSTS, NET
Interest income (416) (730) (1,401)
Interest expense -
non-affiliated 23,377 41,489 41,956
Interest expense - affiliated 12,634 1,021 575
Foreign exchange (gain)
loss, net 1,749 7,371 (2,733)
Realized (gain) loss on
investments, net (2,528) (3,244) -
------------- ------------- -------------
34,816 45,907 38,397
INCOME (LOSS) BEFORE
INCOME TAXES 20,470 (58,048) (65,528)
INCOME TAX BENEFIT 3,708 23,711 32,076
------------- ------------- -------------
NET INCOME (LOSS) 24,178 (34,337) (33,452)
------------- ------------- -------------
------------- ------------- -------------
NET INCOME (LOSS)
ATTRIBUTABLE TO:
Equity holders of the company $ 25,201 $ (32,841) $ (31,480)
Non-controlling interest (1,023) (1,496) (1,972)
------------- ------------- -------------
$ 24,178 $ (34,337) $ (33,452)
------------- ------------- -------------
------------- ------------- -------------
EARNINGS PER SHARE ATTRIBUTABLE
TO EQUITY HOLDERS OF THE COMPANY
Basic earnings (loss)
per share $ 0.06 $ (0.08) $ (0.07)
Diluted earnings (loss)
per share $ 0.06 $ (0.08) $ (0.07)
GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(US$ in thousands)
(Unaudited)
March 31, December 31, January 1,
ASSETS 2010 2009 2009
------------- ------------- -------------
Current assets
Cash and cash equivalents $ 429,801 $ 631,293 $ 482,535
Restricted cash 1,696 1,691 -
Short-term investments 164,894 25,000 205,817
Trade accounts receivable, net 566,389 460,066 677,569
Inventories 952,680 814,788 1,267,768
Costs and estimated earnings
in excess of billings on
uncompleted contracts 5,625 4,687 14,771
Income taxes receivable 85,036 93,652 28,455
Other current assets 27,511 22,643 23,033
------------- ------------- -------------
Total current assets 2,233,632 2,053,820 2,699,948
Non-current assets
Investments in 50% owned
joint ventures 141,315 148,609 161,901
Long-term investments 25,996 28,538 33,189
Property, plant and
equipment, net 1,591,621 1,620,852 1,801,471
Goodwill, net 1,963,131 1,962,098 1,957,029
Other intangible assets, net 435,348 450,003 515,736
Deferred tax assets 34,007 29,760 -
Other non-current assets 43,707 23,459 32,305
------------- ------------- -------------
Total non-current assets 4,235,125 4,263,319 4,501,631
------------- ------------- -------------
TOTAL ASSETS $ 6,468,757 $ 6,317,139 $ 7,201,579
------------- ------------- -------------
------------- ------------- -------------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Trade accounts payable and
accrued liabilities $ 340,623 $ 225,111 $ 199,582
Accrued salaries, wages and
employee benefits 63,492 71,214 127,351
Accrued interest -
non-affiliated 3,675 15,344 54,480
Accrued interest - affiliated 15,896 3,772 -
Provisions 35,675 35,126 34,551
Short-term debt -
non-affiliated 3,171 3,174 1,893
Billings in excess of costs
and estimated earnings on
uncompleted contracts 20,895 26,212 45,687
Other current liabilities 13,579 12,959 20,932
------------- ------------- -------------
Total current liabilities 497,006 392,912 484,476
Non-current liabilities
Long-term debt -
non-affiliated 1,721,170 1,721,806 3,032,824
Long-term debt - affiliated 606,655 606,711 -
Retirement benefit obligations 348,956 348,684 339,055
Deferred tax liabilities 247,591 259,170 269,661
Redeemable non-controlling
interest 27,497 32,439 46,927
Provisions 21,951 21,203 18,552
Other non-current liabilities 123,291 89,753 116,092
------------- ------------- -------------
Total non-current liabilities 3,097,111 3,079,766 3,823,111
TOTAL LIABILITIES 3,594,117 3,472,678 4,307,587
------------- ------------- -------------
Shareholders' equity
Capital 2,536,839 2,535,883 2,531,516
Retained earnings 212,306 187,105 373,323
Other comprehensive income 98,915 94,893 (37,427)
------------- ------------- -------------
Equity attributable to equity
holders of the company 2,848,060 2,817,881 2,867,412
Equity attributable to
non-controlling interest 26,580 26,580 26,580
------------- ------------- -------------
TOTAL SHAREHOLDERS' EQUITY 2,874,640 2,844,461 2,893,992
------------- ------------- -------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 6,468,757 $ 6,317,139 $ 7,201,579
------------- ------------- -------------
------------- ------------- -------------
GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(US$ in thousands)
(Unaudited)
Three Months Ended March 31,
2010 2009
------------- -------------
Cash flows from operating activities
