FORM 6 - K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
As of May 4, 2006
TENARIS, S.A.
(Translation of Registrant's name into English)
TENARIS, S.A.
46a, Avenue John F. Kennedy
L-1855 Luxembourg
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or 40-F.
Form 20-F__X__ Form 40-F
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12G3-2(b) under the Securities Exchange Act of 1934.
Yes____ No__X__
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-____.
The attached material is being furnished to the Securities and Exchange
Commission pursuant to Rule 13a-16 and Form 6-K under the Securities Exchange
Act of 1934, as amended. This report contains Tenaris' Consolidated Condensed
Interim Financial Statements as of March 31, 2006.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: May 4, 2006
Tenaris, S.A.
By: /s/ Cecilia Bilesio
-----------------------
Cecilia Bilesio
Corporate Secretary
2
TENARIS S.A.
CONSOLIDATED CONDENSED INTERIM FINANCIAL
STATEMENTS
MARCH 31, 2006
46a, Avenue John F. Kennedy - 2nd Floor.
L - 1855 Luxembourg
3
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
three-month period ended March 31, 2006
--------------------------------------------------------------------------------
CONSOLIDATED CONDENSED INTERIM INCOME STATEMENT
(all amounts in thousands of U.S. dollars, unless Three-month period ended
otherwise stated) March 31,
---------------------------
Notes 2006 2005
---------------------------
(Unaudited)
Net sales 2 1,783,152 1,452,927
Cost of sales 3 (972,492) (865,128)
---------------------------
Gross profit 810,660 587,799
Selling, general and administrative expenses 4 (217,884) (185,083)
Other operating income (expenses), net 8,130 2,967
---------------------------
Operating income 600,906 405,683
Financial income (expense), net 5 10,596 (41,807)
---------------------------
Income before equity in earnings of
associated companies and income tax 611,502 363,876
Equity in earnings of associated companies 21,521 30,163
---------------------------
Income before income tax 633,023 394,039
Income tax (191,333) (114,069)
---------------------------
Income for the period 441,690 279,970
===========================
Attributable to:
Equity holders of the Company 419,688 264,234
Minority interest 22,002 15,736
---------------------------
441,690 279,970
===========================
Earnings per share attributable to the equity
holders of the Company during the period
Weighted average number of ordinary shares in
issue (thousands) 1,180,537 1,180,537
Earnings per share (U.S. dollars per share) 0.36 0.22
Earnings per ADS (U.S. dollars per ADS) 0.71 0.45
The ratio of ordinary shares per American Depositary Shares (ADSs) was changed
from a ratio of one ADS equal to ten ordinary shares to a new ratio of one ADS
equal to two ordinary shares. The implementation date for this change was April
26, 2006, for shareholders of record at April 17, 2006. Earnings per ADS
reflected above are adjusted for this change in the conversion ratio.
The accompanying notes are an integral part of these consolidated condensed
interim financial statements. The Report of the Independent Registered Public
Accounting Firm on these consolidated condensed interim financial statements is
issued as a separate document. These consolidated condensed interim financial
statements should be read in conjunction with our audited Consolidated Financial
Statements and notes for the fiscal year ended December 31, 2005.
1
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
three-month period ended March 31, 2006
--------------------------------------------------------------------------------
CONSOLIDATED CONDENSED INTERIM BALANCE SHEET
(all amounts in thousands of U.S. dollars)
At March 31, 2006 At December 31, 2005
------------------------ ------------------------
Notes (Unaudited)
ASSETS
Non-current assets
Property, plant and
equipment, net 6 2,275,130 2,230,038
Intangible assets, net 6 159,747 159,099
Investments in
associated companies 341,446 257,234
Other investments 25,579 25,647
Deferred tax assets 212,087 194,874
Receivables 32,276 3,046,265 65,852 2,932,744
----------- -----------
Current assets
Inventories 1,491,632 1,376,113
Receivables and
prepayments 155,661 143,282
Current tax assets 121,138 102,455
Trade receivables 1,289,780 1,324,171
Other investments 297,557 119,907
Cash and cash
equivalents 910,991 4,266,759 707,356 3,773,284
------------------------ ------------------------
Total assets 7,313,024 6,706,028
=========== ===========
EQUITY
Capital and reserves
attributable to the
Company's equity holders
Share capital 1,180,537 1,180,537
Legal reserves 118,054 118,054
Share premium 609,733 609,733
Currency translation
adjustments (54,818) (59,743)
Other reserves 30,801 2,718
Retained earnings 2,076,191 3,960,498 1,656,503 3,507,802
----------- -----------
Minority interest 295,470 268,071
----------- -----------
Total equity 4,255,968 3,775,873
----------- -----------
LIABILITIES
Non-current liabilities
Borrowings 639,129 678,112
Deferred tax liabilities 359,371 353,395
Other liabilities 157,492 154,378
Provisions 45,074 43,964
Trade payables 707 1,201,773 1,205 1,231,054
----------- -----------
Current liabilities
Borrowings 329,703 332,180
Current tax liabilities 517,216 452,534
Other liabilities 159,190 138,875
Provisions 36,566 36,945
Customer advances 129,291 113,243
Trade payables 683,317 1,855,283 625,324 1,699,101
------------------------ ------------------------
Total liabilities 3,057,056 2,930,155
----------- -----------
Total equity and
liabilities 7,313,024 6,706,028
=========== ===========
Contingencies, commitments and restrictions to the distribution of profits are
disclosed in Note 7.
