6-K

MANAGEMENT’S DISCUSSION AND ANALYSIS

May 07, 2010

In this report, “Gerdau Ameristeel” and “Company” refer to Gerdau Ameristeel Corporation and its subsidiaries and 50% owned joint ventures, except where otherwise indicated. All amounts herein are reported in U.S. dollars. Certain statements in this report constitute forward-looking statements. Such statements that describe the Company’s assumptions, beliefs and expectations with respect to its operations, future financial results, business strategies and growth and expansion plans can often be identified by the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” and other words and terms of similar meaning. These forward-looking statements include, among others, statements with respect to the Company’s liquidity and capital resources, the impact of recently adopted accounting standards, the Company’s participation in the consolidation of the steel industry, the impact of compliance with environmental, health and safety laws, the impact of laws relating to greenhouse gases and air emissions, the impact of equipment failures, changes in capital markets, the Company’s financial and operating objectives and strategies to achieve them, and other statements with respect to the Company’s beliefs, outlooks, plans, expectations and intentions. The Company cautions readers that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those currently projected by the Company. In addition to those noted in the statements themselves, any number of factors could affect actual results, including, without limitation:

Excess global steel industry capacity and the availability of competitive substitute materials; the cyclical nature of the steel industry and the industries served by the Company and economic conditions in North America and worldwide; increases in the cost of steel scrap, energy and other raw materials; steel imports and trade regulations; a change in China’s steelmaking capacity or slowdown in China’s steel consumption; the Company’s participation in the consolidation of the steel industry; the substantial capital investment and similar expenditures required in the Company’s business; unexpected equipment failures and plant interruptions or outages; the Company’s level of indebtedness; the cost of compliance with environmental and occupational health and safety laws; the enactment of laws intended to reduce greenhouse gases and other air emissions; the Company’s ability to fund its pension plans; the ability to renegotiate collective bargaining agreements and avoid labor disruptions; the Company’s ability to successfully implement a new enterprise resource planning system; currency exchange rate fluctuations; actions or potential actions taken by the Company’s principal stockholder, Gerdau S.A.; the liquidity of the Company’s long-term investments, including investments in auction rate securities; and the Company’s reliance on its 50% owned joint ventures that it does not control.

Any forward-looking statements in this report are based on current information as of the date of this report and the Company does not undertake any obligation to update any forward-looking statements to reflect new information, future developments or events, except as required by law.

This Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the audited consolidated financial statements of the Company as of and for the year ended December 31, 2009 and the unaudited interim condensed consolidated financial statements as of and for the three months ended March 31, 2010, as publicly filed on SEDAR at www.sedar.com.

As of January 1, 2010, the Company adopted International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board, and the following disclosures, and associated unaudited interim condensed consolidated financial statements, are presented in accordance with IFRS. The comparative periods for fiscal 2009 have been restated in accordance with IFRS. See “Adoption of IFRS” under” Changes in Accounting Policies” for further information regarding the Company’s adoption of IFRS.

OVERVIEW

Gerdau Ameristeel is the second largest mini-mill steel producer in North America with annual manufacturing capacity of approximately 12 million tons of mill finished steel products. Through its vertically integrated network of mini-mills, scrap recycling facilities and downstream operations, the Company primarily serves customers throughout the United States and Canada. The Company’s products are generally sold to steel service centers, steel fabricators, or directly to original equipment manufacturers for use in a variety of industries, including non-residential, infrastructure, commercial, industrial and residential construction, metal building, manufacturing, automotive, mining, cellular and electrical transmission and equipment manufacturing. The Company’s majority shareholder is the Gerdau Group, a 100+ year old steel company, the leading company in the production of long steel in the Americas and one of the major specialty long steel suppliers in the world. The Company’s common shares are traded on the New York Stock Exchange and the Toronto Stock Exchange under the ticker symbol GNA.

OPERATING SEGMENTS

Gerdau Ameristeel is organized into two operating segments, mini-mills and downstream. The mini-mills segment consists of mini-mills in the United States and Canada. This segment manufactures and markets a wide range of long steel products, including reinforcing steel bar (“rebar”), merchant bars (“merchant”), structural shapes, beams, special sections and coiled wire rod (“rod”). The mills segment also produces rebar, merchant, rod and SBQ products which are transferred at arms-length, market prices to the downstream segment. The downstream segment is comprised of various secondary value-added steel businesses, which include

rebar fabrication and epoxy coating, railroad spike operations, cold drawn products, super light beam processing, and the production of elevator guide rails, grinding balls, wire mesh and wire drawing.

RESULTS OF OPERATIONS

The unaudited interim Condensed Consolidated Financial Statements of Gerdau Ameristeel for the three months ended March 31, 2010 and 2009 have been prepared in accordance with IFRS.

Three months ended March 31, 2010, compared to the three months ended March 31, 2009

The following tables summarize the results of Gerdau Ameristeel for the three months ended March 31, 2010 and 2009.

(US$ in thousands)


	Three Months Ended						Three Months Ended						% of Sales
	March 31,			% of			March 31,			% of			Increase			$ Increase
	2010			Sales			2009			Sales			(Decrease)			(Decrease)

Finished Steel Shipments (Tons) — excludes 50% owned joint ventures
Rebar		265,152						192,500
Merchant/Special Sections/Structurals		875,095						601,886
Rod		109,138						117,167
Fabricated Steel		231,680						273,709

Total		1,481,065						1,185,262

Net sales	$	1,137,725			100.0	%	$	1,037,699			100.0	%				$	100,026
Cost of sales		(1,031,828	)		-90.7	%		(989,779	)		-95.4	%		4.7	%		(42,049	)

Gross Profit		105,897			9.3	%		47,920			4.6	%		4.7	%		57,977

Operating expenses
Selling, general and administrative expenses		60,427			5.3	%		62,409			6.0	%		-0.7	%		(1,982	)
Other operating (income) expense, net		(2,140	)		-0.2	%		2,398			0.2	%		-0.4	%		(4,538	)

		58,287			5.1	%		64,807			6.2	%		-1.1	%		(6,520	)

Income (Loss) from operations		47,610			4.2	%		(16,887	)		-1.6	%		5.8	%		64,497

Income (Loss) from 50% owned joint ventures		7,676			0.7	%		(10,244	)		-1.0	%		1.7	%		17,920


Income (Loss) before finance costs, net and income taxes		55,286			4.9	%		(27,131	)		-2.6	%		7.5	%		82,417

Finance costs, net
Interest income		(416	)		-0.1	%		(1,401	)		-0.1	%		0.0	%		985
Interest expense — non-affiliated		23,377			2.1	%		41,956			4.0	%		-1.9	%		(18,579	)
Interest expense — affiliated		12,634			1.1	%		575			0.1	%		1.0	%		12,059
Foreign exchange loss (gain), net		1,749			0.2	%		(2,733	)		-0.3	%		0.5	%		4,482
Realized gain on investments		(2,528	)		-0.2	%		—			0.0	%		-0.2	%		(2,528	)

		34,816			3.1	%		38,397			3.7	%		-0.6	%		(3,581	)

Income (Loss) before income taxes		20,470			1.8	%		(65,528	)		-6.3	%		8.1	%		85,998

Income tax benefit		3,708			0.3	%		32,076			3.1	%		-2.8	%		(28,368	)


Net Income (Loss)	$	24,178			2.1	%	$	(33,452	)		-3.2	%		5.3	%	$	57,630

Net Income (Loss) Attributable To:
Equity holders of the Company	$	25,201			2.2	%	$	(31,480	)		-3.0	%		5.2	%	$	56,681
Noncontrolling interest		(1,023	)		-0.1	%		(1,972	)		-0.2	%		0.1	%		949

	$	24,178			2.1	%	$	(33,452	)		-3.2	%		5.3	%	$	57,630


Earnings per share attributable to equity holders of the Company
Basic earnings (loss) per share	$	0.06					$	(0.07	)
Diluted earnings (loss) per share	$	0.06					$	(0.07	)

The Company uses weighted average net selling prices (“net selling prices”) and metal spread as non-IFRS financial measures. The Company believes that net selling prices are commonly used in the steel industry to measure a company’s revenue performance. The Company believes that net selling prices represent a meaningful measure because it reflects the revenue earned net of freight. The Company’s method of calculating net selling prices may differ from the methods used by other companies and, accordingly, it may not be comparable to similarly titled measures used by other companies. Weighted average net selling prices were computed by dividing shipment revenue by steel shipments (tons) as follows:

(US$ in thousands, except as otherwise indicated)
(Excludes 50% owned joint ventures)


	Three Months Ended
	March 31,		March 31,		$ Increase			% Increase
	2010		2009		(Decrease)			(Decrease)
Mill external shipment revenue	$	802,105	$	663,593
Fabricated steel shipment revenue		185,344		298,459
Other products shipment revenue *		96,608		41,816
Freight		53,668		33,831

Net Sales	$	1,137,725	$	1,037,699

Mill external shipments (tons)		1,249,385		911,553
Fabricated steel shipments (tons)		231,680		273,709

Weighted Average Net Selling Price ($ / ton)
Mill external steel shipments	$	642	$	728		(86	)		-11.8	%
Fabricated steel shipments	$	800	$	1,090		(290	)		-26.6	%

Scrap Charged	$	266	$	200		66			33.0	%

Metal Spread (selling price less scrap)
Mill external steel shipments	$	376	$	528		(152	)		-28.8	%
Fabricated steel shipments	$	534	$	890		(356	)		-40.0	%

Mill Manufacturing Cost ($ / ton)	$	274	$	362		(88	)		-24.3	%


*		Other products shipment revenue includes ferrous scrap, nonferrous scrap, semifinished steel billets, and other building products.

Net sales: Net sales revenue for the three months ended March 31, 2010 increased 10.0% to $1.1 billion from $1.0 billion for the three months ended March 31, 2009 primarily due to increased shipments. Finished tons shipped for the three months ended March 31, 2010 were 1.5 million tons, an increase of 0.3 million tons, or 25.0%, compared to the three months ended March 31, 2009. Weighted average mill selling price was $642 per ton for the three months ended March 31, 2010, a decrease of approximately $86 per ton or 11.8% from the weighted average mill selling prices for the three months ended March 31, 2009.

Cost of sales: As a percentage of sales, cost of sales was 90.7% for the three months ended March 31, 2010 as compared to 95.4% for the three months ended March 31, 2009. Cost of sales, in total, increased as a result of the 25.0% increase in the volume of finished goods shipped to outside customers. As a percentage of sales, cost of sales decreased primarily as the result of lower manufacturing costs. Mill manufacturing costs were approximately 24.3% or $88 per ton lower in the three months ended March 31, 2010 compared to the three months ended March 31, 2009 primarily as a result of significant cost containment initiatives undertaken in 2009. Production levels during the three months ended March 31, 2010 increased 30% from the three months ended March 31, 2009. Partially offsetting the positive effects from manufacturing costs was the increase in scrap raw material cost used in production during the three months ended March 31, 2010 to $266 per ton from $200 per ton for the three months ended March 31, 2009. Additionally, during the three months ended March 31, 2009, the Company incurred an $18.4 million charge to write down certain of its inventory to its net realizable value.

Selling, general and administrative: Selling, general and administrative expenses for the three months ended March 31, 2010 decreased $2.0 million as compared to the three months ended March 31, 2009. The Company’s cost containment initiatives discussed above were also key drivers in helping the Company reduce its selling, general and administrative expenses. As a percentage of revenue, selling, general and administrative expenses decreased from 6.0% in 2009 to 5.3% in 2010 as a result of the increase in shipment volume of the Company’s products.

Income (Loss) from operations: As a percentage of net sales, income from operations for the three months ended March 31, 2010 was 4.2% compared to a loss from operations of 1.6% for the three months ended March 31, 2009. The factors driving this increase are described above.

Income (Loss) from 50% owned joint ventures: Income from the Company’s 50% owned joint ventures was $7.7 million for the three months ended March 31, 2010 compared to a loss of $10.2 million for the three months ended March 31, 2009. This increase was primarily attributable to Gallatin experiencing greater demand for its products which also resulted in increased production and lower manufacturing costs. Gallatin also experienced an increase in its average net selling price.

Interest expense — non-affiliated and affiliated, and interest income: Interest expense non-affiliated and affiliated, decreased $6.5 million for the three months ended March 31, 2010 compared to the three months ended March 31, 2009. The decrease in total interest expense was primarily due to a reduction in the average debt outstanding during the three months ended March 31, 2010 as well as a decrease in the floating interest rate of the Company’s Term Loan Facility. Partially offsetting the decrease in interest expense was a $1.0 million reduction in interest income primarily due to a reduction in the Company’s average outstanding investments during the 2010 period along with lower yields earned by the Company.

Foreign exchange (loss) gain: Foreign exchange loss for the three months ended March 31, 2010 was $1.7 million compared to a foreign exchange gain of $2.7 million for the three months ended March 31, 2009. Transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency. The foreign exchange loss during the three months ended March 31, 2010 is primarily attributable to the strengthening of the Canadian dollar in comparison to the U.S. dollar.

Realized gain on investments: During the three months ended March 31, 2010, the Company sold certain of its auction rate securities with a cost basis of $2.5 million and recognized gains on sales of these investments of $2.5 million.

Income taxes: The Company’s effective income tax rate was approximately (18.1)% and (49.0)%, respectively, for the three months ended March 31, 2010 and March 31, 2009. The 2010 and 2009 rate represents a high recovery due to the impact of the Company’s relatively fixed amount of tax exempt income. During the three months ended March 31, 2009, the Company recorded an expense of $4.0 million to reduce its deferred tax assets to their probable amount of utilization.

Segments: Gerdau Ameristeel is organized with two operating segments, mini-mills and downstream.

Mini-mills segment sales were $1.1 billion for the three months ended March 31, 2010, compared to $856.5 million for the three months ended March 31, 2009. Mini-mill segment sales include sales to the downstream segment of $133.1 million and $130.6 million for the three months ended March 31, 2010 and 2009, respectively. Mini-mill segment income from operations for the three months ended March 31, 2010 was $58.3 million compared to loss from operations of $50.7 million for the three months ended March 31, 2009. The increase in mini-mill segment income from operations for the three months ended March 31, 2010 as compared to the three months ended March 31, 2009 was primarily the result of increased external shipments along with significant cost savings initiatives implemented during 2009.

Downstream segment sales were $198.0 million for the three months ended March 31, 2010 compared to $311.8 million for the three months ended March 31, 2009. Downstream segment loss from operations was $8.2 million for the three months ended March 31, 2010 compared to income from operations of $22.8 million for the three months ended March 31, 2009, a decrease of $31.0 million, or 136.0% which was primarily attributable to a decrease of $290 per ton in the weighted average net selling price of fabricated steel along with a 15.4% decrease in the shipment volume. Due to the contract nature of this segment it tends to have a backlog of work to be completed over a period of up to 24 months. As a result, the economic downturn did not impact the level of downstream shipments until the second half of 2009.

Non-IFRS Financial Measures

EBITDA: EBITDA is calculated by adding income (loss) before interest and other expense on debt, taxes, depreciation, amortization of intangibles, realized gain on investments and foreign exchange loss/gain, net and deducting interest income. Management believes EBITDA, a non-IFRS measure, is a useful supplemental measure of cash available prior to debt service, capital expenditures and income tax. During the three months ended March 31, 2010, the Company changed its calculation of EBITDA to the equity method, which includes net earnings from 50% owned joint ventures and excludes cash distributions from 50% owned joint ventures. EBITDA should not be construed as an alternative to net income determined in accordance with IFRS as a performance indicator or to cash flows from operations as a measure of liquidity and cash flows. The Company’s method of calculating EBITDA may differ from the methods used by other companies and, accordingly, it may not be comparable to similarly titled measures used by other companies. Reconciliation of EBITDA to net income for the three months ended March 31, 2010 and 2009 is shown below:


	For the Three Months Ended
(US$ in thousands)	March 31, 2010			March 31, 2009 (1)
Net (loss) income	$	24,178		$	(33,452	)
Income tax benefit		(3,708	)		(32,076	)
Interest expense — non-affiliated		23,377			41,956
Interest expense — affiliated		12,634			575
Interest income		(416	)		(1,401	)
Depreciation		46,735			52,329
Amortization of intangibles		14,658			16,608
Foreign exchange loss (gain), net		1,749			(2,733	)
Realized gain on investments		(2,528	)		—

EBITDA	$	116,679		$	41,806


(1)		The Company has revised the EBITDA previously reported in its March 31, 2009 quarterly filing for the effects of the Company’s change in methodology used to calculate EBITDA as well as the effect on EBITDA of the adoption of IFRS. See the Company’s reconciliation of EBITDA for the three months ended March 31, 2009 under “Change in Accounting Policies”.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s operations require substantial cash for working capital, capital expenditures, debt service, pensions and dividends. The Company has met its liquidity requirements primarily with cash provided by operations, issuances of common stock and long-term borrowings.

As of March 31, 2010, the Company had $594.7 million of cash and short-term investments and approximately $497.9 million available under the Senior Secured Credit Facility (see Credit Facilities and Indebtedness section herein for an explanation of the availability calculation) which results in a total liquidity position of approximately $1.1 billion. During the remainder of 2010, the Company anticipates being able to generate sufficient cash flow from operations to fund its investing and financing requirements.

Cash Flows

Operating activities: Net cash used in operations for the three months ended March 31, 2010 was $58.5 million compared to $231.9 million of cash provided by operations for the three months ended March 31, 2009. The Company’s investment in working capital increased during the three months ended March 31, 2010 to support increased shipment and production levels. For the three months ended March 31, 2010, accounts receivable used $104.0 million of cash as compared to $109.9 million provided for the three months ended March 31, 2009 primarily due to increased sales during the current year in comparison to 2009. Inventory used $133.2 million of cash for the three months ended March 31, 2010 as compared to $201.5 million provided for the three months ended March 31, 2009 primarily due to increased raw material costs and inventory levels. Liabilities provided $109.7 in cash for the three months ended March 31, 2010 as compared to $74.9 million used for the same period in 2009. For the three months ended March 31, 2010 and 2009, cash paid for interest was $39.4 million and $79.9 million, respectively. The decrease in cash paid for interest was primarily due to a reduction in the average debt outstanding during the three months ended March 31, 2010 as well as a decrease in the floating interest rate of the Company’s Term Loan Facility.

Investing activities: Net cash used in investing activities was $144.5 million for the three months ended March 31, 2010 compared to $159.1 million in the three months ended March 31, 2009. For the three months ended March 31, 2010, cash paid for the purchases of investments was $164.9 million, capital expenditures totalled $10.2 million, and cash received from the sale of investments was $30.1 million. For the three months ended March 31, 2009 cash paid for the purchase of investments was $269.7 million, capital expenditures totalled $36.3 million and cash received from the sale of investments was $145.7 million.

Financing activities: Net cash used by financing activities was $6.8 million in the three months ended March 31, 2010 compared to $14.8 million in the three months ended March 31, 2009. For the three months ended March 31, 2010, cash paid for deferred

financing costs was $1.5 million, payments on term borrowings were $1.6 million and distributions to noncontrolling interest totaled $4.4 million. For the three months ended March 31, 2009, the principal component of financing activities was the payment of dividends of $8.6 million.

Outstanding Shares

As of April 30, 2009, the Company had 433,523,914 common shares outstanding.

Credit Facilities and Indebtedness

The following is a summary of existing credit facilities and other long-term debt:

Non-Affiliated Debt

Term Loan Facility: In September 2007, the Company entered into the Term Loan Facility which has three tranches maturing between 2012 and 2013. The Term Loan Facility bears interest at 6-month LIBOR plus between 1.00% and 1.25% and is payable semi-annually in March and September. The Company’s Term Loan Facility requires that the Company’s majority shareholder, Gerdau S.A. maintain financial covenants (see below) that are calculated under IFRS and presented in Brazilian Reais (“R$”). If Gerdau S.A. has a senior unsecured long-term foreign currency denominated debt rating from Standard & Poor’s Rating Services below BBB-, the interest rate for the term loan facility increases by 0.25%. At March 31, 2010 Gerdau S.A.’s debt rating from Standard & Poor’s Rating Services was BBB-. The Term Loan Facility is not secured by the assets of Gerdau Ameristeel or its subsidiaries but Gerdau S.A. and certain of its Brazilian affiliates have guaranteed the obligations of the borrowers.

In June 2009, the Company entered into an amendment with the lenders of the Term Loan Facility. The amendment provided temporary flexibility with respect to the facility’s covenants. The Term Loan Facility originally required the Company’s majority shareholder, Gerdau S.A. (on a consolidated basis, including the Company) to maintain a ratio of consolidated EBITDA to total interest expense equal to or more than 3.0:1.0, and a ratio of consolidated total debt to EBITDA equal to or less than 4.0:1.0. EBITDA is defined as earnings before interest, taxes, depreciation, amortization, and certain other adjustments as specified in the Term Loan Facility. The amendment revised the financial covenants so that Gerdau S.A. is required (on a consolidated basis, including the Company) to maintain a ratio of consolidated EBITDA to net interest expense equal to or more than 2.5:1.0 and a ratio of consolidated net debt to EBITDA of less than 5.0:1.0. The revised covenant levels remain in effect until September 30, 2010 unless cancelled by the Company prior to that time. The revised covenant levels can be cancelled by the Company at any time without penalty. As of March 31, 2010, Gerdau S.A.’s consolidated EBITDA to net interest expense ratio was 5.8:1.0. For the three months ended March 31, 2010, Gerdau S.A.’s consolidated EBITDA was R$4.6 billion and net interest expense was R$0.8 billion. As of March 31, 2010, Gerdau S.A.’s consolidated net debt to EBITDA ratio was 2.2:1.0 and consolidated net debt was R$10.1 billion.

