ArcelorMittal
Unaudited Condensed Consolidated Financial
Statements for the six months ended June 30, 2007
1
ArcelorMittal AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2007 | December 31, 2006 | |||||
(millions of U.S. Dollars, except share and per share data) | ||||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents, restricted cash and short-term investments | $ | 6,782 | $ | 6,146 | ||
Trade accounts receivables | 11,246 | 8,769 | ||||
Inventories (note 5) | 19,448 | 19,238 | ||||
Prepaid expenses and other current assets | 6,091 | 5,209 | ||||
Total current assets | 43,567 | 39,362 | ||||
Non-current assets: | ||||||
Goodwill and intangible assets (note 4) | 14,954 | 10,782 | ||||
Property, plant and equipment | 57,836 | 54,696 | ||||
Investments in affiliates and joint ventures | 4,707 | 3,492 | ||||
Deferred tax assets | 1,503 | 1,670 | ||||
Other assets | 2,282 | 2,164 | ||||
Total non-current assets | 81,282 | 72,804 | ||||
Total assets | $ | 124,849 | $ | 112,166 | ||
LIABILITIES AND EQUITY | ||||||
Current liabilities: | ||||||
Payable to banks and current portion of long-term debt | $ | 7,617 | $ | 4,922 | ||
Trade accounts payable | 11,853 | 10,717 | ||||
Accrued expenses and other current liabilities | 10,741 | 8,921 | ||||
Total current liabilities | 30,211 | 24,560 | ||||
Non-current liabilities: | ||||||
Long-term debt, net of current portion | 22,389 | 21,645 | ||||
Deferred tax liabilities | 7,625 | 7,274 | ||||
Other long-term obligations and deferred employee benefits | 9,677 | 8,496 | ||||
Total non-current liabilities | 39,691 | 37,415 | ||||
Total liabilities | 69,902 | 61,975 | ||||
Equity (note 6): | ||||||
Equity attributable to equity holders of the parent | 48,549 | 42,127 | ||||
Minority interest | 6,398 | 8,064 | ||||
Total Equity | 54,947 | 50,191 | ||||
Total liabilities and equity | $ | 124,849 | $ | 112,166 | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
ArcelorMittal AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended | ||||||||
June 30, 2007 | June 30, 2006 | |||||||
(millions of U.S. Dollars, except share and per share data) | ||||||||
Sales | $ | 51,699 | $ | 17,660 | ||||
Cost of sales (including depreciation and amortization of, respectively, 1,985 and 699 for six months ended June 30, 2007 and June 30, 2006) | 41,589 | 14,792 | ||||||
Gross margin | 10,110 | 2,868 | ||||||
Selling, general and administrative | 2,423 | 557 | ||||||
Operating income | 7,687 | 2,311 | ||||||
Other income – net | 83 | 1 | ||||||
Income from equity method investments | 349 | 38 | ||||||
Financing costs – net | (192 | ) | (195 | ) | ||||
Income before taxes (including minority interest) | 7,927 | 2,155 | ||||||
Income tax expense (note 7) | 2,021 | 456 | ||||||
Net income (including minority interest) | 5,906 | 1,699 | ||||||
Attributable to: | ||||||||
Equity holders of the parent | 4,973 | 1,507 | ||||||
Minority interest | 933 | 192 | ||||||
Net income (including minority interest) | $ | 5,906 | $ | 1,699 | ||||
Earnings per common share: | ||||||||
Basic | $ | 3.60 | $ | 2.14 | ||||
Diluted | 3.59 | 2.13 | ||||||
Weighted average common shares outstanding (in millions): | ||||||||
Basic | 1,383 | 705 | ||||||
Diluted | 1,385 | 706 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
ArcelorMittal AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Reserves | |||||||||||||||||||||||||||||||||||||||||||||
(millions of U.S. Dollars, except share and per share | Shares* | Share capital | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Net income for the period | Foreign Currency Translation Adjustments | Unrealized Gains (Losses) on Derivative Financial Instruments | Unrealized Gains (Losses) on Available for Sale Securities | Equity | Minority interest | Total equity | |||||||||||||||||||||||||||||||||
Balance at December 31, 2005 | 704 | $ | 60 | $ | (111 | ) | $ | 2,239 | $ | 10,270 | $ | — | $ | 610 | $ | (4 | ) | $ | 222 | $ | 13,286 | $ | 2,171 | $ | 15,457 | ||||||||||||||||||||
Movements with minority shareholders | — | — | — | — | — | — | — | — | — | — | (58 | ) | (58 | ) | |||||||||||||||||||||||||||||||
Items recognized directly in equity | — | — | — | — | — | — | (123 | ) | (28 | ) | (74 | ) | (225 | ) | — | (225 | ) | ||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 1,507 | — | — | — | 1,507 | 192 | 1,699 | |||||||||||||||||||||||||||||||||
Recognized income and expenses | — | — | — | — | — | 1,507 | (123 | ) | (28 | ) | (74 | ) | 1,282 | 134 | 1,416 | ||||||||||||||||||||||||||||||
Transfer to retained earnings | — | — | — | — | 1,507 | (1,507 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Treasury stock | 1 | — | — | 15 | — | — | — | — | 15 | — | 15 | ||||||||||||||||||||||||||||||||||
Recognition of share-based payment | — | — | 21 | 8 | — | — | — | — | — | 29 | — | 29 | |||||||||||||||||||||||||||||||||
Dividends (USD 0.25 per share) | — | — | — | — | (176 | ) | — | — | — | — | (176 | ) | — | (176 | ) | ||||||||||||||||||||||||||||||
Balance at June 30, 2006 | 705 | $ | 60 | $ | (90 | ) | $ | 2,262 | $ | 11,601 | $ | — | $ | 487 | $ | (32 | ) | $ | 148 | $ | 14,436 | $ | 2,305 | $ | 16,741 | ||||||||||||||||||||
Balance at December 31, 2006 | 1,385 | $ | 17 | $ | (84 | ) | $ | 25,566 | $ | 14,974 | $ | — | $ | 1,436 | $ | (20 | ) | $ | 238 | $ | 42,127 | $ | 8,064 | $ | 50,191 | ||||||||||||||||||||
Items recognized directly in equity | — | — | — | — | — | 1,118 | (127 | ) | 220 | 1,211 | (2,599 | ) | (1,388 | ) | |||||||||||||||||||||||||||||||
Net income | — | — | — | — | 4,973 | — | — | — | 4,973 | 933 | 5,906 | ||||||||||||||||||||||||||||||||||
Recognized income and expenses | — | — | — | — | — | 4,973 | 1,118 | (127 | ) | 220 | 6,184 | (1,666 | ) | 4,518 | |||||||||||||||||||||||||||||||
Transfer to retained earnings | — | — | — | — | 4,973 | (4,973 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Issuance of shares in connection with the acquisition of minority interest of Arcelor Brasil | 27 | — | — | 1,713 | — | — | — | — | — | 1,713 | — | 1,713 | |||||||||||||||||||||||||||||||||
Treasury stock | (9 | ) | — | (571 | ) | 31 | — | — | — | — | — | (540 | ) | — | (540 | ) | |||||||||||||||||||||||||||||
Dividends (USD 0.65 per share) | — | — | — | — | (901 | ) | — | — | — | — | (901 | ) | — | (901 | ) | ||||||||||||||||||||||||||||||
Other | — | 7 | — | (41 | ) | — | — | — | — | (34 | ) | — | (34 | ) | |||||||||||||||||||||||||||||||
Balance at June 30, 2007 | 1,403 | $ | 17 | $ | (648 | ) | $ | 27,310 | $ | 19,005 | $ | — | $ | 2,554 | $ | (147 | ) | $ | 458 | $ | 48,549 | $ | 6,398 | $ | 54,947 | ||||||||||||||||||||
* | in millions, excluding treasury shares. |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
ArcelorMittal AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended | ||||||||
June 30, 2007 | June 30, 2006 | |||||||
(millions of U.S. Dollars) | ||||||||
Operating activities: | ||||||||
Net income | $ | 4,973 | $ | 1,507 | ||||
Adjustments to reconcile net income to net cash provided by operations: | ||||||||
Minority interest | 933 | 192 | ||||||
Depreciation | 1,985 | 699 | ||||||
Others | (269 | ) | (173 | ) | ||||
Changes in operating assets and liabilities, net of effects from acquisition | (1,240 | ) | (118 | ) | ||||
Net cash provided by operating activities | 6,382 | 2,107 | ||||||
Investing activities: | ||||||||
Purchase of property, plant and equipment | (2,318 | ) | (611 | ) | ||||
Acquisition of net assets of subsidiaries, net of cash acquired | (4,573 | ) | (957 | ) | ||||
Net cash used in investing activities | (6,891 | ) | (1,568 | ) | ||||
Financing activities: | ||||||||
Proceeds (payments) from payable to banks and long term debts | 2,708 | (164 | ) | |||||
Dividends paid | (1,158 | ) | (241 | ) | ||||
Other financing activities (net) | (534 | ) | 2 | |||||
Net cash provided by (used in) financing activities | 1,016 | (403 | ) | |||||
Net increase in cash and cash equivalents | 507 | 136 | ||||||
Effect of exchange rate changes on cash | 157 | (50 | ) | |||||
Cash and cash equivalents: | ||||||||
At the beginning of the period | 6,020 | 2,035 | ||||||
At the end of the period | $ | 6,684 | $ | 2,121 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
NOTE 1 – NATURE OF BUSINESS, BASIS OF PRESENTATION AND CONSOLIDATION
Nature of business
ArcelorMittal (“ArcelorMittal” or the “Company”), together with its subsidiaries, is a manufacturer of steel and steel related products. ArcelorMittal owns and operates manufacturing facilities in Europe, North and South America, Asia and Africa. ArcelorMittal was formerly known as Mittal Steel Company N.V. (“Mittal Steel”).
These manufacturing facilities, each of which includes its respective subsidiaries, are referred to herein as the “Operating Subsidiaries”.
On September 3, 2007, following approval by the Extraordinary General Meeting of Shareholders of Mittal Steel and by the sole shareholder of ArcelorMittal on August 28, 2007, Mittal Steel merged into ArcelorMittal. With the legal merger becoming effective, Mittal Steel was absorbed by ArcelorMittal, the surviving entity, and therefore no longer exists. As a result of the merger, holders of Mittal Steel shares automatically received one newly issued ArcelorMittal share for every one Mittal Steel share on the basis of their respective holdings in Mittal Steel.
For accounting purposes, the merger of Mittal Steel into ArcelorMittal was considered a combination of entities under common control as of January 1, 2007. All recorded assets and liabilities of Mittal Steel and ArcelorMittal were carried forward at their historical book values, and the income of ArcelorMittal includes the income of Mittal Steel as of January 1, 2007.
Organization
ArcelorMittal was created under Luxembourg law on August 13, 2004 for an unlimited duration of time. ArcelorMittal has no manufacturing operations of its own and its major assets are interests in the common and preferred stock of its Operating Subsidiaries.
Basis of preparation
The unaudited condensed consolidated financial statements for the six months ended June 30, 2007 have been prepared in accordance with International Accounting Standard No-34, “Interim Financial Reporting”, as adopted by the European Union, and are presented in U.S. Dollars with all amounts rounded to the nearest million, except for share and per share data.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies are identical to the ones adopted for the preparation of the consolidated financial statements as at December 31, 2006.
Business combinations
The Company revised its accounting for subsequent purchases after the Company has obtained control. The Company now records the difference between the book value of the reduction in minority interest and the associated fair value of assets and liabilities acquired as goodwill. Previously this amount was directly charged to equity. This change in policy had no impact on total equity or net income for all periods presented.