The accompanying notes are an integral part of these consolidated condensed
interim financial statements. The Report of the Independent Registered Public
Accounting Firm on these consolidated condensed interim financial statements is
issued as a separate document. These consolidated condensed interim financial
statements should be read in conjunction with our audited Consolidated Financial
Statements and notes for the fiscal year ended December 31, 2005.
2
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
three-month period ended March 31, 2006
--------------------------------------------------------------------------------
CONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
(all amounts in thousands of U.S. dollars)
-------------------------------------------------------------------------------------
Attributable to equity holders of the Company
---------------------------------------------------------------
Currency Retained
Share Legal Share Other translation Earnings Minority
Capital Reserves Premium Reserves adjustment (*) Interest Total
----------- --------- --------- -------- ----------- ---------- --------- -----------
(Unaudited)
Balance at January 1, 2006 1,180,537 118,054 609,733 2,718 (59,743) 1,656,503 268,071 3,775,873
-------------------------------------------------------------------------------------
Currency translation differences - - - - 4,925 13,699 18,624
Change in equity reserves (see Notes 1 and 8) 28,083 28,083
Acquisition of minority interest - - - (721) (721)
Dividends paid in cash - - - (7,581) (7,581)
Income for the period - - - - 419,688 22,002 441,690
-------------------------------------------------------------------------------------
Balance at March 31, 2006 1,180,537 118,054 609,733 30,801 (54,818) 2,076,191 295,470 4,255,968
=====================================================================================
----------------------------------------------------------------------------------------
Attributable to equity holders of the Company
-------------------------------------------------------------------
Other Currency
Share Legal Share Distributable translation Retained Minority
Capital Reserves Premium Reserve adjustments Earnings Interest Total
----------- --------- -------- ------------- ------------ --------- -------- -----------
(Unaudited)
Balance at January 1, 2005 1,180,537 118,054 609,733 82 (30,020) 617,538 165,271 2,661,195
Effect of adopting IFRS 3 (see Note 1) - - - - - 110,775 - 110,775
----------------------------------------------------------------------------------------
Adjusted balance at January 1, 2005 1,180,537 118,054 609,733 82 (30,020) 728,313 165,271 2,771,970
Currency translation differences - - - - (41,106) - (2,586) (43,692)
Acquisition of minority interest - - - - - - (38) (38)
Income for the period - - - - - 264,234 15,736 279,970
----------------------------------------------------------------------------------------
Balance at March 31, 2005 1,180,537 118,054 609,733 82 (71,126) 992,547 178,383 3,008,210
========================================================================================
(*) Retained Earnings calculated according to Luxembourg Law are disclosed in
Note 7 (ii).
The accompanying notes are an integral part of these consolidated condensed
interim financial statements. The Report of the Independent Registered Public
Accounting Firm on these consolidated condensed interim financial statements is
issued as a separate document. These consolidated condensed interim financial
statements should be read in conjunction with our audited Consolidated Financial
Statements and notes for the fiscal year ended December 31, 2005.