The amendment also revised the interest charged on the outstanding borrowings effective when the financial covenants originally contained in the facility are not met. Under such circumstances, the interest rate charged would increase to 6-month LIBOR plus between 1.8% and 2.25% from the reporting date to September 30, 2010 unless cancelled by the Company prior to that time. The Company’s interest payment in March 2010 was based on this higher interest rate. The September 2010 interest payment will also be based on this higher interest rate unless the amendment is cancelled by the Company prior to that time. If Gerdau S.A. were to have a senior unsecured long-term foreign currency denominated debt rating from Standard & Poor’s Rating Services below
BBB-, the interest rate for the Term Loan Facility would increase an additional 0.45%. After September 30, 2010 or upon the Company’s cancellation of the revised covenants if sooner, these interest rate revisions would terminate.

In addition, the Term Loan Facility requires that, for each six-month interest period, certain specified export receivables of Gerdau S.A. and certain of its Brazilian subsidiaries have a market value, as determined in accordance with the provisions of the Term Loan Facility, of at least 125% of the principal and interest due on the Tranche A and B Loans outstanding under the Term Loan Facility during such interest period. If this export receivable coverage ratio is not met for any two consecutive interest periods or three non-consecutive interest periods, the Term Loan Facility would be secured by springing liens on the export receivables and related bank accounts. Any subsequent failure to meet the export receivable coverage ratio would constitute an event of default under the Term Loan Facility. As of the most recent interest period ending March 9, 2010, the export receivables were $233.1 million and the principal and interest due on the Tranche A and B Loans outstanding under the Term Loan Facility during this interest period was $25.1 million.

The Term Loan Facility also contains customary covenants restricting the Company from engaging in certain actions, including the ability of certain of its subsidiaries, including Gerdau Ameristeel US Inc. and GNA Partners, GP, to incur additional liens on such entities’ assets, enter into certain transactions with affiliates and enter into certain merger transactions. The Company may elect to prepay all or any portion of the loans under the Facility at any time without penalty or premium if done on an interest rate reset date.

The Company was in compliance with the terms of Term Loan Facility at March 31, 2010.

Senior Secured Credit Facility: In December 2009 the Company entered into a new $650 million senior secured asset-based revolving credit facility. The facility is scheduled to mature on December 21, 2012. The Company can borrow under the Senior Secured Credit Facility the lesser of (i) the committed amount, or (ii) the borrowing base (which is based upon a portion of the inventory and accounts receivable held by most of the Company’s operating units less certain reserves), minus outstanding loans, letter of credit obligations and other obligations owed under the Senior Secured Credit Facility. Since the borrowing base under the

Senior Secured Credit Facility is based on actual inventory and accounts receivable levels, available borrowings under the facility will fluctuate. Any borrowings under the Senior Secured Credit Facility are secured by the Company’s cash, inventory, accounts receivable and certain other assets not including real property, machinery or equipment.

Loans under the Senior Secured Credit Facility bear interest at a rate equal to one of several rate options (LIBOR, federal funds rate, bankers’ acceptance or prime rate) based on the facility chosen at the time of borrowing plus an applicable margin determined by excess availability from time to time. Borrowings under the Senior Secured Credit Facility may be made in US dollars or Canadian dollars, at the option of the Company. The Company’s Senior Secured Credit Facility requires the Company to comply with a Fixed Charge Coverage ratio of at least 1.1:1.0 at all times when the excess availability under the facility is less than $81.3 million. The Fixed Charge Coverage Ratio is defined in the agreement as the ratio of twelve month trailing EBITDA minus unfinanced capital expenditures to the sum of scheduled debt principal payments, prepayments of principal of debt, cash interest payments, cash taxes, cash dividends and share buybacks, and cash pension payments exceeding pension accruals during the period. EBITDA is defined as earnings before interest, taxes, depreciation, amortization, and certain other adjustments as specified in the Senior Secured Credit Facility. In addition, the Company’s Senior Secured Credit Facility contains restrictive covenants that limit its ability to engage in specified types of transactions without the consent of the lenders. These covenants may limit the Company’s ability to, among other things, incur additional secured debt, issue redeemable stock and preferred stock, pay dividends on its common shares, sell or otherwise dispose of certain assets, make acquisitions or other investments and enter into mergers or consolidations.

The Company was in compliance with the terms of the Senior Secured Credit Facility at March 31, 2010.

At March 31, 2010 and December 31, 2009, there were no loans outstanding under these facilities, and there were $70.9 million and $66.3 million, respectively, of letters of credit outstanding under these facilities. At March 31, 2010 and December 31, 2009, approximately $497.9 million and $420.2 million, respectively, was available under the Senior Secured Credit Facility.

Other debt: The Company had other outstanding debt of $59.2 million and $60.8 million as of March 31, 2010 and December 31, 2009, respectively, primarily related to industrial revenue bonds and capital expenditure financing.

The Company’s debt agreements contain covenants that if the Company’s business suffers a material adverse change or if other events of default under the loan agreements are triggered, then pursuant to cross default acceleration clauses, substantially all of the outstanding debt could become due and the underlying facilities could be terminated. See the contractual obligations table below for a maturity analysis of the Company’s borrowings based on contractual maturities.

Affiliated Debt

In November 2009, the Company entered into a loan agreement pursuant to which it borrowed $610.0 million from a subsidiary of Gerdau S.A. The loan is a senior, unsecured obligation of the borrower, bears interest at 7.95%, has no scheduled principal payments prior to maturity, and matures in full on January 20, 2020. Interest is payable semiannually, starting on July 20, 2010. The Company had $610.0 million recorded in Long-term debt — affiliated at March 31, 2010 and December 31, 2009, and had $15.9 million and $3.8 million, respectively, recorded in Accrued interest — affiliated.

The $610.0 million loan from a subsidiary of Gerdau S.A. (the “GHI Loan”) is guaranteed by the Company’s U.S. operating subsidiaries and contains customary covenants that limit the ability of the borrowers and the guarantors to incur additional liens on their respective assets or enter into sale leaseback transactions. A default under the GHI Loan would also trigger certain cross default provisions contained in the Company’s other debt instruments with the result that substantially all of the Company’s debt could become due and the Company’s existing credit facilities could be terminated.

Capital expenditures

The Company spent $10.2 million on capital projects in the three months ended March 31, 2010 compared to $36.3 million in the three months ended March 31, 2009. The most significant projects include an automatic bundling system at the St. Paul, Minnesota mill, a furnace transformer for the Jackson, Tennessee mill and improvements to the melt shop and bag house structure at the Beaumont, Texas mill. See the contractual obligations table below for the Company’s future capital expenditure obligations.

Off — balance sheet arrangements

The Company does not have off-balance sheet arrangements, financings or other relationships with unconsolidated special purpose entities.

Contractual obligations

The following table represents the Company’s contractual obligations as of March 31, 2010.


			Less than		More than 1, less		More than 3, less
(US$ in thousands)	Total		one Year		than 3 Years		than 5 Years		More than 5 Years
Long-term debt — non-affiliated (1)	$	1,749,210	$	3,171	$	1,446,160	$	256,879	$	43,000
Long-term debt — affiliated (1)		610,000		—		—		—		610,000
Interest — non-affiliated (2)		491,281		54,826		96,990		96,990		242,475
Interest — affiliated (2)		196,024		66,689		93,139		8,583		27,613
Operating leases (3)		101,320		21,603		37,097		29,408		13,212
Capital expenditures (4)		56,611		36,231		20,380		—		—
Unconditional purchase obligations (5)		193,253		193,253		—		—		—
Redeemable noncontrolling interest (7)		30,539		—		30,539		—		—
Pension funding obligations (6)		59,738		59,738		—		—		—

Total contractual obligations	$	3,487,976	$	435,511	$	1,724,305	$	391,860	$	936,300


(1)		Amounts are gross of deferred financing costs. Long-term debt — non-affiliated includes amounts due in less than one year which are classified as Short-term debt — non-affiliated on the Company’s unaudited interim condensed consolidated balance sheet.

(2)		Interest payment obligations include actual interest and estimated interest for floating-rate debt based on outstanding long-term debt at March 31, 2010. Interest includes the impact of the Company’s interest rate swap which is recorded as an other non-current liability in the unaudited interim Condensed Consolidated Balance Sheet as of March 31, 2010.

(3)		Includes minimum lease payment obligations for equipment and real property leases in effect as of March 31, 2010.

(4)		Purchase obligations for capital expenditure projects in progress.

(5)		A majority of these purchase obligations are for inventory and operating supplies and expenses used in the ordinary course of business.

(6)		Pension plan and other post retirement plan contributions beyond 2010 are not determinable since the amount of any contribution is heavily dependent on the future economic environment and investment returns on pension plan assets. Continued volatility in the global financial markets could have an unfavorable impact on the Company’s future pension funding obligations as well as net periodic benefit cost.

(7)		The call/put option underlying the redeemable noncontrolling interest can be exercised by the Company/noncontrolling interest beginning November 1, 2011, but is not required to be exercised by either party. For purposes of the maturity table, the Company has assumed that either the call or put will be exercised on November 1, 2011.

As of March 31, 2010, the Company had $24.6 million of unrecognized tax benefits not included in the contractual obligations table. Based on the uncertainties associated with the settlement of these items, the Company is unable to make reasonably reliable estimates of the period of the potential cash settlements, if any, with taxing authorities.

OUTLOOK

The Company is proud to say that the first quarter marked a return to profitability. After a challenging 2009, the Company experienced generally better than expected demand for its products during the quarter as the Company believes its customers are beginning to feel more confident in the U.S. economic recovery and this is translating into better activity in its end-markets.

In addition to better demand, first quarter performance improved thanks to the numerous actions undertaken during the last 18 months to increase cost efficiency and to lower the Company’s breakeven point. These actions, along with increased production, led to the lowest manufacturing cost the Company has experienced since 2007. The Company’s improved operational effectiveness is a testament to the hard work that was and continues to be performed by its employees.

Looking ahead, the Company believes that demand will continue to slowly improve during the second quarter as confidence in the recovery gradually grows and the Company continues to feel the effects of normal seasonality.

CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

Critical accounting policies are those that may have a material impact on the Condensed Consolidated Financial Statements and also require management to exercise significant judgment due to a high degree of uncertainty at the time the estimates are made. Senior management has reviewed the development and selection of the Company’s accounting policies, related account estimates and the disclosures set forth below with the Audit Committee of the Board of Directors. Management review of these estimates and assumptions is based on historical experience, changes in business conditions and other relevant factors as it believes to be reasonable under the circumstances. Changes in facts and circumstances may result in revised estimates, and actual results could differ from those estimates.

Revenue recognition

The Company recognizes revenues on construction contracts of its PCS operation using the percentage-of-completion method of accounting, measured by the percent of contract costs incurred to-date to estimated total contract costs. Use of the percentage-of-completion method requires the Company to estimate the gross profit over the life of the contract as well as the services performed to date as a proportion of the total services to be performed over the life of the contract. Changes in job performance, job conditions, and estimated profitability may result in a revision to revenues and costs, and are recognized in the period in which the revisions are determined.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is evaluated on a regular basis and adjusted based upon management’s best estimate of probable losses inherent in accounts receivable. In estimating probable losses, the Company reviews accounts that are past due, non-performing or in bankruptcy. The Company also reviews accounts that may be at risk using information available about the customer, such as financial statements and published credit ratings. General information regarding industry trends and the general economic environment is also used. The Company determines an estimated loss for specific accounts and estimates an additional amount for the remainder of receivables based on historical trends and other factors. Adverse economic conditions or other factors that might cause deterioration of the financial health of customers could change the timing and level of payments received and necessitates a change in estimated losses.

Inventories

Inventories are stated at the lower of cost and net realizable value. Net realizable value represents the estimated selling price at which the Inventories can be realized in the normal course of business after allowing for the cost of conversion from their existing state to a finished condition and for selling costs. The determination of net realizable value requires the use of estimates and judgment such as determining market selling prices. Changes in market selling prices could result in changes to the Company’s net realizable value estimates and result in further inventory writedowns or a reversal of previous inventory writedowns.

Impairment test of long-lived assets, including goodwill

At each reporting date, if any indication of impairment exists for long-lived assets, including goodwill, the Company performs an impairment test to determine if the carrying amounts are recoverable. The most recent reporting date in which the Company tested long-lived assets (including goodwill) for impairment was as of December 31, 2009 due to facts and circumstances indicating that the carrying amount of goodwill may not be recoverable. The Company’s goodwill resides in multiple cash generating units. The Company’s cash generating units with significant balances of goodwill include the Long Products cash generating unit, which consists of all facilities within the steel mills segment and the PCS and Rebar Fabrication Group cash generating units within the downstream segment. As of December 31, 2009, the date the long-lived asset impairment test was performed, the Long Products, Rebar Fabrication Group and PCS cash generating units had remaining goodwill balances of $1.7 billion, $56 million and $119 million, respectively. There were no significant differences between the carrying values and recoverable amounts of the Company’s cash generating units under IFRS and its reporting units under US GAAP (as reported in the Company’s US GAAP financial statements for the year ended December 31, 2009). As a result, consistent with US GAAP, the Company’s impairment analysis under IFRS as of December 31, 2009 indicated that the recoverable amount of the net assets of each cash generating unit significantly exceeded their respective carrying value and, therefore, no indication of impairment existed. Also consistent with US GAAP disclosures as of December 31, 2009, the Company performed a sensitivity analysis to determine the likelihood of impairment assuming reasonably possible changes in certain key valuation assumptions. The Company performed an analysis assuming a .50% increase in discount rate and then an analysis assuming a decrease of .50% in long-term growth rate. Both analyses indicated that each cash generating unit’s recoverable amount would still significantly exceed its respective carrying value.

The impairment review process is subjective and requires significant judgment throughout the analysis. If the estimates or related assumptions change in the future, the Company may be required to record an impairment charge. Additionally, continued adverse conditions in the economy and future volatility in the stock market could continue to impact the valuation of the Company’s cash generating units, which could trigger additional impairment of goodwill in future periods.

Valuation of Long-term investments

Long-term investments are comprised of variable rate debt obligations, known as auction rate securities, which are categorized as available-for-sale. These securities are recorded at fair value and are analyzed each reporting period for possible impairment factors and appropriate balance sheet classifications. Due to the lack of availability of observable market quotes on the Company’s investment portfolio of auction rate securities, the Company utilizes valuation models that are based on significant estimates and assumptions such as expected cash flow streams and collateral values, including assessments of counterparty credit quality, default risk underlying the security, discount rates and overall capital market liquidity.

Valuation of derivative financial instruments

rates and forward interest rate curves. Volatility in these inputs can cause significant changes in the fair value of swaps and other financial instruments over a short period of time. The fair value recognized in the unaudited interim condensed consolidated financial statements may not necessarily represent the amount of cash that the Company would receive or pay, as applicable, if the Company would settle the transactions on the unaudited interim condensed consolidated financial statements date. The Company has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for the types of derivative contracts it holds.

Environmental provisions

The Company is subject to environmental laws and regulations established by federal, state and local authorities and recognizes environmental reserves for the estimated cost of compliance based on currently available facts, present laws and regulations, and current technology. The Company employs a staff of environmental experts to administer all phases of its environmental programs, and uses outside experts where needed. These professionals develop estimates of potential liabilities at these sites based on projected and known remediation costs. This analysis requires the Company to make significant estimates, and changes in facts and circumstances could result in material changes in the resulting provision. The liability estimates are not reduced by possible recoveries from insurance or other third parties.

Deferred income taxes

The Company records deferred tax assets and liabilities based on the differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases. Deferred tax assets are also recognized for the estimated future effects of tax losses carried forward. The Company reviews the deferred tax assets in the different jurisdictions in which it operates periodically to assess the possibility of realizing such assets based on projected taxable profit, the expected timing of the reversals of existing temporary differences, the carry forward period of temporary differences and tax losses carried forward and the implementation of tax-planning strategies. Significant estimates and judgment are required in determining the provision for income taxes and related accruals, deferred tax assets and liabilities. In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain. Although the Company believes its estimates are reasonable, no assurance can be given that the final tax outcome will not be materially different from that which is reflected in the income tax provisions and accruals.

Pension and other post-employment benefits

In accounting for pension and post-retirement benefits, several statistical and other factors that attempt to anticipate future events are used to calculate plan expenses and liabilities. These factors include expected return on plan assets, discount rate assumptions, rate of future compensation increases, and future increases in health care costs. To estimate these factors, actuarial consultants also use estimates such as withdrawal, turnover, and mortality rates which require significant judgment. The actuarial assumptions used by the Company may differ materially from actual results in future periods due to changing market and economic conditions, regulatory events, judicial rulings, higher or lower withdrawal rates, or longer or shorter participant life spans.

The Company determines the present value of its defined benefit obligations and the fair value of its plan assets at least annually as of December 31. The Company is also required to determine these amounts at interim reporting dates if the amounts were to materially change during the period. The Company did not perform an actuarial valuation as of March 31, 2010. Primary actuarial assumptions were determined as follows for the December 31, 2009 valuation:

•		The expected long-term rate of return on plan assets is based on the Company’s estimate of long-term returns for equities and fixed income securities weighted by the allocation of assets in the plans. The rate is impacted by changes in general market conditions, but because it represents a long-term rate, it is not significantly impacted by short-term market swings. Changes in the allocation of plan assets would also impact this rate.

•		The assumed discount rate is used to discount future benefit obligations back to today’s dollars. The discount rate is as of the measurement date, December 31, and is sensitive to changes in interest rates.

•		The expected rate of compensation increase is used to develop benefit obligations using projected pay at retirement. This rate represents average long-term salary increases and is influenced by the Company’s long-term compensation policies.

•		The assumed health care trend rate represents the rate at which health care costs are assumed to increase and is based on historical and expected experience. Changes in projections of future health care costs due to general economic conditions and those specific to health care will impact this trend rate.

CHANGES IN ACCOUNTING POLICIES

Adoption of IFRS

In 2008, the Canadian Accounting Standards Board confirmed that Canadian publicly accountable enterprises will be required to adopt IFRS by 2011 to replace Canadian GAAP. Effective January 1, 2010, the Company early adopted IFRS in accordance with the exemption received from the Ontario Securities Commission in 2009.

The March 31, 2010 unaudited interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standards (“IAS”) 34, “Interim Financial Reporting” (“IAS 34”), as well as IFRS 1, “First-time Adoption of IFRS”, (“IFRS 1”), because they are part of the period covered by the Company’s first IFRS financial statements for the year ended December 31, 2010. The unaudited interim condensed consolidated financial statements have been prepared in accordance with those IFRS standards and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations required to be applied for annual periods beginning on or after January 1, 2010 which were issued and effective as of the date of approval by the Company’s Board of Directors of the unaudited interim condensed consolidated financial statements. The IFRS standards and IFRIC interpretations that will be applicable at December 31, 2010, including those that will be applicable on an optional basis, are not known with certainty at the time of preparing these interim financial statements. Accordingly, the accounting policies for the annual period that are relevant to the unaudited interim condensed consolidated financial statements will be determined only when the first full IFRS financial statements are prepared for the year ending December 31, 2010.

The principal IFRS accounting policies as set out in Note 2 of the Company’s unaudited interim condensed consolidated financial statements have been consistently applied to all the periods presented in the unaudited interim condensed consolidated financial statements except in instances where IFRS 1 either requires or permits an exemption. See Note 4 of the unaudited interim condensed consolidated financial statements for a description of the significant differences between the previous historical US GAAP accounting policies and the current IFRS accounting policies applied by the Company. The exemptions that the Company either elected to take advantage of or was required to apply are also discussed in Note 4 of the unaudited interim condensed consolidated financial statements.

All comparative information presented in the unaudited interim condensed consolidated financial statements has been adjusted from previously reported amounts under US GAAP. IFRS 1 requires an entity to reconcile equity, comprehensive income and cash flows for those restated prior periods. See Note 4 of the unaudited interim condensed consolidated financial statements for the Company’s reconciliations from US GAAP to IFRS for comparative information presented for equity, net loss (as reported in the company’s condensed consolidated statement of operations) and comprehensive income. The Company’s first time adoption of IFRS did not have a material impact on the Company’s total operating, investing or financing cash flows.

Reconciliation of EBITDA ($000s):

The following represents the reconciliation of EBITDA from the previously reported amount in prior periods for the effects of the Company’s change in methodology used to calculate EBITDA and the effect of IFRS:


	For the Three Months Ended
	March 31, 2009
EBITDA, as previously reported (1)	$	48,631
Adjustment for equity method (2)		(10,649	)

EBITDA	$	37,982
Pension and postemployment benefits (a)		3,325
Stock-based compensation (b)		601
Provisions (c)		(102	)

Subtotal — IFRS adjustments		3,824

EBITDA, as currently reported	$	41,806


(1)		EBITDA as reported in the March 31, 2009 quarterly filing.

(2)		During the three months ended March 31, 2010, the Company changed its calculation of EBITDA to the equity method, which now includes net earnings from 50% owned joint ventures and excludes cash distributions from 50% owned joint ventures.

Description of IFRS adjustments impacting EBITDA

The following narratives explain the significant differences between the previous historical US GAAP accounting policies and the current IFRS accounting policies applied by the Company. Only the differences having a significant impact on the Company’s EBITDA are described below. The following is not a complete summary of all of the differences between US GAAP and IFRS. As previously discussed, see Note 4 of the unaudited interim condensed consolidated financial statements for a description of all of the significant differences between the previous historical US GAAP accounting policies and the current IFRS accounting policies applied by the Company. Relative to the impacts on the Company, the descriptive caption next to each numbered item below corresponds to the same numbered and descriptive caption in the tables above, which reflect the quantitative impacts from each change.

(a) Pension and postemployment benefits

Under US GAAP, the Company recognized actuarial gains and in the statement of operations using the corridor approach. Under IFRS, another approach is permitted allowing a company to adopt a policy of recognizing all of its actuarial gains and losses in the period in which they occur in other comprehensive income. Under US GAAP, prior service cost should be recognized in other comprehensive income at the date of the adoption of the plan amendment and then amortized into income over the participants’ remaining years of service, service to full eligibility date, or life expectancy, as applicable. Under IFRS, prior service cost should be recognized on a straight-line basis over the average period until the benefits become vested. To the extent that benefits are vested as of the date of the plan amendment, the cost of those benefits should be recognized immediately in the statement of operations. Additionally, under US GAAP, the Company recognized curtailments in accumulated other comprehensive income to the extent that prior actuarial gains (losses) had been recognized in accumulated other comprehensive income and had not yet been recognized in the statement of operations based on the corridor approach. Under IFRS, curtailments are recognized immediately in the statement of operations when they occur.