Net income (loss) $ 24,178 $ (33,452)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating
activities:
Depreciation 46,735 52,329
Amortization of intangibles 14,658 16,608
Income tax benefit (3,708) (32,076)
Interest expense - non-affiliated 23,377 41,956
Interest expense - affiliated 12,634 575
Loss on disposition of property, plant
and equipment 602 934
(Income) loss from 50% owned joint
ventures (7,676) 10,244
Distributions from 50% owned joint
ventures 15,405 405
Compensation cost (benefit) from
share-based awards 830 (1,903)
Realized gain on investments (2,528) -
Writedown of inventory - 18,426
Changes in operating assets and liabilities:
Accounts receivable (103,995) 109,925
Inventories (133,204) 201,522
Other assets (16,235) 4,366
Liabilities 109,730 (74,899)
------------- -------------
Cash (used in) provided by operating activities (19,197) 314,960
Income tax refund (paid) 111 (3,185)
Interest paid (39,400) (79,878)
------------- -------------
Net cash (used in) provided by operating
activities (58,486) 231,897
Cash flows from investing activities
Purchases of property, plant and equipment (10,189) (36,284)
Proceeds from disposition of property,
plant and equipment 457 1,179
Change in restricted cash (5) -
Purchases of investments (164,850) (269,688)
Proceeds from sales of investments 30,063 145,697
------------- -------------
Net cash used in investing activities (144,524) (159,096)
Cash flows from financing activities
Repayments on non-affiliated debt (1,568) (2,626)
Payments of deferred financing costs (1,488) -
Cash dividends - (8,646)
Distributions to subsidiary's
non-controlling interest (4,373) (3,593)
Proceeds from exercise of employee
stock options 594 94
------------- -------------
Net cash used in financing activities (6,835) (14,771)
Effect of exchange rate changes on cash
and cash equivalents 8,353 (4,966)
------------- -------------
Net (decrease) increase in cash and cash
equivalents (201,492) 53,064
Cash and cash equivalents beginning of period 631,293 482,535
------------- -------------
Cash and cash equivalents end of period $ 429,801 $ 535,599
------------- -------------
------------- -------------
EBITDA: EBITDA is calculated by adding income (loss) before interest and other expense on debt; taxes; depreciation; amortization of intangibles; realized gain (loss) on investments, net; and foreign exchange gain/loss, net; and deducting interest income. Management believes EBITDA, a non-IFRS measure, is a useful supplemental measure of cash available prior to debt service, capital expenditures and income tax. During the three months ended March 31, 2010, the Company changed its calculation of EBITDA to the equity method, which includes net earnings from 50% owned joint ventures and excludes cash distributions from 50% owned joint ventures. EBITDA should not be construed as an alternative to net income determined in accordance with IFRS as a performance indicator or to cash flows from operations as a measure of liquidity and cash flows. The Company's method of calculating EBITDA may differ from the methods used by other companies and, accordingly, it may not be comparable to similarly titled measures used by other companies. Reconciliation of EBITDA to net income (loss) for the three months ended March 31, 2010, December 31, 2009 and March 31, 2009 is shown below:
For the Three Months Ended - Unaudited
-----------------------------------------
March 31, December 31, March 31,
2010 2009 2009
------------- ------------- -------------
($000s)
Net income (loss) $ 24,178 $ (34,337) $ (33,452)
Income tax benefit (3,708) (23,711) (32,076)
Interest expense -
non-affiliated 23,377 41,489 41,956
Interest expense - affiliated 12,634 1,021 575
Interest income (416) (730) (1,401)
Depreciation 46,735 56,456 52,329
Amortization of intangibles 14,658 16,162 16,608
Foreign exchange loss (gain),
net 1,749 7,371 (2,733)
Realized (gain) on investments,
net (2,528) (3,244) -
------------- ------------- -------------
EBITDA $ 116,679 $ 60,477 $ 41,806
------------- ------------- -------------
------------- ------------- -------------
SUPPLEMENTAL OPERATING AND FINANCIAL INFORMATION - UNAUDITED
THE INFORMATION IN THIS TABLE EXCLUDES 50% OWNED JOINT VENTURES
For the Three Months Ended
----------------------------------------------
March 31, 2010 December 31, 2009
---------------------- ----------------------
Tons Tons
----------- -----------
Production
Melt Shops 1,750,128 1,273,949
Rolling Mills 1,571,111 1,158,748