3
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
three-month period ended March 31, 2006
--------------------------------------------------------------------------------
CONSOLIDATED CONDENSED INTERIM CASH FLOW STATEMENT
Three-month period
ended March 31,
--------------------
(all amounts in thousands of U.S. dollars) 2006 2005
--------------------
(Unaudited)
Cash flows from operating activities
Income for the period 441,690 279,970
Adjustments for:
Depreciation and amortization 54,675 51,977
Income tax accruals less payments 83,458 37,478
Equity in earnings of associated companies (21,521) (30,163)
Interest accruals less payments, net 5,292 2,344
Income from disposal of Investment (6,933) -
Changes in provisions 731 (4,285)
Proceeds from Fintecna arbitration award net of BHP
settlement - 66,594
Changes in working capital (24,257) (209,878)
Other, including currency translation adjustment 10,947 (11,344)
--------------------
Net cash provided by operating activities 544,082 182,693
====================
Cash flows from investing activities
Capital expenditures (69,529) (47,316)
Acquisitions of subsidiaries (see Note 8) (29,809) (38)
Proceeds from disposal of property, plant and equipment and
intangible assets 1,820 1,442
Dividends and distributions received from associated
companies - 19,520
Changes in restricted bank deposits 648 (27,680)
Reimbursement from trust funds - 119,666
Investments in short terms securities (177,650) -
--------------------
Net cash (used in) provided by investing activities (274,520) 65,594
====================
Cash flows from financing activities
Dividends paid to minority interest in subsidiaries (7,581) -
Proceeds from borrowings 101,085 398,269
Repayments of borrowings (146,447) (516,422)
--------------------
Net cash (used in) provided by financing activities (52,943) (118,153)
====================
Increase in cash and cash equivalents 216,619 130,134
Movement in cash and cash equivalents
At beginning of the period 672,437 293,824
Effect of exchange rate changes (1,834) (298)
Increase in cash and cash equivalents 216,619 130,134
--------------------
At March 31, 887,222 423,660
====================
Cash and cash equivalents At March 31,
--------------------
2006 2005
--------------------
Cash and bank deposits 910,991 477,106
Bank overdrafts (22,369) (12,266)
Restricted bank deposits (1,400) (41,180)
--------------------
887,222 423,660
====================
The accompanying notes are an integral part of these consolidated condensed
interim financial statements. The Report of the Independent Registered Public
Accounting Firm on these consolidated condensed interim financial statements is
issued as a separate document. These consolidated condensed interim financial
statements should be read in conjunction with our audited Consolidated Financial
Statements and notes for the fiscal year ended December 31, 2005.
4
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
three-month period ended March 31, 2006
--------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS
Index to the notes to the consolidated condensed interim financial
statements
1 General information and basis of presentation
2 Segment information
3 Cost of sales
4 Selling, general and administrative expenses
5 Financial income (expenses), net
6 Property, plant and equipment and intangible assets, net
7 Contingencies, commitments and restrictions to the distribution of
profits
8 Business acquisitions, incorporation of subsidiaries and other
significant events
9 Related party disclosures
5
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
three-month period ended March 31, 2006
--------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS
(In the notes all amounts are shown in U.S. dollars, unless otherwise stated)
1 General information and basis of presentation
Tenaris S.A. (the "Company" or "Tenaris"), a Luxembourg corporation (societe
anonyme holding), was incorporated on December 17, 2001 as a holding company for
investments in steel pipe manufacturing and distribution companies. The Company
consolidates its subsidiary companies, as detailed in Note 31 to the audited
Consolidated Financial Statements for the year ended December 31, 2005, and
modified as discussed in Note 8 to these consolidated condensed interim
financial statements.
These consolidated condensed interim financial statements have been prepared in
accordance with IAS 34, "Interim Financial Reporting". The accounting policies
used in the preparation of these consolidated condensed interim financial
statements are consistent with those used in the audited consolidated financial
statements for the year ended December 31, 2005. These consolidated condensed
interim financial statements should be read in conjunction with the audited
Consolidated Financial Statements for the year ended December 31, 2005, which
have been prepared in accordance with International Financial Reporting
Standards ("IFRS").
The preparation of consolidated condensed interim financial statements in
conformity with IFRS requires management to make certain accounting estimates
and assumptions that might affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities as of the balance sheet
dates, and also the reported amounts of revenues and expenses for the reported
periods. Actual results may differ from these estimates.