6
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
NOTE 3 – ACQUISITIONS AND DISPOSALS
The Company sold 100% of Travi e Profilati di Pallanzeno (“TPP”) in January 2007 for EUR 117 million (153) and 100% of its subsidiary Stahlwerk Thüringen GmbH on March 5, 2007 for EUR 591 million (768). 100% of Huta Bankowa Spòlka z.o.o. (“Huta Bankowa”) was sold during the second quarter of 2007.
On April 20, 2007, the Company acquired 100% of Siderurgia Lázaro Cárdenas las trunchas S.A. de C.V. (“Sicartsa”) (Long Carbon, Mexico), from Grupo Villacero for an enterprise value of 1,400. The following table presents the preliminary purchase price allocation of the net assets of Sicartsa acquired:
in USD million | Historical | Preliminary purchase accounting adjustments | Fair value | ||||||||
Current assets | $ | 514 | $ | 10 | $ | 524 | |||||
Property, plant and equipment | 1,576 | — | 1,576 | ||||||||
Other assets | 39 | — | 39 | ||||||||
Total assets acquired | 2,129 | 10 | 2,139 | ||||||||
Current liabilities | 648 | — | 648 | ||||||||
Long-term debt | 1,016 | — | 1,016 | ||||||||
Other long-term obligations and deferred employee benefits | 159 | 400 | 559 | ||||||||
Deferred tax liabilities | 185 | (109 | ) | 76 | |||||||
Minority interest | 77 | — | 77 | ||||||||
Total liabilities assumed | 2,085 | 291 | 2,376 | ||||||||
Net asset acquired | $ | 44 | $ | (281 | ) | (237 | ) | ||||
Cash paid | 515 | ||||||||||
Preliminary goodwill | 752 | ||||||||||
Reimbursement of debt to previous shareholder | 926 | ||||||||||
Total cash outflow | $ | 1,441 | |||||||||
On June 5, 2007, the Company announced the result of its offer for the minority interest (free float) of Arcelor Brasil, thereby increasing its previous 67.1% shareholding in Arcelor Brasil to 96.6%. The Company paid for the shares with 3,500 in cash and approximately 27.0 million common shares, representing a total consideration of 5,200.
As of August 8, 2007, the Company had paid an additional 434 in cash for additional shares of Arcelor Brasil after the close of its tender offer. These purchases were made pursuant to the sell-out procedures under applicable Brazilian regulations that required that the remaining Arcelor Brasil shareholders have the opportunity to sell their shares to the Company for R$53.89 per share in cash (the same price offered to Arcelor Brasil shareholders in the all-cash option of the tender offer) plus an interest component from June 8, the date of the settlement of the all-cash option of the tender
7
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
offer, until settlement of such sales. On August 8, 2007, a general Arcelor Brasil shareholders’ meeting was held which approved the redemption by Arcelor Brasil of the remaining shares of Arcelor Brasil not held by the Company. On August 17, 2007, Arcelor Brasil paid a total of 132.7 in cash to the remaining shareholders and redeemed all the remaining shares of Arcelor Brasil for R$53.89 per share plus an interest component for the period from June 8, 2007, the date of the settlement of the all-cash option of the tender offer, until August 17, 2007, the date the funds were made available to the remaining shareholders. On August 20, 2007, Mittal Steel Brasil Participações S.A., a wholly owned subsidiary of the Company that was incorporated in order to acquire the Arcelor Brasil shares in the context of the tender offer, was merged with and into Arcelor Brasil S.A. Following this merger, on August 31, 2007, Arcelor Brasil was merged into Belgo Siderurgia S.A. (“Belgo”), which was then renamed ArcelorMittal Brasil S.A. The combined entity is now 100% owned by ArcelorMittal subsidiaries.
The Company has updated its preliminary purchase price allocation for its acquisition of Arcelor as follows:
in USD million | Arcelor historical | Preliminary purchase accounting adjustments | Updated purchase accounting adjustments | Arcelor at fair value | |||||||||
Intangible assets | $ | — | $ | — | $ | 719 | $ | 719 | |||||
Current assets | 21,292 | 1,060 | — | 22,352 | |||||||||
Property, plant and equipment | 22,480 | 11,770 | 88 | 34,338 | |||||||||
Other assets | 6,356 | 1,607 | (6 | ) | 7,957 | ||||||||
Total assets acquired | 50,128 | 14,437 | 801 | 65,366 | |||||||||
Current liabilities | 16,178 | — | — | 16,178 | |||||||||
Long-term debt | 8,830 | 80 | — | 8,910 | |||||||||
Other long-term obligations and deferred employee benefits | 5,532 | 699 | 545 | 6,776 | |||||||||
Deferred tax liabilities | 1,276 | 4,029 | (251 | ) | 5,054 | ||||||||
Minority interest | 3,303 | 144 | 15 | 3,462 | |||||||||
Total liabilities assumed | 35,119 | 4,952 | 309 | 40,380 | |||||||||
Minority interest | 1,147 | 614 | 21 | 1,782 | |||||||||
Net asset acquired | $ | 13,862 | $ | 8,871 | $ | 471 | 23,204 | ||||||
Fair value of shares issued | 23,240 | ||||||||||||
Cash paid - net | 5,841 | ||||||||||||
Purchase price - net | 29,081 | ||||||||||||
Impact of foreign exchange since acquisition date | 361 | ||||||||||||
Goodwill | $ | 6,238 | |||||||||||
8
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
NOTE 4 –GOODWILL
Goodwill acquired in a business combination is allocated, at the acquisition date, to the cash generating unit(s) that is or are expected to benefit from synergies expected to be realized as a result of that business combination (generally the plant or the plants acquired).The carrying amount of goodwill recognized in the year or period ended December 31, 2006 and six-months June 30, 2007 is specified as follows:
Net Value December 31, 2006 | Acquisitions | Purchase accounting adjustment | Exchange rate and other | Net value June 30, 2007 | ||||||||||||
Mittal Steel Kryviy Rih | $ | 1,332 | $ | — | $ | — | $ | 15 | $ | 1,347 | ||||||
Arcelor * | 6,552 | — | (471 | ) | 157 | 6,238 | ||||||||||
Arcelor Brasil | — | 3,147 | — | — | 3,147 | |||||||||||
Sicartsa * | — | 752 | — | — | 752 | |||||||||||
Others | 136 | — | — | 75 | 211 | |||||||||||
Total | $ | 8,020 | $ | 3,899 | $ | (471 | ) | $ | 247 | $ | 11,695 | |||||
* | Subject to completion of purchase price allocation |
NOTE 5 –INVENTORIES
Inventory at June 30, 2007 and December 31, 2006, net of allowance for slow moving, excess, or obsolete inventory, is comprised of the following:
June 30, 2007 | December 31, 2006 | |||||
Finished products | $ | 7,075 | $ | 7,131 | ||
Production in process | 4,332 | 3,914 | ||||
Raw materials | 6,377 | 6,491 | ||||
Manufacturing supplies, spare parts and other | 1,664 | 1,702 | ||||
Total | $ | 19,448 | $ | 19,238 | ||
9
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
NOTE 6 – EQUITY
Issued capital and share premium
Following the legal merger with Mittal Steel on September 3, 2007 there were 1,403,603,957 issued and outstanding common shares of ArcelorMittal as of June 30, 2007 with a par value of€0.01, giving effect to the merger as if it had occurred on January 1, 2007.
Share buy-back programs
On March 30, 2007, the Board of Directors of the Company unanimously approved the start of a share buy-back program of class A common shares. This share buy-back program was scheduled to end at the earliest of (i) December 31, 2007, (ii) the moment on which the aggregate value of class A common shares repurchased by Mittal Steel since the start of this share buy-back program reached 590, (iii) the moment on which Mittal Steel and its subsidiaries held 10% of the total number of the then-issued class A and class B common shares, or (iv) the moment on which ArcelorMittal no longer had any corporate authorization to repurchase its shares. As of June 30, 2007, the Company had bought back an amount of approximately 577. This share buy-back program was completed on September 4, 2007 as the 590 limit was reached. Mittal Steel and ArcelorMittal, as its successor, purchased an aggregate of 9,493,304 Mittal Steel class A common shares and ArcelorMittal shares under the program.
On June 12, 2007, the Company announced its intention to start a share buy-back program for up to a maximum of 27 million class A common shares, immediately following the completion of the 590 share buy-back program summarized above. This new share buy-back program was designed to offset the issuance of shares as partial consideration for the acquisition of the outstanding minority interests in Arcelor Brasil. This share buy-back program commenced upon the termination of the 590 buy-back program described above and will end at the earliest of the moment at which (i) the aggregate number of shares purchased under this program reaches the 27 million share limit, (ii) ArcelorMittal and its subsidiaries will hold 10% of the then-issued ArcelorMittal shares, or (iii) ArcelorMittal no longer has corporate authorization to repurchase its shares. Under the share buy-back program, the price per ArcelorMittal share, which will be paid in cash, will not exceed 125% of the trading price on the New York Stock Exchange, Euronext Amsterdam by NYSE Euronext, Euronext Brussels by NYSE Euronext, Euronext Paris by NYSE Euronext, the Luxembourg Stock Exchange or the stock exchanges of Barcelona, Bilbao, Madrid and Valencia, depending on the market on which the transactions are effected, and will not be less than the par value of the share at the time of repurchase.
Dividends
Two three-month interim dividends of USD 0.325 per share were paid on March 15, 2007 and June 15, 2007.
10
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
NOTE 7 – INCOME TAX
The income tax provision for the six months ended June 30, 2007 reflects an estimated annual effective tax rate of 25% (six months ended June 30, 2006 was 21%). The tax charge for the period is based on an estimated annual effective rate, which requires management to make its best estimate of annual forecast pretax income for the year. During the year, management regularly updates forecast estimates based on changes in various factors such as prices, shipments, product mix, plant operating performance and cost estimates, including labor, raw materials, energy and pension and other postretirement benefits. To the extent that actual pretax results for domestic and foreign income in 2007 vary from forecast estimates applied at the end of the most recent interim period, the actual tax provision recognized in 2007 could be materially different from the forecast annual tax provision as of the end of the six months ended June 30, 2007.
As of June 30, 2007, the amount of net deferred tax assets recorded in the six months ended June 30, 2007 was 1,503. As of December 31, 2006, the amount of net deferred tax assets recorded was 1,670.
11
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
NOTE 8 – SEGMENT REPORTING
The Company’s primary segment is defined as the “business segment”. Sales between activities are calculated at market price. The operating result is shown after eliminations. The different activities are presented in accordance with the breakdown applied by ArcelorMittal.
