SEC Company Response from NATIONAL STEEL (SID) — Oct 23, 2009
NATIONAL STEEL CO
Date: Oct. 23, 2009 · CIK: 0001049659 · Accession: 0001292814-09-002500
AI Filing Summary & Sentiment
Referenced dates: September 17, 2009
Letter
Division of Corporation Finance United States Securities and Exchange Commission Form 20.F for the Fiscal Year Ended December 31, 2008 Filed June 30, 2009 File No. 1-14732 Response to Staff Comment Letter dated September 17, 2009
Dear Mr. O'Brien:
Companhia Siderúrgica Nacional (the “Company”) received a comment letter from the staff of the United States Securities and Exchange Commission (the “Staff”) on September 17, 2009, concerning the Company’s annual report on Form 20-F filed on June 30, 2009 (the “2008 Form 20-F”). This letter provides the Company’s responses to the Staff’s comments. For your convenience, we have reproduced below in italics the Staff’s comments numbered 1 through 20 and have provided responses immediately below such comments. All page numbers referred to herein are to the 2008 Form 20-F.
SEC Comment No. 1.
5A. Operating Results, page 55
Markets and Product Mix, page 55
1. We note your table of net operating revenues for your steel products. Please revise your disclosures in an amendment to your fiscal year 2008 Form 20-F to clarify why net operating revenues do not appear to agree to the financial information reported for your steel reportable segment in Note 19. In addition, we note that the table presented on page 66 for your steel product costs also does not agree to the cost information for your steel reportable segment in Note 19. Please also clarify your disclosures as to why in the amended filing.
Companhia Siderúrgica Nacional
Escritório Central
Av. Brigadeiro Faria Lima, 3400 – 20º andar - Edificio
Financial Faria Lima Center
Cep: 04538-132 - São Paulo - SP
Response to Comment No. 1.
We understand the Staff´s comment but would like to respectfully explain why in our opinion a revision of our 2008 Form 20-F is not necessary.
Net operating revenues
Net operating revenues in Note 19 encompass sales of all products from our steel manufacturing segment, including sales of relevant by-products such as slag and out-of-specification slabs (resulting from the continuous casting process). Net operating revenues described on the table on page 55 include only sales from finalized steel products (our steel segment´s core business), as highlighted in footnote #1 to such table.
Steel production costs
The table on page 66 sets forth our steel production costs, while the table in Note 19 sets forth the costs of products sold and operating expenses for our steel segment, which includes other operating expenses such as selling, general and administrative expenses (SG&A).
SEC Comment No. 2.
Results of Operations, page 63
2. We note that your mining reportable segment represented 27% of fiscal year 2008 consolidated operating income. As such, please provide a detailed discussion and analysis of the material increase in revenues and changes in profit margins for your mining reportable segment in an amendment to your fiscal year 2008 Form 20-F. Further, please disclose the expected impact of de-consolidation on future operating results of the mining reportable segment by quantifying NAMISA's 2008 operating revenues, gross profit, and operating income and explaining how such results will be presented under the equity method. Refer to Item 5 of Form 20-F and Section 501.06. a of the Financial Reporting Codification for guidance.
Response to Comment No. 2.
The comment has been noted and for clarification purposes we intend to disclose additional information related to revenues and margins related to our mining activities in future filings along the following lines:
The material increase in revenues for our mining segment was a result of: (i) an all-time record of 18.5 million tons of iron ore sales volume in 2008 due to the increase of our iron ore export capacity in the Itaguaí Port and general improvements in iron ore extraction processes and logistics; and (ii) the increase in average iron ore prices in the international market realized in 2008.
The aforementioned increase in sales volumes caused a dilution in our per ton iron ore fixed production costs in 2008. All these factors impacted the profit margins for our mining segment.
With respect to the impact of de-consolidation of our subsidiary Nacional Minérios S.A. (“NAMISA”), we intend to report these results in future years as follows:
Companhia Siderúrgica Nacional
Escritório Central
Av. Brigadeiro Faria Lima, 3400 – 20º andar - Edificio
Financial Faria Lima Center
Cep: 04538-132 - São Paulo - SP
NAMISA’s operating revenues, gross profit, and operating income in 2008 were US$434 million, US$263 million and US$168 million, respectively. Excluding NAMISA, our operating revenues, gross profit, and operating income arising from our mining activities in 2008 would have been US$948 million, US$665 million and US$599 million, respectively, which would still represent significant increases if compared to 2007 figures (which includes NAMISA). The NAMISA’s results for 2009 will be presented as equity in results of affiliates in our statement of income under our mining segment.