Material intercompany transactions and balances between Tenaris subsidiaries
have been eliminated in consolidation. However, some financial gains and losses
do arise from intercompany transactions because certain subsidiaries use their
respective local currencies as their functional currency for accounting
purposes. Such gains and losses are included in the consolidated income
statement under Financial income (expense), net.
The Company applies hedge accounting treatment for certain qualifying financial
instruments. These transactions are classified as cash flow hedges (mainly
currency forward contracts on highly probable forecast transactions and interest
rate swaps). The effective portion of the fair value of derivatives that are
designated and qualify as cash flow hedges is recognized in equity. The gain or
loss relating to the ineffective portion is recognized in the income statement.
The fair value of the Company's derivative financial instruments (asset or
liability) is reflected on the Balance Sheet.
For transactions designated and qualifying for hedge accounting, the Company
documents at the time of designation of the transaction the relationship between
hedging instruments and hedged items, as well as its risk management objectives.
The Company also documents its assessment at hedge designation and at each
period end whether the derivatives that are used in hedging transactions are
expected to be effective in offsetting changes in cash flows of hedged items. At
March 31, 2006, the effective portion of designated cash flow hedges amounts to
$0.4 million and is included in Other reserves in equity.
Upon the adoption of IFRS 3, which was adopted together with the revised IAS 38,
"Intangible Assets", and IAS 36, "Impairment of Assets", previously accumulated
negative goodwill is required to be derecognized through an adjustment to
retained earnings. The derecognition of negative goodwill in this manner
resulted in an increase of $110.8 million in the beginning balance of the
Company's equity at January 1, 2005.
These consolidated condensed interim financial statements were approved for
issue by the Tenaris Board of Directors on May 2, 2006.
6
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
three-month period ended March 31, 2006
--------------------------------------------------------------------------------
2 Segment information
Primary reporting format: business segments
(all amounts in thousands of U.S. dollars)
-----------------------------------------------------
Welded &
Other
Metallic
Seamless Products Energy Other Total
-----------------------------------------------------
Three-month period ended (Unaudited)
March 31, 2006
Net sales 1,440,969 114,596 161,622 65,965 1,783,152
Cost of sales (693,879) (75,525) (156,491) (46,597) (972,492)
-----------------------------------------------------
Gross profit 747,090 39,071 5,131 19,368 810,660
Depreciation and
amortization 46,831 4,547 433 2,864 54,675
Three-month period ended
March 31, 2005
Net sales 1,105,252 160,434 143,972 43,269 1,452,927
Cost of sales (601,517) (101,631) (137,484) (24,496) (865,128)
-----------------------------------------------------
Gross profit 503,735 58,803 6,488 18,773 587,799
Depreciation and
amortization 44,363 3,622 799 3,193 51,977
Secondary reporting format: geographical segments
(all amounts in thousands of U.S. dollars)
--------------------------------------------------------
Middle Far
South North East & East &
America Europe America Africa Oceania Total
--------------------------------------------------------
Three-month period (Unaudited)
ended March 31, 2006
Net sales 343,374 467,813 467,599 331,070 173,296 1,783,152
Depreciation and
amortization 22,510 15,049 15,422 209 1,485 54,675
Three-month period
ended March 31, 2005
Net sales 354,590 405,743 414,058 146,623 131,913 1,452,927
Depreciation and
amortization 21,083 17,781 11,477 11 1,625 51,977
Allocation of net sales to geographical segments is based on customer location.
Allocation of depreciation and amortization is based on the geographical
location of the underlying assets.
