Gerdau S.A. Interim Financial Statements Together with Report of Independent Public Accountants. September 30, 2001

Transcription

1 Gerdau S.A. Interim Financial Statements Together with Report of Independent Public Accountants September 30, 2001

2 Report of Independent Public Accountants (Translation of the report originally issued in Portuguese. See Note 12 to the financial statements.) To the Management and Shareholders of Gerdau S.A.: (1) We have performed a special review of the individual (Company) and consolidated quarterly information of GERDAU S.A. (a Brazilian corporation) which includes the balance sheet as of September 30, 2001, the statement of income for the quarter and nine-month period then ended, the performance report, and relevant information. (2) Our review was conducted in accordance with specific standards established by the Brazilian Institute of Independent Auditors - IBRACON, together with the Federal Accounting Council, and consisted principally of: (a) inquiries of and discussions with management personnel responsible for the accounting, financial and operating areas as to the principal criteria adopted in the preparation of the quarterly information, and (b) review of the information and subsequent events that had or may have had significant effects on the financial position and operations of the Company and subsidiaries. (3) Based on our special review, we are not aware of any significant change that should be made to the quarterly information referred to above for it to be in conformity with accounting practices emanating from Brazilian corporate law, and with standards established by the Brazilian Securities Commission - CVM, specifically applicable to the preparation of such mandatory quarterly information. (4) We had previously reviewed the individual (Company) and consolidated balance sheet as of June 30, 2001, presented for comparative purposes, and our report thereon, dated July 18, 2001, was issued without qualification. The individual (Company) statement of income for the quarter and nine-month period ended September 30, 2000, presented for comparative purposes, was reviewed by us and our report thereon, dated October 20, 2000, was issued without qualification. Porto Alegre, October 16, 2001 ARTHUR ANDERSEN S/C Carlos Biedermann Engagement Partner

3 GERDAU S.A. BALANCE SHEETS--SEPTEMBER 30, 2001 AND JUNE 30, 2001 (In thousands of Brazilian reais) (Translation of the original in Portuguese) (Unaudited) A S S E T S September 30, 2001 Company June 30, 2001 September 30, 2001 Consolidated June 30, 2001 CURRENT ASSETS: Cash and cash equivalents and temporary cash investments 355, , , ,308 Trade accounts receivable 489, , , ,059 Inventories 477, ,519 1,156,060 1,105,790 Advances to employees 18,032 16,012 21,202 19,176 Recoverable taxes 32,136 38,826 59,754 61,822 Deferred income and social contribution taxes 4,200 11,464 23,627 29,839 Other receivables 39,672 49,168 82,348 83, ,416,235 1,226,454 3,245,554 2,876, NONCURRENT ASSETS: Related companies 50,385 28,640 31,362 23,896 Eletrobrás compulsory deposits 14,635 14,635 19,836 19,710 Deferred income and social contribution taxes 25,566 24,050 34,180 49,689 Escrow deposits and other 63,573 63, , , , , , , PERMANENT ASSETS: Investments 1,777,438 1,695, , ,210 Property, plant and equipment 1,608,205 1,619,492 4,236,458 4,012,231 Deferred charges 10,631 11,044 16,646 17, ,396,274 3,326,220 4,621,855 4,358, Total assets 4,966,668 4,683,116 8,079,461 7,450,345 ========= ========= ========= ========= The accompanying notes are an integral part of these balance sheets.

4 GERDAU S.A. BALANCE SHEETS--SEPTEMBER 30, 2001 AND JUNE 30, 2001 (In thousands of Brazilian reais) (Translation of the original in Portuguese) (Unaudited) LIABILITIES AND SHAREHOLDERS EQUITY September 30, 2001 Company June 30, 2001 September 30, 2001 Consolidated June 30, 2001 CURRENT LIABILITIES: Trade accounts payable 106,853 89, , ,321 Loans and financing 605, ,326 1,908,681 1,679,403 Debentures 4,651 4,613 4,651 4,613 Taxes and contributions 104,659 80, ,201 85,553 Deferred income and social contribution taxes 6,251 6,281 6,251 6,815 Salaries payable 37,566 37,256 89,850 80,803 Dividends payable 30,760 42,008 30,760 42,008 Other payables 27,581 30, , , , ,909 2,811,677 2,436, LONG-TERM LIABILITIES: Loans and financing 904, ,999 1,594,360 1,494,736 Debentures 237, , , ,608 Reserve for contingencies 120, , , ,948 Deferred income and social contribution taxes 24,164 25, , ,258 Other payables 81,026 84, , , ,366,963 1,271,630 2,493,200 2,371, MINORITY INTEREST ,698 89,169 SHAREHOLDERS EQUITY: Capital 1,320,133 1,320,133 1,320,133 1,320,133 Capital reserves 242, , , ,288 Income reserves 823, , , ,924 Retained earnings 288, , , , ,675,886 2,553,577 2,675,886 2,553, SHAREHOLDERS EQUITY INCLUDING NON-CONTROLLING SHAREHOLDERS 2,774,584 2,642, Total liabilities and shareholders equity 4,966,668 4,683,116 8,079,461 7,450,345 ========= ========= ========= ========= The accompanying notes are an integral part of these balance sheets.

5 GERDAU S.A. STATEMENTS OF INCOME--SEPTEMBER 30, 2001 AND 2000 (In thousands of Brazilian reais) (Translation of the original in Portuguese) (Unaudited) Company Consolidated September 30, September 30, GROSS REVENUE 2,951,872 2,668,314 5,506,637 4,599, DEDUCTIONS FROM GROSS REVENUE Taxes on sales (564,568) (514,192) (653,323) (577,157) Freights and discounts (93,188) (80,421) (264,547) (189,664) (657,756) (594,613) (917,870) (766,821) NET REVENUE 2,294,116 2,073,701 4,588,767 3,832,801 COST OF PRODUCTS AND / OR SERVICES SOLD (1,459,337) (1,419,072) (3,342,839) (2,830,144) GROSS PROFIT 834, ,629 1,245,928 1,002, OPERATING EXPENSES / INCOME Selling (147,979) (127,991) (185,065) (158,812) General and administrative (198,619) (174,611) (351,995) (292,547) Financial income 47,291 29,333 90,819 94,161 Financial expenses (356,122) (173,688) (675,042) (324,151) Other operating income 7,978 6,564 1,284 43,384 Other operating expenses - - (1,226) - Equity in results of subsidiaries and affiliated companies 230, , ,570 20, (417,112) (297,045) (809,655) (617,575) INCOME FROM OPERATIONS 417, , , ,082 NONOPERATING EXPENSES / INCOME (4,414) (5,312) (5,633) (5,780) INCOME BEFORE TAXES / MANAGEMENT PROFIT SHARING 413, , , ,302 PROVISION FOR INCOME AND SOCIAL CONTRIBUTION TAXES CURRENT AND DEFERRED (35,634) (39,930) (53,736) (61,323) MANAGEMENT PROFIT SHARING (5,543) (4,739) (6,982) (5,460) NET INCOME 372, , , ,519 ====== ====== ====== ======

