United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant To Rule 13a-16 or 15d-16
of the
Securities Exchange Act of 1934
For the month of
November 2002
Valley of the Doce River Company
(Translation of Registrant's name in English)
Avenida Graca Aranha, No. 26
20005-900 Rio de Janeiro, RJ, Brazil
(Address of principal executive office)
(Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.)
(Check One) Form 20-F X Form 40-F
--- ---
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing information to the Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)
(Check One) Yes No X
--- ---
(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b). 82-___.)
Companhia Vale do Rio Doce
TABLE OF CONTENTS
This Form 6-K contains the following:
Sequential
Page
Item Number
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1. Press Release titled "Companhia Vale do Rio Doce
Third Quarter Performance in 2002;
US GAAP" dated November 13, 2002................. 1
2. Third Quarterly Financial Statements; US GAAP............. F-1
This current report on Form 6-K is hereby incorporated by reference into the
Registration Statement on Form F-4 of Companhia Vale do Rio Doce and Vale
Overseas Limited, File No. 333-84696.
US GAAP
BOVESPA: VALE3, VALE5
NYSE: RIO, RIOPR
LATIBEX: XVALO, XVALP
www.cvrd.com.br
CVRD
Investor Relations
Roberto Castelio Branco
Andreia Reis
Barbara Geluda
Daniela Tinoco
Eduardo Mello Franco
Rafael Azevedo
Tel. (5521) 3814-4540
rio@cvrd.com.br
Companhia Vale do Rio Doce
PRESS RELEASE 3Q02
COMPANHIA VALE DO RIO DOCE
THIRD QUARTER PERFORMANCE IN 2002
THE FINANCIAL AND OPERATIONAL INFORMATION CONTAINED IN THIS PRESS RELEASE,
EXCEPT WHETHER OTHERWISE INDICATED, IS BASED ON CONSOLIDATED FIGURES, ACCORDING
TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES OF AMERICA (US
GAAP). THE MAIN SUBSIDIARIES OF CVRD WHICH FORM PART OF THESE CONSOLIDATED
FIGURES ARE: RDME, SIBRA, FERTECO, URUCUM MINERACAO, PARA PIGMENTOS, DOCENAVE,
ALUVALE, ALUNORTE, FLORESTAS RIO DOCE, CELMAR, RIO DOCE EUROPA, ITACO, CVRD
OVERSEAS AND RIO DOCE FINANCE INTERNATIONAL.
Rio de Janeiro, 13 November 2002 - Companhia Vale do Rio Doce (CVRD) has
reported accumulated net earnings in the first nine months of the year of US$
111 million, the equivalent of US$ 0.29 per share, compared to US$ 585 million
in the same period a year earlier. In the third quarter of 2002 (3Q02), it
obtained a loss of US$ 150 million, corresponding to US$ 0.39 per share.
The depreciation of the Real (BRL) against the US dollar (USD) was the main
factor behind this quarterly loss, due to the strong impact on net liabilities
in foreign currency.
The BRL/USD exchange rate on the last day of 3Q02, relevant for the calculation
of the exchange rate effect on net foreign exchange liabilities, was BRL
3.8949/USD, up 36.9% relative to the rate recorded on the last day of 2Q02, of
BRL 2.8444/USD. The average daily exchange rate in 3Q02, which affects CVRD's
cash flow and operating income, was BRL 3.1227/USD, a 25% increase over the
previous quarter, of BRL 2.4408/USD.
CVRD's cash flow is positively correlated to the appreciation in the USD against
the BRL, due to the asymmetry between revenues and expenses in regard to
currency composition. For example, in the first nine months of 2002 84% of gross
revenues were denominated in USD while 72% of the cost of goods sold (COGS) was
denominated in BRL.
The Board of Directors of CVRD has approved the payment of interest on
shareholders equity of R$ 2.68 per share, totalling R$ 1.029 billion, which will
be paid out from December 10, 2002. Therefore, in this year CVRD will have
distributed to its shareholders R$ 4.985 per share, totalling R$ 1.915 billion,
taking into account the amount of R$ 2.305 per share paid from April 30, 2002.
The average dividend yield in USD of CVRD's shares in the period 1997/2001 was
6.5%, 120 basis point higher than the average yield of 10 year U.S. Treasury
Bonds. For 2002, it is estimated that the dividend yield will be close to the
average of the last five years.
1
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Companhia
Vale do Rio Doce US GAAP 3Q02
Gross revenues in the third quarter amounted to US$ 1.133 billion, up by 5.8%
compared with 2Q02, and 6.4% compared with the same quarter a year earlier.
Revenues for the first nine months of the year amounted to US$ 3.191 billion,
Cash generation as measured by EBITDA (earnings before interest, taxes,
depreciation and amortization) amounted to US$ 483 million in 3Q02, 5.9% higher
than in 2Q02 and 1.8% lower than in 3Q01. EBITDA for the first nine months of
the year amounted to US$ 1.383 billion.
Free cash flow, after investments, was US$ 541 million in 3Q02, amounting to US$
1.069 billion in the year. Capital expenditures of CVRD totalled US$ 195.7
million and US$ 615.7 million in the first nine month of 2002.
The iron ore and pellets volume shipped amounted to 42.388 million tons, a new
quarterly record, up 3.1% on 2Q02 and up 11.4% on 3Q01. Sales volume for the
first nine months of 2002 amounted to 120.2 million tons.
By the same token, general cargo transportation (cargo other than iron ore and
pellets) set a new quarterly record. CVRD's railroads (Carajas and Vitoria a
Minas) transported 3.89 billion net ton kilometres (ntk).
During the first nine months of the year 10.946 billion ntk were transported
compared to 9.770 billion in the same period in 2001, therefore showing an
increase of 12%. This performance began to reflect focus on maximising the use
of transportation assets, which is being achieved through greater integration
between CVRD's own assets, exploitation of intermodal connections and the
offering of new services, such as the scheduled trains.
At the end of 3Q02, CVRD's total debt amounted to US$ 3.579 billion, down from
the level of US$ 3.914 billion on June 30, 2002. Debt leverage and interest
coverage indicators continued at comfortable levels. On September 30, 2002,
total debt was 2.02 times LTM EBITDA and equivalent to 29% of the Company's
total assets, while in 3Q02, EBITDA was 9.29 times interest expenses.
RELEVANT EVENTS
CORPORATE GOVERNANCE
Continuing the implementation of the Corporate Governance model announced in
October 2001, which is based on the principles of transparency in the
decision-making process and the definition of clear roles and responsibilities,
CVRD has been developing new initiatives designed to improve Corporate
Governance practices. These efforts seek to emphasize the transparency of
information and the protection of investors' rights.
At the end of July 2002, the Company announced its DISCLOSURE POLICY, in
accordance with the best investor relations practices, with the main aim of
presenting a global and simultaneous spread of information to capital markets
and minimising the risk of an information imbalance.
Today, the Company is releasing three important documents.
1. DIVIDEND POLICY, which has two basic objectives: (a) increase
predictability in the distribution of dividends and/or interest on
shareholders equity; (b) increase the correlation between the remuneration
to shareholders and free cash flow performance, linking this policy more
closely to the Company's financial management. The reduction in uncertainty
is to be achieved by the announcement, until January 31 of each year, of a
minimum amount per share, denominated in USD, to be paid to shareholders in
April and October. Thus the distribution periodicity will be known and the
exchange rate risk for investors not resident in Brazil will be eliminated,
an innovative and a pioneering move by CVRD in shareholder remuneration
policy in Latin America.
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Companhia
Vale do Rio Doce US GAAP 3Q02
2. SECURITIES TRADING POLICY, which specifies the occasions when, and the
mechanisms through which the Company's executives can trade securities
issued by CVRD and its subsidiaries, seeking to minimize the possible use
of privileged information for personal benefit.
3. CODE OF ETHICS AND STANDARDS OF PROFESSIONAL CONDUCT FOR MEMBERS OF THE
FINANCIAL AREA, which defines a code of conduct of the highest ethical
standards for the professionals in this area of the Company, who in their
business activities deal with privileged information and large sized
financial transactions.
RISK MANAGEMENT
The Board of directors of CVRD approved prudential rules for financial
investments (cash management) and commercial risk management criteria.
DIVESTITURES
The sale of the assets of Florestas Rio Doce was completed for US$ 52.3 million,
resulting in a capital gain of US$ 49 million. This transaction concludes the
divestiture of CVRD's pulp and paper assets, as determined by its strategic
directives. The forestry assets of Celmar are likely to be used in projects
linked to the mining and metals businesses, which are currently under analysis.
SHAREHOLDERS DEBENTURES
On October 4, 2002 the CVM (the Brazilian Securities Commission) authorised the
registry with the SND - Sistema Nacional de Debentures (the National Debenture
System), of Shareholders Debentures that were issued by CVRD at the time of its
privatization in 1997 as a way of guaranteeing to all its shareholders prior to
privatization, including the Brazilian government, the right to participate in
the net revenues derived from the exploration of specific mineral deposits of
the Company and some of its subsidiaries. From October 28, 2002, the trading of
these securities was authorised by the SND. More detailed information on these
debentures can be found on CVRD's website (www.cvrd.com.br), Investor Relations
section under Shareholders Information, Debentures.
PUBLIC OFFERING FOR THE PURCHASE OF SHARES IN COMPANHIA PAULISTA DE FERRO LIGAS
On November 26, 2002 at 1.30 p.m. on Bovespa - Sao Paulo Stock Exchange, an
auction will be held to repurchase shares of Companhia Paulista de Ferro Ligas,
a ferro-alloys company controlled by CVRD. The purpose of this transaction is to
acquire the remaining 6% of the capital still owned by minority shareholders,
and subsequently delist the company. The price of the offer is R$ 15.80 per
share, corrected by the variation in the TR index (reference rate) calculated
pro rata die, from September 2nd, 2002 to the date of settlement of the auction
held on Bovespa. The price set incorporates a 45.5% premium to the average
trading price of the shares over the thirty trading days prior to the price
being set and a premium of 7.9% over the book value of the shares as at June
30th, 2002.
THE SHORT TERM OUTLOOK
Recent statistics reveal that the global economy is recovering much more slowly
than had been expected at the beginning of the year. Probably 2003 will be the
third year running of growth below the long term trend in the global economy,
which has progressed over the past three decades at an average annual rate of
3.5%. This is due, in large part, to the absence of an engine to lead global
economic expansion.
This role was played in the latter half of the nineties by the US, responsible
for 40% of global economic growth in this period. Despite the fact that US GDP
grew by 3.1% in 3Q02, the outlook is not good. A substantial part of this
expansion in 3Q02 was explained by a rise in car sales, stimulated by aggressive
incentive policies, and leading indicators of economic activity have been
suggesting a slowdown in the
4
Companhia
Vale do Rio Doce US GAAP 3Q02
growth rate. This situation has led the Federal Reserve Bank to cut the short
term interest rate by 50 basis points to 1.25% per year, the lowest rate in
nominal terms since 1961.
In the Eurozone, economic growth has been extremely modest and future
expectations are pessimistic. Recently, the IMF revised its predictions for
Euroland GDP growth to 0.75% in 2002 and 2% in 2003. In Japan, the recovery
driven by external demand has losed steam. The behaviour of leading indicators
suggest that the fragile Japanese recovery has already reached its peak and a
return to recession has become increasingly probable.
China appears as an oasis of prosperity in this low expansion environment.
Export growth, investment in infrastructure and foreign direct investment are
fuelling GDP growth of 8% a year in that country. One of the consequences of the
rapid growth in China is its economy's increasing influence on mining and metals
markets, such as iron ore, steel, alumina, copper and aluminum.
Global steel production is rising at growing rates this year. In the first nine
months of 2002, steel output was up by 5.1% in relation to the same period in
2001, and September showed an increase of 8.5% on the same month in the previous
year.
The current dynamism in the steel market has therefore been not only directly
affected by China, whose steel production is expanding at 25% a year, but also
indirectly by growth in its imports, which amounted to 17.2 million tons between
January and September, and are mainly supplied by Japan.
The International Institute for Steel and Iron (IISI) projects a 4.2% growth in
the steel global demand in 2002 and 4.9% in 2003, based mainly in the strong
Chinese demand expansion.
At the same time, there was a substantial recovery in the price of steel
products, the CRUspi index showing a variation of 35.6% between December 2001
and the end of October this year. Usually, the steel prices recovery cycle takes
from 15 to 18 months.
The pace in the seaborne demand for iron ore and pellets has seen an upturn,
with an expected increase of 20 million tons for 2002 for a forecast total of
470 million tons. The Company expects a continuation of this strong demand and
that the seaborne market will reach 490 million tons in 2003.
Chinese imports in the period January to September rose 23.8% in relation to
2001, rising from 67.1 million tons to 83.1 million tons. It is very probable
that the estimate of 110 million tons for 2002 will be met. In the first nine
months of the year, CVRD's market share in China was 16%. Japan, the world's
largest importer of iron ore, purchased 95.7 million tons in the first nine
months of the year, compared to 94.8 million in 2001.
The rise in the cost of maritime freight, also widening the freight spreads for
iron ore shipped from Brazil to China, and that shipped from Australia to China,
by some US$ 2.50 per ton, in large part reflected the strong Chinese demand for
iron ore. In the iron ore upcycle freight spreads tend to widen, and vice-versa.
The growing sophistication in Chinese steel plants, seeking to mix their
domestic ore which has a low iron content and a high level of impurities with
high quality ore, is favouring, and should continue to favour CVRD, a high
quality ore supplier. The difference in quality represents an important
compensating factor in offsetting the competitive disadvantage of geographical
distance.
In the case of aluminum, despite the recovery in demand, there has been
excessive growth in global supply. This is because various aluminum smelters,
which were shut down during the power crisis on the Pacific Northwest, have
re-started operations, causing a build-up in stock levels and keeping prices
relatively low.
Furthermore, the global production capacity of primary aluminium is likely to
increase by approximately 2.5 million tons between 2003 and 2005, which will
probably prevent any vigorous price recovery,
5
Companhia
Vale do Rio Doce US GAAP 3Q0
possibly forcing the closure of smelters with a high cost of production. In this
context, Albras, one of the lowest cost producers in the world, should continue
to obtain good profit margins.
Alumina, CVRD's strategic focus in this segment, is likely to benefit from
expected growth in Chinese imports and the expansion in production capacity of
primary aluminum by companies who do not have sufficient domestic supplies of
this raw material. In January 2003, Alunorte's stage 3 should begin to operate,
increasing its annual nominal production capacity to 2.4 million tons. Alunorte
nominal production capacity can be expanded up to 6.1 million tons of alumina
per year.
REVENUES AND SALES VOLUMES
Sales volume of iron ore and pellets in 3Q02 reached a record level of 42.388
million tons, surpassing the previous record of 41.098 million tons achieved in
2Q02. In the first nine months of 2002, shipments totalled 120.2 million tons,
an increase of 8.5% compared to the same period a year earlier.
The average iron ore and pellets sales prices in the quarter were US$ 15.23 per
ton and US$ 30.54 per ton, respectively.
Pellet sales amounted to 4.847 million tons, down 1.9% on the previous quarter
but 9.4% higher YoY. In 3Q02 CVRD purchased 2.749 million tons from its pellet
joint ventures for resale to its customers. In 2Q02 these purchases amounted to
3.049 million tons, while the total for the first nine months of the year
amounted to 7.568 million tons, compared to 7.553 million tons in the same
period of last year.