Additionally, certain NAMISA amounts for 2009 will be disclosed in a note to our financial statements relating to summarized financial information of an equity method investee, if material.
SEC Comment No. 3.
3. We note your discussion and analysis of gross profit for your steel reportable segment. Specifically, you attribute the increase to a 30.3% increase in net operating revenues offset by a 16.2% increase in cost of products sold. Please revise your disclosure in an amendment to your fiscal year 2008 Form 20-F to provide an explanation as to why net operating revenues increased at a greater rate than cost of products sold.
Response to Comment No. 3.
The comment has been noted and, for clarification purposes, we will disclose additional information in future filings, along the following lines:
Our operating revenues are mainly composed of sales of steel and iron ore products. The 30.3% increase in our consolidated net operating revenues from 2007 to 2008 can be attributed to the following:
In connection with our steel segment: (i) larger volume of sales in the domestic market (increase from 3,614 million tons in 2007 to 4,158 million tons in 2008) where we historically have recorded higher profit margins; (ii) increase of the domestic sales in terms of total sales volume, from 67% in 2007 to 85% in 2008; and (iii) successive steel price hikes in the domestic market during 2008.
In connection with the mining segment: (i) an all-time record of 18.5 million tons of iron ore sales volume in 2008 due to the increase of our iron ore export capacity in the Itaguaí port and general improvements in iron ore extraction processes and logistics; and (ii) the increase in average iron ore prices in the international market realized in 2008.
Our cost of products sold increased at a lower rate (16.2%) due to the following reasons:
In connection with the steel segment (i) cost of products sold is mainly driven by raw material prices (which represent approximately 50% of our total steel production cost); (ii) we are self sufficient in the production of iron ore, which is one of the main raw material for steelmaking - thus, our exposure to the increases in raw material prices realized in 2008 was mainly limited to coke and coal (which represented 29% of our production cost in 2008); and (iii) there was no significant oscillation in the other steel production costs for the year.
Companhia Siderúrgica Nacional
Escritório Central
Av. Brigadeiro Faria Lima, 3400 – 20º andar - Edificio
Financial Faria Lima Center
Cep: 04538-132 - São Paulo - SP
In connection with the mining segment: (i) the production cost is basically driven by extraction, beneficiation and logistic costs, which remained stable in 2008; and (ii) we realized a dilution in our per ton iron ore fixed production costs, due to the aforementioned increase in sales volumes.
SEC Comment No. 4.
4. We note that your foreign exchange derivative instruments generated income in fiscal year 2008 and a loss in fiscal year 2007. You attribute the recognition of income to the slight appreciation in the real against the U.S. dollar in fiscal year 2008 as compared to fiscal year 2007. However, we also note that the real appreciated against the U.S. dollar in fiscal year 2007 as compared to fiscal year 2006. Please revise your disclosure in an amendment to your fiscal year 2008 Form 20-F to explain to investors why the appreciation of the real in fiscal year 2008 resulted in the recognition of income for your foreign exchange derivative instruments but a loss in fiscal year 2007 even though the real appreciated in fiscal year 2007.
Response to Comment No. 4.
We note the Staff´s comment and wish to respectfully explain why we understand a revision of our 2008 Form 20-F is not necessary.
We use foreign exchange derivatives to protect ourselves against depreciations of the Real against U.S. dollar. Therefore, our exchange derivative transactions generate an income when the Real depreciates and an expense when the Real appreciates. We record our U.S. dollar denominated derivative instruments in our financial statements by using the period-end exchange rate between the Real and the U.S. dollar. Please note that we do not use the average exchange rate for this purpose.
In 2007, the period-end exchange rate (R$/US$) was 1.771, representing an appreciation of the Real against U.S. dollar, if compared to 2006. In 2008, the period-end exchange rate (R$/US$) was 2.337, representing a depreciation of the Real against the U.S. dollar. Consequently, the foreign exchange derivative instruments generated an income of US$419 million in 2008, as compared to an expense of US$219 million in 2007.
SEC Comment No. 5.