6 NUMBER OF SHARES, FORMERLY TREASURY STOCK (thousand) 113,491, ,491, ,491, ,491,706 EARNINGS PER SHARE ====== ====== ====== ====== The accompanying notes are an integral part of these statements.

7 GERDAU S.A. NOTES TO THE QUARTERLY INFORMATION AS OF SEPTEMBER 30, 2001 (Amounts in thousands of Brazilian reais, unless otherwise indicated) (Translation of the original in Portuguese) (Unaudited) 1. PRESENTATION OF FINANCIAL STATEMENTS The financial statements were prepared in accordance with corporate law (Law No. 6,404/76, changed by articles 4 and 5 of Law No. 9,249/95), at historical values, in accordance with CVM Instruction No SIGNIFICANT ACCOUNTING PRACTICES a) Investments in subsidiaries are carried under the equity method. The result of the equity pickup is recorded in income as an operating item. b) The classification of receivables and payables in current and noncurrent/long-term is in accordance with the realization period or maturity up to September 30, 2002, or after this date, respectively, under the terms of articles 179 and 180 of Law No. 6,404/76. c) The provision for income and social contribution taxes was calculated in conformity with the legislation in force. Deferred income and social contribution taxes were determined based on CVM Resolution No. 273 of August 20, CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements as of September 30, 2001 include the accounts of Gerdau S.A. and its direct and indirect subsidiaries. Following are the principal practices used in preparing the consolidated financial statements: a) Gerdau S.A. and its subsidiaries adopt consistent accounting practices in recording their operations and appraising their assets and liabilities. The financial statements of companies located abroad were translated at the exchange rate prevailing on the balance sheet date. b) The balances of balance sheet accounts resulting from operations between consolidated companies have been eliminated. c) Non-controlling shareholders interest in subsidiaries is separately identified.

8 4. DEFERRED CHARGES Deferred charges (Company and Consolidated) are composed of: - Preoperating expenses on projects for renovation of the steel mill. - Expenses on research and development and reorganization projects. Amortization is calculated on the straight-line basis on restated cost at rates determined based on the production of new units in relation to their installed capacities. 5. LOANS AND FINANCING Financing in local and foreign currency (principally U.S. dollar) is payable to October 15, 2011 and subject to the following charges: a) Interest ranging from 7.50% to 12.50% (Company) and from 7.00% to 12.50% (Consolidated) per year plus monetary restatement calculated based on the Brazilian Long-Term Interest Rate TJLP. b) Annual interest of 5.35% to 11.54% (Company) and 5.20% to 11.54% (Consolidated) above LIBOR in addition to exchange variation. FINAME (Government Agency for Machinery and Equipment Financing) loans are guaranteed by assets, object of the financing, in statutory lien. Other financing are guaranteed by collateral signatures of majority shareholders. The long-term portion of financing is paid as follows: R$ thousand Company Consolidated ,783 98, , , , , , , , , onward 73,555 81,146 Total 904,082 1,594,360

9 6. DEBENTURES Company and Consolidated Approved at the Shareholders Number Number Issuer Meeting Issued in portfolio Maturity Gerdau S.A ,000 29, ,000 42, , ,800 18, ,988 38, ,880 11, ,450 6, ,000 45, Seiva S.A ,000 12, REFIS On December 6, 2000 the Company opted for the Tax Recovery Program REFIS, for making installment payments of PIS and COFINS (taxes on revenue). The balances of such tax debts are recorded under taxes and contributions, in current liabilities, and under accounts payable, in long-term liabilities. The balances of renegotiated taxes, the payment of which has been divided into 60 installments, are the following: Company and consolidated Principal Interest Total PIS (tax on revenue) 30,391 5,046 35,437 COFINS (tax on revenue) 7,202 1,196 8,398 Total 37,593 6,242 43,835 Current portion 10,253 1,702 11,955 Long-term portion 27,340 4,540 31,880 Total 37,593 6,242 43,835

10 8. CAPITAL As of September 30, 2001, subscribed and paid-up capital of R$ 1,320,133,000 is composed of 39,382,020,386 common shares and 74,109,685,986 preferred shares, all without par value. 9. FINANCIAL INSTRUMENTS Temporary cash investments are recognized at their redemption value at the balance sheet date. The book value of other financial assets and liabilities substantially corresponds to their estimated market value. Loans with affiliated companies are restated at average weighted cost of funding in the financial market. The maturity dates are undefined; however, they should be settled when there is available cash. The Company, with the purpose of minimizing the effect of variations in exchange rates on its liabilities, carried out the following currency hedge transactions: Contracting date Amount (US$ thousand) Maturity , , , , ,

11 10. INCOME AND SOCIAL CONTRIBUTION TAXES Company R$ 000 Assets Liabilities Current Noncurrent Current Long-term Deferred income tax 2,037 21,219 6,251 22,493 Deferred social contribution tax 2,163 4,347-1,671 4,200 25,566 6,251 24,164 In R$ 000 Basis for recognition of deferred taxes *IR **CS ASSETS Tax loss for income tax 1,584 - Tax loss for social contribution tax - 17,778 Reserve for tax contingencies 85,183 48,301 Reserve for expenses (export, commission, interest) 6,254 6,254 93,021 72,333 LIABILITIES Tax incentive to accelerated depreciation 92,768 - Amortized negative goodwill 22,207 22, ,975 22,207 Reconciliation In R$ 000 *IR **CS Total Income before taxes 407, , ,710 Nominal rate 25% 9% 34% Income and social contribution tax expenses at nominal rates (101,928) (36,694) (138,622) Tax effects on: - equity in results of subsidiaries and affiliated companies 57,304 20,629 77,933 - interest on capital 20,795 7,486 28,281 - permanent differences (net) (2,624) (602) (3,226) Income and social contribution taxes on income (26,453) (9,181) (35,634) * IR = Income Tax **CS= Social Contribution Tax Consolidated R$ 000 Assets Liabilities Current Noncurrent Current Long-term Deferred income tax 21,380 28,742 6, ,274 Deferred social contribution tax 2,247 5,438-14,435 23,627 34,180 6, ,709