Iron ore volumes sold by CVRD Parent Company to China totalled 13.6 million tons
in the first nine months of the year, up 18.3% compared to the same period in
2001. The Chinese market in 2002 became the Parent Company's second largest
market, accounting for 13% of sales, being only exceeded by the Brazilian
domestic market, with 15%.
CONSOLIDATED SALES OF IRON ORE AND PELLETS
thousand tons
3Q 01 % 2Q 02 % 3Q02 %
---------------------------------------------------------------------------------------------------
Iron Ore 33,624 88.4% 36,159 88.0% 37,541 88.6%
Pellets 4,430 11.6% 4,939 12.0% 4,847 11.4%
Total 38,054 100.0% 41,098 100.0% 42,388 100.0%
Sales of manganese and ferro-alloys also saw a good performance in 3Q02. 213,000
tons of manganese were sold compared to 120,000 in 2Q02 and 352,000 in 3Q01,
when due to power rationing in Brazil, CVRD was forced to cut production of
ferro-alloys and sell most of its manganese production in the market.
Ferro-alloys sales totalled 176,000 tons in 3Q02, compared to 93,000 tons in
2Q02 and 135,000 tons in 3Q01.
Railroad general cargo transportation for customers achieved a new record in
3Q02, with the shipment of 3.89 billion net ton kilometres (nkt), 6.4% higher
than in 2Q02 and 16.5% higher than in 3Q01. In the first nine months of the
year, CVRD's railroads (EFVM and EFC) transported 10.946 billion nkt of general
cargo, compared to 9.777 billion nkt in the same period in 2001. Part of this
growth is explained by CVRD's increased participation in the transport of
agricultural products, particularly grains, an operation that has made the
integration between CVRD's transportation assets of particular importance, on
such links as FCA - EFVM - the Port of Tubarao, as well as Norte Sul Railroad
(state owned railway network operated by CVRD) - EFC - the Port of Ponta da
Madeira.
FCA, a railroad in which CVRD is a shareholder, as well as being the operator,
transported 2.209 billion ntk in 3Q02 compared to 2.253 billion ntk in 2Q02 and
2.167 billion ntk in 3Q01.
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Companhia
Vale do Rio Doce US GAAP 3Q0
Railroad's productivity indic ators showed an improvement in the quarter. EFVM
transported 0.96 million ntk per locomotive in service, per day, compared to
0.95 million in 2Q02, while for EFC this index remained constant at 1.91 million
ntks. The fleet of waggons was more intensively used for general cargo on both
railroad networks. EFVM transported 5,540 ntk per waggon in service per day in
3Q02 compared to 4,810 in 2Q02 and EFC, 16,340 ntk compared to 15,960 ntk in
2Q02.
GENERAL CARGO RAILROAD TRANSPORTATION
million ntk
1Q 01 2Q 01 3Q 01 4Q 01 1Q 02 2Q 02 3Q 02
EF Vitoria a Minas 2,643 2,890 2,844 2,791 2,737 2,807 3,049
EF Carajas 356 543 494 423 664 848 841
Total 2,999 3,433 3,338 3,214 3,401 3,655 3,890
Ferrovia Centro Atlantica 1,962 2,236 2,167 1,993 1,832 2,253 2,209
SALES VOLUME - CARGO TRANSPORTATION
thousand tons
1Q 02 2Q 02 3Q 02
Railroads 12,152 12,818 13,525
Ports 4,412 9,345 8,950
Shipping 658 338 2,786
Gold sales fell sharply due to the closure of the Igarape Bahia at the end of
the last quarter. CVRD, therefore, sold only 63.531 troy ounces of gold in 3Q02
compared to 111.854 in 2Q02 and 144.295 in 3Q01.
Third quarter sales of alumina, by Alunorte, with an average price of US$ 170.13
per ton, amounted to 348,000 tons. In the first nine months of the year,
Alunorte sold 1.219 million tons at an average price of US$ 165 per ton.
However, the operating and financial results of this company only became part of
the consolidated figures from 3Q02.
Potash sales totalled 223,000 tons, 16.1% higher QoQ and 79.8% higher YoY. The
Taquari-Vassouras mine is operating at full capacity - 600,000 tons per year -
and all production for the year 2002 has already been pledged to clients, a
performance caused by the strong growth in Brazil's agricultural sector.
VOLUME SOLD - OTHER PRODUCTS
thousand tons
3Q 01 2Q 02 3Q 02
Gold (troy ounces) 144,295 111,854 63,531
Manganese 352 120 213
Ferro-alloys 135 93 176
Alumina 42 106 348
Aluminum 35 53 49
Bauxite 162 407 398
Potash 124 192 223
Kaolin 69 60 112
Gross operating revenues totalled US$ 1.133 billion in 3Q02, up 5.8% compared to
the previous quarter and 6.4% higher than in 3Q01. In the first nine months of
2002, revenues generated amounted to US$ 3.191 billion compared to US$ 3.099
billion in the same period a year earlier.
7
Companhia
Vale do Rio Doce US GAAP 3Q02
Sales of iron ore accounted for 47.6% of total revenue, pellets 15%,
transportation services 11.3%, products in the aluminum chain (bauxite, alumina
and primary aluminum) 12.7%, manganese and ferro-alloys 6.9%, potash 2.4% and
gold 1.9%.
Despite the growth in logistics activities, as mentioned earlier, revenues from
this business have been falling in USD terms, from US$ 142 million in 3Q01 to
US$ 131 million in 2Q02 and US$ 128 million in 3Q02. This is due to the sharp
depreciation in the BRL, given that logistics is a local business and the prices
of its services are quoted in local currency.
CVRD has stakes in two hydroelectric plants under operation: Igarapava (38.15%),
with installed capacity of 210 MW, and Porto Estrela (33.33%), with installed
capacity of 112 MW, both located in the state of Minas Gerais. CVRD's take in
Igarapava is dedicated to supply the energy needs of the Southern System,
contributing to cost reduction, while the energy produced by Porto Estrela is
sold in the market. In the first nine months of 2002, revenues derived from
energy sales amounted to US$ 4 million.
GROSS REVENUE BY PRODUCT
US$ million
3Q 01 % 2Q 02 % 3Q 02 %
Iron Ore 451 42.3% 557 52.0% 539 47.6%
Pellets 230 21.6% 146 13.6% 170 15.0%
Gold 40 3.8% 35 3.3% 21 1.9%
Transportation 142 13.3% 131 12.2% 128 11.3%
Aluminum, Alumina and Bauxite 63 5.9% 98 9.2% 144 12.7%
Manganese and Ferro-alloys 87 8.2% 65 6.1% 78 6.9%
Potash 17 1.6% 24 2.2% 27 2.4%
Kaolin 9 0.8% 9 0.8% 13 1.1%
Wood and Pulp 12 1.1% 2 0.2% - 0.0%
Others 14 1.3% 4 0.4% 13 1.1%
Total 1,065 100.0% 1,071 100.0% 1,133 100.0%
GROSS REVENUES BY DESTINATION
US$ million
3Q 01 % 2Q 02 % 3Q 02 %
Domestic Market 344 32.3% 345 32.2% 391 34.5%
Foreign Market
United States 115 10.8% 30 2.8% 70 6.2%
Europe 202 19.0% 384 35.9% 379 33.5%
Middle East and Africa 3 0.3% 35 3.3% 51 4.5%
Japan 130 12.2% 69 6.4% 63 5.6%
Asia except Japan 207 19.4% 142 13.3% 117 10.3%
Latin America and others 64 6.0% 66 6.2% 62 5.5%
Total 1,065 100.0% 1,071 100.0% 1,133 100.0%
EXCHANGE RATE VOLATILITY CAUSES LOSSES IN 3Q02
The negative impact of the sharp devaluation in the BRL against the US dollar on
net liabilities in foreign currency, of US$ 511 million, was higher than the
operating profit of US$ 400 million, and was the determining factor in causing
the loss of US$ 150 million in 3Q02.
In comparison with 2Q02, there was a reduction in COGS of US$ 44 million. This
was influenced by the fall in payroll expenses of US$ 17 million, the drop in
product purchases expenses (iron ore, pellets,
Companhia
Vale do Rio Doce US GAAP 3Q02
8
bauxite and primary aluminum) of US$ 82 million and a reduction in depreciation
and depletion provisions of US$ 48 million. On the other hand, the cost of
contracted services increased by US$ 69 million.
The sale of the assets of Florestas Rio Doce in September generated a capital
gain of US$ 49 million.
Sales, general and administrative expenses of US$ 79 million were up US$ 15
million in 3Q02, compared to the previous quarter. A provision for the
distribution of a bonus to employees of approximately US$ 14 million also
contributed to the rise in expenses.
Non-operational expenses, of US$ 46 million, included the reversal of a
provision for losses in Docenave of US$ 30 million, and on the other hand, a
write-off of the premium paid in the acquisition of Caemi of US$ 86 million. The
total figure registered under this item was US$ 36 million higher than in the
previous quarter.
According to SFAS 142, from 2002 companies are obliged to carry out a
revaluation of investments acquired with a premium, as well as other investments
in subsidiaries and affiliates.
In the first case, the revaluation - the impairment test - is carried out once a
year comparing the fair value, estimated using discounted cash flow models,
market capitalization or market multiples, with the book value of the
investment, including the premium paid. CVRD has decided to carry out this
procedure in the third quarter of each year, using, to estimate a fair value,
the discounted cash flow method or market capitalization - for listed companies
as Caemi, CST and Usiminas. In carrying out this test in this quarter it has
been necessary to write down an amount of US$ 86 million, as goodwill paid for
the control of Caemi, as its market value is lower than that accounted for in
CVRD's books.
The revaluation of investments in subsidiaries and affiliates which do not carry
a premium, is carried out each quarter. If the fair value calculated is lower
than the booked value of the investment for three quarters running, the
difference is considered to be a loss of a permanent nature, and a corresponding
adjustment is subsequently made. In this quarter, none of CVRD's investments
fell into this category.
The financial result worsened by US$ 90 million between 2Q02 and 3Q02. Losses
from interest derivatives and financial expenses with related parties explain
most of the deterioration in this result.
CVRD uses derivative operations to fix the rate of interest payable on its
financial obligations contracted at floating rates, as well to protect itself
from price fluctuations in commodities such as gold or aluminum. The fall in the
Libor rate caused losses of US$ 38 million on operations of interest
derivatives, which are marked to market.
In March 2001, CVRD transferred its 10.33% stake in CSN, of US$ 249 million, to
Valia, its employee pension fund, cancelling the actuarial debt then existing.
The contract between CVRD and Valia guarantees the latter a minimum return from
the shares in CSN equal to the variation in the IGP-DI (general domestic price
index) plus 6% a year. Bearing in mind that this condition was not satisfied,
CVRD made a provision in this quarter of US$ 42 million, classified as a
corresponding financial expense. This provision could recur in future quarters
if the price performance of CSN shares on BOVESPA is lower than the minimum
price guaranteed by CVRD to Valia.
The equity income result was negative in US$ 74 million in 3Q02. The effect of
the BRL's depreciation on Albras's debt was the main reason for a negative
equity income result of US$ 31 million from the aluminum businesses. Albra's
total debt on September 30, 2002 was US$ 519 million, from which only 3.9% was
short term. Its debt is decreasing over the time, passing from US$ 704.6 million
on 1Q01 to US$ 519.0 million on 3Q02, representing a reduction of US$ 185.5
million.
The logistics area also had a negative contribution of US$ 28 million to the
equity income result due to the impact o the BRL depreciation on the debt of
FCA, MRS and Sepetiba Tecon.
Companhia
Vale do Rio Doce US GAAP 3Q02
9
CASH GENERATION
In 3Q02 CVRD generated EBITDA of US$ 483 million, up 5.9% in relation to the
previous quarter and slightly lower, 1.8%, compared to 3Q01. EBITDA accumulated
in the first nine months of the year amounted to US$ 1.383 billion, compared to
US$ 1.387 billion in the same period a year earlier.
EBITDA margin amounted to 44.1% in 3Q02, compared to 44.4% in 2Q02 and 47.7% in
3Q01, reflecting the capacity of CVRD in converting revenues into operational
profit.
Adjustment for non-cash items amounted to US$ 22 million, consisting principally
of contingency provisions (US$ 13 million) and a special retirement plan (US$ 7
million). US$ 17 million was received in dividends from non-consolidated
companies, which decreased US$ 13 million when compared to 2Q02.
The increase of US$ 27 million in EBITDA in relation to 2Q02 was in large part
due to a rise of US$ 67 million in net operating revenues and a reduction of US$
44 million in COGS.
EBITDA produced from the ferrous minerals businesses in 3Q02 represented 76.8%
of the total. The aluminum division, with the consolidation of Alunorte,
generated 8.9% of the EBITDA, non ferrous minerals, 5.4%, logistics, 7% and
others, 1.9%.
Free cash flow, after investments, is growing quarter after quarter during 2002.
It increased from US$ 140 million in 1Q02 to US$ 388 million in 2Q02 and US$ 541
million in 3Q02, totalling US$ 1.069 billion in the year.
EBITDA COMPOSITION
US$ million
-----------
3Q 02
-----
Net Operating Revenues 1,094
COGS (550)
SG&A (79)
Research and Development (15)
Other Operational Expenses (50)
Adjustment for Exceptional Non-Cash Items 22
Provision for Contingencies 13
Provision for Early-Retirement Programs 7
Pension Funds 2
Tax (3)
Write-off Assets 3
EBIT 422
Depreciation, Depletion and Amortization 44
Dividends Received 17
EBITDA 483
DIVIDENDS RECEIVED
US$ million
-----------
3Q 02
-----
MRN 9
Usiminas 2
CSI 6
TOTAL 17
Companhia
Vale do Rio Doce US GAAP 3Q02
10
DEBT
CVRD'S total debt fell by US$ 335 million in 3Q02, to US$ 3.579 billion on
September 30, 2002, with the payment of various obligations that fell due in
this period.
The Company's cash availabilities dropped by US$ 170 million in the period, to
US$ 1.402 billion at the end of 3Q02, a lower amount than that spent on paying
down debt and on investments carried out in the quarter, US$ 195.7 million.
Indicators for debt leverage and interest coverage remained at comfortable
levels, reflecting the Company's good financial health. Total debt was equal to
2.02 times LTM EBITDA and 29% of the value of CVRD's total assets (enterprise
value). EBITDA generated in the quarter was equivalent to 9.29 times interest
paid in the same period.
DEBT INDICATORS
US$ million
-----------
3Q 01 2Q 02 3Q 02
----- ----- -----
Gross Debt 3,143 3,914 3,579
Net Debt 1,435 2,342 2,177
Gross Debt / LTM EBITDA 1.72x 2.17x 2.02x
EBITDA / Interest Coverage N.A. 7.35x 9.29x
Gross Debt / Total Assets 0.29x 0.27x 0.29x
CAPITAL EXPENDITURES
In the third quarter of 2002, CVRD carried out investment of US$ 195.7 million,
bringing the accumulated total for the first nine months of the year to US$
615.7 million. This amount includes disbursements for the acquisition of stakes
from Anglo American in the Salobo Copper Project (US$ 50.4 million) and from
Mineracao Rio do Norte in Alunorte (US$ 42 million), as well as the purchase of
full control in Mineracao Vera Cruz (US$ 2.2 million), holder of the mining
rights on bauxite reserves in the Paragominas, in the state of Para. The data
reported refers to investment carried out by CVRD and its subsidiaries Aluvale,
Alunorte and Ferteco, not including, therefore, the capital expenditure by other
companies consolidated under the US GAAP method.