This adjustment reflects the reclassification of actuarial gains and losses recognized as pension cost in the statement of operations under US GAAP to other comprehensive income for the period and the recognition of curtailments and prior service cost immediately in the statement of operations for vested participants. The Company had $22.3 million of curtailment gains during the three months ended December 31, 2009 which were recognized in accumulated other comprehensive income under US GAAP but were required to be recognized in the statement of operations under IFRS. The curtailment gains in the three months ended December 31, 2009 resulted primarily from facility closures as well as certain one-time retirement benefit changes implemented by the Company.

(b) Stock-based compensation

Under US GAAP, the Company recognizes compensation expense associated with share-based compensation plans with graded vesting features on a straight-line basis over the vesting period. Under IFRS, the Company is required to treat each “tranche” of a share-based compensation arrangement with a graded vesting schedule as several individual grants, which results in the recognition of compensation expense on an accelerated basis by comparison to US GAAP.

Under US GAAP, the Company discounted its provisions to reflect the time value of money when the aggregate amount of the liability, and the amount and timing of cash payments for the liability were fixed or reliably determinable. The discount rate used by the Company was one which would have produced an amount at which the liability theoretically could be settled in an arm’s-length transaction with a third party. After initial measurement of a liability, no adjustment in the obligation was made if there was a change in the discount rate. Under IFRS, a provision is discounted if the time value of money is material. IFRS requires the use of a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where all risk adjustments are reflected in the cash flows, then the cash flows are discounted at a risk-free rate, which means that typically, a government bond “yield” rate should be used. The re-measurement of a provision includes the effect of a change in discount rate. This adjustment is the result of the Company’s use of a pre-tax discount rate under IFRS that reflects current market assessments of the time value of money and the risks specific to the liability.

New IFRS standards and IFRIC interpretations Not Yet Adopted

Certain new accounting standards and IFRIC interpretations have been published that are mandatory for accounting periods beginning on or after January 1, 2011. The Company’s assessment of the impact of these standards and interpretations is set out below.

The Company does not expect the effects of the following standards and interpretations to have a material impact to the Company’s consolidated financial statements:

	•		IAS 24, “Related Party Disclosures”

	•		IAS 32, “Financial Instruments — Presentation”

	•		IFRIC 19, “Extinguishing Financial Liabilities with Equity Instruments”

The Company is still assessing the impact to the Company’s consolidated financial statements upon adoption of the following standards and amendments:

IFRS 9, “Financial Instruments”

In November 2009, the IASB issued IFRS 9, “Financial Instruments” as the first step in its project to replace IAS 39, “Financial Instruments: Recognition and Measurement”. IFRS 9 introduces new requirements for classifying and measuring financial instruments, including:

	•		The replacement of the multiple classification and measurement models in IAS 39, “Financial Instruments: Recognition and Measurement” with a single model that has only two classification categories: amortized cost and fair value;

	•		The replacement of the requirement to separate embedded derivatives from financial asset hosts with a requirement to classify a hybrid contract in its entirety at either amortized cost or fair value;

	•		The replacement of the cost exemption for unquoted equities and derivatives on unquoted equities with guidance on when cost may be an appropriate estimate of fair value.

This standard is effective for annual periods beginning on or after January 1, 2013, with earlier adoption permitted. The Company is still assessing the impact of adopting this standard.

Amendments to IFRIC 14, “IAS 19 — The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”

In November 2009, the IASB amended IFRIC 14, “IAS 19 — The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”. The amendments apply in limited circumstances: when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements. The amendments permit such an entity to treat the benefit of such an early payment as an asset. The amendments are effective for annual periods beginning on or after January 1, 2011, with earlier application permitted. The amendments must be applied retrospectively to the earliest comparative period presented. The Company is still assessing the impact of adopting this standard.

RISKS AND UNCERTAINTIES

Excess global capacity in the steel industry and the availability of competitive substitute material has resulted in intense competition, which may exert downward pressure on the prices of the Company’s products.

The Company competes with numerous foreign and domestic steel producers, largely mini-mill producers that produce steel by melting scrap in electric arc furnaces, but also integrated producers that produce steel from coke and iron ore. Competition is based on price, quality and the ability to meet customers’ product specifications and delivery schedules. Global over-capacity in steel manufacturing has in the past had a negative impact on steel pricing and could adversely affect the Company’s sales and profit margins in the future. The construction of new mills, expansion and improved production efficiencies of existing mills, restarting of currently idled facilities and the expansion of foreign steel production capacity all may contribute to an increase in global steel production capacity. Increases in global steel production capacity combined with high levels of steel imports into North America could exert downward pressure on the prices of the Company’s products, which could materially adversely affect its sales and profit margins. In addition, in the case of certain product applications, the Company and other steel manufacturers compete with manufacturers of other materials, including plastic, wood, aluminum (particularly in the automotive industry), graphite, composites, ceramics, glass and concrete. Product substitution could also have a negative impact on demand for steel products and place downward pressure on prices.

The cyclical nature of the steel industry and the industries the Company serves and economic conditions in North America and worldwide may cause fluctuations in the Company’s revenue and profitability.

The North American steel industry is cyclical in nature and may be affected by prevailing economic conditions in the major world economies. A recession in the United States, Canada or globally (or concerns that a recession is likely) could substantially decrease the demand for the Company’s products and adversely affect the Company’s financial condition, production, sales, margins, cash flows, and earnings. The Company is particularly sensitive to trends in cyclical industries such as the North American construction, appliance, machinery and equipment, and transportation industries, which are significant markets for the Company’s products.

Market conditions for steel products in the U.S. and Canada have fluctuated over the years. Significant portions of the Company’s products are also destined for the steel service center industry. The Company’s markets are cyclical in nature, which affects the demand for its finished products. A disruption or downturn in any of these industries or markets could materially adversely impact the Company’s financial condition, production, sales, margins, cash flows and earnings. The Company is also sensitive to trends and events that may impact these industries or markets, including strikes and labor unrest.

The Company’s profitability can be adversely affected by increases in raw material and energy costs.

The Company’s operating results are significantly affected by the cost of steel scrap and scrap substitutes, which are the primary raw materials for the Company’s mini-mill operations. Prices for steel scrap are subject to market forces largely beyond the Company’s control, including demand by U.S. and international steel producers, freight costs and speculation. The rate of worldwide steel scrap consumption, especially in China, can result in increased volatility in scrap prices. Metal spread, the difference between mill selling prices and scrap raw material cost, has been at a high level in recent years. The Company does not know how long these levels can be maintained and if scrap prices change without a commensurate change in finished steel selling prices, the Company’s profit margins could be materially adversely affected. The Company may not be able to pass on higher scrap costs to its customers by increasing mill selling prices and prices of downstream products. Further increases in the prices paid for scrap and other inputs could also impair the Company’s ability to compete with integrated mills and materially adversely affect sales and profit margins.

Energy costs represent a significant portion of the production costs for the Company’s operations. Some of the Company’s mini-mill operations have long-term electricity supply contracts with either major utilities or energy suppliers. The electricity supply contracts typically have two components: a firm portion and an interruptible portion. The firm portion supplies a base load for the rolling mill and auxiliary operations. The interruptible portion supplies the electric arc furnace power demand. This portion represents the majority of the total electric demand and, for the most part, is based on spot market prices of electricity. Therefore, the Company has significant exposure to the variances of the electricity market that could materially adversely affect operating margins and results of operations. Generally, the Company does not have long-term contracts for natural gas and therefore is subject to market supply variables and pricing that could materially adversely affect operating margins and results of operations.

Imports of steel into North America have adversely affected and may again adversely affect steel prices, and despite trade regulation efforts, the industry may not be successful in reducing steel imports.

While imports of steel into North America have recently moderated from historical highs, they have exerted in recent years, and may again in the future exert, downward pressure on steel prices, which adversely affects the Company’s sales and profit margins. Competition from foreign steel producers is strong and may increase in the event of increases in foreign steel production capacity, the relative strengthening of the U.S. dollar compared to foreign currencies or the reduction of domestic steel demand in the economies of the foreign producers. These factors encourage higher levels of steel exports to North America at lower prices. In the past, protective actions taken by the U.S. government to regulate the steel trade, including import quotas and tariffs, have been temporary in nature and, in certain cases, have been found by the World Trade Organization to violate global trade rules. Protective actions may not be taken in the future and, despite trade regulation efforts, unfairly priced imports could enter into the North American markets resulting in price depression, which could materially adversely affect the Company’s ability to compete and maintain sales levels and profit margins.

A change in China’s steelmaking capacity or a slowdown in China’s steel consumption could have a material adverse effect on domestic and global steel pricing and could result in increased steel imports into North America.

A significant factor in the worldwide strengthening of steel pricing over the past several years has been the significant growth in steel consumption in China, which at times has outpaced that country’s manufacturing capacity to produce enough steel to satisfy its own needs. At times this has resulted in China being a net importer of steel products, as well as a net importer of raw materials and supplies required in the steel manufacturing process. A reduction in China’s economic growth rate with a resulting reduction of steel consumption, coupled with China’s expansion of steel-making capacity, could have the effect of a substantial weakening of both domestic and global steel demand and steel pricing. Moreover, many Asian and European steel producers that had previously shipped their output to China may ship their steel products to other markets in the world including the North American market, which could cause a material erosion of margins through a reduction in pricing.

The Company’s participation in the consolidation of the steel industry could adversely affect the business.

The Company believes that there continues to be opportunity for future growth through selective acquisitions, given the pace of consolidation in the steel industry and the increasing trend of customers to focus on fewer key suppliers. As a result, the Company intends to continue to apply a selective and disciplined acquisition strategy. Future acquisitions, investments in joint ventures or strategic alliances may involve some or all of the following risks, which could materially adversely affect the Company’s business, results of operations, cash flows or financial condition:

	•		the difficulty of integrating the acquired operations and personnel into the existing business;

	•		the potential disruption of ongoing business;

	•		the diversion of resources, including management’s time and attention;

	•		incurrence of additional debt;

	•		the inability of management to maintain uniform standards, controls, procedures and policies;

	•		the difficulty of managing the growth of a larger company;

	•		the risk of entering markets in which the Company has little experience;

	•		the risk of becoming involved in labor, commercial or regulatory disputes or litigation related to the new enterprise;

	•		the risk of contractual or operational liability to venture participants or to third parties as a result of the Company’s participation;

	•		the risk of environmental or other liabilities associated with the acquired business;

	•		the inability to work efficiently with joint venture or strategic alliance partners; and

	•		the difficulties of terminating joint ventures or strategic alliances.

Acquisition targets may require additional capital and operating expenditures to return them to, or sustain, profitability. Acquisition candidates may also be financially distressed steel companies that typically do not maintain their assets adequately. Such assets may need significant repairs and improvements. The Company may also have to buy sizeable amounts of raw materials, spare parts and other materials for these facilities before they can resume, or sustain, profitable operation. Such financially distressed steel companies also may not have maintained appropriate environmental programs. These problems also may require significant expenditures by the Company or expose the Company to environmental liability.

There is also a risk that acquisition targets may have undisclosed or unknown liabilities and that the Company may not be indemnified for breaches of representations, warranties or covenants in the acquisition agreement. In addition, there is a risk that the Company may not successfully complete the integration of the business operations and product lines of an acquisition target with its own, or realize all of the anticipated benefits and synergies of the acquisition. If the benefits of an acquisition do not exceed the costs associated with the acquisition, the Company’s results of operations, cash flows and financial condition could be materially adversely affected.

Following an acquisition, the Company may also be required to record impairment charges relating to goodwill, identifiable intangible assets or fixed assets. Goodwill, identifiable intangible assets and fixed assets represent nearly half of the Company’s total assets. Economic, legal, regulatory, competitive, contractual and other factors, including changes in the manner of or use of the acquired assets, may affect the value of the Company’s goodwill, identifiable intangible assets and fixed assets. If any of these factors impair the value of these assets, accounting rules would require that the Company reduce its carrying value and recognize an impairment charge, which would reduce the Company’s reported assets and earnings in the year the impairment charge is recognized. In addition, an impairment charge may impact the Company’s financial ratios under its debt arrangements and affect its ability to pay dividends to holders of the Company’s common shares.

Future acquisitions may be required for the Company to remain competitive, and there can be no assurance that it can complete any such transactions on favorable terms or that it can obtain financing, if necessary, for such transactions on favorable terms. The Company also cannot assure that future transactions will improve its competitive position and business prospects as anticipated; if they do not, the Company’s results of operations may be materially adversely affected.

Steel manufacturing is capital intensive which may encourage producers to maintain production in periods of reduced demand which may in turn exert downward pressure on prices for the Company’s products.

Steel manufacturing is very capital intensive, resulting in a large fixed-cost base. The high levels of fixed costs of operating a mini-mill encourage mill operators to maintain high levels of output, even during periods of reduced demand, which may exert additional downward pressure on selling prices and profit margins in those periods.

Unexpected equipment failures may lead to production curtailments or shutdowns.

The Company operates several steel plants in different sites. Nevertheless, interruptions in the production capabilities at the Company’s principal sites would increase production costs and reduce sales and earnings for the affected period. In addition to periodic equipment failures, the Company’s facilities are also subject to the risk of catastrophic loss due to unanticipated events such as fires, explosions or violent weather conditions. The Company’s manufacturing processes are dependent upon critical pieces of steelmaking equipment, such as its electric arc furnaces, continuous casters, gas-fired reheat furnaces, rolling mills and electrical equipment, including high-output transformers, and this equipment may, on occasion, incur downtime as a result of unanticipated failures. The Company has experienced and may in the future experience material plant shutdowns or periods of reduced production as a result of such equipment failures. Unexpected interruptions in production capabilities would adversely affect the Company’s productivity and results of operations. Moreover, any interruption in production capability may require the Company to make additional capital expenditures to remedy the problem, which would reduce the amount of cash available for operations. The Company’s insurance may not cover the losses. In addition, long-term business disruption could harm the Company’s reputation and result in a loss of customers, which could materially adversely affect the business, results of operations, cash flows and financial condition.

The Company’s level of indebtedness could adversely affect its ability to raise additional capital to fund operations, limit the ability to react to changes in the economy or the industry and prevent it from meeting its obligations under its debt agreements.

The Company had $1.7 billion of net indebtedness as of March 31, 2010. The Company’s degree of leverage could have important consequences, including the following:

	•		it may limit the ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes;

	•		it may limit the ability to declare dividends on the common shares;

	•		a portion of the cash flows from operations must be dedicated to the payment of interest on existing indebtedness and is not available for other purposes, including operations, capital expenditures and future business opportunities;

	•		certain of the Company’s borrowings, including borrowings under its Term Loan Facility and Senior Secured Credit Facility, are at variable rates of interest and are subject to increases in interest rates;

	•		it may limit the ability to adjust to changing market conditions and place the Company at a competitive disadvantage compared to its competitors that have less debt;

	•		the Company may be vulnerable in a downturn in general economic conditions; and

	•		the Company may be required to adjust the level of funds available for capital expenditures.

Under the terms of its existing indebtedness, the Company is permitted to incur additional debt in certain circumstances; doing so could increase the risks described above.

The Term Loan Facility entered into to finance the acquisition of Chaparral requires Gerdau S.A. and its subsidiaries, including the Company, on a consolidated basis to maintain certain debt to last-twelve-months trailing EBITDA and EBITDA to interest ratios, as of the last day of each fiscal quarter. In addition, the term loan facility requires that, for each six-month interest period, certain specified export receivables of Gerdau S.A. and certain of its Brazilian subsidiaries have a market value, as determined in accordance with the provisions of the Term Loan Facility, of at least 125% of the principal and interest due on certain of the loans outstanding under the Term Loan Facility during such interest period. If this export receivable coverage ratio is not met for any two consecutive interest periods or three non-consecutive interest periods, the Term Loan Facility would be secured by springing liens on the export receivables and related bank accounts. Any subsequent failure to meet the export receivable coverage ratio would constitute an event of default under the Term Loan Facility. The Term Loan Facility also contains customary covenants restricting the Company’s ability, including the ability of two of the Company’s subsidiaries, Gerdau Ameristeel US Inc. and GNA Partners, GP, to incur additional liens on the Company’s assets, enter into certain transactions with affiliates and enter into certain merger transactions. A default under the Term Loan Facility could trigger certain cross default provisions contained in the Company’s other debt instruments with the result that substantially all of the Company’s debt could become due and the Company’s existing credit facilities could be terminated. In June 2009, the Company entered into an amendment which provides temporary flexibility with respect to the Term Loan Facility’s covenants through September 30, 2010. However, there is no assurance that future amendments will be granted by the lenders, if required.

The Senior Secured Credit Facility also contains customary covenants that limit the ability of the Company and its subsidiaries to, among other things, incur additional secured debt, make acquisitions and other investments, issue redeemable stock and preferred stock, pay dividends on the Common Shares, modify or prepay other indebtedness, sell or otherwise dispose of certain assets and enter into mergers or consolidations. These covenants may limit the Company’s flexibility in the operation of the business. A default under the Senior Secured Credit Facility could trigger certain cross default provisions contained in the Company’s other debt instruments with the result that substantially all of the Company’s debt could become due.

Environmental and occupational health and safety laws and regulations affect the Company and compliance may be costly and reduce profitability.

The Company is required to comply with an evolving body of environmental and occupational health and safety laws and regulations (“EHS Laws”), most of which are of general application but result in significant obligations in practice for the steel sector. These laws and regulations concern, among other things, air emissions, discharges to soil, surface water and ground water, noise control, the generation, handling, storage, transportation, and disposal of hazardous substances and wastes, the clean-up of contamination, indoor air quality and worker health and safety. These laws and regulations vary by location and can fall within federal, provincial, state or municipal jurisdictions. There is a risk that the Company has not been or, in the future, will not be in compliance with all such requirements. Violations could result in penalties or the curtailment or cessation of operations, any of which could have a material adverse effect on the Company’s results of operations, cash flows and financial condition.

For example, the Company is required to comply with a variety of EHS Laws that restrict emissions of air pollutants, such as lead, particulate matter and mercury. Because the Company’s manufacturing facilities emit significant quantities of air emissions, compliance with these laws does require the Company to make investments in pollution control equipment and to report to the relevant government authority if any air emissions limits are exceeded. The government authorities typically monitor compliance with these limits and use a variety of tools to enforce them, including administrative orders to control, prevent or stop certain activities; administrative penalties for violating certain EHS Laws; and regulatory prosecutions, which can result in significant fines and (in relatively rare cases) imprisonment. The Company is also required to comply with a similar regime with respect to its wastewater or stormwater discharges. EHS Laws restrict the type and amount of pollutants that Company facilities can discharge into receiving bodies of waters, such as rivers, lakes and oceans, and into municipal sanitary and storm sewers. Government authorities can enforce these restrictions using the same variety of tools noted above. The Company has installed pollution control equipment at its manufacturing facilities to address emissions and discharge limits, and has an environmental management system in place designed to reduce the risk of non-compliance.

EHS Laws relating to health and safety may also result in significant obligations for the Company. The Company’s manufacturing operations involve the use of large and complex machinery and equipment and the consequent exposure of workers to various potentially hazardous substances. As a consequence, there is an inherent risk to the health and safety of the Company’s workers’. From time to time, workplace illnesses and accidents, including serious injury and fatalities, do occur. Any serious occurrences of this nature may have a material adverse effect on the Company’s results of operations, cash flows and financial condition.

Other EHS Laws regulate the generation, storage, transport and disposal of hazardous waste. The Company generates certain wastes, including electric arc furnace (“EAF”) dust and other contaminants, some of which are classified as hazardous, that must be properly controlled and disposed of under applicable EHS Laws. Hazardous waste laws require that hazardous wastes be transported by an approved hauler and delivered to an approved recycler or waste disposal site and, in some cases, treated to render the waste non-hazardous prior to disposal. The Company has in place a system for properly handling, storing and arranging for the disposal of the wastes it produces, but non-compliance remains an inherent risk, and could have a material adverse effect on the Company’s results of operations, cash flows and financial condition.

Certain EHS Laws impose joint and several liability on certain classes of persons for the costs of investigation and clean-up of contaminated properties. Liability may attach regardless of fault or the legality of the original contaminating event (including off-site disposal). Some of the Company’s present and former facilities have been in operation for many years and, over such time, have used substances and disposed of wastes that may require clean-up. The Company could be liable for the costs of such clean-ups. Clean-up costs for any contamination, whether known or not yet discovered, could be substantial and could have a material adverse effect on the Company’s results of operations, cash flows and financial condition.

The Company has estimated clean-up costs based on a review of the anticipated remediation activities to be undertaken at each of its known contaminated sites. Although the ultimate costs associated with such remediation are not precisely known, the Company has estimated the present value of the total remaining costs as of March 31, 2010 to be approximately $19.4 million, with these costs recorded as a liability in the Company’s financial statements.

Changes to the regulatory regime, such as new laws or new enforcement policies or approaches could have a material adverse effect on the Company’s business, cash flows, financial condition, or results of operations. Examples of these kinds of changes include recently enacted laws on the emissions of mercury, a currently proposed interpretation of existing rules applicable to the disposal of scrap metal shredder residue, current initiatives with respect to lead emissions, and the emerging legislative responses to climate change.

The Company is also required to obtain governmental permits and approvals pursuant to EHS Laws. Any of these permits or approvals may be subject to denial, revocation or modification under various circumstances, including at the time the Company applies for renewal of existing permits. Failure to obtain or comply with the conditions of permits and approvals may adversely affect the Company’s results of operations, cash flows and financial condition and may subject the Company to significant penalties. In addition, the Company may be required to obtain additional operating permits or governmental approvals and incur additional costs.