7
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
three-month period ended March 31, 2006
--------------------------------------------------------------------------------
3 Cost of sales
Three-month period ended
March 31,
------------------------
(all amounts in thousands of U.S. dollars) 2006 2005
------------------------
(Unaudited)
Inventories at the beginning of the period 1,376,113 1,269,470
Plus: Charges of the period
Raw materials, energy, consumables and other 807,014 706,519
Services and fees 84,348 73,495
Labor cost 108,987 99,060
Depreciation of property, plant and equipment 47,740 44,812
Amortization of intangible assets 1,130 1,711
Maintenance expenses 25,080 23,048
Provisions for contingencies - 1,200
Allowance for obsolescence 4,946 1,264
Taxes 1,013 975
Other 7,753 4,282
------------------------
1,088,011 956,366
Less: Inventories at the end of the period (1,491,632) (1,360,708)
------------------------
972,492 865,128
========================
4 Selling, general and administrative expenses
Three-month period ended
March 31,
------------------------
(all amounts in thousands of U.S. dollars) 2006 2005
------------------------
(Unaudited)
Services and fees 25,438 31,487
Labor cost 58,650 46,035
Depreciation of property, plant and equipment 1,896 2,479
Amortization of intangible assets 3,909 2,975
Commissions, freight and other selling expenses 87,593 68,024
Provisions for contingencies 211 1,878
Allowances for doubtful accounts 1,901 5,314
Taxes 21,350 16,822
Other 16,936 10,069
------------------------
217,884 185,083
========================
5 Financial income (expense), net
Three-month period ended
March 31,
------------------------
(all amounts in thousands of U.S. dollars) 2006 2005
------------------------
(Unaudited)
Interest expense (11,883) (12,442)
Interest income 12,481 2,959
Net foreign exchange transaction losses and changes
in fair value of derivative instruments 8,805 (33,879)
Other 1,193 1,555
------------------------
10,596 (41,807)
========================
8
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
three-month period ended March 31, 2006
--------------------------------------------------------------------------------
6 Property, plant and equipment and intangible assets, net
Net
Property, Net
Plant and Intangible
Equipment Assets
----------- -----------
(all amounts in thousands of U.S. dollars) (Unaudited) (Unaudited)
Three-month period ended March 31, 2006
Opening net book amount 2,230,038 159,099
Currency translation differences 20,393 524
Transfers (124) 124
Additions 65,653 3,876
Disposals (14,086)
Increase due to business acquisition 22,892 1,163
Depreciation/ Amortization charge (49,636) (5,039)
----------- -----------
At March 31, 2006 2,275,130 159,747
=========== ===========
7 Contingencies, commitments and restrictions to the distribution of profits
This note should be read in conjunction with Note 26 included in the Company's
audited Consolidated Financial Statements for the year ended December 31, 2005.
Significant changes or events since the date of the annual report are the
following:
(i) Commitments
(a) In August 2001, Dalmine Energie S.p.A. ("Dalmine Energie") entered into
a ten-year contract ending October 1, 2011 with Eni S.p.A. Gas & Power
Division ("Eni") for the purchase of natural gas with certain take-or-pay
conditions. The outstanding value of these commitments at March 31, 2006
amounts to approximately EUR 770.2 million ($932.3 million).
(b) Under the Gas Release Program enacted by Eni, in August 2004, Dalmine
Energie increased its supply of natural gas for the period from October 1,
2004 to September 30, 2008. The gas purchase and sale agreements entered
into with Eni contain customary take-or-pay conditions. The additional gas
supply mentioned above is valued at approximately EUR 247.5 million ($299.6
million), based on prices prevailing at March 2006. Dalmine Energie has
also obtained the necessary capacity on the interconnection infrastructure
at the Italian border to transport the natural gas to Italy for the supply
period.
(c) Dalmine Energie has entered into arrangements and expects to obtain
additional gas transportation capacity on the Trans Austria Gasleitung GmbH
("TAG") pipeline, which is presently under construction. This capacity will
allow Dalmine Energie to import an incremental 1,176.5 million cubic meters
of natural gas per year. The additional transportation capacity, which is
subject to "ship or pay" provisions, will be available on a firm basis on
the TAG pipeline beginning October 2008 and through September 2028.
The expected annual value of this "ship or pay" commitment is approximately
EUR 5.0 million per year. Tenaris provided bank guarantees in the amount of
EUR 15.1 million in support of Dalmine Energie. The value of the bank
guarantees corresponds to the termination penalties that would be due TAG
in the event of termination or non-utilization of the transportation
capacity.
9
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
three-month period ended March 31, 2006
--------------------------------------------------------------------------------
7 Contingencies, commitments and restrictions to the distribution of profits
(Cont'd)
(ii) Restrictions to the distribution of profits and payment of dividends
As of March 31, 2006, shareholders' equity as defined under Luxembourg law and
regulations consisted of the following:
(all amounts in thousands of U.S. dollars)
Share capital 1,180,537
Legal reserve 118,054
Share premium 609,733
Retained earnings including net income for the three month period
ended March 31, 2006 1,173,773
-----------
Total shareholders equity according to Luxembourg law 3,082,097
===========
At least 5% of the net income per year as calculated in accordance with
Luxembourg law and regulations must be allocated to the creation of a legal
reserve equivalent to 10% of share capital. As of March 31, 2006, this reserve
is fully allocated and additional allocations to the reserve are not required
under Luxembourg law. Dividends may not be paid from this reserve.