Bearing in mind that the Company has an extensive range of projects in its main
business areas, which are scheduled to enter into operation between 2003 and
2007, and will require capital expenses of an estimated US$ 6 billion, more than
60% of the amount invested in 3Q02, US$119.2 million, was allocated to
greenfield and brownfield capacity expansion.
Of this sum, US$ 28 million was directed to the ferrous segment, the main
investments being in the infrastructure needed for the good functioning of the
new pellet plant at Sao Luis (US$ 16.5 million), and the last steps in the
enlarging of iron ore production capacity in the Northern System to 56 million
tons. This includes construction of Pier III at Ponta da Madeira and the
construction and enlargement of the iron ore stock yards, which in 3Q02 received
investment of US$ 5.7 million and US$ 1.8 million, respectively.
The Sossego and Salobo copper projects were responsible for investment of some
US$ 28 million. Work on the Sossego project began in April 2002 and is
progressing according to schedule. The current phase of copper's economic cycle,
with relatively low prices and little expansion in capacity, contributed to
reducing the costs of developing Sossego. At the same time depreciation in real
terms, in local currency, has helped further to reduce the dollar equivalent
cost of this investment, seeing that only 25% of the capital expenditure planned
is actually denominated in US dollars. Therefore, these two factors could reduce
the amount spent on the project, compared with the initial budget of US$ 384
million.
Companhia
Vale do Rio Doce US GAAP 3Q02
11
In the non-ferrous minerals segment, US$ 2.6 million was invested in enlarging
the production capacity of the Taquari-Vassouras potash mine. The brownfield
expansion to 850,000 tons a year is scheduled to come on stream in the middle of
2005.
Our hydroelectric generation projects have required investment of US$ 17.5
million in the quarter. Most of this was dedicated to the building of the
hydro-electric plants at Aimores (US$ 8.4 million), Funil (US$ 5.2 million) and
Candonga (US$ 2.5 million). The Funil plant, located in the state of Minas
Gerais, which has an installed capacity of 180 MW, is programmed to start up in
December 2002.
US$ 8.5 million was invested in the logistics segment, mainly in the purchase of
locomotives and the enlarging of capacity to handle general cargo in the
Southern System.
US$ 34 million was invested in Alunorte, in the project to expand capacity at
its plant to 2.4 million tons a year of alumina (Module 3). In the first nine
months of 2002, investment in this project amounted to US$ 121 million. The
alumina refinery is scheduled to start operations in stage 3 from January 2003.
Maintenance costs for existing operations in 3Q02 amounted to US$ 44.6 million.
The Company invested US$ 9.5 million in mineral exploration, continuing its
prospecting for new deposits of copper, nickel, gold, platinum and zinc, among
others. In addition to this, US$ 2.7 million was spent on information technology
and US$ 1.1 million on environmental protection measures.
CAPITAL EXPENDITURES - 3Q 02
By business area US$ US$ %
million % By category million
Ferrous Minerals 72.3 36.9% Capital Injections 14.9 7.6%
Logistics 24.5 12.5% Maintenance 44.6 22.8%
Non-Ferrous Minerals 40.6 20.8% Projects 119.1 60.9%
Energy 17.8 9.1% Mineral Exploration 9.5 4.8%
Aluminum 34.7 17.7% Environment 1.1 0.6%
Others 3.6 1.8% Information Technology 2.7 1.4%
Total 193.5 98.9% Technological Research 1.6 0.8%
Acquisitions 2.2 1.1% Total 193.5 98.9%
Total 195.7 100.0% Acquisitions 2.2 1.1%
Total 195.7 100.0%
CAPITAL EXPENDITURES - 9M 02
By business area US$ US$ %
million % By category million
Ferrous Minerals 273.3 44.4% Capital Injections 25.8 4.2%
Logistics 63.3 10.3% Maintenance 139.1 22.6%
Non-Ferrous Minerals 71.3 11.6% Projects 315.0 51.1%
Energy 68.0 11.0% Mineral Exploration 22.7 3.7%
Aluminum 34.7 5.6% Environment 4.7 0.8%
Others 10.4 1.7% Information Technology 9.2 1.5%
Total 521.1 84.6% Technological Research 4.6 0.7%
Acquisitions 94.6 15.4% Total 521.1 84.7%
Total 615.7 100.0% Acquisitions 94.6 15.4%
Total 615.7 100.0%
Companhia
Vale do Rio Doce US GAAP 3Q02
12
MINERAL EXPLORATION AND TECHNOLOGY
In 2002, CVRD's mineral exploration and technology activities underwent
reorganization, coming under control of the Department for the Development of
Mineral Projects. This department aims to develop new businesses and projects
for the Company, with a view to its long term growth.
CVRD's mineral exploitation program is distributed into three main areas:
Carajas, other regions in Brazil and abroad. Investment in the first nine months
of 2002 amounted to US$ 38 million, including a tranche of US$ 15 million from
the BNDES, referring to the Mineral Risk Contract.
This exploration program gives priority to the mineral province of Carajas,
where 75% of efforts are concentrated, the main focus being the development of
the copper projects (Sossego, 118, Cristalino, Alemao and Salobo), as well as
the identification of new deposits of copper and gold. Investment is also being
made in the Niquel do Vermelho project, which is in the pre-feasibility stage,
with tests ongoing in a pilot plant and actions designed to minimize risk.
Additionally, prospecting programs are ongoing in the search for nickel and
platinum group metals (PGMs), all still in their initial stages.
In terms of mineral exploration outside Brazil, the initial focus is the
copper-bearing province of Cordilheira dos Andes, with opportunities being
looked at in Argentina, Chile, Peru and Equador. In this context, CVRD and
Antofagasta Plc, one of the main copper producers in Chile, have formed a joint
venture company, Cordillera de las Minas S.A., whose aim is to carry out mineral
prospecting and extraction in the south of Peru, near Cuzco. The area of
interest covers an approximate total of 60,000 square kilometres. Other
significant mining enterprises are located in this region and there is a great
potential for rich mineral deposits.
IRON ORE AND PELLETS - FINANCIAL INDICATORS - NON AUDITED
13
FINANCIAL STATEMENT
US$ million
3Q 01 2Q 02 3Q 02
Gross Operating Revenues 1,065 1,071 1,133
Value Added Tax (34) (44) (39)
Net Operating Revenues 1,031 1,027 1,094
Cost of Goods Sold (516) (594) (550)
Gross Income 515 433 544
Gross Margin (%) 50.0 42.2 49.7
SG&A Expenses (95) (64) (79)
R&D Expenses (11) (12) (15)
Employee Profit Sharing Plan (7) 3 (14)
Others (254) (30) (36)
Operational Income 148 330 400
Financial Income 15 44 10
Financial Expenses (72) (117) (173)
Foreign Exchange and Monetary Gain (loss) (351) (312) (511)
Gains on sales of investments 507 - 49
Others (41) (10) (46)
Income Taxes - Current (31) 3 -
Income Taxes - Deferred - 126 148
Equity in Results of Affiliates
and Joint Ventures (22) (37) 12
Change in Provisions for
Losses on Equity Investments (25) (45) (86)
Minority Interests 3 4 47
Net Income 131 (14) (150)
Earnings per Share (US$) 0.34 (0.04) (0.39)
BALANCE SHEET
US$
million
2Q 02 3Q 02
Assets
Current Assets 3,069 2,893
Long Term Assets 1,459 1,170
Permanent Assets 4,733 3,429
Total 9,261 7,492
Liabilities and Stockholders' Equity
Current Liabilities 1,915 1,602
Long Term Liabilities 3,374 3,282
Shareholders' Equity 3,972 2,608
Capital 2,944 2,944
Reserves 1,028 (336)
Total 9,261 7,492
14
Companhia
Vale do Rio Doce US GAAP 3Q02
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
million US$
Nine months ended September 30
2002 2001
Cash flows from operating activities:
Net income 111 585
Adjustments to reconcile
net income
with cash
provided by
operating
activities:
Depreciation, depletion 171 174
and amortization
Equity in results of affiliates and joint (4) 8
ventures
Dividends received from affiliates and 72 112
joint ventures
Change in provision for losses on equity 126 45
investments
Deferred income taxes (262) (2)
Provisions for 54 87
contingencies
Loss on disposals of property, plant and 96 69
equipment
Gain on sale of investments (49) (784)
Pension plan 8 24
Foreign exchange and monetary (gains) 1.341 616
losses
Unrealized loss on 50 38
derivative instruments
Minority interest (50) (7)
Others 195 141
Decrease (increase) in
assets:
Accounts receivable (172) (78)
Inventories (43) (17)
Others (84) (5)
Increase (decrease) in
liabilities:
Suppliers (23) 30
Payroll and related charges 22 12
Others 39 42
Net cash provided by 1.598 1.090
operating activities
Cash flows from investing
activities:
Loans and advances
receivable
Related parties
Additions (35) (4)
Repayments 52 69
Others 18 5
Guarantees and deposits (61) (15)
Additions to investments (1) (52)
Additions to property, (508) (444)
plant and equipment
Proceeds from disposals of property, 2 2
plant and equipment
Proceeds from disposal of 49 989
assets
Net cash used to acquire (45) (516)
subsidiaries
Net cash used in investing (529) 34
activities
Cash flows from financing
activities:
Short-term debt, net (143) 133
issuances
Loans
Related parties
Additions 32 85
Repayments (29) (9)
Long-term debt
Related parties 11 3
Others 661 320
Repayments of long-term
debt
Related parties (15) (27)
Others (245) (326)
Interest attributed to (329) (639)
stockholders
Treasury stock - (18)
Net cash provided by (used in) financing (57) (478)
activities
Increase in cash and cash 1.012 646
equivalents
Effect of exchange rate changes on cash (727) (149)
and cash equivalents
1.117 1.211
Cash and cash equivalents, 1.402 1.708
end of period
Cash paid during the
period for:
Interest on short-term debt (31) (25)
Interest, net of interest capitalized of (111) (116)
$11 in 2002 and $9 in 2001
Income tax (4) (41)
Non-cash transactions
Special - 249
pension plan
contribution
in shares of
CSN
Exchange of loans receivable for 40 35
investments
15
Companhia
Vale do Rio Doce US GAAP 3Q02
IRON ORE AND PELLETS - FINANCIAL INDICATORS - NON AUDITED
thousand US$
HISPANOBRAS 3Q 01 2Q 02 3Q 02
Sales (thousand 882 835 686
tons)
Foreign Market 422 355 166
Domestic Market 460 480 520
Net Operating 28,683 26,763 23,716
Revenues
Cost of Goods Sold (23,018) (21,992) (19,734)
Financial Results 151 214 189
Net Earnings 4,549 2,968 3,784
Gross Margin (%) 19.8 17.8 16.8
EBITDA 6,287 5,126 5,276
EBITDA Margin (%) 21.9 19.2 22.2
NIBRASCO 3Q 01 2Q 02 3Q 02
Sales (thousand 1,443 2,257 1,842
tons)
Foreign Market 514 686 290
Domestic Market 929 1,571 1,552
Net Operating 43,126 66,759 51,746
Revenues
Cost of Goods Sold (39,479) (57,043) (47,290)
Financial Results (1,449) (1,407) 386
Net Earnings 2,928 2,897 1,711
Gross Margin (%) 8.5 14.6 8.6
EBITDA 23,548 10,041 5,589
EBITDA Margin (%) 54.6 15.0 10.8
Gross Debt (in
US$ million)
- Short Term 2,505 2,400 2,436
- Long Term 4,800 2,400 2,400
Total 7,305 4,800 4,836
ITABRASCO 3Q 01 2Q 02 3Q 02
Sales (thousand 742 702 815
tons)
Foreign Market 471 533 572
Domestic Market 271 169 243
Net Operating 50,254 19,766 25,650
Revenues
Cost of Goods Sold (41,102) (18,305) (22,581)
Financial Results 905 3,102 5,109
Net Earnings 8,095 2,262 3,702
Gross Margin (%) 18.2 7.4 12.0
EBITDA 7,636 1,437 726
EBITDA Margin (%) 15.2 7.3 2.8
Gross Debt (in
US$ million)
- Short Term
- Long Term 407 17,133 15,504
Total 407 17,133 15,504
16
Companhia
Vale do Rio Doce US GAAP 3Q02
thousand US$
KOBRASCO 3Q 01 2Q 02 3Q 02
Sales (thousand 1,123 1,012 850
tons)
Foreign Market 493 534 850
Domestic Market 630 478 -
Net Operating 33,395 27,453 25,222
Revenues
Cost of Goods Sold (26,877) (25,711) (20,671)
Financial Results (18,298) (27,498) (46,398)
Net Earnings (7,684) (15,037) (23,887)
Gross Margin (%) 19.5 6.3 18.0
EBITDA 28,082 1,901 5,518
EBITDA Margin (%) 84.1 6.9 21.9
Gross Debt (in
US$ million)
- Short Term - - -
- Long Term 128,915 143,378 147,150
Total 128,915 143,378 147,150
SAMARCO 3Q 01 2Q 02 3Q 02
Sales (thousand 2,312 3,436 3,871
tons)
Net Operating 65,725 94,763 99,722
Revenues
Cost of Goods Sold (30,735) (48,222) (46,416)
Financial Results (52,000) (37,008) (51,757)
Net Earnings (38,607) (5,295) (23,548)
Gross Margin (%) 53.2 49.1 53.5
EBITDA 21,951 49,777 53,196
EBITDA Margin (%) 33.4 52.5 53.3
Gross Debt (in
US$ million)
- Short Term 158,204 180,539 169,538
- Long Term 119,394 86,584 76,181
Total 277,598 267,123 245,719
17
Companhia
Vale do Rio Doce US GAAP 3Q02
ALUMINUM - SELECTED FINANCIAL INDICATORS - ADJUSTED AND NON AUDITED
thousand US$
MRN 3Q 01 2Q 02 3Q 02
Sales (thousand 2,760 2,610 2,555
tons)
Foreign Market 954 790 740
Domestic Market 1,806 1,820 1,815
Net Operating 53,210 43,006 42,594
Revenues
Cost of Goods Sold (28,883) (28,845) (29,860)
Financial Results (214) (326) 36
Net Earnings 23,883 38,172 29,918
Gross Margin (%) 45.7 32.9 29.9
EBITDA 47,798 17,335 26,724
EBITDA Margin (%) 89.8 40.3 62.7
GROSS DEBT (IN
US$ MILLION)
- Short Term 11,594 18,780 23,198
- Long Term 7,929 90,312 77,786
TOTAL 19,523 109,092 100,984
ALBRAS 3Q 01 2Q 02 3Q 02
Sales (thousand 80 110 104
tons)
Foreign Market 76 108 101
Domestic Market 4 2 3
Net Operating 109,554 145,327 132,549
Revenues
Cost of Goods Sold (64,130) (89,401) (78,909)
Financial Results (91,046) (125,072) (153,515)
Net Earnings (47,500) (68,880) (72,592)
Gross Margin (%) 41.5 38.5 40.5
EBITDA 52,300 57,452 59,399
EBITDA Margin (%) 47.7 39.5 44.8
GROSS DEBT (IN
US$ MILLION)
- Short Term 137,258 48,840 20,156
- Long Term 496,941 506,633 498,857
TOTAL 634,199 555,473 519,013
VALESUL 3Q 01 2Q 02 3Q 02
Sales (thousand 18 23 19
tons)
Foreign Market 7 12 8
Domestic Market 11 11 11
Net Operating 36,364 36,837 29,970
Revenues
Cost of Goods Sold (25,657) (26,516) (19,815)
Financial Results (1,409) 257 (301)
Net Earnings 5,385 6,131 6,355
Gross Margin (%) 29.4 28.0 33.9
EBITDA 10,883 9,234 8,940
EBITDA Margin (%) 29.9 25.1 29.8
GROSS DEBT (IN
US$ MILLION)
- Short Term 939 555 409
- Long Term 2,598 1,416 953
TOTAL 3,537 1,971 1,362
18
Companhia
Vale do Rio Doce US GAAP 3Q02
"This press release may contain statements that express management's
expectations about future events or results rather than historical facts. These
forward-looking statements involve risks and uncertainties that could cause
actual results to differ materially from those projected in forward-looking
statements, and CVRD cannot give assurance that such statements will prove
correct. These risks and uncertainties include factors: relating to the
Brazilian economy and securities markets, which exhibit volatility and can be
adversely affected by developments in other countries; relating to the iron ore
business and its dependence on the global steel industry, which is cyclical in
nature; and relating to the highly competitive industries in which CVRD
operates. For additional information on factors that could cause CVRD's actual
results to differ from expectations reflected in forward-looking statements,
please see CVRD's reports filed with the Comissao de Valores Mobiliarios and the
U.S. Securities and Exchange."