The Company may not be able to meet all the applicable requirements of EHS Laws. Moreover, the Company may be subject to fines, penalties or other liabilities arising from actions imposed under EHS Laws. In addition, the Company’s environmental and occupational health and safety capital expenditures could materially increase in the future.

Laws and regulations intended to reduce greenhouse gases and other air emissions may be enacted in the future and could have a material adverse effect on the Company’s results of operations, cash flows and financial condition.

The Company anticipates that its Canadian and U.S. operations will, in the future, be affected by federal, provincial, and state level climate change initiatives intended to address greenhouse gases and other air emissions. Canadian provincial governments are also implementing other legislative measures, some that have recently taken effect and others planned for the relatively near term. One of the effects of this growing body of legal requirements is likely to be an increase in the cost of energy. Certain state governments in the United States, including California, and growing coalitions of Western and Northeastern/mid-Atlantic states, are also taking active steps to achieve greenhouse gas emission reductions, and the federal government is moving in a similar direction. In particular, various pieces of federal legislation that would limit greenhouse gas emissions have been introduced in the U.S. Congress, some form of which could be enacted in the future. In addition, the U.S. Environmental Protection Agency (EPA) issued its finding that current and projected atmospheric concentrations of certain greenhouse gases thereafter the public health and welfare, which could form the basis for further EPA action. The Canadian federal government is monitoring these U.S. developments closely, and has indicated that it will consider partnering with the U.S. in future greenhouse gas reduction and renewable energy initiatives. While the details of this emerging legislative regime are still in a state of flux in Canada and the United States, the outcome could have a material adverse effect on the Company’s results of operations, cash flows and financial condition.

The Company’s pension plans are currently underfunded.

The Company has several pension plans that are currently underfunded. Although the Company’s pension plans are funded in accordance with statutory requirements, adverse market conditions could require the Company to make additional cash payments to fund the plans which could reduce cash available for other business needs. As of December 31, 2009, the aggregate value of plan assets of the Company’s pension plans (including supplemental retirement plans of the former Co-Steel) was $534.2 million, while the aggregate projected benefit obligation was $754.8 million, resulting in an aggregate deficit of $220.6 million for which the

Company is responsible. As of December 31, 2009 the Company also had an unfunded obligation of $133.8 million with respect to post-retirement medical benefits. The Company made cash payments of $11.3 million to its defined benefit pension plan for the three months ended March 31, 2010. Funding requirements in future years may be higher, depending on market conditions, and may restrict the cash available for the business.

The Company may not be able to successfully renegotiate collective bargaining agreements when they expire and financial results may be adversely affected by labor disruptions.

As of March 31, 2010, approximately 30.7% of the Company’s employees were represented by the United Steel Workers (“USW”) and other unions under different collective bargaining agreements. The agreements have different expiration dates. Nine of the Company’s mini-mill facilities are unionized, with the agreements for two of the facilities having expired in the three month period ended March 31, 2010, two of the facilities expiring in the remainder of 2010, three of the facilities expiring in 2011, and two of the facilities expiring in 2012.

The Company may be unable to successfully negotiate new collective bargaining agreements at one or more facilities without any labor disruption when the existing agreements expire. A labor disruption could, depending on the operations affected and the length of the disruption, have a material adverse effect on the Company’s operations. Labor organizing activities could occur at one or more of the Company’s other facilities or at other companies upon which the Company is dependent for raw materials, transportation or other services. Such activities could result in a loss of production and revenue and have a material adverse effect on the Company’s results of operations, cash flows and financial condition.

The Company may not be able to successfully implement a new Enterprise Resource Planning System.

The Company expects to implement a new enterprise resource planning (“ERP”) system as part of the Company’s ongoing efforts to improve and strengthen its operational and financial processes and its reporting systems. Any difficulties encountered in the implementation or operation of the new ERP system or any difficulties in the operation of the current system could cause the Company to fail to meet customer demand for its product or could delay its ability to meet its financial reporting obligations which, in turn, could materially adversely affect the Company’s results of operations.

Currency fluctuations could adversely affect the Company’s financial results or competitive position.

The Company reports results in U.S. dollars. A portion of net sales and operating costs are in Canadian dollars. As a result, fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar may affect operating results. In addition, the Canadian operations compete with U.S. producers and are less competitive as the Canadian dollar strengthens relative to the U.S. dollar.

In addition, fluctuations in the value of the Canadian and U.S. dollar relative to foreign currencies may adversely affect the Company’s business. A strong Canadian or U.S. dollar makes imported steel relatively less expensive, potentially resulting in more imports of steel products into Canada or the United States by foreign competitors. The Company’s steel products that are made in Canada or the United States, as the case may be, may become relatively more expensive as compared to imported steel due to a strong Canadian or U.S. dollar, which could have a material negative impact on sales, revenues, margins and profitability.

Gerdau S.A. and its controlling shareholders control the Company, and are in a position to affect the Company’s governance and operations.

Gerdau S.A., the main holding company of Gerdau Group, beneficially owned 66.3% of the Company’s outstanding common shares as of March 31, 2010. Gerdau S.A., in turn, is controlled by the Gerdau Johannpeter family.

Five of the directors are members or former members of the management of Gerdau S.A., and four of the directors are members of the Gerdau Johannpeter family. So long as Gerdau S.A. has a controlling interest, it will generally be able to approve any matter submitted to a vote of shareholders including, among other matters, the election of the board of directors and any amendment to the Company’s articles or by-laws. In addition, Gerdau S.A. is able to significantly influence decisions relating to the Company’s business and affairs, the selection of senior management, its access to capital markets, the payment of dividends and the outcome of any significant transaction (such as a merger, consolidation or sale of all or substantially all of the Company’s assets). Gerdau Group has been supportive of the Company’s strategy and business and the Company has benefited from its support and resources, however the interest of Gerdau S.A. and the controlling family may be different from other shareholders’ and they may exercise their control over the Company in a manner inconsistent with the other shareholders’ interests.

Changes in the credit and capital markets may impair the liquidity of the Company’s long-term investments, including investments in auction rate securities, which may adversely affect the Company’s financial condition, cash flows and results of operations.

The Company has invested cash in long-term investments that are comprised of variable rate debt obligations (“auction rate securities”), which are asset-backed and categorized as available-for-sale. As of March 31, 2010, the fair value of these securities was $26.0 million. Despite the long-term nature of the securities’ stated contractual maturities, the Company has historically been able to quickly liquidate these securities. Auctions for certain auction rate securities failed because sell orders exceeded buy orders. As a result of these failed auctions or future failed auctions, the Company may not be able to liquidate these securities until a future

auction is successful, the issuer redeems the outstanding securities, or the securities mature. Although the Company intends to sell these investments when liquidity returns to the market for these securities, it may recognize additional losses in the future if uncertainties in these markets continue or the markets deteriorate further, which may have an adverse effect on the Company’s results of operations, cash flows and financial condition.

The Company relies on its 50% owned joint ventures for a portion of its income and cash flows, but does not control them or their distributions.

The Company has three 50%-owned joint ventures that contribute to its financial results but that it does not control. These joint ventures contributed earnings of $7.7 million to the Company’s net earnings for the three months ended March 31, 2010. As the Company does not control the joint ventures, it cannot, without agreement from its partner, cause any joint venture to distribute its income from operations to the Company. In addition, Gallatin’s existing financing agreement prohibits it from distributing cash to the Company unless specified financial covenants are satisfied. Additionally, since the Company does not control these joint ventures, they may not be operated in a manner that the Company believes would be in the joint ventures’, or the Company’s, best interests. Under terms of the partnership agreement governing the Gallatin joint venture, either partner has the right to compel the other partner to buy or sell its interest in the Gallatin joint venture, subject to certain procedures set out in the partnership agreement.

GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(US$ in thousands)
(Unaudited)


			March 31,		December 31,		January 1,
	Note		2010		2009		2009
ASSETS

Current assets
Cash and cash equivalents		13	$	429,801	$	631,293	$	482,535
Restricted cash		13		1,696		1,691		—
Short-term investments		13		164,894		25,000		205,817
Trade accounts receivable, net		5		566,389		460,066		677,569
Inventories		6		952,680		814,788		1,267,768
Costs and estimated earnings in excess of billings on uncompleted contracts				5,625		4,687		14,771
Income taxes receivable				85,036		93,652		28,455
Other current assets				27,511		22,643		23,033

Total current assets				2,233,632		2,053,820		2,699,948

Non-current assets
Investments in 50% owned joint ventures		9		141,315		148,609		161,901
Long-term investments		13		25,996		28,538		33,189
Property, plant and equipment, net		7		1,591,621		1,620,852		1,801,471
Goodwill		8		1,963,131		1,962,098		1,957,029
Other intangible assets, net		8		435,348		450,003		515,736
Deferred tax assets		10		34,007		29,760		—
Other non-current assets				43,707		23,459		32,305

Total non-current assets				4,235,125		4,263,319		4,501,631

TOTAL ASSETS			$	6,468,757	$	6,317,139	$	7,201,579


LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities
Trade accounts payable and accrued liabilities			$	340,623	$	225,111	$	199,582
Accrued salaries, wages and employee benefits				63,492		71,214		127,351
Accrued interest — non-affiliated				3,675		15,344		54,480
Accrued interest — affiliated				15,896		3,772		—
Provisions		15		35,675		35,126		34,551
Short-term debt — non-affiliated		12		3,171		3,174		1,893
Billings in excess of costs and estimated earnings on uncompleted contracts				20,895		26,212		45,687
Other current liabilities				13,579		12,959		20,932

Total current liabilities				497,006		392,912		484,476

Non-current liabilities
Long-term debt — non-affiliated		12		1,721,170		1,721,806		3,032,824
Long-term debt — affiliated		12		606,655		606,711		—
Retirement benefit obligations		14		348,956		348,684		339,055
Deferred tax liabilities		10		247,591		259,170		269,661
Redeemable non-controlling interest		13		27,497		32,439		46,927
Provisions		15		21,951		21,203		18,552
Other non-current liabilities				123,291		89,753		116,092

Total non-current liabilities				3,097,111		3,079,766		3,823,111

TOTAL LIABILITIES				3,594,117		3,472,678		4,307,587


Shareholders’ equity
Capital		18		2,536,839		2,535,883		2,531,516
Retained earnings				212,306		187,105		373,323
Other comprehensive income				98,915		94,893		(37,427	)

Equity attributable to equity holders of the Company				2,848,060		2,817,881		2,867,412
Equity attributable to noncontrolling interest				26,580		26,580		26,580

TOTAL SHAREHOLDERS’ EQUITY				2,874,640		2,844,461		2,893,992

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			$	6,468,757	$	6,317,139	$	7,201,579

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(US$ in thousands, except earnings per share data)
(Unaudited)


			Three Months Ended March 31,
	Note		2010			2009
NET SALES			$	1,137,725		$	1,037,699
Cost of sales				(1,031,828	)		(989,779	)

GROSS PROFIT				105,897			47,920

OPERATING EXPENSES
Selling, general and administrative expenses				60,427			62,409
Other operating (income) expense, net				(2,140	)		2,398

				58,287			64,807

INCOME (LOSS) FROM OPERATIONS				47,610			(16,887	)
INCOME (LOSS) FROM 50% OWNED JOINT VENTURES		9		7,676			(10,244	)


INCOME (LOSS) BEFORE FINANCE COSTS, NET AND INCOME TAXES				55,286			(27,131	)

FINANCE COSTS, NET
Interest income				(416	)		(1,401	)
Interest expense — non-affiliated				23,377			41,956
Interest expense — affiliated				12,634			575
Foreign exchange loss (gain), net				1,749			(2,733	)
Realized gain on investments				(2,528	)		—

				34,816			38,397

INCOME (LOSS) BEFORE INCOME TAXES				20,470			(65,528	)
INCOME TAX BENEFIT		10		3,708			32,076

NET INCOME (LOSS)				24,178			(33,452	)


NET INCOME (LOSS) ATTRIBUTABLE TO:
Equity holders of the Company			$	25,201		$	(31,480	)
Noncontrolling interest				(1,023	)		(1,972	)

			$	24,178		$	(33,452	)


EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
Basic earnings (loss) per share		18	$	0.06		$	(0.07	)
Diluted earnings (loss) per share		18	$	0.06		$	(0.07	)

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(US$ in thousands)
(Unaudited)


	Attributable to equity holders of the Company
						Foreign			Unrealized			Unrealized
						Currency			Gain on			(Loss) Gain									Total
	Capital		Retained			Translation			Short-term			on Cash Flow						Noncontrolling			Shareholders’
	Stock		Earnings			Gain (Loss)			Investments			Hedges			Total			Interest			Equity

Balance as of January 1, 2009	$	2,531,516	$	373,323		$	—		$	—		$	(37,427	)	$	2,867,412		$	26,580		$	2,893,992


Total comprehensive (loss) income		—		(31,480	)		(17,687	)		78			11,629			(37,460	)		(1,972	)		(39,432	)
Dividends ($0.02 per share)		—		(8,646	)		—			—			—			(8,646	)		—			(8,646	)
Distribution to noncontrolling interest		—		—			—			—			—			—			(3,593	)		(3,593	)
Redeemable noncontrolling interest liability		—		—			—			—			—			—			5,565			5,565
Employee stock options exercised and stock compensation expense		954		—			—			—			—			954			—			954

Balance at March 31, 2009	$	2,532,470	$	333,197		$	(17,687	)	$	78		$	(25,798	)	$	2,822,260		$	26,580		$	2,848,840



Balance at January 1, 2010	$	2,535,883	$	187,105		$	109,439		$	1		$	(14,547	)	$	2,817,881		$	26,580		$	2,844,461

Total comprehensive (loss) income		—		25,201			15,231			(9	)		(11,200	)		29,223			(1,023	)		28,200
Distribution to noncontrolling interest		—		—			—			—			—			—			(4,373	)		(4,373	)
Redeemable noncontrolling interest liability		—		—			—			—			—			—			5,396			5,396
Employee stock options exercised and stock compensation expense		956		—			—			—			—			956			—			956

Balance at March 31, 2010	$	2,536,839	$	212,306		$	124,670		$	(8	)	$	(25,747	)	$	2,848,060		$	26,580		$	2,874,640

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(US$ in thousands)
(Unaudited)


			Three Months Ended March 31,
	Note		2010			2009
Cash flows from operating activities
Net income (loss)			$	24,178		$	(33,452	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation		7		46,735			52,329
Amortization of intangibles		8		14,658			16,608
Income tax benefit		10		(3,708	)		(32,076	)
Interest expense — non-affiliated				23,377			41,956
Interest expense — affiliated				12,634			575
Loss on disposition of property, plant and equipment				602			934
(Income) loss from 50% owned joint ventures		9		(7,676	)		10,244
Distributions from 50% owned joint ventures				15,405			405
Compensation cost (benefit) from share-based awards				830			(1,903	)
Realized gain on investments				(2,528	)		—
Writedown of inventory		6		—			18,426

Changes in operating assets and liabilities:
Accounts receivable				(103,995	)		109,925
Inventories				(133,204	)		201,522
Other assets				(16,235	)		4,366
Liabilities				109,730			(74,899	)

Cash (used in) provided by operating activities				(19,197	)		314,960

Income tax refund (paid)				111			(3,185	)
Interest paid				(39,400	)		(79,878	)

Net cash (used in) provided by operating activities				(58,486	)		231,897

Cash flows from investing activities
Purchases of property, plant and equipment				(10,189	)		(36,284	)
Proceeds from disposition of property, plant and equipment				457			1,179
Change in restricted cash				(5	)		—
Purchases of investments				(164,850	)		(269,688	)
Proceeds from sales of investments				30,063			145,697

Net cash used in investing activities				(144,524	)		(159,096	)

Cash flows from financing activities
Repayments on non-affiliated debt				(1,568	)		(2,626	)
Payments of deferred financing costs				(1,488	)		—
Cash dividends				—			(8,646	)
Distributions to subsidiary’s noncontrolling interest				(4,373	)		(3,593	)
Proceeds from exercise of employee stock options				594			94

Net cash used in financing activities				(6,835	)		(14,771	)
Effect of exchange rate changes on cash and cash equivalents				8,353			(4,966	)

Net (decrease) increase in cash and cash equivalents				(201,492	)		53,064

Cash and cash equivalents beginning of period				631,293			482,535

Cash and cash equivalents end of period			$	429,801		$	535,599

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US$ in thousands)
(Unaudited)

NOTE 1. GENERAL INFORMATION

Gerdau Ameristeel Corporation and subsidiaries (the “Company”) operates steel mini-mills, producing primarily steel bars and special sections for commercial and industrial building construction, steel service centers and original equipment manufacturers. The Company’s principal market area is the United States and Canada. Principal suppliers to the Company include scrap metal producers, electric utilities, natural gas suppliers, and rail and truck carriers.

The Company is incorporated under the laws of Canada with executive offices in the United States of America in the city of Tampa, Florida. The Company’s common shares are traded on the Toronto Stock Exchange and the New York Stock Exchange under the ticker symbol GNA.

The Company’s majority shareholder is Gerdau S.A., a leading producer of long steel products in the Americas and a major supplier of specialty long steel products in the world. As of March 31, 2010, Gerdau S.A. indirectly owned 66.3% of the Company’s outstanding common shares.

These unaudited interim condensed consolidated financial statements were approved by the Company’s Board of Directors on May 5, 2010.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of preparation

These unaudited interim condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), including International Accounting Standards (“IAS”) 34, "Interim Financial Reporting", (“IAS 34”), as well as IFRS 1, “First-time Adoption of IFRS”, (“IFRS 1”), because they are part of the period covered by the Company’s first IFRS financial statements for the year ended December 31, 2010. These unaudited interim condensed consolidated financial statements have been prepared in accordance with those IFRS standards and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations required to be applied for annual periods beginning on or after January 1, 2010 which were issued and effective as of the date of approval by the Company’s Board of Directors of these interim financial statements. The IFRS standards and IFRIC interpretations that will be applicable at December 31, 2010, including those that will be applicable on an optional basis, are not known with certainty at the time of preparing these unaudited interim condensed consolidated financial statements. Accordingly, the accounting policies for the annual period that are relevant to these unaudited interim condensed consolidated financial statements will be determined only when the first annual IFRS financial statements are prepared for the year ending December 31, 2010.

The Company’s unaudited interim condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) until December 31, 2009. US GAAP differs in some areas from IFRS and in preparing these unaudited interim condensed consolidated financial statements, management has revised certain accounting, valuation and consolidation methods previously applied in the US GAAP financial statements to comply with IFRS. The principal accounting policies applied in the preparation of these unaudited interim condensed consolidated financial statements are set out below and have been consistently applied to all the periods presented except in instances where IFRS 1 either requires or permits an exemption. The provisions of IFRS 1 and the exemptions thereunder that the Company either elected to take advantage of or was required to apply are discussed in Note 4. The reconciliations required by IFRS 1 are also disclosed in Note 4.

The preparation of the unaudited interim condensed consolidated financial statements in accordance with IAS 34 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the unaudited interim condensed consolidated financial statements are disclosed in Note 3.

2.1.1 New IFRS standards and IFRIC interpretations Not Yet Adopted

The Company does not expect the effects of the following standards and interpretations to have a material impact on the Company’s consolidated financial statements:

	•		IAS 24, “Related Party Disclosures”

	•		IAS 32, “Financial Instruments — Presentation”

	•		IFRIC 19, “Extinguishing Financial Liabilities with Equity Instruments”

The Company is still assessing the impact on the Company’s consolidated financial statements upon adoption of the following standards and amendments:

IFRS 9, “Financial Instruments”

	•		The replacement of the multiple classification and measurement models in IAS 39, “Financial Instruments: Recognition and Measurement” with a single model that has only two classification categories: amortized cost and fair value;

	•		The replacement of the requirement to separate embedded derivatives from financial asset hosts with a requirement to classify a hybrid contract in its entirety at either amortized cost or fair value;

	•		The replacement of the cost exemption for unquoted equities and derivatives on unquoted equities with guidance on when cost may be an appropriate estimate of fair value.

This standard is effective for annual periods beginning on or after January 1, 2013, with earlier adoption permitted.

Amendments to IFRIC 14, “IAS 19 — The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”

2.2 Consolidation

(a) Subsidiaries

Subsidiaries are all entities over which Gerdau Ameristeel Corporation has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-consolidated from the date that control ceases.

All intercompany transactions and accounts have been eliminated in consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company.

(b) Transactions with noncontrolling interests

Beginning November 1, 2011, the Company has the option to purchase the remaining 16% noncontrolling interest in Pacific Coast Steel (“PCS”) at a price to be calculated based on an agreed-upon valuation method (“PCS call option”). Likewise, each of the other PCS partners has the option to put their remaining interests in PCS to the Company on the same terms and from the same dates (“PCS put option”). In accordance with IAS 32, “Financial Instruments: Presentation", the Company records a liability for the present value of the expected redemption amount with a corresponding reclassification from equity at transition date. Subsequent changes in the fair value of the liability (i.e. the present value of the expected redemption amount), including accretion of the discount and the effects of changes in underlying assumptions, are reflected in the statement of operations. If the PCS call option or PCS put option expires, the liability will be reclassed to equity.

The Company treats transactions with noncontrolling interests, including the acquisition of noncontrolling interests pursuant to existing puts and/or calls as transactions with shareholders. Accordingly, any differential between consideration paid or received (in connection with purchases from and dispositions to noncontrolling interests, respectively) and the Company’s share of the underlying net assets of the affected subsidiary is recorded directly in equity.

(c) Joint ventures

The Company’s interests in jointly controlled entities (Gallatin Steel Company, Bradley Steel Processors and MRM Guide Rail), which are 50% owned joint ventures, are accounted for by the equity method from the date the joint control is acquired. According to this method, investments in jointly-owned subsidiaries are recognized in the consolidated balance sheet at acquisition cost and are adjusted periodically based on the Company’s share in income and other variations in shareholders’ equity of these companies. Additionally, the balances of the investments can be reduced due to impairment losses.

Losses in jointly-owned subsidiaries in excess of the investment in these entities are not recognized, except when the Company has agreed to cover these losses.