5D. Trend Information, page 82
5. In an amendment to your fiscal year 2008 Form 20-F, please include the disclosures required by Item 5.D. for material events, trends and uncertainties. In this regard, we note the applicable items in the risk factors section, the known exposures in your derivative portfolio, the February 2009 expiration of operational risk insurance coverage, loss contingencies, etc.
Companhia Siderúrgica Nacional
Escritório Central
Av. Brigadeiro Faria Lima, 3400 – 20º andar - Edificio
Financial Faria Lima Center
Cep: 04538-132 - São Paulo - SP
Response to Comment No. 5.
For clarification purposes, we respectfully inform the Staff that disclosure regarding future impact of presently known trends, events or uncertainties and forward-looking information which may involve predictions or projections are not required under corporate or securities laws in Brazil nor by any local market regulator. In this regard, we have not made publicly available such kind of information for investors in our local market or elsewhere.
In any event, in response to the Staff’s comment, the Company proposes to amend the disclosure in future filings to include the requested information, as follows:
“Other than as disclosed elsewhere in this report including under “Item 3D. Key Information —Risk Factors”, we are not aware of any trends, uncertainties, demands, commitments or events which are reasonably likely to have a material effect upon our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.”
SEC Comment No. 6.
6. In an amendment to your fiscal year 2008 Form 20-F, please disclose the expected impact of market fluctuations on your existing derivative positions. For example, disclose whether a significant increase in market interest rates would be expected to cause a material gain or loss on your existing interest rate derivative instruments. For your existing foreign currency exchange rate derivative instruments, please disclose whether a significant gain or loss could result from a material appreciation in the real against the U.S. dollar. Further, please disclose whether a significant gain or loss on your equity swap agreements would be expected if there was a material increase in the trading price of the ADRs. See Item 5D of the form instructions and the guidance in Section 501.02 of the Financial Reporting Codification regarding the disclosure of known uncertainties.
Response to Comment No. 6.
We note the Staff´s comment and wish to respectfully explain why we understand a revision of our 2008 Form 20-F is not necessary.
Item 11 of our 2008 Form 20-F includes a detailed discussion on possible impacts of fluctuations in the foreign currency exchange and interest rates on our existing derivative positions. Moreover, according to the sensitivity analysis disclosed on a Form 6-K filed with the U.S Securities and Exchange Commission on May 18, 2009, a significant variation in interest rates and/or in currency exchange rates would not generate a material impact in our financial statements and results of operations.
With respect to our equity swap agreements, as disclosed to the market on Form 6-K filed with the United States Securities and Exchange Commission on August 12, 2009, they were terminated on August 13, 2009. Therefore, we currently do not have any exposure to variations in the trading price of our shares or ADRs. As a consequence, we believe that providing an analysis of gains or losses from such equity swap agreements in view of trading price variations of our shares or ADRs in a revision of our 2008 Form 20-F is not necessary in light of the subsequent facts described above.
Companhia Siderúrgica Nacional
Escritório Central
Av. Brigadeiro Faria Lima, 3400 – 20º andar - Edificio
Financial Faria Lima Center
Cep: 04538-132 - São Paulo - SP
SEC Comment No. 7.
Management's annual report on internal control over financial reporting, page 116
7. We note that you have identified a material weakness that relates to "monitoring controls over the process of identification, accounting and disclosure of certain foreign subsidiaries incorporated in prior fiscal years and related transactions therein". It is unclear what exactly the material weakness is in terms of the control deficiency(ies) and the impact this material weakness had to your consolidated financial statements (i.e., what financial statement adjustments were required to be made because of the control deficiency(ies)). Please revise your disclosures in an amendment to your fiscal year 2008 Form 20-F, including the specific accounting errors that were at risk of being undetected. Please provide us with a more detailed understanding of the circumstances that resulted in the material weaknesses (e.g., what caused the control deficiency(ies), how the issue was identified, etc.). Please also quantify each financial statement adjustment that was required to be made as a result of the control deficiency. Please tell us whether the control deficiency impacted your consolidated financial statements for prior fiscal periods. If there was no impact to previous fiscal years, please tell us how you arrived at this conclusion.
Response to Comment No. 7.
We note the Staff´s comment and wish to respectfully explain why we understand a revision of our 2008 Form 20-F is not necessary.
