##### 



GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(US$ in thousands)

September 30, 2003
    
    December 31, 2002Unaudited
    
    AuditedAssetsCurrent AssetsCash and cash equivalents
    
    $
    20,411
    
    
    $
    16,361Accounts receivable, net
    
    
    225,829
    
    
    
    172,745Inventories
    
    
    374,053
    
    
    
    351,400Deferred tax assets and recoverable taxes
    
    
    17,514
    
    
    
    11,417Other current assets
    
    
    10,913
    
    
    
    2,997Total Current Assets
    
    
    648,720
    
    
    
    554,920Property, Plant and Equipment
    
    
    917,789
    
    
    
    898,948Goodwill
    
    
    116,564
    
    
    
    114,374Deferred Financing Costs
    
    
    15,491
    
    
    
    2,514Future Tax Assets
    
    
    8,364
    
    
    
    Other Assets
    
    
    2,033
    
    
    
    645Total Assets
    
    $
    1,708,961
    
    
    $
    1,571,401Liabilities and Shareholders EquityCurrent LiabilitiesTrade accounts payable
    
    $
    212,853
    
    
    $
    170,334Accrued salaries, wages and employee
benefits
    
    
    26,220
    
    
    
    27,342Other current liabilities
    
    
    57,819
    
    
    
    46,662Bank indebtedness
    
    
    2,810
    
    
    
    23,379Current maturities of long-term borrowings
    
    
    10,771
    
    
    
    83,942Total Current Liabilities
    
    
    310,473
    
    
    
    351,659Long Term Borrowings, Less Current Portion
    
    
    581,816
    
    
    
    411,833Other Liabilities
    
    
    105,542
    
    
    
    99,341Future Tax Liabilities
    
    
    60,991
    
    
    
    82,158Minority Interest
    
    
    
    
    
    
    33,312Total Liabilities
    
    
    1,058,822
    
    
    
    978,303Shareholders EquityInvested capital
    
    
    547,601
    
    
    
    513,400Convertible debentures
    
    
    92,565
    
    
    
    79,134Retained (deficit) earnings
    
    
    (16,813
    )
    
    
    1,329Cumulative foreign currency translation
    
    
    26,786
    
    
    
    (765
    )Total Shareholders Equity
    
    
    650,139
    
    
    
    593,098Total Liabilities and Shareholders Equity
    
    $
    1,708,961
    
    
    $
    1,571,401


8



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##### 



GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(US$ in thousands)
(Unaudited)

Three Months Ending
    
    Nine Months EndingSeptember 30, 2003
    
    September 30, 2002
    
    September 30, 2003
    
    September 30, 2002Actual
    
    Actual
    
    Actual
    
    ActualNet Sales
    
    $
    485,323
    
    
    $
    234,523
    
    
    $
    1,401,270
    
    
    $
    697,622Operating ExpensesCost of sales
    
    
    447,053
    
    
    
    194,520
    
    
    
    1,283,916
    
    
    
    571,298Selling and administrative
    
    
    21,173
    
    
    
    15,553
    
    
    
    59,312
    
    
    
    45,369Depreciation
    
    
    20,549
    
    
    
    12,799
    
    
    
    60,467
    
    
    
    38,520Other operating expense (income)
    
    
    86
    
    
    
    92
    
    
    
    144
    
    
    
    1,007488,861
    
    
    
    222,964
    
    
    
    1,403,839
    
    
    
    656,194Income (Loss) From Operations
    
    
    (3,538
    )
    
    
    11,559
    
    
    
    (2,569
    )
    
    
    41,428Other ExpensesInterest
    
    
    14,718
    
    
    
    8,605
    
    
    
    30,147
    
    
    
    30,562Foreign exchange (gains) losses
    
    
    757
    
    
    
    (557
    )
    
    
    186
    
    
    
    386Amortization of deferred
financing costs
    
    
    552
    
    
    
    294
    
    
    
    4,130
    
    
    
    87916,027
    
    
    
    8,342
    
    
    
    34,463
    
    
    
    31,827(Loss) Income Before Taxes
    
    
    (19,565
    )
    