COMPANHIA VALE DO RIO DOCE
INDEX TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Page
Report of PricewaterhouseCoopers Auditores Independentes F-2
Condensed Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001 F-3
Condensed Consolidated Statements of Income for the Nine-month periods
ended September 30, 2002 and 2001 F-5
Condensed Consolidated Statements of Cash Flows for the Nine-month periods
ended September 30, 2002 and 2001 F-6
Condensed Consolidated Statements of Changes in Stockholders' Equity for
the Nine-month periods ended September 30, 2002 and 2001 F-7
Notes to the Condensed Consolidated Financial Information F-8
Additional Information F-19
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of Companhia Vale do Rio Doce
We have reviewed the accompanying unaudited condensed consolidated balance sheet
of Companhia Vale do Rio Doce and subsidiaries as of September 30, 2002, and the
unaudited condensed consolidated statements of income, of cash flows and of
changes in stockholders' equity for the nine-month periods ended September 30,
2002 and 2001 These financial statements are the responsibility of the
Company's management The unaudited financial information of certain affiliates,
the investments in which total US$202 million at September 30, 2002 and equity
in earnings which total US$16 million and US$7 million for the nine month
periods ended September 30, 2002 and 2001, respectively, and that of certain
subsidiaries, which statements reflect total assets of US$674 million at
September 30, 2002 and total revenues of US$133 million and US$ 197 million
consolidated in the nine-month periods ended September 30, 2002 and 2001,
respectively, were reviewed by other independent accountants whose reports
thereon have been furnished to us.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole Accordingly, we do not express such an
opinion.
Based on our reviews and the reports of other accountants, we are not aware of
any material modifications that should be made to the condensed consolidated
interim financial statements referred to above for them to be in conformity with
accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Companhia Vale do Rio Doce and subsidiaries as of December 31, 2001, and the
related consolidated statements of income, shareholders' equity, and cash flows
for the year then ended (not presented herein) In our report dated March 28,
2002, we expressed an unqualified opinion on those consolidated financial
statements In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 2001 is fairly stated in
all material respects, in relation to the consolidated balance sheet from which
it has been derived.
PricewaterhouseCoopers
Auditores Independentes
Rio de Janeiro, Brazil
November 13, 2002
F-2
Condensed Consolidated Balance Sheets
Expressed in millions of United States dollars
(Except for numbers of shares)
September 30, December 31,
2002 2001
------ ------
(Unaudited)
Assets
Current assets
Cash and cash equivalents 1,402 1,117
Accounts receivable:
Related parties 105 106
Unrelated parties 500 443
Loans and advances to related parties 33 160
Inventories 243 323
Deferred income tax 378 265
Others 232 224
------ ------
2,893 2,638
Property, plant and equipment, net 2,849 3,813
Investments in affiliated companies and
joint ventures and other investments 666 1,227
Provision for losses on equity investments (86) (9)
Goodwill on acquisition of consolidated subsidiaries 373 540
Loans and advances:
Related parties 85 555
Unrelated parties 64 100
Judicial deposits 198 235
Deferred income tax 261 227
Prepaid pension cost 62 113
Other assets 127 83
------ ------
TOTAL 7,492 9,522
====== ======
F-3
Condensed Consolidated Balance Sheets
Expressed in millions of United States dollars (Continued)
September 30, December 31,
2002 2001
---- ----
(Unaudited)
Liabilities and stockholders' equity
Current liabilities
Suppliers 213 296
Payroll and related charges 68 85
Interest attributed to stockholders 267 340
Current portion of long-term debt
Related parties -- 22
Unrelated parties 443 274
Short-term debt 389 589
Loans from related parties 74 168
Others 148 147
------ ------
1,602 1,921
------ ------
Long-term liabilities
Employees postretirement benefits 109 187
Long-term debt
Related parties -- 156
Unrelated parties 2,637 2,014
Loans from related parties 36 21
Provisions for contingencies (Note 8) 358 452
Unrealized loss on derivative instruments 63 40
Others 72 86
------ ------
3,275 2,956
------ ------
Minority interests 7 5
------ ------
Stockholders' equity
Preferred class A stock - 600,000,000
no-par-value shares authorized and 138,575,913 issued 904 820
Common stock - 300,000,000 no-par-value
shares authorized and 249,983,143 issued 1,630 1,479
Treasury stock -4,751 (2001 - 91) preferred and 4,715,170
(2001 - 4,715,170) common shares (88) (88)
Additional paid-in capital 498 498
Other cumulative comprehensive income (5,285) (3,465)
Appropriated retained earnings 1,635 3,212
Unappropriated retained earnings 3,314 2,184
------ ------
2,608 4,640
------ ------
TOTAL 7,492 9,522
====== ======
See notes to condensed consolidated financial information.
F-4
Condensed Consolidated Statements of Income
Expressed in milions of United States dollars
(except number of shares and per-share amounts)
(Unaudited)
Nine months ended September 30
------------------------------
2002 2001
---- ----
Operating revenues, net of discounts, returns and allowances
Iron ore and pellets 2,078 1,937
Gold 90 100
Other metals 316 291
-------- --------
2,484 2,328
Revenues from transportation services 370 464
Aluminum products 310 224
Other products and services 27 83
-------- --------
3,191 3,099
Value-added tax (117) (102)
-------- --------
Net operating revenues 3,074 2,997
-------- --------
Operating costs and expenses
Cost of ores and metals sold (1,194) (1,155)
Cost of transportation services (196) (270)
Cost of aluminum products (273) (214)
Others (18) (76)
-------- --------
(1,681) (1,715)
Selling, general and administrative expenses (202) (188)
Research and development (36) (31)
Employee profit sharing plan (20) (21)
Others (112) (335)
-------- --------
(2,051) (2,290)
-------- --------
Operating income 1,023 707
-------- --------
Non-operating income (expenses)
Financial income 87 80
Financial expenses (352) (280)
Foreign exchange and monetary loss, net (826) (660)
Gain on sale of assets 49 784
Others (56) (43)
-------- --------
(1,098) (119)
-------- --------
Income(loss) before income taxes, equity results
and minority interests (75) 588
-------- --------
Income taxes
Current (4) 41
Deferred 262 2
-------- --------
258 43
-------- --------
Equity in results of affiliates and joint ventures 4 (8)
Change in provision for losses on equity investments (126) (45)
Minority interests 50 7
-------- --------
Net income 111 585
======== ========
Basic earnings per Common and Preferred Class A Share 0.29 1.52
-------- --------
Weighted average number of shares outstanding
(thousands of shares)
Common shares 245,268 249,864
Preferred Class A shares 138,575 135,042
See notes to condensed consolidated financial information.
F-5
Condensed Consolidated Statements of Cash Flows
Expressed in millions of United States dollars
(Unaudited) Nine months ended September 30
------------------------------
2002 2001
---- ----
Cash flows from operating activities:
Net income 111 585
Adjustments to reconcile net income with
cash provided by operating activities:
Depreciation, depletion and amortization 171 174
Equity in results of affiliates and joint ventures (4) 8
Dividends received from affiliates and joint ventures 72 112
Change in provision for losses on equity investments 126 45
Deferred income taxes (262) (2)
Provisions for contingencies 54 87
Loss on disposals of property, plant and equipment 96 69
Gain on sale of investments (49) (784)
Pension plan 8 24
Foreign exchange and monetary (gains) losses 1,341 616
Unrealized loss on derivative instruments 50 38
Minority interest (50) (7)
Others 195 141
Decrease (increase) in assets:
Accounts receivable (172) (78)
Inventories (43) (17)
Others (84) (5)
Increase (decrease) in liabilities:
Suppliers (23) 30
Payroll and related charges 22 12
Others 39 42
------ ------
Net cash provided by operating activities 1,598 1,090
------ ------
Cash flows from investing activities:
Loans and advances receivable
Related parties
Additions (35) (4)
Repayments 52 69
Others 18 5
Guarantees and deposits (61) (15)
Additions to investments (1) (52)
Additions to property, plant and equipment (508) (444)
Proceeds from disposals of property, plant and equipment 2 2
Proceeds from disposal of assets 49 989
Net cash used to acquire subsidiaries (45) (516)
------ ------
Net cash used in investing activities (529) 34
------ ------
Cash flows from financing activities:
Short-term debt, net issuances (143) 133
Loans
Related parties
Additions 32 85
Repayments (29) (9)
Long-term debt
Related parties 11 3
Others 661 320
Repayments of long-term debt
Related parties (15) (27)
Others (245) (326)
Interest attributed to stockholders (329) (639)
Treasury stock -- (18)
------ ------
Net cash provided by (used in) financing activities (57) (478)
------ ------
Increase in cash and cash equivalents 1,012 646
Effect of exchange rate changes on cash and cash (727) (149)
equivalents
Cash and cash equivalents, beginning of period 1,117 1,211
------ ------
Cash and cash equivalents, end of period 1,402 1,708
====== ======
Cash paid during the period for:
Interest on short-term debt (31) (25)
Interest, net of interest capitalized of (111) (116)
$11 in 2002 and $9 in 2001
Income tax (4) (41)
Non-cash transactions
Special pension plan contribution in shares of CSN -- 249
Exchange of loans receivable for investments 40 35
See notes to condensed consolidated financial information.
F-6
Condensed Consolidated Statements of Changes in Stockholders' Equity
Expressed in millions of United States dollars
(except number of shares and per-share amounts)
(Unaudited)
Nine months ended September 30
------------------------------
2002 2001
---- ----
Shares
------
Preferred class A stock (including one special
share)
Balance January 1 138,575,913 820 709
Transfer from appropriated retained earnings - 84 111
------------ ------------ ------------
Balance September 30 138,575,913 904 820
------------ ------------ ------------
Common stock
Balance January 1 249,983,143 1,479 1,279
Transfer from appropriated retained earnings -- 151 200
------------ ------------ ------------
Balance September 30 249,983,143 1,630 1,479
------------ ------------ ------------
Treasury stock
Balance January 1 (4,719,921) (88) (61)
Acquisitions in 2001 -- (583,450) (18)
--------------------- ------------ ------------
Balance September 30 (4,719,921) (88) (79)
------------ ------------ ------------
Additional paid-in capital
Balance January 1and September 30 498 498
------------ ------------
Other cumulative comprehensive income
Amounts not recognized as net periodic pension
cost
Balance January 1 -- (100)
Excess of additional minimum liability -- 151
Tax effect on above -- (51)
------ ------
Balance September 30 -- --
------ ------
Cumulative translation adjustments
Balance January 1 (3,475) (2,972)
Change in the period (1,820) (934)
------ ------
Balance September 30 (5,295) (3,906)
------ ------
Unrealized gain on available-for-sale security
Balance January 1 -- 24
Change in the period -- (24)
------ ------
Balance September 30 -- --
------ ------
Adjustments relating to investments in affiliates
Balance January 1 10 8
Change in the period -- (1)
------ ------
Balance September 30 10 7
------ ------
Total other cumulative comprehensive income (5,285) (3,899)
------ ------
Appropriated retained earnings
Balance January 1 3,212 3,537
Transfer to retained earnings (1,342) (905)
Transfer to capital stock (235) (311)
------ ------
Balance September 30 1,635 2,321
------ ------
Retained earnings
Balance January 1 2,184 1,647
Net income 111 585
Interest attributed to stockholders
Preferred class A stock ($0 84 per share in (116) (239)
September 2002 and $1 72 in September 2001 )
Common stock ($0 84 per share in September 2002 and $1 72 in September 2001) (207) (425)
Appropriation from reserves 1,342 905
------ ------
Balance 3,314 2,473
------ ------
September 30
----------- ------ ------
Total stockholders' equity 383,839,135 2,608 3,613
----------- ------ ------
Comprehensive income is comprised as follows:
Net income 111 585
Amounts not recognized as net periodic pension cost -- 100
Cumulative translation adjustments (1,820) (934)
Unrealized loss on -- (24)
available-for-sale security
Adjustments relating to -- (1)
investments in affiliates
------ ------
Total comprehensive income (1,709) (274)
====== ======
See notes to condensed consolidated financial information.
F-7
Notes to the Condensed Consolidated Financial Information Expressed in
millions of United States dollars, unless otherwise stated
1 The Company and its operations
Companhia Vale do Rio Doce (CVRD) is a limited liability company,
duly organized and existing under the laws of the Federative Republic
of Brazil Our operations are carried out through CVRD and its
subsidiary companies, joint ventures and affiliates, and mainly
consist of mining, non-ferrous metal production and logistics, as
well as forestry, aluminum and steel activities Further details of
our operations and those of our joint ventures and affiliates are
described in Note 9.
The main consolidated operating subsidiaries are as follows:
Head office Principal
Subsidiary % ownership location activity
--------------------------------------------------------------- ----------------- ------------------ ------------------------------
Ferteco Mineracao S A - FERTECO 100 Brazil Iron ore and pellets
Para Pigmentos S A 76 Brazil Kaolin
SIBRA - Eletrosiderurgica Brasileira S A 98 Brazil Manganese and Ferrous alloys
Navegacao Vale do Rio Doce S A - DOCENAVE 100 Brazil Shipping
Vale do Rio Doce Aluminio S A - ALUVALE 100 Brazil Aluminum
Itabira Rio Doce Company Ltd - ITACO 100 Cayman Island Trading
Rio Doce International Finance Ltd - RDIF 100 Bahamas International finance
CELMAR S A - Industria de Celulose e Papel 85 Brazil Forestry
Florestas Rio Doce S A 100 Brazil Forestry
Rio Doce Manganese Europe - RDME 100 France Ferrous alloys
Urucum Mineracao S A 100 Brazil Iron ore and Ferrous alloys
Alumina do Norte do Brasil S A - Alunorte(as from June,2002) 57 Brazil Aluminum
Salobo Metais S A 100 Brazil Copper
2 Basis of consolidation
All majority-owned subsidiaries where we have both share and
management control are consolidated with elimination of all
significant intercompany accounts and transactions Investments in
unconsolidated affiliates and joint ventures are reported at cost
less amortized goodwill plus our equity in undistributed earnings or
losses Included in this category are certain joint ventures in which
we have majority ownership but, by force of shareholders' agreements,
do not have effective management control We provide for losses on
equity investments with negative stockholders' equity where we have
assumed commitments and for other than temporary decreases in market
value below carrying value where applicable.