June 30, 2007
(in USD million unless otherwise stated) | Flat Carbon Americas | Flat Carbon Europe | Long Carbon Americas and Europe | Africa, Asia, CIS | Stainless Steel | Arcelor Mittal Steel Solutions and Services | Elimination | Total | |||||||||
Financial information | |||||||||||||||||
Sales | 11,023 | 17,072 | 11,645 | 8,784 | 4,986 | 7,197 | (9,008 | ) | 51,699 | ||||||||
Operating income | 1,430 | 2,248 | 2,076 | 1,763 | 610 | 305 | (745 | ) | 7,687 | ||||||||
Depreciation and amortization | 494 | 654 | 325 | 269 | 126 | 62 | 55 | 1,985 | |||||||||
Capital expenditures | 691 | 645 | 441 | 345 | 113 | 83 | 2,318 | ||||||||||
Total assets as of June 30, 2007 | 17,642 | 32,369 | 25,615 | 17,424 | 5,812 | 4,501 | 21,486 | 124,849 | |||||||||
Total liabilities as of June 30, 2007 | 5,364 | 11,706 | 8,728 | 3,000 | 2,551 | 3,147 | 35,406 | 69,902 | |||||||||
Operational information | |||||||||||||||||
Employees (000's) | 36 | 70 | 56 | 126 | 12 | 14 | 314 |
June 30, 2006
(in USD million unless otherwise stated) | Flat Carbon Americas | Flat Carbon Europe | Long Carbon Americas and Europe | Africa, Asia, CIS | Arcelor Mittal Steel Solutions and Services | Elimination | Total | |||||||||
Financial information | ||||||||||||||||
Sales | 7,321 | 1,894 | 4,324 | 6,598 | 33 | (2,510 | ) | 17,660 | ||||||||
Operating income | 691 | 170 | 487 | 987 | (93 | ) | 69 | 2,311 | ||||||||
Depreciation and amortization | 206 | 98 | 124 | 235 | 43 | (7 | ) | 699 | ||||||||
Capital expenditure | 161 | 63 | 164 | 216 | 7 | 611 | ||||||||||
Total assets as of June 30, 2006 | 10,895 | 2,904 | 10,934 | 14,005 | — | (3,008 | ) | 35,730 | ||||||||
Total liabilities as of June 30, 2006 | 2,926 | 537 | 2,858 | 2,120 | — | 10,663 | 19,104 | |||||||||
Operational information | ||||||||||||||||
Employees (000's) | 21 | 28 | 21 | 105 | 46 | 221 |
12
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
NOTE 9– CONTINGENT LIABILITIES
Legal Claims
The Company is a party to various legal actions arising from the ordinary course of business. An update of the principal legal actions for the six months ended June 30, 2007 is disclosed below.
United States
In July 2007, Viga Investments Inc. (“Viga”) filed a lawsuit seeking damages and other relief against ArcelorMittal USA alleging a failure to comply with terms of a stock purchase agreement for the purchase of certain steel assets (the “Viga SPA”). The suit alleged breaches relating to post-closing purchase price adjustment procedures under the agreement. In a related transaction, the Company and ArcelorMittal Mexico Holdings B.V. purchased the stock of Sicartsa in Mexico owned by Siderurgica Del Pacifico, S.A. De C.V. and Conjunto Siderurgico Del Balsas, S.A. de C.V. pursuant to a separate stock purchase agreement (the “Sicartsa SPA”). The Sicartsa SPA and the Viga SPA were interrelated (each refers to the other) and part of an overarching, integrated transaction. The Sicartsa sellers similarly dispute the validity of the closing balance sheet under the Sicartsa SPA. Both the Sicartsa and the Viga SPAs have identical terms requiring the parties to arbitrate any dispute under the SPAs relative to post-closing purchase price adjustments. The Company believes Viga breached this term by filing a lawsuit in New York state court and seeking a judicial determination of the appropriate purchase price adjustment. Due to the interrelatedness of the two transactions, ArcelorMittal USA, the Company and ArcelorMittal Mexico Holdings B.V. asserted counterclaims against the Sicartsa sellers in the Viga litigation. The Company is unable to assess the outcome of these proceedings or to reasonably estimate the amount of ArcelorMittal USA, ArcelorMittal Mexico Holdings B.V. or the Company’s liabilities relating to these matters, if any.
Canada
Mittal Steel North America Inc. and Mittal Steel Roman are involved in a dispute with Canadian Natural Resources Limited (“CNRL”). The Company has learned that on March 30 and April 3, 2007, CNRL filed complaints in Calgary, Alberta for negligence seeking damages of approximately 56.4 and 25.4, respectively. As of this time, the complaints have not been served on either ArcelorMittal entity. The plaintiff alleges that it purchased defective pipe manufactured by Mittal Steel Roman and sold by Mittal Steel Roman and Mittal Steel North America Inc. ArcelorMittal is unable to reasonably estimate the amount of Mittal Steel North America Inc.’s and Mittal Steel Roman’s liabilities relating to this matter, if any.
Mexico
Sicartsa is involved in a dispute with Ejido Santa Maria of the Municipality of La Union Guerrero over the payment of materials and related damages under a Joint Venture Agreement between the parties. In October 2006, the Agrarian Unity Tribunal entered a judgment ordering Sicartsa to pay the plaintiff damages of 54. In April 2007, upon appeal by Sicartsa, a higher court set aside the judgment and ordered further expert evidence relating to the matters in dispute. The Company and other subsidiaries, as purchasers under the Sicartsa SPA, have served notice on Pacifico, S.A. de C.V., and Conjunto Siderúrgico del Balsas, S.A. de C.V., as sellers under the Sicartsa SPA seeking indemnity for any damages that may be incurred with respect to this claim, since it was not disclosed in connection with the acquisition.
South America
In May 2007, the Brazilian Federal Revenue Service issued a 726 tax assessment to Belgo to recover taxes primarily related to credit settlements in the context of the 2003 financial reorganization and acquisition of Mendes Júnior Siderurgia S.A. In June 2007, Belgo filed a defense against this assessment through an administrative proceeding. In September 2007, Belgo received an administrative decision on the tax assessment pursuant to which it was determined that the amount of tax payable under the assessment should be 14. This decision is subject to mandatory review by an Administrative Court which may modify the decision and also is subject to appeal by Belgo.
13
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Europe
On April 23, 2007, the Company received a decision of the Financial Directorate in Ostrava, Czech Republic, in which it ordered ArcelorMittal Ostrava to pay approximately 106 for allegedly abusing its economic position and, as a result, acquiring unjustified profits in respect of prices of blast furnace coke produced by ArcelorMittal Ostrava and delivered in 2004. The Financial Directorate subsequently ordered ArcelorMittal Ostrava to pay an additional fine of 24.7 for the period from January to March 2005. After its previous decision in October 2006 was cancelled by the Czech Republic Ministry of Finance, the matter was returned to the Financial Directorate in Ostrava for new investigation and decision. ArcelorMittal Ostrava received notice on June 14, 2007 that the Ministry of Finance had upheld the Financial Directorate of Ostrava’s decision. ArcelorMittal Ostrava filed a petition against the decision with the Municipal Court, Prague, on June 29, 2007. Filing the petition had the effect of suspending payment of the fines.
Several minority shareholders of Arcelor or their representatives have made allegations regarding or brought legal proceedings relating to the merger process and more specifically the proposed exchange ratio in the merger. Their principal actions have been the following: writing letters to the Boards of Directors of Arcelor and the Company; seeking to instigate investigations or actions by market regulatory authorities; and seeking injunctions from Dutch and French courts. Arcelor and ArcelorMittal each believe that the allegations made and claims brought by the minority shareholders regarding the proposed exchange ratio are without merit and that such exchange ratio complies with the requirements of applicable law, is consistent with previous guidance on the principles that would be used to determine the exchange ratio in the second-step merger and is relevant and reasonable to shareholders of ArcelorMittal and Arcelor. To date, the courts and regulators that have ruled on the claims brought by minority shareholders have rejected the claims. It is possible that additional claims may be brought before regulators or courts prior to the ArcelorMittal and Arcelor extraordinary general meetings that will be convened to vote on the second-step merger.
Mittal Steel South Africa
Mittal Steel South Africa is involved in a dispute with Harmony Gold Mining Company Limited and Durban Roodeport Deep Limited alleging that Mittal Steel South Africa is in violation of the Competition Act. On March 27, 2007, the Competition Tribunal decided that Mittal Steel South Africa had contravened Section 8(a) of the Competition Act by charging an excessive price. On September 6, 2007, the Competition Tribunal imposed a penalty on Mittal Steel South Africa of approximately 97, other behavioral remedies designed to prevent Mittal Steel South Africa imposing or agreeing with customers any conditions on the resale of flat steel products and ordered that Mittal Steel South Africa pay the costs of the case. Mittal Steel South Africa has already appealed the decision of the Competition Tribunal on the merits and also intends to appeal its decision on the remedies. The Competition Commission has stated that it will not seek to recover the penalty pending the outcome of the appeals.
14
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
NOTE 10– SUBSEQUENT EVENTS
On July 26, 2007, the Company announced that it had reached an agreement with the Polish Government to acquire the outstanding 25.2% shares of ArcelorMittal Poland (the “Polish Company”) currently held by the Polish State and Treasury Ministry. The Company agreed to acquire the shares for approximately 436 million Polish zloty or approximately 157. The Company initially acquired approximately 69% of the Polish Company in March 2004 and as part of that agreement received an option to purchase a further 25% from the Polish state, which was exercised in this transaction.
On August 28, 2007, the Company sold 13,400,000 class A common shares for an aggregate amount of€616 million pursuant to a block trade transaction and simultaneously bought a call option giving it the right to purchase the equivalent number of shares (or the shares substituted for them in the merger of Mittal Steel into ArcelorMittal or in the proposed merger of ArcelorMittal into Arcelor, as the case may be). The call option was transferred to ArcelorMittal as a result of the first-step merger. ArcelorMittal expects to use any shares that would be purchased pursuant to the call option for share deliveries under the ArcelorMittal employee stock option plan. The purchase price for the call option was€315 million and the strike price was€22.975 per share. The call option expires on November 28, 2007.
On August 31, 2007, the Company announced that it had signed an agreement with RAG Beteiligungs-AG, Essen, for the acquisition of the 76.88% stake directly held by RAG in Saar Ferngas AG, Saarbrücken on August 30. The sale is subject to board approval and also to approval by the European antitrust authorities. The purchase price under the agreement is approximately EUR 367 million (503). The transaction is expected to be completed in the fourth quarter of 2007.
On September 5, 2007, ArcelorMittal announced that it would acquire all of the outstanding interests of Wabush Mines, an iron ore and pellet producer in northeastern Canada. The Company will acquire the remaining interests it does not own in the joint venture through the exercise of a right of first refusal over such interests held by its subsidiary Dofasco Inc. Dofasco, which already held 28.6% of the mining venture, will acquire the interests of Stelco (44.6%) and Cleveland Cliffs (26.8%) for an aggregate cash element of approximately 67 and the assumption of certain liabilities. The transaction, which is subject to regulatory approval, is expected to close in December 2007.
On September 6, 2007, ArcelorMittal announced that it had received approval from the United States Department of Justice (DOJ) to sell its Sparrows Point steel mill located near Baltimore, Maryland and related railroad, intellectual property and other assets to a joint venture entity sponsored by Esmark Incorporated and Wheeling-Pittsburgh Corporation, with participation by industry and institutional investors, for an enterprise value of 1,350. The transaction is expected to close in the fourth quarter of 2007.
On September 10, 2007, ArcelorMittal announced the proposed acquisition of 51% of the shares of Rozak A.S., the main Turkish steel stockholding company. The transaction is subject to the approval of antitrust authorities, and is expected to be completed by December 31, 2007.
15
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
NOTE 11: FINANCIAL INFORMATION FOR ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES
On March 9, 2004, Ispat Inland ULC, a 100% owned limited purpose finance subsidiary, issued Senior Secured Notes. The notes are secured by a pledge of 800 of ArcelorMittal USA’s First Mortgage Bonds, and are jointly, severally, fully and unconditionally guaranteed by ArcelorMittal and certain of its existing and future subsidiaries.