    
    3,217
    
    
    
    (37,032
    )
    
    
    9,601Income Tax (Benefit) Expense
    
    
    (10,856
    )
    
    
    350
    
    
    
    (21,525
    )
    
    
    565(Loss) Income before Minority Interest
    
    
    (8,709
    )
    
    
    2,867
    
    
    
    (15,507
    )
    
    
    9,036Minority Interest
    
    
    
    
    
    
    (356
    )
    
    
    217
    
    
    
    (1,430
    )Net (Loss) Income
    
    $
    (8,709
    )
    
    $
    2,511
    
    
    $
    (15,290
    )
    
    $
    7,606EPS  Basic
    
    $
    (0.05
    )
    
    $
    0.02
    
    
    $
    (0.09
    )
    
    $
    0.06EPS  Diluted
    
    $
    (0.05
    )
    
    $
    0.02
    
    
    $
    (0.09
    )
    
    $
    0.06


9



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##### 



GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY     (U.S.
$ in thousands, except share data) (unaudited)

Retained
    
    CumulativeNumber of
    
    Capital
    
    Convertible
    
    Earnings
    
    TranslationShares
    
    Stock
    
    Debentures
    
    (Deficit)
    
    Adjustment
    
    TotalBalanceDecember 31, 2001
    
    
    133,388,400
    
    
    $
    58,364
    
    
    $
    
    
    
    $
    (7,622
    )
    
    $
    (944
    )
    
    $
    49,798Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,606
    
    
    
    
    
    
    
    7,606Subsidiary stock
activity
    
    
    
    
    
    
    (418
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (418
    )Foreign exchange
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,649
    )
    
    
    (1,649
    )Debt converted to
equity
    
    
    
    
    
    
    325,948
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    325,948BalanceSeptember 30, 2002
    
    
    133,388,400
    
    
    
    383,894
    
    
    
    
    
    
    
    (16
    )
    
    
    (2,593
    )
    
    
    381,285BalanceDecember 31, 2002
    
    
    184,892,360
    
    
    
    513,400
    
    
    
    79,134
    
    
    
    1,329
    
    
    
    (765
    )
    
    
    593,098Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,290
    )
    
    
    
    
    
    
    (14,390
    )Acquisition of
minority shares
    
    
    13,198,501
    
    
    
    34,201
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,201Foreign exchange
    
    
    
    
    
    
    
    
    
    
    13,431
    
    
    
    
    
    
    
    27,551
    
    
    
    40,982Interest on
convertible
debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,852
    )
    
    
    
    
    
    
    (2,852
    )BalanceSeptember 30, 2003
    
    
    198,090,861
    
    
    $
    547,601
    
    
    $
    92,565
    
    
    $
    (16,813
    )
    
    $
    26,786
    
    
    $
    650,139


10



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##### 



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

Three Months EndingSeptember 30,
    
    September 30,2003
    
    2002OPERATING ACTIVITIESNet (loss) income
    
    $
    (8,709
    )
    
    $
    2,511Adjustment to reconcile net income (loss) to net cashProvided by (used for) operating activities:Depreciation
    
    
    20,549
    
    
    
    12,799Amortization
    
    
    552
    
    
    
    294Deferred income taxes
    
    
    (9,010
    )
    
    
    (2,640
    )Gain on disposition of property, plant and equipment
    
    
    
    
    
    
    (254
    )Unrealized foreign exchange on related party loans
    
    
    
    
    
    
    (4,043
    )Accrued interest on related party loans
    
    
    
    
    
    
    757Changes in operating assets and liabilities, net of acquisitions:Accounts receivable
    
    
    7,000
    
    
    
    873Inventories
    
    
    (4,653
    )
    
    
    (10,295
    )Other assets
    
    
    (2,341
    )
    
    
    (5,063
    )Liabilities
    
    
    13,019
    
    
    
    (3,889
    )NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
    
    
    16,407
    
    
    
    (8,950
    )INVESTING ACTIVITIESAdditions to property, plant and equipment
    
    
    (16,253
    )
    
    
    (4,143
    )Proceeds from dispositions
    
    
    
    
    
