Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes _______ No ___X____(Convenience translation into English from the original previously issued in Portuguese)
FEDERAL PUBLIC SERVICE | External Disclosure | |
CVM - BRAZILIAN SECURITIES AND EXCHANGE COMMISSION | ||
STANDARD FINANCIAL STATEMENTS - DFP | December 31, 2006 | Accounting Practices |
COMMERCIAL, INDUSTRY & OTHER TYPES OF COMPANY | Adopted in Brazil |
REGISTRATION WITH CVM SHOULD NOT BE CONSTRUED AS AN EVALUATION OF THE COMPANY. COMPANY MANAGEMENT IS RESPONSIBLE FOR THE INFORMATION PROVIDED. |
01.01 IDENTIFICATION
1 - CVM CODE 00403-0 |
2 - COMPANY NAME COMPANHIA SIDERÚRGICA NACIONAL |
3 - CNPJ (Corporate Taxpayers ID) 33.042.730/0001-04 |
4 - NIRE (Corporate Registry ID) 33-3.00011595 |
01.02 HEAD OFFICE
1 - ADDRESS R. SÃO JOSÉ, 20/ GR.1602 PARTE |
2 - DISTRICT CENTRO |
|||
3 - ZIP CODE 22010-020 |
4 CITY RIO DE JANEIRO |
5 - STATE RJ |
||
6 - AREA CODE 21 |
7 - TELEPHONE 2215-4901 |
8 - TELEPHONE - |
9 - TELEPHONE - |
10 - TELEX |
11 - AREA CODE 21 |
12 - FAX 2215-7140 |
13 - FAX - |
14 FAX - |
|
15 - E-MAIL invrel@csn.com.br |
01.03 INVESTOR RELATIONS OFFICER (Company Mailing Address)
1- NAME BENJAMIN STEINBRUCH |
||||
2 - ADDRESS AV. BRIGADEIRO FARIA LIMA, 3400 20º ANDAR |
3 - DISTRICT ITAIM BIBI |
|||
4 - ZIP CODE 04538-132 |
5 CITY SÃO PAULO |
6 - STATE SP |
||
7 - AREA CODE 11 |
8 - TELEPHONE 3049-7100 |
9 - TELEPHONE - |
10 - TELEPHONE - |
11 - TELEX |
12 - AREA CODE 11 |
13 - FAX 3049-7558 |
14 - FAX 3049-7519 |
15 FAX - |
|
16 - E-MAIL invrel@csn.com.br |
01.04 DFP REFERENCE AND AUDITOR INFORMATION
YEAR | 1 DATE OF THE FISCAL YEAR BEGINNING | 2 DATE OF THE FISCAL YEAR END |
1 Last | 1/1/2006 | 12/31/2006 |
2 Next to last | 1/1/2005 | 12/31/2005 |
3 Last but two | 1/1/2004 | 12/31/2004 |
09 - INDEPENDENT ACCOUNTANT DELOITTE TOUCHE TOHMATSU AUDITORES INDEPENDENTES |
10 - CVM CODE 00385-9 |
|
11. TECHNICIAN IN CHARGE JOSÉ CARLOS MONTEIRO |
12 TECHNICIANS CPF (INDIVIDUAL TAXPAYERS ID) 443.201.918-20 |
1
01.05 CAPITAL STOCK
Number of Shares (in thousands) |
1 12/31/2006 |
2 12/31/2005 |
3 12/31/2004 |
Paid-in Capital | |||
1 Common | 272,068 | 272,068 | 286,917 |
2 Preferred | 0 | 0 | 0 |
3 Total | 272,068 | 272,068 | 286,917 |
Treasury Stock | |||
4 Common | 14,655 | 13,886 | 10,024 |
5 Preferred | 0 | 0 | 0 |
6 Total | 14,655 | 13,886 | 10,024 |
01.06 COMPANY PROFILE
1 - TYPE OF COMPANY Commercial, Industrial and Others |
2 STATUS Operational |
3 - NATURE OF OWNERSHIP Private National |
4 - ACTIVITY CODE 106 Metallurgy and Steel Industry |
5 - MAIN ACTIVITY MANUFACTURING, TRANSF. AND TRADING OF STEEL PRODUCTS |
6 - CONSOLIDATION TYPE Total |
01.07 COMPANIES NOT INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS
1 - ITEM | 2 - CNPJ (Corporate Taxpayers ID) | 3 - COMPANY NAME |
01.08 - CASH DIVIDENDS
1 - ITEM | 2 - EVENT | 3 - APPROVAL | 4 - TYPE | 5 - DATE OF PAYMENT | 6 - TYPE OF SHARE | 7 - AMOUNT PER SHARE |
01 | AGO/E | 4/28/2006 |
Dividend | 5/8/2006 | Common | 0.4967400000 |
02 | AGO/E | 4/28/2006 |
Interest on Own Capital | 5/8/2006 | Common | 1.0077300000 |
03 | RCA | 6/23/2006 |
Dividend | 6/30/2006 | Common | 1.6121900000 |
04 | RCA | 8/3/2006 |
Dividend | 8/10/2006 | Common | 1.2936380000 |
01.09 INVESTOR RELATIONS OFFICER
1 DATE | 2 SIGNATURE |
3/29/2007 |
2
02.01 BALANCE SHEETS - ASSETS (in thousands of Reais)
1-CODE | 2- DESCRIPTION | 3 12/31/2006 | 4 12/31/2005 | 5 12/31/2004 |
1 | Total Assets | 24,305,340 | 24,375,769 | 25,571,666 |
1.01 | Current Assets | 5,008,626 | 5,545,202 | 6,440,179 |
1.01.01 | Cash and Cash Equivalents | 71,389 | 73,034 | 47,411 |
1.01.02 | Credits | 2,280,776 | 2,625,732 | 2,885,749 |
1.01.02.01 | Customers | 1,428,866 | 1,772,853 | 1,696,794 |
1.01.02.01.01 | Domestic Market | 490,529 | 697,396 | 752,225 |
1.01.02.01.02 | Foreign Market | 1,007,972 | 1,146,408 | 1,011,376 |
1.01.02.01.03 | Allowance for Doubtful Accounts | (69,635) | (70,951) | (66,807) |
1.01.02.02 | Sundry Credits | 851,910 | 852,879 | 1,188,955 |
1.01.02.02.01 | Employees | 13,016 | 13,036 | 13,441 |
1.01.02.02.02 | Suppliers | 131,173 | 67,233 | 80,395 |
1.01.02.02.03 | Recoverable Corporate Income Tax and Social Contribution | 31,340 | 25,168 | 12,744 |
1.01.02.02.04 | Deferred Income Tax | 235,030 | 358,950 | 360,946 |
1.01.02.02.05 | Deferred Social Contribution | 82,962 | 80,843 | 48,426 |
1.01.02.02.06 | Other Taxes | 147,570 | 153,932 | 94,538 |
1.01.02.02.07 | Proposed Dividends Receivable | 198,304 | 140,924 | 28,727 |
1.01.02.02.08 | Prepaid Corporate Income Tax and Social Contribution | 0 | 0 | 497,195 |
1.01.02.02.09 | Other Credits | 12,515 | 12,793 | 52,543 |
1.01.03 | Inventories | 1,649,930 | 1,396,406 | 1,560,071 |
1.01.04 | Others | 1,006,531 | 1,450,030 | 1,946,948 |
1.01.04.01 | Marketable Securities | 517,474 | 1,422,761 | 1,909,866 |
1.01.04.02 | Prepaid Expenses | 41,950 | 27,269 | 30,413 |
1.01.04.03 | Insurance Claimed | 447,107 | 0 | 6,669 |
1.02 | Non Current Assets | 19,296,714 | 18,830,567 | 19,131,487 |
1.02.01 | Long-Term Assets | 1,778,635 | 1,516,617 | 1,379,361 |
1.02.01.01 | Sundry Credits | 826,803 | 646,515 | 630,810 |
1.02.01.01.01 | Loans Eletrobrás | 31,551 | 26,084 | 29,804 |
1.02.01.01.02 | Marketable Securities Receivable | 144,204 | 79,172 | 44,472 |
1.02.01.01.03 | Deferred Income Tax | 417,046 | 410,391 | 442,482 |
1.02.01.01.04 | Deferred Social Contribution | 111,884 | 81,952 | 87,486 |
1.02.01.01.05 | Other Taxes | 122,118 | 48,916 | 26,566 |
1.02.01.02 | Credits with Related Parties | 282,653 | 195,436 | 117,227 |
1.02.01.02.01 | In Associated and Related Companies | 0 | 0 | 0 |
1.02.01.02.02 | In Subsidiaries | 282,653 | 195,436 | 117,227 |
1.02.01.02.03 | Other Related Parties | 0 | 0 | 0 |
1.02.01.03 | Others | 669,179 | 674,666 | 631,324 |
1.02.01.03.01 | Judicial Deposits | 509,851 | 471,142 | 431,231 |
1.02.01.03.02 | Marketable Securities | 125,673 | 125,639 | 125,652 |
1.02.01.03.03 | Prepaid Expenses | 32,300 | 35,685 | 44,878 |
1.02.01.03.04 | Others | 1,355 | 42,200 | 29,563 |
1.02.02 | Permanent Assets | 17,518,079 | 17,313,950 | 17,752,126 |
1.02.02.01 | Investments | 5,309,209 | 5,098,885 | 5,450,044 |
1.02.02.01.01 | In Associated /Related Companies | 0 | 0 | 0 |
1.02.02.01.02 | In Associated/Related Companies-Goodwill | 0 | 0 | 0 |
1.02.02.01.03 | In Subsidiaries | 5,221,911 | 4,962,167 | 5,350,486 |
1.02.02.01.04 | In Subsidiaries -Goodwill | 87,298 | 136,718 | 99,558 |
1.02.02.01.05 | Other Investments | 0 | 0 | 0 |
1.02.02.02 | Property, Plant and Equipment | 12,031,793 | 12,020,165 | 12,092,187 |
1.02.02.02.01 | In Operation, Net | 11,250,457 | 11,524,199 | 11,824,377 |
3
02.01 BALANCE SHEETS - ASSETS (in thousands of Reais)
1-CODE | 2- DESCRIPTION | 3 12/31/2006 | 4 12/31/2005 | 5 12/31/2004 |
1.02.02.02.02 | In Construction | 636,411 | 352,025 | 139,074 |
1.02.02.02.03 | Land | 144,925 | 143,941 | 128,736 |
1.02.02.03 | Intangible Assets | 0 | 0 | 0 |
1.02.02.04 | Deferred | 177,077 | 194,900 | 209,895 |
4
02.02 BALANCE SHEETS - LIABILITIES (in thousands of Reais)
1- CODE | 2- DESCRIPTION | 3 12/31/2006 | 4 12/31/2005 | 5 12/31/2004 |
2 | Total Liabilities | 24,305,340 | 24,375,769 | 25,571,666 |
2.01 | Current Liabilities | 5,521,473 | 5,273,803 | 6,220,134 |
2.01.01 | Loans and Financing | 2,126,852 | 979,704 | 1,208,793 |
2.01.02 | Debentures | 36,240 | 661,920 | 44,943 |
2.01.03 | Suppliers | 1,404,537 | 1,149,504 | 557,090 |
2.01.04 | Taxes and Contributions | 385,694 | 305,526 | 956,069 |
2.01.04.01 | Salaries and Social Contributions | 54,634 | 59,903 | 55,432 |
2.01.04.02 | Taxes Payable | 204,580 | 119,143 | 639,144 |
2.01.04.03 | Deferred Income Tax | 93,000 | 93,000 | 192,274 |
2.01.04.04 | Deferred Social Contribution | 33,480 | 33,480 | 69,219 |
2.01.05 | Dividends Payable | 686,984 | 1,324,087 | 2,268,517 |
2.01.06 | Provisions | 20,645 | 13,289 | 3,608 |
2.01.06.01 | Contingencies | 53,584 | 40,451 | 15,051 |
2.01.06.02 | Judicial Deposits | (32,939) | (27,162) | (11,443) |
2.01.07 | Debt with Related Parties | 0 | 0 | 0 |
2.01.08 | Others | 860,521 | 839,773 | 1,181,114 |
2.01.08.01 | Accounts Payable - Subsidiaries | 683,099 | 687,347 | 1,038,379 |
2.01.08.02 | Others | 177,422 | 152,426 | 142,735 |
2.02 | Non Current Liabilities | 12,557,291 | 12,566,776 | 12,506,991 |
2.02.01 | Long-Term Liabilities | 12,557,291 | 12,566,776 | 12,506,991 |
2.02.01.01 | Loans and Financing | 5,419,156 | 6,587,731 | 6,635,135 |
2.02.01.02 | Debentures | 897,141 | 286,176 | 900,000 |
2.02.01.03 | Provisions | 5,667,992 | 5,212,880 | 4,478,829 |
2.02.01.03.01 | Contingencies | 3,773,113 | 3,192,954 | 2,323,709 |
2.02.01.03.02 | Judicial Deposits | (108,627) | (143,021) | (140,893) |
2.02.01.03.03 | Deferred Income Tax | 1,473,166 | 1,590,402 | 1,688,245 |
2.02.01.03.04 | Deferred Social Contribution | 530,340 | 572,545 | 607,768 |
2.02.01.04 | Debts with Related Parties | 0 | 0 | 0 |
2.02.01.05 | Advance for Future Capital Increase | 0 | 0 | 0 |
2.02.01.06 | Others | 573,002 | 479,989 | 493,027 |
2.02.01.06.01 | Allowance for Loss on Investments | 106,673 | 77,833 | 90,412 |
2.02.01.06.02 | Accounts Payable Subsidiaries | 52,434 | 99,116 | 107,031 |
2.02.01.06.03 | Provisions for Pension Funds | 286,940 | 223,400 | 200,568 |
2.02.01.06.04 | Others | 126,955 | 79,640 | 95,016 |
2.02.02 | Deferred Income | 0 | 0 | 0 |
2.04 | Shareholders Equity | 6,226,576 | 6,535,190 | 6,844,541 |
2.04.01 | Paid-Up Capital Stock | 1,680,947 | 1,680,947 | 1,680,947 |
2.04.02 | Capital Reserves | 0 | 0 | 17,319 |
2.04.03 | Revaluation Reserve | 4,208,550 | 4,518,054 | 4,763,226 |
2.04.03.01 | Own Assets | 4,208,197 | 4,517,701 | 4,763,226 |
2.04.03.02 | Subsidiaries/Associated and Related Companies | 353 | 353 | 0 |
2.04.04 | Profit Reserves | 337,079 | 336,189 | 383,049 |
2.04.04.01 | Legal | 336,189 | 336,189 | 336,189 |
2.04.04.02 | Statutory | 0 | 0 | 0 |
2.04.04.03 | For Contingencies | 0 | 0 | 0 |
2.04.04.04 | Unrealized Income | 0 | 0 | 0 |
2.04.04.05 | Profit Retentions | 0 | 0 | 0 |
5
02.02 BALANCE SHEETS - LIABILITIES (in thousands of Reais)
1- CODE | 2- DESCRIPTION | 3 12/31/2006 | 4 12/31/2005 | 5 12/31/2004 |
2.04.04.06 | Special For Non-Distributed Dividends | 0 | 0 | 0 |
2.04.04.07 | Other Profit Reserves | 890 | 0 | 46,860 |
2.04.04.07.01 | From Investments | 677,611 | 637,611 | 487,203 |
2.04.04.07.02 | Treasury Stock | (676,721) | (637,611) | (440,343) |
2.04.05 | Accrued Profits/Losses | 0 | 0 | 0 |
2.04.06 | Advance for Future Capital Increase | 0 | 0 | 0 |
6
03.01 STATEMENTS OF INCOME (in thousands of Reais)
1- CODE | 2- DESCRIPTION | 3 1/1/2006 to 12/31/2006 |
4 1/1/2005 to 12/31/2005 |
5 1/1/2004 to 12/31/2004 |
3.01 | Gross Revenue from Sales and/or Services | 8,743,881 | 10,147,678 | 10,128,511 |
3.02 | Deductions from Gross Revenue | (1,754,622) | (1,973,701) | (1,994,019) |
3.03 | Net Revenue from Sales and/or Services | 6,989,259 | 8,173,977 | 8,134,492 |
3.04 | Cost of Goods and/or Services Sold | (4,780,880) | (4,448,925) | (4,063,033) |
3.04.01 | Depreciation and Amortization | (774,637) | (759,235) | (686,655) |
3.04.02 | Others | (4,006,243) | (3,689,690) | (3,376,378) |
3.05 | Gross Income | 2,208,379 | 3,725,052 | 4,071,459 |
3.06 | Operating Income/Expenses | (715,958) | (1,147,019) | (1,078,363) |
3.06.01 | Selling | (254,036) | (268,396) | (264,712) |
3.06.01.01 | Depreciation and Amortization | (9,544) | (8,359) | (7,882) |
3.06.01.02 | Others | (244,492) | (260,037) | (256,830) |
3.06.02 | General and Administrative | (249,772) | (211,146) | (240,958) |
3.06.02.01 | Depreciation and Amortization | (14,292) | (15,759) | (21,914) |
3.06.02.02 | Others | (235,480) | (195,387) | (219,044) |
3.06.03 | Financial | (826,473) | (310,515) | (831,703) |
3.06.03.01 | Financial Income | (527,706) | (303,174) | (211,938) |
3.06.03.02 | Financial Expenses | (298,767) | (7,341) | (619,765) |
3.06.03.02.01 | Exchange and Monetary Variation, net | 707,922 | 923,530 | 540,752 |
3.06.03.02.02 | Financial Expenses | (1,006,689) | (930,871) | (1,057,338) |
3.06.03.02.03 | Amortization of Deferred Exchange Variation | 0 | 0 | (103,179) |
3.06.04 | Other Operating Income | 764,007 | 28,711 | 70,762 |
3.06.05 | Other Operating Expenses | (314,067) | (10,984) | (235,942) |
3.06.06 | Equity Pick-up | 164,383 | (374,689) | 424,190 |
3.07 | Operating Income | 1,492,421 | 2,578,033 | 2,993,096 |
3.08 | Non-Operating Income | 17,887 | (6,292) | (17,694) |
3.08.01 | Income | 201,555 | 4 | 6 |
3.08.02 | Expenses | (183,668) | (6,296) | (17,700) |
3.09 | Income before Taxes and Participation | 1,510,308 | 2,571,741 | 2,975,402 |
3.10 | Provision for Income Tax and Social Contribution | (400,231) | (953,861) | (784,110) |
3.11 | Deferred Income Tax | 59,289 | 260,878 | (46,295) |
3.11.01 | Deferred Income Tax | (11,013) | 163,032 | (54,950) |
3.11.02 | Deferred Social Contribution | 70,302 | 97,846 | 8,655 |
3.12 | Statutory Interests/Contributions | 0 | 0 | 0 |
3.12.01 | Participations | 0 | 0 | 0 |
3.12.02 | Contributions | 0 | 0 | 0 |
3.13 | Reversal of Interest on Own Capital | 0 | 0 | 0 |
3.15 | Income/Loss for the Year | 1,169,366 | 1,878,758 | 2,144,997 |
No. SHARES, EX-TREASURY (in thousands) | 257,413 | 258,182 | 276,893 | |
EARNINGS PER SHARE (in reais) | 4.54276 | 7.27687 | 7.74666 | |
LOSS PER SHARE (in reais) |
7
04.01 STATEMENTS OF CHANGES IN FINANCIAL POSITION (in thousands of Reais)
1 - CODE | 2 DESCRIPTION | 3 1/1/2006 to 12/31/2006 |
4 1/1/2005 to 12/31/2005 |
5 1/1/2004 to 12/31/2004 |
4.01 | Sources | 4,346,654 | 5,281,436 | 7,622,685 |
4.01.01 | Of Operations | 1,418,290 | 2,118,718 | 2,589,275 |
4.01.01.01 | Income/Loss for the Year | 1,169,366 | 1,878,758 | 2,144,997 |
4.01.01.02 | Amounts not Affecting Working Capital | 248,924 | 239,960 | 444,278 |
4.01.01.02.01 | Long-term exchange and monetary variations | (209,190) | (1,010,185) | (411,321) |
4.01.01.02.02 | Equity in the earnings of subsidiaries | (164,383) | 374,689 | (424,190) |
4.01.01.02.03 | Permanent Assets Write-off | (9,240) | 8,527 | 15,374 |
4.01.01.02.04 | Depreciation / Depletion / Amortization | 798,473 | 783,353 | 716,451 |
4.01.01.02.05 | Deferred Exchange Variation Amortization | 0 | 0 | 103,179 |
4.01.01.02.06 | Deferred Income Tax and Social Contribution | (181,091) | (95,442) | 52,804 |
4.01.01.02.07 | Provision for PIS/COFINS/CPMF Contingencies | (41,413) | 164,140 | 132,972 |
4.01.01.02.08 | Actuarial Liability | 63,540 | 22,832 | 63,853 |
4.01.01.02.09 | Others | (7,772) | (7,954) | 195,156 |
4.01.02 | From Shareholders | 0 | 0 | 0 |
4.01.03 | From Third Parties | 2,928,364 | 3,162,718 | 5,033,410 |
4.01.03.01 | Inflow of long-term loans and financing | 1,256,969 | 1,937,650 | 2,730,685 |
4.01.03.02 | Issuance of Debentures | 600,000 | 0 | 0 |
4.01.03.03 | Decrease in Other Receivables | 301,775 | 354,424 | 1,648,234 |
4.01.03.04 | Increase in Other Liabilities Income tax/ social contribution | 373,837 | 702,545 | 578,293 |
4.01.03.05 | Subsidiaries Proposed Dividends/Interest on Own Capital | 202,770 | 168,099 | 28,727 |
4.01.03.06 | Recovery of Loss Claimed | 193,013 | 0 | 0 |
4.01.03.07 | Others | 0 | 0 | 47,471 |
4.02 | Applications | 5,130,901 | 5,230,081 | 8,358,564 |
4.02.01 | Investments | 212,766 | 204,089 | 1,905,718 |
4.02.02 | Property, Plant and Equipment | 970,245 | 654,930 | 378,788 |
4.02.03 | Deferred | 42,181 | 45,361 | 44,561 |
4.02.04 | Interest on Own Capital and Dividends | 1,433,262 | 1,324,087 | 2,303,045 |
4.02.05 | Treasury Stock | 39,110 | 864,375 | 440,343 |
4.02.06 | Transf. of loan and financing to short-term | 1,719,579 | 1,545,619 | 2,003,709 |
4.02.07 | Increase in Long-Term Assets | 323,041 | 273,116 | 197,733 |
4.02.08 | Decrease in Other Long-Term Liabilities | 390,717 | 318,504 | 1,084,667 |
4.02.09 | Others | 0 | 0 | 0 |
4.03 | Increase/Decrease in the Working Capital | (784,247) | 51,355 | (735,879) |
4.04 | Changes in Current Assets | (536,577) | (894,976) | 932,510 |
4.04.01 | Current Assets at the Beginning of the Year | 5,545,203 | 6,440,179 | 5,507,669 |
4.04.02 | Current Assets at the End of the Year | 5,008,626 | 5,545,203 | 6,440,179 |
4.05 | Changes in Current Liabilities | 247,670 | (946,331) | 1,668,389 |
4.05.01 | Current Liabilities at the Beginning of the Year | 5,273,803 | 6,220,134 | 4,551,745 |
4.05.02 | Current Liabilities at the End of the Year | 5,521,473 | 5,273,803 | 6,220,134 |
8
05.01 STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FROM 01/01/2006 TO 12/31/2006 (in thousands of Reais)
1 - CODE | 2 - DESCRIPTION | 3 CAPITAL STOCK |
4 CAPITAL RESERVES |
5 REVALUATION RESERVES |
6 PROFIT RESERVES |
7 - ACCRUED PROFIT/LOSS |
8 - TOTAL SHAREHOLDERS EQUITY |
5.01 | Opening Balance | 1,680,947 | 0 | 4,518,054 | 336,189 | 0 | 6,535,190 |
5.02 | Adjustments of Previous Years | 0 | 0 | 0 | 0 | 0 | 0 |
5.03 | Increase/Decrease in Capital Stock | 0 | 0 | 0 | 0 | 0 | 0 |
5.04 | Realization of Reserves | 0 | 0 | (280,508) | 0 | 303,756 | 23,248 |
5.04.01 | Of Own Assets Net of Income Tax and Social Contribution |
0 | 0 | (280,508) | 0 | 280,508 | 0 |
5.04.02 | Debentures in the Market | 0 | 23,248 | 0 | 0 | 0 | 23,248 |
5.04.03 | Allocation of Debentures Redemption to Treasury Stock |
0 | (23,248) | 0 | 0 | 23,248 | 0 |
5.05 | Treasury Stock | 0 | 0 | 0 | (39,110) | 0 | (39,110) |
5.06 | Income/Loss for the Year | 0 | 0 | 0 | 0 | 1,338,775 | 1,338,775 |
5.07 | Allocations | 0 | 0 | 0 | 40,000 | (1,642,671) | (1,602,671) |
5.07.01 | Prepaid Dividends | 0 | 0 | 0 | 0 | (748,000) | (748,000) |
5.07.02 | Proposed Dividends and Interest on Own Capital | 0 | 0 | 0 | 0 | (854,671) | (854,671) |
5.07.03 | Investment Reserve | 0 | 0 | 0 | 40,000 | (40,000) | 0 |
5.08 | Others | 0 | 0 | (28,996) | 0 | 140 | (28,856) |
5.08.01 | Write-off of Interest on Own Capital Lapsed | 0 | 0 | 0 | 0 | 140 | 140 |
5.08.02 | Reversal of Revaluation CTE II Net of Income Tax and Social Contribution |
0 | 0 | (28,996) | 0 | 0 | (28,996) |
5.09 | Ending Balance | 1,680,947 | 0 | 4,208,550 | 337,079 | 0 | 6,226,576 |
9
05.02 STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FROM 1/1/2005 TO 12/31/2005 (in thousands of Reais)
1 - CODE | 2 DESCRIPTION | 3 CAPITAL STOCK |
4 CAPITAL RESERVES |
5 REVALUATION RESERVES |
6 PROFIT RESERVES |
7 - ACCRUED PROFIT/LOSS |
8 - TOTAL SHAREHOLDERS EQUITY |
5.01 | Opening Balance | 1,680,947 | 17,319 | 4,763,226 | 383,049 | 0 | 6,844,541 |
5.02 | Adjustments of Previous Years | 0 | 0 | 0 | 0 | 0 | 0 |
5.03 | Increase/Decrease in Capital Stock | 0 | 0 | 0 | 0 | 0 | 0 |
5.04 | Realization of Reserves | 0 | 0 | (245,172) | 0 | 245,525 | 353 |
5.04.01 | Of Own Assets, Net of Income Tax and Social Contribution |
0 | 0 | (245,525) | 0 | 0 | (245,525) |
5.04.02 | Reversal of Own Assets Revaluation Reserve | 0 | 0 | 0 | 0 | 245,525 | 245,525 |
5.04.03 | Revaluation of Subsidiaries Assets Net of Income Tax and Social Contribution |
0 | 0 | 353 | 0 | 0 | 353 |
5.05 | Treasury Stock | 0 | (17,319) | 0 | (684,471) | (162,585) | (864,375) |
5.06 | Income/Loss for the Year | 0 | 0 | 0 | 0 | 1,878,758 | 1,878,758 |
5.07 | Allocations | 0 | 0 | 0 | 637,611 | (1,961,698) | (1,324,087) |
5.07.01 | Proposed Dividends and Interest on Own Capital | 0 | 0 | 0 | 0 | (1,324,087) | (1,324,087) |
5.07.02 | Investment Reserve | 0 | 0 | 0 | 637,611 | (637,611) | 0 |
5.08 | Others | 0 | 0 | 0 | 0 | 0 | 0 |
5.09 | Ending Balance | 1,680,947 | 0 | 4,518,054 | 336,189 | 0 | 6,535,190 |
10
05.03 STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FROM 1/1/2004 TO 12/31/2004 (in thousands of Reais)
1 - CODE | 2 DESCRIPTION | 3 CAPITAL STOCK | 4 CAPITAL RESERVES | 5 REVALUATION RESERVES | 6 PROFIT RESERVES | 7 - ACCRUED PROFIT/LOSS | 8 - TOTAL SHAREHOLDERS EQUITY |
5.01 | Opening Balance | 1,680,947 | 17,319 | 5,008,072 | 736,594 | 0 | 7,442,932 |