12 In R$ 000 Basis for recognition of deferred taxes *IR **CS ASSETS Tax loss for income tax 9,923 - Tax loss for social contribution tax - 29,790 Reserve for tax contingencies 152,559 49,312 Reserve for expenses (export, commission, interest) 7,060 7, ,542 86,162 LIABILITIES Tax incentive to accelerated depreciation 853,816 13,344 Amortized negative goodwill 189, ,049 1,043, ,393 Reconciliation In R$ 000 *IR **CS Total Income before taxes 423, , ,658 Nominal rate 25% 9% 34% Income and social contribution tax expenses at nominal rates (105,915) (38,129) (144,044) Tax effects on: - Difference of rate in companies located abroad 1,498 (31) 1,467 - equity in results of subsidiaries and affiliated companies 77,893 28, ,934 - interest on capital 20,866 7,512 28,378 - permanent differences (net) (27,190) (18,281) (45,471) Income and social contribution taxes on income (32,848) (20,888) (53,736) * IR = Income Tax **CS= Social Contribution Tax

13 11. CASH FLOW Company Consolidated Net income 372, , , ,519 Equity pick-up (230,339) (143,348) (311,570) (20,390) Income and social contribution taxes 35,634 (39,930) 53,736 61,323 Depreciation and amortization 131, , , ,491 Interest and non-cash monetary variations 282, , ,893 (14,136) Working capital variation (114,388) (141,059) 1,163 (156,905) Net cash from operating activity 477, , , , Purchase/disposal of property, plant and equipment (125,762) (147,955) (260,127) (278,231) Increase in deferred charges (1,503) (68) (2,346) - Purchase/disposal of investments 52,390 (128,524) (11,191) (104,555) Use of cash in investments (74,875) (276,547) (273,664) (382,786) Working capital financing (9,201) (55,659) 10,507 (95,649) Long-term cash investments 60, , , ,076 Amortization of long-term financing (155,229) (284,922) (621,050) (502,861) Payment of dividends/management profit sharing (131,125) (104,052) (133,345) (107,744) Net cash from financial activity (235,094) (128,089) (330,023) (118,178) Change in cash balance 167,146 (75,734) 231,388 (71,062) ======== ========= ======== ========= Cash beginning of period 188, , , ,863 Cash end of period 355, , , , EXPLANATION ADDED FOR TRANSLATION TO ENGLISH The accompanying financial statements are presented on the basis of accounting practices emanating from corporate law in Brazil. Certain accounting practices applied by the Company and its subsidiaries that conform with those accounting practices in Brazil may not conform with generally accepted accounting principles in the countries where these financial statements may be used. * * * * * * * * * *

14 GERDAU S.A. COMMENTS ON THE COMPANY S PERFORMANCE FOR THE QUARTER PRODUCTION In the third quarter of 2001, Gerdau S.A. production of crude steel reached 859 thousand tons, remaining practically unchanged in relation to the production in the second quarter (-0.4%). One of the Company s major achievements in this period was facing the electric energy rationing in Brazil, in effect since last June. By relocating the production among its several units, Gerdau S.A. managed to reorganize the utilization of its installed capacity and meet all targets established by the Government. One of the melting furnaces in the Rio de Janeiro unit was closed down and its production was transferred to the integrated plants in Minas Gerais, which consume less electric energy, and to Southern Brazil, where there is no rationing. The production of rolled steel reached 861 thousand tons in the third quarter, 2.6% lower than in the previous quarter. The decrease was due to the reduction in exports. SALES In the third quarter of 2001, Gerdau S.A. sales reached 939 thousand tons, 4.8% lower than in the previous quarter. This decrease arises from the lower exports since Gerdau assigned greater priority to serving domestic customers in this phase of the electric energy rationing. In the domestic market, sales volume reached 901 thousand tons, 3.1% higher than in the second quarter. Deliveries achieving the highest growth were those to the civil construction sector, reflecting the investments that have been made, especially in telephony and electric energy generation and transmission. Exports totaled 38 thousand tons, 66.3% lower than in the second quarter, but even so contributed with US$ 9.1 million to the period s revenue. RESULTS Net sales revenue reached R$ million in the third quarter, 10.4% higher than in the second quarter of the year. The principal factors responsible for this growth were the strong domestic market demand, especially in civil construction, and the decrease in exports, which, due to the characteristics of the shipped goods, have a lower value added. Gross margin increased from 34.1% in the second quarter to 42.2% in the third quarter, as a result of reduction in the price of some raw materials, especially scrap metal, which is the principal item in the Company s production cost, and inventory reductions. The decreased exports and the internal market growth also contributed to the margin improvement. Selling, general and administrative expenses totaled R$ million, compared to R$ million in the previous quarter. This increase arises, basically, from the increase in the allowance for doubtful accounts recorded under selling expenses in the period.