Gains and losses on transactions with jointly-owned subsidiaries are eliminated against the value of the investment in these jointly-owned subsidiaries proportionately to the Company’s interest.

2.3 Translation of foreign currency balances

The financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The Company’s unaudited interim condensed consolidated financial statements are presented in US Dollars ($), which is the Company’s functional and reporting currency.

The transactions in foreign currency are translated into the functional currency using the exchange rate in effect on the transaction date. The gains and losses resulting from the difference between the conversion of assets and liabilities in foreign currency at the balance sheet date and the conversion of the transaction amounts are recognized in the statement of operations.

The financial position and results of operation of all subsidiaries included in the unaudited interim condensed consolidated financial statements and equity investments that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

	(i)		Assets and liabilities are translated at the exchange rate prevailing at the balance sheet date;

	(ii)		Income and expenses are translated at monthly average exchange rates; and

	(iii)		Translation adjustments are recognized as a separate component of equity in “Other Reserves”.

2.4 Financial Assets

(a) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.

(b) Restricted cash

Restricted cash represents cash collateral for standby letters of credit not readily available to the Company. Changes in restricted cash are included within other investing activities (net) in the statement of cash flows.

(c) Trade accounts receivable, net

Trade accounts receivable are recognized initially at fair value and do not carry any interest. Included in accounts receivable are contract receivables billed, and unbilled retention of PCS. Unbilled retention is that portion of contract billings retained by the customer until after completion of PCS’ scope of work. Unbilled retentions vary up to 10% of the total amount billed on each respective contract. Upon completion of PCS’ agreed scope of work related to a particular contract, the retained amount is billed which converts the unbilled retention to billed retention. Depending on the term of the project, a portion of the unbilled retention is current and a portion is non-current. The non-current portion is recorded in “Other non-current assets” in the consolidated balance sheets. Subject to the negotiated terms of each contract, the due date of billed retentions ranges from 30 days after the substantial completion of PCS’ scope of work, or up to 40 days following the completion of the overall project. PCS’ contracts typically range in duration from 3 to 18 months. Additionally, PCS has the right, under normal circumstances, to file statutory liens on construction projects where collection problems are anticipated. The liens serve as collateral for related accounts receivable.

An allowance for doubtful accounts is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the account receivable is impaired. The allowance for doubtful accounts is estimated based on the Company’s historical losses, review of specific problem accounts, existing economic conditions in the construction industry, and the financial stability of its customers. Generally, the Company considers accounts receivables past due after 30 days. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the Company’s customers. The

carrying amount of the receivable is reduced through the use of an allowance account, and the amount of the loss is recognized in the statement of operations within “Selling, general and administrative expenses”.

(d) Available-for-sale financial assets

Financial assets are classified as available-for-sale when the investment is not held for active trading purposes and the Company does not intend to hold the investment to maturity. All short-term investments and long-term investments are classified as available-for-sale as of March 31, 2010, December 31, 2009 and January 1, 2009.

Regular purchases and sales of available-for-sale financial assets are recognized on the trade date, which is the date on which the Company commits to purchase or sell the asset. The Company’s available-for-sale financial assets are initially recognized at fair value (plus transaction costs when applicable). Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (or the security is unlisted), the Company establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same and discounted cash flow analysis.

Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognized in equity. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognized in shareholders’ equity are included in the statement of operations.

Interest on available-for-sale securities is recognized in the statement of operations as part of interest income.

(e) Impairment of financial assets

The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. Financial assets are deemed impaired when events have occurred after the initial recognition of the financial asset that would have a negative impact on the estimated future cash flows of the asset. Impairments are measured as the excess of the carrying amount over the fair value and are recognized in the statement of operations. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through the consolidated statement of operations.

2.5 Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the average cost method. The cost of finished goods and work in progress comprises raw materials and consumables, direct labor, other direct costs and related production overheads (based on normal operating capacity). During periods when the Company is producing inventory levels below normal capacity, excess fixed costs are not inventoried but are charged to cost of sales in the period incurred. Net realizable value represents the estimated selling price at which the inventories can be realized in the normal course of business after allowing for the cost of conversion from their existing state to a finished condition and for selling costs.

2.6 Property, plant and equipment

Property, plant and equipment are stated at historical cost less depreciation, except for land which is not depreciated. The Company recognizes monthly as part of the acquisition cost of the property, plant and equipment in progress the interest incurred on loans and financing considering the following capitalization criteria: (a) the capitalization period occurs when the property, plant and equipment item is under construction and the capitalization of interest is ceased when the asset is available for use; (b) interest is capitalized considering the weighted average rate of loans existing on the capitalization date; (c) interest capitalized monthly does not exceed the interest expense calculated in the period of capitalization; and (d) capitalized interest is depreciated considering the same criteria and useful life determined for the property, plant and equipment item to which it was capitalized. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statement of operations during the period in which they are incurred.

The Company provides for depreciation of property, plant and equipment using the straight-line method over the estimated useful lives of 10 to 30 years for buildings and improvements and 4 to 15 years for other equipment.

The residual value and useful life of the assets are reviewed and adjusted, if necessary, at each balance sheet date.

Gains and losses on retirement or other disposition of property, plant and equipment are determined by comparing the proceeds with the carrying amount and are recognized within the statement of operations.

2.7 Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the purchase accounting method. The cost of the acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Company in exchange for control of the acquired company. The acquired company’s identifiable assets (including previously unrecognized intangible assets), liabilities and contingent liabilities are recognized at their fair values at the acquisition date.

2.8 Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is allocated to the cash-generating units expected to benefit from the synergies of the combination for the purpose of impairment testing. Goodwill is tested, at the cash-generating unit level, for impairment annually or if events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. See further discussion of impairment testing under “Impairment of long-lived assets, including goodwill” below.

2.9 Intangible assets

Intangible assets are recognized only when it is probable that the expected future economic benefits attributable to the assets will accrue to the Company and the cost can be reliably measured. Intangible assets acquired in a business combination are recorded at fair value, less accumulated amortization and impairment losses, when applicable. Intangible assets that do not have indefinite lives are amortized over their useful lives using an amortization method which reflects the economic benefit of the intangible asset. The customer relationship intangible asset has been amortized based on an accelerated method that considers the expected future economic benefit provided by those acquired customers over time. Intangible assets are reviewed for impairment annually or if events or changes in circumstances indicate that the carrying amount may not be recoverable. See further discussion of impairment testing under “Impairment of long-lived assets, including goodwill” below.

2.10 Impairment of long-lived assets, including goodwill

Long-lived assets that have an indefinite useful life, for example goodwill, are not subject to amortization and are tested annually for impairment and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the cash generating unit level which is the lowest level for which there are separately identifiable cash flows. Impairment losses recognized in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash generating units (or group of cash generating units) and then, to reduce the carrying amount of the other assets in the cash generating unit (or group of cash generating units) on a pro rata basis. Long-lived assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

2.11 Current and deferred income taxes

The tax currently payable is based on taxable income (loss) for the year. Taxable income (loss) differs from income (loss) as reported in the consolidated statement of operations because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of taxable income (loss), and is accounted for using the liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences, and deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable income will be available against which those deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the taxable temporary difference arises from the initial recognition of goodwill or if the differences arise from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable income (loss) nor the income (loss) reported in the Company’s statement of operations.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable income against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

2.12 Derivative financial instruments and hedging activities

The Company’s use of derivative instruments is limited. Derivative instruments are not used for speculative purposes but they are used to manage well-defined risks associated with variability in cash flows or changes in fair values related to the Company’s financial assets and liabilities. Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Company applies cash flow hedge accounting to interest rate swaps designated as hedges of the variability of future cash flows from floating rate liabilities due to the benchmark interest rate. Effectiveness testing and other procedures required to ensure the ongoing validity of the hedges are performed monthly. The Company uses regression analysis to perform an ongoing prospective and retrospective assessment of the effectiveness of these hedging relationships. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized through other comprehensive income within shareholders’ equity. Amounts accumulated in equity are reclassified in the statement of operations in the periods when the hedged item affects profit or loss (as interest on the hedged borrowings is recognized). The gain or loss relating to the ineffective portion of interest rate swaps hedging variable rate borrowings is recognized in the statement of operations within interest expense.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the statement of earnings. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the statement of earnings within interest expense.

2.13 — Financial Liabilities and Equity Instruments

a) Classification as Debt or Equity

Debt or equity instruments are classified in accordance with the substance of the contractual terms.

b) Long-Term Debt, net (including current portion of long-term debt)

Long-term debt is recognized initially at fair value, net of transaction costs incurred. Long-term debt is subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized within interest expense in the statement of operations over the period of the borrowings using the effective interest method.

The portion of long-term debt to be contractually settled within twelve months of the balance sheet date are classified as current liabilities in the Company’s consolidated balance sheet unless the Company has a conditional right to defer settlement of the liability past twelve months.

c) Equity Instruments

An equity instrument is based on a contract that evidences a residual interest in the assets of an entity after deducting its liabilities.

2.14 Employee benefits

(a) Pension obligations

The Company maintains defined benefit pension plans covering certain of its employees. The benefits are based on years of service and compensation during the period of employment. Annual contributions are made in conformity with minimum funding requirements and maximum deductible limitations. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years or service and compensation. Many employees are also covered by the Company’s defined contribution retirement plans. A defined contribution plan is a pension plan under which

the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognized past-service costs. The defined benefit obligation for pension and other retirement benefits is calculated annually by independent actuaries using the projected unit credit method prorated on service and management’s best estimate of expected plan investment performance for funded plans, salary escalation, retirement ages of employees and expected health care costs. The discount rate used for determining the liability for future benefits is the current interest rate at the balance sheet date on high quality fixed income investments with maturities that match the expected maturity of the obligations.

Pension assets are recorded at fair market value. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited directly to equity through other comprehensive income in the period in which they arise.

Past-service costs are recognized immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortized on a straight-line basis over the vesting period.

A plan curtailment will result if the Company has demonstrably committed to a significant reduction in the expected future service of active employees or a significant element of future service by active employees no longer qualifies for benefits. A curtailment is recognized when the event giving rise to the curtailment occurs.

(b) Other post-employment obligations

The Company currently provides specified health care benefits to retired employees. Employees who retire after a certain age with specified years of service become eligible for benefits under this unfunded plan. The Company has the right to modify or terminate these benefits. The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited directly to equity through other comprehensive income in the period in which they arise. These obligations are valued annually by independent qualified actuaries.

(c) Share-based compensation

Certain employees of the Company participate in equity compensation plans. The fair value of all equity compensation awards granted to employees is estimated at the grant date and recorded as an expense in the statement of operations over the vesting period on a graded vesting basis. For equity-settled plans, an increase in equity is recorded for this expense and any subsequent cash flows from exercises of vested awards are recorded as changes in equity. For cash-settled plans, a liability is recorded, which is measured at fair value at each balance sheet date with any movements in fair value being recorded in the statement of operations. Any subsequent cash flows from exercise of vested awards are recorded as a reduction of the liability.

Fair value of the Company’s equity-settled options and stock appreciation rights (“SARs”) are measured using the Black-Scholes pricing model and considers forfeiture assumptions based on the Company’s estimate of the awards that will eventually vest, adjusted for the effect of non market-based vesting conditions.

2.15 Environmental provisions

Environmental provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Environmental provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in provisions due to the passage of time is recognized as an interest expense.

2.16 Asset retirement obligations

Asset retirement obligations represent legal or constructive obligations associated with the retirement of tangible long-lived assets that result from the normal operation of the long-lived asset. The fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred and capitalized as part of the carrying amount of the long-lived asset. The fair value of such obligations is based upon the present value of the future cash flows expected to be incurred to satisfy the obligation. Over time, the liability is accreted to its present value and the capitalized cost is depreciated over the useful life of the related asset. At March 31, 2010 and December 31, 2009, the Company had no significant asset retirement obligations.

2.17 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Company’s activities. Revenue is presented net of returns, rebates and discounts and after eliminating intercompany sales.

The Company recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Company’s activities as described below. The amount of revenue is considered to be reliably measurable when all contingencies relating to the sale have been resolved. The Company bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

The Company recognizes revenues from sale of goods when they are shipped to the customer, which is when the Company can measure the amount of revenue reliably, the risks and rewards of ownership of the goods have been transferred to the buyer and the Company no longer retains control over the goods sold. Provisions are made for estimated product returns and customer claims based on estimates and actual historical experience. If the historical data used in the estimates does not reflect future returns and claims trends, additional provisions may be necessary. Freight costs are classified as part of cost of sales.

The Company recognizes revenues on construction contracts of its PCS operation using the percentage-of-completion method of accounting, measured by the percent of contract costs incurred to-date to estimated total contract costs. This method is used because management considers total cost to be the best available measure of completion of construction contracts in progress. Provisions for estimated losses on construction contracts in progress are made in their entirety in the period in which such losses are determined without reference to the percentage complete. Changes in job performance, job conditions, and estimated profitability may result in a revision to revenues and costs, and are recognized in the period in which the revisions are determined. Claims for additional revenues are not recognized until the period in which such claims are allowed.

The asset, “Costs and estimated earnings in excess of billings on uncompleted contracts”, represents revenues recognized in advance of amounts billed. The liability, “Billings in excess of costs and estimated earnings on uncompleted contracts”, represents billings in advance of revenues recognized.

2.18 Earnings per share

Basic earnings per common share is computed by dividing net income (loss) available to equity holders by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net income (loss) available to equity holders by the weighted average number of common shares and potential common shares from outstanding stock options. Potential common shares are calculated using the treasury stock method and represent incremental shares issuable upon exercise of the Company’s outstanding stock options.

2.19 Capital stock

Common shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

2.20 Dividend distributions

Dividend distributions to the Company’s shareholders are recognized as a liability in the Company’s financial statements in the period in which the dividends are approved by the Company’s Board of Directors.

2.21 Interim measurement note

The demand for steel products is subject to seasonal fluctuations with greater demand generally in the second and third quarters of each year because of the colder weather conditions in certain markets in the first and fourth quarters.

NOTE 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The Company’s unaudited interim condensed consolidated financial statements are prepared in accordance with IFRS recognition and measurement principles that often require management to use estimates and assumptions regarding uncertainties that affect the reported amounts presented and disclosed in the financial statements. Management reviews these estimates and assumptions based on historical experience, changes in business conditions and other relevant factors as it believes to be reasonable under the circumstances. Changes in facts and circumstances may result in revised estimates, and actual results could differ from those estimates. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. See Note 2 for further discussion of the Company’s accounting policies related to these estimates and judgments.

Revenue recognition

Allowance for doubtful accounts

Inventories

Impairment test of long-lived assets, including goodwill

As discussed in Note 2.10, at each reporting date, if any indication of impairment exists for long-lived assets, including goodwill, the Company performs an impairment test to determine if the carrying amounts are recoverable. The impairment review process is subjective and requires significant judgment throughout the analysis. See Note 8 for discussion of the Company’s goodwill impairment test as of December 31, 2009 and the estimates and judgments made by management in determining the recoverable amount of the Company’s cash generating units.

Valuation of Long-term investments

As described in Note 2.4, Long-term investments are comprised of variable rate debt obligations, known as auction rate securities, which are categorized as available-for-sale. These securities are recorded at fair value and are analyzed each reporting period for possible impairment factors and appropriate balance sheet classifications. Due to the lack of availability of observable market quotes on the Company’s investment portfolio of auction rate securities, the Company utilizes valuation models that are based on significant estimates and assumptions such as expected cash flow streams and collateral values, including assessments of counterparty credit quality, default risk underlying the security, discount rates and overall capital market liquidity.

Valuation of derivative financial instruments

The Company values its derivative financial instruments utilizing a standard pricing model based on inputs that were either readily available in public markets or derived from information available in public markets. Significant inputs include factors such as discount rates and forward interest rate curves. Volatility in these inputs can cause significant changes in the fair value of swaps and other financial instruments over a short period of time. The fair value recognized in the unaudited interim condensed consolidated financial statements may not necessarily represent the amount of cash that the Company would receive or pay, as applicable, if the Company would settle the transactions on the unaudited interim condensed consolidated financial statements date. The Company has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for the types of derivative contracts it holds. See Note 13 for a sensitivity analysis related to the fair value of the Company’s derivative instruments.

Environmental provisions

Deferred income taxes

Pension and other post-employment benefits

•		The expected long-term rate of return on plan assets is based on the Company’s estimate of long-term returns for equities and fixed income securities weighted by the allocation of assets in the plans. The rate is impacted by changes in general market conditions, but because it represents a long-term rate, it is not significantly impacted by short-term market swings. Changes in the allocation of plan assets would also impact this rate.

•		The assumed discount rate is used to discount future benefit obligations back to today’s dollars. The discount rate is as of the measurement date, December 31, and is sensitive to changes in interest rates.

•		The expected rate of compensation increase is used to develop benefit obligations using projected pay at retirement. This rate represents average long-term salary increases and is influenced by the Company’s long-term compensation policies.

•		The assumed health care trend rate represents the rate at which health care costs are assumed to increase and is based on historical and expected experience. Changes in projections of future health care costs due to general economic conditions and those specific to health care will impact this trend rate.

NOTE 4. TRANSITION TO IFRS

4.1 Basis of transition to IFRS

4.1.1 Application of IFRS 1

The Company’s financial statements for the year ended December 31, 2010, will be the first annual financial statements that comply with IFRS. Accordingly, the Company has applied IFRS 1 in preparing these unaudited interim condensed consolidated financial statements. The Company’s transition date is January 1, 2009 and the Company prepared its opening IFRS balance sheet as of that date.

In preparing these unaudited interim condensed consolidated financial statements in accordance with IFRS 1, the Company has applied the relevant mandatory exceptions and certain optional exemptions from full retrospective application of IFRS, which are discussed in Notes 4.1.2 and 4.1.3, respectively.

4.1.2 Exceptions from full retrospective application followed by the Company

The Company has applied the following mandatory exception from retrospective application:

Use of estimates - Estimates under IFRS at January 1, 2009, the Company’s date of transition, are consistent with estimates made for the same date under US GAAP (after adjustment to reflect any difference in accounting policies).

All other mandatory exceptions in IFRS 1 were not applicable because there were no significant differences in management’s application of US GAAP in these areas.

4.1.3 Exemptions from full retrospective application elected by the Company

The Company has elected to apply the following optional exemptions from full retrospective application:

(a) Business combinations

The Company has applied the business combinations exemption in IFRS 1 to all business combinations consummated prior to January 1, 2009. Accordingly, it has not restated business combinations that were consummated prior to January 1, 2009 in accordance with IFRS 3 (revised), “Business Combinations”.

(b) Cumulative translation differences

All cumulative translation differences as of January 1, 2009 have been eliminated through shareholders’ equity. This exemption has been applied to all foreign subsidiaries in accordance with IFRS 1.

(c) Share-based payment transactions

The Company has elected to apply the share-based payment exemption and therefore IFRS 2 will be applied prospectively from January 1, 2009 only to unvested awards as of January 1, 2009.

All other optional exemptions in IFRS 1 were either not applicable because there were no significant differences in management’s application of US GAAP in these areas or were not taken.

4.2 Reconciliations between IFRS and US GAAP

IFRS 1 requires an entity to reconcile equity, comprehensive income and cash flows for prior periods. The Company’s first time adoption of IFRS did not have a material impact on total operating, investing or financing cash flows in prior periods. The following represents the reconciliations from US GAAP to IFRS for the respective periods noted for equity, net loss and comprehensive loss:

4.2.1 Reconciliations of shareholders’ equity ($000s):


				December 31,			March 31,			January 1,
	Note 4.2.4			2009			2009			2009
Shareholders’ equity, US GAAP				$	2,870,935		$	2,881,837		$	2,933,492

Business combinations — redeemable noncontrolling interest		(a	)		(32,439	)		(41,936	)		(46,927	)
Stock-based compensation		(c	)		(5,277	)		(1,181	)		(2,064	)
Provisions		(d	)		(9,099	)		(11,498	)		(11,396	)
Income taxes		(e	)		20,341			21,618			20,887

Subtotal — IFRS adjustments					(26,474	)		(32,997	)		(39,500	)

Shareholders’ equity, IFRS				$	2,844,461		$	2,848,840		$	2,893,992

4.2.2 Reconciliations of net loss ($000s):


				Year ended			Three-months ended
	Note 4.2.4			December 31, 2009			March 31, 2009
Net loss, US GAAP				$	(164,273	)	$	(34,644	)

Business combinations — redeemable noncontrolling interest		(a	)		7,768			(575	)
Pension and postemployment benefits		(b	)		43,575			3,325
Stock-based compensation		(c	)		(3,498	)		601
Provisions		(d	)		2,297			(102	)
Income taxes		(e	)		(19,085	)		(2,057	)

Subtotal — IFRS adjustments					31,057			1,192


Net loss, IFRS				$	(133,216	)	$	(33,452	)

4.2.3 Reconciliations of comprehensive loss ($000s):


				Year ended			Three-months ended
	Note 4.2.4			December 31, 2009			March 31, 2009
Comprehensive loss, US GAAP				$	(51,535	)	$	(40,624	)

Differences in net loss (see Note 4.2.2 above)					31,057			1,192
Pension and postemployment benefits		(b	)		(27,331	)		—

Subtotal — IFRS adjustments					3,726			1,192


Comprehensive loss, IFRS				$	(47,809	)	$	(39,432	)

4.2.4 Description of adjustments impacting comprehensive loss and/or shareholders’ equity

In addition to the exemptions and exceptions discussed above, the following narratives explain the significant differences between the previous historical US GAAP accounting policies and the current IFRS accounting policies applied by the Company. Only the differences having a significant impact on the Company are described below. The following is not a complete summary of all of the differences between US GAAP and IFRS. Relative to the impacts on the Company, the descriptive caption next to each numbered item below corresponds to the same numbered and descriptive caption in the tables above, which reflect the quantitative impacts from each change.