5.02 | Adjustments of Previous Years | 0 | 0 | 0 | 0 | 0 | 0 |
5.03 | Increase/Decrease in Stock Capital | 0 | 0 | 0 | 0 | 0 | 0 |
5.04 | Realization of Reserves | 0 | 0 | (244,846) | 0 | 244,846 | 0 |
5.05 | Treasury Stock | 0 | 0 | 0 | (440,343) | 0 | (440,343) |
5.06 | Income/Loss for the Year | 0 | 0 | 0 | 0 | 2,144,997 | 2,144,997 |
5.07 | Allocations | 0 | 0 | 0 | 86,798 | (2,389,843) | (2,303,045) |
5.07.01 | Legal Reserve | 0 | 0 | 0 | 86,798 | (86,798) | 0 |
5.07.02 | Prepaid Dividends | 0 | 0 | 0 | 0 | (35,000) | (35,000) |
5.07.03 | Proposed Dividends and Interest on Own Capital | 0 | 0 | 0 | 0 | (2,268,045) | (2,268,045) |
5.07.04 | Reserve for Investments | 0 | 0 | 0 | 0 | 0 | 0 |
5.08 | Others | 0 | 0 | 0 | 0 | 0 | 0 |
5.09 | Ending Balance | 1,680,947 | 17,319 | 4,763,226 | 383,049 | 0 | 6,844,541 |
11
06.01 CONSOLIDATED BALANCE SHEETS ASSETS (in thousands of Reais)
1-CODE | 2- DESCRIPTION | 3 12/31/2006 | 4 12/31/2005 | 5 12/31/2004 |
1 | Total Assets | 25,028,301 | 24,245,857 | 24,539,278 |
1.01 | Current Assets | 7,927,762 | 8,164,081 | 8,608,514 |
1.01.01 | Cash and Cash Equivalents | 167,288 | 135,185 | 109,485 |
1.01.02 | Credits | 2,363,915 | 2,371,236 | 2,615,241 |
1.01.02.01 | Customers | 1,292,291 | 1,366,047 | 1,140,136 |
1.01.02.01.01 | Domestic Market | 765,612 | 879,153 | 914,870 |
1.01.02.01.02 | Foreign Market | 635,920 | 588,098 | 311,853 |
1.01.02.01.03 | Allowance for Doubtful Accounts | (109,241) | (101,204) | (86,587) |
1.01.02.02 | Sundry Credits | 1,071,624 | 1,005,189 | 1,475,105 |
1.01.02.02.01 | Employees | 14,029 | 13,917 | 14,231 |
1.01.02.02.02 | Suppliers | 151,284 | 86,381 | 87,551 |
1.01.02.02.03 | Recoverable Corporate Income Tax and Social Contribution | 41,739 | 32,428 | 21,454 |
1.01.02.02.04 | Deferred Income Tax | 317,042 | 405,034 | 440,589 |
1.01.02.02.05 | Deferred Social Contribution | 112,588 | 98,105 | 77,090 |
1.01.02.02.06 | Other Taxes | 325,024 | 254,980 | 167,674 |
1.01.02.02.07 | Prepaid Corporate Income Tax and Social Contribution | 0 | 38,429 | 529,270 |
1.01.02.02.08 | Other Credits | 109,918 | 75,915 | 137,246 |
1.01.03 | Inventories | 2,435,281 | 1,907,462 | 2,276,027 |
1.01.04 | Others | 2,961,278 | 3,750,198 | 3,607,761 |
1.01.04.01 | Marketable Securities | 2,455,813 | 3,709,753 | 3,561,720 |
1.01.04.02 | Prepaid Expenses | 58,358 | 40,445 | 39,372 |
1.01.04.03 | Insurance Claimed | 447,107 | 0 | 6,669 |
1.02 | Non-Current Assets | 17,100,539 | 16,081,776 | 15,930,764 |
1.02.01 | Long-Term Assets | 1,927,316 | 1,861,190 | 1,617,875 |
1.02.01.01 | Sundry Credits | 1,025,275 | 867,197 | 880,684 |
1.02.01.01.01 | Loans ELETROBRÁS | 32,227 | 26,425 | 30,145 |
1.02.01.01.02 | Marketable Securities Receivable | 260,855 | 202,718 | 204,241 |
1.02.01.01.03 | Deferred Income Tax | 437,005 | 447,679 | 475,970 |
1.02.01.01.04 | Deferred Social Contribution | 119,155 | 95,459 | 99,572 |
1.02.01.01.05 | Other Taxes | 176,033 | 94,916 | 70,756 |
1.02.01.02 | Credits with Related Parties | 0 | 63,258 | 25,968 |
1.02.01.02.01 | With Associated and Related Companies | 0 | 0 | 0 |
1.02.01.02.02 | With Subsidiaries | 0 | 63,258 | 25,968 |
1.02.01.02.03 | With Other Related Parties | 0 | 0 | 0 |
1.02.01.03 | Others | 902,041 | 930,735 | 711,223 |
1.02.01.03.01 | Judicial Deposits | 519,964 | 471,144 | 446,936 |
1.02.01.03.02 | Prepaid Expenses | 80,669 | 92,275 | 81,114 |
1.02.01.03.03 | Marketable Securities | 143,123 | 254,262 | 90,159 |
1.02.01.03.04 | Others | 158,285 | 113,054 | 93,014 |
1.02.02 | Permanent Assets | 15,173,223 | 14,220,586 | 14,312,889 |
1.02.02.01 | Investments | 957,674 | 270,745 | 292,649 |
1.02.02.01.01 | In Associated/Related Companies | 0 | 0 | 0 |
1.02.02.01.02 | In Associated/Related Companies-Goodwill | 0 | 0 | 0 |
1.02.02.01.03 | In Subsidiaries | 0 | 0 | 0 |
12
06.01 CONSOLIDATED BALANCE SHEETS ASSETS (in thousands of Reais)
1-CODE | 2- DESCRIPTION | 3 12/31/2006 | 4 12/31/2005 | 5 12/31/2004 |
1.02.02.01.04 | In Subsidiaries Goodwill | 277,465 | 269,449 | 291,815 |
1.02.02.01.05 | Other Investments | 680,209 | 1,296 | 834 |
1.02.02.02 | Property, Plant and Equipment | 13,948,261 | 13,638,200 | 13,666,803 |
1.02.02.02.01 | In Operation, Net | 12,971,477 | 13,051,394 | 13,318,101 |
1.02.02.02.02 | In Construction | 792,907 | 424,038 | 198,713 |
1.02.02.02.03 | Land | 183,877 | 162,768 | 149,989 |
1.02.02.03 | Intangible Assets | 0 | 0 | 0 |
1.02.02.04 | Deferred | 267,288 | 311,641 | 353,437 |
13
06.02 CONSOLIDATED BALANCE SHEETS - LIABILITIES (in thousands of Reais)
1- CODE | 2- DESCRIPTION | 3 12/31/2006 | 4 12/31/2005 | 5 12/31/2004 |
2 | Total Liabilities | 25,028,301 | 24,245,857 | 24,539,278 |
2.01 | Current Liabilities | 4,317,780 | 4,792,540 | 6,149,866 |
2.01.01 | Loans and Financing | 994,904 | 758,976 | 1,684,571 |
2.01.02 | Debentures | 85,583 | 705,517 | 87,884 |
2.01.03 | Suppliers | 1,568,331 | 1,261,690 | 760,466 |
2.01.04 | Taxes and Contributions | 624,486 | 452,689 | 1,061,570 |
2.01.04.01 | Salaries and Social Contributions | 91,095 | 85,385 | 79,407 |
2.01.04.02 | Taxes Payable | 406,911 | 240,824 | 720,670 |
2.01.04.03 | Deferred Income Tax | 93,000 | 93,000 | 192,274 |
2.01.04.04 | Deferred Social Contribution | 33,480 | 33,480 | 69,219 |
2.01.05 | Dividends Payable | 686,984 | 1,324,087 | 2,268,517 |
2.01.06 | Provisions | 21,871 | 18,765 | 3,354 |
2.01.06.01 | Contingencies | 54,810 | 61,032 | 17,149 |
2.01.06.02 | Judicial Deposits | (32,939) | (42,267) | (13,795) |
2.01.07 | Debts with Related Parties | 0 | 0 | 0 |
2.01.08 | Others | 335,621 | 270,816 | 283,504 |
2.02 | Non-Current Liabilities | 14,586,377 | 12,980,876 | 11,734,144 |
2.02.01 | Long-term Liabilities | 14,581,085 | 12,974,795 | 11,656,348 |
2.02.01.01 | Loans and Financing | 7,349,138 | 6,908,495 | 5,621,644 |
2.02.01.02 | Debentures | 995,679 | 425,517 | 1,075,593 |
2.02.01.03 | Provisions | 5,766,286 | 5,253,888 | 4,583,764 |
2.02.01.03.01 | Contingencies | 3,877,086 | 3,250,526 | 2,439,300 |
2.02.01.03.02 | Judicial Deposits | (134,372) | (159,585) | (151,574) |
2.02.01.03.03 | Deferred Income Tax | 1,487,932 | 1,590,402 | 1,688,270 |
2.02.01.03.04 | Deferred Social Contribution | 535,640 | 572,545 | 607,768 |
2.02.01.04 | Debts with Related Parties | 0 | 0 | 0 |
2.02.01.05 | Advance for Future Capital Increase | 0 | 0 | 0 |
2.02.01.06 | Others | 469,982 | 386,895 | 375,347 |
2.02.01.06.01 | Provision for Private Pension | 286,940 | 223,400 | 200,568 |
2.02.01.06.02 | Others | 183,042 | 163,495 | 174,779 |
2.02.02 | Deferred Income | 5,292 | 6,081 | 77,796 |
2.03 | Non-Controlling Shareholders Interest | 0 | 0 | 0 |
2.04 | Shareholders Equity | 6,124,144 | 6,472,441 | 6,655,268 |
2.04.01 | Paid-Up Capital | 1,680,947 | 1,680,947 | 1,680,947 |
2.04.02 | Capital Reserve | 0 | 0 | 17,319 |
2.04.03 | Revaluation Reserve | 4,208,550 | 4,518,054 | 4,763,226 |
2.04.03.01 | Own Assets | 4,208,197 | 4,517,701 | 4,763,226 |
2.04.03.02 | Subsidiaries/Associated and Related Companies | 353 | 353 | 0 |
2.04.04 | Profit Reserves | 234,647 | 273,440 | 193,776 |
2.04.04.01 | Legal From Investments | 336,189 | 336,189 | 336,189 |
2.04.04.02 | Statutory | 0 | 0 | 0 |
2.04.04.03 | For Contingencies | 0 | 0 | 0 |
2.04.04.04 | Unrealized Income | 0 | 0 | 0 |
2.04.04.05 | Profit Retention | 0 | 0 | 0 |
2.04.04.06 | Special For Non-Distributed Dividends | 0 | 0 | 0 |
2.04.04.07 | Other Profit Reserves | (101,542) | (62,749) | (142,413) |
2.04.04.07.01 | Investments | 677,611 | 637,611 | 487,203 |
14
06.02 CONSOLIDATED BALANCE SHEETS - LIABILITIES (in thousands of Reais)
1- CODE | 2- DESCRIPTION | 3 12/31/2006 | 4 12/31/2005 | 5 12/31/2004 |
2.04.04.07.02 | Treasury Stock | (676,721) | (637,611) | (440,343) |
2.04.04.07.03 | Unrealized Income | (102,432) | (62,749) | (189,273) |
2.04.05 | Accrued Profits/Losses | 0 | 0 | 0 |
2.04.06 | Advance for Future Capital Increase | 0 | 0 | 0 |
15
07.01 CONSOLIDATED STATEMENTS OF INCOME (in thousands of Reais)
1- CODE | 2- DESCRIPTION | 3 1/01/2006 to 12/31/2006 | 4 1/1/2005 to 12/31/2005 | 5 1/1/2004 to 12/31/2004 |
3.01 | Gross Revenue from Sales and/or Services | 11,265,137 | 12,283,464 | 12,250,641 |
3.02 | Deductions from Gross Revenue | (2,224,768) | (2,245,877) | (2,451,072) |
3.03 | Net Revenue from Sales and/or Services | 9,040,369 | 10,037,587 | 9,799,569 |
3.04 | Cost of Goods and/or Services Sold | (5,988,785) | (5,468,263) | (4,997,244) |
3.04.01 | Depreciation and Amortization | (909,314) | (870,314) | (781,572) |
3.04.02 | Others | (5,079,471) | (4,597,949) | (4,215,672) |
3.05 | Gross Income | 3,051,584 | 4,569,324 | 4,802,325 |
3.06 | Operating Income/Expenses | (1,383,645) | (1,687,355) | (1,996,306) |
3.06.01 | Selling | (476,343) | (577,226) | (503,433) |
3.06.01.01 | Depreciation and Amortization | (10,809) | (9,990) | (8,986) |
3.06.01.02 | Others | (465,534) | (567,236) | (494,447) |
3.06.02 | General and Administrative | (376,476) | (322,511) | (348,101) |
3.06.02.01 | Depreciation and Amortization | (41,270) | (43,791) | (47,518) |
3.06.02.02 | Others | (335,206) | (278,720) | (300,583) |
3.06.03 | Financial | (899,525) | (761,174) | (921,914) |
3.06.03.01 | Financial Income | (14,402) | 463,859 | (38,014) |
3.06.03.02 | Financial Expenses | (885,123) | (1,225,033) | (883,900) |
3.06.03.02.01 | Exchange and Monetary Variation, net | 471,707 | 132,480 | 341,566 |
3.06.03.02.02 | Financial Expenses | (1,356,830) | (1,357,513) | (1,112,850) |
3.06.03.02.03 | Amortization of Deferred Exchange Variation | 0 | 0 | (112,616) |
3.06.04 | Other Operating Income | 805,945 | 55,836 | 122,795 |
3.06.05 | Other Operating Expenses | (349,737) | (27,110) | (299,648) |
3.06.06 | Equity Pick-up | (87,509) | (55,170) | (46,005) |
3.07 | Operating Income | 1,667,939 | 2,881,969 | 2,806,019 |
3.08 | Non-Operating Income | 19,066 | (7,372) | (1,228) |
3.08.01 | Income | 222,247 | 33,497 | 17,538 |
3.08.02 | Expenses | (203,181) | (40,869) | (18,766) |
3.09 | Income before Taxes and participation | 1,687,005 | 2,874,597 | 2,804,791 |
3.10 | Provision for Income Tax and Social Contribution | (604,919) | (1,092,907) | (871,596) |
3.11 | Deferred Income Tax | 85,439 | 223,592 | 48,593 |
3.11.01 | Deferred Income Tax | 8,151 | 135,581 | 15,691 |
3.11.02 | Deferred Social Contribution | 77,288 | 88,011 | 32,902 |
3.12 | Statutory Interest/Contributions | 0 | 0 | 0 |
3.12.01 | Participations | 0 | 0 | 0 |
3.12.02 | Contributions | 0 | 0 | 0 |
3.13 | Reversal of Interest on Own Capital | 0 | 0 | 0 |
3.14 | Non-Controlling Shareholders Interest | 0 | 0 | 0 |
3.15 | Income/Loss for the Year | 1,167,525 | 2,005,282 | 1,981,788 |
No. SHARES, EX-TREASURY (in thousands) | 257,413 | 258,182 | 276,893 | |
EARNINGS PER SHARE (in reais) | 4.53561 | 7.76693 | 7.15723 | |
LOSS PER SHARE (in reais) |
16
08.01 CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION (in thousands of Reais)
1 - CODE | 2 DESCRIPTION | 3 01/01/2006 to 12/31/2006 | 4 - 01/01/2005 to 12/31/2005 | 5 - 01/01/2004 to 12/31/2004 |
4.01 | Sources | 5,967,596 | 6,484,019 | 7,581,587 |
4.01.01 | Of Operations | 1,991,715 | 2,438,183 | 3,156,931 |
4.01.01.01 | Income/Loss for the Year | 1,167,525 | 2,005,282 | 1,981,788 |
4.01.01.02 | Amounts not Affecting Working Capital | 824,190 | 432,901 | 1,175,143 |
4.01.01.02.01 | Long-term Monetary and Exchange Variations | (152,114) | (614,141) | (325,657) |
4.01.01.02.02 | Equity Pick-Up | 87,509 | 55,170 | 46,005 |
4.01.01.02.03 | Permanent Assets Write-off | 16,379 | 34,616 | 17,841 |
4.01.01.02.04 | Depreciation /Amortization/Depletion | 961,393 | 924,094 | 838,075 |
4.01.01.02.05 | Deferred Exchange Variation Amortization | 0 | 0 | 112,616 |
4.01.01.02.06 | Deferred Income Tax and Social Contribution | (137,458) | (100,688) | 49,018 |
4.01.01.02.07 | Provision for PIS/COFINS/CPMF contingencies | (10,052) | 133,350 | 132,972 |
4.01.01.02.08 | Provision for Actuarial Liability | 63,540 | 22,832 | 63,589 |
4.01.01.02.09 | Deferred Income Variation | (789) | (23,402) | 22,986 |
4.01.01.02.10 | Others | (4,218) | 1,070 | 217,698 |
4.01.02 | From Shareholders | 0 | 0 | 0 |
4.01.03 | From Third Parties | 3,975,881 | 4,045,836 | 4,424,656 |
4.01.03.01 | Inflow of Long-Term Loans and Financing | 1,631,358 | 2,947,967 | 2,918,565 |
4.01.03.02 | Issuance of Debentures | 600,000 | 0 | 0 |
4.01.03.03 | Decrease in Other Receivables | 504,378 | 304,261 | 492,462 |
4.01.03.04 | Increase in Other Liabilities Income Tax/Social Contribution | 1,047,132 | 793,608 | 618,506 |
4.01.03.05 | Subsidiaries Proposed Dividends/Interest on Own Capital | 0 | 0 | 0 |
4.01.03.06 | Recovery of Loss Claimed | 193,013 | 0 | 0 |
4.01.03.07 | Others | 0 | 0 | 395,123 |
4.02 | Applications | 5,729,155 | 5,571,126 | 7,355,801 |
4.02.01 | Investments | 772,520 | 81,690 | 139,821 |
4.02.02 | Property, Plant and Equipment | 1,450,157 | 888,587 | 1,374,996 |
4.02.03 | Deferred | 45,117 | 46,664 | 154,029 |
4.02.04 | Interest on Own Capital and Dividends | 1,433,262 | 1,324,087 | 2,303,045 |
4.02.05 | Treasury Stock | 39,110 | 864,375 | 440,343 |
4.02.06 | Transf. of loans and financing to short term | 1,285,314 | 1,643,503 | 2,205,871 |
4.02.07 | Increase in Long-Term Assets | 322,955 | 371,795 | 525,360 |
4.02.08 | Decrease in Other Long-Term liabilities | 380,720 | 350,425 | 212,336 |
4.03 | Increase/Decrease in the Working Capital | 238,441 | 912,893 | 225,786 |
4.04 | Changes in Current Assets | (236,319) | (444,433) | 1,833,134 |
4.04.01 | Current Assets at the Beginning of the Year | 8,164,081 | 8,608,514 | 6,775,380 |
4.04.02 | Current Assets at the End of the Year | 7,927,762 | 8,164,081 | 8,608,514 |
4.05 | Changes in Current Liabilities | (474,760) | (1,357,326) | 1,607,348 |
4.05.01 | Current Liabilities at the Beginning of the Year | 4,792,540 | 6,149,866 | 4,542,518 |
4.05.02 | Current Liabilities at the End of the Year | 4,317,780 | 4,792,540 | 6,149,866 |
17
(Convenience translation into English from the original previously issued in Portuguese)
FEDERAL PUBLIC SERVICE | External Disclosure | |
CVM - BRAZILIAN SECURITIES AND EXCHANGE COMMISSION | ||
STANDARD FINANCIAL STATEMENTS - DFP | December 31, 2006 | Accounting Practices |
COMMERCIAL, INDUSTRY & OTHER TYPES OF COMPANY | Adopted in Brazil |
00403 0 | COMPANHIA SIDERÚRGICA NACIONAL | 33.042.730/0001-04 |
09.01 - REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS | ||
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To
The Shareholders and Management of
Companhia Siderúrgica Nacional
Rio de Janeiro RJ
1. |
We have audited the individual and consolidated balance sheets of Companhia Siderúrgica Nacional and its subsidiaries as of December 31, 2006 and 2005 and the related statements of income, changes in shareholders equity (parent company)
and changes in financial position for the years then ended, prepared under the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements. |
2. |
Our audits were conducted in accordance with auditing standards in Brazil, and comprised: (a) planning of the work, taking into consideration the significance of the balances, the volume of transactions and the accounting and internal control
systems of the Company and its subsidiaries; (b) checking, on a test basis, the evidence and records that support the amounts and accounting information disclosed and; (c) evaluating the most significant accounting practices followed and estimates
made by Management, as well as the presentation of financial statements taken as a whole. |
3. |
In our opinion, the financial statements referred to in paragraph (1) present fairly, in all material respects, the equity and financial position, individual and consolidated of Companhia Siderúrgica Nacional and its subsidiaries as of December
31, 2006 and 2005, the results of their operations, the changes in their shareholders equity (parent company) and the changes in their financial position for the years then ended, in accordance with accounting practices followed in
Brazil. |
4. |
Our audits were conducted for the purpose of forming an opinion on the financial statements referred to in paragraph (1) above, taken as a whole. The statements of cash flow and the statement of value-added, parent company and consolidated, are
disclosed for the purpose of allowing additional analyses on the Company, and are not required by the accounting practices followed in Brazil. This information was audited according to the same audit procedures mentioned in paragraph (2) above and,
in our opinion, these supplementary statements are fairly stated, in all material respects, in relation to the financial statements mentioned in paragraph (1) for the years ended on December 31, 2006 and 2005, taken as a whole. |
5. |
As commented in Note 22, on January 22, 2006 an accident involving the blast furnace III occurred, causing the stoppage of such equipment during the entire first semiannual period of the year. The Company, maintaining insurance policy related to
loss of profits and property damages covered by indemnification, requested the recovery of losses incurred by such casualty. Likewise, the Company, based on calculations, which were confirmed by experts engaged by the insurance companies, recognized
under item Other Operating Revenues up to December 31, 2006, the amount resulting from minimum estimate of loss of profit indemnification of R$730 million and under item Non-Operating Income the amount of R$19 million
for the recovery of property damages. Up to December 31, 2006, the Company had received as advances on the part of insurance companies, the approximate amount of R$476 million. On the other hand, in the subsequent period to the closing of
financial statements, until January 2007, a further amount of R$39 million was received as advances related to the settlement of the indemnification. |
18
Rio de Janeiro, March 29, 2007.
Deloitte Touche Tohmatsu Auditores Independentes
CRC 2SP 011.609/O -8 F RJ
José Carlos Monteiro
Accountant CRC 1SP 100.597/O -2 S RJ
19
(Convenience translation into English from the original previously issued in Portuguese)
FEDERAL PUBLIC SERVICE | External Disclosure | |
CVM - BRAZILIAN SECURITIES AND EXCHANGE COMMISSION | ||
STANDARD FINANCIAL STATEMENTS - DFP | December 31, 2006 | Accounting Practices |
COMMERCIAL, INDUSTRY & OTHER TYPES OF COMPANY | Adopted in Brazil |
00403 0 | COMPANHIA SIDERÚRGICA NACIONAL | 33.042.730/0001-04 |
10.01 - MANAGEMENT REPORT | ||
1. MESSAGE FROM THE CHAIRMAN
The year of 2006 was marked by a series of momentous challenges and once again CSN demonstrated its extraordinary resilience, overcoming adversities with enthusiasm, determination and transparency.
The year began with the impact of accident to Blast Furnace 3 in Volta Redonda, which accounts for more than 70% of our steel production capacity. Nevertheless, we still managed to record exceptionally healthy operating and financial results.
We took immediate steps to ensure that our clients did not suffer any product delivery problems by importing slabs from third parties. Although this had an adverse impact on our costs, given that our own slabs are the most cost-competitive in the world.
Even in such a challenging scenario, CSNs crude steel production still reached 3.5 million tones. We also consolidated our domestic-market leadership in the higher added-value coated steel segment.
We posted an annual net income of R1.168 billion and cash flow, measured by EBITDA, of R$3.82 billion. The EBITDA margin, adjusted for the receipt of lost earnings, stood at 42.3%, ensuring that we retained our position as the worlds most profitable integrated steelmaker.
We were also the Brazilian Company that paid the most, in terms of dividends per share, to its shareholders in 2006, distributing more than R$2 billion in dividends and interest on equity.