3 Summary of significant accounting policies
Our condensed consolidated interim financial information as of
September 30, 2002 and for the periods of nine months ended September
30, 2002 and 2001 is unaudited However, in our opinion, such
condensed consolidated financial information includes all
adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results for interim periods
The results of operations for the nine month period ended September
30, 2002 are not necessarily indicative of the results to be expected
for the full fiscal year ending December 31, 2002.
This condensed interim financial information should be read in
conjunction with our consolidated financial statements for the year
ended December 31, 2001.
In accordance with SFAS 142 "Goodwill and Other Intangible Assets",
as from January 1, 2002 (or immediately for acquisitions after June
30, 2001):
o Goodwill relative to consolidated subsidiaries is no longer
amortized, but is aggregated to reporting units and subject at
least annually to testing for impairment, considering the
reporting unit as a whole.
F-8
o Goodwill relative to affiliates and joint ventures is no longer
amortized but is allocated to the respective investment and
included in the measurement of the gain or loss on sale, or the
loss arising from an other than temporary decline in the value of
the investment.
o Goodwill charged against earnings for the nine months ended
September 30, 2001 totaled $16 relating to subsidiaries and $55
relating to equity investees which were classified as other
operating expenses and equity in results of affiliates and joint
ventures, respectively.
o At September 30, 2002 we finalized the impairment test of our
goodwill and recorded a write-off of $86 related to Caemi
Mineracao e Metalurgia S.A.
SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived
Assets" has been adopted as from January 1, 2002.
Other long-term assets includes $62 related to ships held for sale.
4 Recently issued accounting pronouncement
In accordance with SFAS 143 "Accounting for Obligations Associated
with the Retirement of Long-Lived Assets", as from January 1, 2003.
This will require that:
o an existing legal obligation associated with the retirement of a
tangible long-lived asset be recognized as a liability when
incurred and the amount of the liability be initially measured at
a fair value.
o Subsequent changes in the liability that result from (a) passage
of time and (b) revisions in either the timing or amount of
estimated cash flows, be recognized; and
o Upon initially recognizing a liability for an asset retirement
obligation, the cost may be capitalized by recognizing an
increase in the carrying amount of the related long-lived asset.
Management is evaluating the impact of this standard.
5 Income tax
Income taxes in Brazil comprise federal income tax and social
contribution, which is an additional federal tax The statutory
enacted tax rates applicable in the periods presented are as follows:
%
---------
Federal income tax 25.00
Social contribution (*) 9.00
---------
Composite tax rate 34.00
=========
(*) As from January 1, 2003 the enacted rate is 8% However, new legislation if
passed would increase the rate to 9%.
F-9
The amount reported as income tax benefit in this consolidated
financial information is reconciled to the statutory rates as follows:
Nine months ended September 30
-----------------------------
2002 2001
---------- ----------
Income (loss) before income taxes, equity results and minority interests (75) 588
==== ====
Federal income tax and social contribution at statutory enacted rates 26 (200)
Adjustments to derive effective tax rate:
Tax benefit on interest attributed to stockholders 90 226
Exempt foreign income 174 185
Tax incentives 2 22
Valuation allowance reversal (provision) (37) (27)
Adjustments to reflect expected annual effective rate -- (167)
Other non-taxable items 3 4
---- ----
Federal income tax and social contribution benefit in consolidated
statements of income 258 43
==== ====
In 2000, we obtained approval of certain tax incentives relative to
our iron ore and manganese operations in Carajas The incentives
comprise full income tax exemption on defined production levels up to
2005 and partial exemption up to 2013 An amount equal to the tax
saving must be appropriated to a reserve account within stockholders'
equity and may not be distributed in the form of cash dividends.
Our subsidiary Alunorte has obtained 100% of federal income tax
exemption for a production limited up to 800,000 tons of alumina per
year, during a period of ten years, as from 2000 For a production
output higher than 800,000 up to 3,200,000 tons per year, such
exemption is reduced to 75%.
6 Inventories
September 30, 2002 December 31, 2001
---------------------------------------
Finished products and work-in-process
Iron ore 68 110
Gold 2 5
Manganese 23 27
Ferrous alloys 21 28
Alumina 12 -
Others 10 16
Spare parts and maintenance supplies 107 137
------------------- -------------------
243 323
=================== ===================
F-10
7 Investments
Equity
September 30, 2002 Investments Adjustments
------------------ ----------------- ------------
(1)Net Nine months
income ended
(loss) Septem- September 30,
Participation (1) Net for the ber 30, December 31,------------
in capital (%) equity period 2002 2001 2002 2001
-------------- ------- ---------- ------- ----------- ---- ----
Investments in affiliated companies and joint ventures voting total
------ -----
Steel
Usinas Siderurgicas de Minas Gerais S A - USIMINAS (2) 22.99 11.46 - (131) - 32 (15) 7
Companhia Siderurgica Nacional - CSN (3) - - - - - - - 9
Companhia Siderurgica de Tubarao - CST (4) 20.51 22.85 92 48 21 18 11 6
California Steel Industries Inc - CSI 50.00 50.00 208 24 104 98 12 (3)
Aluminum and bauxite
Mineracao Rio do Norte S A - MRN 40.00 40.00 388 77 155 154 31 21
Valesul Aluminio S A - VALESUL 54.51 54.51 66 15 36 51 8 8
Alumina do Norte do Brasil S A - ALUNORTE (6) 62.09 57.03 - (51) - 89 (23) (37)
Pellets
Companhia Nipo-Brasileira de Pelotizacao - NIBRASCO 51.11 51.00 21 4 11 16 2 6
Companhia Hispano-Brasileira de Pelotizacao - HISPANOBRAS 51.00 50.89 25 9 13 18 5 4
Companhia Coreano Brasileira de Pelotizacao - KOBRASCO 50.00 50.00 - (38) - 2 (2) (8)
Companhia Italo-Brasileira de Pelotizacao - ITABRASCO 51.00 50.90 20 8 10 13 4 4
Gulf Industrial Investment Company - GIIC 50.00 50.00 68 6 34 38 3 4
SAMARCO Mineracao S A 50.00 50.00 220 (6) 138 258 (3) (12)
Others
Fertilizantes Fosfatados S A - FOSFERTIL (5) 10.96 10.96 183 46 20 29 5 3
Caemi Mineracao e Metalurgia S A (7) 50.00 16.85 486 (6) 82 289 (1) -
Salobo Metais S A(6) 100.00 100.00 - - - 22 - -
Ferrovia Centro-Atlantica S A - FCA 20.00 45.65 - - - - - (28)
Others 30 84 (33) 8
-------------------------------------
654 1,211 4 (8)
Investments at cost
SIDERAR (market value $18and $11 in September 30, 2002
and December 31, 2001, respectively 4.85 4.85 11 15 - -
Unrealized holding gains on equity security - (4) - -
Others 1 5 - -
-------------------------------------
666 1,227 4 (8)
=====================================
Change in provision for losses on equity investments:
Aluminio Brasileiro S A - ALBRAS (59) (37)
Cia Ferroviaria do Nordeste (3) (8)
Companhia Coreano Brasileira de Pelotizacao - KOBRASCO (17) -
Ferroban (1) -
Ferrovia Centro-Atlantica S A - FCA (32) -
MRS Logistica S A (14) -
----------------
(126) (45)
================
(1) Based on US GAAP financial information.
(2) Value based on quoted market price at September 30, 2002 is $34 compared to net book value of $0.
(3) Investments sold in 2001.
(4) Value based on quoted market price at September 30, 2002 is $84 compared to net book value of $21.
(5) Value based on quoted market price at September 30, 2002 is $29 compared to net book value of $20.
(6) Alunorte and Salobo Metais S A are consolidated at September 30, 2002, after acquisition of control.
(7) Provision for losses was based on quoted market price of $82 compared to net book value of $168.
F-11
Goodwill which is no longer amortized as from January 1, 2002 in accordance with
SFAS 142, included in the above investments is as follows:
September 30, December 31,
Investee 2002 2001
---------------------------------------------------------- ------------------ ------------------
Alumina do Norte do Brasil S A - ALUNORTE - 24
Samarco Mineracao S A 28 41
Caemi Mineracao e Metalurgia S A - 223
------------------ ------------------
28 288
================== ==================
Information with respect to other major affiliates' financial
position and results of operations is as follows:
ALUNORTE ALBRAS MRN
-----------------------------------------------------------------------------------
June 30, December 31, September 30, December 31, September 30, December 31,
2002 2001 2002 2001 2002 2001
---------------- ------------------------------------------------------------------
Balance Sheet
Current assets 85 159 129 158 36 55
Other noncurrent assets 497 509 336 510 493 425
Current liabilities (84) (95) (183) (219) (37) (35)
Noncurrent liabilities (413) (431) (394) (463) (104) (59)
-------- ----------- ------------- ---------- ------------- ----------------
Stockholders' equity 85 142 (112) (14) 388 386
======== =========== ============= ========== ============= ================
Our participation 57.58% 45.58% 51.00% 51.00% 40.00% 40.00%
-------- ----------- ------------- ---------- ------------- ----------------
Investments 49 65 (57) (7) 155 154
======== =========== ============= ========== ============= ================
Nine months ended September 30
------------------------------------------------------------------------------
ALUNORTE ALBRAS MRN
-------------------- -----------------------------------------------------
2002 2001 2002 2001 2002 2001
-------- ----------- ------------- ---------- ------------- --------------
Statement of Operations
Net sales 138 227 393 382 118 148
Costs and expenses (189) (306) (509) (454) (28) (80)
Income (loss) before income
taxes (51) (79) (116) (72) 90 68
Income taxes - - - (8) (6)
Equity in results of affiliates - - - (5) (9)
--------- ----------- ------------- ---------- ------------- --------------
Net income (loss) (51) (79) (116) (72) 77 53
========= =========== ============= ========== ============= ==============
Our participation 44 96% 46 60% 51 00% 51 00% 40 00% 40 00%
Participation in results (23) (37) (59) (37) 31 21
Change in provision for losses - - 59 37 - -
--------------------------------------------------------------- ------------
Equity in results (23) (37) - - 31 21
========= =========== ============= ========== ============= ==============
(*) Six months ended June 30.
The provision for losses on equity investments of $86 and $9 at September 30,
2002 and December 31, 2001, respectively, relates to our investments in
affiliates which have reported negative stockholders' equity in their financial
statements prepared in accordance with US GAAP and in circumstances where we
have assumed commitments to fund our share of the accumulated losses, if
necessary, through additional capital contributions or other means Accordingly
we (a) first reduce the value of the investment to zero and (b) subsequently
provide for our portion of negative equity The provision is comprised as
follows:
F-12
Cia
Coreano- Ferrovia Cia
MRS Brasileira de Centro- Ferroviaria
Ferroban Logistica Pelotizacao Atlantica do Nordeste ALBRAS TOTAL
-------- --------------------- --------- ----------- ------ -----
Provision at January 1, 2001 - - - - - (15) (15)
Change in provision - results - - - - (8) (37) (45)
-------------------------------- ---------- ---------- --------- -------
- - - - (8) (52) (60)
Translation adjustment - - - 5 8 13
-------------------------------- ---------- ---------- --------- -------
Provision at September 30, 2001 - - - - (3) (44) (47)
================================ ========== ========== ========= =======
Provision at January 1, 2002 - - - - (2) (7) (9)
Additional loss provision (1) (14) (17) (32) (3) (59) (126)
-------------------------------- ---------- ---------- --------- -------
(1) (14) (17) (32) (5) (66) (135)
Payment of capital - - - 32 4 - 36
Translation adjustment 1 2 - - 1 9 13
- -
-------------------------------- ---------- ---------- --------- -------
Provision at September 30, 2002 - (12) (17) - - (57) (86)
================================ ========== ========== ========= =======
Dividends received from investees aggregated $72 and $112 in nine
month periods ended September 30, 2002 and 2001, respectively.
8 Commitments and contingencies
(a) At September 30, 2002, we had extended guarantees for borrowings
obtained by affiliates and joint ventures in the amount of $511, of
which $410 is denominated in United States dollars and the remaining
$101 in local currency These guarantees include $352 relative to
ALBRAS.
(b) We are defendants in numerous legal actions in the normal course of
business Based on the advice of our legal counsel, management
believes that the provision made against contingent losses is
sufficient to cover probable losses in connection with such actions.
The provision for contingencies and the related judicial deposits are composed as follows:
September 30, 2002 December 31, 2001
---------------------------------------------------------------------
Provision for Judicial Provision for Judicial
contingencies deposits contingencies deposits
---------------------------------------------------------------------
Labor claims 103 44 147 50
Civil claims 82 31 123 53
Tax - related actions 168 123 177 131
Others 5 - 5 1
----------------- --------------- ----------------- ---------------
358 198 452 235
================= =============== ================= ===============
Long-term 358 198 452 235
================= =============== ================= ===============
Labor -related actions principally comprise employee claims for (i)
payment of time spent travelling from their residences to the
work-place, (ii) additional payments for alleged dangerous or
unhealthy working conditions and (iii) various other matters, often
in connection with disputes about the amount of indemnities paid upon
dismissal.
Civil actions principally relate to claims made against us by
contractors in connection with losses alleged to have been incurred
by them as a result of various past government economic plans during
which full indexation of contracts for inflation was not permitted.
Tax-related actions principally comprise our challenges of changes in
basis of calculation and rates of certain revenue taxes.
F-13
We continue to vigorously pursue our interests in all the above
actions but recognize that probably we will incur some losses in the
final instance, for which we have made provisions.
Our judicial deposits are made as required by the courts for us to be
able to enter or continue a legal action When judgment is favorable
to us, we receive the deposits back; when unfavorable, the deposits
are delivered to the prevailing party.
Contingencies settled in the nine months period ended September 30,
2002 and 2001 aggregated $158 and $19, respectively, and additional
provisions aggregated $212 and $125 in the nine months periods ended
September 30, 2002 and 2001, respectively.
(c) We are defendants in two actions seeking substantial compensatory
damages brought by the Municipality of Itabira, State of Minas
Gerais, which we believe are without merit Due to the remote
likelihood that any loss will arise therefrom no provision has been
made in the financial statements with respect to these two actions.
(d) We are committed under a take-or-pay agreement to take delivery of
approximately 207,060 metric tons per year of aluminum from ALBRAS at
market prices This estimate is based on 51% of ALBRAS expected
production and, at a market price of $1,319 52 per metric ton at
September 30, 2002, represents an annual commitment of $273 Actual
take from ALBRAS was $192 and $176 during the nine month periods
ended September 30, 2002 and 2001, respectively.
Our subsidiary Alunorte is committed under a take-and-pay agreement
to purchase approximately 53,835 thousand metric tons of bauxite from
Mineracao Rio do Norte S A at a formula price, which is calculated
based on the London Metal Exchange (LME) quotation for aluminum At a
market price of US$ 18 94 per metric ton as of September 30, 2002, it
represents an annual commitment of $59 which approximates actual take
in 2002.