Presented below is condensed consolidating financial information as required by Rule 3-10 of Regulation S-X related to these notes for the following:
- ArcelorMittal on a parent company only basis;
- Ispat Inland ULC, the issuer;
- ArcelorMittal’s guarantor subsidiaries on a combined basis;
- ArcelorMittal’s non-guarantor subsidiaries on a combined basis;
- ArcelorMittal consolidating adjustments; and
- ArcelorMittal and subsidiaries consolidated
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Condensed consolidating balance sheets as of June 30, 2007
IFRS | ||||||||||||||
ArcelorMittal - Parent Company | Ispat Inland ULC - Issuer Subsidiary | ArcelorMittal Guarantor Subsidiaries | ArcelorMittal Non-guarantor Subsidiaries | ArcelorMittal Consolidating Adjustments | ArcelorMittal - Consolidated | |||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | 25 | 1 | 49 | 6,609 | — | 6,684 | ||||||||
Restricted Cash | 36 | — | — | 57 | — | 93 | ||||||||
Short-term investments | — | — | — | 5 | — | 5 | ||||||||
Trade accounts receivable | — | — | 1,134 | 10,112 | — | 11,246 | ||||||||
Inventories | — | — | 2,305 | 17,173 | (30 | ) | 19,448 | |||||||
Other current assets | 2,047 | 11 | 1,132 | 29,177 | (26,276 | ) | 6,091 | |||||||
Total current assets | 2,108 | 12 | 4,620 | 63,133 | (26,306 | ) | 43,567 | |||||||
Property, plant and equipment – net | — | — | 4,984 | 52,940 | (88 | ) | 57,836 | |||||||
Investments in affiliates | 63,610 | 90 | 583 | 45,632 | (105,208 | ) | 4,707 | |||||||
Other assets | 9,556 | 428 | 111 | 24,928 | (16,284 | ) | 18,739 | |||||||
Total assets | 75,274 | 530 | 10,298 | 186,633 | (147,886 | ) | 124,849 | |||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||
Current liabilities: | ||||||||||||||
Payable to banks and current portion of long-term debt | 3,211 | — | 73 | 4,333 | — | 7,617 | ||||||||
Trade accounts payable | 3 | — | 789 | 11,061 | — | 11,853 | ||||||||
Accrued expenses and other current liabilities | 8,166 | 12 | 1,335 | 25,583 | (24,355 | ) | 10,741 | |||||||
Total current liabilities | 11,380 | 12 | 2,197 | 40,977 | (24,355 | ) | 30,211 | |||||||
Long-term debt | 15,345 | 432 | 2,799 | 27,689 | (23,876 | ) | 22,389 | |||||||
Deferred employee benefits | — | — | 350 | 4,995 | (1 | ) | 5,344 | |||||||
Other long-term obligations | — | (2 | ) | 1,277 | 10,730 | (47 | ) | 11,958 | ||||||
Total liabilities | 26,725 | 442 | 6,623 | 84,391 | (48,279 | ) | 69,902 | |||||||
Minority Interest | — | — | — | 2,032 | 4,366 | 6,398 | ||||||||
Equity | 48,549 | 88 | 3,675 | 100,210 | (103,973 | ) | 48,549 | |||||||
Total liabilities and equity | 75,274 | 530 | 10,298 | 186,633 | (147,886 | ) | 124,849 | |||||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Condensed consolidating statements of income for the six months ended June 30, 2007
IFRS | |||||||||||||||||
ArcelorMittal - Parent Company | Ispat Inland ULC - Issuer Subsidiary | ArcelorMittal Guarantor Subsidiaries | ArcelorMittal Non-guarantor Subsidiaries | ArcelorMittal Consolidating Adjustments | ArcelorMittal - Consolidated | ||||||||||||
Net sales | — | — | 6,203 | 49,824 | (4,328 | ) | 51,699 | ||||||||||
Costs and expenses: | |||||||||||||||||
Cost of sales (exclusive of depreciation shown separately below) | — | — | 5,439 | 38,580 | (4,060 | ) | 39,959 | ||||||||||
Depreciation | — | — | 196 | 1,789 | — | 1,985 | |||||||||||
Selling, general and administrative | 61 | — | 142 | 2,338 | (118 | ) | 2,423 | ||||||||||
Other Operating Expense (Income) | — | — | — | (295 | ) | (60 | ) | (355 | ) | ||||||||
Operating income | (61 | ) | — | 426 | 7,412 | (90 | ) | 7,687 | |||||||||
Other income (expense) – net | 873 | — | — | 530 | (1,320 | ) | 83 | ||||||||||
Equity in earnings of subsidiaries | 4,404 | — | 23 | 326 | (4,404 | ) | 349 | ||||||||||
Financing costs: | |||||||||||||||||
Net interest income (expense) | (269 | ) | — | (108 | ) | 53 | (21 | ) | (345 | ) | |||||||
Net gain (loss) from foreign exchange | 26 | — | — | 92 | 35 | 153 | |||||||||||
Income before taxes | 4,973 | — | 341 | 8,413 | (5,800 | ) | 7,927 | ||||||||||
Income tax (benefit) expense: | |||||||||||||||||
Current | — | — | 73 | 1,473 | — | 1,546 | |||||||||||
Deferred | — | — | 31 | 447 | (3 | ) | 475 | ||||||||||
Net income (loss) before minority interest | 4,973 | — | 237 | 6,493 | (5,797 | ) | 5,906 | ||||||||||
Minority Interest | — | — | — | (439 | ) | (494 | ) | (933 | ) | ||||||||
Net income (loss) | 4,973 | — | 237 | 6,054 | (6,291 | ) | 4,973 | ||||||||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Condensed consolidating statements of cash flows for the six months ended June 30, 2007
ArcelorMittal - Parent Company | Ispat Inland ULC - Issuer Subsidiary | ArcelorMittal Guarantor Subsidiaries | ArcelorMittal Non-guarantor Subsidiaries | ArcelorMittal Consolidating Adjustments | ArcelorMittal - Consolidated | |||||||||||||
Net cash provided by operating activities | 867 | 1 | 253 | 6,507 | (1,246 | ) | 6,382 | |||||||||||
Investing activities: | ||||||||||||||||||
Purchases of property, plant and equipment (PP&E) | — | — | (229 | ) | (2,089 | ) | — | (2,318 | ) | |||||||||
Proceeds from sale of assets and investments including affiliates and joint ventures | — | — | 2 | 973 | — | 975 | ||||||||||||
Investment in affiliates and joint ventures | (793 | ) | — | — | (5,819 | ) | 945 | (5,667 | ) | |||||||||
Other investing activities | (381 | ) | — | — | 500 | — | 119 | |||||||||||
Net cash provided (used) by investing activities | (1,174 | ) | — | (227 | ) | (6,435 | ) | 945 | (6,891 | ) | ||||||||
Financing activities: | ||||||||||||||||||
Proceeds from payable to banks | — | — | — | 1,966 | — | 1,966 | ||||||||||||
Proceeds from long-term debt | 2,175 | — | — | 3 | — | 2,178 | ||||||||||||
Proceeds from long-term debt payable to affiliated | — | (1 | ) | — | 3,022 | (3,021 | ) | — | ||||||||||
Payments of payable to banks | (405 | ) | — | 25 | (382 | ) | — | (762 | ) | |||||||||
Payments of long-term debt payable to unrelated parties | — | — | (34 | ) | (640 | ) | — | (674 | ) | |||||||||
Payments of long-term debt payable to affiliated | — | — | (49 | ) | (2,830 | ) | 2,879 | — | ||||||||||
Sale of treasury stock | 7 | — | — | (571 | ) | — | (564 | ) | ||||||||||
Dividends | (901 | ) | — | — | (1,449 | ) | 1,192 | (1,158 | ) | |||||||||
Others | (558 | ) | — | — | 1,343 | (755 | ) | 30 | ||||||||||
Net cash used by financing activities | 318 | (1 | ) | (58 | ) | 462 | 295 | 1,016 | ||||||||||
Effect of exchange rate changes - cash | — | — | — | 157 | — | 157 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 11 | — | (32 | ) | 685 | — | 664 | |||||||||||
Cash and cash equivalents: | ||||||||||||||||||
At the beginning of the year | 14 | 1 | 81 | 5,924 | — | 6,020 | ||||||||||||
At the end of the period | 25 | 1 | 49 | 6,609 | — | 6,684 | ||||||||||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Condensed consolidating reconciliation of IFRS Net Income to U.S. GAAP Net Income as at June 30, 2007
ArcelorMittal - Parent Company | Ispat Inland ULC - Issuer Subsidiary | ArcelorMittal Guarantor Subsidiaries | ArcelorMittal Non-guarantor Subsidiaries | ArcelorMittal Consolidating Adjustments | ArcelorMittal - Consolidated | ||||||||||||
Net Income under IFRS | 4,973 | — | 237 | 6,056 | (6,293 | ) | 4,973 | ||||||||||
Employee Benefits | 22 | — | 13 | 9 | (22 | ) | 22 | ||||||||||
Business Combinations | 152 | — | (87 | ) | 239 | (152 | ) | 152 | |||||||||
Other | (81 | ) | — | 1 | (82 | ) | 81 | (81 | ) | ||||||||
Effect of minority interests on adjustments | (22 | ) | — | — | (22 | ) | 22 | (22 | ) | ||||||||
Deferred income tax effect on adjustments | (22 | ) | — | 24 | (46 | ) | 22 | (22 | ) | ||||||||
Total Adjustments | 49 | — | (49 | ) | 98 | (49 | ) | 49 | |||||||||
Net Income under US GAAP | 5,022 | — | 188 | 6,154 | (6,342 | ) | 5,022 | ||||||||||
Condensed consolidating reconcilliation of IFRS Shareholders’ Equity to U.S. GAAP Shareholders’ Equity as at June 30, 2007 |
| ||||||||||||||||
Shareholder Equity under IFRS | 48,549 | 88 | 3,675 | 100,210 | (103,973 | ) | 48,549 | ||||||||||
Employee Benefits | (1,171 | ) | — | (797 | ) | (374 | ) | 1,171 | (1,171 | ) | |||||||
Business Combinations | (6,978 | ) | — | 177 | (7,155 | ) | 6,978 | (6,978 | ) | ||||||||
Other | (259 | ) | — | (248 | ) | (11 | ) | 259 | (259 | ) | |||||||
Effect of minority interests on adjustments | 973 | — | — | 973 | (973 | ) | 973 | ||||||||||
Deferred income tax effect on adjustments | 1,735 | — | 174 | 1,561 | (1,735 | ) | 1,735 | ||||||||||
Total Adjustments | (5,700 | ) | — | (694 | ) | (5,006 | ) | 5,700 | (5,700 | ) | |||||||
Shareholder under US GAAP | 42,849 | 88 | 2,981 | 95,204 | (98,273 | ) | 42,849 | ||||||||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Condensed consolidating balance sheets as of December 31, 2006