We invested around R$1.5 billion last year in expanding iron ore output at the Casa de Pedra mine in Minas Gerais, in enlarging the port of Itaguaí, in Rio de Janeiro, in MRS and in maintenance of the Compamys plants.
The offers we have made to acquire strategic assets in Europe and the US are also part of this strategy. The idea is to increase slab production in Brazil, at extremely attractive costs. Output will then be exported to CSN companies in these regions, where they will be rolled, transformed into high added-value steel products of exemplary quality and sold. As result, we expect to generate substantially higher returns than those of our future competitors in these exceptionally important markets.
The construction of our new cement plant is also moving ahead as planned; all the necessary equipment has been ordered and we expect to be offering the Brazilian construction industry yet another product guaranteed by the CSN seal of quality. I
The long steel project is underway in Volta Redonda (RJ), with conclusion expected for 2008.
CSNs share closed 2006 with an annual appreciation of 45%, as compared to 33% rise of the Ibovespa. The outlook for 2007 is very favorable since the very first quarter.
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Our investors are well aware that the present time is one of solid results, they are even more confident regarding the Companys future and CSN will do everything possible to ensure they are not disappointed.
BENJAMIN STEINBRUCH
Chairman of the Board of Directors
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2. THE COMPANY
CSN is a highly integrated company whose carbon steel operations cover the entire production chain, from the mining of iron ore to the final delivery of steel slabs, sheets, coils and packaging. It also has interests in railways, port terminals and power generation. Founded in 1941 by the Getúlio Vargas government, it began operations in 1946 as Brazils first flat steel producer, paving the way for the implantation of the national automotive sector. Privatized in 1993, it was entirely restructured, becoming one of the worlds most competitive and profitable steelmakers. Currently, it focuses on four key areas: mining, steel, logistics and cement.
This integrated production system, allied to top-quality management, ensures that production costs are among the lowest in the global steel sector. In addition, CSNs market capitalization at the close of 2006 was among the 15 highest for steelmakers worldwide.
2.1 MINING
The iron ore market remained buoyant throughout 2006. Growing demand, both in Brazil and abroad, especially in China, sent prices up to record heights. As a result, the great challenge facing sector firms at the moment is to ensure sufficient supply capacity to meet their clients needs. Output was sold as soon as it was produced and this scenario looks set to continue for some years.
This favorable climate both sustains and strengthens CSNs strategic plan, which aims to triple iron ore production by the end of the decade. The project will absorb around US$ 1.5 billion and includes the construction of a pelletizing plant and ship loading infrastructure in the port of Itaguaí, in Rio de Janeiro.
Casa de Pedra
With proven reserves of more than 1.6 billion tonnes of iron ore, verified by the international consulting firm, Golder Associates, the Casa de Pedra mine, located in Congonhas, in the state of Minas Gerais, has a current production capacity of 16 million tonnes per year.
Arcos
The Bocaina quarry in Arcos (also in Minas Gerais) has an annual production capacity of 4 million tonnes of limestone and dolomite, which are used as fluxes in the steel reduction process. In 2006, the facility turned out 1.3 million tonnes of these inputs for the blast furnaces in the Volta Redonda steelworks. The quarry will also be supplying non-steel-grade-limestone for the production of clinker, which CSN will use as the raw material for its new cement project, adding yet another activity to boost competitiveness and profitability.
Ersa
Estanho de Rondônia S.A. (ERSA) comprises the Santa Bárbara tin mine in Itapuã do Oeste, and a smelting plant in Ariquemes, both in the state of Rondônia. Output is used in the production of tin-plate at the Presidente Vargas Steelworks.
2.2 STEEL
CSN produces everything from steel slabs to coated items, including galvanized, Galvalume and pre-painted, as well as metallic sheets, all high added-value products less susceptible to
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international price swings. The Presidente Vargas Steelworks in Volta Redonda turns out the most complete range of flat steel products in Latin America. In 2008, it will also begin producing long steel using the facilities of the old foundry on the premises of steel plant.
Currently, CSNs main markets are the automotive, construction, distribution, home appliance, OEM and metal packaging sectors.
The Company has five galvanizing lines in Brazil three in the Presidente Vargas plant, one in GalvaSud, in Porto Real (in Rio de Janeiro) and one in CSN Paraná, in Araucária (in Paraná), which also produces cold-rolled and pre-painted products. It also has two overseas subsidiaries: CSN LLC, based in Terre Haute, Indiana, USA, which produces cold-rolled and galvanized, and Lusosider, in Paio Pires, Portugal, which also produces coated steel.
CSN is Brazils sole producer of tin-plate (and one of the five biggest producers in the world), with an installed capacity of 1.1 million tonnes per year, and Galvalume, a steel coated with zinc and aluminum which combines visual attractiveness with high resistance and is being increasingly used by the construction industry. It also produces pre-painted steel, much in demand by the construction and home-appliance industries, which it delivers in the precise sizes and colors specified by its clients. In 2006, pre-painted output virtually doubled, jumping from 50,000 tonnes, in 2005, to 83,000 tonnes.
The year got off to a bad with Januarys accident to Blast Furnace 3 in the Presidente Vargas Steelworks. Despite the hefty impact on crude steel output, however, the Company successfully mobilized its human and financial resources to minimize possible losses for its shareholder, clients and insurers, doing everything possible to ensure continuity of normal operations and prioritizing the domestic market.
Even given this set-back, CSN generated impressive results. Flat steel output totaled 4.1 million tonnes, only 10% less than in 2005, the share of coated products in total sales moved up significantly and the Company consolidated its segment lead. Sales to the distribution, construction and home-appliance sectors did best.
Achieving such a positive annual performance was no easy task, however. No less than 4,000 people were hired specifically to undertake the repairs to Blast Furnace 3. Aside from the material damage, the accident jeopardized slab production and led to substantial loss of earnings. The Company spent around US$ 90 million (R$ 193 million) alone on the equipment and services associated with the repairs, which proved entirely successful.
The work lasted for close to five months, a very short period of time and considered a record by the market. The blast furnace returned to operations in June and gradually climbed back to normal production levels throughout the second half.
Due to the shutdown, CSN was forced to acquire 1 million tonnes of slabs from third parties, mostly based abroad, to keep its rolling mills supplied and avoid disappointing its clients.
The financial, commercial, legal affairs and supply areas worked in complete unison and demonstrated considerable negotiating skills. The slabs wee acquired at a fair price, minimizing the final cost and, consequently, the impact on margins. A great deal of effort was also expended on finding suppliers with the requisite high quality standards.
These purchases also involved considerable exertion on the logistics front involving reception of the slabs in Brazil and their subsequent transport to Volta Redonda, not to mention the
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reprogramming of the steelworks itself, a highly complex undertaking from the technical point of view. Below we present the performance of CSNs subsidiaries:
Metalic Nordeste
Metalic is the only manufacturer of two-piece steel cans for carbonated beverages in Latin America. In 2006, the company, which also produces aluminum lids, sold 760 million cans and 1,216 million lids, 18% up on the previous year. It retains a 7% share of the Brazilian beverage can market and 45% of the Northeast market.
In 2007, Metalic plans to expand production capacity to 1 billion cans per year and has been conducting feasibility studies into opening a new plant nearer to the countrys main consumption region, the Southeast.
Prada
In 2006, through its subsidiary Inal, CSN acquired Prada, Brazils leading manufacturer of steel packaging for the chemical and food industries, with production units in São Paulo, Araçatuba and Uberlândia. The acquisition is currently in the process of being approved by Cade (the governments antitrust authority).
In the second half, Prada was subjected to a thorough organizational overhaul, which involved streamlining costs and personnel, reorganizing productive processes and providing integrated solutions for clients.
Inal
CSN operates in the steel distribution and service market through Indústria Nacional de Aços Laminados S.A. (Inal), which maintains a presence in six Brazilian states. The leader in the flat steel distribution segment, it supplies various sectors, including the automotive, auto parts, home appliance, construction, electromechanical machinery and equipment, packaging and furniture industries, as well as resales, all of which under the just-in-time system.
In 2006, it distributed 343,300 tonnes of steel, 8.1% more than in 2005, a new company record.
GalvaSud
GalvaSud S.A. is strategically located between Rio de Janeiro and São Paulo and offers a wide range of world-class products and services. It has galvanizing and shearing lines, as well as a state-of-the-art laser welding facility, and its main customer is the automotive industry. In 2006, it produced 273,000 tonnes, versus 247,700 tonnes the year before.
CSN LLC
CSN LLC, the Companys Indiana-based US branch, played an important role during the shutdown of Blast Furnace 3 at the Presidente Vargas Steelworks, buying most of the 1 million slabs that CSN had to acquire from third parties. The company operates a cold-rolling mill and a galvanizing line. In 2006, it imported 303,476 tonnes of steel slabs and coils from Brazil for processing and sale in the American market.
Another important event was the slab-supply agreement with Wheeling-Pittsburgh which is valid throughout 2007. Slabs are the raw material for hot-rolled coils.
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Lusosider
In mid-2006, CSN acquired the 50% stake in Lucosider retained by the Anglo-Dutch Corus for US$ 38 million (R$ 83 million), giving the Company outright control.
Installed in Paio Pires, Portugal, Lucosider achieved its best ever results in 2006, producing 59,000 tonnes of tin-plate and 241,000 tonnes of galvanized, as well as 34,000 tonnes of pickled hot-rolled coils and 25,000 tonnes of cold-rolled coils, totaling 359,000 tonnes in all. Annual revenue stood at US$ 238 million (R$ 518 million).
2.3. LOGISTICS and ENERGY
Ports
CSN manages two terminals in Rio de Janeiro: a Bulk Solids Terminal (Tecar) and a Container Terminal (Sepetiba Tecon), both in the port of Itaguaí (formerly Sepetiba). Tecar is currently being expanded to begin iron ore exports in the first quarter of 2007, with an initial capacity of 7 million tonnes per year.
The works will continue throughout 2007 and the concluding phase will take place in 2008, by which time Tecar will have a shipping capacity of 30 million tonnes per year, consolidating Itaguaí as one of Brazils largest port complexes.
In 2006, Tecar handled 2.44 million tonnes of products, including coal, coke, sulphur, zinc concentrate, pellets, pig iron, ferroalloys, soybean and other bulk solids on behalf of CSN and various clients. This volume was 42.02% less than in 2005.
Sepetiba Tecon handled 190,600 containers, versus 138,000 in the previous year, and 1.67 million tonnes of steel products, 72% up on 2005. Strong demand in this market, which has been recording substantial annual growth recently, has made the terminal one of the biggest in its segment.
Railways
CSN retains an interest in two railway companies: MRS Logística (32.93%), which operates the former Southeastern Network of the Federal Railways (RFFSA), connecting Rio de Janeiro, São Paulo and Belo Horizonte, and CFN (45.78%), which operates the RFFSAs former Northeastern Network in the states of Maranhão, Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco and Alagoas.
MRS Logística, which concluded 10 years of operations, continues to grow. In 2006, it carried 113.3 million tonnes, 4.6% up on the year before, and 124,000 TEUs (20-ft containers), consolidating its position as the countrys leading rail container transporter. Gross revenue totaled R$ 2.274 billion, 13.7% more than in 2005 and net income reached the record level of R$ 540.9 million, up by 31.8% .
The main focus was on heavy haul clients (ore, bauxite, coal and coke) and capturing new markets. The companys services are vital to CSN, both in terms of incoming raw materials and outgoing end products, in that it transports all the iron ore, coal and coke consumed by the Presidente Vargas Steelworks and a good part the steel produced there, both for the domestic and export markets.
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In association with the federal government, the Company will invest R$ 4.5 billion in CFN to lay 1,800 kilometers of track, creating the Nova Transnordestina Railway, which will have a transport capacity twenty times greater than at present and will play an important role in the development of Brazils Northeast region. Completion is scheduled for 2010.
Energy
CSN is one Brazils biggest industrial electric power consumers behind only the aluminum producers. Since 2000, therefore, it has been investing in generation projects in order to ensure self-sufficiency. Its electrical assets are the 1,450 MW Itá Hydroelectric Plant, in Santa Catarina, in which it holds a 29.5% stake; the 210 MW Igarapava Hydroelectric Plant, in Minas Gerais, where it retains a 17.9% interest; and the 238 MW thermoelectric cogeneration plant in the Presidente Vargas steelworks, which is fueled by the waste gases from the steel production process. Together, these three plants give CSN an average generating capacity of 430 MW.
2.4. CEMENT
Not only do the cement and steel industries complement one another, but the cement sector will play an important role in the expansion of the construction industry, which turned over around R$ 25 billion in 2006. The countrys housing deficit is estimated at 7.2 million units, a clear indication of huge potential growth, fueled by the increasing availability of public and private credit. The Presidente Vargas Steelworks produces around 1.4 million tonnes of blast-furnace slag every year, sufficient to supply 70% of the cement plants needs.
Consequently, the Company has set up a specific business unit for this market and will begin producing cement on a commercial scale in 2007. Currently half of Brazils cement consumption is concentrated in the Southeast region.
3. OUTLOOK, STRATEGY AND INVESTMENTS
With global growth likely to remain high, demand for steel and iron ore should remain buoyant in the coming years. Given this favorable outlook, CSN will seek to use its competitive advantages to expand its businesses in Brazil and abroad, particularly in the EU and US through its existing subsidiaries and new strategic acquisitions. At the same time, it will invest sufficient funds to triple current production capacity, equipping it to take on the new challenges.
The main ongoing projects are increasing iron ore output, raising flat steel production capacity and globalizing operations. There are also two important complementary projects - cement and long steel production.
Iron ore growth
The year of 2007 marks CSNs first entry into the international iron ore market and it intends to become the worlds fourth biggest iron ore exporter. The first step towards this goal was taken in February, with the completion of the first phase of the expansion of the bulk export terminal in Itaguaí (RJ) and the loading of the first shipment.
CSN aims to penetrate the biggest consuming markets, including Asia, Europe and the Middle East, with its high-grade ore. The second and third phases of CSNs port expansion are due for completion in November 2007 and July, 2010, respectively. The new pier and conveyor belt will give added flexibility to the unloading of coal and coke and the loading of iron ore, raising handling capacity from 30 million to 53 million tonnes per year.
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In 2007, the Company expects to produce 15.5 million tonnes of ore. A total of around US$ 1.5 billion will be spent on the two pelletizing plants and expanding the Casa de Pedra mines. The aim is to triple the Companys ore area within the next three years, increasing production capacity from the current 16 million per year to 40 million in 2008 and 53 million by 2010.
Investments have already been approved to boost slab capacity from its present level of 5.6 million tonnes per year to 14.6 million. CSN has established a partnership with the Chinese steel group, Baosteel, to draw up a feasibility study and engineering project for a plant in Itaguaí, adjacent to the port, to produce 4.5 million tonnes of slabs per year from three new blast furnaces. Another slab facility of identical capacity may be installed in Rio de Janeiro or Minas Gerais at an as-yet undefined location.
Jointly, the two projects will virtually triple CSNs current crude steel output, acting as a platform for its global operations. The idea is to produce more slabs in Brazil, shipping the excess abroad for rolling and finishing, thereby becoming a major player in highly sophisticated strategic markets, especially the US and EU, via its existing overseas subsidiaries and new acquisitions to come.
The Company will also invest in the long steel segment, ensuring that it is strategically positioned to take advantage of the expected construction boom in Brazil. It will make use of existing infrastructure in the Presidente Vargas Steelworks and will spend around US$ 113 million on the necessary installations, including expanding and upgrading a 30-tonne electric furnace. The new facility is expected to produce 500,000 tonnes of long steel per year from surplus pig iron and low added-value slabs.
CSN achieved great visibility in 2006 by disputing important assets in Europe and the USA. The offers for the Anglo-Dutch steelmaker Corus and the US-owned Wheeling-Pittsburgh were important steps forward in the Companys operational globalization process, by means of which it seeks to acquire companies whose activities complement its own and which generate substantial gains in synergy. CSN has been investing in order to play a leading role in the consolidation of the global steel industry.
The offer for Corus, made when the latter firm was already in advanced negotiations with the Indian-owned Tata Steel, took the entire global steel market by surprise. Eventually, the transaction was decided by an auction, which reached US$ 13 billion. Tata won out, bidding 608 pence per share, versus CSNs 603 pence. The offer for Wheeling-Pittsburgh, although superior to that of its rival, was rejected by the US firms Board, which was split by internal issues.
Nevertheless, by taking part in the dispute for these major assets, the Company proved that it has all the necessary qualifications to become a leading global player in the steel sector. It also demonstrated its capacity to raise large sums of capital in short periods of time. CSN remains committed to its globalization strategy, pursuing investment opportunities and gains in scale in order to become even more globally competitive.
As part of this process, the Company created its own commercial network in the USA enabling it to sell directly in that market, without having to rely exclusively upon local traders, while aiming to increase its share of the North American metallic and galvanized sheet segments.
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Main Highlights
CSN posted Net Revenue of R$ 2.58 billion in the 4Q06, registering R$ 5.17 billion for the second half, up by 7% and 12% year-on-year, respectively. Annual net revenue exceeded R$ 9 billion.
Annual EBITDA, adjusted for earnings losses due to business interruption, came to R$ 3.82 billion (approximately US$ 1.8 billion) accompanied by an EBITDA margin, similarly adjusted, of 42.3%, climbing back to end-of-2005 levels.
Annual Net Income totaled approximately R$1.2 billion.
These results are particularly important, given the accident to the structure adjacent to the main blast furnace (BF-3) on January 22, 2006, which is responsible for 70% of the Companys steel output. CSN demonstrated exceptional operational resilience, taking immediate steps to acquire appropriate volumes of steel slabs in order to avoid any break in production and ensure delivery of end products to clients. At the same time, it immediately activated its pool of insurers, in order to guarantee compensation as quickly as possible, both for material damages and lost earnings, through the insurance policies duly taken out to cover just such a contingency.
BF-3 returned to full capacity in the second half of the year. Although costs were significantly affected, especially due to the purchase of slabs from third parties, the Companys results and margins underlined its ability to recover, even in such a challenging scenario as that of 2006.
The Companys average sales prices for the year were very close to 2005 levels (-3%). Average prices in the 4Q06 were 2% and 29% up on the domestic and export markets, respectively.
As of November 2006, CSN was one of the bidders in the acquisition of the UK-based Corus Group, whose auction was completed in the 1Q07, aiming throughout this process to ensure the best rates of return for all its shareholders. Management did everything possible to emerge victorious, but without exceeding the pre-established debt and investment limits considered appropriate for the Companys future. In 2007, the Company will sell its minority 3.8% stake in Corus.
Full Year | 4Q06 X 4Q05 | 4Q06 X 3Q06 | 2006 X 2005 | |||||||
Consolidated Highlights | 4Q05 | 3Q06 | 4Q06 | Consolidated Highlights | ||||||
2005 | 2006 | (Chg%) | (Chg%) | (Chg.%) | ||||||
Crude Steel Production (thousand t) | 1,355 | 1,259 | 1,307 | 5,201 | 3,499 | Crude Steel Production (thousand t) | -3.5% | 3.9% | -32.7% | |
Sales Volume (thousand t) | 1,350 | 1,261 | 1,193 | 4,864 | 4,384 | Sales Volume (thousand t) | -11.6% | -5.3% | -9.9% | |
Domestic Market | 598 | 794 | 732 | 2,875 | 2,818 | Domestic Market | 22.4% | -7.9% | -2.0% | |
Exports | 752 | 466 | 462 | 1,989 | 1,567 | Exports | -38.6% | -1.0% | -21.2% | |
Net Revenue per unit (R$/t) | 1,581 | 1,805 | 1,856 | 1,827 | 1,771 | Net Revenue per unit (R$/t) | 17.4% | 2.8% | -3.1% | |
Financial Data (RS MM) | Financial Data (RS MM) | |||||||||
Net Revenue | 2,408 | 2,593 | 2,576 | 10,038 | 9,040 | Net Revenue | 7.0% | -0.6% | -9.9% | |
Gross Income | 1,065 | 913 | 966 | 4,569 | 3,051 | Gross Income | -9.3% | 5.8% | -33.2% | |
EBITDA | 1,053 | 912 | 984 | 4,594 | 3,160 | EBITDA | -6.6% | 7.9% | -31.2% | |
Adjusted EBITDA | 1,053 | 1,142 | 809 | 4,594 | 3,823 | Adjusted EBITDA | -23.2% | -29.2% | -16.8% | |
Net Income | 352 | 334 | 83 | 2,005 | 1,168 | Net Income | -76.4% | -75.1% | -41.7% | |
Net Debt (R$ MM) | 4,699 | 6,239 | 6,659 | 4,699 | 6,659 | Net Debt (R$ MM) | 41.7% | 6.7% | 41.7% |
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ECONOMIC AND STEEL SCENARIO
Domestic Market:
Brazils GDP recorded growth of 2.9% in 2006, less than the global average of 5.1% and also lower than the 6.5% average registered by the emerging countries.
The Brazilian flat steel market did exceptionally well in the 4Q06, with a 26.9% increase in sales volume over the same period the year before, mainly fueled by higher consumption in the Distribution and Construction sectors. The construction industry recorded growth of 54.3% and 10.2% over the 4Q05 and 3Q06, respectively.
In 2006 as a whole, Brazils flat steel sales moved up 7.3% over the previous year, led by the Automotive, Distribution, Home Appliance and OEM segments.
International Market:
On the international front, the impact of economic growth in China and India, which once again recorded significant increases in production, affected, above all, the global steel market. In addition, the international steel market continued with its consolidation process, with expansion projects concentrated in the low-cost production regions, notably in the BRIC nations (Brazil, India, Russia and China).
The year was also marked by exceptionally volatile prices for metals with a direct effect on steel prices.
Following a year of adjustments between supply and demand, which included localized production cut-backs, international steel product prices were subject to swings, peaking in mid-July, 2006. As of then, there was a series of gradual reductions, partially due to increased global output and partly to high inventories in certain consuming markets, such as the US.
The outlook for 2007 is still positive, given that the European and American markets have already demonstrated concerns over excess exports of Chinese products, with manifestations of possible control and protection measures. In addition, inventories may fall at a more accelerated pace in the 1Q07, opening the way for a new round of price increases, which may well become a global trend.
PRODUCTION
In 2006, as a direct result of the accident to BF-3, annual crude and rolled steel production fell by 32.7% and 8.95%, respectively. The acquisition of slabs on the market offset the lower output of crude steel, ensuring proportionally higher deliveries of rolled products to clients. With the return to operations of BF-3, crude steel production in the 4Q06 was already back in line with 4Q05 levels.
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Production | Full Year | |||||||||||||
(in thousand t) | 4Q05 | 1Q06 | 2Q06 | 3Q06 | 4Q06 | 2005 | 2006 | |||||||
Crude Steel (Volta Redonda Steel Mill) | 1,355 | 540 | 393 | 1,259 | 1,307 | 5,201 | 3,499 | |||||||
Purchased Slabs from Third Parties | - | 88 | 529 | 276 | 65 | - | 957 | |||||||
Total Crude Steel | 1,355 | 628 | 922 | 1,535 | 1,372 | 5,201 | 4,456 | |||||||
Rolled Products (UPV) * | 1,256 | 751 | 815 | 1,359 | 1,173 | 4,570 | 4,098 | |||||||
Hot Coils Acquired from Market | - | - | - | 31 | 32 | - | 63 | |||||||
Total Rolled Products | 1,256 | 751 | 815 | 1,390 | 1,205 | 4,570 | 4,161 | |||||||
* Products delivered for sale, including shipments to CSN Paraná and GalvaSud. |
PRODUCTION COSTS (PARENT COMPANY)
In the 4Q06, total production cost was R$ 1.3 billion, R$ 115 million (+9%) higher than the total production cost recorded in the 4Q05. This increase was basically due to the consumption of slabs and coils acquired from third parties, whose total period cost was R$ 93 million.
Annual production costs totaled R$ 4.8 billion, in line with the 2005 figure. There were, however, opposing factors among various lines, which ended up canceling each other out:
Cost increases
Increase of R$ 0.9 billion, from the consumption of slabs and coils acquired from third parties, and R$100 million from the upturn in international zinc prices;
Cost reductions
Reduction of R$ 472 million, due to lower coke prices and coke consumption. The cost of coke fell by more than 50% and the drop in consumption can be explained by the reduced output from BF-3.
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Reduced consumption of other raw materials, such as coal (R$ 171 million), iron ore (R$ 30 million), tin (R$ 28 million), scrap metal (R$ 36 million) and others (R$ 28 million);
Finally, general manufacturing costs fell by around R$180 million, also associated with Januarys accident; notably around R$ 90 million in electric power and fuel costs, and R$ 90 million in other expenses (maintenance and others).
SALES
Total Sales Volume
Annual sales volume totaled 4.384 billion tonnes, 10% down on 2005.
Domestic Market
Domestic sales volume of 732 thousand tonnes in the 4Q06 fell 8% over the previous three months, primarily due to the lower number of business days in December. In year-on-year terms, however, the result was highly positive, with a 22% increase over the 4Q05.
Annual domestic sales volume (2.818 billion tonnes) remained in line with the previous year, justifying the Companys strategy of prioritizing the Brazilian market in 2006, given the above-mentioned restrictions on production occasioned by the fact that the Companys main blast furnace was inoperative throughout the first half.
Export Market
Exports of 462 thousand tonnes in 4Q06 remained stable over the previous quarter. However, in comparison with the 4Q05, they fell by a substantial 39%, due to the heating up of the domestic market and the Companys strategy mentioned above. For the same reasons, annual export volume of 1.568 billion tonnes fell 21% over 2005.
Market Share and Product Mix
In the 4Q06, the Company recorded a 28% share of the domestic flat steel market (hot-rolled, cold-rolled and galvanized), very close to the 30% recorded in the previous quarter and an improvement over the 4Q05 figure of 24%.
For the year as a whole, it recorded an average market share of 27%, stable in comparison with the previous year.
As for the product mix, the Company once again exceeded a 53% market share of the coated products domestic market, the same level as in 2005.
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NET REVENUE
The improvement in CSNs 4Q06 domestic and export prices over the previous quarter offset the reduction in national sales volume, leading to revenue of R$ 2.576 billion. In year-on-year terms, net revenue moved up 7%.
Annual net revenue was R$ 6.4 billion in Brazil and R$ 2.6 billion abroad. Both markets recorded a reduction 7% and 16%, respectively, due to the volume and price trends described previously (production cut-backs and a focus on the domestic market) associated with the price tendency in place over the last two years.