(e) We and BNDES entered into a contract, known as the Mineral Risk
Contract, in June 1997, relating to prospecting authorizations for
mining regions where drilling and exploration are still in their
early stages The Mineral Risk Contract provides for the joint
development of certain unexplored mineral deposits in approximately
two million identified hectares of land in the Carajas region, as
well as proportional participation in any financial benefits earned
from the development of such resources Iron ore and manganese
deposits already identified and subject to development are
specifically excluded from the Mineral Risk Contract.
(f) At the time of our privatization in 1997, we issued shareholder
revenue interests known in Brazil as "debentures" to our
then-existing shareholders, including the Brazilian Government The
Brazilian Securities Commission (CVM) authorized the public
distribution of these debentures and a request was made to the
Brazilian Central Bank for distribution abroad The terms of the
"debentures", which are more fully described in our consolidated
financial statements for the year ended December 31, 2001, were set
to ensure that our pre-privatization shareholders, including the
Brazilian Government, would participate alongside us in potential
future financial benefits that we are able to derive from exploiting
our mineral resources.
(g) At September 30, 2002 we have provided $14 for environmental
liabilities Such provisions relate to site restoration at mines
already closed or which are expected to be closed in the next two
years.
We use various judgments and assumptions when measuring our
environmental liabilities Changes in circumstances, law or
technology may affect our estimates and we periodically review the
amounts accrued and adjust them as necessary Our accruals do not
reflect unasserted claims because we are currently not aware of any
such issues Also the amounts provided are not reduced by any
potential recoveries under cost sharing, insurance or indemnification
arrangements because such recoveries are considered uncertain.
F-14
9 Segment and geographical information
Consolidated net income and principal assets are reconciled as
follows:
September 30, 2002
-----------------------------------------------------------------------------------
Holdings
--------------------------------------------
Non
Ferrous ferrous Logistics Forestry Aluminum(2) Steel Eliminations Consolidated
------------------------------------------------------------------------------------
RESULTS
Revenues - Export 3,067 119 30 - 264 - (1,318) 2,162
Revenues - Domestic 790 70 236 4 45 - (116) 1,029
Cost and expenses (3,639) (171) (142) 43 (408) (24) 1,518 (2,823)
Interest revenue 116 - 8 1 8 2 (48) 87
Interest expense (375) (5) (5) - (9) (6) 48 (352)
Depreciation, depletion and amortization (134) (22) (12) (1) (2) - - (171)
Pension plan (7) (1) - - - - - (8)
Equity (7) - (80) - (43) 8 - (122)
Income taxes 275 - (1) (14) (2) - - 258
Minority interest - - - - 51 - - 51
------------------------------------------------------------------------------------
Net income 86 (10) 34 33 (96) (20) 84 111
=====================================================================================
Sales classified by geographic destination:
Export market
Latin America 290 - 20 - 17 - (148) 179
United States ....................... 257 34 3 - 2 - (131) 165
Europe ................................ 1,322 81 4 - 234 - (536) 1,105
Middle East ........................... 151 - - - - - (26) 125
Japan ................................. 363 1 1 - - - (170) 195
Asia, other than Japan ................ 684 3 2 - 11 - (307) 393
------------------------------------------------------------------------------------
3,067 119 30 - 264 - (1,318) 2,162
Domestic market ....................... 790 70 236 4 45 - (116) 1,029
------------------------------------------------------------------------------------
3,857 189 266 4 309 (1,434) 3,191
====================================================================================
Assets :
Property, plant and equipment, net .... 2,046 313 127 42 321 - - 2,849
Capital expenditures .................. 380 56 30 14 28 - - 508
Investments in affiliated companies and
and joint ventures and other investments,
net provision for losses ............. 300 4 12 - 128 136 - 580
====================================================================================
Capital employed ...................... 2,168 137 140 26 196 16 5 2,688
(1) Includes $49 for profit on sales of assets.
(2)Control of ALUNORTE was acquired in June 2002 and it was consolidated from then.
F-15
September 30, 2001
-----------------------------------------------------------------------------------
Holdings
--------------------------------------------
Non
Ferrous ferrous Logistics Forestry(4) Aluminum Steel Eliminations Consolidated
------------------------------------------------------------------------------------
RESULTS
Revenues - Export ......................... 2,570 133 125 49 225 -- (986) 2,116
Revenues - Domestic ....................... 805 58 269 7 1 -- (157) 983
Cost and expenses ......................... (3,211) (446) 611 (209) 107 1,143 (2,146)
Interest revenue .......................... 97 1 6 7 5 -- (36) 80
Interest expense .......................... (256) (9) (7) -- (1) (3) 36 (240)
Depreciation, depletion and amortization .. (132) (23) (17) (2) -- -- -- (174)
Pension plan .............................. (19) (3) (2) -- -- -- -- (24)
Equity .................................... 5 -- (43) 11 (45) 19 -- (53)
Income taxes .............................. 47 -- (1) (3) -- -- -- 43
Minority interest
----------------------------------------------------------------------------------
Net income ................................ (94) 16 (116) 680 (24) 123 -- 585
==================================================================================
Sales classified by geographic destination:
Export market
Latin America ............................. 194 4 52 -- 8 -- (69) 189
United States ............................. 154 100 15 42 33 -- (57) 287
Europe .................................... 1,015 27 43 7 161 -- (450) 803
Middle East ............................... 149 -- 3 -- -- -- (57) 95
Japan ..................................... 395 -- 9 -- 12 -- (114) 302
Asia, other than Japan .................... 663 2 3 -- 11 -- (239) 440
----------------------------------------------------------------------------------
2,570 133 125 49 225 -- (986) 2,116
Domestic market ........................... 805 58 269 7 1 -- (157) 983
----------------------------------------------------------------------------------
3,375 191 394 56 226 -- (1,143) 3,099
==================================================================================
Assets :
Property, plant and equipment, ............ 2,693 203 294 130 -- -- -- 3,320
Capital expenditures ...................... 391 36 17 -- -- -- -- 444
Investments in affiliated companies and
and joint ventures and other investments, . 390 20 35 -- 179 194 -- 818
==================================================================================
Capital employed .......................... 2,805 194 302 127 (2) 10 (50) 3,386
(1) - Includes provisions $101 to reflect realizable value of assets
(2) - Includes $170 profit on sale of Bahia Sul Celulose S A - BSC and $507
profit on sale of Celulose Nipo-Brasileira S A - CENIBRA
(3) - Includes $107 profit on sale of Companhia Siderurgica Nacional - CSN
(4) - Up to September 2001 includes pulp and paper operation.
For more information on segments see the segment disclosures included in our
consolidated financial statements for the year ended December 31, 2001.
10 Derivative financial instruments
Volatility of interest rates, exchange rates and commodity prices are
the main market risks to which we are exposed - all three are managed
through derivative operations. These have the exclusive aim of
reducing exposure to risk. We do not use derivatives for speculation
purposes.
We monitor and evaluate our derivative positions on a regular basis
and adjust our strategy in response to market conditions. We also
periodically review the credit limits and credit worthiness of our
counter-parties in these transactions. In view of the policies and
practices established for operations with derivatives, management
considers the occurrence of non-measurable risk situations as
unlikely.
As from January 1, 2001 we adopted SFAS 133 "Accounting for
Derivative Financial Instruments and Hedging Activities", as amended
by SFAS 137 and SFAS 138, and began to recognize all derivatives on
our balance sheet at fair value. Accordingly we recognized an initial
transition adjustment of $3 as a charge in our statement of income
relative to net unrealized losses on contracts open as of December
31, 2000. Subsequently to January 1, 2001 all derivatives have been
adjusted to fair market value at each balance sheet date and the
change included in current earnings.
F-16
For the nine month periods ended September 30, 2002 and 2001 the
movement of unrealized and realized gains or losses on derivative
financial instruments is as follows:
Net Gains (losses)
---------------------------------------------------------------
Interest
Gold rates (libor) Currencies Alumina Total
---------- --------------------------- ------------------------
Initial unrealized gains and losses at January 1, 2001........... 9 (8) (4) - (3)
Change in the period............................................. 2 (39) (1) - (38)
(Gains) and losses realized in the period........................ (5) 6 2 - 3
---------- ------------- ------------- ------------------------
Unrealized gains and (losses) at September 30, 2001 6 (41) (3) - (38)
========== ============= ============= ========================
Unrealized gains and losses at January 1, 2002................... 7 (36) (4) - (33)
Gain recognized upon consolidation of Alunorte................... - - - 2 2
Change in the period............................................. 9) (51) 8 2 (50)
(Gains) and losses realized in the period........................ (2) 22 (2) - 18
---------- ------------- ------------- ------------------------
Unrealized gains and (losses) at September 30, 2002 (4) (65) 2 4 (63)
========== ============= ============= ========================
Realized and unrealized gains and losses are included in our income statement.
Final maturity dates for the above instruments are as follows:
Gold..................................................... December 2006
Interest rates (libor)................................... May 2007
Currencies............................................... May 2005
(a) Interest Rate and Exchange Rate Risk
Interest rate risks mainly relate to that part of the debt borrowed
at floating rates. The foreign currency debt is largely subject to
fluctuations in the London Interbank Offered Rate - LIBOR. That
portion of local currency denominated debt that is subject to
floating rates is linked to the Long Term Interest Rate - TJLP, fixed
quarterly by the Brazilian Central Bank. Since May 1998, we have used
derivative instruments to protect ourselves against fluctuations in
the LIBOR rate.
There is an exchange rate risk associated with our foreign currency
denominated debt. On the other hand, a substantial proportion of our
revenues are denominated in, or automatically indexed to, the U.S.
dollar, while the majority of costs are expressed in reais. This
provides a natural hedge against any devaluation of the Brazilian
real against the U.S. dollar. When events of this nature occur, the
immediate negative impact on foreign currency denominated debt is
offset over time by the positive effect of devaluation on future cash
flows.
With the advent of a floating exchange rate regime in Brazil in
January 1999, we adopted a strategy of monitoring market
fluctuations, using derivatives to protect against specific risks
from exchange rate variation.
From time to time we enter into foreign exchange derivative swap
transactions seeking to change the characteristics of our
real-denominated cash investments to US dollar-indexed instruments.
The extent of such transactions depends on our perception of market
and currency risk, but is never speculative in nature. All such
operations are marked-to-market at each balance sheet date and the
effect included in financial income or expense. During the nine
months ended September 30, 2002 and 2001 our use of such instruments
was not significant.
F-17
(b) Commodity Price Risk
We also use derivative instruments to manage exposure to changing
gold prices. Derivatives allow the fixing of an average minimum
profit level for future gold production. However, they may also have
the effect of eliminating potential gains on certain price increases
in the spot market for gold. We manage our contract positions
actively, and the results are reviewed at least monthly, allowing
adjustments to targets and strategy to be made in response to
changing market conditions.
In the case of gold derivatives, our policy has been to settle all
contracts through cash payments or receipts, without physical
delivery of product.
Our affiliate Albras and our subsidiary Alunorte manage the risk of
fluctuating aluminum prices using derivatives, allowing an average
minimum profit level for future production and ensuring stable cash
generation. However, they may also have the effect of eliminating
potential gains on certain price increases in the spot market for
aluminum.
