Exhibit 3
GERDAU S.A.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2003 and 2002
(in thousands of U.S. Dollars, except number of shares)
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS
2003 2002
--------------- ---------------
Current assets
Cash and cash equivalents 92,504 40,457
Restricted cash 1,935 15,001
Short-term investments 236,137 367,748
Trade accounts receivable, net 465,857 361,801
Inventories 797,961 632,806
Unrealized gains on derivatives 9,599 8,712
Deferred income taxes 49,451 34,585
Tax credits 37,953 14,954
Prepaid expenses 21,859 12,468
Other 46,576 35,686
--------------- ---------------
Total current assets 1,759,832 1,524,218
Non-current assets
Property, plant and equipment, net 2,371,317 2,084,895
Deferred income taxes 164,147 12,055
Judicial deposits 66,121 13,391
Unrealized gains on derivatives 86 43,146
Equity investments 153,555 112,016
Investments at cost 23,854 7,220
Goodwill 119,531 116,826
Prepaid pension cost 35,253 25,050
Other 77,138 61,484
--------------- ---------------
Total assets 4,770,834 4,000,301
=============== ===============
F-1
Exhibit 3
GERDAU S.A.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2003 and 2002
(in thousands of U.S. Dollars, except number of shares)
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
2003 2002
--------------- ---------------
Current liabilities
Short-term debt 479,586 707,378
Current portion of long-term debt 318,910 397,415
Trade accounts payable 372,518 281,855
Income taxes payable 27,790 23,978
Unrealized losses on derivatives 29,582 2,003
Deferred income taxes 7,286 7,628
Payroll and related liabilities 54,478 53,682
Dividends (interest on equity) payable 53,202 42,288
Taxes payable, other than income taxes 26,482 21,255
Other 89,328 50,315
--------------- ---------------
Total current liabilities 1,459,162 1,587,797
Non-current liabilities
Long-term debt, less current portion 1,132,429 794,571
Debentures 155,420 200,766
Deferred income taxes 72,125 42,368
Accrued pension and other post-retirement benefits obligation 108,679 109,870
Provision for contingencies 102,060 45,304
Unrealized losses on derivatives 11,356 -
Other 61,543 45,860
--------------- ---------------
Total non-current liabilities 1,643,612 1,238,739
--------------- ---------------
Total liabilities 3,102,774 2,826,536
Minority interest 264,997 308,755
SHAREHOLDERS' EQUITY
Preferred shares - no par value
96,885,787 and 74,527,528,780 shares issued and outstanding at December
31, 2003 and 2002, respectively 653,344 562,801
Common shares - no par value
51,468,224 and 39,590,941,783 shares issued and outstanding at December
31,2003 and 2002, respectively 329,257 281,158
Additional paid-in capital 3,271 2,086
Treasury stock - 345,000 preferred shares at December 31, 2003 (5,920) -
Legal reserve 63,834 36,105
Retained earnings 1,161,527 936,612
Cumulative other comprehensive loss
- Foreign currency translation adjustment (790,731) (935,133)
- Additional minimum pension liability (11,519) (16,309)
- Unrealized gain (loss) on cash flow hedge - (2,310)
--------------- ---------------
Total shareholders' equity 1,403,063 865,010
--------------- ---------------
Total liabilities and shareholders' equity 4,770,834 4,000,301
=============== ===============
F-2
GERDAU S.A.