IFRS | ||||||||||||||
ArcelorMittal - Parent Company | Ispat Inland ULC - Issuer Subsidiary | ArcelorMittal Guarantor Subsidiaries | ArcelorMittal Non-guarantor Subsidiaries | ArcelorMittal Consolidating Adjustments | ArcelorMittal - Consolidated | |||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | 14 | 1 | 81 | 5,924 | — | 6,020 | ||||||||
Restricted Cash | 66 | — | — | 54 | — | 120 | ||||||||
Short-term investments | — | — | — | 6 | — | 6 | ||||||||
Trade accounts receivable | — | — | 874 | 7,895 | — | 8,769 | ||||||||
Inventories | — | — | 3,012 | 16,465 | (239 | ) | 19,238 | |||||||
Other current assets | 4,450 | 11 | (185 | ) | 26,359 | (25,426 | ) | 5,209 | ||||||
Total current assets | 4,530 | 12 | 3,782 | 56,703 | (25,665 | ) | 39,362 | |||||||
Property, plant and equipment – net | — | — | 5,487 | 49,023 | 186 | 54,696 | ||||||||
Investments in affiliates | 54,872 | 90 | 558 | 42,709 | (94,737 | ) | 3,492 | |||||||
Other assets | 3,417 | 428 | 151 | 18,958 | (8,338 | ) | 14,616 | |||||||
Total assets | 62,819 | 530 | 9,978 | 167,393 | (128,554 | ) | 112,166 | |||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||
Current liabilities: | ||||||||||||||
Payable to banks and current portion of long-term debt | — | — | 87 | 1,643 | 3,192 | 4,922 | ||||||||
Trade accounts payable | 17 | — | 855 | 9,839 | 6 | 10,717 | ||||||||
Accrued expenses and other current liabilities | 4,099 | 11 | 963 | 19,896 | (16,048 | ) | 8,921 | |||||||
Total current liabilities | 4,116 | 11 | 1,905 | 31,378 | (12,850 | ) | 24,560 | |||||||
Long-term debt | 16,576 | 427 | 2,813 | 27,751 | (25,922 | ) | 21,645 | |||||||
Deferred employee benefits | — | — | 498 | 4,787 | — | 5,285 | ||||||||
Other long-term obligations | — | 4 | 1,320 | 9,187 | (26 | ) | 10,485 | |||||||
Total liabilities | 20,692 | 442 | 6,536 | 73,103 | (38,798 | ) | 61,975 | |||||||
Minority Interest | — | — | — | 4,043 | 4,021 | 8,064 | ||||||||
Equity | 42,127 | 88 | 3,442 | 90,247 | (93,777 | ) | 42,127 | |||||||
Total liabilities and equity | 62,819 | 530 | 9,978 | 167,393 | (128,554 | ) | 112,166 | |||||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Condensed consolidating statements of income for the six months ended June 30, 2006
IFRS | ||||||||||||||||||
ArcelorMittal - Parent Company | Ispat Inland ULC - Issuer | ArcelorMittal Guarantor Subsidiaries | ArcelorMittal Non-guarantor Subsidiaries | ArcelorMittal Consolidating Adjustments | ArcelorMittal - Consolidated | |||||||||||||
Net sales | — | — | 6,718 | 10,957 | (15 | ) | 17,660 | |||||||||||
Costs and expenses: | ||||||||||||||||||
Cost of sales (exclusive of depreciation shown separately below) | — | — | 5,808 | 8,372 | (15 | ) | 14,165 | |||||||||||
Depreciation | — | — | 182 | 517 | — | 699 | ||||||||||||
Selling, general and administrative | 44 | — | 146 | 404 | (37 | ) | 557 | |||||||||||
Other Operating Expense (Income) | — | — | — | (72 | ) | — | (72 | ) | ||||||||||
Operating income | (44 | ) | — | 582 | 1,736 | 37 | 2,311 | |||||||||||
Other income (expense) – net | 95 | — | — | — | (94 | ) | 1 | |||||||||||
Equity in earnings of subsidiaries | 1,446 | — | 42 | (4 | ) | (1,446 | ) | 38 | ||||||||||
Financing costs: | — | — | — | — | — | — | ||||||||||||
Net interest income (expense) | 10 | (4 | ) | (165 | ) | (30 | ) | (101 | ) | (290 | ) | |||||||
Net gain (loss) from foreign exchange | — | — | — | 95 | — | 95 | ||||||||||||
Income before taxes | 1,507 | (4 | ) | 459 | 1,797 | (1,604 | ) | 2,155 | ||||||||||
Income tax (benefit) expense: | ||||||||||||||||||
Current | — | — | 82 | 349 | — | 431 | ||||||||||||
Deferred | — | (2 | ) | 75 | (48 | ) | — | 25 | ||||||||||
Net income (loss) before minority interest | 1,507 | (2 | ) | 302 | 1,496 | (1,604 | ) | 1,699 | ||||||||||
Minority Interest | — | — | — | (192 | ) | — | (192 | ) | ||||||||||
Net income (loss) | 1,507 | (2 | ) | 302 | 1,304 | (1,604 | ) | 1,507 | ||||||||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Condensed consolidating statements of cash flows for the six months ended June 30, 2006
- | ||||||||||||||||||
ArcelorMittal - Parent Company | Ispat Inland ULC - Issuer | ArcelorMittal Guarantor Subsidiaries | ArcelorMittal Non-guarantor Subsidiaries | ArcelorMittal Consolidating Adjustments | ArcelorMittal - Consolidated | |||||||||||||
Net cash provided by operating activities | 4,030 | 1 | 457 | 968 | (3,349 | ) | 2,107 | |||||||||||
Investing activities: | ||||||||||||||||||
Purchases of property, plant and equipment (PP&E) | — | — | (156 | ) | (455 | ) | — | (611 | ) | |||||||||
Proceeds from sale of assets and investments including affiliates and joint ventures | — | — | 3 | 16 | — | 19 | ||||||||||||
Restricted Cash | (987 | ) | — | 6 | 26 | — | (955 | ) | ||||||||||
Investment in affiliates and joint ventures | 12 | — | — | (8 | ) | — | 4 | |||||||||||
Other investing activities | — | — | 11 | (23 | ) | (13 | ) | (25 | ) | |||||||||
Net cash provided (used) by investing activities | (975 | ) | — | (136 | ) | (444 | ) | (13 | ) | (1,568 | ) | |||||||
Financing activities: | ||||||||||||||||||
Proceeds from payable to banks | 4,348 | — | — | (4,302 | ) | — | 46 | |||||||||||
Proceeds from long-term debt | — | — | — | 4,362 | — | 4,362 | ||||||||||||
Proceeds from long-term debt payable to affiliated | (3,132 | ) | — | 1 | — | 3,131 | — | |||||||||||
Debt issuance cost | (9 | ) | — | — | 9 | — | — | |||||||||||
Payments of payable to banks | (4,025 | ) | — | (23 | ) | 3,920 | — | (128 | ) | |||||||||
Payments of long-term debt payable to unrelated parties | — | (150 | ) | (65 | ) | (4,229 | ) | — | (4,444 | ) | ||||||||
Payments of long-term debt payable to affiliated | — | 150 | (230 | ) | (151 | ) | 231 | — | ||||||||||
Sale of treasury stock | 1 | — | — | — | — | 1 | ||||||||||||
Dividends | (176 | ) | — | — | (65 | ) | — | (241 | ) | |||||||||
Others | (53 | ) | — | (15 | ) | 69 | — | 1 | ||||||||||
Net cash used by financing activities | (3,046 | ) | — | (332 | ) | (387 | ) | 3,362 | (403 | ) | ||||||||
Effect of exchange rate changes - cash | 1 | — | — | (51 | ) | — | (50 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | 10 | 1 | (11 | ) | 86 | — | 86 | |||||||||||
Cash and cash equivalents: | ||||||||||||||||||
At the beginning of the year | 50 | — | 9 | 1,976 | — | 2,035 | ||||||||||||
At the end of the period | 60 | 1 | (2 | ) | 2,062 | — | 2,121 | |||||||||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Condensed consolidating reconciliation of IFRS Net Income to U.S. GAAP Net Income for the period ended June 30, 2006
ArcelorMittal - Parent Company | Ispat Inland ULC - Issuer | ArcelorMittal Guarantor Subsidiaries | ArcelorMittal Non-guarantor Subsidiaries | ArcelorMittal Consolidating Adjustments | ArcelorMittal - Consolidated | |||||||||||||
Net Income under IFRS | 1,507 | (2 | ) | 302 | 1,304 | (1,604 | ) | 1,507 | ||||||||||
Employee Benefits | 21 | — | 24 | (3 | ) | (21 | ) | 21 | ||||||||||
Business Combinations | 225 | — | 80 | 145 | (225 | ) | 225 | |||||||||||
Other | 23 | — | (44 | ) | 67 | (23 | ) | 23 | ||||||||||
Effect of minority interests on adjustments | (14 | ) | — | — | (14 | ) | 14 | (14 | ) | |||||||||
Deferred income tax effect on adjustments | (4 | ) | — | (22 | ) | 18 | 4 | (4 | ) | |||||||||
Total Adjustments | 251 | — | 38 | 213 | (251 | ) | 251 | |||||||||||
Net Income under US GAAP | 1,758 | (2 | ) | 340 | 1,517 | (1,855 | ) | 1,758 | ||||||||||
Condensed consolidating reconcilliation of IFRS Shareholder Equity to U.S. GAAP Shareholder Equity as at December 31, 2006 | ||||||||||||||||||
Equity under IFRS | 42,127 | 88 | 3,442 | 90,247 | (93,777 | ) | 42,127 | |||||||||||
Employee Benefits | (1,225 | ) | — | (832 | ) | (393 | ) | 1,225 | (1,225 | ) | ||||||||
Business Combinations | (6,758 | ) | — | 177 | (6,935 | ) | 6,758 | (6,758 | ) | |||||||||
Other | (161 | ) | — | (155 | ) | (6 | ) | 161 | (161 | ) | ||||||||
Effect of minority interests on adjustments | 1,098 | — | — | 1,098 | (1,098 | ) | 1,098 | |||||||||||
Deferred income tax effect on adjustments | 1,798 | — | 149 | 1,649 | (1,798 | ) | 1,798 | |||||||||||
Total Adjustments | (5,248 | ) | — | (661 | ) | (4,587 | ) | 5,248 | (5,248 | ) | ||||||||
Equity under US GAAP | 36,879 | 88 | 2,781 | 85,660 | (88,529 | ) | 36,879 | |||||||||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
On April 14, 2004, Mittal Steel USA ISG Inc. issued senior, unsecured debt securities due 2014. Certain of the wholly owned subsidiaries of ArcelorMittal USA guarantee these notes on a full, unconditional and joint and several basis. On March 8, 2007, ArcelorMittal fully and unconditionally guaranteed the notes above.