    
    15NET CASH USED IN INVESTING ACTIVITIES
    
    
    (16,253
    )
    
    
    (4,128
    )FINANCING ACTIVITIES(Payment) borrowing of short-term and long-term
borrowings, net
    
    
    (5,176
    )
    
    
    11,696Additions to deferred financing costs
    
    
    (1,615
    )
    
    
    Foreign exchange loss
    
    
    (480
    )
    
    
    Changes in minority interest
    
    
    
    
    
    
    1,291Subsidiary stock activity
    
    
    
    
    
    
    987NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES
    
    
    (7,271
    )
    
    
    13,974(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (7,117
    )
    
    
    896CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    27,528
    
    
    
    7,594CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    20,411
    
    
    $
    8,490


11



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##### 



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

Nine Months EndingSeptember 30,
    
    September 30,2003
    
    2002OPERATING ACTIVITIESNet (loss) income
    
    $
    (15,290
    )
    
    $
    7,606Adjustment to reconcile net income (loss) to net cashProvided by operating activities:Depreciation
    
    
    60,467
    
    
    
    38,520Amortization
    
    
    4,130
    
    
    
    879Deferred income taxes
    
    
    (20,739
    )
    
    
    (4,861
    )Gain on disposition of property, plant and equipment
    
    
    (93
    )
    
    
    Unrealized foreign exchange on related party loans
    
    
    7,241
    
    
    
    181Accrued interest on related party loans
    
    
    (2,884
    )
    
    
    (594
    )Changes in operating assets and liabilities, net of acquisitions:Accounts receivable
    
    
    (56,501
    )
    
    
    (36,320
    )Inventories
    
    
    (2,808
    )
    
    
    (3,467
    )Other assets
    
    
    (10,034
    )
    
    
    (5,152
    )Liabilities
    
    
    39,691
    
    
    
    12,736NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    3,180
    
    
    
    9,528INVESTING ACTIVITIESAdditions to property, plant and equipment
    
    
    (40,475
    )
    
    
    (21,787
    )Assets acquisition
    
    
    
    
    
    
    (8,356
    )Proceeds from dispositions
    
    
    77
    
    
    
    134NET CASH USED IN INVESTING ACTIVITIES
    
    
    (40,398
    )
    
    
    (30,009
    )FINANCING ACTIVITIESProceeds from issuance of new debt
    
    
    
    
    
    
    542,357(Payment) borrowing of short-term and long-term
borrowings, net
    
    
    (484,554
    )
    
    
    20,572Additions to deferred financing costs
    
    
    (15,034
    )
    
    
    Foreign exchange loss
    
    
    (520
    )
    
    
    Changes in minority interest
    
    
    (218
    )
    
    
    2,365Subsidiary stock activity
    
    
    (763
    )
    
    
    947NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    41,268
    
    
    
    23,884INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    4,050
    
    
    
    3,403CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    16,361
    
    
    
    5,087CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    20,411
    
    
    $
    8,490


12



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##### 



GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  BASIS OF PRESENTATION

The consolidated financial statements include the results and accounts of
companies controlled by Gerdau Ameristeel Corporation, a Canadian corporation,
whose indirect majority shareholder is Gerdau S.A., a Brazilian company.
Gerdau Ameristeels financial statements are presented in United States dollars
and in accordance with Canadian generally accepted accounting principles
(GAAP).

The 2002 consolidated financial statements include the accounts of Gerdau
North America Group consisting of the Gerdau Canada Group (Gerdau Ameristeel
Cambridge Inc. and Gerdau MRM Holdings Inc. and their consolidated
subsidiaries) and Gerdau USA, Inc. and its consolidated subsidiaries FLS
Holdings Inc., AmeriSteel Corporation and AmeriSteel Bright Bar, Inc.
(collectively, GUSA). All significant intercompany transactions and
accounts have been eliminated in consolidation.