Tenaris may pay dividends to the extent, among other conditions, that it has
distributable retained earnings calculated in accordance with Luxembourg law and
regulations.
At March 31, 2006, the retained earnings of Tenaris under Luxembourg law
totalled $1,173.8 million, as detailed below.
(all amounts in thousands of U.S. dollars)
Retained earnings at December 31, 2005 under Luxembourg law 1,171,738
Other income and expenses for the three-month period ended March
31, 2006 2,035
-----------
Retained earnings at March 31, 2006 under Luxembourg law 1,173,773
===========
8 Business acquisitions, incorporation of subsidiaries and other significant
events
(a) Investment in Ternium S.A. ("Ternium")
On September 9, 2005, the Company exchanged its 21.2% equity interest in
Consorcio Siderurgia Amazonia Ltd. ("Amazonia") and its 24.4% equity
interest in Ylopa Servicos de Consultadoria Ltda. ("Ylopa"), for
209,460,856 shares in Ternium, the company into which San Faustin N.V. (a
Netherlands Antilles corporation and the controlling shareholder of
Tenaris) consolidated its Latin American holdings in flat and long steel
producers Siderar S.A.I.C. ("Siderar"), Sidor C.A. ("Sidor") and Hylsamex,
S.A de C.V. As a result of the exchange, which was carried out based on
fair values as determined by an internationally recognized investment bank
engaged for this purpose, Tenaris obtained an initial ownership interest of
approximately 17.9% in Ternium.
Subsequently, on October 27, 2005, Usinas Siderurgicas de Minas Gerais S.A.
reached an agreement with Ternium to exchange its interests in Amazonia,
Ylopa and Siderar, plus additional consideration of approximately $114.1
million provided as a convertible loan, for an equity stake in Ternium. As
a consequence of the additional shares issued under this transaction,
Tenaris' ownership stake was reduced to 15.0% of Ternium's outstanding
common stock at December 31, 2005. The effect of this transaction resulted
in an increase of the Company's proportional ownership in Ternium's equity
of approximately $2.7 million, which Tenaris recognized in Other Reserves
in equity.
10
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
three-month period ended March 31, 2006
--------------------------------------------------------------------------------
8 Business acquisitions, incorporation of subsidiaries and other significant
events (Cont'd)
In addition, in August 2005 Tenaris extended to Ternium two subordinated
convertible loans consisting of principal amount of $39.7 million. The
principal amount of these loans at the date issue corresponded to the
amount of certain distributions received from Amazonia during the second
and third quarters of 2005 in connection with Ternium's participation in
Amazonia's financial debt restructuring in 2003. At the date of Ternium's
initial public offering ("IPO"), the loans totaled approximately $40.5
million, including accrued interest.
On February 1, 2006, Ternium completed its IPO, issuing an additional
248,447,200 shares (equivalent to 24,844,720 ADS) at a price of $2.00 per
share, or $20.00 per ADS. Tenaris received an additional 20,252,338 shares
upon the mandatory conversion of its loans to Ternium. In addition to the
shares issued to Tenaris, Ternium issued shares to other shareholders
corresponding to their mandatory convertible loans. On February 23, 2006,
the underwriters of Ternium's IPO exercised an overallotment option under
which Ternium issued an additional 37,267, 080 shares (equivalent to
3,726,708 ADS). As a result of the IPO and the conversion of loans, as of
February 1, 2006, Tenaris' ownership stake in Ternium amounted to 11.46%.
The effect of these transactions resulted in an additional increase of the
Company's proportional ownership in Ternium's equity of approximately $27.7
million, which Tenaris recognized in Other Reserves in equity.
At March 31, 2006, the closing price of Ternium shares as quoted on the New
York Stock Exchange was $28.35 per ADS, giving Tenaris' ownership stake a
market value of approximately $651 million. At March 31, 2006, the carrying
value of Tenaris's ownership stake in Ternium was approximately $338.0
million.