OTHER OPERATING REVENUE AND EXPENSES
The major highlight in other operating revenue and expenses was the booking of R$ 730 million (US$ 334 million) for earnings losses due to business interruption in the Other Revenue line. The upper indemnity limit of the policy is US$750 million, including the earnings losses and material damages.
In 2006 and January 2007, CSN received R$ 515 million (US$ 237 million) in advances from the insurers.
When compared to 2005, the impact was reduced by non-recurrent reversals booked in 2005.
EBITDA
Fourth-quarter EBITDA moved up by 8% over the previous three months, from R$ 912 million to R$ 984 million and the EBIDA margin widened by 3 percentage points, fueled by the return to operations of BF-3. It is worth pointing out, however, that the 4Q06 margin of 38% reflects operating costs that were still affected by the accident, especially the higher inventory costs of steel produced in previous months and acquired from third parties. 2006 Annual EBITDA totaled
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R$3.16 billion and EBITDA margin was 35%.
Adjusted EBITDA totaled R$3.82 billion, accompanied by an EBITDA margin of 42.3%, reflecting managements success in minimizing the impact of the BF-3 accident and the Companys return to normal operations.
CONSOLIDATED | PARENT COMPANY | |||||||
Determination of EBITDA | Ytd | Ytd | Ytd | ytd | ||||
2005 | 2006 | 2005 | 2006 | |||||
Net Income for the Period | 2,005,282 | 1,167,525 | 1,878,758 | 1,169,366 | ||||
(-) Net Financial Result | (761,174) | (899,525) | (310,515) | (826,473) | ||||
(-) Social Contribution | (226,510) | (119,871) | (186,787) | (82,511) | ||||
(-) Income Tax | (642,806) | (399,610) | (506,196) | (258,431) | ||||
(-) Depreciation and Amortization | (924,095) | (961,393) | (783,353) | (798,473) | ||||
(-) Interest in Subsidiaries | (55,170) | (87,509) | (374,689) | 164,383 | ||||
(-) Non-Operating Revenue (Expenses), net | (7,372) | 19,066 | (6,292) | 17,887 | ||||
(-) Other Revenue (Expenses), net* | 28,726 | 456,208 | 17,727 | 449,940 | ||||
EBITDA | 4,593,682 | 3,160,158 | 4,028,863 | 2,503,044 | ||||
Recording of Loss of Profit, net of PIS and COFINS | 662,399 | 662,399 | ||||||
Adjusted EBITDA | 4,593,682 | 3,822,557 | 4,028,863 | 3,165,443 | ||||
*as these do not represent disbursement. | ||||||||
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COMMENTS ON EBITDA
EBITDA represents net income (loss) before the financial result, income and social contribution taxes, depreciation and amortization. EBITDA should not be regarded as an alternative to net income (loss) as an indicator of CSNs operating performance or as an alternative to cash flow as an indicator of liquidity. Although CSNs management considers EBITDA to be a practical means of measuring operating performance and permitting comparisons with other companies, it is not recognized by Brazilian Accounting Principles (Brazilian Corporate Law or BR GAAP) or US Accounting Principles (US GAAP) and other companies may define and calculate it differently.
NET FINANCIAL RESULT AND DEBT
The 4Q06 financial result was a net expense of R$ 255 million, R$ 150 million less than the expense recorded in 4Q05 and R$ 182 million less than the expense booked in the 3Q06.
With the fall in the US dollar x Brazilian Real exchange rate, the net monetary and exchange variation line recorded revenue of R$ 136 million, an improvement of R$ 460 million and R$ 146 million, respectively, over the expenses recorded in the same two prior periods.
The appreciation of the Real against the dollar had a negative impact on the financial revenue line, which recorded a negative R$ 18 million, or a negative variation of R$ 289 million and a positive one of R$ 6 million when compared to the 4Q05 and 3Q06, respectively. The Companys strategy is to neutralize the impact of variations in the exchange rate on its results through foreign exchange hedge instruments, which are booked in the financial revenue line.
Finally, 4Q06 financial expenses, basically comprising interest on the debt and the restatement of contingent liabilities, totaled R$ 372 million, R$22 million down on the 4Q05 and R$22 million up on the 3Q06.
The Company recorded an annual net financial expense of R$ 900 million, versus an expense of R$ 761 million in 2005. Given the damage to BF-3s peripheral/auxiliary equipment and its impact on cash flow, the net debt averaged R$ 5.6 billion in 2006, versus R$ 4.5 billion in the previous year. Up to the date of writing, the insurance companies have advanced US$ 237 million.
The financial cost of the debt, in Brazilian Reais, remained at 11% p.a., equivalent to 73% of the CDI CETIP rate, versus 14% p.a. in 2005, also equivalent to 73% of the CDI. The progressive reduction in the basic SELIC interest rate has partially offset the increase in the Companys net debt.
At the close of 2006, CSNs net debt totaled R$ 6.7 billion, R$ 1.95 billion above the end-of-2005 figure. Apart from the impact of the BF-3 accident on annual operating cash flow, there were certain additional reasons for the increase, notably the investments of more than R$ 1 billion, dividend payments of R$ 2.1 billion and R$ 0.7 billion disbursed at the end of the year to acquire 34,072,613 shares in the Corus Group (UK), equivalent to 3.8% of the companys capital, booked under other investments. When adjusted to reflect the future sale of these shares at 608 UK pence each, as approved by the Shareholders Meeting of March 7, 2007, net debt is reduced by around R$ 0.9 billion, to R$ 5.8 billion.
The net debt/EBITDA ratio stood at 1.7x in 2006, or 1.5x when adjusted for the sale of the stake in Corus. Taking EBITDA in 2005, when the Company was operating normally, as the ratio base, the ratio would be reduced to 1.25x.
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At the close of 2006, consolidated gross debt totaled R$ 9.4 billion, or R$ 0.6 billion higher than at the end of December 2005. In May 2006, CSN effected its 4th issue of non-convertible debentures in the amount of R$ 600 million, maturing in February 2012. Subsequently, in November and December, the Company raised a further US$ 700 million: US$ 200 million in ACCs (Advances on Export Contracts), US$ 100 million in pre-payments, US$ 100 million in Import Notes (effected through its subsidiary CSN Steel and maturing in December 2011), and US$ 300 million, through a previous contracted credit line (Revolving Credit Facility).
Also in December of 2006, the Company redeemed R$ 650 million in debentures, R$ 400 million of which from the 2nd. issue and R$ 250 million from the first series of the 3rd.issue.
On December 31, 2006, the average maturity of the gross debt was 7.4 years.
Net Debt Period: December/2006 | ||||||||||||
R$ thousand | ||||||||||||
Parent Company | Consolidated | |||||||||||
2006 | 2005 | Change | 2006 | 2005 | Change | |||||||
Short term | 2,163,092 | 1,641,624 | 521,468 | 1,080,487 | 1,464,493 | (384,006) | ||||||
Domestic Currency | 154,076 | 739,956 | (585,880) | 184,566 | 763,285 | (578,719) | ||||||
Foreign Currency | 1,866,639 | 762,269 | 1,104,370 | 677,159 | 346,111 | 331,048 | ||||||
Derivatives | 142,377 | 139,399 | 2,978 | 218,762 | 355,097 | (136,335) | ||||||
Long term | 6,316,297 | 6,873,907 | (557,610) | 8,344,817 | 7,334,012 | 1,010,805 | ||||||
Domestic Currency | 902,741 | 292,476 | 610,265 | 1,367,505 | 717,326 | 650,179 | ||||||
Foreign Currency | 5,413,556 | 6,581,431 | (1,167,875) | 6,977,312 | 6,616,686 | 360,626 | ||||||
Swap | - | - | - | - | - | - | ||||||
Total | 8,479,389 | 8,515,531 | (36,142) | 9,425,304 | 8,798,505 | 626,799 | ||||||
Domestic Currency | 1,056,817 | 1,032,432 | 24,385 | 1,552,071 | 1,480,611 | 71,460 | ||||||
Foreign Currency | 7,280,195 | 7,343,700 | (63,505) | 7,654,471 | 6,962,797 | 691,674 | ||||||
Swap | 142,377 | 139,399 | 2,978 | 218,762 | 355,097 | (136,335) | ||||||
Cash/Uses | 714,536 | 1,621,434 | (906,898) | 2,766,224 | 4,099,200 | (1,332,976) | ||||||
- | - | |||||||||||
Net Debt | 7,764,853 | 6,894,097 | 870,756 | 6,659,080 | 4,699,305 | 1,959,775 | ||||||
COMMENTS ON NET DEBT
Net debt as presented is used by CSN to measure our financial performance. However, net debt is not recognized as a measurement of financial performance according to the accounting practices adopted in Brazil, nor should it be considered in isolation, or as an alternative to net income or financial result as an indicator of liquidity. Other companies may calculate net debt differently
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INCOME TAXES
Annual income and social contribution taxes were R$350 million lower than in 2005, primarily due to reduced taxable income, explained by the variations dealt with above. The effective 2006 tax rate was 31%, versus 30% in 2005.
NET INCOME
Net income totaled R$ 83 million in the 4Q06, annual net income came to R$ 1.168 billion in 2006, with a net margin of 13%.
The 42% reduction over 2005 was mainly due to the impact of the BF-3 accident on gross profit, partially offset by the booking of provisions for earnings losses due to business interruption.
CAPEX
Investments totaled R$380 million in the 4Q06, R$147 million of which went to the Casa de Pedra iron ore mine expansion project, R$24 million to the Sepetiba port expansion project, R$63 million to the MRS railway system (corresponding to CSNs 33% stake in the company) and R$34 million to industrial maintenance.
Investments in 2006 totaled R$ 1.5 billion, as follows: R$247 million in the Casa de Pedra mine expansion; R$176 million in the Sepetiba port expansion project; R$175 million in MRS; R$ 78 million in Lusosider, in Portugal; R$ 122 million in the subsidiary Prada; and R$ 396 million in general maintenance projects. Most of the remainder went to smaller, but also relevant, projects associated with maintenance and overall improvements in CSNs operating performance and that of its subsidiaries.
Ore Export Terminal
In February, 2007, CSN completed the first phase of the expansion of its Iron Ore Terminal in the port of Itaguaí, with an initial annual export capacity of 7 million tonnes. The second phase will raise the terminals capacity to 30 million tonnes p.a., and the third to 53 million tonnes p.a. Investments are estimated at US$ 260 million, until the conclusion of the works and the installation of the necessary equipment.
WORKING CAPITAL
At the close of 2006, working capital invested totaled R$ 1.9 billion, 7% and 6% higher, respectively, than at the end of September 2006 and December 2005. It is important to note that, due to the profile of coke and coal imports (one-off, large-scale purchases), the raw material inventories, suppliers and advances to supplier lines may show some oscillations, although without any significant change in working capital management. In the periods in question, these accounts, if analyzed jointly, showed no significant variation.
The balance of warehoused materials may also show some oscillations, caused by investments or important maintenance procedures involving major items of equipment, which occur on a one-off, unscheduled basis over time.
The average supplier payment period remained at around 90 days, while client payment periods averaged around 40 days. Accounts receivable at year-end were around R$ 74 million less than in December 2005 due to the different amounts billed in the final months of each year.
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Finally, it is worth highlighting the annual difference of almost R$ 166 million in the taxes payable line, which was primarily due to the greater concentration of sales in the domestic market and the consequent increment in the amount paid in local sales taxes.
In R$ MM | ||||||||||
WORKING CAPITAL | Dec/2005 | Sep/06 | Dec/2006 | Chg. 4Q06 | Chg. 2006 | |||||
Assets | 3,495 | 4,062 | 4,045 | (17) | 550 | |||||
Cash | 135 | 159 | 167 | 8 | 32 | |||||
Accounts Receivable | 1,366 | 1,311 | 1,292 | (19) | (74) | |||||
- Domestic Market | 879 | 976 | 766 | (210) | (113) | |||||
- Export Market | 588 | 464 | 635 | 171 | 47 | |||||
- Allowance for Debtful | (101) | (129) | (109) | 20 | (8) | |||||
Inventory | 1,907 | 2,422 | 2,435 | 13 | 528 | |||||
Advances to Suppliers | 87 | 170 | 151 | (19) | 64 | |||||
Liabilities | 1,670 | 2,267 | 2,118 | (149) | 448 | |||||
Suppliers | 1,262 | 1,599 | 1,568 | (31) | 306 | |||||
Salaries and Social Contribution | 85 | 119 | 91 | (28) | 6 | |||||
Taxes Payable | 241 | 499 | 407 | (92) | 166 | |||||
Advances from Clients | 82 | 50 | 52 | 2 | (30) | |||||
Working Capital | 1,825 | 1,795 | 1,927 | 132 | 102 | |||||
Average Periods | Dec/2005 | Sep/06 | Dec/2006 | Chg. 4Q06 | Chg. 2006 | |||||
Receivables | 40 | 44 | 41 | 3 | (1) | |||||
Supplier Payment | 83 | 99 | 94 | (5) | 11 | |||||
Inventory Turnover | 126 | 149 | 146 | 3 | (20) | |||||
CAPITAL MARKETS
CSNs shares performed well in 2006, appreciating by close to 45%, versus 33% for the Ibovespa index. Even after this upturn, a trend which continued at the beginning of 2007, most steel industry analysts were still maintaining their Buy recommendations for the Companys shares. According to Bloomberg, on March 3 2007 CSN had eleven Buy recommendations, three recommendations to Hold and just one Sell.
The 39% appreciation recorded by CSNs ADRs on the NYSE was equally significant, particularly when compared to the Dow Jones appreciation of 16%, last year.
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Capital Markets - CSNA3 / SID / IBOVESPA | ||||||
4Q05 | 4Q06 | 2006 | ||||
N# of shares | 272,067,946 | 272,067,946 | 272,067,947 | |||
Market Capitalization | ||||||
Closing price (R$/share) | 44.58 | 64.50 | 64.50 | |||
Closing price (US$/share) | 21.51 | 29.94 | 29.94 | |||
Market Capitalization (R$ million) | 12,129 | 17,548 | 17,548 | |||
Market Capitalization (US$ million) | 5,182 | 8,208 | 8,208 | |||
Variation | ||||||
CSNA3 (%) | (2.8) | 4.0 | 44.7 | |||
SID (%) | (7.4) | 5.3 | 39.2 | |||
Ibovespa - index | 33,455 | 44,473 | 44,473 | |||
Ibovespa - variation (%) | 5.9 | 22.0 | 32.9 | |||
Volume | ||||||
Average daily (n# of shares) | 879,126 | 585,453 | 696,984 | |||
Average daily (R$ Thousand) | 40,139 | 38,266 | 45,214 | |||
Average daily (n# of ADR´s) | 823,803 | 792,474 | 945,564 | |||
Average daily (US$ Thousand) | 16,376 | 24,130 | 28,320 | |||
Source: Economática |
Dividends and Annual Shareholders Meeting
On March 28 2007, the Companys Board of Directors approved the payment of dividends and interest on equity in the amount of R$ 1,433,262 thousand, to be ratified by the Annual Shareholders Meeting scheduled for April 30, 2007. The amount proposed includes those anticipated dividends paid by the Company on June 30. 2006, and August 9. 2006, respectively, as an advance on results for the fiscal year ended December 31, 2006.
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Share Buy-back Program
As a result of the buy-back program approved by the Board of Directors, the Company retained 14,654,500 shares in treasury at the close of 2006, which had cost around R$677 million to acquire. On the same date, the market value of these shares was R$954 million. In 2006, the Company spent R$39 million on share repurchases.
4. CORPORATE GOVERNANCE
Investor Relations
As of August 2006, the Investor Relations area became a Department reporting directly to the CEO. CSN took part in several national and international market events and completed the redesign and upgrading of its IR web pages as part of its general website overhaul. The Company also became affiliated to the INI (National Institute of Investors) in order to form closer ties with individual investors.
CSNs disclosure procedures were classified among the five best in Latin America, according to the technical criteria of the 9th edition of the Investor Relations Global Rankings, held in February 2007, in which 145 companies from 33 countries participated.
The awards were organized by MZ Consult Serviços e Negócios and the independent judging committee comprised representatives from Linklaters, IR Magazine and KPMG International.
Sarbanes-Oxley Act
We are in the final certification stage for our internal controls related to financial statements, in compliance with Section 404 of the Sarbanes-Oxley Act. In 2006, tests were carried out to verify the effectiveness of the internal controls of CSN, CSN Export, Inal and Fundos de Investimentos Exclusivos as part of the certification process that began in July of the same year. A total of 1927 controls and 52 processes were mapped. All the controls were tested by management and 859 were verified by internal audit (611 via monitoring and 248 via walkthrough).
Code of Ethics
CSN has employed a Code of Ethics since 1998, which is periodically revised and updated. In 2006, Board members, executives and employees of all the CSN Companies received yet another revised version and signed the respective consent agreement. New versions are delivered to members of staff by their superiors in meetings where the changes can be discussed and any possible queries cleared up.
CSNs Code of Ethics not only details the standards of personal and professional conduct expected of its employees in their relations with their various constituencies, but also contains a declaration of our corporate conduct and commitments.
One constant aspect of the Code since 1998 is the guidance on trading in the Companys shares.
Disclosure of Material Facts
CSN maintains a Material Fact Disclosure Policy, which determines that all such disclosures must contain information that is accurate, consistent, appropriate, transparent and within the
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proper deadlines, in accordance with CVM Instruction 358 of January 3, 2002, and Section 409 of the Sarbanes-Oxley Act Real Time Issuer Disclosure.
All material facts are disclosed to the markets in which the Companys shares are listed, currently Brazil (BOVESPA) and the United States (NYSE).
Administration
CSN is controlled by Vicunha Siderurgia S.A., which holds a 43% interest, and administered by its Board of Directors and Board of Executive Officers. In compliance with the prevailing legislation, the General Shareholders Meeting, the Companys governing body, meets once a year, or whenever necessary, to discuss and approve matters in the Companys interest.
The role of the Board of Directors is to analyze and approve overall policies and strategies and oversee the activities of the Board of Executive Officers. It is also responsible for appointing these Officers and the members of the statutory committees.
Board of Directors
The Board of Directors Comprises eight members and meets ordinarily on the dates set forth in the annual schedule of corporate events.
Audit Committee
The Audit Committee has the autonomy to take decisions related to the provisions of the Sections 301 and 407 of the Sarbanes-Oxley Act. Its main responsibilities are to review, consider and recommend to the Board of Directors the appointment, remuneration and hiring of the external auditors, as well as supervising the internal and external audits.
Internal Audit
CSN employs the services of an independent Internal Audit, as determined in the Bylaws. Using generally accepted auditing principles, it tests, analyses, maps and corroborates the internal controls of all the CSN Companies in order to assess their effectiveness, appropriateness and integrity, as well as their cost-effectiveness. The work of the Internal Audit is defined according to the Risk Matrix and approved by the Audit Committee, which also monitors its results.
Independent Auditors
In 2006, CSN and its subsidiaries independent auditors Deloitte Touche Tomatsu Auditores Independentes were hired to perform services in addition to those related to the examination of the financial statements.
Both the Company and its independent auditors recognize that these services, essentially comprising reviews of income tax declarations, do not affect the auditors independence. Payment for the services in question did not exceed 5% of the total external auditing fees.
Certain services to be provided by the external auditors, in addition to examining the financial statements, are previously submitted to the legal affairs department and the Audit Committee in order to ensure that they do not involve a conflict of interest or jeopardize the auditors independence or objectivity.
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5. RISK MANAGEMENT
CSN has a fully comprehensive insurance policy designed to meet its specific needs. Due to its high degree of complexity, this policy is backed by ample coverage with the IRB-Brasil Re (Brazilian Reinsurance Institute) and international reinsurers. Shortly after the accident to Blast Furnace 3 in the Presidente Vargas Steelworks, CSN assessed the resulting damages at US$ 600 million, US$ 100 million of which in material damages and the remainder in lost earnings, and duly communicated this estimate to the lead insurer, Unibanco AIG.
Until the date of writing, CSN has received US$ 237 million and expects to receive the remainder by the end of the first half of 2007. The reinsurers involved have already booked provisions for this payment in their financial statements.
6. INNOVATION
One of CSNs primary strategies is to meet clients needs in a creative way in order to provide them with products and services of the highest quality. It therefore makes a point of investing in innovative solutions in all its operational areas.
Research and Development
As Brazils leading producer of high added-value coated flat steel products, CSN has invested continuously in improving its products, processes and services.
In 2006, R&D absorbed investments of R$ 40.2 million, with a particular focus on new products and processes, and the latters application in the production chain. in order to ensure improved performance and customer service and ensure that the Company continues to provide its clients with innovative solutions.
As a company that leads from the front, CSN is fully committed to seeking out pioneering technology, generating products that are welcomed by the market and continuously upgrading its production procedures.
7. HUMAN RESOURCES
In 2006, CSN stepped up its efforts to align its subsidiaries human resources policies in order to establish standardized criteria for behavior and evaluating individual performance and results.
Throughout the year, the Company adopted a number of measures, including the mapping and redefining of job and salary structures, linking these to the results that each position generates for the Company.
CSN recognizes that, in order to achieve its goal of tripling in size within three years, it must adopt a pro-active approach to attracting, developing and retaining the best talent available. Technical competence, the necessary flexibility to cope with constant change and a focus on results are the chief attributes the Company looks for in its employees, whose conduct must be governed at all times by the highest ethical and professional standards. CSN and its subsidiaries closed 2006 with 13,640 employees, versus 12,396 at the end of 2005.
Internal Communications
CSN invests in the best corporate communications procedures, employing a variety of channels to communicate with its staff, including printed and electronic bulletins, a bimonthly magazine, a
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notice-board newspaper, banners, billboard posters, an intranet and an e-mail system with specific addresses for media relations, the internal auditors and the ethics committee.
In 2006, the Company upgraded its intranet and the CSN portal, bringing them into line with the best practices employed by major corporations worldwide, facilitating browsing, increasing interactivity and providing more and better information, thereby benefiting staff, clients and other users.
Involving staff in management
In 2006, CSN employed two initiatives designed to increase staff involvement in management: the Quality Cycle and the Technological Seminar. The latter allows employees make technical contributions designed to improve systems and help the Companys growth. Both projects award prizes for the best contributions, based on criteria such as profitability, productivity gains and cost reductions.
Training and development
CSN offers its staff with a number of training and development opportunities. One such example is Programa Educar, which was first set up in 1998 in the Presidente Vargas Steelworks. It provides primary and secondary level school education, as well as technical training, and has already benefited more than 2,394 employees. The program is fully funded by the Company, which also provides the classrooms, organizes the courses and the teachers and maintains agreements with several educational institutions.
Every year, CSN employees can also take advantage of the courses in Electromechanics and Metallurgy, which are co-sponsored by the Fundação CSNs Escola Técnica Pandiá Calógeras. Participants have invariably joined the internal recruitment program and been promoted to technical positions.
The Company also grants partial university study scholarships as a means of furthering the professional and personal development of its staff.
Profit sharing
The Profit Sharing Program is tied to corporate earnings. All areas have pre-established targets which must be met during the year. The amount payable is calculated according to the average fulfillment of these targets on a Company-wide basis.
Work safety
CSN puts considerable emphasis on safety in the workplace. Accident prevention programs, which are extended to cover subcontracted employees, are progressive in nature, with a focus on developing a safety-first attitude. There are weekly meetings to analyze corrective and preventive measures.
8. SOCIAL RESPONSIBILITY
Since its earliest days, CSN has been developing socially responsible policies, an activity which is currently handled by the Fundação CSN. The Company is deeply committed to its neighboring communities and to the countrys social and economic development, sponsoring projects in a wide range of areas including education, community development, health, sport and the arts. In 2006, it invested R$13 million in social projects, benefiting more than 400,000
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people in 12 municipalities in five states, always in association with carefully selected institutions.
The Fundação CSN also develops community projects geared towards generating income in underprivileged areas in Volta Redonda and Itaguaí (RJ), Congonhas and Arcos (MG), Mogi das Cruzes (SP) and Araucária (PR). Moreover, it sponsors digital and social inclusion programs through the Projeto Informática e Cidadania (Information Technology and Citizenship Program), developed in partnership with the CDI (Information Technology Democratization Committee), which aims to prepare underprivileged youngsters and adults for the job market.
9. ENVIRONMENTAL RESPONSIBILITY
Promoting a socially responsible approach to the environment is part of CSNs daily routine. In addition to prioritizing state-of-the-art risk management and monitoring equipment, the Company has an Internal Environmental Management Committee, made up of members from all areas of the main plant. It meets once a week to discuss any problems that may arise and identify potential trouble spots, in order to take preventive action and minimize any possible environmental impact.
The Company has also implanted an Environmental Management System in its operational units, designed to effect continuous improvements to its environmental performance. Based on the international ISO 14001:2004 norms, it is applied in an integrated manner throughout the Companys various production chains. Its industrial operations in Volta Redonda and Porto Real (RJ), and Congonhas and Arcos (MG), have received this certification, and are audited every year by renowned certification firms. In 2006, CSN spent R$ 224 million on environmental projects (initial and ongoing).
10. FORWARD-LOOKING STATEMENTS
Certain of the statements contained herein are forward-looking statements, which express or imply results, performance or events that are expected in the future. Actual results, performances or events may differ materially from those expressed or implied by the forward-looking statements, as a result of several factors, such as the general and economic conditions in Brazil and other countries, interest rate and exchange rate levels, the future rescheduling and prepayment of foreign-currency debt, protectionist measures in the US, Brazil and other countries, changes in laws and regulations and general competitive factors (on a global, regional or national basis).
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(Convenience translation into English from the original previously issued in Portuguese) | ||||
FEDERAL PUBLIC SERVICE | External Disclosure | |||
CVM - BRAZILIAN SECURITIES AND EXCHANGE COMMISSION | ||||
STANDARD FINANCIAL STATEMENTS - DFP | December 31, 2006 | Accounting Practices | ||
COMMERCIAL, INDUSTRY & OTHER TYPES OF COMPANY | Adopted in Brazil |
00403 0 |
COMPANHIA SIDERÚRGICA NACIONAL | 33.042.730/0001-04 |
11.01 - NOTES TO THE FINANCIAL STATEMENTS | ||
(In thousands of reais, unless otherwise stated)
1. OPERATING CONTEXT
Companhia Siderúrgica Nacional (CSN) is engaged in the production of flat steel products, its main industrial complex being the Presidente Vargas Steelworks (UPV) located in the City of Volta Redonda, State of Rio de Janeiro.