15 EBITDA growth was driven by higher revenues and margins. A 40.4% increase was achieved in the quarter s EBITDA, in relation to the previous quarter, totaling R$ million. The margin also improved, reaching 31.7%, compared to 24.9% in the second quarter. Net financial expenses reached R$ million, 48.0% higher than in the second quarter. This increase is essentially due to the exchange variation on loans denominated in US dollars obtained by Gerdau S.A. Equity pick-up reached R$ 75.6 million in the quarter, a decrease of 12.1% in relation to the R$ 86.1 million of the second quarter. This result arises, mainly, from the negative effect of the exchange variation on the Açominas result. In the third quarter, net income reached R$ million. The 12.1% growth in relation to the second quarter was due to the increase in revenues and improvements in operating margins, as well as the positive result of the exchange variation on the shareholders equity of the companies located abroad in relation to the debt exposed to the US dollar variation. INVESTMENTS The Gerdau S.A. investment plan for the third quarter was carried out in full. The Company invested US$ 17.9 million in fixed assets, reaching the accumulated amount of US$ 58.4 million this year. The investments were earmarked for plant maintenance and technological updating. FINANCIAL DEBT As of September 30, 2001, Gerdau S.A. gross debt amounted to R$ 1.75 billion, 8.2% higher than in June. This increase is essentially due to the 15.9% exchange variation in the period, since a significant portion of the debt (49%) was denominated in US dollar. Of the gross debt amount, 34.8% are short-term (R$ million) and the remaining 65.2% are long-term (R$ 1.14 billion). Net debt at the end of the quarter amounted to R$ 1.4 billion, representing a decrease of 4.2% in relation to June. As a hedge against the dollar rate fluctuations in relation to the Brazilian real on its debt in foreign currency contracted in Brazil, the Company carried out, in the first half of February and in the second half of July, currency hedge transactions totaling US$ 200 million and US$ 70 million, respectively, exchanging debts in US dollar for CDI (interbank deposit certificates). Cash and cash equivalents and temporary cash investments, at the end of September 2001, reached R$ million, and were invested with financial institutions in Brazil. CAPITAL MARKET From January to September 2001, 25.3 billion shares of Gerdau S.A. were traded on the São Paulo Stock Exchange, 27.7% more than in the same period in the previous year. The number of transactions reached 24,000, involving R$ 459 million, an average of R$2.3 million per day. On the New York Stock Exchange (NYSE), 5.6 million ADRs of Gerdau S.A. were traded, 135.5% higher than in the same nine-month period of 2000, involving US$ 45.4 million, an average of US$ 245 thousand per day.

16 In October 2001, Gerdau S.A. will hold three meetings with the members of the Brazilian Associations of Capital Market Analysts (ABAMECs), for a presentation related to the thirdquarter performance, scheduled as follows: October 23 in Brasília, 24 in Belo Horizonte, and 25 in São Paulo. On August 23, interest on capital was paid to the shareholders of Gerdau S.A., for R$ per thousand common shares, and R$ per thousand preferred shares. These payments totaled R$ 48.1 million.

17 GERDAU S.A. COMMENTS ON THE CONSOLIDATED PERFORMANCE FOR THE QUARTER The good economic performance observed in Brazil in the first months of this year provided indications that the growth would continue over the subsequent months, and supported economists favorable expectations for However, low levels in the hydroelectric reservoirs in the Southeast and Northeast led the Government to implement an electric energy rationing in those regions, which changed the country s economic scenario. Currently, the energy crisis, worsened by the internal difficulties of certain countries, and the conflict between the United States and Afghanistan, has been generating a climate of uncertainty and instability in the world scenario. The market for long steel products, the segment in which Gerdau operates, remained very active in Brazil in the third quarter. In the two-month period of July and August 2001, Brazilian Steelmaking Institute statistics recorded sales of 1.1 million tons in the domestic market, with exports declining slightly in the same period, reaching 135 thousand tons. The Brazilian rolled steel production reached 1.3 million tons in July and August, slightly less than in preceding months. PRODUCTION In the third quarter of 2001, production of crude steel by Gerdau companies reached 1.7 million tons, remaining unchanged in relation to the second quarter. One of the Company s major achievements in this period was facing the electric energy rationing in Brazil, in effect since last June. By relocating the production among its several units, Gerdau managed to reorganize the utilization of its installed capacity and meet all targets established by the Government. One of the Cosigua melting furnaces was closed down and its production was transferred to the integrated plants in Minas Gerais, which consume less electric energy, and to Southern Brazil, where there is no rationing. The Brazilian operations accounted for 63% of Gerdau s crude steel production. In the third quarter 1.1 million tons were produced, 5% more than in the previous quarter. Production of Gerdau S.A. s nine steel mills remained stable, and Açominas production increased by 34.6% after the conclusion of the blast furnace refurbishment and resulting increase in installed capacity. The units abroad produced 625 thousand tons of crude steel in the quarter, 8.4% less than in the second quarter. This decrease in production is due to scheduled maintenance shutdown in some units in North America, which traditionally occurs in this period. Gerdau companies production of rolled steel reached 1.5 million tons in the third quarter, 2.8% lower than in the previous quarter. The decrease was due to the reduction in exports from Brazil, one of the strategies adopted by Gerdau to comply with the rationing, and the scheduled maintenance shutdown in North America.

18 Crude Steel In thousand tons 3Q01 2Q01 3Q00 9M01 9M00 In Brazil 1,072 1,021 1,142 3,235 3,262 Abroad ,961 1,991 Total 1,697 1,703 1,754 5,196 5,253 Rolled Steel In Brazil ,672 2,551 Abroad ,922 1,911 Total 1,528 1,571 1,490 4,594 4,462 SALES In the third quarter of 2001 Gerdau consolidated sales reached 1.7 million tons, 3.2% lower than in the previous quarter. This decrease in sales volume is due to the lower production of the subsidiaries located abroad, explained above, and of the lower exports, since Gerdau assigned priority to serving domestic customers in this phase of the electric energy rationing. In the domestic market, sales volume reached 975 thousand tons, 2.6% higher than in the previous quarter. Deliveries achieving the highest growth were those to the civil construction sector, reflecting the investments that have been made, especially in telephony and electric energy generation and transmission. Exports from Brazil totaled 122 thousand tons, 16.9% lower than in the second quarter. Although Açominas, after the shutdown for refurbishing its blast furnace in June and on the first days of July, had significantly increased its shipments to foreign countries (+96.4%) these were not sufficient to compensate for the 66.3% decrease in the exports of Gerdau S.A. during the quarter. Sales by the companies located abroad reached 652 thousand tons in this quarter, 8.2% lower than in the second quarter. In North America, sales decreased by 5.1%, especially due to the September results. In South America, sales totaled 75 thousand tons, 12.2% lower than in the previous quarter, essentially due to the weaker performance of Argentina operations. Brazil In thousand tons 3Q01 2Q01 3Q00 9M01 9M00 Domestic ,858 2,676 Export Total 1,097 1,098 1,244 3,372 3,386 Abroad North America ,773 1,741 South America Total ,059 1,994 Total 1,749 1,808 1,910 5,431 5,380