(a) Business combinations — redeemable noncontrolling interest

Under US GAAP, a redeemable noncontrolling interest is not required to be separately recognized in the balance sheet as a financial instrument when the redemption value is determined to be at the fair value of the underlying noncontrolling interest. Under IFRS, the Company was required to record a liability for the present value of the expected redemption amount of the written put. As of January 1, 2009 (the Company’s transition date), the counterpart was recorded directly in Capital in the Company’s unaudited interim condensed consolidated balance sheet. Subsequent changes to the present value of the expected redemption amount are recognized in the statement of operations in Interest expense — affiliated. Upon exercise, under IFRS, the differential between the amount paid and the carrying amount of the noncontrolling interest at the date of exercise would be reclassified to Capital in the Company’s unaudited interim condensed consolidated balance sheet.

(b) Pension and postemployment benefits

This adjustment reflects the reclassification of actuarial gains and losses recognized as pension cost in the statement of operations under US GAAP to other comprehensive income for the period and the recognition of curtailments and prior service cost immediately in the statement of operations for vested participants. The Company had $39.2 million of curtailment gains during the twelve months ended December 31, 2009 which were recognized in accumulated other comprehensive income under US GAAP but were required to be recognized in the statement of operations under IFRS. The curtailment gains in 2009 resulted primarily from facility closures as well as certain one-time retirement benefit changes implemented by the Company.

(c) Stock-based compensation

(d) Provisions

(e) Income taxes

This adjustment reflects the deferred income tax effects of the above adjustments. In addition, under US GAAP, the deferred tax benefit associated with share-based compensation awards (equity awards) is recognized over the vesting period based on the grant date fair value of the grant. Any difference between the tax benefit realized on the tax return and the amount previously recognized through the statement of operations is recognized either in equity or income, depending on the Company’s prior experience, when the tax deduction is realized on the tax return. Under IFRS, the deferred tax benefit associated with share-based compensation awards (equity awards) is recognized over the vesting period based on the best estimate of the future tax deduction at each balance sheet date.

4.2.5 Description of adjustments or presentation changes with no impact on comprehensive loss and shareholders’ equity

(a)		Under IFRS 1 (see Note 4.1.3 (b)), the Company elected to eliminate all cumulative translation differences as of January 1, 2009 through shareholders’ equity. This adjustment is only a reclassification of the balance of cumulative translation adjustments as of January 1, 2009 to retained earnings.

(b)		Under US GAAP, deferred finance costs are reflected in the balance sheet as a non-current asset and amortized to expense using the effective interest method. Under IFRS, deferred finance costs are reflected as a reduction of the related long-term debt and amortized to expense using the effective interest method.

(c)		US GAAP requires deferred tax assets and liabilities to be presented as current or non-current based on the classification of the underlying asset or liability upon which the temporary difference arises. For a deferred tax asset or liability arising that is not related to a book asset or liability (for example, a deferred tax asset arising from a net operating loss carryforward), US GAAP requires classification as current or non-current based on the expected reversal date of the temporary difference. Under IFRS, deferred tax assets and liabilities are to be presented as non-current if a classified balance sheet is presented.

(d)		Under US GAAP, depreciation and amortization of intangibles were presented separately in the Company’s consolidated statement of operations. Under IFRS, because the Company elected to present its consolidated statement of operations by function of expense, depreciation is included in Cost of sales and Selling, general and administrative expenses and amortization of intangibles is included in Cost of sales. The amounts of depreciation included in Cost of sales in the Company’s consolidated statements of operations, along with amounts included in Selling, general and administrative expenses are presented in Note 7.

NOTE 5. TRADE ACCOUNTS RECEIVABLE, NET

The Company’s Trade accounts receivable balances were as follows ($000s):


	March 31,			December 31,			January 1,
	2010			2009			2009
Trade accounts receivable	$	575,302		$	469,008		$	686,392
(-) Allowance for doubtful accounts		(8,913	)		(8,942	)		(8,823	)

Trade accounts receivable, net	$	566,389		$	460,066		$	677,569

The aging list of Trade accounts receivable was as follows ($000s):


	March 31,			December 31,
	2010			2009
Current	$	451,003		$	332,771
Past due (1):
Up to 30 days		65,642			71,447
From 31 to 60 days		11,090			16,568
From 61 to 90 days		8,742			12,821
From 91 to 180 days		9,677			9,157
Above 180 days		29,148			26,244
(-) Allowance for doubtful accounts		(8,913	)		(8,942	)

	$	566,389		$	460,066


(1)		As of March 31, 2010 and December 31, 2009, Trade accounts receivable greater than 90 days past due of $33.3 million and $30.5 million, respectively, represented contract receivables and billed retention of PCS. PCS has the right, under normal circumstances, to file statutory liens on construction projects where collection problems are anticipated. These liens serve as collateral for the related accounts receivable.

The changes in the allowance for doubtful accounts were as follows ($000s):


At January 1, 2009	$	(8,823	)
Provision for doubtful accounts		(270	)
Recoveries		(260	)
Writeoffs		939
Foreign exchange translation		49


At March 31, 2009		(8,365	)
Provision for doubtful accounts		(4,349	)
Recoveries		(701	)
Writeoffs		4,806
Foreign exchange translation		(333	)


At December 31, 2009		(8,942	)
Provision for doubtful accounts		(442	)
Recoveries		(120	)
Writeoffs		654
Foreign exchange translation		(63	)


At March 31, 2010	$	(8,913	)

See Note 13 for a discussion of the Company’s credit risk management activities.

NOTE 7. PROPERTY, PLANT AND EQUIPMENT

The summary of changes in property, plant and equipment is as follows ($000s):


	Land and			Buildings and			Machinery and			Construction in			Assets held
	improvements			improvements			equipment			progress			for sale			Total
Cost
At January 1, 2009	$	174,484		$	372,046		$	2,034,005		$	117,365		$	4,301		$	2,702,201
Additions		—			—			1,245			30,466			2			31,713
Disposals		(7	)		—			(2,711	)		—			(288	)		(3,006	)
Transfers		2,008			5,030			25,357			(32,395	)		—			—
Foreign exchange translation		(650	)		(1,637	)		(14,141	)		(333	)		—			(16,761	)

At March 31, 2009		175,835			375,439			2,043,755			115,103			4,015			2,714,147
Additions		—			—			1,538			39,722			61			41,321
Disposals		(138	)		(114	)		(8,734	)		(58	)		—			(9,044	)
Transfers		(3,698	)		14,628			109,254			(120,184	)		—			—
Impairment		(2,075	)		(21,407	)		(100,560	)		(2,108	)		—			(126,150	)
Foreign exchange translation		4,705			11,569			98,682			1,758			—			116,714

At December 31, 2009		174,629			380,115			2,143,935			34,233			4,076			2,736,988
Additions		—			—			544			9,147			343			10,034
Disposals		—			(459	)		(2,031	)		—			—			(2,490	)
Transfers		8,123			1,253			3,678			(13,054	)		—			—
Other		(924	)		(283	)		19,923			—			—			18,716
Foreign exchange translation		834			2,106			18,029			70			—			21,039

At March 31, 2010	$	182,662		$	382,732		$	2,184,078		$	30,396		$	4,419		$	2,784,287


Accumulated depreciation
At January 1, 2009	$	14,013		$	66,162		$	820,555		$	—		$	—		$	900,730
Depreciation		1,311			3,908			47,110			—			—			52,329
Disposals		(2	)		—			(1,628	)		—			—			(1,630	)
Foreign exchange translation		(15	)		(563	)		(8,415	)		—			—			(8,993	)

At March 31, 2009		15,307			69,507			857,622			—			—			942,436
Depreciation		4,589			11,878			141,610			—			—			158,077
Disposals		(11	)		(45	)		(5,439	)		—			—			(5,495	)
Impairment		(1,192	)		(4,168	)		(38,902	)		—			—			(44,262	)
Foreign exchange translation		117			4,181			61,082			—			—			65,380

At December 31, 2009		18,810			81,353			1,015,973			—			—			1,116,136
Depreciation		1,301			3,878			41,556			—			—			46,735
Disposals		—			(94	)		(1,342	)		—			—			(1,436	)
Other		(924	)		(283	)		19,923			—			—			18,716
Foreign exchange translation		25			808			11,682			—			—			12,515

At March 31, 2010	$	19,212		$	85,662		$	1,087,792		$	—		$	—		$	1,192,666


Carrying amount
At December 31, 2009	$	155,819		$	298,762		$	1,127,962		$	34,233		$	4,076		$	1,620,852

At March 31, 2010	$	163,450		$	297,070		$	1,096,286		$	30,396		$	4,419		$	1,591,621

For the three months ended March 31, 2010 and 2009, $44.0 million and $49.5 million, respectively, of depreciation expense was charged to Cost of sales and $2.7 million and $2.8 million, respectively, was charged to Selling, general and administrative expenses.

See Note 16 for purchase obligations related to capital expenditure projects in progress.

NOTE 8. GOODWILL AND INTANGIBLE ASSETS

The following table summarizes the changes in goodwill by reportable segment ($000s):


							Downstream
	Total			Steel mills			products
Cost at January 1, 2009 (1)	$	1,957,029		$	1,778,729		$	178,300
Foreign exchange translation		(672	)		(672	)		—

Cost at March 31, 2009		1,956,357			1,778,057			178,300
Foreign exchange translation		5,741			5,741			—

Cost at December 31, 2009		1,962,098			1,783,798			178,300
Foreign exchange translation		1,033			1,033			—

Cost at March 31, 2010	$	1,963,131		$	1,784,831		$	178,300


(1)		As required by IFRS 3(R), the January 1, 2009 amounts have been adjusted retrospectively for purchase price adjustments made under IFRS in 2009 related to acquisitions made in 2008.

The following table summarizes the changes in Intangibles assets ($000s):


	Customer		Patent						Non-compete
	relationships		technology		Order backlog		Trade name		agreements			Total
Cost
At January 1, 2009	$	572,380	$	29,220	$	29,272	$	5,505	$	8,144		$	644,521
Foreign exchange translation		—		—		—		—		(6	)		(6	)

At March 31, 2009		572,380		29,220		29,272		5,505		8,138			644,515
Foreign exchange translation		—		—		—		—		48			48

At December 31, 2009		572,380		29,220		29,272		5,505		8,186			644,563
Foreign exchange translation		—		—		—		—		9			9

At March 31, 2010	$	572,380	$	29,220	$	29,272	$	5,505	$	8,195		$	644,572


Accumulated amortization
At January 1, 2009	$	94,826	$	7,555	$	21,862	$	1,917	$	2,625		$	128,785
Amortization charges		12,324		1,454		2,036		275		519			16,608

At March 31, 2009		107,150		9,009		23,898		2,192		3,144			145,393
Amortization charges		37,083		4,360		5,370		825		1,490			49,128
Foreign exchange translation		—		—		—		—		39			39

At December 31, 2009		144,233		13,369		29,268		3,017		4,673			194,560
Amortization charges		12,524		1,453		4		184		493			14,658
Foreign exchange translation		—		—		—		—		6			6

At March 31, 2010	$	156,757	$	14,822	$	29,272	$	3,201	$	5,172		$	209,224


Carrying amount
At December 31, 2009	$	428,147	$	15,851	$	4	$	2,488	$	3,513		$	450,003

At March 31, 2010	$	415,623	$	14,398	$	—	$	2,304	$	3,023		$	435,348


Estimated useful lives		11 to 15 years		5 to 16 years		—	5 years			2 to 5 years

For the three months ended March 31, 2010 and 2009, the Company recorded amortization expense related to its intangible assets of $14.7 million and $16.6 million, respectively, which is included in cost of sales in the Company’s unaudited interim condensed consolidated statements of operations.

Long-lived assets impairment test, including goodwill

The most recent reporting date in which the Company tested long-lived assets (including goodwill) for impairment was as of December 31, 2009 due to facts and circumstances indicating that the carrying amount of goodwill may not be recoverable. The Company’s goodwill resides in multiple cash generating units. The Company’s cash generating units with significant balances of goodwill include the Long Products cash generating unit, which consists of all facilities within the steel mills segment and the PCS and Rebar Fabrication Group cash generating units within the downstream segment. As of December 31, 2009, the date the long-lived asset impairment test was performed, the Long Products, Rebar Fabrication Group and PCS cash generating units had remaining goodwill balances of $1.7 billion, $56 million and $119 million, respectively. There were no significant differences between the carrying values and recoverable amounts of the Company’s cash generating units under IFRS and its reporting units under US GAAP (as reported in the Company’s US GAAP financial statements for the year ended December 31, 2009). As a result, consistent with US GAAP, the Company’s impairment analysis under IFRS as of December 31, 2009 indicated that the recoverable amount of the net assets of each cash generating unit significantly exceeded their respective carrying value and, therefore, no indication of impairment existed. Also consistent with US GAAP disclosures as of December 31, 2009, the Company performed a sensitivity analysis to determine the likelihood of impairment assuming reasonably possible changes in certain key valuation assumptions. The Company performed an analysis assuming a .50% increase in discount rate and then an analysis assuming a decrease of .50% in long-term growth rate. Both analyses indicated that each cash generating unit’s recoverable amount would still significantly exceed its respective carrying value.

The impairment review process is subjective and requires significant judgment throughout the analysis. If the estimates or related assumptions change in the future, the Company may be required to record additional impairment charges. Additionally, continued adverse conditions in the economy and future volatility in the stock market could continue to impact the valuation of the Company’s cash generating units, which could trigger additional impairment of goodwill in future periods.

Transition date impairment test

In accordance with IFRS 1, the Company was required to perform an impairment test of its long-lived assets, including goodwill as of January 1, 2009 (the Company’s transition date to IFRS). The Company’s impairment analysis as of January 1, 2009 indicated that the recoverable amount of the net assets of each cash generating unit exceeded its respective carrying value and, therefore, no indication of impairment existed.

NOTE 9. INVESTMENTS IN JOINT VENTURES

The Company’s investments in Gallatin Steel Company, Bradley Steel Processors and MRM Guide Rail are 50% owned joint ventures. The Company’s investment in these joint ventures have been accounted for using the equity method under which the Company’s proportionate share of (loss) earnings has been included in the consolidated statement of operations.

The following table summarizes the results of these companies’ financial statements in which the Company owns 50% ($000s):


	March 31,		December 31,		January 1,
	2010		2009		2009
Current assets	$	256,054	$	225,228	$	199,150
Non-current assets		130,806		138,812		169,128

	$	386,860	$	364,040	$	368,278

Current liabilities	$	99,494	$	62,180	$	40,156
Non-current liabilities		4,684		4,624		4,316

	$	104,178	$	66,804	$	44,472

Net assets	$	282,682	$	297,236	$	323,806


	Three Months Ended March 31,
	2010		2009
Sales	$	244,085	$	123,491
Cost of sales		216,040		129,460
Net operating income (loss)		16,143		(17,242	)
Net income (loss)		15,352		(20,488	)

NOTE 10. INCOME TAXES

The Company’s income tax provision is based on the statutory tax rates and income (loss) in the respective tax jurisdictions where the Company conducts business. The Company’s income tax benefit differs from the amount computed by applying the Canadian statutory income tax rate (federal and provincial) to income (loss) before income taxes, as follows ($000s):


	Three Months Ended March 31,
	2010			2009
Tax provision at Canadian statutory rates (30.0% and 31.0% for 2010 and 2009, respectively)	$	6,141		$	(20,313	)
Increased (decreased) by the tax effect of:
Tax exempt income		(8,971	)		(11,774	)
Effect of different rates in foreign jurisdictions		358			(5,778	)
Change in substantially enacted tax rates		549			(13	)
Stock-based compensation		(72	)		790
Net change in deferred tax asset of tax loss and credit carryovers		(1,485	)		3,956
Noncontrolling interest		307			611
Other, net		(535	)		445

Income tax benefit	$	(3,708	)	$	(32,076	)


Current	$	8,826		$	(30,363	)
Deferred		(12,534	)		(1,713	)

	$	(3,708	)	$	(32,076	)

As of March 31, 2010 and December 31, 2009, the Company had a deferred tax asset of $41.1 million and $36.3 million, respectively, for tax loss carry forwards in Canada. The Company believes it is probable that these deferred tax benefits will be realized through the generation of future taxable income prior to the expiration of the loss carry forward period, the reversal of net deferred tax liabilities, and various tax planning strategies that could be implemented, if necessary. Historically, the Company has been able to generate sufficient taxable income to utilize tax benefits associated with previous tax loss carry forwards. However, the amount of deferred tax assets considered realizable could be adjusted in the future if estimates of taxable income are revised.

As of March 31, 2010 and December 31, 2009, the Company had $81.4 million and $80.4 million, respectively, of capital losses that have not been recognized in the Company’s unaudited interim condensed consolidated balance sheets. These losses relate primarily to the writedown of the Company’s long-term investments and currently have no expiration date. The Company had various state tax losses of $136.4 million and $136.5 million for the periods ending March 31, 2010 and December 31, 2009, respectively, which expire on various dates between 2010 and 2029. The Company also had $33.0 million of state tax credits as of March 31, 2010 and December 31, 2009 that have not been recognized in the Company’s unaudited interim condensed consolidated balance sheet. These credits will expire on various dates between 2015 and 2018 with the exception of $6.8 million of recycling credits which have no expiration date.

NOTE 11. RELATED-PARTY TRANSACTIONS

From time to time in the normal course of business, the Company and/or certain of its subsidiaries make purchases and sales of steel products and raw materials from or to affiliated companies including Gerdau S.A. and subsidiaries (“Gerdau S.A.”), the Company’s majority shareholder and ultimate controlling party. The Company also records rent expense related to leases between PCS and entities controlled by management of PCS. These transactions do not represent a significant percentage of the Company’s total purchases, total sales or total lease transactions and were on terms which management believes were no less favorable than could be obtained from unaffiliated third parties.

The related party transactions consisted of the following ($000s):


	Three Months Ended March 31,
	2010		2009
Gerdau S.A.:
Sales	$	30,006	$	2,891
Purchases		5,203		2,812
Interest expense — affiliated (1)		12,180		—
PCS:
Leases with entities controlled by PCS management		809		1,517
Interest expense — affiliated (2)		454		575


	March 31,		December 31,
	2010		2009
Receivables from Gerdau S.A.	$	16,157	$	10,303


(1)		The interest expense — affiliated is related to the $610.0 million affiliated loan agreement discussed in Note 12.

(2)		The interest expense — affiliated is related to loss on redeemable noncontrolling interest discussed in Note 2.

Key management personnel are comprised of the Company’s directors and executive officers. Key management compensation was as follows ($000s):


	Three Months Ended March 31,
	2010		2009
Key management compensation:
Salaries and other short-term employee benefits	$	2,035	$	5,197
Directors’ fees		85		89
Post-employment benefits		34		25
Share-based payments		1,187		200

	$	3,341	$	5,511

Salaries and other short-term employee benefits include cash payments for employee base salaries and bonuses, and other short-term cash payments. Director’s fees consist of cash payments for meeting fees, committee chairman fees, and retainers. Post-employment benefits include Company contributions to the Company’s defined contribution plan (401k). Share-based payments includes the intrinsic value of awards exercised during the period as well as the intrinsic value of shares vested during the period related to the Chief Executive Officer’s long-term incentive arrangement. Key management personnel did not receive termination benefits or other long-term benefits during the three months ended March 31, 2010 and 2009.

NOTE 12. DEBT

Non-Affiliated Debt

Term Loan Facility: In September 2007, the Company entered into the Term Loan Facility which has three tranches maturing between 2012 and 2013. The Term Loan Facility bears interest at 6-month LIBOR plus between 1.00% and 1.25% and is payable semi-annually in March and September. The Company’s Term Loan Facility requires that the Company’s majority shareholder, Gerdau S.A. maintain financial covenants (see below) that are calculated under IFRS and presented in Brazilian Reais (“R$”). If Gerdau S.A., has a senior unsecured long-term foreign currency denominated debt rating from Standard & Poor’s Rating Services below BBB-, the interest rate for the term loan facility increases by 0.25%. At March 31, 2010 Gerdau S.A.’s debt rating from Standard & Poor’s Rating Services was BBB-. The Term Loan Facility is not secured by the assets of Gerdau Ameristeel or its subsidiaries but Gerdau S.A. and certain of its Brazilian affiliates have guaranteed the obligations of the borrowers.

consolidated net debt to EBITDA of less than 5.0:1.0. The revised covenant levels remain in effect until September 30, 2010 unless cancelled by the Company prior to that time. The revised covenant levels can be cancelled by the Company at any time without penalty. As of March 31, 2010, Gerdau S.A.’s consolidated EBITDA to net interest expense ratio was 5.8:1.0. For the three months ended March 31, 2010, Gerdau S.A.’s consolidated EBITDA was R$4.6 billion and net interest expense was R$0.8 billion. As of March 31, 2010, Gerdau S.A.’s consolidated net debt to EBITDA ratio was 2.2:1.0 and consolidated net debt was R$10.1 billion.

The amendment also revised the interest charged on the outstanding borrowings effective when the financial covenants originally contained in the facility are not met. Under such circumstances, the interest rate charged would increase to 6-month LIBOR plus between 1.8% and 2.25% from the reporting date to September 30, 2010 unless cancelled by the Company prior to that time. The Company’s interest payment in March 2010 was based on this higher interest rate. The September 2010 interest payment will also be based on this higher interest rate unless the amendment is cancelled by the Company prior to that time. If Gerdau S.A. were to have a senior unsecured long-term foreign currency denominated debt rating from Standard & Poor’s Rating Services below BBB-, the interest rate for the Term Loan Facility would increase an additional 0.45%. After September 30, 2010 or upon the Company’s cancellation of the revised covenants if sooner, these interest rate revisions would terminate.

The Company was in compliance with the terms of Term Loan Facility at March 31, 2010.

Senior Secured Credit Facility: In December 2009 the Company entered into a new $650 million senior secured asset-based revolving credit facility. The facility is scheduled to mature on December 21, 2012. The Company can borrow under the Senior Secured Credit Facility the lesser of (i) the committed amount, or (ii) the borrowing base (which is based upon a portion of the inventory and accounts receivable held by most of the Company’s operating units less certain reserves), minus outstanding loans, letter of credit obligations and other obligations owed under the Senior Secured Credit Facility. Since the borrowing base under the Senior Secured Credit Facility is based on actual inventory and accounts receivable levels, available borrowings under the facility will fluctuate. Any borrowings under the Senior Secured Credit Facility are secured by the Company’s cash, inventory, accounts receivable and certain other assets not including real property, machinery or equipment.