CSN is engaged in the mining of iron ore, limestone and dolomite, in the State of Minas Gerais and tin in the State of Rondônia to meet the needs of UPV, maintains strategic investments in railroad, electricity and ports, to optimize its activities, and it is implementing a cement plant.
To be closer to customers and win additional markets on a global level, CSN has, in Brazil, a steel distributor, two metal package plants, one for the manufacture of two-piece steel cans, besides a galvanized steel plant in the South of Brazil to supply home appliances and another in the Southeast supplying the automotive industry. Abroad, the Company has a rolling mill in Portugal and another mill in the United States.
2. SIGNIFICANT ACCOUNTING PRACTICES
The financial statements were prepared in conformity with the accounting practices followed in Brazil, as well as with the accounting standards and pronouncements issued by the Brazilian Securities Commission CVM. These financial statements include alterations introduced by CVM Deliberations 488 and 489, issued on October 3, 2005. Certain reclassifications were made to the financial statements related to the year ended December 31, 2005, presented for comparison purposes, aiming at fitting them into said Deliberations, allowing users to compare them with the current year. The main alterations resulting from the application of such Deliberations are the following:
(a) Statement of Income
The results of operations are determined on an accrual basis.
(b) Marketable securities
The investment funds have daily liquidity and have their assets valued at market as per instructions of the Central Bank of Brazil and CVM, since the Company considers these investments as securities retained for trading.
Fixed income securities and financial investments abroad are recorded at cost plus yields accrued through the balance sheet date, and do not exceed market value.
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(c) Allowance for doubtful accounts
The allowance for doubtful accounts has been set up in an amount which, in the opinion of Management, is enough to absorb any losses that might be incurred in realizing accounts receivable.
(d) Inventories
Inventories are stated at their average cost of acquisition or production and on-going imports are recorded at their cost of acquisition, not exceeding their market or realization values.
(e) Other current and non-current assets
Other current and long-term assets are presented at their realization value, including, when applicable, income earned to the balance sheet date or, in the case of prepaid expenses, at cost.
(f) Investments
Investments in subsidiaries and jointly-owned subsidiary companies are recorded by the equity accounting method, adjusted for any amortizable goodwill, if applicable. Other permanent investments are recorded at acquisition cost.
(g) Property, plant and equipment
The property, plant and equipment of the parent company is presented at market or replacement values, based on appraisal reports conducted by independent expert appraisal firms, as permitted by Deliberation 288 issued by the Brazilian Securities Commission on December 3, 1998. Depreciation is computed by the straight-line method, based on the remaining economic useful lives of the assets after revaluation. Depletion of the iron mine Casa de Pedra is calculated on the basis of the quantity of iron ore extracted, and interest charges related to capital funding for construction in progress are capitalized for as long as the projects remain in construction.
(h) Deferred charges
The deferred charges are comprised of expenses incurred for development and implementation of projects that should generate a payback to the Company in the next few years, with the amortization applied on a straight-line basis based on the period foreseen for the economic return on the above projects.
(i) Current and non-current liabilities
These are stated at their known or estimated values, including, when applicable, accrued charges, monetary and foreign exchange variation incurred up to the balance sheet date.
(j) Employees benefit
In accordance with Deliberation 371, issued by the Brazilian Securities Commission, on December 13, 2000, the Company decided to record the respective actuarial liabilities as from
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January 1, 2002, in accordance with the above-mentioned reported deliberation and based on studies by independent actuaries.
(k) Income Tax and Social Contribution
Income tax and social contribution on net income are calculated based on their effective tax rates and consider the tax loss carryforward and negative basis of social contribution limited to 30% of taxable income, to compute the tax liability. Tax credits are set up for deferred taxes on tax losses, negative basis of social contribution on net income and on temporary differences.
(l) Derivatives
The derivatives operations are recorded in accordance with the characteristics of the financial instruments. Swap operations are recorded based on the operations net results, which are booked monthly in line with the contractual conditions.
Exchange options are adjusted monthly to market value whenever the position shows a loss. These losses are recognized as Companys liability with the corresponding entry in the financial results. Options traded through exclusive funds are adjusted to market value and futures contracts have their positions adjusted to market daily by the Futures and Commodities Exchange (BM&F) with recognition of gains and losses directly in results.
(m) Treasury Shares
As established by CVM Instruction 10/80, treasury shares are recorded at acquisition cost.
(n) Estimates
Pursuant to the accounting practices followed in Brazil, the preparation of the Financial Statements requires the Companys Management to make estimates and assumptions related to the assets and liabilities reported, the disclosure of contingent assets and liabilities on the balance sheet date and the amount of income and expenses during the year. The final results may differ from these estimates.
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3. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated Financial Statements for the years ended December 31, 2006 and 2005 include the following direct and indirect subsidiaries and jointly-owned subsidiaries:
Ownership interest (%) |
||||||||
Companies | Currency of origin | 2006 | 2005 | Main activities | ||||
Direct investment: full consolidation | ||||||||
CSN Energy | US$ | 100.00 | 100.00 | Equity interest | ||||
CSN Export | US$ | 100.00 | 100.00 | Financial operations and trading | ||||
CSN Islands VII | US$ | 100.00 | 100.00 | Financial operations | ||||
CSN Islands VIII | US$ | 100.00 | 100.00 | Financial operations | ||||
CSN Islands IX | US$ | 100.00 | 100.00 | Financial operations | ||||
CSN Islands X | US$ | 100.00 | 100.00 | Financial operations | ||||
CSN Overseas | US$ | 100.00 | 100.00 | Financial operations and equity interest | ||||
CSN Panama | US$ | 100.00 | 100.00 | Financial operations and equity interest | ||||
CSN Steel | US$ | 100.00 | 100.00 | Financial operations and equity interest | ||||
CSN I | R$ | 100.00 | 100.00 | Equity interest | ||||
Sepetiba Tecon | R$ | 100.00 | 20.00 | Maritime port services | ||||
Estanho de Rondônia - ERSA | R$ | 99.99 | 100.00 | Mining | ||||
Cia. Metalic Nordeste | R$ | 99.99 | 99.99 | Package production | ||||
Indústria Nacional de Aços Laminados - INAL | R$ | 99.99 | 99.99 | Steel products service center | ||||
CSN Cimentos | R$ | 99.99 | 99.99 | Cement production | ||||
Inal Nordeste | R$ | 99.99 | 99.99 | Steel products service center | ||||
CSN Energia | R$ | 99.90 | 99.90 | Trading of electricity | ||||
Nacional Minérios | R$ | 99.99 | Mining and equity interest | |||||
GalvaSud | R$ | 15.29 | 15.29 | Steel industry | ||||
Direct investment: proportionate | ||||||||
consolidation | ||||||||
Itá Energética | R$ | 48.75 | 48.75 | Electricity Generation | ||||
Companhia Ferroviária do Nordeste (CFN) | R$ | 45.78 | 49.99 | Railroad transportation | ||||
MRS Logística | R$ | 32.93 | 32.22 | Railroad transportation | ||||
Indirect investment: full consolidation | ||||||||
CSN Aceros | US$ | 100.00 | 100.00 | Equity interest | ||||
CSN Cayman | US$ | 100.00 | 100.00 | Financial operations and trading | ||||
CSN Iron | US$ | 100.00 | 100.00 | Financial operations | ||||
CSN LLC | US$ | 100.00 | 100.00 | Steel industry | ||||
CSN LLC Holding Corp | US$ | 100.00 | 100.00 | Equity interest | ||||
CSN Partner LLC | US$ | 100.00 | 100.00 | Equity interest | ||||
Energy I | US$ | 100.00 | 100.00 | Equity interest | ||||
Tangua | US$ | 100.00 | 100.00 | Equity interest | ||||
Jaycee | EUR | 100.00 | 100.00 | Financial operations and equity interest | ||||
Cinnabar | EUR | 100.00 | 100.00 | Financial operations and equity interest | ||||
Hickory | EUR | 100.00 | Financial operations and trading | |||||
Lusosider Projetos Siderúrgicos | EUR | 100.00 | Equity Interest | |||||
Lusosider Aços Planos | EUR | 99.93 | Steel industry | |||||
CSN Finance | GBP | 100.00 | Financial operations and equity interest | |||||
CSN Holdings | GBP | 100.00 | Financial operations and equity interest | |||||
Cia Metalúrgica Prada | R$ | 100.00 | Package production | |||||
GalvaSud | R$ | 84.71 | 84.71 | Steel industry | ||||
Sepetiba Tecon | R$ | 80.00 | Maritime port services | |||||
Indirect investment: | ||||||||
proportionate consolidation | ||||||||
Lusosider Projetos Siderúrgicos | EUR | 50.00 | Equity Interest | |||||
Lusosider Aços Planos | EUR | 49.97 | Steel Industry |
47
The Financial Statements prepared in US dollars, in Euros and in Great Britain Pounds were translated to Brazilian currency at the exchange rate as of December 31, 2006 R$/US$2.138 (R$/US$2.3407 in 2005), R$/EUR2.82024 (R$/EUR2.76905 in 2005) and R$GBP4.18535 (R$/GBP4.02202 in 2005).
The gains and losses from this translation were recorded in the income statements of the related periods, as equity accounting in the parent company and exchange variation in the consolidated entity. These financial statements were prepared applying the same accounting principles as those applied by the parent company.
In the preparation of the consolidated financial statements, the consolidated intercompany balances were eliminated, such as intercompany investments, equity accounting, asset and liability balances, revenues and expenses and unrealized profits resulting from operations among these companies.
Pursuant to the CVM Instruction 408/04 the Company consolidates the financial statements of the exclusive investment funds.
The reference date for the subsidiaries and jointly-owned subsidiaries financial statements coincides with that of the parent company.
The reconciliation between shareholders equity and net income for the year of the parent company and consolidated is as follows:
Shareholder's Equity | Net income in the period | |||||||
2006 | 2005 | 2006 | 2005 | |||||
Parent Company | 6,226,576 | 6,535,190 | 1,169,366 | 1,878,758 | ||||
Elimination of profits on | ||||||||
inventories | (102,432) | (62,749) | (1,841) | 126,524 | ||||
Consolidated | 6,124,144 | 6,472,441 | 1,167,525 | 2,005,282 | ||||
4. RELATED PARTY TRANSACTIONS
Purchase trade transactions, sale of products and inputs and contracting of services with subsidiaries are performed under usual conditions applicable to non-related parties, such as prices, terms, charges, quality etc. The main loans and financing operations and mutual contracts are as follows:
48
a) Assets
Companies | Accounts | Financial | Mutual (1) | Debentures | Dividends |
Advance for future capital |
Advance to |
Total | ||||||||
receivable | Investments | receivable | increase | suppliers | ||||||||||||
CSN Export | 980,494 | 980,494 | ||||||||||||||
Exclusive Funds | 383,290 | 383,290 | ||||||||||||||
INAL | 46,893 | 82,302 | 139 | 129,334 | ||||||||||||
CFN | 87 | 116,177 | 53,267 | 169,531 | ||||||||||||
MRS Logistica | 113 | 84,617 | 23,099 | 107,829 | ||||||||||||
Sepetiba Tecon | 1,005 | 36,000 | 62,785 | 299 | 100,089 | |||||||||||
CSN Cimentos | 12,248 | 31,104 | 43,352 | |||||||||||||
CSN Energia | 26,973 | 26,973 | ||||||||||||||
Jaycee | 10,492 | 10,492 | ||||||||||||||
Cia. Metalic Nordeste | 2,425 | 7,072 | 9,497 | |||||||||||||
Cia. Metalurgia Prada | 5,859 | 5,859 | ||||||||||||||
GalvaSud | 3,558 | 156 | 3,714 | |||||||||||||
INAL Nordeste | 3,388 | 3,388 | ||||||||||||||
Ita Energética | 3,286 | 3,286 | ||||||||||||||
Ersa | 5 | 110 | 3,043 | 3,158 | ||||||||||||
Other (*) | 672 | 860 | 1,532 | |||||||||||||
Total in 2006 Advance | 1,054,991 | 383,290 | 135,497 | 36,000 | 198,304 | 147,156 | 26,580 | 1,981,818 | ||||||||
Total in 2005 | 1,260,297 | 188,248 | 80,715 | 36,000 | 140,924 | 114,721 | 2,103 | 1,823,008 | ||||||||
(1) Receivable mutual agreements with related parties are restated by 101% of CDI. | ||||||||||||||||
(*) Other: CSN LLC, CSN I and CBS Previdência |
b) Liabilities | ||||||||||||||||||
Loans and financing | Accounts | Suppliers | ||||||||||||||||
Derivatives | payable | |||||||||||||||||
Companies | Loans from Investees |
Mutual (3) / Inter company accounts |
Total | |||||||||||||||
Prepayment | Fixed Rate | Intercompany | Investees | |||||||||||||||
(1) | (2) | Bonds (2) | Swap | Inventories | Other | |||||||||||||
Notes | ||||||||||||||||||
CSN Steel | 1,241,257 | 657,132 | 280,727 | 2,179,116 | ||||||||||||||
CSN Iron | 1,292,230 | 1,292,230 | ||||||||||||||||
CSN Islands VIII | 1,063,662 | 117,653 | 1,964 | 1,183,279 | ||||||||||||||
CSN Export | 1,120,053 | 11,576 | 1,131,629 | |||||||||||||||
CSN Islands VII | 582,780 | 24,724 | 607,504 | |||||||||||||||
Jaycee | 22,431 | 324,556 | 346,987 | |||||||||||||||
Cinnabar | 227,099 | 72,125 | 43,204 | 342,428 | ||||||||||||||
CBS Previdência | 286,941 | 286,941 | ||||||||||||||||
MRS Logística | 51,968 | 51,968 | ||||||||||||||||
CSN Energia | 22,831 | 22,831 | ||||||||||||||||
Aceros | 21,493 | 21,493 | ||||||||||||||||
GalvaSud | 12,228 | 12,228 | ||||||||||||||||
INAL Nordeste | 3,930 | 1,626 | 5,556 | |||||||||||||||
Other (*) | 455 | 455 | ||||||||||||||||
Total in 2006 | 2,588,409 | 2,303,574 | 94,556 | 1,292,230 | 142,377 | 706,351 | 3,930 | 353,218 | 7,484,645 | |||||||||
Total in 2005 | 2,875,662 | 2,533,092 | 88,499 | 1,414,743 | 786,461 | 29,635 | 262,794 | 7,990,886 | ||||||||||
49
(1) Information referring to loan agreements with related parties. |
Jaycee (part): semiannual Libor + 3% p.a. with indeterminate maturity. |
Jaycee (part): semiannual Libor + 2.5% p.a. with maturity on 9/15/2011. |
Cinnabar (part): semiannual Libor + 3% p.a. with indeterminate maturity and IGPM + 6% p.a. with indeterminate maturity. |
CSN Export: semiannual Euribor + 0.5% p.a. with indeterminate maturity. |
(2)Contracts in US$ - CSN Iron: interest of 9.125% p.a. with maturity on 6/1/2007. |
Contracts in YEN - CSN Islands VII: interest of 7.3% and 7.75% p.a. with maturity on 9/12/2008. |
Contracts in YEN - CSN Islands VIII: interest of 5.65% p.a. with maturity on 12/15/2013. |
Contracts in YEN - CSN Steel: interest of 1.5% p.a. with maturity on 7/13/2010. |
(3) Contracts in US$ - CSN Export: interest of 6.15% to 7.46% p.a. with maturity on 5/6/2015 |
Contracts in US$ - CSN Cinnabar: interest of 5.07% to 8.71% p.a. with maturity on 6/28/2008 |
Contracts in US$ - CSN Steel: interest of 5.75% to 10.0% p.a. with maturity on 1/13/2017 |
(*) OTHER: CFN, INAL, Prada and Fundação CSN.
c) Results
Income | Expenses | |||||||||||||
Interest and | Interest and | |||||||||||||
Companies | Products | monetary | Products | monetary | ||||||||||
and | and | Total | and | and | Other | Total | ||||||||
services | exchange | services | exchange | |||||||||||
variations | variations | |||||||||||||
CSN Export | 1,594,961 | (19,127) | 1,575,834 | 1,276,727 | (39,440) | 1,237,287 | ||||||||
INAL | 659,504 | 659,504 | 352,303 | 352,303 | ||||||||||
GalvaSud | 139,295 | 139,295 | 242,287 | 242,287 | ||||||||||
Cia. Metalúrgica | ||||||||||||||
Prada | 135,325 | 135,325 | ||||||||||||
Cia. Metalic Nordeste | 53,522 | 73 | 53,595 | 34,787 | 34,787 | |||||||||
INAL Nordeste | 25,630 | 25,630 | 19,488 | 19,488 | ||||||||||
MRS Logística | 199 | 17,222 | 17,421 | 182,824 | 182,824 | |||||||||
CFN | 13,097 | 13,097 | ||||||||||||
CBS Previdência | 134,375 | 134,375 | ||||||||||||
Ita Energética | 85,173 | 85,173 | ||||||||||||
CSN LLC | 40,814 | 40,814 | ||||||||||||
ERSA | 23,713 | 23,713 | ||||||||||||
Fundação CSN | 5,648 | 5,648 | ||||||||||||
Cinnabar | 5,329 | 5,329 | ||||||||||||
CSN Iron | (58) | (58) | ||||||||||||
CSN Steel | (108,504) | (108,504) | ||||||||||||
Jaycee | (8,057) | (8,057) | (31,772) | (31,772) | ||||||||||
CSN Islands VII | (23,616) | (23,616) | (16,872) | (16,872) | ||||||||||
CSN Islands VIII | (52,782) | (52,782) | (46,475) | (46,475) | ||||||||||
Exclusive Funds | (557,657) | (557,657) | ||||||||||||
Sepetiba Tecon | 23,857 | 23,857 | ||||||||||||
Total in 2006 | 2,608,436 | (630,847) | 1,977,589 | 2,287,621 | (237,792) | 134,375 | 2,184,204 | |||||||
Total in 2005 | 3,060,124 | (637,624) | 2,422,500 | 2,590,429 | (663,268) | 91,730 | 2,018,891 | |||||||
50
5. CASH AND CASH EQUIVALENTS AND MARKETABLE SECURITIES
Consolidated | Parent Company | ||||||
2006 | 2005 | 2006 | 2005 | ||||
Short-term | |||||||
Cash and Cash Equivalents | |||||||
Cash and Banks | 167,288 | 135,185 | 71,389 | 73,034 | |||
Financial Investments | |||||||
In the country: | |||||||
Exclusive investment funds | 383,290 | 188,248 | |||||
Brazilian government securities | 833,919 | 695,475 | |||||
Fixed income and debentures (net of provision for | |||||||
probable losses and withholding income tax) | 249,802 | 240,269 | 1,152 | 40,715 | |||
Derivatives | 376 | 15,031 | |||||
1,084,097 | 950,775 | 384,442 | 228,963 | ||||
Abroad: | |||||||
Time Deposit | 881,713 | 2,409,840 | 133,032 | 1,193,798 | |||
Derivatives | 490,003 | 349,138 | |||||
1,371,716 | 2,758,978 | 133,032 | 1,193,798 | ||||
Total Financial Investments | 2,455,813 | 3,709,753 | 517,474 | 1,422,761 | |||
Total cash and cash equivalents and financial | |||||||
investments | 2,623,101 | 3,844,938 | 588,863 | 1,495,795 | |||
Long-term | |||||||
Investment abroad | 53,450 | 35,657 | |||||
Fixed income and debentures (net of provision for | |||||||
probable losses and withholding income tax) | 89,673 | 218,605 | 125,673 | 125,639 | |||
143,123 | 254,262 | 125,673 | 125,639 | ||||
Total cash and cash equivalents and financial | |||||||
investments | 2,766,224 | 4,099,200 | 714,536 | 1,621,434 | |||
The Companys Management invests financial resources, available at the parent company and subsidiaries headquartered in the country basically in exclusive investment funds, whose cash is mostly invested in purchase and sale commitments pegged to Brazilian government securities, with immediate liquidity. Additionally, a significant portion of the Companys and its subsidiaries financial resources abroad is invested in Time Deposits, with first-tier banks.