On October 23, 2002, Gerdau S.A., parent company of the Gerdau North America
Group, entered into a transaction agreement with Co-Steel Inc. (Co-Steel), a
Canadian public company. This transaction agreement resulted in Co-Steel
acquiring all of the issued and outstanding shares of the companies included in
the Gerdau North America Group, in exchange for Co-Steel common shares
representing approximately 74% of Co-Steels total common shares The
transaction was accounted for using the reverse-takeover method of purchase
accounting. The Gerdau North America Group is deemed to be the acquirer and is
assumed to be purchasing the assets and liabilities of Co-Steel, since the
original shareholder of the Gerdau North America Group became owner of more
than 50 percent of the voting shares of Co-Steel on a fully-diluted basis
following the transaction. As a result, the Gerdau North America Groups
historical accounts became the historical accounts for all periods prior to the
date of merger. In connection with the merger, Co-Steels name was changed to
Gerdau Ameristeel Corporation (the Company or Gerdau Ameristeel). As part
of this transaction, certain related party loans of the Gerdau North America
Group were converted into equity in October 2002.

On March 31, 2003, under the terms of the Transaction Agreement relating to the
acquisition of Co-Steel, the Company completed an exchange of minority shares
of AmeriSteel Corporation for shares of Gerdau Ameristeel. Minority
shareholders of AmeriSteel, mostly executives and employees, exchanged
1,395,041 shares of AmeriSteel for 13,198,501 shares of Gerdau Ameristeel, an
exchange ratio of 9.4617 to 1. As a result, AmeriSteel became a wholly owned
subsidiary of Gerdau Ameristeel.

The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions for interim period reports and, therefore,
do not include all the information or footnotes necessary for a complete
presentation of financial condition, results of operations and cash flows in
conformity with Canadian GAAP. However, all adjustments which, in the opinion
of management, are necessary for a fair presentation have been included. Such
adjustments consisted of only normally recurring items. These condensed
financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Companys latest annual report
and have been prepared using the same accounting policies as described in Note
2 of the latest annual report. Certain amounts have been reclassified to
conform to the current-period financial statement presentation. The results of
the three and nine month periods ended September 30, 2003 and 2002 are not
necessarily indicative of the results to be expected for future periods. 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. Its principal market area is the
eastern United States and Canada. Principal suppliers to the Company include
scrap metal producers, electric utilities, natural gas suppliers, rail and
truck carriers.

13



---



##### 



NOTE 2  INVENTORIES

Inventories consist of the following ($000s):

At September 30,
    
    At December 31,2003
    
    2002(unaudited)Ferrous and non-ferrous scrap
    
    $
    65,628
    
    
    $
    40,983Work in-process
    
    
    44,076
    
    
    
    33,701Finished goods
    
    
    161,288
    
    
    
    195,893Raw materials (excluding scrap) and operating supplies
    
    
    103,061
    
    
    
    80,823$
    374,053
    
    
    $
    351,400


NOTE 3  PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following ($000s):

At September 30, 2003(unaudited)Accumulated
    
    NetCost
    
    Depreciation
    
    Book ValueLand and improvements
    
    $
    81,956
    
    
    $
    11,511
    
    
    $
    70,445Buildings and improvements
    
    
    220,474
    
    
    
    113,266
    
    
    
    107,208Machinery and equipment
    
    
    891,128
    
    
    
    200,540
    
    
    
    690,588Construction in progress
    
    
    38,953
    
    
    
    
    
    
    
    38,953Property, plant and equipment held for sale
    
    
    10,595
    
    
    
    
    
    
    
    10,595$
    1,243,106
    
    
    $
    325,317
    
    
    $
    917,789


NOTE 4  STOCK BASED COMPENSATION

The Company accounts for stock options granted to employees using the intrinsic
value based method of accounting. Under this method, the Company does not
recognize compensation expense for the stock options because the exercise price
is equal to the market price of the underlying stock on the date of grant. Had
the Company applied the fair value based method of accounting, net loss and
loss per share and net income and income per share would be as shown on the
following table. The Black-Scholes option pricing model was used to estimate
the fair value of each option grant on the date of grant and calculate the pro
forma stock-based compensation costs. For purposes of the pro forma
disclosures, the assumed compensation expense is amortized over the options
vesting periods and includes option granted subsequent to January 1, 2002 and
excludes options issued prior to January 1, 2002. The following assumptions
were used:

Expected dividend yield
    
    
    0
    %Expected share price volatility
    
    
    25
    %Risk-free rate of return
    
    
    4
    %Expected period until exercise
    
    5 years


(Amounts in $000 except per share data)
For the Three Months Ended
    
    For the Nine Months EndedSeptember 30, 2003
    
    September 30, 2002
    
    September 30, 2003
    
    September 30, 2002(unaudited)
    
    (unaudited)Net (loss) income, as reported
    
    $
    (8,709
    )
    
    $
    2,511
    
    
    $
    (15,290
    )
    
    $
    7,606Pro forma stock-based
Compensation cost
    
    
    25
    
    
    
    25
    
    
    
    75
    
    
    
    75Pro forma, net income
    
    $
    (8,734
    )
    
    $
    2,486
    
    
    $
    (15,365
    )
    
    $
    7,531Earnings per shareBasic, as reported
    
    $
    (0.05
    )
    
    $
    0.02
    
    
    $
    (0.09
    )
    
    $
    (0.06
    )Basic, pro forma
    
    
    (0.05
    )
    
    
    0.02
    
    
    
    (0.09
    )
    
    
    (0.06
    )Diluted, as reported
    
    
    (0.05
    )
    
    
    0.02
    
    
    
    (0.09
    )
    
    
    (0.06
    )Diluted, pro forma
    
    
    (0.05
    )
    
    
    0.02
    
    
    
    (0.09
    )
    
    
    (0.06
    )


14NOTE 5  JOINT VENTURESThe Companys investments in Gallatin Steel Company, Bradley Steel Processors
and SSS/MRM Guide Rail are 50% joint ventures. The results for Gallatin Steel
are presented from the date of acquisition, October 23, 2002; therefore the
results for the three months and nine months ending September 30, 2002 exclude
Gallatin Steel. The Companys interests in the joint ventures have been
accounted for using the proportional consolidation method under which the
Companys proportionate share of assets, liabilities, revenues and expenses of
the joint ventures have been included in the consolidated financial statements.
The Companys interest in the joint ventures is as follows ($000s):At September 30,
    
    At December 31,Balance Sheet
    
    2003
    
    2002(unaudited)Current assets
    
    $
    45,976
    
    
    $
    45,234Property, plant and equipment
    
    
    108,991
    
    
    
    107,421Current liabilities
    
    
    21,215
    
    
    
    26,505Long-term debt
    
    
    4,670
    
    
    
    3,415

Three Months ended September 30,Statement of Earnings
    
    2003
    
    2002(unaudited)Sales
    
    $
    52,700
    
    
    $
    4,071Operating earnings
    
    
    4,109
    
    
    
    246Earnings before income taxes
    
    
    191
    
    
    
    257

Nine Months ended September 30,2003
    
    2002(unaudited)Sales
    
    $
    163,072
    
    
    $
    10,674Operating earnings
    
    
    13,980
    
    
    
    1,045Earnings before income taxes
    
    
    1,729
    
    
    
    1,052

Three Months ended September 30,Changes in Cash Flows
    
    
    2003
    
    2002(unaudited)Cash provided by (used in)Operating activities
    
    $
    4,867
    
    
    $
    (855
    )Investing activities
    
    
    (1,620
    )
    
    
    (11
    )Financing activities
    
    
    (1,918
    )
    
    
    1,665Proportionate share of increase in cash
    
    
    1,329
    
    
    
    799

Nine Months ended September 30,2003
    
    2002(unaudited)Cash provided by (used in)Operating activities
    
    $
    5,673
    
    
    $
    36Investing activities
    
    
    (4,592
    )
    
    
    (36
    )Financing activities
    
    
    (2,146
    )
    
    
    Proportionate share of decrease in cash
    
    
    (1,065
    )
    
    
    

NOTE 6  LONG-TERM DEBTAt September 30, 2003, Gerdau Ameristeel debt includes the following ($000s):Senior Notes, 10 3/8% due 2011, net of original issue discount
    