Tons % Tons %
----------- ----- ----------- -----
Finished Steel Shipments
Rebar 265,152 18% 217,965 17%
Merchant/Special Sections 875,095 59% 752,588 58%
Rod 109,138 7% 102,897 8%
Fabricated Steel 231,680 16% 215,158 17%
----------- ----- ----------- -----
Total Shipments 1,481,065 100% 1,288,608 100%
$/Ton $/Ton
----------- -----------
Selling Prices
Mill external shipments 642 605
Fabricated steel shipments 800 839
Scrap Charged 266 217
Metal Spread (Selling
price less scrap)
Mill external shipments 376 388
Fabricated steel shipments 534 622
Mill manufacturing cost 274 328
For the Three
Months Ended
----------------------
March 31, 2009
----------------------
Tons
-----------
Production
Melt Shops 1,150,894
Rolling Mills 1,205,959
Tons %
----------- -----
Finished Steel Shipments
Rebar 192,500 16%
Merchant/Special Sections 601,886 51%
Rod 117,167 10%
Fabricated Steel 273,709 23%
----------- -----
Total Shipments 1,185,262 100%
$/Ton
-----------
Selling Prices
Mill external shipments 728
Fabricated steel shipments 1,090
Scrap Charged 200
Metal Spread (Selling
price less scrap)
Mill external shipments 528
Fabricated steel shipments 890
Mill manufacturing cost 362
RECONCILIATIONS BETWEEN IFRS AND US GAAP
IFRS 1 requires an entity to reconcile equity, net loss and cash flows for prior periods. The Company's first time adoption of IFRS did not have a significant impact on the total operating, investing or financing cash flows in prior periods. The following represents the reconciliations from US GAAP to IFRS for the respective periods noted for equity, net loss, and EBITDA:
Reconciliations of net loss ($000s):
For the Three Months Ended
----------------------------
December 31, March 31,
2009 2009
-------------- -------------
Net loss, US GAAP $ (47,594) $ (34,644)
Business combinations - redeemable
non-controlling interest (a) 2,770 (575)
Pension and postemployment benefits (b) 21,289 3,325
Stock-based compensation (c) (746) 601
Provisions (d) (1,038) (102)
Income taxes (e) (9,018) (2,057)
-------------- -------------
Subtotal - IFRS adjustments 13,257 1,192
-------------- -------------
Net loss, IFRS $ (34,337) $ (33,452)
-------------- -------------
-------------- -------------
Reconciliations of EBITDA ($000s):
For the Three Months Ended
----------------------------
December 31, March 31,
2009 2009
-------------- -------------
EBITDA, as previously reported(1) $ 43,816 $ 48,631
Adjustment for equity method(2) (2,844) (10,649)
-------------- -------------
EBITDA $ 40,972 $ 37,982
Pension and postemployment benefits (b) 21,289 3,325
Stock-based compensation (c) (746) 601
Provisions (d) (1,038) (102)
-------------- -------------
Subtotal - IFRS adjustments 19,505 3,824
-------------- -------------
EBITDA, as currently reported $ 60,477 $ 41,806
-------------- -------------
-------------- -------------
(1) EBITDA as reported in the March 31, 2009 quarterly filing.
(2) During the three months ended March 31, 2010, the Company changed its
calculation of EBITDA to the equity method, which now includes net
earnings from 50% joint ventures and excludes cash distributions from
50% owned joint ventures.
Reconciliations of shareholders' equity ($000s):
December 31, January 1,
2009 2009
------------- -------------
Shareholders' equity, US GAAP $ 2,870,935 $ 2,933,492
Business combinations - redeemable
non-controlling interest (a) (32,439) (46,927)
Stock-based compensation (c) (5,277) (2,064)
Provisions (d) (9,099) (11,396)
Income taxes (e) 20,341 20,887
------------- -------------
Subtotal - IFRS adjustments (26,474) (39,500)
------------- -------------
Shareholders' equity, IFRS $ 2,844,461 $ 2,893,992
------------- -------------
------------- -------------
Description of adjustments impacting net loss, EBITDA and/or shareholders' equity
In addition to the exemptions and exceptions discussed above, the following narratives explain the significant differences between the previous historical US GAAP accounting policies and the current IFRS accounting policies applied by the Company. Only the differences having a significant impact on the Company are described below. The following is not a complete summary of all of the differences between US GAAP and IFRS. Relative to the impacts on the Company, the descriptive caption next to each numbered item below corresponds to the same numbered and descriptive caption in the tables above, which reflect the quantitative impacts from each change.