51
6. ACCOUNTS RECEIVABLE
Consolidated | Parent Company | ||||||
2006 | 2005 | 2006 | 2005 | ||||
Domestic market | |||||||
Subsidiaries | 63,346 | 57,485 | |||||
Other customers | 765,612 | 879,153 | 427,183 | 639,911 | |||
765,612 | 879,153 | 490,529 | 697,396 | ||||
Foreign market | |||||||
Subsidiaries | 991,645 | 1,202,812 | |||||
Other customers | 635,920 | 588,098 | 16,327 | 9,135 | |||
Advance on Export Contracts (ACE) | (65,539) | ||||||
635,920 | 588,098 | 1,007,972 | 1,146,408 | ||||
Allowance for doubtful accounts | (109,241) | (101,204) | (69,635) | (70,951) | |||
1,292,291 | 1,366,047 | 1,428,866 | 1,772,853 | ||||
7. INVENTORIES
Consolidated | Parent Company | ||||||
2006 | 2005 | 2006 | 2005 | ||||
Finished products | 554,624 | 556,652 | 308,273 | 367,810 | |||
Work in process | 510,732 | 466,305 | 370,800 | 315,847 | |||
Raw materials | 767,357 | 474,276 | 496,428 | 397,374 | |||
Supplies | 465,241 | 352,611 | 385,227 | 295,705 | |||
Imports in transit | 22,449 | 25,215 | 20,279 | 23,676 | |||
Provision for losses | (10,736) | (4,251) | (9,173) | (4,006) | |||
Other | 125,614 | 36,654 | 78,096 | ||||
2,435,281 | 1,907,462 | 1,649,930 | 1,396,406 | ||||
52
8. DEFERRED INCOME TAX AND SOCIAL CONTRIBUTION
Consolidated | Parent Company | |||||||
2006 | 2005 | 2006 | 2005 | |||||
Current assets | ||||||||
Income tax | 317,042 | 405,034 | 235,030 | 358,950 | ||||
Social contribution | 112,588 | 98,105 | 82,962 | 80,843 | ||||
429,630 | 503,139 | 317,992 | 439,793 | |||||
Long-term assets | ||||||||
Income tax | 437,005 | 447,679 | 417,046 | 410,391 | ||||
Social contribution | 119,155 | 95,459 | 111,884 | 81,952 | ||||
556,160 | 543,138 | 528,930 | 492,343 | |||||
Current liabilities | ||||||||
Income tax | 93,000 | 93,000 | 93,000 | 93,000 | ||||
Social contribution | 33,480 | 33,480 | 33,480 | 33,480 | ||||
126,480 | 126,480 | 126,480 | 126,480 | |||||
Long-term liabilities | ||||||||
Income tax | 1,487,932 | 1,590,402 | 1,473,166 | 1,590,402 | ||||
Social contribution | 535,640 | 572,545 | 530,340 | 572,545 | ||||
2,023,572 | 2,162,947 | 2,003,506 | 2,162,947 | |||||
2006 | 2005 | 2006 | 2005 | |||||
Income | ||||||||
Income tax | 8,151 | 135,581 | (11,013) | 163,032 | ||||
Social contribution | 77,288 | 88,011 | 70,302 | 97,846 | ||||
85,439 | 223,592 | 59,289 | 260,878 | |||||
The deferred income tax and social contribution of the parent company are shown as follows:
2006 | 2005 | |||||||||||||||
Income tax | Social contribution | Income tax | Social contribution | |||||||||||||
Long- | Long- | |||||||||||||||
Current | Long-term | Current | term | Current | Long-term | Current | term | |||||||||
Assets | ||||||||||||||||
Provisions for | ||||||||||||||||
contingencies | 13,396 | 159,935 | 4,823 | 57,577 | 10,085 | 93,758 | 3,631 | 35,393 | ||||||||
Provision for interest on | ||||||||||||||||
own capital | 43,620 | 15,703 | 64,546 | 23,236 | ||||||||||||
Provision for payment of | ||||||||||||||||
private pension plans | 71,735 | 25,824 | 55,850 | 20,106 | ||||||||||||
Taxes under litigation | 106,256 | 187,301 | ||||||||||||||
Tax losses | 4,580 | 134,385 | ||||||||||||||
Other | 173,434 | 79,120 | 62,436 | 28,483 | 149,934 | 73,482 | 53,976 | 26,453 | ||||||||
235,030 | 417,046 | 82,962 | 111,884 | 358,950 | 410,391 | 80,843 | 81,952 | |||||||||
Liabilities | ||||||||||||||||
Income tax and social | ||||||||||||||||
contribution on revaluation | ||||||||||||||||
reserve | 93,000 | 1,473,166 | 33,480 | 530,340 | 93,000 | 1,590,402 | 33,480 | 572,545 |
53
Following is the reconciliation between the income tax and social contribution of the parent company and consolidated, and the application of the effective rate on net income before Corporate Income tax (IRPJ) and Social Contribution (CSL):
Consolidated | ||||||||
2006 | 2005 | |||||||
Corporate | Corporate | |||||||
Income | Social | Income | Social | |||||
tax | contribution | tax | contribution | |||||
Income before income tax and social contribution | 1,687,005 | 1,687,005 | 2,874,597 | 2,874,597 | ||||
( - ) Interest on own capital total expense | (174,428) | (174,428) | (259,404) | (259,404) | ||||
Income before income tax and social contribution - adjusted | 1,512,577 | 1,512,577 | 2,615,193 | 2,615,193 | ||||
- Tax rate | 25% | 9% | 25% | 9% | ||||
Total | (378,144) | (136,132) | (653,798) | (235,367) | ||||
Adjustments to reflect the effective tax rate: | ||||||||
Income from foreign subsidiaries | (5,413) | (1,949) | 91,581 | 32,969 | ||||
Other permanent (additions) deductions | (16,052) | 18,210 | (80,588) | (24,112) | ||||
Consolidated current and deferred income tax and social | ||||||||
contribution | (399,609) | (119,871) | (642,805) | (226,510) | ||||
Parent Company | ||||||||
2006 | 2005 | |||||||
Corporate | Corporate | |||||||
Income | Social | Income | Social | |||||
tax | contribution | tax | contribution | |||||
Income before income tax and social contribution | 1,510,308 | 1,510,308 | 2,571,741 | 2,571,741 | ||||
( - ) Interest on own capital total expense | (174,428) | (174,428) | (259,404) | (259,404) | ||||
Income before income tax and social contribution - adjusted | 1,335,880 | 1,335,880 | 2,312,337 | 2,312,337 | ||||
- Tax rate | 25% | 9% | 25% | 9% | ||||
Total | (333,970) | (120,229) | (578,084) | (208,110) | ||||
Adjustments to reflect the effective tax rate: | ||||||||
Equity pick-up | 62,524 | 22,508 | (69,831) | (25,139) | ||||
Income from foreign subsidiaries | (5,413) | (1,949) | 91,581 | 32,969 | ||||
Other permanent (additions) deductions | 18,428 | 17,159 | 50,138 | 13,493 | ||||
Parent company current and deferred income tax and social | ||||||||
contribution | (258,431) | (82,511) | (506,196) | (186,787) | ||||
54
9. INVESTMENTS
a) Direct investments in subsidiaries and jointly-owned subsidiaries
2006 | 2005 | |||||||||||||||
Companies | Number of shares | Direct investment % |
Net income (loss) for the year |
Shareholders equity (unsecured liabilities) |
Direct investment % |
Net income (loss) for the year |
Shareholders equity (unsecured liabilities) |
|||||||||
Common | Preferred | |||||||||||||||
Steel and Corporate | ||||||||||||||||
GalvaSud | 11,801,406,867 | 15.29 | 81,064 | 601,478 | 15.29 | 51,362 | 521,433 | |||||||||
CSN I | 9,996,751,600 | 1,200 | 100.00 | 40,838 | 579,012 | 100.00 | 15,684 | 539,034 | ||||||||
CSN Steel | 480,726,588 | 100.00 | 185,355 | 1,203,187 | 100.00 | (58,725) | 1,114,332 | |||||||||
INAL | 421,408,393 | 99.99 | 58,634 | 560,295 | 99.99 | 78,180 | 448,120 | |||||||||
Cia. Metalic | ||||||||||||||||
Nordeste | 87,868,185 | 4,424,971 | 99.99 | 12,206 | 114,638 | 99.99 | (23,767) | 102,411 | ||||||||
INAL Nordeste | 37,800,000 | 99.99 | 2,830 | 34,611 | 99.99 | (2,929) | 18,178 | |||||||||
CSN Overseas | 7,173,411 | 100.00 | 66,348 | 1,039,292 | 100.00 | 65,781 | 1,065,186 | |||||||||
CSN Panama | 4,240,032 | 100.00 | 12,438 | 388,104 | 100.00 | (186,805) | 411,282 | |||||||||
CSN Energy | 3,675,319 | 100.00 | (35,971) | 375,278 | 100.00 | 5,110 | 450,239 | |||||||||
CSN Export | 31,954 | 100.00 | 10,503 | 96,430 | 100.00 | 16,873 | 94,074 | |||||||||
CSN Islands VII | 1,000 | 100.00 | 878 | 656 | 100.00 | (5) | (243) | |||||||||
CSN Islands VIII | 1,000 | 100.00 | 2,274 | 4,522 | 100.00 | 20,632 | 2,462 | |||||||||
CSN Islands IX | 1,000 | 100.00 | (15,129) | 10,735 | 100.00 | 30,518 | 28,316 | |||||||||
CSN Islands X | 1,000 | 100.00 | (4,027) | (25,997) | 100.00 | (24,055) | (24,053) | |||||||||
Logistics | ||||||||||||||||
MRS Logistica | 188,332,667 | 151,667,333 | 32.93 | 540,940 | 913,210 | 32.22 | 410,254 | 629,217 | ||||||||
CFN | 118,939,957 | 45.78 | (60,704) | (90,257) | 49.99 | (56,890) | (102,252) | |||||||||
Sepetiba Tecon | 62,220,270 | 100.00 | 38,938 | 26,866 | 20.00 | 6,333 | (12,072) | |||||||||
Energy | ||||||||||||||||
Itá Energética | 520,219,172 | 48.75 | 28,380 | 567,580 | 48.75 | 33,344 | 545,941 | |||||||||
CSN Energia | 1,000 | 99.90 | 3,566 | 90,895 | 99.90 | 3,295 | 117,306 | |||||||||
Mining | ||||||||||||||||
ERSA | 34,236,307 | 99.99 | 2,072 | 20,093 | 100.00 | 611 | 19,442 | |||||||||
Nacional Minérios | 8,000,000 | 99.99 | 8,000 | |||||||||||||
Cement | ||||||||||||||||
CSN Cimentos | 376,337 | 99.99 | (14,117) | (39,353) | 99.99 | 37,543 | 3,263 |
55
b) Investments breakdown
2005 | 2006 | |||||||||||||
Initial | Provision | Equity | Goodwill | |||||||||||
Companies | investment | for losses | Addition | pick-up and | (1) | Final | Provision | |||||||
balance | balance | (write-off) | provision | amortization | investment | for losses | ||||||||
for losses | balance | balance | ||||||||||||
Steel and Corporate | ||||||||||||||
GalvaSud( 2 ) | 79,727 | (156) | 12,395 | 91,966 | ||||||||||
CSN I( 2 ) | 539,034 | (860) | 40,838 | 579,012 | ||||||||||
CSN Steel | 1,114,332 | 88,855 | 1,203,187 | |||||||||||
INAL( 3 ) | 448,119 | 53,542 | 58,634 | 560,295 | ||||||||||
Cia. Metalic Nordeste | 168,794 | 12,206 | (33,186) | 147,814 | ||||||||||
INAL Nordeste( 4 ) | 18,178 | 10,995 | 5,438 | 34,611 | ||||||||||
CSN Overseas | 1,065,186 | (25,894) | 1,039,292 | |||||||||||
CSN Panama | 411,282 | (23,178) | 388,104 | |||||||||||
CSN Energy | 450,239 | (74,961) | 375,278 | |||||||||||
CSN Export | 94,074 | 2,356 | 96,430 | |||||||||||
CSN Islands VII | (243) | 899 | 656 | |||||||||||
CSN Islands VIII | 2,462 | 2,060 | 4,522 | |||||||||||
CSN Islands IX | 28,316 | (17,581) | 10,735 | |||||||||||
CSN Islands X | (24,053) | (1,944) | (25.997) | |||||||||||
4,419,743 | (24,296) | 63,521 | 80,123 | (33,186) | 4,531,902 | (25.997) | ||||||||
Logistics | ||||||||||||||
MRS Logistica( 7 ) | 202,756 | (80,161) | 178,141 | 300,736 | ||||||||||
CFN ( 5 ) | (51,123) | 37,593 | (27,792) | (41.322) | ||||||||||
Sepetiba Tecon( 6 ) | (2,414) | 21,493 | 7,787 | 26,866 | ||||||||||
202,756 | (53,537) | (21,075) | 158,136 | 327,602 | (41.322) | |||||||||
Energy | ||||||||||||||
Itá Energética( 2 ) | 266,146 | (3,286) | 13,835 | 276,695 | ||||||||||
CSN Energia( 2 ) | 117,190 | (29,948) | 3,563 | 90,805 | ||||||||||
383,336 | (33,234) | 17,398 | 367,500 | |||||||||||
Mining | ||||||||||||||
ERSA | 89,788 | (110) | 762 | (16,234) | 74,206 | |||||||||
Nacional Minérios | 7,999 | 7,999 | ||||||||||||
89,788 | 7,889 | 762 | (16,234) | 82,205 | ||||||||||
Cement | ||||||||||||||
CSN Cimentos | 3,262 | (42,616) | (39.354) | |||||||||||
3,262 | (42,616) | (39.354) | ||||||||||||
5,098,885 | (77,833) | 17,101 | 213,803 | (49,420) | 5,309,209 | (106.673) | ||||||||
164,383 | 5,309,209 | (106,673) |
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(1) | This comprises the balance of the parent companys equity in the earnings of subsidiary and associated companies. The balances of consolidated goodwill are shown in item (e) of this note. |
(2) | Dividends proposed by investees in 2006. |
(3) | The net addition refers to the capital increase in the amount of R$135.834, with the issuance of 95,723,258 common shares, upon assignment of credits CSN held against Cia Metalúrgica Prada, gain in the percentage variation in the amount of R$10 and proposed dividends in the amount of R$82,302. |
(4) | The addition refers to the payment of capital in the amount of R$10,995, with the issuance of 36,700,000 common shares. |
(5) | The net addition refers to the capital increase in the amount of R$36,341, with the issuance of 36,301,709 common shares, upon capitalization of AFAC and gain in the percentage variation in the amount of R$1,252. |
(6) | The addition refers to the purchase of CSN Aceros shares, in the amount of R$21,493. |
(7) | The net write-off refers to proposed dividends in the amount of R$86,109 and to the gain in percentage variation in the amount of R$1,595. |
c) Additional Information on the main subsidiaries
GalvaSud
Incorporated in 1998, GalvaSud started its operations in December 2000 and operates a galvanization line by hot immersion, a blank cut line and a weld laser line directed mainly to the automotive industry, and it also operates service centers for steel product processing.
On June 22, 2004, the subsidiary CSN I subscribed 8,262,865,920 common shares of GalvaSuds capital, paid with credits related to the full payment of all financial debts of the Company, and also acquired the totality of shares of the company.
CSN is the holder of a 15.29% participation on a direct basis and of an 84.71% participation on an indirect basis of GalvaSuds capital stock, by means of its wholly-owned subsidiary CSN I.
Indústria Nacional de Aços Laminados INAL
Company based in Araucária, State of Paraná, with establishments in the States of São Paulo, Rio de Janeiro, Paraná, Rio Grande do Sul, Pernambuco and Minas Gerais, aims to reprocess and act as distributor of CSNs steel products, acting as a service and distribution center.
Cia Metalic Nordeste
Cia. Metalic Nordeste, acquired in 2002, is a company based in Maracanaú, State of Ceará, which has as main objective the manufacturing of two-piece steel cans and investment in other companies.
Sepetiba Tecon
Acquired in 1998, through a privatization auction, its objective is to exploit the No.1 Containers Terminal of the Itaguaí Port, located in Itaguaí, State of Rio de Janeiro. This terminal is connected to Presidente Vargas Steelworks by the Southeast railroad network.
CSN Energia
Incorporated in 1999, with the main objective of distributing and trading the excess of electric energy generated by CSN and by companies, consortiums or other entities in which CSN holds an interest. The Company maintains a balance receivable related to the electric energy sale under the scope of the Electric Power Trade Chamber (Câmara de Comercialização de
57
Energia Elétrica) CCEE, in the amount of R$74,150 on December 31, 2006 (R$88,711 on December, 31 2005), out of which R$10,952 are provisioned with the existence of judicial collection related to defaulting customers.
From the balance receivable on December 31, 2006, the amount of R$59,129 (R$59,129 in 2005) is due by concessionaires with injunctions suspending the corresponding payments. The Companys Management understands that an allowance for doubtful accounts is not necessary in view of the judicial measures taken by the industry official entities.
CSN Cimentos
In March 2005, the company previously named FEM Projetos, Construções e Montagens changed its name to CSN Cimentos. Based in Volta Redonda, State of Rio de Janeiro, CSN Cimentos is a business under implementation which will have as main purpose the production and trading of cement and it will use the blast furnace slag from the production of pig iron at Presidente Vargas Steelworks for the manufacturing of clinker, raw material of cement.
ERSA Estanho de Rondônia
Acquired in April 2005, the Company, which is headquartered in the State of Rondônia, has as its main purpose the operation of the cassiterite (tin ore) mine in Santa Bárbara State of Rondônia and casting in which metal tin is obtained in Ariquemes State of Rondônia, which is one of the main raw materials used in CSN for the production of tin plates.
INAL Nordeste
In March 2005, the Company previously named CSC Companhia Siderúrgica do Ceará changed its name to INAL Nordeste. Based in Camaçari, State of Bahia, the Company has as its main purpose to reprocess and distribute CSNs steel products, operating as a service and distribution center in the Northeast region.
Cia Metalúrgica Prada
Companhia Metalúrgica Prada was acquired in June 2006 through the subsidiary INAL. The company, headquartered in the city of São Paulo, has branches in the States of São Paulo and Minas Gerais. The Company is a manufacturer of metallic packages and it produces more than 1 billion units per year.
Nacional Minérios
The company incorporated on November 3, 2006, it is headquartered in the city of Congonhas, State of Minas Gerais, acting in the trading of iron ore obtained from small mining companies or other companies trading iron ore, focused on exports.
58
d) Additional information on the main jointly-owned subsidiaries
The amounts of balance sheets and statements of income of companies which control is shared are shown as follows. The amounts were consolidated at the Companys statements according to the stake percentage described in item (a) of this Note.
2006 | 2005 | |||||||||||
CFN | MRS | ITASA | CFN | MRS | ITASA | |||||||
Current Assets | 63,193 | 725,516 | 74,786 | 69,303 | 623,343 | 66,067 | ||||||
Non-Current Assets | 273,012 | 1,732,891 | 1,026,705 | 215,705 | 1,409,531 | 1,073,610 | ||||||
Long-Term Assets | 37,841 | 269,363 | 3,743 | 30,105 | 288,728 | 9,521 | ||||||
Investments, Property, Plant and | ||||||||||||
Equipment and Deferred | 235,171 | 1,463,528 | 1,022,962 | 185,600 | 1,120,803 | 1,064,089 | ||||||
Total Assets | 336,205 | 2,458,407 | 1,101,491 | 285,008 | 2,032,874 | 1,139,677 | ||||||
Current Liabilities | 25,129 | 980,013 | 109,534 | 26,679 | 911,694 | 104,004 | ||||||
Non-Current Liabilities | 401,333 | 565,184 | 424,377 | 360,581 | 491,963 | 489,732 | ||||||
Shareholders Equity | (90,257) | 913,210 | 567,580 | (102,252) | 629,217 | 545,941 | ||||||
Total Liabilities and Shareholders Equity | 336,205 | 2,458,407 | 1,101,491 | 285,008 | 2,032,874 | 1,139,677 | ||||||
CFN
Acquired in 1997 through a privatization auction, it has as its main objective the exploration and development of the public service to railroad transportation of load for the Northeast network. In 2006, the merger of Transnordestina into CFN was authorized, which allowed CFN to concentrate its activities and that of its subsidiary, Transnordestina, into one single company. Besides, as a result of that merger, BNDESPar became holder of a direct investment in CFN, thus allowing money from FINOR (Northeast Investment Fund) to be used in the construction of the Transnordestina project.
MRS Logística
The Companys main objective is to explore and develop public service to railroad transportation of load for the Southeast network. MRS transports to Presidente Vargas (UPV) Steelworks in Volta Redonda the iron ore from Casa de Pedra and raw material imported through Itaguaí Port. It also links the UPV steelworks to the Rio de Janeiro and Santos ports and also to other load terminals in the State of São Paulo, CSNs principal market.
Itasa
Itasa (Itá Energética S.A.) holds a 60.5% stake in the Consortium Itá created for the exploration of Itá Hydroelectric Plant pursuant to the concession agreement as of December 28, 1995, and its addendum #1 dated as of July 31, 2000 and entered into between the consortium holders (Itasa and Centrais Geradoras do Sul do Brasil - Gerasul, previously named Tractebel Energia S.A.) and the Brazilian Agency of Electric Energy - ANEEL.
CSN holds 48.75% of the subscribed capital corresponding to 48.75% of the total of common shares issued by Itasa, a special purpose company originally organized to make feasible the construction of UHE Itá, the contracting of supply of goods and services necessary to carry out the venture and the acquisition of financing by offering the corresponding guarantees.
59
e) Goodwill on acquisition of investments
On December 31, 2006, the Company maintained on its consolidated balance sheet the amount of R$277,465 (R$269,449 in 2005), net of amortization mainly related to goodwill based on the expectation of future profits, with amortization estimated at five years.
Balance as | Additions | Amortizations/ | Balance as | Investor | ||||||
of 2005 | write-off | of 2006 | ||||||||
Goodwill (negative goodwill) | ||||||||||
on investments: | ||||||||||
Parent company | ||||||||||
Ersa | 70,346 | (16,234) | 54,112 | CSN | ||||||
Metalic | 66,372 | (33,186) | 33,186 | CSN | ||||||
Sub-total parent company | 136,718 | (49,420) | 87,298 | |||||||
GalvaSud | 97,443 | (27,840) | 69,603 | |||||||
Tangua / LLC | 39,931 | (16,331) | 23,600 | CSN Panama | ||||||
Prada | 76,631 | 76,631 | INAL | |||||||
Lusosider | (8,521) | 20,320 | 6,517 | 18,316 | CSN Steel | |||||
Other | 3,878 | 20,141 | (22,002) | 2,017 | INAL | |||||
Total consolidated | 269,449 | 117,092 | (109,076) | 277,465 | ||||||
f) Other investments
Acquisition of 34,072,613 shares of Corus Group PLC in December 2006, corresponding to an addition of R$678,155 and other investments in the amount of R$2,054.
g) Additional information on indirect participations abroad:
CSN LLC
The company was incorporated in 2001 with the assets and liabilities of the extinguished Heartland Steel Inc., headquartered in Wilmington, State of Delaware USA, it has an industrial plant located in Terre Haute, State of Indiana USA. It is a complex comprising cold rolling, hot coil pickled line and galvanization line. The Company holds an indirect and wholly-owned stake in CSN LLC by means of the subsidiary CSN Panama.
Lusosider
Lusosider Aços Planos was incorporated in 1996, providing continuity to Siderurgia Nacional - Empresa de Produtos Planos (flat products company), privatized in that year by the Portuguese Government. Located in Seixal, Portugal it is engaged in galvanization line and tin plates.
In 2003, the Company acquired 912,500 shares issued by Lusosider Projectos Siderúrgicos, holder of Lusosider Aços Planos, which represented 50% of the total capital of Lusosider and on August 31, 2006, the Company acquired the remaining shares and began to have full control of Lusosider Projectos Siderúrgicos S.A.. The acquisitions were made through CSNs subsidiary CSN Steel.
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10. PROPERTY, PLANT AND EQUIPMENT
Parent Company |
||||||||||
Effective rate | 2006 |
2005 | ||||||||
for depreciation, | Accumulated | |||||||||
depletion and | Reevaluated | depreciation, | ||||||||
amortization | Cost | depletion | Net | Net | ||||||
(% per year) | and | |||||||||
amortization | ||||||||||
Machinery and equipment | 6.71 | 11,408,101 | (2,339,937) | 9,068,164 | 9,349,820 | |||||
Mines and mineral deposits | 0.45 | 1,239,084 | (18,779) | 1,220,305 | 1,225,450 | |||||
Buildings | 3.39 | 937,652 | (98,842) | 838,810 | 836,323 | |||||
Land | 144,925 | 144,925 | 143,941 | |||||||
Other assets | 20.00 | 210,634 | (99,421) | 111,213 | 98,644 | |||||
Furniture and fixtures | 10.00 | 100,290 | (88,325) | 11,965 | 13,962 | |||||
14,040,686 | (2,645,304) | 11,395,382 | 11,668,140 | |||||||
Property, plant and | ||||||||||
equipment in progress | 636,411 | 636,411 | 352,025 | |||||||
14,677,097 | (2,645,304) | 12,031,793 | 12,020,165 | |||||||
Consolidated | ||||||||
2006 | 2005 | |||||||
Machinery and equipment | 12,720,839 | (2,870,792) | 9,850,047 | 10,035,680 | ||||
Mines and mineral deposits | 1,239,084 | (18,779) | 1,220,305 | 1,232,048 | ||||
Buildings | 1,492,988 | (207,378) | 1,285,610 | 1,259,755 | ||||
Land | 183,877 | 183,877 | 162,768 | |||||
Other assets | 909,184 | (312,849) | 596,335 | 503,614 | ||||
Furniture and fixtures | 123,345 | (104,165) | 19,180 | 20,297 | ||||
16,669,317 | (3,513,963) | 13,155,354 | 13,214,162 | |||||
Property, plant and | ||||||||
equipment in progress | 792,907 | 792,907 | 424,038 | |||||
17,462,224 | (3,513,963) | 13,948,261 | 13,638,200 | |||||
Based on the appraisal report prepared by expert consultants issued on December 11, 2006, approved by the Management, the Company recorded a R$43,934 reduction in the revalued assets of the electric energy generation and stem thermal plant- CTE-II, located in the CSNs Presidente Vargas Steelworks in Volta Redonda, Rio de Janeiro. The assets net value prior to the revaluation was R$830,211 and the new report set the value of R$786,277.
At the Extraordinary General Meeting held on April 29, 2003, pursuant to paragraphs 15 and 17 of CVM Deliberation 183/95, shareholders approved the appraisal report of the land, machinery and equipment, facilities, real properties and buildings, existing in the CSN's Presidente Vargas, Itaguaí, Casa de Pedra and Arcos plants, in addition to the iron ore mine in Casa de Pedra. The report set out an addition of R$4,068,559, composing the new amount of the assets.
Up to December 31, 2006, the assets provided as collateral for financial operations amounted to R$47,985.
61
Depreciation, depletion and amortization expenses in 2006 (parent company) amounted to R$730,911 (R$720,000 in 2005), out of which R$719,494 (R$708,604 in 2005) was charged to production costs and R$11,417 (R$11,396 in 2005) was charged to selling, general and administrative expenses (amortization of deferred charges not included).
On December 31, 2006, the Company had R$6,337,202 (R$6,806,147 in 2005) of revaluation of own net depreciation assets.
11. DEFERRED CHARGES
Consolidated | Parent Company | |||||||
2006 | 2005 | 2006 | 2005 | |||||
Information technology projects | 104,451 | 163,799 | 104,451 | 153,210 | ||||
( - ) Accumulated amortization | (86,621) | (125,311) | (86,621) | (114,722) | ||||
Expansion projects | 193,748 | 188,508 | 193,748 | 188,508 | ||||
( - ) Accumulated amortization | (92,752) | (61,559) | (92,752) | (61,559) | ||||
Pre-operating expenses | 130,480 | 129,866 | ||||||
( - ) Accumulated amortization | (83,487) | (70,985) | ||||||
Other projects | 192,231 | 191,484 | 84,908 | 78,585 | ||||
( - ) Accumulated amortization | (90,762) | (104,161) | (26,657) | (49,122) | ||||
267,288 | 311,641 | 177,077 | 194,900 | |||||
Information technology projects are represented by projects of automation and computerization of operating processes that aim to reduce costs and increase the competitiveness of the Company.
The expansion projects disclosed on December 31, 2006 are primarily related to the expansion of the production capacity of Casa de Pedra mine and enlargement of Itaguaí port for the outflow of part of such production.
Amortization of information technology projects and of other projects in 2006 amounted to R$59,974 (R$57,879 in 2005), of which R$47,731 (R$44,896 in 2005) is charged to production costs and R$12,243 (R$12,983 in 2005) to selling, general and administrative expenses.
Amortization is made on a straight-line basis by the time expected for future benefit and cash used in deferred assets will be amortized periodically within terms no longer than 10 years.
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12. LOANS AND FINANCING
Consolidated | Parent Company | |||||||||||||||
Current Liabilities | Long-term liabilities | Current Liabilities | Long-term liabilities | |||||||||||||
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | |||||||||
FOREIGN CURRENCY | ||||||||||||||||
Long-Term Loans |
||||||||||||||||
Advance on Export | ||||||||||||||||
Contracts | 131,137 | 299,320 | 131,137 | 299,320 | ||||||||||||
Prepayment | 173,469 | 104,371 | 1,363,037 | 1,429,601 | 316,598 | 635,354 | 2,688,597 | 2,415,035 | ||||||||
Perpetual Bonds | 32,159 | 35,208 | 1,603,500 | 1,755,525 | ||||||||||||
Fixed Rate Notes | 239,656 | 72,893 | 2,619,050 | 3,053,052 | 1,323,433 | 31,334 | 2,276,271 | 3,919,097 | ||||||||
Import Financing | 90,800 | 56,705 | 166,204 | 261,634 | 86,125 | 44,196 | 135,439 | 229,428 | ||||||||
Bilateral | 46,019 | 46,019 | ||||||||||||||
Other | 9,938 | 30,915 | 926,201 | 116,874 | 9,346 | 5,366 | 13,929 | 17,871 | ||||||||
677,159 | 346,111 | 6,977,312 | 6,616,686 | 1,866,639 | 762,269 | 5,413,556 | 6,581,431 | |||||||||
LOCAL CURRENCY | ||||||||||||||||
Long-Term Loans | ||||||||||||||||
BNDES/Finame | 77,918 | 36,595 | 301,660 | 277,561 | 32,511 | |||||||||||
Debentures (Note 13) | 85,583 | 705,517 | 995,679 | 425,517 | 36,240 | 661,920 | 897,141 | 286,176 | ||||||||
Other | 21,065 | 21,173 | 70,166 | 14,248 | 85,325 | 78,036 | 5,600 | 6,300 | ||||||||
184,566 | 763,285 | 1,367,505 | 717,326 | 154,076 | 739,956 | 902,741 | 292,476 | |||||||||
Total Loans and | ||||||||||||||||
Financing | 861,725 | 1,109,396 | 8,344,817 | 7,334,012 | 2,020,715 | 1,502,225 | 6,316,297 | 6,873,907 | ||||||||
Derivatives | 218,762 | 355,097 | 142,377 | 139,399 | ||||||||||||
Total Loans and | ||||||||||||||||
Financing + Derivatives | 1,080,487 | 1,464,493 | 8,344,817 | 7,334,012 | 2,163,092 | 1,641,624 | 6,316,297 | 6,873,907 | ||||||||
On December 31, 2006, the long-term amortization schedule, by year of maturity, is as follows:
Consolidated | Parent Company | |||||||
2008 | 2,164,152 | 25.9% | 1,599,439 | 25.3% | ||||
2009 | 364,973 | 4.4% | 262,934 | 4.2% | ||||
2010 | 344,332 | 4.1% | 935,094 | 14.8% | ||||
2011 | 567,306 | 6.8% | 238,580 | 3.8% | ||||
2012 | 850,428 | 10.2% | 853,453 | 13.5% | ||||
After 2012 | 2,450,126 | 29.4% | 2,426,797 | 38.4% | ||||
Perpetual Bonds | 1,603,500 | 19.2% | ||||||
8,344,817 | 100.0% | 6,316,297 | 100.0% | |||||
63
Interest is applied to loans and financing and debentures (Note 13), at the following annual rates on December 31, 2006:
Consolidated | Parent Company | |||||||
Foreign | Foreign | |||||||
Local Currency | Currency | Local Currency | Currency | |||||
Up to 7% | 63,021 | 2,544,746 | 12,046 | 3,470,905 | ||||
From 7.1 to 9% | 121,204 | 616,734 | 111,391 | 2,069,624 | ||||
From 9.1 to 11% | 486,562 | 4,492,990 | 299,398 | 1,739,665 | ||||
Over 11% | 880,815 | 633,984 | ||||||
Variable | 219,232 | 142,376 | ||||||
1,551,602 | 7,873,702 | 1,056,819 | 7,422,570 | |||||
9,425,304 | 8,479,389 | |||||||
Breakdown of total loans, contracted financing and debentures (Note 13) by currency/index of origin (unaudited):
Consolidated | Parent Company | |||||||
2006 | 2005 | 2006 | 2005 | |||||
Domestic Currency | ||||||||
CDI | 7.49 | 8.49 | 7.48 | 7.75 | ||||
IGPM | 4.27 | 5.03 | 4.46 | 4.23 | ||||
TJLP | 4.11 | 3.83 | 0.38 | |||||
IGP-DI | 0.13 | 0.17 | 0.14 | 0.15 | ||||
Other currencies | ||||||||
16.00 | 17.52 | 12.46 | 12.13 | |||||
Foreign Currency | ||||||||
US dollar | 81.11 | 81.45 | 58.55 | 55.73 | ||||
Yen | 0.47 | 0.49 | 27.21 | 30.26 | ||||
Euro | 0.10 | 0.54 | 0.11 | 0.23 | ||||
Other currencies | 2.32 | 1.67 | 1.65 | |||||
84.00 | 82.48 | 87.54 | 87.87 | |||||
100.00 | 100.00 | 100.00 | 100.00 | |||||
In July 2005, the Company issued through its subsidiary CSN Islands X Corp. perpetual bonds amounting to US$750 million. These bonds with indeterminate maturity pay 9.5% p.a. and the Company has the right to settle the transaction at its face value after five (5) years, on the interest maturity dates.
