Gerdau Ameristeel Reports Profit For First Quarter of 2010

TAMPA, FL, May 6 /CNW/ - 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.

%SEDAR: 00000593E

SOURCE GERDAU AMERISTEEL CORPORATION

For further information: For further information: Mario Longhi, President and Chief Executive Officer, Gerdau Ameristeel, (813) 207-2346, mlonghi@gerdauameristeel.com; Barbara R. Smith, Vice President and Chief Financial Officer, Gerdau Ameristeel, (813) 319-4324, basmith@gerdauameristeel.com

Organization Profile

GERDAU AMERISTEEL CORPORATION

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