    $
    397,087Senior Secured Credit Facility
    
    
    149,991Industrial Revenue Bonds
    
    
    36,795AmeriSteel Bright Bar Term Loan
    
    
    3,368Gallatin Joint Venture Debt
    
    
    6,375Other
    
    
    1,781595,397Less current portion
    
    
    13,581$
    581,816


15At December 31, 2002, the Company had debt agreements that were specific to the
Gerdau Canada Group, GUSA and former Co-Steel entities and included the
following ($000s):Gerdau Canada Group:Bank indebtedness
    
    $
    17,243U.S. Dollar Floating Rate Term Loan
    
    
    61,743Canadian dollar revolving loan (Cdn $35.0 million)
    
    
    22,157Other
    
    
    1,444GUSA:AmeriSteel Revolving Credit Agreement
    
    
    100,800AmeriSteel Term Loan
    
    
    68,750Industrial Revenue Bonds
    
    
    36,795AmeriSteel Bright Bar
    
    
    3,522Other
    
    
    809Co-Steel Group:Bank Indebtedness
    
    
    6,136Canadian dollar revolving loan (Cdn$48.3 million)
    
    
    30,577U.S. Dollar Fixed Rate Reducing Term Loan
    
    
    96,784Fair value of early payment penalty of fixed rate reducing
term loans
    
    
    9,065U.S. dollar revolving loan
    
    
    59,768Other
    
    
    3,561519,154Less current portion
    
    
    (107,321
    )$
    411,833

On June 27, 2003, the Company refinanced its debt by issuing $405 million
aggregate principal 10 3/8% Senior Notes, of which $35.0 million were sold to
an indirect wholly-owned subsidiary of the Companys parent, Gerdau S.A. The
notes mature July 15, 2011 and were issued at 98% of face value. The Company
also entered into a new Senior Secured Credit Facility, with a term of up to
five years, which provides commitments of up to $350 million. The borrowings
under the Senior Secured Credit Facility are secured by the Companys inventory
and accounts receivable. The proceeds were used to repay existing
indebtedness. At September 30, 2003, approximately $103.5 million was
available under the Senior Secured Credit Facility.Gerdau Ameristeel US Inc. issued industrial revenue bonds (IRBs) in prior
years to obtain funding to construct facilities in Jackson, Tennessee;
Charlotte, North Carolina; Jacksonville, Florida; and Plant City, Florida. The
Company assumed an additional $3.6 million IRB with the acquisition of the
Cartersville cold drawn facility in June 2002. The interest rates on these
bonds range from 50% to 75% of the prime rate. $9.4 million of the IRBs mature
in the fourth quarter of 2003, $3.8 million matures in 2015, $20.0 million
matures in 2017, and $3.6 million matures in 2018. Irrevocable letters of
credit issued pursuant to the Senior Secured Credit Facility back the IRBs.The AmeriSteel Bright Bar Term Loan represents a bank loan of Gerdau Ameristeel
US Inc.s majority-owned subsidiary, secured by machinery and equipment. The
loan matures in 2011 with amortization payments that began in July 2001. The
loan currently bears interest at a rate of approximately 6.0% per year. Gerdau
Ameristeel US Inc. is a guarantor of the loan. Gallatin Joint Venture Debt
represents the Companys proportionate 50% share of the joint ventures
outstanding debt, including borrowings under its $40 million credit facility
and capital leases. Other debt includes equipment loans and capital leases at
various subsidiaries.In order to reduce its exposure to interest-rate fluctuations, the Company had
entered into four interest-rate swap agreements. The interest-rate swaps have
a notional value of $69 million, with the Company paying a fixed interest rate
and receiving a variable interest rate based on three-month LIBOR. The
aggregate mark-to-market (fair value) of the interest rate agreements, which
represents the amount that would be paid by GUSA if the agreements were
terminated at September 30, 2003, was approximately $5.4 million.16NOTE 7  ACQUISITIONOn June 24, 2002, the Company acquired certain assets and assumed certain
liabilities of Republic Technologies cold drawn plant in Cartersville,
Georgia. The purchase price was $8.4 million and the transaction was accounted
for as a business combination. The plant commenced operations under Gerdau
Ameristeels ownership on July 2, 2002.NOTE 8  SEGMENT INFORMATIONThe Company is organized into two primary business segments: (a) Steel mills
and (b) Downstream products. Steel products sold to the downstream divisions
are sold at market prices with intra-company transactions eliminated upon
consolidation. 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 include primarily cash, assets held for sale, some
property, plant and equipment, deferred income taxes and deferred financing
costs. Operational results and other financial data for the two business
segments for the three and nine months ended September 30, 2003 and 2002, are
presented below ($000s):Three Months Ending
    