Presented below is condensed consolidating financial information as required by Rule 3-10 of Regulation S-X related to these notes for the following:
- | ArcelorMittal on a parent company only basis; |
- | ArcelorMittal USA, the issuer; |
- | ArcelorMittal’s non-guarantor subsidiaries on a combined basis; |
- | ArcelorMittal consolidating adjustments; and |
- | ArcelorMittal and subsidiaries consolidated |
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Condensed consolidating balance sheets as of June 30, 2007
IFRS | |||||||||||
Arcelor Mittal - Parent Company | ArcelorMittal USA - Issuer Subsidiary | Arcelor Mittal Non- guarantor | Arcelor Mittal Consolidating Adjustments | Arcelor Mittal - Consolidated | |||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | 25 | 51 | 6,608 | — | 6,684 | ||||||
Restricted Cash | 36 | — | 57 | — | 93 | ||||||
Short-term investments | — | — | 5 | — | 5 | ||||||
Trade accounts receivable | — | 1,150 | 10,096 | — | 11,246 | ||||||
Inventories | — | 2,309 | 17,169 | (30 | ) | 19,448 | |||||
Other current assets | 2,047 | 1,533 | 28,787 | (26,276 | ) | 6,091 | |||||
Total current assets | 2,108 | 5,043 | 62,722 | (26,306 | ) | 43,567 | |||||
Property, plant and equipment – net | — | 5,077 | 52,847 | (88 | ) | 57,836 | |||||
Investments in affiliates | 63,610 | 342 | 45,453 | (104,698 | ) | 4,707 | |||||
Other assets | 9,556 | 105 | 25,362 | (16,284 | ) | 18,739 | |||||
Total assets | 75,274 | 10,567 | 186,384 | (147,376 | ) | 124,849 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Payable to banks and current portion of long-term debt | 3,211 | 81 | 4,325 | — | 7,617 | ||||||
Trade accounts payable | 3 | 815 | 11,035 | — | 11,853 | ||||||
Accrued expenses and other current liabilities | 8,166 | 1,360 | 25,570 | (24,355 | ) | 10,741 | |||||
Total current liabilities | 11,380 | 2,256 | 40,930 | (24,355 | ) | 30,211 | |||||
Long-term debt | 15,345 | 2,820 | 28,100 | (23,876 | ) | 22,389 | |||||
Deferred employee benefits | — | 355 | 4,990 | (1 | ) | 5,344 | |||||
Other long-term obligations | — | 1,313 | 10,692 | (47 | ) | 11,958 | |||||
Total liabilities | 26,725 | 6,744 | 84,712 | (48,279 | ) | 69,902 | |||||
Minority Interest | — | — | 2,032 | 4,366 | 6,398 | ||||||
Equity | 48,549 | 3,823 | 99,640 | (103,463 | ) | 48,549 | |||||
Total liabilities and equity | 75,274 | 10,567 | 186,384 | (147,376 | ) | 124,849 | |||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Condensed consolidating statements of income for the six months ended June 30, 2007
IFRS | |||||||||||||||
Arcelor Mittal - Parent Company | ArcelorMittal USA - Issuer Subsidiary | Arcelor Mittal Non- guarantor Subsidiaries | Arcelor Mittal Consolidating Adjustments | Arcelor Mittal - Consolidated | |||||||||||
Net sales | — | 6,250 | 49,776 | (4,327 | ) | 51,699 | |||||||||
Costs and expenses: | |||||||||||||||
Cost of sales (exclusive of depreciation shown separately below) | — | 5,451 | 38,567 | (4,059 | ) | 39,959 | |||||||||
Depreciation | — | 197 | 1,788 | — | 1,985 | ||||||||||
Selling, general and administrative | 61 | 152 | 2,328 | (118 | ) | 2,423 | |||||||||
Other Operating Expense (Income) | — | — | (295 | ) | (60 | ) | (355 | ) | |||||||
Operating income | (61 | ) | 450 | 7,388 | (90 | ) | 7,687 | ||||||||
Other income (expense) – net | 873 | — | 530 | (1,320 | ) | 83 | |||||||||
Equity in earnings of subsidiaries | 4,404 | — | 349 | (4,404 | ) | 349 | |||||||||
Financing costs: | |||||||||||||||
Net interest income (expense) | (269 | ) | (109 | ) | 54 | (21 | ) | (345 | ) | ||||||
Net gain (loss) from foreign exchange | 26 | — | 92 | 35 | 153 | ||||||||||
Income before taxes | 4,973 | 341 | 8,413 | (5,800 | ) | 7,927 | |||||||||
Income tax (benefit) expense: | |||||||||||||||
Current | — | 73 | 1,473 | — | 1,546 | ||||||||||
Deferred | — | 31 | 447 | (3 | ) | 475 | |||||||||
Net income (loss) before minority interest | 4,973 | 237 | 6,493 | (5,797 | ) | 5,906 | |||||||||
Minority Interest | — | — | (439 | ) | (494 | ) | (933 | ) | |||||||
Net income (loss) | 4,973 | 237 | 6,054 | (6,291 | ) | 4,973 | |||||||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Condensed consolidating statements of cash flows for the six months ended June 30, 2007
Arcelor Mittal - Parent Company | ArcelorMittal USA - Issuer Subsidiary | ArcelorMittal Non-guarantor Subsidiaries | Arcelor Mittal Consolidating Adjustments | Arcelor Mittal - Consolidated | |||||||||||
Net cash provided by operating activities | 867 | 268 | 6,493 | (1,246 | ) | 6,382 | |||||||||
Investing activities: | |||||||||||||||
Purchases of property, plant and equipment (PP&E) | — | (269 | ) | (2,049 | ) | — | (2,318 | ) | |||||||
Proceeds from sale of assets and investments including affiliates and joint ventures | — | 2 | 973 | — | 975 | ||||||||||
Investment in affiliates and joint ventures | (793 | ) | 33 | (5,852 | ) | 945 | (5,667 | ) | |||||||
Other investing activities | (381 | ) | — | 500 | — | 119 | |||||||||
Net cash provided (used) by investing activities | (1,174 | ) | (234 | ) | (6,428 | ) | 945 | (6,891 | ) | ||||||
Financing activities: | |||||||||||||||
Proceeds from payable to banks | — | — | 1,966 | — | 1,966 | ||||||||||
Proceeds from long-term debt | 2,175 | — | 3 | — | 2,178 | ||||||||||
Proceeds from long-term debt payable to affiliated | — | — | 3,021 | (3,021 | ) | — | |||||||||
Payments of payable to banks | (405 | ) | 22 | (379 | ) | — | (762 | ) | |||||||
Payments of long-term debt payable to unrelated parties | — | (41 | ) | (633 | ) | — | (674 | ) | |||||||
Payments of long-term debt payable to affiliated | — | (49 | ) | (2,830 | ) | 2,879 | — | ||||||||
Sale of treasury stock | 7 | — | (571 | ) | — | (564 | ) | ||||||||
Dividends | (901 | ) | — | (1,449 | ) | 1,192 | (1,158 | ) | |||||||
Others | (558 | ) | — | 1,343 | (755 | ) | 30 | ||||||||
Net cash used by financing activities | 318 | (68 | ) | 471 | 295 | 1,016 | |||||||||
Effect of exchange rate changes - cash | — | — | 157 | — | 157 | ||||||||||
Net increase (decrease) in cash and cash equivalents | 11 | (34 | ) | 687 | — | 664 | |||||||||
Cash and cash equivalents: | |||||||||||||||
At the beginning of the year | 14 | 85 | 5,921 | — | 6,020 | ||||||||||
At the end of the period | 25 | 51 | 6,608 | — | 6,684 | ||||||||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Condensed consolidating reconciliation of IFRS Net Income to U.S. GAAP Net Income as at June 30, 2007
Arcelor Mittal - Parent Company | ArcelorMittal USA - Issuer Subsidiary | Arcelor Mittal Non- guarantor | Arcelor Mittal Consolidating Adjustments | Arcelor Mittal - Consolidated | |||||||||||
Net Income under IFRS | 4,973 | 237 | 6,056 | (6,293 | ) | 4,973 | |||||||||
Employee Benefits | 22 | 13 | 9 | (22 | ) | 22 | |||||||||
Business Combinations | 152 | (87 | ) | 239 | (152 | ) | 152 | ||||||||
Other | (81 | ) | 1 | (82 | ) | 81 | (81 | ) | |||||||
Effect of minority interests on adjustments | (22 | ) | — | (22 | ) | 22 | (22 | ) | |||||||
Deferred income tax effect on adjustments | (22 | ) | 24 | (46 | ) | 22 | (22 | ) | |||||||
Total Adjustments | 49 | (49 | ) | 98 | (49 | ) | 49 | ||||||||
Net Income under U.S. GAAP | 5,022 | 188 | 6,154 | (6,342 | ) | 5,022 | |||||||||
Condensed consolidating reconciliation of IFRS Shareholders’ Equity to U.S. GAAP Shareholders’ Equity as at June 30, 2007 | |||||||||||||||
Equity under IFRS | 48,549 | 3,823 | 99,640 | (103,463 | ) | 48,549 | |||||||||
Employee Benefits | (1,171 | ) | (797 | ) | (374 | ) | 1,171 | (1,171 | ) | ||||||
Business Combinations | (6,978 | ) | 177 | (7,155 | ) | 6,978 | (6,978 | ) | |||||||
Other | (259 | ) | (248 | ) | (11 | ) | 259 | (259 | ) | ||||||
Effect of minority interests on adjustments | 973 | — | 973 | (973 | ) | 973 | |||||||||
Deferred income tax effect on adjustments | 1,735 | 174 | 1,561 | (1,735 | ) | 1,735 | |||||||||
Total Adjustments | (5,700 | ) | (694 | ) | (5,006 | ) | 5,700 | (5,700 | ) | ||||||
Equity under U.S. GAAP | 42,849 | 3,129 | 94,634 | (97,763 | ) | 42,849 | |||||||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Condensed consolidating balance sheets as of December 31, 2006
IFRS | |||||||||||
ArcelorMittal - Parent Company | ArcelorMittal USA - Issuer Subsidiary | ArcelorMittal Non-guarantor Subsidiaries | ArcelorMittal Consolidating Adjustments | ArcelorMittal - Consolidated | |||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | 14 | 85 | 5,921 | — | 6,020 | ||||||
Restricted Cash | 66 | — | 54 | — | 120 | ||||||
Short-term investments | — | — | 6 | — | 6 | ||||||
Trade accounts receivable | — | 879 | 7,890 | — | 8,769 | ||||||
Inventories | — | 3,003 | 16,474 | (239 | ) | 19,238 | |||||
Other current assets | 4,450 | 178 | 26,007 | (25,426 | ) | 5,209 | |||||
Total current assets | 4,530 | 4,145 | 56,352 | (25,665 | ) | 39,362 | |||||
Property, plant and equipment – net | — | 5,593 | 48,917 | 186 | 54,696 | ||||||
Investments in affiliates | 54,872 | 338 | 42,538 | (94,256 | ) | 3,492 | |||||
Other assets | 3,417 | 165 | 19,372 | (8,338 | ) | 14,616 | |||||
Total assets | 62,819 | 10,241 | 167,179 | (128,073 | ) | 112,166 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Payable to banks and current portion of long-term debt | — | 93 | 1,637 | 3,192 | 4,922 | ||||||
Trade accounts payable | 17 | 876 | 9,818 | 6 | 10,717 | ||||||
Accrued expenses and other current liabilities | 4,099 | 986 | 19,884 | (16,048 | ) | 8,921 | |||||
Total current liabilities | 4,116 | 1,955 | 31,339 | (12,850 | ) | 24,560 | |||||
Long-term debt | 16,576 | 2,824 | 28,167 | (25,922 | ) | 21,645 | |||||
Deferred employee benefits | — | 504 | 4,781 | — | 5,285 | ||||||
Other long-term obligations | — | 1,363 | 9,148 | (26 | ) | 10,485 | |||||
Total liabilities | 20,692 | 6,646 | 73,435 | (38,798 | ) | 61,975 | |||||
Minority Interest | — | — | 4,043 | 4,021 | 8,064 | ||||||
Equity | 42,127 | 3,595 | 89,701 | (93,296 | ) | 42,127 | |||||
Total liabilities and equity | 62,819 | 10,241 | 167,179 | (128,073 | ) | 112,166 | |||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Condensed consolidating statements of income for the six months ended June 30, 2006
IFRS | |||||||||||||||
ArcelorMittal - Parent Company | ArcelorMittal USA - Issuer Subsidiary | ArcelorMittal Non-guarantor Subsidiaries | ArcelorMittal Consolidating Adjustments | ArcelorMittal - Consolidated | |||||||||||
Net sales | — | 6,736 | 10,929 | (5 | ) | 17,660 | |||||||||
Costs and expenses: | |||||||||||||||
Cost of sales (exclusive of depreciation shown separately below) | — | 5,776 | 8,394 | (5 | ) | 14,165 | |||||||||
Depreciation | — | 183 | 516 | — | 699 | ||||||||||
Selling, general and administrative | 44 | 147 | 403 | (37 | ) | 557 | |||||||||
Other Operating Expense (Income) | — | — | (72 | ) | — | (72 | ) | ||||||||
Operating income | (44 | ) | 630 | 1,688 | 37 | 2,311 | |||||||||