19 RESULTS Net sales revenue reached R$ 1.7 billion in the third quarter, 13.9% higher than in the second quarter of the year. The principal factors responsible for this growth were the strong domestic market demand, especially in civil construction, and the translation of revenue generated in dollars by the subsidiaries abroad into Brazilian reais. Gross margin increased from 26.1% in the second quarter to 30.1% in the third quarter, as a result of reduction in the price of some raw materials, especially scrap metal, which is the principal item in the Company s production cost, and inventory reductions. Redirecting exports to the domestic market also contributed to the margin improvement, as exports generate lower margins. Selling, general and administrative expenses totaled R$ million, compared to R$ million in the previous quarter. Part of this increase arises from the consolidation of expenses generated by subsidiaries located abroad, an effect similar to the one observed in net sales revenue, and part from the increase in the allowance for doubtful accounts recorded under selling expenses in the period. EBITDA growth was driven by higher revenues and margins. A 35.9% increase was achieved in the quarter s EBITDA in relation to the previous quarter, totaling R$ million. The margin also improved, reaching 24.9%, compared to 20.9% in the second quarter. Net financial expenses reached R$ million, of which R$ million corresponds to the impact of exchange variation on loans denominated in US dollars obtained by the Gerdau companies in Brazil and R$ 33.5 million refers to exchange variation on loans denominated in US dollars obtained by the companies in Canada. The amounts related to the exchange variation were fully offset by the same effect on the shareholders equity of the companies located abroad. In the third quarter, consolidated net income reached R$ million. The 11.6% growth in relation to the second quarter was due to the increase in revenues and improvements in operating margins, as well as the positive result of the exchange variation on the shareholders equity of the companies located abroad in relation to the debt exposed to the US dollar variation. Net revenue In R$ million 3Q01 2Q01 3Q00 9M01 9M00 Consolidated Brazil , ,340.1 North America , ,321.3 South America Total , , , ,832.7 EBITDA Consolidated Brazil North America South America Total , Net Income Consolidated Brazil North America (7.9) South America (4.3) 4.9 (1.6) Total

20 INVESTMENTS The Gerdau investment plan for the third quarter was carried out in full. US$ 36.6 million was invested in fixed assets, of which US$ 31.2 in Brazil and US$ 5.4 abroad. The investments were earmarked for plant maintenance and technological updating. To date Gerdau has already invested US$ million, of which US$ 92.6 million in the companies located in Brazil and US$ 26.5 abroad. FINANCIAL DEBT As of September 30, 2001, gross debt amounted to R$ 3.7 billion, 8.8% higher than in June. This increase is mostly due to the 15.9% exchange variation in the period, since a significant portion of the debt was denominated in US dollars. Had the Company not amortized part of the debt of the subsidiaries abroad or not contracted the US$ 70 million currency hedge transaction, which was done in the second half of July, the debt would have suffered an even higher increase. Net debt at the end of the quarter amounted to R$ 2.8 billion, 2.6% higher than in June. As of September 30, the net debt to total net capitalization ratio was 50.1%, compared to 50.7% as of June 30. As a hedge against the dollar rate fluctuations in relation to the Brazilian real on its debt in foreign currency contracted in Brazil, the Company carried out, in the first half of February and in the second half of July, exchange hedge transactions totaling US$ 200 million and US$ 70 million, respectively, exchanging debts in US dollar for CDI (interbank deposit certificates). In R$ million Short-term 1,913 Local currency 322 Foreign currency 520 Companies located abroad 1,071 Long-term 1,812 Local currency 677 Foreign currency 575 Companies located abroad 560 Gross debt 3,725 Cash and cash equivalents and temporary cash investments 936 Net debt 2,789 The debt in local currency essentially comprises loans contracted from the National Social and Economic Development Bank (BNDES), debentures and Açominas debts consolidated in the Gerdau balance sheet. The debt in foreign currency contracted by the companies in Brazil comprises, to a large extent, export credit lines (advances on exchange contracts and pre-export financing) and equipment import financing (Firce 25). The debt of the companies located abroad comprises mostly revolving credit and commercial paper.

21 Temporary cash investments, at the end of September 2001, amounted to R$ million, of which R$ million was invested by the companies located abroad and R$ million by the companies in Brazil. CAPITAL MARKET Gerdau S.A. (GGBR) From January to September 2001, 25.3 billion shares of Gerdau S.A. were traded on the São Paulo Stock Exchange (BOVESPA), 27.7% more than in the same period in the previous year. The number of transactions reached 24,000, involving R$ 459 million, an average of R$ 2.3 million per day. Gerdau S.A. (GGB) On the New York Stock Exchange (NYSE), 5.6 million ADRs of Gerdau S.A. were traded, 135.5% higher than in the same nine-month period of 2000, involving US$ 45.4 million, an average of US$ 245 thousand per day. ABAMEC Meetings In October 2001, Gerdau S.A. will hold three meetings with the members of the Brazilian Associations of Capital Market Analysts (ABAMECs), for a presentation related to the thirdquarter performance, scheduled as follows: October 23 in Brasília, 24 in Belo Horizonte, and 25 in São Paulo. Interest on Capital On August 23, interest on capital was paid to the shareholders of Gerdau S.A., for R$ per thousand common shares, and R$ per thousand preferred shares. These payments totaled R$ 48.1 million at Gerdau S.A.

22 ATTACHMENT 1 1 / 10 GERDAU S.A. CHARACTERISTICS OF THE PUBLIC OR PRIVATE ISSUANCE OF DEBENTURES 1 ITEM 01 2 ORDER NUMBER 03 3 CVM REGISTRATION NUMBER DCA-82/018 4 CVM REGISTRATION DATE ISSUED SERIES A 6 TYPE OF ISSUANCE SIMPLE 7 NATURE OF ISSUANCE PUBLIC 8 DATE OF ISSUANCE MATURITY DATE TYPE OF DEBENTURE WITHOUT PREFERENCE 11 CONDITION OF REMUNERATION IN EFFECT 100% OF CDI 12 PREMIUM/DISCOUNT 13 PAR VALUE (reais) ISSUED AMOUNT (thousands of reais) 8, NUMBER OF ISSUED BONDS (UNIT) 24, OUTSTANDING BONDS (UNIT) 13, TREASURY BONDS (UNIT) 10, REDEEMED BONDS (UNIT) 0 19 CONVERTED BONDS (UNIT) 0 20 BONDS TO BE PLACED (UNIT) 0 21 DATE OF THE LAST RENEGOTIATION DATE OF THE NEXT EVENT