The Company´s management is committed to the continuous improvement of our internal controls over financial reporting. In 2008, the Company’s management identified a deficiency in the process of identification, accounting and disclosure of four offshore dormant subsid
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CORRESP
1
filename1.htm
Provided by MZ Data Products
October 23, 2009
VIA FACSIMILE AND EDGAR TRANSMISSION
Mr. Terence O'Brien
Accounting Branch Chief
Division of Corporation Finance
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549-4631
Fax: (703) 813-6968
RE:
National Steel Company
Form 20.F for the Fiscal Year Ended December 31, 2008
Filed June 30, 2009
File No. 1-14732
Response to Staff Comment Letter dated September 17, 2009
Dear Mr. O'Brien:
Companhia Siderúrgica Nacional (the “Company”) received a comment letter from the staff of the United States Securities and Exchange Commission (the “Staff”) on September 17, 2009, concerning the
Company’s annual report on Form 20-F filed on June 30, 2009 (the “2008 Form 20-F”). This letter provides the Company’s responses to the Staff’s comments. For your convenience, we have reproduced below in italics the
Staff’s comments numbered 1 through 20 and have provided responses immediately below such comments. All page numbers referred to herein are to the 2008 Form 20-F.
SEC Comment No. 1.
5A. Operating Results, page 55
Markets and Product Mix, page 55
1. We note your table of net operating revenues for your steel products. Please revise your disclosures in an amendment to your fiscal year 2008 Form 20-F to clarify why net operating revenues do not appear to agree to the financial
information reported for your steel reportable segment in Note 19. In addition, we note that the table presented on page 66 for your steel product costs also does not agree to the cost information for your steel reportable segment in Note 19. Please
also clarify your disclosures as to why in the amended filing.
Companhia Siderúrgica Nacional
1
Escritório Central
Av. Brigadeiro Faria Lima, 3400 – 20º andar - Edificio
Financial Faria Lima Center
Cep: 04538-132 - São Paulo - SP
Response to Comment No. 1.
We understand the Staff´s comment but would like to respectfully explain why in our opinion a revision of our 2008 Form 20-F is not necessary.
Net operating revenues
Net operating revenues in Note 19 encompass sales of all products from our steel manufacturing segment, including sales of relevant by-products such as slag and out-of-specification slabs (resulting from the continuous casting process). Net
operating revenues described on the table on page 55 include only sales from finalized steel products (our steel segment´s core business), as highlighted in footnote #1 to such table.
Steel production costs
The table on page 66 sets forth our steel production costs, while the table in Note 19 sets forth the costs of products sold and operating expenses for our steel segment, which includes other operating expenses such as selling, general and
administrative expenses (SG&A).
SEC Comment No. 2.
Results of Operations, page 63
2. We note that your mining reportable segment represented 27% of fiscal year 2008 consolidated operating income. As such, please provide a detailed discussion and analysis of the material increase in revenues and changes in profit
margins for your mining reportable segment in an amendment to your fiscal year 2008 Form 20-F. Further, please disclose the expected impact of de-consolidation on future operating results of the mining reportable segment by quantifying NAMISA's 2008
operating revenues, gross profit, and operating income and explaining how such results will be presented under the equity method. Refer to Item 5 of Form 20-F and Section 501.06. a of the Financial Reporting Codification for guidance.
Response to Comment No. 2.
The comment has been noted and for clarification purposes we intend to disclose additional information related to revenues and margins related to our mining activities in future filings along the following lines:
The material increase in revenues for our mining segment was a result of: (i) an all-time record of 18.5 million tons of iron ore sales volume in 2008 due to the increase of our iron ore export capacity in the Itaguaí Port and general
improvements in iron ore extraction processes and logistics; and (ii) the increase in average iron ore prices in the international market realized in 2008.
The aforementioned increase in sales volumes caused a dilution in our per ton iron ore fixed production costs in 2008. All these factors impacted the profit margins for our mining segment.
With respect to the impact of de-consolidation of our subsidiary Nacional Minérios S.A. (“NAMISA”), we intend to report these results in future years as follows:
Companhia Siderúrgica Nacional
2
Escritório Central
Av. Brigadeiro Faria Lima, 3400 – 20º andar - Edificio
Financial Faria Lima Center
Cep: 04538-132 - São Paulo - SP
NAMISA’s operating revenues, gross profit, and operating income in 2008 were US$434 million, US$263 million and US$168 million, respectively. Excluding NAMISA, our operating revenues, gross profit, and operating income arising from
our mining activities in 2008 would have been US$948 million, US$665 million and US$599 million, respectively, which would still represent significant increases if compared to 2007 figures (which includes NAMISA). The NAMISA’s
results for 2009 will be presented as equity in results of affiliates in our statement of income under our mining segment.