Other income (expense) – net | 95 | — | — | (94 | ) | 1 | |||||||||
Equity in earnings of subsidiaries | 1,446 | — | 38 | (1,446 | ) | 38 | |||||||||
Financing costs: | |||||||||||||||
Net interest income (expense) | 10 | (171 | ) | (28 | ) | (101 | ) | (290 | ) | ||||||
Net gain (loss) from foreign exchange | — | — | 95 | — | 95 | ||||||||||
Income before taxes | 1,507 | 459 | 1,793 | (1,604 | ) | 2,155 | |||||||||
Income tax (benefit) expense: | |||||||||||||||
Current | — | 82 | 349 | — | 431 | ||||||||||
Deferred | — | 75 | (50 | ) | — | 25 | |||||||||
Net income (loss) before minority interest | 1,507 | 302 | 1,494 | (1,604 | ) | 1,699 | |||||||||
Minority Interest | — | — | (192 | ) | — | (192 | ) | ||||||||
Net income (loss) | 1,507 | 302 | 1,302 | (1,604 | ) | 1,507 | |||||||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Condensed consolidating statements of cash flows for the six months ended June 30, 2006
- | |||||||||||||||
ArcelorMittal - Parent Company | ArcelorMittal USA - Issuer Subsidiary | ArcelorMittal Non-guarantor Subsidiaries | ArcelorMittal Consolidating Adjustments | ArcelorMittal - Consolidated | |||||||||||
Net cash provided by operating activities | 4,030 | 397 | 1,029 | (3,349 | ) | 2,107 | |||||||||
Investing activities: | |||||||||||||||
Purchases of property, plant and equipment (PP&E) | — | (156 | ) | (455 | ) | — | (611 | ) | |||||||
Proceeds from sale of assets and investments including affiliates and joint ventures | — | 15 | 4 | — | 19 | ||||||||||
Restricted Cash | (987 | ) | 6 | 26 | — | (955 | ) | ||||||||
Investment in affiliates and joint ventures | 12 | 10 | (18 | ) | — | 4 | |||||||||
Other investing activities | — | 11 | (23 | ) | (13 | ) | (25 | ) | |||||||
Net cash provided (used) by investing activities | (975 | ) | (114 | ) | (466 | ) | (13 | ) | (1,568 | ) | |||||
Financing activities: | |||||||||||||||
Proceeds from payable to banks | 4,348 | — | (4,302 | ) | — | 46 | |||||||||
Proceeds from long-term debt | — | — | 4,362 | — | 4,362 | ||||||||||
Proceeds from long-term debt payable to affiliated | (3,132 | ) | 1 | — | 3,131 | — | |||||||||
Debt issuance cost | (9 | ) | — | 9 | — | — | |||||||||
Payments of payable to banks | (4,025 | ) | (23 | ) | 3,920 | — | (128 | ) | |||||||
Payments of long-term debt payable to unrelated parties | — | (65 | ) | (4,379 | ) | — | (4,444 | ) | |||||||
Payments of long-term debt payable to affiliated | — | (230 | ) | (1 | ) | 231 | — | ||||||||
Sale of treasury stock | 1 | — | — | — | 1 | ||||||||||
Dividends | (176 | ) | — | (65 | ) | — | (241 | ) | |||||||
Others | (53 | ) | (15 | ) | 69 | — | 1 | ||||||||
Net cash used by financing activities | (3,046 | ) | (332 | ) | (387 | ) | 3,362 | (403 | ) | ||||||
Effect of exchange rate changes - cash | 1 | — | (51 | ) | — | (50 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | 10 | (49 | ) | 125 | — | 86 | |||||||||
Cash and cash equivalents: | |||||||||||||||
At the beginning of the year | 50 | 55 | 1,930 | — | 2,035 | ||||||||||
At the end of the period | 60 | 6 | 2,055 | — | 2,121 | ||||||||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Condensed consolidating reconciliation of IFRS Net Income to U.S. GAAP Net Income for the six months ended June 30, 2006 | |||||||||||||||
ArcelorMittal - Parent Company | ArcelorMittal USA - Issuer Subsidiary | ArcelorMittal Non-guarantor Subsidiaries | ArcelorMittal Consolidating Adjustments | ArcelorMittal - Consolidated | |||||||||||
Net Income under IFRS | 1,507 | 302 | 1,302 | (1,604 | ) | 1,507 | |||||||||
Employee Benefits | 21 | 24 | (3 | ) | (21 | ) | 21 | ||||||||
Business Combinations | 225 | 80 | 145 | (225 | ) | 225 | |||||||||
Other | 23 | (44 | ) | 67 | (23 | ) | 23 | ||||||||
Effect of minority interests on adjustments | (14 | ) | — | (14 | ) | 14 | (14 | ) | |||||||
Deferred income tax effect on adjustments | (4 | ) | (22 | ) | 18 | 4 | (4 | ) | |||||||
Total Adjustments | 251 | 38 | 213 | (251 | ) | 251 | |||||||||
Net Income under U.S. GAAP | 1,758 | 340 | 1,515 | (1,855 | ) | 1,758 | |||||||||
Condensed consolidating reconciliation of IFRS Shareholders’ Equity to U.S. GAAP Shareholders’ Equity as at December 31, 2006 | |||||||||||||||
Equity under IFRS | 42,127 | 3,595 | 89,701 | (93,296 | ) | 42,127 | |||||||||
Employee Benefits | (1,225 | ) | (832 | ) | (393 | ) | 1,225 | (1,225 | ) | ||||||
Business Combinations | (6,758 | ) | 177 | (6,935 | ) | 6,758 | (6,758 | ) | |||||||
Other | (161 | ) | (155 | ) | (6 | ) | 161 | (161 | ) | ||||||
Effect of minority interests on adjustments | 1,098 | — | 1,098 | (1,098 | ) | 1,098 | |||||||||
Deferred income tax effect on adjustments | 1,798 | 149 | 1,649 | (1,798 | ) | 1,798 | |||||||||
Total Adjustments | (5,248 | ) | (661 | ) | (4,587 | ) | 5,248 | (5,248 | ) | ||||||
Equity under U.S. GAAP | 36,879 | 2,934 | 85,114 | (88,048 | ) | 36,879 | |||||||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
NOTE 12: RECONCILIATION FROM IFRS TO US GAAP
The Company’s consolidated financial statements have been prepared in accordance with IFRS, which, differs in certain significant respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”).
The effects of the application of U.S. GAAP on consolidated net income for the six-month periods ended June 30, 2006 and 2007, as determined under IFRS, are set out in the table below:
For the six months ended June 30, | ||||||
2006 | 2007 | |||||
Net income (including minority interests) | 1,699 | 5,906 | ||||
Less: minority interests, as reported under IFRS | (192 | ) | (933 | ) | ||
Net income attributable to equity holders of parent , as reported under IFRS | 1,507 | 4,973 | ||||
U.S. GAAP adjustments: | ||||||
(a) Employee benefits | 21 | 22 | ||||
(b) Business combination-related adjustments: | ||||||
(1) Negative goodwill and measurement date | 144 | 92 | ||||
(2) Revaluation of minority interests | — | 60 | ||||
(3) Restructuring provisions | 81 | — | ||||
(c) Other | 23 | (81 | ) | |||
(d) Effect of minority interests on adjustments | (14 | ) | (22 | ) | ||
(e) Deferred income tax effect on adjustments | (4 | ) | (22 | ) | ||
Total U.S. GAAP adjustments | 251 | 49 | ||||
Net income, as determined under U.S. GAAP | 1,758 | 5,022 | ||||
Earnings per share (Class A and Class B), as determined under U.S. GAAP: | ||||||
Basic | 2.49 | 3.63 | ||||
Diluted | 2.49 | 3.63 |
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
The effects of the application of U.S. GAAP on consolidated shareholders’ equity as of December 31, 2006 and June 30, 2007, as determined under IFRS, are set out in the table below:
As of December 31, | As of June 30, | |||||
Consolidated shareholders’ equity, as reported under IFRS | 50,191 | 54,947 | ||||
Less: minority interest, as reported under IFRS | (8,064 | ) | (6,398 | ) | ||
Consolidated shareholders’ equity excluding minority interest, as determined under IFRS | 42,127 | 48,549 | ||||
U.S. GAAP adjustments: | ||||||
(a) Employee benefits | (1,225 | ) | (1,171 | ) | ||
(b) Business combination-related adjustments: | ||||||
(1) Negative goodwill and measurement date | (5,373 | ) | (5,467 | ) | ||
(2) Revaluation of minority interests | (1,586 | ) | (1,511 | ) | ||
(3) Restructuring provisions | 80 | — | ||||
(4) Finalization of purchase price allocation | 121 | — | ||||
(c) Other | (161 | ) | (130 | ) | ||
(d) Effect of minority interests on adjustments | 1,098 | 973 | ||||
(e) Deferred income tax effect on adjustments | 1,798 | 1,735 | ||||
(f) Uncertain tax positions | — | (129 | ) | |||
Total U.S. GAAP adjustments | (5,248 | ) | (5,700 | ) | ||
Shareholders’ equity, as determined under U.S. GAAP | 36,879 | 42,849 | ||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
(a) Employee benefits
The aggregate adjustments included in the tables above as of December 31, 2006 and June 30, 2007 and for each of the six-month period ended June 30, 2006 and 2007 consist of the following:
As of December 31, 2006 | As of June 30, 2007 | For the six months ended June 30, | ||||||||
2006 | 2007 | |||||||||
Recognition of funded status (SFAS 158) | (1,012 | ) | (991 | ) | — | 3 | ||||
Prior service costs | (213 | ) | (180 | ) | 21 | 19 | ||||
Total U.S. GAAP adjustments (before income taxes and minority interest) | (1,225 | ) | (1,171 | ) | 21 | 22 | ||||
Recognition of funded status (SFAS 158)
Under U.S. GAAP, the Company accounts for its pensions and post-retirement benefit plans in accordance with Statement of Financial Accounting Standards (“SFAS”) 87, “Employers’ Accounting for Pensions” and SFAS 106, “Employers’ Accounting for Post-retirement Benefits” and, from December 31, 2006, SFAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R).” Effective December 31, 2006, SFAS 158 requires the Company to recognize the funded status of employee benefit plans on the balance sheet. Due to the adoption of SFAS 158, actuarial gains and losses and past service costs, (which remain unrecognized under IFRS) are recognized as of June 30, 2007 directly in equity, net of deferred income taxes.
Prior service costs
Under IFRS, in accordance with IAS 19, “Employee Benefits”, where pension benefits have already vested, past service costs are recognized immediately. Under U.S. GAAP, in accordance with SFAS 87, prior service costs are amortized over the remaining service period for both vested and unvested rights.
(b) Business combination-related adjustments
(1) Negative goodwill and measurement date
Under IFRS 3, “Business Combinations,” any excess of the fair value of acquired net assets over the acquisition cost (negative goodwill) is recognized immediately as income.
Under U.S. GAAP, in accordance with SFAS 141, “Business Combinations,” any excess of the fair value of acquired net assets over the acquisition cost (negative goodwill) is allocated on a pro rata basis to reduce the amount allocated to non-current, non-monetary assets until such assets are reduced to zero. Any remaining excess is recognized immediately as an extraordinary gain.
Under U.S. GAAP, these amounts reduced the underlying long-lived assets, thereby reducing depreciation and amortization expense on the related assets of 144 and 92 for the six-month periods ended June 30, 2006 and 2007, respectively.
Under IFRS, the guidance of IFRS 3 requires that securities issued as consideration in a business combination be recorded at their fair value as of the date of exchange – the date on which an entity obtains control over the acquiree’s net assets and operations.
Under U.S. GAAP, in accordance with Emerging Issues Task Force (“EITF”) 99-12: “Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination,” the measurement date used to determine the fair value of securities issued as consideration in a business combination is the date when the terms of the transaction are agreed to and announced.