On December 31, 2006, loans with certain agents contain certain restrictive clauses, which are being complied with.
The Company contracts derivatives operations, aiming at minimizing fluctuation risks in the parity between Real and other foreign currency.
64
The loans, financing and debentures (Note 13) recorded in balance sheet accounts as of December 31, 2006, whose estimated market value differs from the book value, are as follows:
Consolidated | Parent Company | |||||||
Book Value | Market Value (unaudited) |
Book Value | Market Value (unaudited) |
|||||
Loans, financing and debentures (short and long-term) | 9,425,304 | 9,836,249 | 8,479,389 | 8,938,896 |
The guarantees provided for loans comprise fixed assets items, bank guarantees, sureties and securitization operations (exports), as shown in the following table. This amount does not consider the guarantees provided to subsidiaries mentioned in note 15.
2006 | 2005 | |||
Property, Plant and Equipment | 47,985 | 47,985 | ||
Personal Guarantee | 77,087 | 125,239 | ||
Imports | 144,477 | 222,945 | ||
Securitizations (Exports) | 3,005,196 | 3,050,389 | ||
3,274,745 | 3,446,558 | |||
The most significant amortizations and loans in the current year are as follows:
Amortizations | ||||
Company | Description | Principal (in million) |
Settlement | Interest rate (p.a.) |
CSN Export | Securitization | US$28 | Feb, May, Aug and Nov/ 2006 |
7.28% |
CSN | Commercial Paper | JPY43,230 | Dec / 2006 | 0.45% |
CSN | Debentures 2nd issuance | R$400 | Dec / 2006 | 107% CDI CETIP |
CSN | Debentures 3rd issuance 1st tranche |
R$250 | Dec / 2006 | 106.5% CDI CETIP |
65
Loans |
||||||||||||
Company | Description | Principal (in million) |
Issuance | Term | Maturity | Interest rate (p.a.) | ||||||
CSN |
Debentures 4th issuance |
R$600 | Feb / 2006 | 6 years | Feb / 2012 | 103.6% CDI | ||||||
CSN | Commercial Paper | JPY43,230 | Jun / 2006 | 6 months | Dec / 2006 | 0.45% | ||||||
CSN Steel | Revolving Credit Facility |
US$300 | Nov / 2006 | 3 months | Feb / 2007 | 6.58% | ||||||
CSN | Advance on Export Contracts |
US$200 | Nov / 2006 | From 1 to 2 years |
Nov / 2007 to Dec / 2008 |
5.55% to 5.85% | ||||||
CSN | Prepayment | US$100 | Nov / 2006 | 7 years | Nov / 2013 | 6.18% | ||||||
CSN Steel | Import Note | US$100 | Dec / 2006 | 5 years | Dec / 2011 | 5.99% |
On December 23, 2005, the Company was granted a credit line named Revolving Credit Facility, with maturity on December 23, 2008. We are currently using the totality of this operation, in the amount of US$300,000 thousand.
The funds raised in 2006 were used in working capital, increasing the companys liquidity.
13. DEBENTURES
First issuance
The first issuance was redeemed in the totality of debentures, representing a total of fifty-four thousand (54,000) debentures on October 4,2004.
Second issuance
As approved at the Board of Directors Meeting held on October 21 and ratified on December 5, 2003, the Company issued, on December 1, 2003, 40,000 registered, non-convertible debentures, unsecured and without preference in one single tranche, for the unit face value of R$10. The referred debentures were issued for the total amount of R$400,000, whereas the credits generated in the negotiations with the financial institutions were received on December 9 and 10, 2003, amounting to R$401,805. The difference of R$1,805, resulting from the unit price variation between the date of issue and of the effective negotiation is recorded under Shareholders Equity as Capital Reserve, subsequently used in the stock buyback program.
The debentures of this issuance were redeemed on December 1, 2006 and compensation interest applied to the face value balance of these debentures represents 107% of the CDI Cetip, as provided for in the Deed.
Third issuance
As approved at the Board of Directors Meeting held on December 11 and ratified on December 18, 2003, the Company issued, on December 1, 2003, 50,000 registered and non-convertible debentures, unsecured and without preference in two tranches, for the unit face value of R$10. Such debentures were issued for the total value of issue of R$500,000. The credits from the
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negotiations with the financial institutions were received on December 22 and 23, 2003, amounting to R$505,029. The difference of R$5,029, resulting from the variation of the unit price between the date of issue and of the effective negotiation was recorded in Shareholders Equity as Capital Reserve, subsequently used in the stock buyback program.
The 1st tranche debentures of this issue were redeemed on December 01,2006, as provided for by deed and compensation interest corresponding to 106.5% of Cetips CDI incurred on such debentures until the redemption date.
The face value of the 2nd tranche of this issue is adjusted by the IGP-M plus compensation interest of 10% p.a.. and its maturity is scheduled for December 1, 2008.
Fourth issuance
As approved at the Board of Directors Meeting held on December 20, 2005 and ratified on April 24, 2006, the Company issued, on February 1, 2006, 60,000 non-convertible and unsecured debentures, in one single tranche, in the unit face value of R$10. Such debentures were issued in the total issuance value of R$600,000. The credits from the negotiations with the financial institutions were received on May 3, 2006 amounting to R$623,248. The difference of R$23,248, resulting from the variation of the unit price between the issuance date and the effective negotiation was recorded in Shareholders Equity as Capital Reserve and subsequently used in the stock buyback program.
Compensation interest is applied to the face value balance of these debentures, representing 103.6% of the Cetips CDI, and the maturity of the face value is scheduled for February 1, 2012, without early redemption option.
The deeds for these issues contain certain restrictive covenants, which have been duly complied with.
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14. DERIVATIVES AND FINANCIAL INSTRUMENTS
General considerations
The Companys business includes mainly the production of flat steel to supply the domestic and foreign markets and mining of iron ore, limestone, dolomite and tin to supply the Presidente Vargas Steelworks needs. To finance its activities, the Company often resorts to the capital market, local as well as international, and, due to the debt profile it seeks, most of the Companys debt is pegged to the dollar. On December 31, 2006, the consolidated position of the outstanding derivative agreements is as follows:
Agreement | Market Value | |||||||
Maturity | Reference Value | Book Value | ||||||
Variable income swap (*) | Jul 27/2007 |
US$49,223 thousand |
R$490,003 | R$490,003 | ||||
Gains and losses are | ||||||||
Interest derivatives listed on BM&F | R$1,730,000 | daily settled, according | ||||||
(DI) - contracted by exclusive funds | thousand |
R$376 | to variations in the | |||||
Jan/2008 |
market contract value | |||||||
Jan | US$1,453,428 | |||||||
2/2007 | thousand | (R$207,621) | (R$207,621) | |||||
Exchange swaps registered with | Apr | US$50,000 | ||||||
CETIP (contracted by exclusive | 2/2007 |
thousand | (R$2,258) | (R$2,258) | ||||
funds) | US$150,000 | |||||||
Jul 2/2007 |
thousand | (R$6,825) |
(R$6,825) |
(*) The non-cash swap establishes that the counterparty undertakes to pay, at the end of the contract, the variation of variable income assets, as long as the Companys subsidiary, CSN Steel, undertakes to pay the same reference value adjusted at the fixed rate of 7.5% per annum. This amount is shown in the Marketable Securities account under current assets.
The main market risk factors that can affect the Companys business are listed below, as well as a more detailed explanation about the derivatives associated with them:
I - Exchange risk
Although most of the Companys revenues are denominated in Brazilian reais as of December 31, 2006, R$7,654,471 or 81% of the Companys consolidated loans and financing (except for derivates) were denominated in foreign currency (R$6,962,797 or 79% in 2005). As a result, the Company is subject to fluctuations in exchange and interest rates and manages the risk of the fluctuations in the amounts in Brazilian reais that will be necessary to pay the obligations in foreign currency, using several financial instruments, including dollar investments and derivatives, mainly futures contracts, swaps contracts, currency contracts and option exchange contracts.
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a) Consolidated balance sheet classified by currency
2006 | ||||||||
U.S. Dollar | Other Foreign Currencies |
Reais | Total | |||||
Current Assets | 2,449,237 | 344,403 | 5,134,122 | 7,927,762 | ||||
Cash and Cash equivalents | 58,637 | 245 | 108,406 | 167,288 | ||||
Financial investments | 1,118,170 | 253,546 | 1,084,097 | 2,455,813 | ||||
Customers, net of provisions for doubtful | ||||||||
accounts | 624,650 | 181 | 667,460 | 1,292,291 | ||||
Inventories | 465,793 | 1,969,488 | 2,435,281 | |||||
Insurance Claimed | 447,107 | 447,107 | ||||||
Deferred Income Tax/Social Contribution | 33,204 | 396,426 | 429,630 | |||||
Other | 148,783 | 90,431 | 461,138 | 700,352 | ||||
Non-current Assets | 452,646 | 678,154 | 15,969,739 | 17,100,539 | ||||
Long-term Assets | 131,352 | 1,795,964 | 1,927,316 | |||||
Financial Investments | 53,450 | 89,673 | 143,123 | |||||
Deferred Income Tax/Social Contribution | 556,160 | 556,160 | ||||||
Other |
77,902 | 1,150,131 | 1,228,033 | |||||
Investments, Property, Plant and Equipment | ||||||||
and Deferred Assets | 321,294 | 678,154 | 14,173,775 | 15,173,223 | ||||
Total Assets | 2,901,883 | 1,022,557 | 21,103,861 | 25,028,301 | ||||
Current Liabilities | 1,957,883 | 33,022 | 2,326,875 | 4,317,780 | ||||
Loans, Financing and Debentures | 677,159 | 2,047 | 401,281 | 1,080,487 | ||||
Suppliers | 1,183,562 | 29,723 | 355,046 | 1,568,331 | ||||
Other | 97,162 | 1,252 | 1,570,548 | 1,668,962 | ||||
Non-current Liabilities | 6,977,427 | 7,608,950 | 14,586,377 | |||||
Loans, Financing and Debentures | 6,977,312 | 1,367,505 | 8,344,817 | |||||
Contingent Liabilities- Net of Deposits | 59 | 3,747,947 | 3,748,006 | |||||
Deferred Income Tax/Social Contribution | 2,023,572 | 2,023,572 | ||||||
Other | 56 | 469,926 | 469,982 | |||||
Shareholders Equity | (62,177) | 6,186,321 | 6,124,144 | |||||
Total Liabilities and Shareholders Equity | 8,873,133 | 33,022 | 16,122,146 | 25,028,301 | ||||
II - Credit risk
The credit risk exposure with financial instruments is managed through restrictions of counterpart to large financial institutions with high quality of credit. Thus, Management believes that the risk of non-compliance by the counterpart is insignificant. The Company neither maintains nor issues financial instruments for commercial purposes. The selection of customers, as well as the diversification of its accounts receivable and the control on sales financing conditions through business segment are procedures adopted by CSN to minimize occasional problems with its customers. Since part of the Companies funds are invested in Brazilian government securities, there is exposure to the credit risk with the government.
III - Fair value
The fair values were calculated according to the conditions in the local and foreign markets as of December 31, 2006, for financial transactions with identical features, such as: volume and term of the transaction and maturity dates. All transactions carried out in non-organized
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markets (over-the-counter markets) were made with financial institutions previously approved by the Companys Board of Directors.
15. COLLATERAL SIGNATURE AND GUARANTEES
With respect to its wholly owned and jointly-owned subsidiaries, the Company has expressed in their original currency - the following responsibilities, in the amount of R$5,570 million, for guarantees provided:
In millions | ||||||||||
Companies | Maturity | Conditions | ||||||||
Currency | 2006 | 2005 | ||||||||
CFN | R$ | 18.0 | 18.0 | 9/24/2007 | BNDES loan guarantees | |||||
CFN | R$ | 23.0 | 23.0 | 4/5/2007 | BNDES loan guarantees | |||||
CFN | R$ | 24.0 | 24.0 | 11/13/2009 | BNDES loan guarantees | |||||
CFN | R$ | 20.0 | 20.0 | 2/21/2008 | BNDES loan guarantees | |||||
CFN | R$ | 19.2 | 19.2 | 4/3/2007 | BNDES loan guarantees | |||||
CFN | R$ | 50.0 | 50.0 | 11/29/2007 | BNDES loan guarantees | |||||
CFN | R$ | 13.0 | 11/15/2015 | BNDES loan guarantees | ||||||
CFN | R$ | 20.0 | 11/15/2020 | BNDES loan guarantees | ||||||
CSN Cimentos | R$ | 29.0 | 27.0 | Indeterminate | Guarantee for execution of outstanding debt with INSS | |||||
CSN Cimentos | R$ | 0.3 | 0.3 | Indeterminate | Collateral signature in guarantee contract for tax | |||||
foreclosure | ||||||||||
INAL | R$ | 2.8 | 2.8 | Indeterminate | Collateral signature in guarantee contract for tax | |||||
foreclosure | ||||||||||
INAL | R$ | 6.1 | 6.1 | Indeterminate | Collateral signature in guarantee contract for tax | |||||
foreclosure | ||||||||||
INAL | R$ | 0.3 | Indeterminate | Collateral signature in guarantee contract for tax | ||||||
foreclosure | ||||||||||
INAL | R$ | 0.1 | Indeterminate | Collateral signature in guarantee contract for tax | ||||||
foreclosure | ||||||||||
Sepetiba Tecon | R$ | 15.0 | 5/5/2011 | Guarantee by CSN for issuance of Export Credit Note | ||||||
Total in R | 240.8 | 190.4 | ||||||||
CSN Iron | US$ | 79.3 | 79.3 | 6/1/2007 | Promissory note of Eurobond operation | |||||
CSN Islands VII | US$ | 275.0 | 275.0 | 9/12/2008 | Guarantee by CSN in Bond issuance | |||||
CSN Islands VIII | US$ | 550.0 | 550.0 | 12/16/2013 | Guarantee by CSN in Bond issuance | |||||
CSN Islands IX | US$ | 400.0 | 450.0 | 1/15/2015 | Guarantee by CSN in Bond issuance | |||||
CSN Islands X | US$ | 750.0 | 750.0 | Perpetual | Guarantee by CSN in Bond issuance | |||||
Guarantee by CSN in withdrawal of Revolving Credit | ||||||||||
CSN Steel | US$ | 300.0 | 12/23/2008 | Facility | ||||||
CSN Steel | US$ | 100.0 | 12/22/2011 | Guarantee by CSN in issue of Import Note | ||||||
CSN Steel | US$ | 20.0 | 20.0 | 10/29/2009 | Guarantee by CSN in issue of Promissory Notes | |||||
INAL | US$ | 1.4 | 1.4 | 3/26/2008 | Personal guarantee for equipment financing | |||||
Sepetiba Tecon | US$ | 16.7 | 16.7 | 9/15/2012 | Personal guarantee for equipment acquisition and | |||||
terminal implementation | ||||||||||
Sepetiba Tecon | US$ | 0.4 | 2/21/2007 | Guarantee by CSN for issuance of Import Letter of | ||||||
Credit | ||||||||||
Total in US | 2,492.8 | 2,142.4 | ||||||||
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16. CONTINGENT LIABILITIES AND JUDICIAL DEPOSITS
The Company is currently party to several administrative and court proceedings involving a large number of actions, claims and complaints. Details of the amounts provided and their respective judicial deposits related to those claims are shown below:
2006 | 2005 | |||||||||||
Judicial | Contingent | Net | Judicial | Contingent | Net | |||||||
Deposits | Liabilities | Contingencies | Deposits | Liabilities | Contingencies | |||||||
Short term | ||||||||||||
Contingencies: | ||||||||||||
Labor | (22,080) | 37,487 | 15,407 | (17,618) | 27,170 | 9,552 | ||||||
Civil | (10,859) | 16,097 | 5,238 | (9,544) | 13,281 | 3,737 | ||||||
Parent Company | (32,939) | 53,584 | 20,645 | (27,162) | 40,451 | 13,289 | ||||||
Consolidated | (32,939) | 54,810 | 21,871 | (42,267) | 61,032 | 18,765 | ||||||
Long-term | ||||||||||||
Contingencies: | ||||||||||||
Environmental | (138) | 52,670 | 52,532 | (138) | 24,062 | 23,924 | ||||||
Tax | (1,149) | 1,381 | 232 | 558 | 558 | |||||||
(1,287) | 54,051 | 52,764 | (138) | 24,620 | 24,482 | |||||||
Legal liabilities questioned in court: | ||||||||||||
Tax | ||||||||||||
IPI premium credit | 1,445,537 | 1,445,537 | 818,242 | 818,242 | ||||||||
IPI presumed credit | 942,964 | 942,964 | 708,633 | 708,633 | ||||||||
CSL credit over exports | 787,500 | 787,500 | 547,766 | 547,766 | ||||||||
PIS / COFINS Law 9,718/99 | 317,947 | 317,947 | 292,363 | 292,363 | ||||||||
SAT | (27,219) | 95,234 | 68,015 | (23,245) | 76,699 | 53,454 | ||||||
Education Allowance | (33,121) | 33,121 | (33,121) | 33,121 | ||||||||
CIDE | (23,895) | 23,895 | (22,786) | 22,786 | ||||||||
Income tax Plano Verão | (20,892) | 20,892 | (60,573) | 60,573 | ||||||||
CPMF | 370,616 | 370,616 | ||||||||||
Income tax / full tax losses | ||||||||||||
carryforward | 193,218 | 193,218 | ||||||||||
Other liabilities | (2,213) | 51,972 | 49,759 | (3,158) | 44,317 | 41,159 | ||||||
(107,340) | 3,719,062 | 3,611,722 | (142,883) | 3,168,334 | 3,025,451 | |||||||
Parent Company | (108,627) | 3,773,113 | 3,664,486 | (143,021) | 3,192,954 | 3,049,933 | ||||||
Consolidated | (134,372) | 3,877,086 | 3,742,714 | (159,585) | 3,250,526 | 3,090,941 | ||||||
Total short term + long term | ||||||||||||
Parent Company | (141,566) | 3,826,697 | 3,685,131 | (170,183) | 3,233,405 | 3,063,222 | ||||||
Total short term + long term- | ||||||||||||
Consolidated | (167,311) | 3,931,896 | 3,764,585 | (201,852) | 3,311,558 | 3,109,706 | ||||||
The provision for contingencies estimated by the Companys Management was substantially based on the appraisal of tax and legal advisors. Such provision is only recorded for lawsuits classified as probable losses. Additionally, it includes tax liabilities due to actions from the Companys initiative, with appliance of Selics interest rates.
The Company is defending itself in other judicial and administrative proceedings (labor, civil, tax and environmental) in the approximate amount of R$3 billion. According to the Companys legal counsel, there is a possible risk of losing these lawsuits, and therefore they were not provided for in accordance with accounting practices followed in Brazil.
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a) Labor Litigation:
Until December 31, 2006, CSN was defendant in 8,196 labor claims (7,232 claims in 2005), which required a provision in the amount of R$37,487 (R$27,170 in 2005). Most of the lawsuits are related to joint and/or subsidiary responsibility, wages equalization, additional payment for unhealthy and hazardous activities, overtime and differences related to the 40% fine over FGTS (severance pay), and due to governments economic policies.
b) Civil Actions:
These are, mainly, claims for indemnities among the civil judicial processes in which the Company is involved. Such proceedings, in general, are originated from occupational accidents and diseases related to industrial activities of the Company. For all these disputes, the Company accrued the amount of R$16,097 on December 31, 2006 (R$13,281 in 2005).
c) Environmental Actions:
On December 31, 2006, the Company recorded a provision of R$52,670 (R$24,062 in 2005) for investment in environmental recovery expenditures, mainly related to the Companys plants in the States of Minas Gerais and Santa Catarina.
d) Tax Litigation:
Income Tax and Social Contribution
(i) The Company claims recognition of the financial and tax effects on the calculation of the income tax and social contribution on net income, related to Consumer Price Index IPC understated inflation, which occurred in January and February 1989, by a percentage of 51.87% (Plano Verão).
In 2004, the proceeding was concluded and judgment was made final and unappealable, granting to CSN the right to apply the index of 42.72% (Jan/89), of which the 12.15% already applied should be deducted. The application of 10.14% (Feb/89) was granted. The proceeding is now under accounting inspection.
On December 31, 2006, the Company recorded R$326,313 (R$361,928 in 2005) as judicial deposit and a provision of R$20,892 (R$60,573 in 2005), which represents the portion not recognized by the courts.
(ii) In February 2003, the Company was charged by tax authorities related to the calculation of IRPJ and CSL of previous years in view of the fact that had tax losses carryforward above the 30% limit of taxable income, as provided for by laws.
On August 21, 2003, a decision was rendered by the second panel of the Judgment Federal Revenue Office in Rio de Janeiro related to the decision which made said tax deficiency notice null and void and a new Tax Deficiency Notice was issued about same matter in November 2003. The Company challenged such new Tax Deficiency Notice, which was rejected in administrative lower courts. An administrative appeal was brought against such decision, which was accepted in administrative appellate court on April 26, 2006, so that said Tax Deficiency Notice had favorable decision to CSN, on an irrevocable basis, and respective decision was
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published in November 2006. On December 31,2005, the balance of such provision was R$193,218.
(iii) The Company filed an action questioning the assessment of Social Contribution on Income on export revenues, based on Constitutional Amendment #33/01 and in March 2004 the Company obtained an initial decision authorizing the exclusion of these revenues from said calculation basis, as well as the offsetting of amounts paid as from 2001. The lower court decision was favorable and the proceeding is waiting for trial of the appeal filed by the Federal Government in the Regional Federal Court. On December 31, 2006, the amount of suspended liability and the offset credits based on the referred proceedings was R$787,500 (R$547,766 in 2005), plus Selic (Central Bank overnight rate).
PIS/COFINS Law 9,718/99
CSN is questioning the legality of Law 9,718/99, which increases the PIS and COFINS calculation bases, including the financial revenue of the Company. On December 31, 2006, provision amounts to R$317,947 (R$292,363 in 2005), which includes legal charges.
In February 1999, the Company obtained a favorable decision in the lower court. However, the 2nd Regional Federal Court reversed the favorable decision. Later on, the Company appealed against this decision in the Supreme Court of Justice and is currently awaiting trial.
CPMF
The Company was questioned the enforceability of CPMF, since the amendment to Constitution 21/99 was enacted. On May 31, 2006 unfavorable decision to the Company was published and said proceeding was closed on June 30, 2006 when the Company settled the obligation related to said tax.
CIDE Intervention Contribution in the Economic Domain
CSN disputes the legal validity of Law 10,168/00, which established the collection of the intervention contribution in the economic domain on the amounts paid, credited or remitted to non-resident beneficiaries, as royalties or remuneration of supply contracts, technical assistance, trademark license agreement and exploration of patents.
The Company recorded court deposits and its corresponding provision in the amount of R$23,985 on December 31, 2006 (R$22,786 in 2005), which include legal charges.
The lower court decision was unfavorable and the proceeding is currently under judgment at the 2nd Regional Federal Court.
Education Allowance
The Company discussed the unconstitutionality of the Education Allowance and the possible recovery of the amounts paid in the period from January 5, 1989 to October 16, 1996. The lawsuit was judged unfounded, and the Federal Regional Court maintained its unfavorable decision, judgment made final and unappealable.
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In view of this fact, the Company attempted to pay the amount due, and FNDE and INSS did not reach an agreement as to whom the amounts should be paid. A fine was also demanded, but CSN did not agree.
The Company filed new proceedings to question the above-mentioned facts and deposited in court the amounts due. In the first lawsuit, the 1st level sentence was partially in favor of CSN, with the fine being disregarded but not the SELIC rate. We presented counter-arguments to the defendants appeal and appealed in relation to the SELIC rate. No judgment has been made regarding the other lawsuits.
The provision on December 31, 2006 amounts to R$33,121 (R$33,121 in 2005).
SAT - Workers Compensation Insurance
The Company understands that it must pay the SAT at the rate of 1% in all of its establishments, and not 3%, as determined by the current legislation. The amount provided as of December 31, 2006 totals R$95,234 (R$76,699 in 2005), which includes legal charges.
The lower court decision was unfavorable and the proceeding is under judgment of the 2nd Region of the Federal Regional Court. Given the new understanding adopted by the Courts, the Companys lawyers deem as probable the possibility of loss.
IPI premium credit over exports
The Company brought an action claiming the right to the IPI premium credit on exports from 1992 to 2002 and in March 2003 a favorable decision was obtained authorizing the use of said credits. The Regional Federal Court 2nd Region reversed the favorable decision for CSN.
CSN filed a special appeal to the Superior Court of Justice (STJ) and an extraordinary appeal to the Federal Supreme Court (STF), which have not yet been judged.
On December 31, 2006, the provision referring to the total of credits already offset and kept in the Companys liabilities amounted to R$1,445,537 (R$818,242 in 2005), adjusted by the Selic rate.