Additionally, certain NAMISA amounts for 2009 will be disclosed in a note to our financial statements relating to summarized financial information of an equity method investee, if material.
SEC Comment No. 3.
3. We note your discussion and analysis of gross profit for your steel reportable segment. Specifically, you attribute the increase to a 30.3% increase in net operating revenues offset by a 16.2% increase in cost of products sold.
Please revise your disclosure in an amendment to your fiscal year 2008 Form 20-F to provide an explanation as to why net operating revenues increased at a greater rate than cost of products sold.
Response to Comment No. 3.
The comment has been noted and, for clarification purposes, we will disclose additional information in future filings, along the following lines:
Our operating revenues are mainly composed of sales of steel and iron ore products. The 30.3% increase in our consolidated net operating revenues from 2007 to 2008 can be attributed to the following:
In connection with our steel segment: (i) larger volume of sales in the domestic market (increase from 3,614 million tons in 2007 to 4,158 million tons in 2008) where we historically have recorded higher profit margins; (ii) increase of the domestic
sales in terms of total sales volume, from 67% in 2007 to 85% in 2008; and (iii) successive steel price hikes in the domestic market during 2008.
In connection with the mining segment: (i) an all-time record of 18.5 million tons of iron ore sales volume in 2008 due to the increase of our iron ore export capacity in the Itaguaí port and general improvements in iron ore extraction
processes and logistics; and (ii) the increase in average iron ore prices in the international market realized in 2008.
Our cost of products sold increased at a lower rate (16.2%) due to the following reasons:
In connection with the steel segment (i) cost of products sold is mainly driven by raw material prices (which represent approximately 50% of our total steel production cost); (ii) we are self sufficient in the production of iron ore, which is one of
the main raw material for steelmaking - thus, our exposure to the increases in raw material prices realized in 2008 was mainly limited to coke and coal (which represented 29% of our production cost in 2008); and (iii) there was no significant
oscillation in the other steel production costs for the year.
Companhia Siderúrgica Nacional
3
Escritório Central
Av. Brigadeiro Faria Lima, 3400 – 20º andar - Edificio
Financial Faria Lima Center
Cep: 04538-132 - São Paulo - SP
In connection with the mining segment: (i) the production cost is basically driven by extraction, beneficiation and logistic costs, which remained stable in 2008; and (ii) we realized a dilution in our per ton iron ore fixed production costs, due to
the aforementioned increase in sales volumes.
SEC Comment No. 4.
4. We note that your foreign exchange derivative instruments generated income in fiscal year 2008 and a loss in fiscal year 2007. You attribute the recognition of income to the slight appreciation in the real against the U.S. dollar
in fiscal year 2008 as compared to fiscal year 2007. However, we also note that the real appreciated against the U.S. dollar in fiscal year 2007 as compared to fiscal year 2006. Please revise your disclosure in an amendment to your fiscal year 2008 Form 20-F to explain to investors why the appreciation of the real in fiscal year 2008 resulted in the recognition of income for your foreign exchange derivative instruments
but a loss in fiscal year 2007 even though the real appreciated in fiscal year 2007.
Response to Comment No. 4.
We note the Staff´s comment and wish to respectfully explain why we understand a revision of our 2008 Form 20-F is not necessary.
We use foreign exchange derivatives to protect ourselves against depreciations of the Real against U.S. dollar. Therefore, our exchange derivative transactions generate an income when the Real depreciates and an expense when the
Real appreciates. We record our U.S. dollar denominated derivative instruments in our financial statements by using the period-end exchange rate between the Real and the U.S. dollar. Please note that we do not use the average exchange
rate for this purpose.
In 2007, the period-end exchange rate (R$/US$) was 1.771, representing an appreciation of the Real against U.S. dollar, if compared to 2006. In 2008, the period-end exchange rate (R$/US$) was 2.337, representing a
depreciation of the Real against the U.S. dollar. Consequently, the foreign exchange derivative instruments generated an income of US$419 million in 2008, as compared to an expense of US$219 million in 2007.
SEC Comment No. 5.
5D. Trend Information, page 82
5. In an amendment to your fiscal year 2008 Form 20-F, please include the disclosures required by Item 5.D. for material events, trends and uncertainties. In this regard, we note the applicable items in the risk factors section, the known exposures in your derivative portfolio, the February 2009 expiration of operational risk insurance coverage,
loss contingencies, etc.