F-18
Aluminum Area - VALESUL (Additional information) in thousands
------------------------------------------------------------------------------------------------------------------------------------
Information 2002
1Q 2Q 3Q 4Q Total
----------------------------------------------------------
Quantity sold - external market ........ MT (thousand) 9 12 8 29
Quantity sold - internal market ........ MT (thousand) 12 11 11 34
----------------------------------------------------------
Quantity sold - total .................. MT (thousand) 21 23 19 - 63
==========================================================
Average sales price - external market .. US$ 1,467.44 1,481.49 1,485.09 1,478.28
Average sales price - internal market .. US$ 1,906.21 1,865.52 1,779.65 1,852.10
Average sales price - total ............ US$ 1,720.97 1,663.20 1,654.96 1,679.61
Long-term indebtedness, gross .......... US$ 1,868 1,416 953 953
Short-term indebtedness, gross ......... US$ 685 555 409 409
----------------------------------------------------------
Total indebtedness, gross .............. US$ 2,553 1,971 1,362 - 1,362
==========================================================
Stockholders' equity ................... US$ 95,463 83,294 66,161 66,161
==========================================================
Net operating revenues ................. US$ 32,675 36,837 29,970 99,482
Cost of products ....................... US$ (25,335) (26,516) (19,815) (71,666)
Other expenses/revenues ................ US$ (2,751) (2,462) (2,249) (7,462)
Depreciation, amortization and depletion US$ 1,513 1,375 1,034 3,922
EBITDA ................................. US$ 6,102 9,234 8,940 - 24,276
Depreciation, amortization and depletion US$ (1,513) (1,375) (1,034) - (3,922)
----------------------------------------------------------
EBIT ................................... US$ 4,589 7,859 7,906 - 20,354
Non-operating result ................... US$ 23 409 165 597
Net financial result ................... US$ (250) 257 (301) (294)
----------------------------------------------------------
Income before income tax and social .... US$ 4,362 8,525 7,770 - 20,657
contribution
Income tax and social contribution ..... US$ (1,751) (2,394) (1,415) (5,560)
----------------------------------------------------------
Net income ............................. US$ 2,611 6,131 6,355 - 15,097
----------------------------------------------------------
Information 2001
1Q 2Q 3Q 4Q Total
---------------------------------------------------------
Quantity sold - external market MT (thousand) 2 9 7 5 23
Quantity sold - internal market MT (thousand) 14 17 11 11 53
---------------------------------------------------------
Quantity sold - total MT (thousand) 16 26 18 16 76
=========================================================
Average sales price - external market US$ 1,733.37 1,585.14 1,554.56 1,490.00 1,590.39
Average sales price - internal market US$ 2,155.46 2,047.69 1,934.35 1,887.58 2,054.36
Average sales price - total US$ 2,107.06 1,882.41 1,784.68 1,757.16 1,916.59
Long-term indebtedness, gross US$ 2,568 2,273 2,598 2,002 2,002
Short-term indebtedness, gross US$ 33,619 9,700 939 1,412 1,412
---------------------------------------------------------
Total indebtedness, gross US$ 36,187 11,973 3,537 3,414 3,414
=========================================================
Stockholders' equity US$ 83,138 85,219 78,024 92,780 92,780
=========================================================
Net operating revenues US$ 29,559 37,273 36,364 26,152 129,348
Cost of products US$ (20,205) (25,700) (25,657) (19,489) (91,051)
Other expenses/revenues US$ (2,526) (2,351) (1,372) (2,154) (8,403)
Depreciation, amortization and depletion US$ 1,693 1,282 1,548 1,296 5,819
EBITDA US$ 8,521 10,504 10,883 5,805 35,713
Depreciation, amortization and depletion US$ (1,693) (1,282) (1,548) (1,296) (5,819)
---------------------------------------------------------
EBIT US$ 6,828 9,222 9,335 4,509 29,894
Non-operating result US$ 24 (319) (594) 55 (834)
Net financial result US$ (1,525) (645) (1,409) (727) (4,306)
---------------------------------------------------------
Income before income tax and social US$ 5,327 8,258 7,332 3,837 24,754
contribution
Income tax and social contribution US$ (1,413) (2,116) (1,947) (745) (6,221)
---------------------------------------------------------
Net income US$ 3,914 6,142 5,385 3,092 18,533
---------------------------------------------------------
F-19
Aluminum Area - MRN (Additional information) in thousands
Information 2002
1Q 2Q 3Q 4Q Total
---------------------------------------------------------
Quantity sold - external market MT (thousand) 485 790 740 2,015
Quantity sold - internal market MT (thousand) 1,296 1,820 1,815 4,931
Quantity sold - total MT (thousand) 1,781 2,610 2,555 - 6,946
=========================================================
Average sales price - external market US$ 20.56 19.09 19.21 19.49
Average sales price - internal market US$ 19.46 18.01 18.16 18.45
Average sales price - total US$ 19.76 18.34 18.46 18.75
Long-term indebtedness, gross US$ 95,892 90,312 77,786 77,786
Short-term indebtedness, gross US$ 14,436 18,780 23,198 23,198
Total indebtedness, gross US$ 110,328 109,092 100,984 - 100,984
=========================================================
Stockholders' equity US$ 363,737 376,905 387,632 387,632
=========================================================
Net operating revenues US$ 32,074 43,006 42,594 117,674
Cost of products US$ (19,472) (28,845) (29,860) (78,177)
Other expenses/revenues US$ (786) (868) (774) (2,428)
Depreciation, amortization and depletion US$ 9,160 4,042 14,764 27,966
---------------------------------------------------------
EBITDA US$ 20,976 17,335 26,724 - 65,035
Depreciation, amortization and depletion US$ (9,160) (4,042) (14,764) - (27,966)
---------------------------------------------------------
EBIT US$ 11,816 13,293 11,960 - 37,069
Gain on investments accounted for by the US$ (542) 20,120 - 19,578
equity method
Non-operating result US$ (154) 12,792 16,860 29,498
Net financial result US$ (531) (326) 36 (821)
---------------------------------------------------------
Income before income tax and social US$ 10,589 45,879 28,856 - 85,324
contribution
Income tax and social contribution US$ (1,462) (7,707) 1,062 (8,107)
---------------------------------------------------------
Net income US$ 9,127 38,172 29,918 - 77,217
Information 2001
1Q 2Q 3Q 4Q Total
----------------------------------------------------------------
Quantity sold - external market MT (thousand) 581 886 954 992 3,413
Quantity sold - internal market MT (thousand) 1,604 1,946 1,806 2,183 7,539
Quantity sold - total MT (thousand) 2,185 2,832 2,760 3,175 10,952
===============================================================
Average sales price - external market US$ 22.70 21.99 22.16 22.32 22.27
Average sales price - internal market US$ 20.08 20.16 20.37 21.00 20.36
Average sales price - total US$ 21.39 21.08 20.99 21.67 20.95
Long-term indebtedness, gross US$ 700 7,929 22,038 22,038
Short-term indebtedness, gross US$ 1,456 1,400 11,594 706 706
Total indebtedness, gross US$ 2,156 1,400 19,523 22,744 22,744
===============================================================
Stockholders' equity US$ 353,154 371,665 357,602 385,943 385,943
===============================================================
Net operating revenues US$ 42,228 52,825 53,210 62,372 210,635
Cost of products US$ (21,382) (30,132) (28,883) (30,917) (111,314)
Other expenses/revenues US$ (1,007) (848) (808) (909) (3,572)
Depreciation, amortization and depletion US$ 8,349 (6,597) 24,279 9,149 35,180
----------------------------------------------------------------
EBITDA US$ 28,188 15,248 47,798 39,695 130,929
Depreciation, amortization and depletion US$ (8,349) 6,597 (24,279) (9,149) (35,180)
----------------------------------------------------------------
EBIT US$ 19,839 21,845 23,519 30,546 95,749
Gain on investments accounted for by the US$ (4,282) (5,522) 212 8,692 (900)
equity method
Non-operating result US$ 120 931 2,097 (7,429) (4,281)
Net financial result US$ 588 (810) (214) (295) (731)
----------------------------------------------------------------
Income before income tax and social US$ 16,265 16,444 25,614 31,514 89,837
contribution
Income tax and social contribution US$ (1,779) (2,215) (1,731) (3,173) (8,898)
----------------------------------------------------------------
Net income US$ 14,486 14,229 23,883 28,341 80,939
F-20
Aluminum Area - ALBRAS (Additional information) in thousands
------------------------------------------------------------------------------------------------------------------------------------
Information 2002
----
1Q 2Q 3Q 4Q Total
----------------------------------------------------
Quantity sold - external market MT (thousand) 84 108 101 293
Quantity sold - internal market MT (thousand) 4 2 3 9
----------------------------------------------------
Quantity sold - total MT (thousand) 88 110 104 - 302
Average sales price - external market US$ 1,318.33 1,409.42 1,288.20 1,341.52
Average sales price - internal market US$ 1,352.12 1,330.47 1,335.69 1,341.83
Average sales price - total US$ 1,319.81 1,332.13 1,289.68 1,313.92
Long-term indebtedness, gross US$ 524,095 506,633 498,857 498,857
Short-term indebtedness, gross US$ 72,938 48,840 20,156 20,156
----------------------------------------------------
Total indebtedness, gross US$ 597,033 555,473 519,013 - 519,013
====================================================
Stockholders' equity US$ 56,416 (17,901) (96,966) (96,966)
====================================================
Net operating revenues US$ 114,933 145,327 132,549 392,809
Cost of products US$ (69,656) (89,401) (78,909) (237,966)
Other expenses/revenues US$ (4,387) (3,114) (3,546) (11,047)
Depreciation, amortization and depletion US$ 4,733 4,640 9,305 18,678
----------------------------------------------------
EBITDA US$ 45,623 57,452 59,399 - 162,474
Depreciation, amortization and depletion US$ (4,733) (4,640) (9,305) (18,678)
----------------------------------------------------
EBIT US$ 40,890 52,812 50,094 - 143,796
Non-operating result US$ (3,489) 1,139 1,762 (588)
Net financial result US$ (8,875) (125,072) (153,515) (287,462)
----------------------------------------------------
Income before income tax and social US$ 28,526 (71,121) (101,659) - (144,254)
contribution
Income tax and social contribution US$ (2,241) 2,241 29,067 29,067
----------------------------------------------------
Net income US$ 26,285 (68,880) (72,592) - (115,187)
Information 2001
----
1Q 2Q 3Q 4Q Total
--------------------------------------------------------
Quantity sold - external market MT (thousand) 87 88 76 66 317
Quantity sold - internal market MT (thousand) 3 4 4 4 15
--------------------------------------------------------
Quantity sold - total MT (thousand) 90 92 80 70 332
Average sales price - external market US$ 1,530.02 1,468.13 1,387.58 1,279.75 1,426.64
Average sales price - internal market US$ 1,606.92 1,528.21 1,456.51 1,330.54 1,477.68
Average sales price - total US$ 1,532.90 1,470.68 1,390.89 1,282.77 1,428.99
Long-term indebtedness, gross US$ 527,685 496,058 496,941 450,400 450,400
Short-term indebtedness, gross US$ 176,879 167,370 137,258 183,017 183,017
--------------------------------------------------------
Total indebtedness, gross US$ 704,564 663,428 634,199 633,417 633,417
========================================================
Stockholders' equity US$ (32,491) (48,823) (87,118) 29,293 29,293
========================================================
Net operating revenues US$ 137,332 134,669 109,554 90,608 472,163
Cost of products US$ (79,813) (77,814) (64,130) (59,593) (281,350)
Other expenses/revenues US$ (9,256) (12,625) (3,422) (2,076) (27,379)
Depreciation, amortization and depletion US$ 5,144 4,541 10,298 5,251 25,234
--------------------------------------------------------
EBITDA US$ 53,407 48,771 52,300 34,190 188,668
Depreciation, amortization and depletion US$ (5,144) (4,541) (10,298) (5,251) (25,234)
--------------------------------------------------------
EBIT US$ 48,263 44,230 42,002 28,939 163,434
Non-operating result US$ (123) (964) 1,544 (369) 88
Net financial result US$ (61,008) (54,861) (91,046) 86,014 (120,901)
--------------------------------------------------------
Income before income tax and social US$ (12,868) (11,595) (47,500) 114,584 42,621
contribution
Income tax and social contribution US$ 7,586 (7,913) - (34,773) (35,100)
--------------------------------------------------------
Net income US$ (5,282) (19,508) (47,500) 79,811 7,521
F-21
Pelletizing Affiliates - KOBRASCO (Additional information) in thousands
------------------------------------------------------------------------------------------------------------------------------------
Information 2002
1Q 2Q 3Q 4Q Total
Quantity sold - external market MT (thousand) 436 534 850 1,820
Quantity sold - internal market MT (thousand) 420 478 - 898
-------------------------------------------------
Quantity sold - total MT (thousand) 856 1,012 850 - 2,718
=================================================
Average sales price - external market US$ 31.31 29.34 29.47 29.88
Average sales price - internal market US$ 32.08 29.24 - 30.51
Average sales price - total US$ 31.69 29.30 29.47 30.09
Long-term indebtedness, gross US$ 149,583 143,378 147,150 147,150
-------------------------------------------------
Total indebtedness, gross US$ 149,583 143,378 147,150 - 147,150
=================================================
Stockholders' equity US$ 22,910 2,527 (31,055) (31,055)
=================================================
Net operating revenues US$ 27,046 27,453 25,222 79,721
Cost of products US$ (20,944) (25,711) (20,671) (67,326)
Other expenses/revenues US$ 518 (636) 330 212
Depreciation, amortization and depletion US$ 834 795 637 2,266
-------------------------------------------------
EBITDA US$ 7,454 1,901 5,518 - 14,873
Depreciation, amortization and depletion US$ (834) (795) (637) - (2,266)
-------------------------------------------------
EBIT US$ 6,620 1,106 4,881 - 12,607
Other expenses/revenues - non cash (2,186) 1,722 2,554 2,090
Gain on investments accounted for by the 24 395 565 984
equity method
Non-operating result US$ - -
Net financial result US$ (1,879) (27,498) (46,398) (75,775)
-------------------------------------------------
Income before income tax and social US$ 2,579 (24,275) (38,398) - (60,094)
contribution
Income tax and social contribution US$ (1,334) 9,238 14,511 22,415
-------------------------------------------------
Net income US$ 1,245 (15,037) (23,887) - (37,679)
-------------------------------------------------
Information 2001
1Q 2Q 3Q 4Q Total
Quantity sold - external market MT (thousand) 561 523 493 558 2,135
Quantity sold - internal market MT (thousand) 420 489 630 510 2,049
-------------------------------------------------------
Quantity sold - total MT (thousand) 981 1,012 1,123 1,068 4,184
=======================================================
Average sales price - external market US$ 30.04 31.38 33.26 30.80 30.56
Average sales price - internal market US$ 31.80 31.29 29.77 31.64 31.32
Average sales price - total US$ 30.79 31.34 31.19 31.20 30.93
Long-term indebtedness, gross US$ 128,282 128,006 128,915 128,797 128,797
-------------------------------------------------------
Total indebtedness, gross US$ 128,282 128,006 128,915 128,797 128,797
=======================================================
Stockholders' equity US$ 15,872 12,059 2,941 3,938 3,938
=======================================================
Net operating revenues US$ 30,205 30,793 33,395 33,270 127,663
Cost of products US$ (22,561) (24,203) (26,877) (27,045) (100,686)
Other expenses/revenues US$ (855) (570) 20,788 (21,824) (2,461)
Depreciation, amortization and depletion US$ 971 856 776 781 3,384
-------------------------------------------------------
EBITDA US$ 7,760 6,876 28,082 (14,818) 27,900
Depreciation, amortization and depletion US$ (971) (856) (776) (781) (3,384)
-------------------------------------------------------
EBIT US$ 6,789 6,020 27,306 (15,599) 24,516
Other expenses/revenues - non cash - - (20,447) 5,505 (14,942)
Gain on investments accounted for by the 157 100 (214) 242 285
equity method
Non-operating result US$
Net financial result US$ (15,544) (10,482) (18,298) 17,515 (26,809)
-------------------------------------------------------
Income before income tax and social US$ (8,598) (4,362) (11,653) 7,663 (16,950)
contribution
Income tax and social contribution US$ 2,931 1,478 3,969 (8,148) 230
-------------------------------------------------------
Net income US$ (5,667) (2,884) (7,684) (485) (16,720)
-------------------------------------------------------
F-22
Pelletizing Affiliates - HISPANOBRAS (Additional information) in thousands
------------------------------------------------------------------------------------------------------------------------------------
Information 2002
----
1Q 2Q 3Q 4Q Total
Quantity sold - external market MT (thousand) 487 355 166 1,008
Quantity sold - internal market MT (thousand) 420 480 520 1,420
--------------------------------------------------
Quantity sold - total MT (thousand) 907 835 686 - 2,428
==================================================
Average sales price - external market US$ 31.33 31.49 31.39 31.40
Average sales price - internal market US$ 31.43 31.63 32.28 31.81
Average sales price - total US$ 31.38 31.56 32.07 31.64
--------------------------------------------------
Stockholders' equity US$ 35,655 31,166 25,299 25,299
==================================================
Net operating revenues US$ 28,370 26,763 23,716 78,849
Cost of products US$ (23,815) (21,992) (19,734) (65,541)
Other expenses/revenues US$ (689) (106) 1,211 416
Depreciation, amortization and depletion US$ 728 461 83 1,272
--------------------------------------------------
EBITDA US$ 4,594 5,126 5,276 - 14,996
Depreciation, amortization and depletion US$ (728) (461) (83) - (1,272)
--------------------------------------------------
EBIT US$ 3,866 4,665 5,193 - 13,724
Non-operating result US$ - -
Net financial result US$ 167 214 189 570
--------------------------------------------------