23 ATTACHMENT 1 2 / 10 1 ITEM 02 2 ORDER NUMBER 03 3 CVM REGISTRATION NUMBER DCA-82/019 4 CVM REGISTRATION DATE ISSUED SERIES B 6 - TYPE OF ISSUANCE SIMPLE 7 NATURE OF ISSUANCE PUBLIC 8 - DATE OF ISSUANCE MATURITY DATE TYPE OF DEBENTURE WITHOUT PREFERENCE 11 CONDITION OF REMUNERATION IN EFFECT 100% OF CDI 12 PREMIUM/DISCOUNT 13 PAR VALUE (reais) ISSUED AMOUNT (thousands of reais) 8, NUMBER OF ISSUED BONDS (UNIT) 24, OUTSTANDING BONDS (UNIT) 4, TREASURY BONDS (UNIT) 19, REDEEMED BONDS (UNIT) 0 19 CONVERTED BONDS (UNIT) 0 20 BONDS TO BE PLACED (UNIT) 0 21 DATE OF THE LAST RENEGOTIATION DATE OF THE NEXT EVENT

24 ATTACHMENT 1 3 / 10 1 ITEM 03 2 ORDER NUMBER 04 3 CVM REGISTRATION NUMBER DCA-83/043 4 CVM REGISTRATION DATE ISSUED SERIES TYPE OF ISSUANCE SIMPLE 7 NATURE OF ISSUANCE PUBLIC 8 - DATE OF ISSUANCE MATURITY DATE TYPE OF DEBENTURE WITHOUT PREFERENCE 11 CONDITION OF REMUNERATION IN EFFECT 100% OF CDI 12 PREMIUM/DISCOUNT 13 PAR VALUE (reais) ISSUED AMOUNT (thousands of reais) 14, NUMBER OF ISSUED BONDS (UNIT) 42, OUTSTANDING BONDS (UNIT) 0 17 TREASURY BONDS (UNIT) 42, REDEEMED BONDS (UNIT) 0 19 CONVERTED BONDS (UNIT) 0 20 BONDS TO BE PLACED (UNIT) 0 21 DATE OF THE LAST RENEGOTIATION DATE OF THE NEXT EVENT

25 ATTACHMENT 1 4 / 10 1 ITEM 04 2 ORDER NUMBER 05 3 CVM REGISTRATION NUMBER 4 CVM REGISTRATION DATE 5 ISSUED SERIES TYPE OF ISSUANCE CONVERTIBLE 7 NATURE OF ISSUANCE PRIVATE 8 - DATE OF ISSUANCE MATURITY DATE TYPE OF DEBENTURE WITHOUT PREFERENCE 11 CONDITION OF REMUNERATION IN EFFECT REFERENTIAL RATE TR + 8% p.a. 12 PREMIUM/DISCOUNT 13 PAR VALUE (reais) ISSUED AMOUNT (thousands of reais) 30, NUMBER OF ISSUED BONDS (UNIT) 46, OUTSTANDING BONDS (UNIT) 29, TREASURY BONDS (UNIT) 16, REDEEMED BONDS (UNIT) 0 19 CONVERTED BONDS (UNIT) 0 20 BONDS TO BE PLACED (UNIT) 0 21 DATE OF THE LAST RENEGOTIATION DATE OF THE NEXT EVENT

26 ATTACHMENT 1 5 / 10 1 ITEM 05 2 ORDER NUMBER 7 3 CVM REGISTRATION NUMBER DCA-82/024 4 CVM REGISTRATION DATE ISSUED SERIES TYPE OF ISSUANCE SIMPLE 7 NATURE OF ISSUANCE PUBLIC 8 - DATE OF ISSUANCE MATURITY DATE TYPE OF DEBENTURE WITHOUT PREFERENCE 11 CONDITION OF REMUNERATION IN EFFECT 100% OF CDI 12 PREMIUM/DISCOUNT 13 PAR VALUE (reais) ISSUED AMOUNT (thousands of reais) 7, NUMBER OF ISSUED BONDS (UNIT) 22, OUTSTANDING BONDS (UNIT) 4, TREASURY BONDS (UNIT) 18, REDEEMED BONDS (UNIT) 0 19 CONVERTED BONDS (UNIT) 0 20 BONDS TO BE PLACED (UNIT) 0 21 DATE OF THE LAST RENEGOTIATION DATE OF THE NEXT EVENT

27 ATTACHMENT 1 6 / 10 1 ITEM 06 2 ORDER NUMBER 8 3 CVM REGISTRATION NUMBER DCA-82/004 4 CVM REGISTRATION DATE ISSUED SERIES TYPE OF ISSUANCE SIMPLE 7 NATURE OF ISSUANCE PUBLIC 8 - DATE OF ISSUANCE MATURITY DATE TYPE OF DEBENTURE WITHOUT PREFERENCE 11 CONDITION OF REMUNERATION IN EFFECT 100% OF CDI 12 PREMIUM/DISCOUNT 13 PAR VALUE (reais) ISSUED AMOUNT (thousands of reais) 20, NUMBER OF ISSUED BONDS (UNIT) 59, OUTSTANDING BONDS (UNIT) 21, TREASURY BONDS (UNIT) 38, REDEEMED BONDS (UNIT) 0 19 CONVERTED BONDS (UNIT) 0 20 BONDS TO BE PLACED (UNIT) 0 21 DATE OF THE LAST RENEGOTIATION DATE OF THE NEXT EVENT

28 ATTACHMENT 1 7 / 10 1 ITEM 07 2 ORDER NUMBER 9 3 CVM REGISTRATION NUMBER DCA-83/044 4 CVM REGISTRATION DATE ISSUED SERIES TYPE OF ISSUANCE SIMPLE 7 NATURE OF ISSUANCE PUBLIC 8 - DATE OF ISSUANCE MATURITY DATE TYPE OF DEBENTURE WITHOUT PREFERENCE 11 CONDITION OF REMUNERATION IN EFFECT 100% OF CDI 12 PREMIUM/DISCOUNT 13 PAR VALUE (reais) ISSUED AMOUNT (thousands of reais) 14, NUMBER OF ISSUED BONDS (UNIT) 41, OUTSTANDING BONDS (UNIT) 29, TREASURY BONDS (UNIT) 11, REDEEMED BONDS (UNIT) 0 19 CONVERTED BONDS (UNIT) 0 20 BONDS TO BE PLACED (UNIT) 0 21 DATE OF THE LAST RENEGOTIATION DATE OF THE NEXT EVENT