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 2003, 2002 and 2001
(in thousands of U.S. Dollars, except number of shares and per share amounts)
- ----------------------------------------------------------------------------------------------------------------------------
2003 2002 2001
----------------- ------------------ -----------------
Sales 5,033,472 3,664,920 2,751,872
Less: Federal and state excise taxes (414,198) (344,654) (311,223)
Less: Discounts (88,305) (55,340) (39,511)
----------------- ------------------ -----------------
Net sales 4,530,969 3,264,926 2,401,138
Cost of sales (3,445,564) (2,349,636) (1,722,228)
----------------- ------------------ -----------------
Gross profit 1,085,405 915,290 678,910
Sales and marketing expenses (146,388) (112,645) (105,801)
General and administrative expenses (241,854) (221,895) (181,108)
----------------- ------------------ -----------------
Operating income 697,163 580,750 392,001
Financial expenses (416,953) (292,463) (166,496)
Foreign exchange gains and losses, net 162,190 (131,684) (71,773)
Financial income 62,036 100,350 55,002
Equity in earnings (losses) of unconsolidated 22,062 (10,057) 18,324
companies, net
Other non-operating expense, net (824) (18,178) (7,853)
----------------- ------------------ -----------------
Income before income taxes and minority interest 525,674 228,718 219,205
Provision for income taxes
Current (87,812) (27,065) (40,981)
Deferred 121,925 20,507 (13,666)
----------------- ------------------ -----------------
34,113 (6,558) (54,647)
----------------- ------------------ -----------------
Income before minority interest 559,787 222,160 164,558
Minority interest (49,623) 9,667 2,795
----------------- ------------------ -----------------
Net income 510,164 231,827 167,353
================= ================== =================
PER SHARE DATA (IN US$)
Basic earnings per share
Preferred 3.44 1.57 1.17
Common 3.44 1.57 1.06
Diluted earnings per share
Preferred 3.44 1.57 1.17
Common 3.44 1.57 1.06
Number of weighted-average common shares outstanding
after giving retroactive effect to stock bonus and
reverse stock split - Basic and diluted 51,468,224 51,343,083 51,196,627
================= ================== =================
Number of weighted-average preferred shares outstanding
after giving retroactive effect to stock bonus and
reverse stock split - Basic 96,871,412 96,653,627 96,342,592
================= ================== =================
Number of weighted-average preferred shares outstanding
after giving retroactive effect to stock bonus and
reverse stock split - Diluted 97,023,811 96,653,627 96,342,592
================= ================== =================
F-3
GERDAU S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 2003, 2002 and 2001
(in thousands of U.S. Dollars)
- -----------------------------------------------------------------------------------------------------------------------------
2003 2002 2001
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 510,164 231,827 167,353
Adjustments to reconcile net income to cash flows
from operating activities:
Depreciation and amortization 182,403 178,805 135,878
Equity in earnings (losses) on non-consolidated companies, net (22,062) 10,057 (18,324)
Exchange (gain) loss (162,190) 266,594 71,773
Unrealized losses (gains) on derivative instruments 78,257 (58,772) -
Minority interest 49,623 (9,667) (2,795)
Deferred income taxes (121,925) (20,507) 13,666
(Gain) loss on dispositions of property, plant and equipment (1,913) 997 10,395
Provision for doubtful accounts 6,714 1,310 6,743
Provision for contingencies 43,106 20,773 (4,099)
CHANGES IN ASSETS AND LIABILITIES:
Increase in accounts receivable (80,017) (28,657) (16,948)
Increase in inventories (74,248) (94,477) (57,563)
Increase (decrease) in accounts payable and accrued liabilities 100,298 (9,632) 66,496
Decrease (increase) in other assets and liabilities, net (39,733) (138,196) 22,867
------------- ------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 468,477 350,455 395,442
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (297,755) (185,892) (244,021)
Proceeds from dispositions of property, plant and equipment 2,284 6,029 11,482
Acquisitions of equity and cost investments (7,680) - -
Acquisition of additional interest in Gerdau Ameristeel (7,050) - -
Dispositions of investments - - 29,850
Cash paid for acquisitions in 2002, mainly Acominas - (412,150) -
Cash acquired in acquisitions in 2002 - 19,954 -
Purchases of short-term investments (959,522) (847,806) (282,967)
Proceeds from maturities and sales of short-term investments 1,102,314 847,108 223,874
Cash received from joint ventures 1,692 - -
------------- ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (165,717) (572,757) (261,782)
------------- ------------- -------------
F-4
GERDAU S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 2003, 2002 and 2001
(in thousands of U.S. Dollars)
- -----------------------------------------------------------------------------------------------------------------------------
2003 2002 2001
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends (interest on equity) paid (122,262) (74,265) (64,399)
(Purchase) sale of treasury shares (5,920) 2,318 -
Decrease (increase) in restricted cash 13,593 (6,091) -
Debt Issuance 1,997,978 1,186,109 377,633
Repayment of debt (2,126,520) (824,880) (436,622)
Net related party debt repayments (5,956) - -
------------- ------------- -------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (249,087) 283,191 (123,388)
------------- ------------- -------------
Effect of exchange rate changes on cash (1,626) (48,264) 5,127
Increase in cash 52,047 12,625 15,399
Cash at beginning of year 40,457 27,832 12,433
------------- ------------- -------------
CASH AT END OF YEAR 92,504 40,457 27,832
============= ============= =============
SUPPLEMENTAL CASH FLOW DATA
Cash paid during the year for:
Interest (net of amounts capitalized) 127,413 123,680 83,258
Income taxes 100,305 28,003 11,890
SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCIAL ACTIVITIES:
Purchase consideration, representing 51,503,960 Co-Steel shares at $2.51
per share 129,275
Debentures converted into common and preferred shares 5,745
F-5