Income before income tax and social US$ 4,033 4,879 5,382 - 14,294
contribution
Income tax and social contribution US$ (1,515) (1,911) (1,598) (5,024)
--------------------------------------------------
Net income US$ 2,518 2,968 3,784 - 9,270
--------------------------------------------------
Information 2001
----
1Q 2Q 3Q 4Q Total
Quantity sold - external market MT (thousand) 312 336 422 148 1,218
Quantity sold - internal market MT (thousand) 520 560 460 850 2,390
-------------------------------------------------------
Quantity sold - total MT (thousand) 832 896 882 998 3,608
=======================================================
Average sales price - external market US$ 30.80 30.79 32.84 31.46 31.44
Average sales price - internal market US$ 30.57 31.55 32.44 31.05 31.41
Average sales price - total US$ 30.65 31.26 32.64 31.12 31.42
-------------------------------------------------------
Stockholders' equity US$ 33,954 31,555 30,491 30,491
=======================================================
Net operating revenues US$ 25,767 27,922 28,683 30,992 113,364
Cost of products US$ (21,684) (22,922) (23,018) (24,676) (92,300)
Other expenses/revenues US$ (20) (1,049) 212 (3,614) (4,471)
Depreciation, amortization and depletion US$ 739 649 410 987 2,785
-------------------------------------------------------
EBITDA US$ 4,802 4,600 6,287 3,689 19,378
Depreciation, amortization and depletion US$ (739) (649) (410) (987) (2,785)
-------------------------------------------------------
EBIT US$ 4,063 3,951 5,877 2,702 16,593
Non-operating result US$
Net financial result US$ 295 137 151 28 611
-------------------------------------------------------
Income before income tax and social US$ 4,358 4,088 6,028 2,730 17,204
contribution
Income tax and social contribution US$ (1,402) (3,854) (1,479) (1,140) (7,875)
-------------------------------------------------------
Net income US$ 2,956 234 4,549 1,590 9,329
-------------------------------------------------------
F-23
Pelletizing Affiliates - ITABRASCO (Additional information) in thousands
---------------------------------------------------------------------------------------------------------------------------
Information 2002
1Q 2Q 3Q 4Q Total
Quantity sold - external market MT (thousand) 644 533 572 1,749
Quantity sold - internal market MT (thousand) 233 169 243 645
---------------------------------------------------------
Quantity sold - total MT (thousand) 877 702 815 - 2,394
=========================================================
Average sales price - external market US$ 31.16 28.46 29.96 29.94
Average sales price - internal market US$ 31.90 27.79 30.33 30.23
Average sales price - total US$ 31.35 28.30 30.06 30.02
Long-term indebtedness, gross US$ 18,023 17,133 15,504 15,504
---------------------------------------------------------
Total indebtedness, gross US$ 18,023 17,133 15,504 - 15,504
=========================================================
Stockholders' equity US$ 26,771 24,055 20,177 20,177
=========================================================
Net operating revenues US$ 27,552 19,766 25,650 72,968
Cost of products US$ (23,597) (18,305) (22,581) (64,483)
Other expenses/revenues US$ (1,725) (166) (2,576) (4,467)
Depreciation, amortization and depletion US$ 126 142 233 501
---------------------------------------------------------
EBITDA US$ 2,356 1,437 726 - 4,519
Depreciation, amortization and depletion US$ (126) (142) (233) - (501)
---------------------------------------------------------
EBIT US$ 2,230 1,295 493 - 4,018
Non-operating result US$ - -
Net financial result US$ (132) 3,102 5,109 8,079
---------------------------------------------------------
Income before income tax and social US$ 2,098 4,397 5,602 - 12,097
contribution
Income tax and social contribution US$ (864) (2,135) (1,900) (4,899)
---------------------------------------------------------
Net income US$ 1,234 2,262 3,702 - 7,198
---------------------------------------------------------
Information 2001
---------------------------------------------------------
1Q 2Q 3Q 4Q Total
---------------------------------------------------------
Quantity sold - external market MT (thousand) 497 579 471 700 2,247
Quantity sold - internal market MT (thousand) 278 196 271 295 1,040
---------------------------------------------------------
Quantity sold - total MT (thousand) 775 775 742 995 3,287
=========================================================
Average sales price - external market US$ 31.13 31.96 31.80 31.67 31.63
Average sales price - internal market US$ 31.29 32.66 31.50 32.44 31.93
Average sales price - total US$ 31.19 31.62 31.69 31.90 31.72
Long-term indebtedness, gross US$ 503 - 407 522 522
---------------------------------------------------------
Total indebtedness, gross US$ 503 - 407 522 522
==========================================================
Stockholders' equity US$ 33,905 28,486 25,973 25,973
==========================================================
Net operating revenues US$ 23,770 25,723 50,254 27,388 99,747
Cost of products US$ (20,080) (20,290) (41,102) (21,628) (81,472)
Other expenses/revenues US$ 2,638 (2,534) (1,642) (1,441) (2,979)
Depreciation, amortization and depletion US$ 136 147 126 104 513
EBITDA US$ 6,464 3,046 7,636 4,423 15,809
Depreciation, amortization and depletion US$ (136) (147) (126) (104) (513)
---------------------------------------------------------
EBIT US$ 6,328 2,899 7,510 4,319 15,296
Non-operating result US$
Net financial result US$ 1,345 793 905 (2,498) 545
---------------------------------------------------------
Income before income tax and social US$ 7,673 3,692 8,415 1,821 15,841
contribution
Income tax and social contribution US$ (2,496) (5,032) (320) (1,087) (7,848)
---------------------------------------------------------
Net income US$ 5,177 (1,340) 8,095 734 7,993
---------------------------------------------------------
F-24
Pelletizing Affiliates - NIBRASCO (Additional information) in thousands
-----------------------------------------------------------------------------------------------------------------------------------
Information 2002
1Q 2Q 3Q 4Q Total
Quantity sold - external market MT (thousand) 407 686 290 1,383
Quantity sold - internal market - CVRD MT (thousand) 584 1,544 1,520 3,648
Quantity sold - internal market - Others MT (thousand) 9 27 32 68
--------------------------------------------------
Quantity sold - total MT (thousand) 1,000 2,257 1,842 - 5,099
==================================================
Average sales price - external market US$ 30.25 30.88 27.39 29.96
Average sales price - internal market US$ 30.49 31.58 25.69 28.95
Average sales price - total US$ 30.39 31.36 25.96 28.69
Long-term indebtedness, gross US$ 3,600 2,400 2,400 2,400
Short-term indebtedness, gross US$ 2,484 2,400 2,436 2,436
--------------------------------------------------
Total indebtedness, gross US$ 6,084 4,800 4,836 - 4,836
==================================================
Stockholders' equity US$ 30,547 27,653 21,419 21,419
==================================================
Net operating revenues US$ 30,929 66,759 51,746 149,434
Cost of products US$ (29,126) (57,043) (47,290) (133,459)
Other expenses/revenues US$ (735) (765) (115) (1,155)
Depreciation, amortization and depletion US$ 990 1,090 1,248 3,328
--------------------------------------------------
EBITDA US$ 2,058 10,041 5,589 - 18,148
Depreciation, amortization and depletion US$ (830) (790) (1,248) - (2,868)
--------------------------------------------------
EBIT US$ 1,228 9,251 4,341 - 15,280
Other expenses/revenues - non cash 1,070 2,827 1,565 5,462
Non-operating result US$ - -
Net financial result US$ (1,216) (1,407) 386 (2,237)
--------------------------------------------------
Income before income tax and social US$ (1,058) 5,017 3,162 - 7,581
contribution
Income tax and social contribution US$ (186) (2,120) (1,451) (3,757)
--------------------------------------------------
Net income US$ (1,244) 2,897 1,711 - 3,824
--------------------------------------------------
Information 2001
1Q 2Q 3Q 4Q Total
Quantity sold - external market MT (thousand) 806 559 514 432 2,311
Quantity sold - internal market - CVRD MT (thousand) 1,169 1,572 929 871 4,541
Quantity sold - internal market - Others MT (thousand) 35 38 - 68 141
-------------------------------------------------------
Quantity sold - total MT (thousand) 2,010 2,169 1,443 1,371 6,993
=======================================================
Average sales price - external market US$ 30.16 30.00 30.48 30.10 30.20
Average sales price - internal market US$ 30.41 31.00 28.57 26.66 29.70
Average sales price - total US$ 30.31 31.00 29.22 27.90 29.80
Long-term indebtedness, gross US$ 6,000 4,800 4,800 3,600 3,600
Short-term indebtedness, gross US$ 2,619 2,400 2,505 2,400 2,400
-------------------------------------------------------
Total indebtedness, gross US$ 8,619 7,200 7,305 6,000 6,000
=======================================================
Stockholders' equity US$ 31,793 31,793 31,793 31,793
=======================================================
Net operating revenues US$ 61,181 66,499 43,126 37,635 208,441
Cost of products US$ (52,100) (54,365) (39,479) (34,185) (180,129)
Other expenses/revenues US$ (4,676) (2,794) 18,762 (17,926) (6,634)
Depreciation, amortization and depletion US$ 1,050 1,200 1,139 1,478 4,867
-------------------------------------------------------
EBITDA US$ 5,455 10,540 23,548 (12,998) 26,545
Depreciation, amortization and depletion US$ (1,050) (1,200) (1,139) (1,478) (4,867)
-------------------------------------------------------
EBIT US$ 4,405 9,340 22,409 (14,476) 21,678
Other expenses/revenues - non cash (16,535) (1,160) (17,695)
Non-operating result US$
Net financial result US$ (333) (138) (1,449) 544 (1,376)
-------------------------------------------------------
Income before income tax and social US$ 4,072 9,202 4,425 (15,092) 2,607
contribution
Income tax and social contribution US$ (1,647) (2,467) (1,497) (263) (5,874)
-------------------------------------------------------
Net income US$ 2,425 6,735 2,928 (15,355) (3,267)
-------------------------------------------------------
F-25
Pelletizing Affiliates - SAMARCO (Additional information) in thousands
-----------------------------------------------------------------------------------------------------------------------------------
Information 2002
1Q 2Q 3Q 4Q Total
Quantity sold - total MT (thousand) 3,301 3,436 3,871 - 10,608
=================================================
Average sales price - total US$ 28.48 28.78 27.93 - 28.38
Long-term indebtedness, gross US$ 92,788 86,584 76,181 76,181
Short-term indebtedness, gross US$ 169,170 180,539 169,538 169,538
-------------------------------------------------
Total indebtedness, gross US$ 261,958 267,123 245,719 - 245,719
=================================================
Stockholders' equity US$ 454,472 332,500 219,941 219,941
=================================================
Net operating revenues US$ 89,502 94,763 99,722 283,987
Cost of products US$ (48,379) (48,222) (46,416) (143,017)
Other expenses/revenues US$ (8,410) (3,272) (5,146) (16,828)
Depreciation, amortization and depletion US$ 5,882 6,508 5,036 17,426
-------------------------------------------------
EBITDA US$ 38,595 49,777 53,196 - 141,568
Depreciation, amortization and depletion US$ (5,882) (6,508) (5,036) - (17,426)
EBIT US$ 32,713 43,269 48,160 - 124,142
Other expenses/revenues - non cash US$ (762) (3,690) (5,915) - (10,367)
Gain on investments accounted for by the US$ 930 (4,606) (13,647) - (17,323)
equity method
Net financial result US$ (6,460) (37,008) (51,757) - (95,225)
-------------------------------------------------
Income before income tax and social US$ 26,421 (2,035) (23,159) - 1,227
contribution
Income tax and social contribution US$ (4,625) (3,260) (389) (8,274)
-------------------------------------------------
Net income US$ 21,796 (5,295) (23,548) (7,047)
-------------------------------------------------
Information 2001
1Q 2Q 3Q 4Q Total
Quantity sold - total MT (thousand) 3,399 2,919 2,312 2,571 11,201
=======================================================
Average sales price - total US$ 28.83 30.00 29.44 29.55 29.70
Long-term indebtedness, gross US$ 166,257 132,655 119,394 109,691 109,691
Short-term indebtedness, gross US$ 188,795 164,003 158,204 171,223 171,223
-------------------------------------------------------
Total indebtedness, gross US$ 355,052 296,658 277,598 280,914 280,914
=======================================================
Stockholders' equity US$ 447,177 431,353 355,487 355,487
=======================================================
Net operating revenues US$ 97,575 83,480 65,725 81,001 327,781
Cost of products US$ (50,703) (38,479) (30,735) (42,585) (162,502)
Other expenses/revenues US$ (7,786) (6,722) (16,798) 15,987 (15,319)
Depreciation, amortization and depletion US$ 8,016 6,476 3,759 3,526 21,777
-------------------------------------------------------
EBITDA US$ 47,102 44,755 21,951 57,929 171,737
Depreciation, amortization and depletion US$ (8,016) (6,476) (3,759) (3,526) (21,777)
EBIT US$ 39,086 38,279 18,192 54,403 149,960
Other expenses/revenues - non cash US$ (2,304) (1,307) (1,743) (7,689) (13,043)
Gain on investments accounted for by the US$ (1,560) (1,785) (3,643) 6,480 (508)
equity method
Net financial result US$ (31,269) (20,125) (52,000) 13,220 (90,174)
-------------------------------------------------------
Income before income tax and social US$ 3,953 15,062 (39,194) 66,414 46,235
contribution
Income tax and social contribution US$ (1,344) (3,164) 587 (5,874) (9,795)
-------------------------------------------------------
Net income US$ 2,609 11,898 (38,607) 60,540 36,440
-------------------------------------------------------
F-26
Indexes on Debt (Additional information) in million
09/30/02 09/30/01 12/31/01
-------- --------- --------
Current liabilities
Current portion of long-term debt - related parties .............. - 24 22
Current portion of long-term debt - unrelated parties ............ 443 236 274
Short-term debt .................................................. 389 649 589
Loans from related parties ....................................... 74 119 168
-------- --------- --------
906 1,028 1,053
Long-term liabilities
Long-term debt - related parties ................................. - 101 156
Long-term debt - unrelated parties ............................... 2,637 2,010 2,014
Loans from related parties ....................................... 36 4 21
-------- --------- --------
2,673 2,115 2,191
-------- --------- --------
Gross Debt ....................................................... 3,579 3,143 3,244
======== ========= ========
Gross interest ................................................... 169 196 242
Gross interest - annual estimated ................................ 225 242 -
EBITDA ........................................................... 1,383 1,387 1,772
EBITDA - annual estimated ........................................ 1,844 1,772 -
EBITDA/Gross interest - annual estimated ......................... 8.20 7.32 7.32
Gross Debt/EBITDA - annual estimated ............................. 1.94 1.77 1.83
Financial Result, net in million
09/30/02 09/30/01 12/31/01
-------- --------- --------
Financial expenses
Local debt ...................................................... (35) (49) (64)
Foreign debt .................................................... (126) (131) (140)
Related parties, net ............................................ (8) (16) (38)
-------- --------- --------
(169) (196) (242)
Labor and civil claims and tax-related actions .................. (58) (22) (28)
Tax on financial transactions CPMF / COFINS ..................... (11) (17) (38)
Derivatives ..................................................... (67) (40) (36)
Valia - Shares CSN x IGP-DI ..................................... (42) - -
Others .......................................................... (5) (5) (25)
-------- --------- --------
(352) (280) (369)
-------- --------- --------
Financial income
Markatable securities ........................................... 44 36 105
Others .......................................................... 43 44 30
................................................................... 87 80 135
-------- --------- --------
Financial expenses, net ......................................... (265) (200) (234)
-------- --------- --------
Monetary and exchange variation on liabilities .................. (1,505) (1,124) (648)
Monetary and exchange variation on assets ....................... 679 464 289
-------- --------- --------
Monetary and exchange variation, net ............................ (826) (660) (359)
-------- --------- --------
Financial result, net ........................................... (1,091) (860) (593)
======== ========= ========
F-27
Members of the Board of Directors, Audit Committee, Chief Executive Officer and Executive Directors
Board of Directors Chief Executive Officer
Roger Agnelli
Luiz Tarquinio Sardinha Ferro
Chairman Executive Officer (Finance and
Investor Relations)
Erik Persson Fabio de Oliveira Barbosa
Renato Augusto Zagallo Villela dos Santos Executive Officer (Planning and Control)
Gabriel Stoliar
Francisco Valadares Povoa
Joao Moises Oliveira Executive Officer (Human Resources and
Corporate Services)
Jose Marques de Lima Carla Grasso
Octavio Lopes Castello Branco Neto
Executive Officer (Ferrous Minerals)
Renato da Cruz Gomes Armando de Oliveira Santos Neto
Romeu do Nascimento Teixeira
Executive Officer (Logistics)
Guilherme Rodolfo Laager
Audit Commitee
Claudio Bernardo Guimaraes de Moraes Executive Officer (Holdings and
Business Development)
Eliseu Martins Antonio Miguel Marques
Marcos Fabio Coutinho
Executive Officer (Non-Ferrous)
Pedro Carlos de Mello Diego Cristobal Hernandez Cabrera
Ricardo Wiering de Barros
Eduardo de Carvalho Duarte Otto de Souza Marques Junior
Chief Accountant Head of Control Department
CRC-RJ 57439
F-28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMPANHIA VALE DO RIO DOCE
(Registrant)
Date: November 15, 2002
By: /s/ Fabio de Oliveira Barbosa
-----------------------------
Fabio de Oliveira Barbosa
Chief Financial Officer