(a) Business combinations - redeemable non-controlling interest
Under US GAAP, a redeemable non-controlling interest is not required to be separately recognized in the balance sheet as a financial instrument when the redemption value is determined to be at the fair value of the underlying non-controlling interest. Under IFRS, the Company was required to record a liability for the present value of the expected redemption amount of the written put. As of January 1, 2009 (the Company's transition date), the counterpart was recorded directly in Capital in the Company's condensed consolidated balance sheet. Subsequent changes to the present value of the expected redemption amount are recognized in the statement of operations in Interest expense - affiliated. Upon exercise, under IFRS, the differential between the amount paid and the carrying amount of the non-controlling interest at the date of exercise would be reclassified to Capital in the Company's condensed consolidated balance sheet.
(b) Pension and postemployment benefits
Under US GAAP, the Company recognized actuarial gains and in the statement of operations using the corridor approach. Under IFRS, another approach is permitted allowing a company to adopt a policy of recognizing all of its actuarial gains and losses in the period in which they occur in other comprehensive income. Under US GAAP, prior service cost should be recognized in other comprehensive income at the date of the adoption of the plan amendment and then amortized into income over the participants' remaining years of service, service to full eligibility date, or life expectancy, as applicable. Under IFRS, prior service cost should be recognized on a straight-line basis over the average period until the benefits become vested. To the extent that benefits are vested as of the date of the plan amendment, the cost of those benefits should be recognized immediately in the statement of operations. Additionally, under US GAAP, the Company recognized curtailments in accumulated other comprehensive income to the extent that prior actuarial gains (losses) had been recognized in accumulated other comprehensive income and had not yet been recognized in the statement of operations based on the corridor approach. Under IFRS, curtailments are recognized immediately in the statement of operations when they occur.
This adjustment reflects the reclassification of actuarial gains and losses recognized as pension cost in the statement of operations under US GAAP to other comprehensive income for the period and the recognition of curtailments and prior service cost immediately in the statement of operations for vested participants. The Company had $22.3 million of curtailment gains during the three months ended December 31, 2009 which were recognized in accumulated other comprehensive income under US GAAP but were required to be recognized in the statement of operations under IFRS. The curtailment gains in the three months ended December 31, 2009 resulted primarily from facility closures as well as certain one-time retirement benefit changes implemented by the Company.
(c) Stock-based compensation
Under US GAAP, the Company recognizes compensation expense associated with share-based compensation plans with graded vesting features on a straight-line basis over the vesting period. Under IFRS, the Company is required to treat each "tranche" of a share-based compensation arrangement with a graded vesting schedule as several individual grants, which results in the recognition of compensation expense on an accelerated basis in comparison to US GAAP.
(d) Provisions
Under US GAAP, the Company discounted its provisions to reflect the time value of money when the aggregate amount of the liability, and the amount and timing of cash payments for the liability were fixed or reliably determinable. The discount rate used by the Company was one which would have produced an amount at which the liability theoretically could be settled in an arm's-length transaction with a third party. After initial measurement of a liability, no adjustment in the obligation was made if there was a change in the discount rate. Under IFRS, a provision is discounted if the time value of money is material. IFRS requires the use of a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where all risk adjustments are reflected in the cash flows, then the cash flows are discounted at a risk-free rate, which means that typically, a government bond "yield" rate should be used. The re-measurement of a provision includes the effect of a change in discount rate. This adjustment is the result of the Company's use of a pre-tax discount rate under IFRS that reflects current market assessments of the time value of money and the risks specific to the liability.
(e) Income taxes
This adjustment reflects the deferred income tax effects of the above adjustments. In addition, under US GAAP, the deferred tax benefit associated with share-based compensation awards (equity awards) is recognized over the vesting period based on the grant date fair value of the grant. Any difference between the tax benefit realized on the tax return and the amount previously recognized through the statement of operations is recognized either in equity or income, depending on the Company's prior experience, when the tax deduction is realized on the tax return. Under IFRS, the deferred tax benefit associated with share-based compensation awards (equity awards) is recognized over the vesting period based on the best estimate of the future tax deduction at each balance sheet date.
SOURCE Gerdau Ameristeel Corporation
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