IPI (Excise Tax) presumed credit on inputs
The Company brought an action pleading the right to the IPI presumed credit on the acquisition of exempted, immune, non-taxed inputs, or taxed at zero rate and in May 2003 an initial decision was obtained authorizing the use of said credits. This action is currently waiting for the sentence in lower court.
On December 31, 2006, the provision related to the total credits already offset and recorded under the Companys liabilities amounted to R$942,964 (R$708,633 in 2005), adjusted by the Selic rate.
Other
The Company also made provision for several other lawsuits in respect of FGTS LC 110, COFINS Law 10,833/03, PIS Law 10,637/02 and PIS/COFINS Manaus Free-Trade Zone, in the amount of R$53,353 on December 31, 2006 (R$44,875 in 2005), which includes legal charges.
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17. SHAREHOLDERS EQUITY
i. Paid-in capital stock
On July 7, 2005, at an Extraordinary Annual Meeting, CSN approved the cancellation of 14,849,099 shares held in treasury, with no reduction in the capital stock. The Companys fully subscribed and paid-in capital stock of R$1,680,947 was then divided into 272,067,946 common book-entry shares, with no par value. Each share is entitled to one vote in the resolutions of the General Meeting.
ii. Authorized capital stock
The Companys capital stock may be increased up to 400,000,000 shares, by issuing up to 127,932,054 new no-par book-entry shares, by decision of the Board of Directors.
iii. Revaluation reserve
This reserve covers revaluations of the Companys fixed assets, which aimed, pursuant to CVM Deliberation 288, dated December 3,1998, to adjust the amounts of the Companys fixed assets to the market value, enabling the Financial Statements to reflect assets value closer to their market or replacement value.
Pursuant to the provisions of CVM Deliberation 273, as of August 20, 1998, a provision for deferred social contribution and income tax was set up based on the balance of the revaluation reserve (except land), which is classified as long-term liability.
The realized portion of the revaluation reserve, by means of depreciation or assets written-off, net of income tax and social contribution, is included for purposes of calculating the mandatory minimum dividend.
iv. Treasury shares
The Board of Directors approved on May 25, 2005 for a period of 360 days the purchase of 15,000,000 shares of the Company to be held in treasury and subsequent sale and/or cancellation. Such authorization for repurchase finished on May 26, 2006, and treasury shares position on December 31,2006 was as follows:
Market value of shares on 12/31/2006 (*) | ||||||||||
Number of | Total value | Unit cost of shares | ||||||||
shares purchased | paid for | |||||||||
(in units) | shares | |||||||||
Minimum | Maximum | Average | ||||||||
14,654,500 | 676,721 | 35.88 | 56.58 | 46.18 | 953,715 |
(*) Average price of shares on 12/31/06 at the unit value of R$65.08 per share.
While held in treasury, the shares will have no proprietorship and/or political rights.
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v. Ownership structure
On December 31, 2006, the Companys capital was comprised as follows:
Number of shares | ||||||
Total % of | Outstanding | |||||
Common | shares | Shares % | ||||
Vicunha Siderurgia S.A. | 116,286,665 | 42.74% | 45.18% | |||
BNDESPAR | 17,085,986 | 6.28% | 6.64% | |||
Caixa Beneficente dos Empregados da CSN - CBS | 11,831,289 | 4.35% | 4.60% | |||
Sundry (ADR - NYSE) | 51,308,096 | 18.86% | 19.93% | |||
Other shareholders (approximately 10 thousand) | 60,901,410 | 22.38% | 23.65% | |||
Outstanding shares | 257,413,446 | 94.61% | 100.00% | |||
Treasury shares | 14,654,500 | 5.39% | ||||
Total shares | 272,067,946 | 100.00% |
vi. Investment policy and payment of interest on own capital and dividends
On December 11, 2000, CSNs Board of Directors decided to adopt a policy of profit distribution, which, by observing the provisions of Law 6,404/76, altered by Law 9,457/97 implies the distribution of all the Companys net profit to the shareholders, as long as the following priorities are preserved irrespective of their order: (i) corporate strategy, (ii) compliance with obligations, (iii) making the necessary investments and (iv) maintenance of a good financial situation of the Company.
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18. DIVIDENDS AND INTEREST ON OWN CAPITAL
The Companys Bylaws ensures an annual minimum dividend corresponding to 25% of net income determined as per corporate law. Nevertheless, Management is proposing to distribute amount higher than that ensured, by law as follows:
2006 | ||
Net income for the year | 1,169,366 | |
Realization of revaluation reserve (net of income tax and social contribution) | 280,508 | |
Realization of capital reserve | 23,248 | |
Interest on own capital lapsed | 140 | |
Setting up of reserve for investment | (40,000) | |
Basic net income to determine dividend | 1,433,262 | |
Profits distribution: | ||
Additional Information | ||
Mandatory minimum dividends | 358,316 | |
Proposed dividends higher than the mandatory minimum dividend | 1,074,946 | |
1,433,262 | ||
Proposed allocation: | ||
- Prepaid dividends | 748,000 | |
- Proposed dividends | 510,834 | |
- Proposed interest on own capital | 174,428 | |
Proposed dividends and interest on own capital | 1,433,262 | |
i) PREPAID DIVIDENDS
On June 23, 2006 and August 3,2006, the Companys Board of Directors approved, pursuant to article 31 of its Bylaws and article 204 and paragraphs 1 and 2, of Law 6404/76, the payment of dividends as prepaid dividends, in the amount of R$415,000 and R$333,000 corresponding to R$1.61219 and R$ 1.293638, respectively, per share outstanding on the date of approval of the payment.
ii) INTEREST ON OWN CAPITAL
The calculation of interest on own capital is based on the change in the Long-Term Interest Rates over shareholders equity, limited to 50% of the income for the year before income tax or 50% of accumulated profits and profit reserves, and the higher between two limits may be used, pursuant to the prevailing laws.
In compliance with CVM Deliberation 207, as of December 31, 1996 and fiscal rules, the Company opted to record the interest on own capital the amount of R$174,428 in 2006, corresponding to the remuneration of R$0.67762 per share, in counter entry of the financial expenses account, and revert it on the same account, not been shown on the income statement and not generating effects on net income after IRPJ/CSL, except as to the fiscal effects, these recognized under income tax and social contribution. The Companys management shall propose that the amount of interest on own capital be attributed to the mandatory minimum dividend.
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19. NET REVENUES AND COST OF GOODS SOLD
Consolidated | ||||||||||||
2006 | 2005 | |||||||||||
Tons | Cost of | Tons | ||||||||||
(thousand) | Net revenue | Goods | (thousand) | Net revenue | Cost of | |||||||
Unaudited | Sold | Unaudited | Goods Sold | |||||||||
Steel products | ||||||||||||
Domestic market | 2,818 | 5,217,001 | (3,134,769) | 2,875 | 5,822,785 | (2,425,575) | ||||||
Foreign market | 1,567 | 2,548,602 | (2,104,191) | 1,989 | 3,067,065 | (2,327,893) | ||||||
4,385 | 7,765,603 | (5,238,960) | 4,864 | 8,889,850 | (4,753,468) | |||||||
Other sales | ||||||||||||
Domestic market | 1,182,851 | (736,008) | 1,062,873 | (701,637) | ||||||||
Foreign market | 91,915 | (13,817) | 84,864 | (13,158) | ||||||||
1,274,766 | (749,825) | 1,147,737 | (714,795) | |||||||||
4,385 | 9,040,369 | (5,988,785) | 4,864 | 10,037,587 | (5,468,263) | |||||||
Parent Company | ||||||||||||
2006 | 2005 | |||||||||||
Tons | Cost of | Tons | ||||||||||
(thousand) | Net revenue | Goods | (thousand) | Net revenue | Cost of | |||||||
Unaudited | Sold | Unaudited | Goods Sold | |||||||||
Steel products | ||||||||||||
Domestic market | 2,838 | 4,886,695 | (3,156,823) | 2,939 | 5,632,356 | (2,630,265) | ||||||
Foreign market | 1,302 | 1,703,216 | (1,405,099) | 1,647 | 2,078,460 | (1,552,832) | ||||||
4,140 | 6,589,911 | (4,561,922) | 4,586 | 7,710,816 | (4,183,097) | |||||||
Other sales | ||||||||||||
Domestic market | 380,131 | (205,141) | 441,308 | (252,670) | ||||||||
Foreign market | 19,217 | (13,817) | 21,853 | (13,158) | ||||||||
399,348 | (218,958) | 463,161 | (265,828) | |||||||||
4,140 | 6,989,259 | (4,780,880) | 4,586 | 8,173,977 | (4,448,925) | |||||||
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20. FINANCIAL RESULTS AND MONETARY AND FOREIGN EXCHANGE VARIATIONS, NET
Consolidated | Parent Company | |||||||
2006 | 2005 | 2006 | 2005 | |||||
Financial expenses: | ||||||||
Loans and financing - foreign currency | (633,648) | (790,334) | (37,893) | (237,298) | ||||
Loans and financing - domestic currency | (230,771) | (173,756) | (205,081) | (167,853) | ||||
Related parties | (434,076) | (278,506) | ||||||
PIS/COFINS (taxes on revenue) on financial income | (96,326) | (33,698) | (96,326) | (33,058) | ||||
Interest, fines and interest on tax in arrears | (251,473) | (119,704) | (241,454) | (110,898) | ||||
Other financial expenses | (144,612) | (240,021) | 8,141 | (103,258) | ||||
(1,356,830) | (1,357,513) | (1,006,689) | (930,871) | |||||
Financial income: | ||||||||
Related parties | 15,025 | |||||||
Income on financial investments, net of provision for losses | 202,855 | 346,473 | 71,490 | 147,577 | ||||
Gains (losses) on derivatives | (265,454) | (60,017) | (634,187) | (555,423) | ||||
Other income | 48,197 | 177,403 | 19,966 | 104,672 | ||||
(14,402) | 463,859 | (527,706) | (303,174) | |||||
Net financial results | (1,371,232) | (893,654) | (1,534,395) | (1,234,045) | ||||
Monetary variations: | ||||||||
- Assets | 20,396 | 2,757 | 18,046 | 1,485 | ||||
- Liabilities | (82,240) | (19,045) | (71,920) | (14,773) | ||||
(61,844) | (16,288) | (53,874) | (13,288) | |||||
Exchange variations: | ||||||||
- Assets | (307,501) | (309,135) | (108,064) | (100,450) | ||||
- Liabilities | 841,052 | 457,903 | 869,860 | 1,037,268 | ||||
533,551 | 148,768 | 761,796 | 936,818 | |||||
Net monetary and exchange variations | 471,707 | 132,480 | 707,922 | 923,530 | ||||
21. OTHER OPERATING EXPENSES / REVENUES
Consolidated | Parent Company | |||||||
2006 | 2005 | 2006 | 2005 | |||||
Other Operating Expenses | (349,737) | (27,110) | (314,067) | (10,984) | ||||
Provision for Actuarial Liabilities | (111,832) | (69,628) | (111,832) | (69,628) | ||||
Provision for Contingencies | (68,905) | 165,099 | (51,673) | 116,141 | ||||
Contractual Fines | (33,026) | (49,243) | ||||||
Equipment Stoppage | (26,865) | (26,854) | ||||||
Other | (109,109) | (122,581) | (74,465) | (57,497) | ||||
Other Operating Revenues | 805,945 | 55,836 | 764,007 | 28,711 | ||||
Difference in the Settlement of Loss | 729,916 | 729,911 | ||||||
Indemnifications | 7,862 | 7,772 | ||||||
Other Revenues | 76,029 | 47,974 | 34,096 | 20,939 | ||||
OTHER OPERATING EXPENSES / | ||||||||
REVENUES | 456,208 | 28,726 | 449,940 | 17,727 | ||||
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22. LOSS AF-III
On January 22, 2006 an accident involving equipment adjacent to Blast Furnace #3 took place, mainly affecting the powder collecting system and interrupted the equipment production until the end of the first semiannual period. The Company has an insurance policy for loss of profits and equipment in the maximum amount of US$750 million, which the Management deems as sufficient to recover any losses derived from the accident. The cause of the accident had its coverage by the policy expressly recognized by the insurance companies, and the work to calculate the losses is under the final phase.
The amount of losses subject to indemnification shown by regulating bodies up to the closing date of the Financial Statements is US$445 million or R$951 million, translated by the exchange rate as of December 31, 2006. Based on insurance policy and confident as to the conclusion of studies about the loss, CSN requested and the insurance companies granted an advance of US$237 million (equivalent to R$515 million received until January 2007, of which R$476 million was received up to December 31, 2006) as advance such amount will be deducted from losses subject to indemnification, verified during the normal course of regulation process.
Based on reports issued by independent consultants and in the confirmation of insurance coverage on the part of insurance companies, the Company recorded, on a conservative basis, on account of minimum estimate of loss of profits indemnification up to December 31, 2006, the amount of R$730 million as Other operating revenues and R$19 million as Non-operating income corresponding to the income in the write-off of damaged assets (net book value of R$174 million).
On December 31, 2006 the Company maintained balance receivable from losses claimed in the amount of R$447 million. The Company does not identify any risk in such credit, taking into account the international reputation and prestige of insurance and reinsurance companies.
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23. STATEMENT OF VALUE ADDED
Consolidated | Parent Company | |||||||
2006 | 2005 | 2006 | 2005 | |||||
Revenues | ||||||||
Sales of products and services (except for refunds and | ||||||||
discounts) | 11,117,842 | 12,182,539 | 8,653,355 | 10,080,163 | ||||
Allowance for doubtful accounts |
1,080 | (3,662) | 1,316 | (4,144) | ||||
Nonoperating income | 19,066 | (7,372) | 17,887 | (6,292) | ||||
11,137,988 | 12,171,505 | 8,672,558 | 10,069,727 | |||||
Input purchased from third parties | ||||||||
Raw material used up | (3,999,490) | (3,847,299) | (2,483,070) | (2,241,084) | ||||
Cost of goods and services sold (except for depreciation) | (508,799) | (223,867) | (1,129,890) | (1,024,636) | ||||
Materials, energy, outsourced services and other | (888,537) | (666,551) | (641,505) | (323,720) | ||||
Assets recovery | 729,916 | 4,653 | 729,916 | 4,653 | ||||
(4,666,910) | (4,733,064) | (3,524,549) | (3,584,787) | |||||
Gross value-added | 6,471,078 | 7,438,441 | 5,148,009 | 6,484,940 | ||||
Retentions | ||||||||
Depreciation, amortization and depletion | (961,393) | (924,094) | (798,473) | (783,353) | ||||
Net produced value-added | 5,509,685 | 6,514,347 | 4,349,536 | 5,701,587 | ||||
Value-added received (transferred) | ||||||||
Equity in the earnings of subsidiaries | (87,509) | (55,170) | 164,383 | (374,689) | ||||
Financial income/Exchange variations (gains) | (307,916) | 160,835 | (617,725) | (402,138) | ||||
(395,425) | 105,665 | (453,342) | (776,827) | |||||
Total value-added to distribute | 5,114,260 | 6,620,012 | 3,896,194 | 4,924,760 | ||||
VALUE-ADDED DISTRIBUTION | ||||||||
Payroll and related charges | 674,353 | 612,776 | 457,920 | 485,315 | ||||
Taxes, fees and contributions | 2,807,183 | 3,133,833 | 2,190,565 | 2,687,514 | ||||
Interest and exchange variation | 465,199 | 868,121 | 78,343 | (126,827) | ||||
Interest on own capital and dividends | 1,129,366 | 1,324,087 | 1,129,366 | 1,324,087 | ||||
Retained earnings in the period | 40,000 | 554,671 | 40,000 | 554,671 | ||||
Unrealized profit in the period | (1,841) | 126,524 | ||||||
5,114,260 | 6,620,012 | 3,896,194 | 4,924,760 | |||||
24. EMPLOYEES PENSION FUND
(i) Private Pension Administration
The Company is the principal sponsor of CBS Previdência, a private non-profit pension fund established in July 1960, main purpose of which is to pay supplementary benefits to those of the official Pension Plan. CBS Previdência congregates CSN employees, of CSN related companies and the entity itself, provided they sign the adherence agreement.
(ii) Description of characteristics of the plans
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CBS Previdência has three benefit plans, as follows:
35% of average salary plan
It is a defined benefit plan (BD), which began on February 1, 1966, for the purpose of paying retirements (related to length of service, special, disability or old age) on a life-long basis, equivalent to 35% of the participants salaries for the 12 last salaries. The plan also guarantees the payment of sickness assistance to the licensed by the Official Pension Plan and it also guarantees the payment of funeral grant and pension. The participants (active and retired) and the sponsors make thirteen contributions per year, being the same number of benefits paid. This plan became inactive on October 31, 1977, when the new benefit plan began, and it is in process of extinction.
Supplementary average salary plan
It is a defined benefit plan (BD), which began on November 1, 1977. The purpose of this plan is to complement the difference between the 12 last average salaries and the Official Pension Plan (Previdência Oficial) benefit, to the retired, and also on a life-long basis. As with the 35% Average Salary Plan, there is sickness assistance, funeral grant and pension coverage. Thirteen contributions and payment of benefits are made per year. This plan became inactive on December 26, 1995, because of the combined supplementary benefits plan creation.
Combined supplementary benefit plan
Begun on December 27, 1995, it is a combined plan, being a Variable Contribution (CV). Besides the programmed pension benefit, there is the payment of risk benefits (pension in activity, disability and sickness benefit). In this plan, the retirement benefit is calculated based on the sponsor and participants contributions, totaling thirteen per year. Upon retirement of the participant, the plan becomes a defined benefit plan and thirteen benefits are paid per year.
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On December 31, 2006 and 2005, the plans are as follows (unaudited):
2006 | 2005 | |||
Members | 20,060 | 18,933 | ||
In service | 9,316 | 7,972 | ||
Retired | 10,744 | 10,961 | ||
Distribution of members by benefit plan | ||||
35% of Average Salary Plan | 5,346 | 5,587 | ||
Active | 16 | 16 | ||
Beneficiaries | 5,330 | 5,571 | ||
Supplementary Average Salary Plan | 4,967 | 5,051 | ||
Active | 38 | 45 | ||
Beneficiaries | 4,929 | 5,006 | ||
Combined Supplementary Benefit Plan | 9,747 | 8,295 | ||
Active | 9,261 | 7,911 | ||
Beneficiaries | 486 | 384 | ||
Linked beneficiaries: | 5,495 | 5,397 | ||
35% of average salary plan | 4,117 | 4,110 | ||
Supplementary average salary plan | 1,305 | 1,227 | ||
Combined supplementary benefit plan | 73 | 60 | ||
Total participants (members/beneficiaries) | 25,555 | 24,330 | ||
(iii) Settlement of actuarial deficit
According to the official letter 1555/SPC/GAB/COA, as of August 22, 2002, confirmed by official letter 1598/SPC/GAB/COA as of August 28, 2002, a proposal was approved for refinancing of reserves to amortize the sponsors responsibility in 240 monthly and successive installments, monetarily indexed by INPC + 6% p.a., starting June 28, 2002.
The agreement foresees the installments prepayment in case of cash necessity in the defined benefit plan and the incorporation to the updated debit balance the eventual deficits/surpluses under the sponsors responsibility, so as to preserve the plans balance without exceeding the maximum period of amortization provided for by the agreement.
(iv) Actuarial Liabilities
As provided by CVM Deliberation 371/00, approving the NPC 26 of IBRACON Employees Benefit Accounting that established new calculation and disclosure accounting practices, the Companys management and its external actuaries calculated the assessment of the effects arising from this practice, and records are kept in conformity with the report dated January 10, 2007.
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Plans | ||||||||
35% of | Supplementary | Combined | ||||||
Average | Average | Supplementary | Total | |||||
Salary | Salary | Benefit | ||||||
Present value of covered actuarial liabilities | 276,797 | 1,078,116 | 741,878 | 2,096,791 | ||||
Fair value of plan assets | (176,854) | (736,270) | (807,541) | (1,720,665) | ||||
Present value of liabilities in excess of assets fair value | 99,943 | 341,846 | (65,663) | 376,126 | ||||
Adjustments by deferrals allowed: | (28,029) | (82,970) | 31,255 | (79,744) | ||||
- Non-recognized actuarial gains | (28,029) | (82,970) | 10,082 | (100,917) | ||||
- Non-recognized past cost of service | 21,173 | 21,173 | ||||||
Present value of amortizing participants contributions | (5,801) | (20,845) | (26,646) | |||||
Actuarial Liabilities / (assets) | 66,113 | 238,031 | (34,408) | 269,736 | ||||
Provisioned actuarial liabilities/ (assets) (Long-Term Liabilities/Other) | 66,113 | 238,031 | (17,204) | 286,940 | ||||
Actuarial Liability Recognition
The Companys Management decided to recognize the actuarial liability adjustment in the results for the period of five years, from January 1, 2002, being appropriated in 2006, the amount of R$63,540 (R$22,832 in 2005), in accordance with paragraphs 83 and 84 of NPC 26 of IBRACON approved by CVM Deliberation 371/2000, which, added to related disbursements, totaled R$111,832 (R$100,042 in 2005).
The balance of the provision for coverage of the actuarial liability on December 31, 2006 amounts to R$286,940 (R$223,400 until 2005).
With respect to the recognition of the actuarial liability, the amortizing contribution related to the amount for the participants for determination of the reserve insufficiency was deducted from the present value of total actuarial obligation of the respective plans. A number of participants are disputing in court this amortizing contribution, but the Company, based on its legal and actuarial advisers opinion understands that such amortizing contribution was duly approved by the Secretaria da Previdência Complementar SPC and consequently, is legally due by the participants.
In addition, in the case of Combined Supplementary Benefit Plan, of defined contribution, which shows net asset and where the sponsors contribution corresponds to an equal counterpart of the participants contribution, the understanding of the actuary is that up to 50% of the net actuarial asset may be used for reduction of the sponsors contribution. As a result, the sponsor opted for recognizing 50% of such asset on its books, in the amount of R$17,204 in 2006 (R$13,220 in 2005).
According to actuarial calculation prepared by the method of projected credit unit, the Company will appropriate R$4,293 and sponsors defined contributions of the combined supplementary benefit plan are estimated at R$12,445 for the next year.
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Main actuarial assumptions adopted in the actuarial liability calculation
Methodology used | Projected credit unit method | |
Nominal discount rate for actuarial liability | 11.3% p.a. (6.3% actual and 5% inflation) | |
Expected yield rate over plan assets | 35% of Average Salary Plan: 15.02% p.a. | |
Supplementary Average Salary Plan: 14.95% p.a. | ||
Combined Supplementary Benefit Plan: 17.5% p.a. | ||
Estimated salary increase index | INPC + 1% (6.05%) | |
Estimated benefits increase index | INPC + 0% (5.00%) | |
Estimated inflation rate in the long-term | INPC + 0% (5.00%) | |
Biometric table of overall mortality | AT83 separated by gender | |
Biometric table for disability | Mercer Disability with probabilities multiplied by 2 | |
Biometric table for disability mortality | Winklevoss | |
Expected turnover rate | Fixed 2% p.a. | |
Probability of starting retirement | 35% Average Salary Plan and Supplementary | |
Average Salary Plan: 100% in the first eligibility to a | ||
full benefit by the Plan; | ||
Combined Supplementary Benefit Plan: 55 years of | ||
age, 10 years of service and 5 years of Plan. | ||
CSN does not have other post-employment benefit plans.
25. INSURANCE
In view of the nature of its operations, CSN renewed effective up to November 21, 2007 the operational risk insurance policy - "All Risks" type for Presidente Vargas Steelworks, Casa de Pedra Mining, Arcos Mining, Paraná Branch, Coal Terminal-Tecar, GalvaSud (property damages and loss of profits), Containers Terminal-Tecon and ERSA Estanho de Rondônia (loss of profit) in the total risk amount of US$8.1 billion (property damage and loss of profit), equivalent to R$17.6 billion and maximum amount of indemnification, in the event of loss of U$750 million (property damages and loss of profit), corresponding to R$1.6 billion.
26. MANAGEMENT COMPENSATION
The Managements fees were set out at the Annual General Meeting of April 28, 2006, in the annual global amount of R$33,000 (R$30,000 in 2005). The amount of R$15,585 (R$14,209 in 2005) was charged to general and administrative expenses during the year ended on December 31,2006.
27. SUBSEQUENT EVENT
Stocks buyback
On January 29, 2007, the Board of Directors approved the stock buyback program for the acquisition of up to 923,628 shares issued by the Company to be held in treasury and further disposal or cancellation, pursuant to the provisions in article 3 of CVM Instruction 10/80, by
85
means of negotiations at São Paulo Stock Exchange BOVESPA. This program is valid up to January 25, 2008.
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TABLE OF CONTENTS
GROUP | TABLE | DESCRIPTION | PAGE |
01 | 01 | IDENTIFICATION | 1 |
01 | 02 | HEAD OFFICE | 1 |
01 | 03 | INVESTOR RELATIONS OFFICER (Company Mailing Address) | 1 |
01 | 04 | DFP REFERENCE | 1 |
01 | 05 | CAPITAL STOCK | 2 |
01 | 06 | COMPANY PROFILE | 2 |
01 | 07 | COMPANIES NOT INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS | 2 |
01 | 08 | CASH DIVIDENDS | 2 |
01 | 09 | INVESTOR RELATIONS OFFICER | 2 |
02 | 01 | BALANCE SHEETS ASSETS | 3 |
02 | 02 | BALANCE SHEETS - LIABILITIES | 5 |
03 | 01 | STATEMENTS OF INCOME | 7 |
04 | 01 | STATEMENTS OF CHANGES IN FINANCIAL POSITION | 8 |
05 | 01 | STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FROM 1/1/2006 TO 12/31/2006 | 9 |
05 | 02 | STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FROM 1/1/2005 TO 12/31/2005 | 10 |
05 | 03 | STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FROM 1/1/2004 TO 12/31/2004 | 11 |
06 | 01 | CONSOLIDATED BALANCE SHEETS ASSETS | 12 |
06 | 02 | CONSOLIDATED BALANCE SHEETS LIABILITIES | 14 |
07 | 01 | CONSOLIDATED STATEMENTS OF INCOME | 16 |
08 | 01 | CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION | 17 |
09 | 01 | REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS | 18 |
10 | 01 | MANAGEMENT REPORT | 20 |
11 | 01 | NOTES TO THE FINANCIAL STATEMENTS | 44 |
87
COMPANHIA SIDERÚRGICA NACIONAL |
||
By: |
/S/ Benjamin Steinbruch
|
|
Benjamin Steinbruch
Chief Executive Officer and Acting Chief Financial Officer |
This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.