    Nine Months EndingSeptember 30, 2003
    
    September 30, 2002
    
    September 30, 2003
    
    September 30, 3002(unaudited)
    
    (unaudited)Revenue from external customers:Steel mills
    
    $
    410,114
    
    
    $
    158,252
    
    
    $
    1,177,233
    
    
    $
    483,258Downstream products
    
    
    75,209
    
    
    
    76,271
    
    
    
    224,037
    
    
    
    214,364Total
    
    $
    485,323
    
    
    $
    234,523
    
    
    $
    1,401,270
    
    
    $
    697,622Inter-company sales:Steel mills
    
    $
    78,420
    
    
    $
    45,160
    
    
    $
    235,008
    
    
    $
    126,006Downstream products
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corp/eliminations/other
    
    
    (78,420
    )
    
    
    (45,160
    )
    
    
    (235,008
    )
    
    
    (126,006
    )Total
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Total sales:Steel mills
    
    $
    488,534
    
    
    $
    203,412
    
    
    $
    1,412,241
    
    
    $
    609,264Downstream products
    
    
    75,209
    
    
    
    76,271
    
    
    
    224,037
    
    
    
    214,364Corp/eliminations/other
    
    
    (78,420
    )
    
    
    (45,160
    )
    
    
    (235,008
    )
    
    
    (126,006
    )Total
    
    $
    485,323
    
    
    $
    234,523
    
    
    $
    1,401,270
    
    
    $
    697,622Income (loss) from operations:Steel mills
    
    $
    565
    
    
    $
    11,207
    
    
    $
    1,806
    
    
    $
    43,345Downstream products
    
    
    970
    
    
    
    3,741
    
    
    
    4,343
    
    
    
    12,179Corp/eliminations/other
    
    
    (5,073
    )
    
    
    (3,389
    )
    
    
    (8,718
    )
    
    
    (14,096
    )Total
    
    $
    (3,538
    )
    
    $
    11,559
    
    
    $
    (2,569
    )
    
    $
    41,428

September 30, 2003
    
    December 31, 2002Segment assets:Steel mills
    
    $
    1,545,306
    
    
    $
    1,424,363Downstream products
    
    
    134,110
    
    
    
    122,425Corp/eliminations/other
    
    
    29,545
    
    
    
    24,613Total
    
    $
    1,708,961
    
    
    $
    1,571,401

Geographic data is as follows:United States
    
    Canada
    
    TotalSeptember 30, 2003Revenue from external customers
    
    $
    1,078,686
    
    
    $
    322,584
    
    
    $
    1,401,270Long-lived assets
    
    
    655,496
    
    
    
    262,293
    
    
    
    917,789September 30, 2002Revenue from external customers
    
    $
    578,688
    
    
    $
    118,934
    
    
    $
    697,622Long-lived assets
    
    
    388,235
    
    
    
    140,472
    
    
    
    528,707


17NOTE 9  OTHER OPERATING EXPENSEOther operating expense for the nine months ended September 30, 2003 was
approximately $0.1 million. This includes a $1.8 million charge from a
settlement of environmental warranties from the May 2000 sale of Co-Steels
Mayer Parry Recycling unit in England, asset write-downs of $.8 million, $0.5
million charge relating to start-up costs associated with new process
automation controls at the Knoxville rolling mill and fabricating plant
shutdown expenses of $0.3 million. The charges were offset by income of $3.5
million in electric power rebates from the Province of Ontario. Other
operating expense for the nine months ended September 30, 2002 was $1.0 million
relating to the closing of certain of the Companys fabricating plants.18