(b) Acquisition of Welded Pipe Business in Argentina
On January 31, 2006, Siat S.A., a subsidiary of Tenaris, completed its
acquisition of the welded pipe assets and facilities located in Villa
Constitucion, province of Santa Fe, Argentina, belonging to Industria
Argentina de Acero, S.A. ("Acindar") for $29.1 million. The acquisition was
approved by the Argentine antitrust authorities (Comision Nacional de
Defensa de la Competencia). The facilities acquired have an annual capacity
of 80,000 tons of welded pipes whose small diameter range largely
complements the range of welded pipes that Tenaris produces in Argentina.
The acquired business did not materially contribute to the Company's
revenue and income. The fair value of acquired assets and liabilities were:
Three-month period
ended March 31, 2006
--------------------
(all amounts in thousands of U.S. dollars) Unaudited)
--------------------
Other assets and liabilities (net) 5,033
Property, plant and equipment 22,892
Goodwill 1,163
--------------------
Net assets acquired 29,088
(c) Minority Interest
During the quarter ended march 31, 2006, additional shares of Silcotub and
Dalmine were acquired from minority shareholders for approximately $0.7
million.
11
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
three-month period ended March 31, 2006
--------------------------------------------------------------------------------
9 Related party disclosures
The Company is controlled by San Faustin N.V., a Netherlands Antilles
corporation, which owns 60.45% of the Company's outstanding shares, either
directly or through its wholly-owned subsidiary I.I.I. Industrial Investments
Inc., a Cayman Islands corporation. The Company's directors and executive
officers as a group own 0.2% of the Company's outstanding shares, while the
remaining 39.35% is publicly traded. San Faustin N.V. is controlled by Rocca &
Partners, a British Virgin Islands corporation.
Transactions and balances disclosed as with "Associated" companies are those
with companies in which Tenaris owns 20% to 50% of the voting rights or over
which Tenaris exerts significant influence, but does not have control. All other
transactions with related parties which are not Associated and which are not
consolidated are disclosed as "Other".
The following transactions were carried out with related parties:
(all amounts in thousands of $)
Three-month period ended March 31, 2006
Associated Other Total
(1)
(i) Transactions
(a) Sales of goods and services
Sales of goods 24,902 14,391 39,293
Sales of services 3,544 631 4,175
---------------------------
28,446 15,022 43,468
===========================
(b) Purchases of goods and services
Purchases of goods 19,441 5,510 24,951
Purchases of services 2,116 13,141 15,257
---------------------------
21,557 18,651 40,208
===========================
Three-month period ended March 31, 2005
Associated Other Total
(2)
(i) Transactions
(a) Sales of goods and services
Sales of goods 181 40,686 40,867
Sales of services 235 2,854 3,089
---------------------------
416 43,540 43,956
===========================
(b) Purchases of goods and services
Purchases of goods 27 17,649 17,676
Purchases of services 40 16,239 16,279
---------------------------
67 33,888 33,955
===========================
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Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
three-month period ended March 31, 2006
--------------------------------------------------------------------------------
9 Related party disclosures (Cont'd)
At March 31, 2006
Associated Other Total
---------------------------
(ii) Period-end balances
(a) Related to sales/purchases of
goods/services
Receivables from related parties 24,982 22,954 47,936
Payables to related parties (23,072) (9,599) (32,671)
---------------------------
1,910 13,355 15,265
===========================
(b) Other balances
Receivables 2,080 - 2,080
(c) Financial debt
Borrowings (4) (55,623) - (55,623)
At December 31, 2005
Associated Other Total
---------------------------
(ii) Period-end balances
(a) Related to sales/purchases of
goods/services
Receivables from related parties 30,988 15,228 46,216
Payables to related parties (21,034) (8,413) (29,447)
--------------------------
9,954 6,815 16,769
==========================
(b) Other balances (3) 42,437 - 42,437
(c) Financial debt
Borrowings (4) (54,801) - (54,801)
(1) Includes Ternium S.A. and its subsidiaries and Condusid C.A.
(2) Up to September 30, 2005 includes: Condusid, Ylopa, Amazonia and Sidor.
From October 1, 2005 includes: Condusid and Ternium
(3) Includes convertible loan to Ternium S.A. of $40.4 million at December 31,
2005.
(4) Convertible loan from Sidor C.A. to Matesi (Materiales Siderurgicos S.A.).
(iii) Officers and director's compensation
The aggregate compensation of the directors and executive officers earned during
the three-month period ended March 31, 2006 amounted to $3.2 million.
Carlos Condorelli
Chief Financial Officer
13