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
The following adjustments related to measurement date differences between IFRS and U.S. GAAP as of and for the years ended December 31, 2006 and June 30, 2007 are set out below:
2006 Arcelor | 2007 Arcelor | 2007 Arcelor Brasil SA | |||||||
Value of Mittal Steel shares issued as determined under U.S. GAAP purposes | 21,172 | 21,172 | 1,455 | ||||||
Value of Mittal Steel shares issued as determined under IFRS | 23,240 | 23,240 | 1,709 | ||||||
Total U.S. GAAP difference on measurement date | (2,068 | ) | (2,068 | ) | (254 | ) | |||
Cumulative translation adjustment related to goodwill difference | (65 | ) | (120 | ) | — | ||||
U.S. equity adjustment for measurement date | (2,133 | ) | (2,188 | ) | (254 | ) | |||
Acquisition of Arcelor
Under IFRS, the 679.4 million Mittal Steel common shares issued in connection with the acquisition of Arcelor were valued at a weighted average price of $34.20 per share, resulting in an aggregate consideration for this component of the purchase price of 23,240. Under U.S. GAAP, the 679.4 million Mittal Steel common shares issued in connection with the acquisition of Arcelor were valued at a weighted average price of $31.16 per share, resulting in an aggregate consideration for this component of the purchase price of 21,172. The resulting difference in fair value assigned to the Mittal Steel common shares issued in connection with the acquisition of Arcelor amounts to 2,068 and is included in the reconciliation of consolidated shareholders’ equity as of December 31, 2006.
Acquisition of Arcelor Brasil SA minority interests
Under IFRS, the 27.0 million Mittal Steel common shares issued in connection with the acquisition of Arcelor Brasil SA minority interests were valued at a weighted average price of $63.23 per share, resulting in an aggregate consideration for this component of the purchase price of 1,709. Under U.S. GAAP, the 27.0 million Mittal Steel common shares issued in connection with the acquisition of Arcelor Brasil SA minority interests were valued at a weighted average price of $53.85 per share, resulting in an aggregate consideration for this component of the purchase price of 1,455. The resulting difference in fair value assigned to the Mittal Steel common shares issued in connection with the acquisition of Arcelor Brasil SA minority interests amounts to 254 and is included in the reconciliation of consolidated shareholders’ equity as of June 30, 2007.
(2) Revaluation of minority interests
Under IFRS, when a company acquires less than 100% of a subsidiary, the minority (non-controlling) interests are recorded in the acquirer’s balance sheet at the minority’s proportion of the fair value of the assets acquired and liabilities assumed.
Under U.S. GAAP, when a company acquires less than 100% of a subsidiary, the minority (non-controlling) interests are recorded in the acquirer’s balance sheet at the minority’s proportion of the historical book value of the assets acquired and liabilities assumed. Fair values are only assigned to the parent company’s share of the net assets acquired.
The aggregate adjustments included in the tables above as of December 31, 2006 and June 30, 2007 and for the six-month periods ended June 30, 2006 and 2007:
As of | For the six months ended June 30, | ||||||||||
December 31, 2006 | June 30, 2007 | ||||||||||
2006 | 2007 | ||||||||||
U.S. GAAP adjustments: | |||||||||||
Minority interest in Arcelor | (731 | ) | (680 | ) | — | 32 | |||||
Minority interest in subsidiaries of Arcelor | (617 | ) | (597 | ) | — | 28 | |||||
Minority interest in Kryviy Rih | (238 | ) | (234 | ) | — | — | |||||
Total U.S. GAAP adjustments (before income taxes and minority interest) | (1,586 | ) | (1,511 | ) | — | 60 | |||||
Effect of income taxes on adjustments | (525 | ) | (538 | ) | — | (15 | ) | ||||
Effect of minority interests on adjustments | (1,061 | ) | (973 | ) | — | (45 | ) | ||||
Total U.S. GAAP adjustments (after income taxes and minority interest) | — | — | — | — | |||||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
(3) Restructuring provisions
Under IFRS, the Company may recognize restructuring provisions as part of the acquired liabilities only if the Company has an existing liability at the acquisition date for a restructuring plan recognized in accordance with International Accounting Standards (“IAS”) 37, “Provisions, contingent liabilities, and contingent assets”.
Under U.S. GAAP, EITF 95-3, “Recognition of Liabilities in Connection with a Business Combination,” requires the Company to recognize a restructuring liability at the acquisition date if specific criteria are met. Mittal Steel must have a plan to exit an activity as of the acquisition date, and communication of such a plan should have occurred.
Acquisition of ISG
In conjunction with the acquisition of ISG, a restructuring provision was recognized under U.S. GAAP, which could not be recognized for IFRS. Therefore, under IFRS, the net assets acquired were higher than those recognized under U.S. GAAP in the opening balance sheet, resulting in a corresponding adjustment to the amount of negative goodwill recognized immediately in the statement of income under IFRS, which is not recognized for U.S. GAAP purposes. The difference had no impact on consolidated shareholders’ equity in total between IFRS and U.S. GAAP, however, in reconciling from IFRS to U.S. GAAP, a reclassification adjustment is necessary within equity from retained earnings under IFRS to additional paid in capital under U.S. GAAP for this difference.
During the year ended December 31, 2006, ISG recorded a restructuring provision of 80 under IFRS, which was previously recognized under U.S. GAAP through purchase accounting during the year ending December 31, 2005. Accordingly, the provision recorded under IFRS has been reversed during the year ended December 31, 2006 for U.S. GAAP.
(4) Finalization of purchase price allocation (“PPA”)
The aggregate adjustments included in the tables above as of December 31, 2006 and June 30, 2007 consist of the following:
As of | |||||
December 31, 2006 | June 30, 2007 | ||||
U.S. GAAP adjustments: | |||||
Finalization of ISG PPA | 130 | — | |||
Finalization of Kryviy Rih PPA | (9 | ) | — | ||
Total U.S. GAAP adjustments (before income taxes and minority interest) | 121 | — | |||
Effect of income taxes on adjustments | — | — | |||
Effect of minority interests on adjustments | 10 | — | |||
Total U.S. GAAP adjustments (after income taxes and minority interest) | 131 | — | |||
Under IFRS and U.S. GAAP, the period that is allowed for finalizing the identification and measurement of the fair value of assets acquired and liabilities assumed in a business combination ends when the acquiring entity is no longer waiting for information that it has arranged to obtain and that is known to be available or obtainable. That allocation period should usually not exceed one year from the consummation of a business combination. Accordingly, the measurement and recognition of certain items have been adjusted to take into account information obtained in 2006 regarding the facts and circumstances that existed as of the acquisition date and that, if known, would have affected the measurement or recognition of the amounts as of that date.
Under IFRS, the prior period financial statements were modified to reflect these adjustments from the date of acquisition. Under U.S. GAAP, the prior period financial statements were not modified to reflect these adjustments. The final U.S. GAAP purchase price adjustments were recorded during the year ended December 31, 2006, with no impact on the consolidated statement of income.
(c) Other
The aggregate adjustments included in the tables above as of December 31, 2006 and June 30, 2007 and for the six-month periods ended June 30, 2006 and 2007 consist of the following:
As of | For the six months ended June 30, | ||||||||||
December 31, 2006 | June 30, 2007 | ||||||||||
2006 | 2007 | ||||||||||
Inventory valuation | (154 | ) | (87 | ) | 17 | (87 | ) | ||||
Other | (7 | ) | (43 | ) | 6 | 6 | |||||
Total U.S. GAAP adjustments (before income taxes and minority interest) | (161 | ) | (130 | ) | 23 | (81 | ) | ||||
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
Inventory valuation
Under IFRS, inventory is measured on the basis of first in – first out (FIFO). Under U.S. GAAP, the Company measures certain inventory on the basis of last in – first out (LIFO).
(d) Effect of minority interests on adjustments
This adjustment reflects the portion of the aforementioned adjustments attributable to the Company’s subsidiaries with minority interests.
(e) Deferred income tax effect on adjustments
This adjustment reflects the deferred tax effects attributable to the aforementioned adjustments.
(f) Uncertain tax positions
On January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). As a result of the implementation of FIN 48, the Company recognized an increase of approximately 129 of additional liabilities for uncertain tax positions, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings.
The total amount of unrecognized tax benefits were approximately 1,199 as of June 30, 2007 and 1,238 as of January 1, 2007. If these unrecognized tax benefits were recognized, the annual effective tax rate would decrease by approximately 3%. Unrecognized tax benefits are the differences between a tax position taken, or expected to be taken in a tax return, and the benefit recognized for accounting purposes pursuant to FIN 48.
The Company records interest related to uncertain tax positions as a part of net interest and other financial costs in the Statement of Operations. Any penalties are recognized as part of selling, general administrative expenses. As of June 30, 2007 and January 1, 2007, the Company had an accrued liability of approximately 43 and 35, respectively for interest and penalties related to uncertain tax positions.
(g) Other presentation differences
The major reclassifications, adjusting the IFRS presentation to conform to U.S. GAAP, are as follows:
Deferred income taxes
Under IFRS, current deferred tax assets and current deferred tax liabilities are presented as non-current items in the balance sheet. Under U.S. GAAP, current deferred tax assets and current deferred tax liabilities are presented within current assets and current liabilities, respectfully, in the balance sheet.
Classification of accreted interest
Under IFRS, the interest component of discounted obligations is presented as part of interest. Under U.S. GAAP the interest component of discounted obligations is presented as part of cost of sales.
Deferred financing costs
Under IFRS, borrowings are recognized in the balance sheet net of issuance related costs. Under U.S. GAAP, issuance related costs are recognized in the balance sheet as an asset.
Pension costs
Under IFRS, the Company has classified the interest component and the expected return on plan assets component of net periodic pension cost as a financial expense in the consolidated statement of income. Under U.S. GAAP, the interest component and the expected return on plan assets component of net periodic pension costs is included within the operating expense section of the consolidated statement of income.
Assets and liabilities held for sale
Under IFRS, as of December 31, 2006, the Company has classified its laser-welded tailor blank business as held for sale, following the signing of a binding letter of intent during the year. Under U.S. GAAP, as the Company will continue to have significant involvement in the laser-welded tailor blank business being sold, the respective assets and liabilities have been reclassified from the held for sale designation.
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
(h) U.S. GAAP earnings per share
Under U.S. GAAP, basic earnings-per-share is calculated by dividing the net income available to common shareholders by the weighted average number of shares outstanding during the period, and diluted earnings-per-share is calculated by adjusting both the numerator and denominator used for the calculation of basic earnings-per-share for instruments that provide holders with potential access to the capital of the Company, whether they are issued by the Company itself or by one of its subsidiaries. The dilution is calculated, instrument-by-instrument, taking into account the conditions existing at the balance sheet date, and excluding anti-dilutive instruments.
ArcelorMittal AND SUBSIDIARIES
(millions of U.S. Dollars, except share and per share data)
Notes to the Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 2007
The following table sets out the calculation of basic and diluted earnings-per-share (in millions, except per share data), as determined in accordance with U.S. GAAP, for the six-month periods ended June 30, 2006 and 2007:
For the six months Ended June 30, | ||||
2006 | 2007 | |||
Net income available to common shareholders: | ||||
Basic earnings-per-share | 1,758 | 5,022 | ||
Net income available to shareholders and assumed conversion | 1,758 | 5,022 | ||
Weighted average number of shares outstanding: | ||||
Basic earnings-per-share | 706 | 1,383 | ||
Incremental shares from assumed exercise of stock options | 1 | 2 | ||
Diluted earnings-per-share | 707 | 1,385 | ||
Earnings per share: | ||||
Basic | 2.49 | 3.63 | ||
Diluted | 2.49 | 3.63 |