The Company was in compliance with the terms of the Senior Secured Credit Facility at March 31, 2010.

Other debt: The Company had other outstanding debt as of March 31, 2010 and December 31, 2009 primarily related to industrial revenue bonds and capital expenditure financing. The terms and amounts outstanding related to these borrowings are presented below.

Affiliated Debt

Debt includes the following ($000s):


	March 31,			December 31,			January 1,
	2010			2009			2009
Non-affiliated debt:
Term Loan Facility, bearing interest of LIBOR plus 1.00% to 2.25%, due September 2012 (1)	$	690,000		$	690,000		$	1,600,000
Term Loan Facility, bearing interest of LIBOR plus 1.00% to 2.25%, due September 2013 (1)		1,000,000			1,000,000			1,000,000
Senior Notes, bearing interest of 10.375%, due July 2011, net of original issue discount		—			—			403,976
Industrial Revenue Bonds, bearing interest of 0.37% to 5.30%, due through May 2037		46,800			46,800			50,400
Capital Expenditure Credit Facility, bearing interest of LIBOR plus 1.80%, due March 2014		12,319			13,859			15,399
Other, bearing interest from 6.00% to 7.46%, due through April 2011		91			116			112

Total non-affiliated debt		1,749,210			1,750,775			3,069,887
Less short-term debt — non-affiliated		(3,171	)		(3,174	)		(1,893	)
Less deferred financing cost — non-affiliated		(24,869	)		(25,795	)		(35,170	)

Long-term debt — non-affiliated		1,721,170			1,721,806			3,032,824


Affiliated debt:
Affiliated debt, bearing interest of 7.95%, due January 2020		610,000			610,000			—
Less deferred financing cost — affiliated		(3,345	)		(3,289	)		—

Long-term debt — affiliated		606,655			606,711			—


Total Long-term debt	$	2,327,825		$	2,328,517		$	3,032,824


(1)		The Term Loan Facility has semi-annual debt repayments beginning March 2012 based on the Loan amortization schedule within the Term Loan Facility agreement.

The Company’s debt agreements contain covenants that if the Company’s business suffers a material adverse change or if other events of default under the loan agreements are triggered, then pursuant to cross default acceleration clauses, substantially all of the outstanding debt could become due and the underlying facilities could be terminated. See Note 13 for a maturity analysis of the Company’s borrowings based on contractual maturities.

For the three months ended March 31, 2010 and 2009, the Company recorded amortization of deferred financing costs of $2.4 million and $2.8 million, respectively, which is included in both interest expense — non-affiliated and affiliated in the Company’s unaudited interim condensed consolidated statements of operations.

NOTE 13. FINANCIAL INSTRUMENTS AND RISK FACTORS

The Company enters into transactions with financial instruments whose risks are managed by means of strategies and exposure limit controls. The Company’s financial instruments consist mainly of:

	•		Cash and cash equivalents

	•		Restricted cash

	•		Short-term investments

	•		Trade accounts receivable, net

	•		Long-term investments

	•		Trade accounts payable

	•		Short-term debt — non-affiliated

	•		Long-term debt — non-affiliated

	•		Long-term debt — affiliated

	•		Derivative financial instruments; and

	•		Redeemable noncontrolling interest

The Company classifies its financial assets in the following categories: loans and receivables and available-for-sale.

(a) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are measured at amortized cost and included in current assets. The Company’s loans and receivables comprise Cash and cash equivalents, Restricted cash and Accounts receivable, net in the unaudited interim condensed consolidated balance sheet.

(b) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. As of March 31, 2010, December 31, 2009 and January 1, 2009, the Company has the following available-for-sale financial assets:

Short-term investments — The Company invests excess cash in short-term investments that are comprised of US government treasury bills, US government agency discount notes, Canadian government treasury bills, top-tier commercial paper, time deposits, certificates of deposit, bearer deposit notes and banker’s acceptances with highly rated financial institutions.

Long-term investments — In prior years, the Company invested excess cash in investments that are comprised of variable rate debt obligations, known as auction rate securities, which are categorized as available-for-sale. These securities became illiquid in 2007 and the Company may not be able to liquidate these securities until a future auction is successful, the issuer redeems the outstanding securities, or the securities mature beginning in 2025. Although it is the Company’s intention to sell its remaining auction rate securities when liquidity returns to the market for these securities, these investments are classified as a non-current asset.

The Company classifies its financial liabilities in the following categories: at fair value recognized through earnings, derivatives used for hedging and other financial liabilities.

(a) Liabilities at fair value recognized in earnings

Liabilities at fair value recognized in earnings represent the Company’s redeemable noncontrolling interest which is included in non-current liabilities. This liability represents the present value of the expected redemption amount of the noncontrolling interest.

(b) Derivatives used for hedging

Derivatives used for hedging includes the fair value of the Company’s cash flow hedges which is included in Other non-current liabilities.

(c) Other financial liabilities

Other financial liabilities at amortized cost includes the Company’s Trade accounts payable, Short-term debt — non-affiliated, Long-term debt — non-affiliated and Long-term debt — affiliated.

The following table is a summary of the Company’s financial instruments by category ($000s):


							Liabilities at
							fair value		Derivatives
			Loans and		Available-for-		recognized in		used for		Other financial
March 31, 2010	Note		receivables		sale		earnings		hedging		liabilities		Total
Cash and cash equivalents			$	429,801	$	—	$	—	$	—	$	—	$	429,801
Restricted cash				1,696		—		—		—		—		1,696
Short-term investments				—		164,894		—		—		—		164,894
Trade accounts receivable, net		5		566,389		—		—		—		—		566,389
Long-term investments				—		25,996		—		—		—		25,996
Trade accounts payable				—		—		—		—		295,898		295,898
Short-term debt — non-affiliated		12		—		—		—		—		3,171		3,171
Long-term debt — non-affiliated		12		—		—		—		—		1,721,170		1,721,170
Long-term debt — affiliated		12		—		—		—		—		606,655		606,655
Derivative financial instruments				—		—		—		45,078		—		45,078
Redeemable noncontrolling interest				—		—		27,497		—		—		27,497

Total			$	997,886	$	190,890	$	27,497	$	45,078	$	2,626,894	$	3,888,245


							Liabilities at
							fair value		Derivatives
			Loans and		Available-for-		recognized in		used for		Other financial
December 31, 2009	Note		receivables		sale		earnings		hedging		liabilities		Total
Cash and cash equivalents			$	631,293	$	—	$	—	$	—	$	—	$	631,293
Restricted cash				1,691		—		—		—		—		1,691
Short-term investments				—		25,000		—		—		—		25,000
Trade accounts receivable, net		5		460,066		—		—		—		—		460,066
Long-term investments				—		28,538		—		—		—		28,538
Trade accounts payable				—		—		—		—		173,385		173,385
Short-term debt — non-affiliated		12		—		—		—		—		3,174		3,174
Long-term debt — non-affiliated		12		—		—		—		—		1,721,806		1,721,806
Long-term debt — affiliated		12		—		—		—		—		606,711		606,711
Derivative financial instruments				—		—		—		37,822		—		37,822
Redeemable noncontrolling interest				—		—		32,439		—		—		32,439

Total			$	1,093,050	$	53,538	$	32,439	$	37,822	$	2,505,076	$	3,721,925


							Liabilities at
							fair value		Derivatives
			Loans and		Available-for-		recognized in		used for		Other financial
January 1, 2009	Note		receivables		sale		earnings		hedging		liabilities		Total
Cash and cash equivalents			$	482,535	$	—	$	—	$	—	$	—	$	482,535
Short-term investments				—		205,817		—		—		—		205,817
Trade accounts receivable, net		5		677,569		—		—		—		—		677,569
Long-term investments				—		33,189		—		—		—		33,189
Trade accounts payable				—		—		—		—		151,984		151,984
Short-term debt — non-affiliated		12		—		—		—		—		1,893		1,893
Long-term debt — non-affiliated		12		—		—		—		—		3,032,824		3,032,824
Derivative financial instruments				—		—		—		63,005		—		63,005
Redeemable noncontrolling interest				—		—		46,927		—		—		46,927

Total			$	1,160,104	$	239,006	$	46,927	$	63,005	$	3,186,701	$	4,695,743

Fair Value Estimation

IFRS 7 defines fair value as the price that would be received for an asset or paid for transferring a liability (exit price) in the principal or most advantageous market for the asset or liability in a regular transaction between market participants on the day of calculation. IFRS 7 also establishes a hierarchy of three levels for the fair value, which prioritizes information when measuring the fair value by the company, to maximize the use of observable information and minimize the use of non-observable information. IFRS 7 describes the three levels of information to be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Significant inputs other than within level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 — Inputs for the assets or liabilities that are observable and require management assumptions or inputs from unobservable markets.

As of March 31, 2010, December 31, 2009 and January 1, 2009, the Company had certain financial assets and liabilities that were required to be measured at fair value on a recurring basis. These included the Company’s available-for-sale financial assets (Short-term and Long-term investments), derivative financial instruments and Redeemable noncontrolling interest.

The Company’s Short-term investments consisted of the items as identified above under (b) Available-for-sale financial assets. The fair values of the US and Canadian government treasury bills were determined based on observed prices in publicly quoted markets. Therefore the Company utilized level 1 inputs to measure the fair market value of those investments. For the fair value of the remaining short-term investments the Company utilized a standard pricing model based on inputs that were readily available in public markets or derived from information available in publically quoted markets. Therefore, the Company utilized level 2 inputs to measure the fair market value of these Short-term investments. The changes in the fair value of the Company’s Short-term investments recognized in Other comprehensive income in the Company’s unaudited interim condensed consolidated balance sheets was insignificant for the three months ended March 31, 2010 and 2009.

The Company’s auction rate security instruments, which were classified as Long-term investments at March 31, 2010 and December 31, 2009, were reflected at fair value. The fair values of these securities were estimated utilizing valuation models including those based on expected cash flows and collateral values, including assessments of counterparty credit quality, default risk underlying the security, discount rates and overall capital market liquidity in a non-active market as of March 31, 2010, December 31, 2009 and January 1, 2009. Therefore, the Company utilized level 3 inputs to measure the fair market value of these investments. There were no changes in the fair value of the Company’s Long-term investments for the three months ended March 31, 2010 and 2009. During the three months ended March 31, 2010, the Company sold Long-term investments with a carrying value of $2.5 million and recognized a Realized gain on investments of $2.5 million. No available-for-sale financial assets were sold during the three months ended March 31, 2009.

The Company’s derivative financial instruments consist of interest rate swaps. See “Derivative financial instruments” within this note for further information on the Company’s derivative instruments and hedging activities. The Company utilized a standard pricing model based on inputs that were either readily available in public markets or derived from information available in publicly quoted markets to determine the value of the derivatives. Therefore, the Company utilized level 2 inputs to measure the fair market value of these derivatives. During the three months ended March 31, 2010 and 2009, the Company recognized changes in the fair value of its derivative instruments in Other comprehensive income in the Company’s unaudited interim condensed consolidated balance sheets of ($7.3) million and $20.7 million, respectively.

The Company’s Redeemable noncontrolling interest represents the Company’s option to purchase the remaining 16% noncontrolling interest in PCS and is a financial liability measured at fair value. The fair value is derived based on an agreed-upon valuation method (redemption amount). The inputs used in deriving the redemption amount are based on actual and forecasted EBITDA. Because these inputs are based on assumptions about observable market data, the Company utilized level 3 inputs to measure the fair market value of the Redeemable noncontrolling interest. Changes in the credit risk of the liability had no significant impact on the change in fair value during the three months ended March 31, 2010 and 2009. The changes in the fair value of the Company’s Redeemable noncontrolling interest recognized in interest expense — affiliated in the Company’s unaudited interim condensed consolidated statement of operations was $0.5 million and $0.6 million for the three months ended March 31, 2010 and 2009, respectively.

The following table summarizes the changes in fair value for the level 3 financial assets and liabilities ($000s):


Long-term Investments
At January 1, 2009	$	33,189

At March 31, 2009		33,189


Realized gain on investments, net		3,244
Sales of long-term investments		(7,895	)

At December 31, 2009		28,538


Realized gain on investments		2,528
Sales of long-term investments		(5,070	)

At March 31, 2010	$	25,996


Redeemable noncontrolling interest
At January 1, 2009	$	46,927
Undistributed loss of noncontrolling interest		(5,565	)
Loss on redeemable noncontrolling interest		575

At March 31, 2009		41,937


Undistributed loss of noncontrolling interest		(1,155	)
Gain on redeemable noncontrolling interest		(8,343	)

At December 31, 2009		32,439


Undistributed loss of noncontrolling interest		(5,396	)
Loss on redeemable noncontrolling interest		454

At March 31, 2010	$	27,497

The fair value of the Company’s total debt was $2.3 billion, $2.2 billion and $2.6 billion as of March 31, 2010, December 31, 2009 and January 1, 2009, respectively. At March 31, 2010 and December 31, 2009, the fair value of the Company’s debt was determined by the present value of future payments based on interest rate conditions as of that time. At January 1, 2009, fair values of the floating rate debt were determined by the present value of future payments based on interest rate conditions at that time and those of the fixed rate debt were estimated based on quoted market prices.

The carrying value of Cash and cash equivalents, Restricted cash, Trade accounts receivable, net and Trade accounts payable in the unaudited interim condensed consolidated balance sheets approximated fair value.

Financial Risk Management

The Company’s business activities expose it to a variety of financial risks: commodities price risk, interest rate risk, foreign exchange rate risk, credit risk, capital management risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance. The Company uses derivative financial instruments to hedge its interest rate risk exposures.

Financial risk management is carried out by a central treasury function under policies approved by the Board of Directors. The function identifies, evaluates and hedges financial risks in close cooperation with the Company’s operating units. The Board of Directors provides written principles for overall risk management, as well as written policies covering specific risk areas.

(a) Commodities price risk

This risk is related to the possibility of changes in prices of the products sold by the Company or in prices of raw materials and other inputs used in the production process. The Company’s operating results are significantly affected by the cost of steel scrap and scrap substitutes, which are the primary raw materials for the Company’s mini-mill operations. Energy costs represent a significant portion of the production costs for the Company’s operations. Some of the Company’s mini- mill operations have long-term electricity supply contracts with either major utilities or energy suppliers. Generally, the Company does not have long-term contracts for natural gas and therefore is subject to market supply variables and pricing that could materially adversely affect operating margins and results of operations. In order to minimize this risk, the Company constantly monitors price developments in the domestic and international markets.

(b) Interest rate risk

This risk arises from the possibility of losses (or gains) due to fluctuations in interest rates applied to the Company’s assets (investments) or liabilities in the market. To minimize possible impacts from interest rate fluctuations, the Company adopts a diversification policy, alternating between variable (such as LIBOR) and fixed rates when issuing debt. The Company has entered into interest rate swaps to reduce its exposure to interest rate risk. See “Derivative financial instruments” below for further discussion of the Company’s interest rate swaps.

(c) Foreign exchange rate risk

This risk is related to the possibility of fluctuations in exchange rates affecting financial expenses (or income) and the liability (or asset) balance of contracts denominated in foreign currency. The Company reports results in U.S. dollars. A portion of net sales and operating costs are in Canadian dollars. As a result, fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar may affect operating results. The Company currently does not use any hedging program to manage this risk.

(d) Credit risk

This risk arises from the possibility of the Company not receiving amounts arising from sales to customers or investments made with financial institutions. In order to minimize collection risk related to the Company’s Trade accounts receivable, the Company adopts the procedure of carefully analyzing the financial position of its customers, establishing a credit limit, and constantly monitoring customers’ balances. In relation to cash investments, the Company invests solely in high-quality financial institutions, as assessed by rating agencies. The Company’s investment policy limits the maximum amount which can be invested in any financial institution.

The Company’s maximum exposure to credit risk related to each of its financial assets (Cash and cash equivalents, Trade accounts receivable, Short-term investments and Long-term investments) is its carrying amount.

(e) Capital management risk

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or debt or sell assets to reduce debt. The Company is not subject to capital requirements imposed by regulatory authorities.

(f) Liquidity risk

The Company’s principal sources of liquidity are cash generated from its operations and borrowings under its secured credit facility. The Company monitors its levels of cash, credit lines and debt and takes appropriate actions to ensure it has sufficient cash to meet operational needs while ensuring compliance with covenants. The table below analyzes the Company’s financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The maturity amounts disclosed in the table are the contractual undiscounted cash flows. ($000s):


March 31, 2010	Total		2010		2011		2012		2013		2014		Thereafter

Trade accounts payable	$	295,898	$	295,898	$	—	$	—	$	—	$	—	$	—
Short-term debt — non-affiliated		3,171		1,611		1,560		—		—		—		—
Long-term debt — non-affiliated (1)		1,746,039		—		1,539		1,193,080		503,080		5,340		43,000
Long-term debt — affiliated (1)		610,000		—		—		—		—		—		610,000
Derivative financial liabilities		47,978		15,365		23,292		8,921		400		—		—
Redeemable noncontrolling interest (2)		30,539		—		30,539		—		—		—		—


December 31, 2009	Total		2010		2011		2012		2013			2014		Thereafter

Trade accounts payable	$	173,385	$	173,385	$	—	$	—	$	—		$	—	$	—
Short-term debt — non-affiliated		3,174		3,174		—		—		—
Long-term debt — non-affiliated (1)		1,747,601		—		3,101		1,193,080		503,080			5,340		43,000
Long-term debt — affiliated (1)		610,000		—		—		—		—			—		610,000
Derivative financial liabilities		47,132		28,205		16,747		3,523		(1,343	)		—		—
Redeemable noncontrolling interest (2)		35,935		—		35,935		—		—			—		—


January 1, 2009	Total		2009		2010		2011		2012		2013		Thereafter

Trade accounts payable	$	151,984	$	151,984	$	—	$	—	$	—			$	—
Short-term debt — non-affiliated		1,893		1,893		—		—		—				—
Long-term debt — non-affiliated (1)		3,067,994		—		3,420		1,132,374		1,378,380		503,480		50,340
Derivative financial liabilities		65,923		13,420		25,250		14,651		9,084		3,518		—
Redeemable noncontrolling interest (2)		53,991		—		—		53,991		—		—		—


(1)		Long-term debt is shown gross of deferred financing costs.

(2)		The call/put option underlying the redeemable noncontrolling interest can be exercised by the Company/noncontrolling interest beginning November 1, 2011, but is not required to be exercised by either party. For purposes of the maturity table, the Company has assumed that either the call or put will be exercised on November 1, 2011.

Sensitivity Analysis

Foreign currency sensitivity analysis

If the US dollar had strengthened by 5% against the Canadian dollar at March 31, 2010 and March 31, 2009, with all other variables held constant, the impact on the Company’s pre-tax earnings would have been an increase of $5.3 million and $5.9 million for the three months ended March 31, 2010 and 2009, respectively, as a result of foreign exchange gains/losses on translation of US dollar-denominated monetary items. The effect on equity of a 5% strengthening of the US Dollar at March 31, 2010 and December 31, 2009 would have been a decrease of $25.5 million and $26.1 million, respectively. If the US dollar had weakened by 5%, the effect on pre-tax earnings and equity would be approximately equal and opposite. The Company does not use derivatives to hedge foreign currency risk.

Interest rate sensitivity analysis — variable-rate debt and derivative instruments

An increase of 100 basis points (1%) in interest rates at March 31, 2010 and March 31, 2009 would have increased interest expense recorded by the Company related to its variable-rate debt by approximately $1.8 million and $4.1 million for the three months ended March 31, 2010 and 2009, respectively. A corresponding decrease in respective interest rates would have an approximately equal and opposite effect. This analysis considers the effect on interest expense of the Company’s derivative instruments which are hedging the Company’s exposure to interest rate risk.

Additionally, for the Company’s derivative instruments (interest rate swaps), changes in fair value are recorded in Other comprehensive income within shareholders’ equity (assuming no ineffectiveness). An increase of 100 basis points in interest rates at

March 31, 2010 and December 31, 2009 would have increased the fair value of the Company’s interest rate swaps and, therefore, total shareholders’ equity by approximately $27.6 million and $31.2 million (on a pre-tax basis), respectively.

Commodity price risk sensitivity analysis

The Company operates in a commodities market and has risk exposure associated with the fluctuation of the sales price of the Company’s products and the price of raw materials and other inputs used in the production process. The Company performed a sensitivity analysis which considers the effects of an increase or of a reduction of 1% on both prices. The impact on the Company’s post-tax earnings and equity considering an increase in the price of products sold and raw materials and other inputs would have been a decrease of approximately $3.0 million and $6.2 million for the three months ended March 31, 2010 and 2009, respectively. A corresponding reduction in both prices would have an approximate equal and opposite effect on post-tax earnings and equity. The company does not hedge commodity price risk.

Derivative financial instruments

(a) Cash flow hedges

During March 2008, the Company entered into interest rate swaps, which qualify as cash flow hedges, to reduce its exposure to the variability in the floating USD LIBOR interest rates. The notional value of the interest rate swaps is $1.0 billion, the fixed interest rate of the swaps is between 3.3005% and 3.707% and they expire between March 2012 and September 2013. If added to the spread over LIBOR on tranche B of the Term Loan Facility, the interest rate on these swaps would be between 4.5505% and 4.9570%.

The fair value of the Company’s derivative financial instruments designated as hedging instruments is included in the Other non-current liabilities line item in the Company’s unaudited interim condensed consolidated balance sheets. Fair value estimates and amounts recorded for derivatives designated as hedging instruments as of March 31, 2010, December 31, 2009 and January 1, 2009, respectively, are summarized above under “Fair value estimation”.