29 ATTACHMENT 1 8 / 10 1 ITEM 08 2 ORDER NUMBER 10 3 CVM REGISTRATION NUMBER DEB-81/017 4 CVM REGISTRATION DATE ISSUED SERIES TYPE OF ISSUANCE SIMPLE 7 NATURE OF ISSUANCE PUBLIC 8 - DATE OF ISSUANCE MATURITY DATE TYPE OF DEBENTURE SUBORDINATE 11 CONDITION OF REMUNERATION IN EFFECT 12 PREMIUM/DISCOUNT 13 PAR VALUE (reais) 1,015,49 14 ISSUED AMOUNT (thousands of reais) 6, NUMBER OF ISSUED BONDS (UNIT) 6, OUTSTANDING BONDS (UNIT) 0 17 TREASURY BONDS (UNIT) 6, REDEEMED BONDS (UNIT) 0 19 CONVERTED BONDS (UNIT) 0 20 BONDS TO BE PLACED (UNIT) 0 21 DATE OF THE LAST RENEGOTIATION 22 DATE OF THE NEXT EVENT

30 ATTACHMENT 1 9 / 10 1 ITEM 09 2 ORDER NUMBER 11 3 CVM REGISTRATION NUMBER DEB-90/041 4 CVM REGISTRATION DATE ISSUED SERIES A 6 - TYPE OF ISSUANCE SIMPLE 7 NATURE OF ISSUANCE PUBLIC 8 - DATE OF ISSUANCE MATURITY DATE TYPE OF DEBENTURE WITHOUT PREFERENCE 11 CONDITION OF REMUNERATION IN EFFECT 100% OF CDI 12 PREMIUM/DISCOUNT 13 PAR VALUE (reais) 1, ISSUED AMOUNT (thousands of reais) 31, NUMBER OF ISSUED BONDS (UNIT) 25, OUTSTANDING BONDS (UNIT) 3, TREASURY BONDS (UNIT) 21, REDEEMED BONDS (UNIT) 0 19 CONVERTED BONDS (UNIT) 0 20 BONDS TO BE PLACED (UNIT) 0 21 DATE OF THE LAST RENEGOTIATION DATE OF THE NEXT EVENT

31 ATTACHMENT 1 10 / 10 1 ITEM 10 2 ORDER NUMBER 11 3 CVM REGISTRATION NUMBER DEB-90/004 4 CVM REGISTRATION DATE ISSUED SERIES B 6 - TYPE OF ISSUANCE SIMPLE 7 NATURE OF ISSUANCE PUBLIC 8 - DATE OF ISSUANCE MATURITY DATE TYPE OF DEBENTURE WITHOUT PREFERENCE 11 CONDITION OF REMUNERATION IN EFFECT 100% OF CDI 12 PREMIUM/DISCOUNT 13 PAR VALUE (reais) 1, ISSUED AMOUNT (thousands of reais) 31, NUMBER OF ISSUED BONDS (UNIT) 25, OUTSTANDING BONDS (UNIT) 1, TREASURY BONDS (UNIT) 23, REDEEMED BONDS (UNIT) 0 19 CONVERTED BONDS (UNIT) 0 20 BONDS TO BE PLACED (UNIT) 0 21 DATE OF THE LAST RENEGOTIATION DATE OF THE NEXT EVENT

32 ATTACHMENT 2 1 / 7 GERDAU S.A. In compliance with the Corporate Governance Differentiated Practices Regulation (Level 1), we present below spreadsheets containing ownership interest of all those directly or indirectly holding more than 5% of voting capital, up to the level of individuals. GERDAU S.A. CNPJ No / Capital: R$ 1,320,133, CAPITAL DISTRIBUTION - POSITION AS OF SEPTEMBER 30, 2001 NUMBER OF SHARES SHAREHOLDER S NAME COMMON PREFERRED TOTAL NUMBER OF SHARES % NUMBER OF SHARES % NUMBER OF SHARES % METALÚRGICA GERDAU S/A 32,677,464, ,363,871, ,041,335, STA. FELICIDADE COM. EXP. DE PRODS SID LTDA 936,949, ,999,759, ,936,709, OTHER CONTROLLING SHAREHOLDERS 1,540,108, ,430, ,616,539, SUM 35,154,522, ,440,061, ,594,584, OUTSTANDING SHARES 4,227,498, ,669,624, ,897,122, TOTAL ISSUED 39,382,020, ,109,685, ,491,706, METALÚRGICA GERDAU S.A. CNPJ No / Capital: R$ 520,280, CAPITAL DISTRIBUTION NUMBER OF SHARES SHAREHOLDER S NAME COMMON PREFERRED TOTAL NUMBER OF SHARES % NUMBER OF SHARES % NUMBER OF SHARES % INDAC IND. ADM. E COM. S/A 2,238,363, ,238,363, GRUPO GERDAU EMPREEND. LTDA 1,772,301, , ,772,964, GERSUL EMPREEND. IMOBS. LTDA 965,121, ,121, SUM 4,975,786, , ,976,449, OTHER 1,954,946, ,860,801, ,815,748, TOTAL 6,930,732, ,861,465, ,792,198,

33 ATTACHMENT 2 2 / 7 STA FELICIDADE COM., IMPORT. E EXPORT DE PROD. SIDERÚRGICOS LTDA CNPJ No / Capital: R$ 30,000, CAPITAL DISTRIBUTION TOTAL SHAREHOLDER S NAME NUMBER OF SHARES % METALÚRGICA GERDAU S/A 29,999, GRUPO GERDAU EMPREENDIMENTOS LTDA SUM 29,999, OTHER TOTAL 30,000, INDAC INDÚSTRIA, ADMINISTRAÇÃO E COMÉRCIO S/A - CNPJ No / Capital: R$ 129,675, CAPITAL DISTRIBUTION NUMBER OF SHARES SHAREHOLDER S NAME COMMON PREFERRED TOTAL NUMBER OF SHARES % NUMBER OF SHARES % NUMBER OF SHARES % CINDAC EMPREEND. E PART. S/A 405,885, ,885, OTHER ,683, ,683, TOTAL 405,885, ,683, ,217,568, GRUPO GERDAU EMPREENDIMENTOS LTDA CNPJ No / Capital: R$ 30,238, CAPITAL DISTRIBUTION TOTAL SHAREHOLDER S NAME NUMBER OF SHARES % INDAC INDÚSTRIA, ADMINISTRAÇÃO E COMÉRCIO SA 26,557, OTHER 3,681, TOTAL 30,238,