Companhia Siderúrgica Nacional
4
Escritório Central
Av. Brigadeiro Faria Lima, 3400 – 20º andar - Edificio
Financial Faria Lima Center
Cep: 04538-132 - São Paulo - SP
Response to Comment No. 5.
For clarification purposes, we respectfully inform the Staff that disclosure regarding future impact of presently known trends, events or uncertainties and forward-looking information which may involve predictions or projections are not required
under corporate or securities laws in Brazil nor by any local market regulator. In this regard, we have not made publicly available such kind of information for investors in our local market or elsewhere.
In any event, in response to the Staff’s comment, the Company proposes to amend the disclosure in future filings to include the requested information, as follows:
“Other than as disclosed elsewhere in this report including under “Item 3D. Key Information —Risk Factors”, we are not aware of any trends, uncertainties, demands, commitments or events which are reasonably likely to
have a material effect upon our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future
operating results or financial condition.”
SEC Comment No. 6.
6. In an amendment to your fiscal year 2008 Form 20-F, please disclose the expected impact of market fluctuations on your existing derivative positions. For example, disclose whether a significant increase in market interest rates
would be expected to cause a material gain or loss on your existing interest rate derivative instruments. For your existing foreign currency exchange rate derivative instruments, please disclose whether a significant gain or loss could result from a
material appreciation in the real against the U.S. dollar. Further, please disclose whether a significant gain or loss on your equity swap agreements would be expected if there was a material increase in the trading price of the ADRs. See Item 5D of
the form instructions and the guidance in Section 501.02 of the Financial Reporting Codification regarding the disclosure of known uncertainties.
Response to Comment No. 6.
We note the Staff´s comment and wish to respectfully explain why we understand a revision of our 2008 Form 20-F is not necessary.
Item 11 of our 2008 Form 20-F includes a detailed discussion on possible impacts of fluctuations in the foreign currency exchange and interest rates on our existing derivative positions. Moreover, according to the sensitivity analysis disclosed on a
Form 6-K filed with the U.S Securities and Exchange Commission on May 18, 2009, a significant variation in interest rates and/or in currency exchange rates would not generate a material impact in our financial statements and results of operations.
With respect to our equity swap agreements, as disclosed to the market on Form 6-K filed with the United States Securities and Exchange Commission on August 12, 2009, they were terminated on August 13, 2009. Therefore, we currently do not have any
exposure to variations in the trading price of our shares or ADRs. As a consequence, we believe that providing an analysis of gains or losses from
such equity swap agreements in view of trading price variations of our shares or ADRs in a revision of our 2008 Form 20-F is not necessary in light of the subsequent facts described above.
Companhia Siderúrgica Nacional
5
Escritório Central
Av. Brigadeiro Faria Lima, 3400 – 20º andar - Edificio
Financial Faria Lima Center
Cep: 04538-132 - São Paulo - SP
SEC Comment No. 7.
Management's annual report on internal control over financial reporting, page 116
7. We note that you have identified a material weakness that relates to "monitoring controls over the process of identification, accounting and disclosure of certain foreign subsidiaries incorporated in prior fiscal years and
related transactions therein". It is unclear what exactly the material weakness is in terms of the control deficiency(ies) and the impact this material weakness had to your consolidated financial statements (i.e., what financial statement
adjustments were required to be made because of the control deficiency(ies)). Please revise your disclosures in an amendment to your fiscal year 2008 Form 20-F, including the specific accounting errors that were at risk of being undetected. Please
provide us with a more detailed understanding of the circumstances that resulted in the material weaknesses (e.g., what caused the control deficiency(ies), how the issue was identified, etc.). Please also quantify each financial statement adjustment
that was required to be made as a result of the control deficiency. Please tell us whether the control deficiency impacted your consolidated financial statements for prior fiscal periods. If there was no impact to previous fiscal years, please tell
us how you arrived at this conclusion.
Response to Comment No. 7.
We note the Staff´s comment and wish to respectfully explain why we understand a revision of our 2008 Form 20-F is not necessary.
The Company´s management is committed to the continuous improvement of our internal controls over financial reporting. In 2008, the Company’s management identified a deficiency in the process of identification, accounting and disclosure
of four offshore dormant subsid