The following table summarizes the effect of cash flow derivative instruments on the Company’s unaudited interim condensed consolidated statements of operations for the three months ended March 31, 2010 and 2009 ($000s):

Amount of (Loss) Gain Recognized

Amount of Loss Reclassified from

in Other Comprehensive Income

Other Comprehensive Income into

(Effective Portion)

Earnings (Effective Portion) (a)

Three Months Ended March 31,

2010

2009

2010

2009

Interest rate derivative contracts

(4,463)

12,635

7,129

1,006


*		Net of tax

(a)		Amounts related to interest rate derivatives are included in Interest expense.

There was no ineffectiveness recorded as interest expense for the three months ended March 31, 2010 and 2009.

The Company is not required to post assets as collateral for its derivatives.

NOTE 14. RETIREMENT BENEFIT OBLIGATIONS

The Company maintains defined benefit pension plans covering the majority of its employees. The benefits are based on years of service and compensation during the period of employment. Annual contributions are made in conformity with minimum funding requirements and maximum deductible limitations.

The Company currently provides specified health care benefits to retired employees. Employees who retire after a certain age with specified years of service become eligible for benefits under this unfunded plan. The Company has the right to modify or terminate these benefits. The Company uses a December 31 measurement date for its plans. However, IAS 19 requires the Company to remeasure its retirement benefit obligations at an interim reporting date if material changes occurred since the Company’s last remeasurement date. The Company has not remeasured its retirement benefit obligations as of March 31, 2010.

The following tables summarize the expenses related to pension benefits and postretirement medical benefits included in the Company’s interim unaudited condensed consolidated statements of operations ($000s):


	Pension Benefits						Other Benefit Plans
	Three Months Ended March 31,						Three Months Ended March 31,
	2010			2009			2010		2009
Components of net periodic benefit cost:
Service cost	$	5,571		$	6,164		$	478	$	641
Interest cost		10,922			10,325			1,937		1,815
Expected return on plan assets		(10,481	)		(7,898	)		—		—

Net periodic benefit cost	$	6,012		$	8,591		$	2,415	$	2,456

Of the total net periodic benefit cost for the three months ended March 31, 2010 and 2009, $6.1 million and $9.2 million, respectively, was included in Cost of sales and $2.3 million and $1.8 million, respectively, was included in Selling, general and administrative expenses in the Company’s unaudited interim condensed consolidated statements of operations.

The Company contributed $11.3 million and $8.6 million to its defined benefit pension plans for the three months ended March 31, 2010 and 2009, respectively. The Company expects to contribute an additional $59.8 million during the remainder of fiscal year 2010. Continued volatility in the global financial markets could have an unfavorable impact on the Company’s future pension funding obligations as well as net periodic benefit cost.

NOTE 15. PROVISIONS

The table below provides a summary of changes in Provisions ($000s):


	Environmental			Accrued workers
	remediation			compensation			Total
At January 1, 2009	$	26,151		$	26,952		$	53,103
Provision adjustment charged to earnings		354			4,941			5,295
Cash payments		(341	)		(2,377	)		(2,718	)
Foreign exchange translation and other movements		—			(4	)		(4	)

At March 31, 2009		26,164			29,512			55,676
Provision adjustment charged to earnings		769			10,042			10,811
Cash payments		(824	)		(9,806	)		(10,630	)
Foreign exchange translation and other movements		—			472			472

At December 31, 2009		26,109			30,220			56,329
Provision adjustment charged to earnings		198			4,251			4,449
Cash payments		(472	)		(2,707	)		(3,179	)
Foreign exchange translation and other movements		—			27			27

At March 31, 2010	$	25,835		$	31,791		$	57,626


	Current		Non-current		Total
At March 31, 2010	$	35,675	$	21,951	$	57,626
At December 31, 2009		35,126		21,203		56,329
At January 1, 2009		34,551		18,552		53,103

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.

Environmental remediation

As the Company is involved in the manufacturing of steel, it produces and uses certain substances that may pose environmental hazards. The principal hazardous waste generated by current and past operations is electric arc furnace (“EAF”) dust, a residual from the production of steel in electric arc furnaces. Environmental legislation and regulation at both the federal and state level over EAF dust is subject to change, which may change the cost of compliance. While EAF dust is generated in current production processes, such EAF dust is being collected, handled and disposed of in a manner that the Company believes meets all current federal, state and provincial environmental regulations. The costs of collection and disposal of EAF dust are expensed as operating costs when incurred. In addition, the Company has handled and disposed of EAF dust in other manners in previous years, and is responsible for the remediation of certain sites where such dust was generated and/or disposed.

In general, the Company’s estimate of remediation costs is based on its review of each site and the nature of the anticipated remediation activities to be undertaken. The Company’s process for estimating such remediation costs includes determining for each site the expected remediation methods, and the estimated cost for each step of the remediation. In such determinations, the Company may employ outside consultants and providers of such remedial services to assist in making such determinations. Considering the uncertainties inherent in determining the costs associated with the clean-up of such contamination, including the time periods over which such costs must be paid, the extent of contribution by parties which are jointly and severally liable, and the nature and timing of payments to be made under cost sharing arrangements, there can be no assurance the ultimate costs of remediation may not differ from the estimated remediation costs. Additional accruals or reversals of accruals are recorded in the Company’s unaudited interim condensed consolidated statements of operations in Other operating (income) expense, net.

Accrued workers’ compensation

The Company provides workers’ compensation benefits to employees who suffer injuries while performing their job duties. The Company is self-insured up to a maximum limit, over which, they are then covered by a third party insurer. The accrued workers’ compensation liability represents the present value of the Company’s future expected payouts for both reported claims and incurred but not reported claims and is included within Accrued salaries, wages, and employee benefits in the unaudited interim condensed consolidated balance sheets. Additional accruals or reversals of accruals are recorded in the Company’s unaudited interim condensed consolidated statements of operations in either Cost of sales or Selling, general and administrative expenses.

NOTE 16. COMMITMENTS

Operating Lease Commitments

The Company leases certain machinery, equipment and real property under non-cancelable operating leases. The future aggregate minimum lease payments under non-cancelable operating leases are as follows ($000s):


	March 31,		December 31,
	2010		2009
No later than 1 year	$	21,603	$	21,757
Later than 1 year and no later than 5 years		66,504		68,561
Later than 5 years		13,212		15,389

	$	101,319	$	105,707

Total rent expense related to operating leases was $7.2 million and $9.0 million for the three months ended March 31, 2010 and 2009, respectively.

Capital Expenditure Commitments

The Company has contractual purchase obligations for capital expenditures in progress of $56.6 million and $37.0 million as of March 31, 2010 and December 31, 2009, respectively.

Service Commitments

The Company has long-term contracts with several raw material suppliers. The Company typically realizes lower costs and improved service from these contracts. The Company believes these raw materials would be readily available in the market without such contracts.

NOTE 17. CONTINGENCIES

In September 2008, the Company and most other major North American steel producers were named as defendants in a series of lawsuits filed in federal court in the Northern District of Illinois. The lawsuits allege that the defendants conspired to fix, raise, maintain

and stabilize the price at which steel products were sold in the United States by artificially restricting the supply of such steel products. The lawsuits, which purport to be brought on behalf of a class consisting of all direct and indirect purchasers of steel products from the defendants between January 1, 2005 and the present, seek treble damages and costs, including reasonable attorney fees and pre- and post-judgment interest. Although the Company believes that the lawsuits are entirely without merit and plans to aggressively defend them, the Company cannot at this time predict the outcome of this litigation or determine the Company’s potential exposure, but if determined adversely to the Company, they could have a material adverse effect on the Company’s assets.

The Company is occasionally named as a party in various claims and legal proceedings which arise during the normal course of its business. Although there can be no assurance that any particular claim will be resolved in the Company’s favor, the Company does not believe that the outcome of any claims or potential claims of which it is currently aware will have a material adverse effect on the Company.

NOTE 18. SHAREHOLDERS’ EQUITY

Changes in the Company’s capital stock were as follows ($000s):


	Number of		Share
	shares		premium
At January 1, 2009		433,004,253	$	2,531,516
Employee stock options exercised and stock compensation expense		45,908		954

At March 31, 2009		433,050,161		2,532,470
Employee stock options exercised and stock compensation expense		264,648		3,413

At December 31, 2009		433,314,809		2,535,883
Employee stock options exercised and stock compensation expense		178,055		956

At March 31, 2010		433,492,864	$	2,536,839

The total authorized number of ordinary shares is unlimited with no par value per share. All issued shares are fully paid.

Earnings Per Share

The following table identifies the components of basic and diluted earnings (loss) per share attributable to the Company ($000s except share and earnings (loss) per share data):


	Three Months Ended March 31,
	2010		2009
Basic earnings (loss) per share attributable to equity holders of the Company:
Basic net earnings (loss)	$	25,201	$	(31,480	)

Weighted average number of outstanding shares		432,469,235		432,320,951


Basic net earnings (loss) per share ($ per share)	$	0.06	$	(0.07	)


	Three Months Ended March 31,
	2010		2009
Diluted earnings (loss) per share attributable to equity holders of the Company:
Diluted net earnings (loss)	$	25,201	$	(31,480	)

Weighted average number of outstanding shares		432,469,235		432,320,951
Dilutive effective of stock options and share units		2,002,499		—

		434,471,734		432,320,951


Diluted net earnings (loss) per share ($ per share)	$	0.06	$	(0.07	)

At March 31, 2010 and 2009, options to purchase 2,484,412 and 3,942,587 common shares, respectively, were not included in the computation of diluted earnings (loss) per share as their inclusion would be anti-dilutive.

NOTE 19. STOCK-BASED COMPENSATION PLANS

In February 2010, the Board of Directors of the Company approved the adoption of the Equity Incentive Plan (the “EIP”), which is subject to shareholder approval. The EIP is designed to provide awards, as determined by the Human Resources Committee of the Board of Directors. Awards under the EIP may take the form of stock options, SARs, deferred share units (“DSUs”), restricted share units (“RSUs”), performance share units (“PSUs”), restricted stock, and/or other share-based awards. Except for stock options, which must be settled in common shares, awards may be settled in cash or common shares as determined by the Human Resources Committee at the time of grant. The maximum number of common shares issuable under the EIP is 16,000,000.

For the portion of any award which is payable in options or SARs, the exercise price of the options or SARs will be no less than the fair market value of a common share on the date of the award. The vesting period for Options and SARs is determined by the Human Resources Committee at the time of grant. Options and SARs have a maximum term of 10 years. No more than 8,000,000 common shares may be issued under the EIP pursuant to SARs granted on a stand alone basis.

With respect to any award made in the form of DSUs, RSUs or PSUs, the number of common shares awarded to a participant and the vesting period of the award is determined by the Human Resources Committee. Under the EIP, no more than 1,000,000 common shares may be issued pursuant to DSUs and no more than 2,500,000 common shares may be issued pursuant to PSUs.

On March 12, 2010, an award of approximately $11.8 million was granted to participants under the EIP for 2010 performance, subject to shareholder approval of the EIP. The Company issued 1,728,689 equity-settled SARs, 277,621 RSUs, and 396,602 PSUs under this plan. This award is being accrued over the vesting periods.

In connection with the proposed adoption of the EIP, the Company terminated the existing long-term incentive plan (“LTIP”), and no further awards will be granted under the LTIP. All outstanding awards under the LTIP will remain outstanding until either exercised, forfeited or they expire. At March 31, 2010, there were 3,486,469 cash-settled SARs, 2,351,026 stock options, and 687,944 phantom shares outstanding under the LTIP. These awards are being accrued over the vesting period.

An award valued at approximately $10.6 million was earned by participants pursuant to the long-term incentive plan in 2008 and was granted 40% in SARs, 30% in options and 30% in phantom stock during the three months ended March 31, 2009. The Company issued 2,002,116 options as part of this award.

Share Appreciation Rights (SARs)

SARs provide the holder with the opportunity to receive either common shares or a cash payment equal to the fair market value of the Company’s common shares less the grant price. The grant price is set at the closing price of the Company’s common shares on the date of grant. SARs vest over a four to five year period and expire ten years after the grant date. Compensation expense is recognized based on the fair value of the awards that are expected to vest and remain outstanding at the end of the reporting period. The Black-Scholes option pricing model is used to calculate an estimate of fair value. The Company has both equity-settled and cash-settled SARs. For SARs accounted for as equity-settled, the fair value is estimated only at the date of grant. For SARs accounted for as cash-settled, the fair value is remeasured at each balance sheet reporting date.

The grant date fair value of equity-settled SARs granted during the three months ended March 31, 2010 was $3.72 and the principal assumptions used in applying the Black-Scholes option pricing model were as follows:


	2010
Risk-free interest rate		2.81	%
Expected life	6.51 years
Expected volatility		60.99	%
Expected dividend yield		2.77	%

The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions. The model requires the use of subjective assumptions. Expected volatility was based on historical volatility of the Company’s stock as well as other companies operating similar businesses. The expected life (in years) was determined using historical data to estimate SARs exercise patterns. The expected dividend yield was based on the historical annualized dividend rates. The risk free interest rate was based on the rate for US Treasury bonds commensurate with the expected term of the granted SARs.

Restricted Share Units (RSUs)

RSUs give the holder the right to receive a specified number of common shares at the specified vesting date. As determined by the Human Resources Committee, the RSUs vest over a five-year period. The holders of RSUs have no voting rights, but accumulate additional units based on notional dividends paid by the Company on its common shares at each dividend payment date, which are reinvested as additional RSUs. Compensation expense related to RSUs is recognized over the vesting period based upon the fair value of the Company’s common shares on the grant date and the awards that are expected to vest. The fair value is calculated with reference to the closing price of the Company’s common shares on the NYSE on the date of grant. The weighted-average fair value of RSUs granted was $7.89 for the three months ended March 31, 2010.

Performance Share Units (PSUs)

PSUs give the holder the right to receive one common share for each unit that vests on the vesting date as determined by the Human Resources Committee. The holders of PSUs accumulate additional units based upon notional dividends paid by the Company on its common shares on each dividend payment date, which are reinvested as additional PSUs. The percentage of PSUs initially granted that cliff vest in 5 years depends upon the Company’s performance over the performance period against pre-established performance goals.

Compensation expense related to each PSU grant is recognized over the performance period based upon the fair value of the Company’s common shares on the grant date and the number of units expected to vest. The fair value is calculated with reference to the closing price of the Company’s common shares on the NYSE on the date of grant. The weighted-average fair value of PSUs granted was $7.89 for the three months ended March 31, 2010.

Stock Options

As determined by the Human Resources Committee, the Company’s stock options vest over a period of four years. The maximum term of an option is 10 years from the date of grant. Options under the plan are granted at the closing price of the Company’s common shares on the date of grant.

There were no stock options granted under the EIP during the three months ended March 31, 2010. The grant date fair value of stock options granted under the long-term incentive plans during the three months ended March 31, 2009 was $1.59. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants issued in the table below.


	2009
Risk-free interest rate		1.99	%
Expected life	6.25 years
Expected volatility		62.95	%
Expected dividend yield		3.10	%

The summary of stock option activity is as follows ($000s):


	March 31, 2010					December 31, 2009
	Number of			Weighted Average		Number of			Weighted Average
	Shares			Exercise Price		Shares			Exercise Price
Outstanding at the beginning of the year		2,828,498		$	5.79		1,307,036		$	9.13
Granted		—			—		2,002,116			3.48
Exercised (a)		(178,055	)		3.31		(108,590	)		1.98
Forfeited		—			—		(372,064	)		6.18

Outstanding at the end of the period		2,650,443		$	5.96		2,828,498		$	5.79


Options exercisable		1,109,193		$	7.44		665,320		$	7.57


(a)		The weighted-average price of the Company’s stock at the date of exercise for stock options exercised during the three months ended March 31, 2010 and 2009 was $3.31 and $2.04, respectively.

The following table summarizes information about options outstanding at March 31, 2010:


			Weighted Average		Weighted
Exercise Price	Number		Remaining		Average		Number
Range US$	Outstanding		Contractual Life		Exercise Price		Exercisable
$1.38 to $3.48		1,894,720		7.8	$	3.22		590,947
$9.50 to $10.90		428,140		6.7	$	10.53		350,121
$15.86		327,583		7.9	$	15.86		168,125


		2,650,443						1,109,193

During the three months ended March 31, 2010 and 2009, the compensation costs recognized by the Company for all equity-settled awards were $0.8 million and $0.9 million, respectively. The Company recorded no compensation expense and a reversal of $2.8 million related to cash-settled awards for the three months ended March 31, 2010 and 2009, respectively.

At March 31, 2010, December 31, 2009 and January 1, 2009, the outstanding liability for share-based payment transactions included in Other non-current liabilities in the Company’s unaudited interim condensed consolidated balance sheets was $19.5 million, $21.7 million and $17.0 million, respectively. The total intrinsic value of share-based liabilities for which the participant’s right to cash had vested was $4.0 million, $1.5 million and $1.6 million as of March 31, 2010, December 31, 2009 and January 1, 2009, respectively.

NOTE 20. Segment information

The Company is organized into two primary business segments: (a) steel mills which manufacture and market a wide range of Long Steel Products, including reinforcing steel bar (rebar), merchant bars, structural shapes, beams, special sections and coiled wire rod and (b) downstream products which include rebar fabrication and epoxy coating, railroad spike operations, cold drawn products, super light beam processing, and the production of elevator guide rails, grinding balls, wire mesh and wire drawing. Steel products sold to the downstream divisions are sold at market prices with intracompany transactions eliminated upon consolidation, based on the same accounting policies discussed in Note 2. Performance is evaluated and resources allocated based on specific segment requirements and measurable factors. Segment assets are those assets that are specifically identified with the operations in each operational segment. Corporate assets primarily include cash; short-term investments; long-term investments; investment in 50% owned joint ventures; assets held for sale; some property, plant and equipment; deferred income taxes; and deferred financing costs. Corporate expense includes some unallocated selling and administrative expenses, interest income, interest expense, write down of long-term investments and income tax expense that may not be directly attributable to either specific segment.

Operational results and other financial data along with balance sheet data for the two business segments are presented below ($000s):


							Corp/
	Steel			Downstream			eliminations/
	Mills			products			other			Total
Statement of operations and other financial data:
For the three months ended March 31, 2010:
Revenue from external customers	$	939,748		$	197,977		$	—		$	1,137,725
Inter-company sales		133,137			—			(133,137	)		—
Total sales		1,072,885			197,977			(133,137	)		1,137,725
Operating (loss) income		58,273			(8,201	)		(2,462	)		47,610
Depreciation expense		39,556			4,409			2,770			46,735
Amortization expense		13,986			672			—			14,658
Capital expenditures		8,816			509			864			10,189

For the three months ended March 31, 2009:
Revenue from external customers	$	725,910		$	311,789		$	—		$	1,037,699
Inter-company sales		130,627			—			(130,627	)		—
Total sales		856,537			311,789			(130,627	)		1,037,699
Operating (loss) income		(50,658	)		22,791			10,980			(16,887	)
Depreciation expense		44,471			4,987			2,871			52,329
Amortization expense		13,660			2,948			—			16,608
Capital expenditures		33,283			1,402			1,599			36,284

Balance sheet data:
As of March 31, 2010:
Segment assets	$	4,884,531		$	658,294		$	925,932		$	6,468,757
Segment goodwill		1,784,831			178,300			—			1,963,131
Segment Intangibles		422,188			13,160			—			435,348

As of December 31, 2009:
Segment assets	$	4,701,907		$	637,978		$	977,254		$	6,317,139
Segment goodwill		1,783,798			178,300			—			1,962,098
Segment Intangibles		435,103			14,900			—			450,003

As of January 1, 2009:
Segment assets	$	5,365,272		$	887,552		$	948,755		$	7,201,579
Segment goodwill		1,778,729			178,300			—			1,957,029
Segment Intangibles		489,667			26,069			—			515,736


Exhibit		Description
	99.1	Quarterly Report for the three months ended March 31, 2010, as filed with Canadian Securities Regulators
	99.2	Certifications pursuant to Canadian law


GERDAU AMERISTEEL CORPORATION
By:	/s/ Robert E. Lewis
	Name:	Robert E. Lewis
	Title:	Vice-President, General Counsel and Corporate Secretary


	March 31,		December 31,		January 1,
	2010		2009		2009
Ferrous and non-ferrous scrap	$	140,392	$	101,431	$	193,577
Raw materials (excluding scrap) and operating supplies		325,461		322,491		423,402
Work-in-process		161,140		112,889		225,767
Finished goods		347,626		277,977		425,022

	$	974,619	$	814,788	$	1,267,768


Current	$	952,680	$	814,788	$	1,267,768
Non-current		21,939		—		—

	$	974,619	$	814,788	$	1,267,768


			Fair Value Measurements at Reporting Date Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
Description	Value		(Level 1)		(Level 2)		(Level 3)
As of March 31, 2010:
Assets:
Short-term investments	$	164,894	$	—	$	164,894	$	—
Long-term Investments		25,996		—		—		25,996
Liabilities:
Derivative financial instruments	$	45,078	$	—	$	45,078	$	—
Redeemable noncontrolling interest		27,497		—		—		27,497

As of December 31, 2009:
Assets:
Short-term investments	$	25,000	$	—	$	25,000	$	—
Long-term Investments		28,538		—		—		28,538
Liabilities:
Derivative financial instruments	$	37,822	$	—	$	37,822	$	—
Redeemable noncontrolling interest		32,439		—		—		32,439

As of January 1, 2009:
Assets:
Short-term investments	$	205,817	$	74,980	$	130,837	$	—
Long-term Investments		33,189		—		—		33,189
Liabilities:
Derivative financial instruments	$	63,005	$	—	$	63,005	$	—
Redeemable noncontrolling interest		46,927		—		—		46,927

5.1		*Control framework:* The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

5.2		N/A

5.3		N/A


Date:		May 7, 2010

“Mario Longhi”

Mario Longhi
President and Chief Executive Officer


Date:		May 7, 2010

“Barbara R. Smith”

Barbara R. Smith Vice-President, Finance and Chief Financial Officer


Form 20-F o		Form 40-F þ