34 ATTACHMENT 2 3 / 7 GERSUL EMPREENDIMENTOS IMOBILIÁRIOS LTDA CNPJ No / Capital: R$ 15,000, CAPITAL DISTRIBUTION TOTAL SHAREHOLDER S NAME NUMBER OF SHARES % GRUPO GERDAU EMPREENDIMENTOS LTDA 4,599, AÇOTER PARTICIPAÇÕES LTDA 5,676, INDAC IND. ADM. E COMÉRCIO S/A 3,492, SUM 13,768, OTHER 1,231, TOTAL 15,000, CINDAC EMPREENDIMENTOS E PARTICIPAÇÕES S/A - CNPJ No / Capital: R$ 16,000, CAPITAL DISTRIBUTION NUMBER OF SHARES SHAREHOLDER S NAME COMMON PREFERRED TOTAL NUMBER OF SHARES % NUMBER OF SHARES % NUMBER OF SHARES % GETER REPRES. E ADM. LTDA KLATER REPRES. E ADM. LTDA JOTER REPRES. E ADM. LTDA FRETER REPRES. E ADM. LTDA TOTAL

35 ATTACHMENT 2 4 / 7 AÇOTER PARTICIPAÇÕES LTDA CNPJ No / Capital: R$ 12,800, CAPITAL DISTRIBUTION TOTAL SHAREHOLDER S NAME NUMBER OF SHARES % CINDAC EMPREEND. E PARTICIPAÇÕES S/A 10,609, GRUPO GERDAU EMPREENDIMENTOS LTDA 2,190, TOTAL 12,800, GETER REPRESENTAÇÕES E ADMINISTRAÇÃO LTDA CNPJ No / Capital: R$ 22,000, CAPITAL DISTRIBUTION TOTAL SHAREHOLDER S NAME NUMBER OF SHARES % GERMANO HUGO GERDAU JOHANNPETER 21,995, OTHER 4, TOTAL 22,000, KLATER REPRESENTAÇÕES E ADMINISTRAÇÃO LTDA CNPJ No / Capital: R$ 20,000, CAPITAL DISTRIBUTION TOTAL SHAREHOLDER S NAME NUMBER OF SHARES % KLAUS GERDAU JOHANNPETER 19,999, OTHER TOTAL 20,000,

36 ATTACHMENT 2 5 / 7 JOTER REPRESENTAÇÕES E ADMINISTRAÇÃO LTDA CNPJ No / Capital: R$ 20,000, CAPITAL DISTRIBUTION TOTAL SHAREHOLDER S NAME NUMBER OF SHARES % JORGE GERDAU JOHANNPETER 19,999, OTHER TOTAL 20,000, FRETER REPRESENTAÇÕES E ADMINISTRAÇÃO LTDA CNPJ No / Capital: R$ 20,000, CAPITAL DISTRIBUTION TOTAL SHAREHOLDER S NAME NUMBER OF SHARES % FREDERICO CARLOS GERDAU JOHANNPETER 19,999, OTHER TOTAL 20,000,

37 ATTACHMENT 2 6 / 7 In compliance with the Corporate Governance Differentiated Practices Regulation (Level 1), we present below spreadsheets containing the number and characteristics of securities issued by the Company and which are directly or indirectly held by the Controlling Shareholder, Managers and Members of the Audit Committee and Board of Directors. GERDAU S.A. CNPJ No / Capital: R$ 1,320,133, CAPITAL DISTRIBUTION - POSITION AS OF SEPTEMBER 30, 2001 NUMBER OF SHARES SHAREHOLDER S NAME COMMON PREFERRED TOTAL NUMBER OF SHARES % NUMBER OF SHARES % NUMBER OF SHARES % CONTROLLING SHAREHOLDERS 35, , ,440,061, ,594,584, BOARD OF DIRECTORS 315,000-99, ,124 - AUDIT COMMITTEE - - 8,646, ,646, DIRECTORS 207,544-2,600,562-2,808,106 - TOTAL 35,155,044, ,451,407, ,606,452,

38 ATTACHMENT 2 7 / 7 In compliance with the Corporate Governance Differentiated Practices Regulation (Level 1), we present below spreadsheets containing the number of outstanding shares and their percentage in relation to total shares issued. GERDAU S.A. CNPJ No / Capital: R$ 1,320,133, CAPITAL DISTRIBUTION - POSITION AS OF SEPTEMBER 30, 2001 NUMBER OF SHARES SHAREHOLDER S NAME COMMON PREFERRED TOTAL NUMBER OF SHARES % NUMBER OF SHARES % NUMBER OF SHARES % METALÚRGICA GERDAU S/A 32,677,464, ,363,871, ,041,335, STA. FELICIDADE COM. EXP. DE PRODS SID LTDA 936,949, ,999,759, ,936,709, OTHER CONTROLLING SHAREHOLDERS 1,540,108, ,430, ,616,539, SUM 35,154,522, ,440,061, ,594,584, OUTSTANDING SHARES 4,227,498, ,669,624, ,897,122, TOTAL ISSUED 39,382,020, ,109,685, ,491,706,

39 ATTACHMENT 3 1 / 4 A) GERDAU INTERN. EMPREEND. LTDA. GERDAU S.A. STATEMENTS OF INCOME SUBSIDIARY / AFFILIATED COMPANY Nine-month periods ended September 30, GROSS REVENUE - - DEDUCTIONS FROM GROSS REVENUE NET REVENUE - - COST OF PRODUCTS AND / OR SERVICES SOLD GROSS PROFIT OPERATING EXPENSES / INCOME Selling - - General and administrative (18) (35) Financial income Financial expenses - (1) Other operating income - - Equity in results of subsidiaries and affiliated companies 269,589 49, INCOME FROM OPERATIONS 269,651 50,947 NONOPERATING EXPENSES (33,563) INCOME BEFORE TAXES / MANAGEMENT PROFIT SHARING 236,088 50,947 PROVISION FOR INCOME AND SOCIAL CONTRIBUTION TAXES - (222) DEFERRED INCOME TAX 3, NET INCOME 239,129 50,725 ====== ====== NUMBER OF SHARES, FORMERLY TREASURY STOCK (thousand) 370, ,795 EARNINGS PER SHARE ====== ======