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 November 9, 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- . -
TENARIS S.A.
CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
46a, Avenue John F. Kennedy - 2nd Floor.
L - 1855 Luxembourg
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the nine
month period ended September 30, 2006
- --------------------------------------------------------------------------------
CONSOLIDATED CONDENSED INTERIM INCOME STATEMENT
(all amounts in thousands of U.S. dollars, unless Three-month period ended Nine-month period ended
otherwise stated) September 30, September 30,
-------------------------------------------------------
Notes 2006 2005 2006 2005
-------------------------------------------------------
(Unaudited)
Net sales 2 1,922,491 1,640,385 5,667,908 4,837,623
Cost of sales 2 & 3 (982,487) (962,929) (2,974,015) (2,871,831)
-------------------------------------------------------
Gross profit 940,004 677,456 2,693,893 1,965,792
Selling, general and administrative expenses 4 (246,506) (205,937) (712,882) (603,530)
Other operating income, net 2,274 3,696 8,465 9,265
-------------------------------------------------------
Operating income 695,772 475,215 1,989,476 1,371,527
Financial income (expenses), net 5 (3,743) (5,141) 10,918 (89,591)
-------------------------------------------------------
Income before equity in earnings of associated 692,029 470,074 2,000,394 1,281,936
companies and income tax
Equity in earnings of associated companies 29,653 26,502 76,725 94,944
-------------------------------------------------------
Income before income tax 721,682 496,576 2,077,119 1,376,880
Income tax (211,726) (145,678) (629,709) (404,392)
-------------------------------------------------------
Income for the period 509,956 350,898 1,447,410 972,488
Attributable to:
Equity holders of the Company 479,105 318,897 1,370,564 896,587
Minority interest 30,851 32,001 76,846 75,901
-------------------------------------------------------
509,956 350,898 1,447,410 972,488
-------------------------------------------------------
Earnings per share attributable to the equity
holders of the Company during the period
Weighted average number of ordinary shares
(thousands) 1,180,537 1,180,537 1,180,537 1,180,537
Earnings per share (U.S. dollars per share) 0.41 0.27 1.16 0.76
Earnings per ADS (U.S. dollars per ADS) 0.81 0.54 2.32 1.52
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 have been 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.
CONSOLIDATED CONDENSED INTERIM BALANCE SHEET
(all amounts in thousands of U.S. dollars) At September 30, 2006 At December 31, 2005
---------------------------- -----------------------------
Notes (Unaudited)
ASSETS
Non-current assets
Property, plant and equipment, net 6 2,403,926 2,230,038
Intangible assets, net 6 165,673 159,099
Investments in associated companies 392,011 257,234
Other investments 27,473 25,647
Deferred tax assets 248,032 194,874
Receivables 39,310 3,276,425 65,852 2,932,744
-------------- --------------
Current assets
Inventories 1,668,723 1,376,113
Receivables and prepayments 192,433 143,282
Current tax assets 144,307 102,455
Trade receivables 1,438,470 1,324,171
Other investments 134,651 119,907
Cash and cash equivalents 1,295,184 4,873,768 707,356 3,773,284
---------------------------- -----------------------------
Total assets 8,150,193 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 (29,371) (59,743)
Other reserves 28,835 2,718
Retained earnings 2,822,834 4,730,622 1,656,503 3,507,802
-------------- --------------
Minority interest 328,255 268,071
-------------- ---------------
Total equity 5,058,877 3,775,873
-------------- ---------------
LIABILITIES
Non-current liabilities
Borrowings 554,094 678,112
Deferred tax liabilities 361,974 353,395
Other liabilities 163,582 154,378
Provisions 80,079 43,964
Trade payables 521 1,160,250 1,205 1,231,054
-------------- --------------
Current liabilities
Borrowings 321,217 332,180
Current tax liabilities 463,448 452,534
Other liabilities 187,524 138,875
Provisions 9,037 36,945
Customer advances 180,381 113,243
Trade payables 769,459 1,931,066 625,324 1,699,101
---------------------------- -----------------------------
Total liabilities 3,091,316 2,930,155
============== ===============
Total equity and liabilities 8,150,193 6,706,028
============== ===============
Contingencies, commitments and restrictions to the distribution of profits are
disclosed in Note 8.
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.
CONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
(all amounts in thousands of U.S. dollars)
Attributable to equity holders of the Company
----------------------------------------------------------------------
Currency
Share Legal Share Other translation Retained Minority
Capital Reserves Premium Reserves adjustment Earnings (*) 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 - - - - 30,372 - 13,090 43,462
Change in equity reserves (see
Notes 1 and 9) - - - 26,117 - - - 26,117
Acquisition of minority
interest - - - - - - (10,131) (10,131)
Dividends paid in cash - - - - - (204,233) (19,621) (223,854)
Income for the period - - - - - 1,370,564 76,846 1,447,410
-------------------------------------------------------------------------------------------
Balance at September 30, 2006 1,180,537 118,054 609,733 28,835 (29,371) 2,822,834 328,255 5,058,877
-------------------------------------------------------------------------------------------
Attributable to equity holders of the Company
----------------------------------------------------------------------
Currency
Share Legal Share Other translation Retained Minority
Capital Reserves Premium Reserves adjustment 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 - - - - (17,457) - 18,137 680
Acquisition and increase of
minority interest - - - - - - 969 969
Dividends paid in cash - - - (82) - (199,429) (7,924) (207,435)
Income for the period - - - - - 896,587 75,901 972,488
-------------------------------------------------------------------------------------------
Balance at
September 30, 2005 1,180,537 118,054 609,733 - (47,477) 1,425,471 252,354 3,538,672
-------------------------------------------------------------------------------------------
(*) Retained Earnings calculated in accordance with Luxembourg Law are disclosed
in Note 8 (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
CONSOLIDATED CONDENSED INTERIM CASH FLOW STATEMENT
Nine-month period ended September
30,
-----------------------------------
(all amounts in thousands of U.S. dollars) 2006 2005
-----------------------------------
(Unaudited)
Cash flows from operating activities
Income for the period 1,447,410 972,488
Adjustments for:
Depreciation and amortization 166,008 156,654
Income tax accruals less payments 1,947 104,425
Equity in earnings of associated companies (76,725) (94,944)
Interest accruals less payments, net 1,456 3,006
Income from disposal of investment (6,933) -
Changes in provisions 8,207 (423)
Proceeds from Fintecna arbitration award net of BHP settlement - 66,594
Changes in working capital (250,654) (301,376)
Other, including currency translation adjustment 21,447 25,549
-----------------------------------
Net cash provided by operating activities 1,312,163 931,973
-----------------------------------
Cash flows from investing activities
Capital expenditures (302,077) (194,428)
Acquisitions of subsidiaries (see Note 9) (39,828) (48,002)
Convertible loan to associated companies - (39,944)
Proceeds from disposal of property, plant and equipment and intangible assets 16,568 5,413
Dividends and distributions received from associated companies - 59,127
Changes in restricted bank deposits 2,027 10,060
Reimbursement from trust funds - 119,666
Investments in short terms securities (14,744) (144,659)
-----------------------------------
Net cash used in investing activities (338,054) (232,767)
-----------------------------------
Cash flows from financing activities
Dividends paid (204,233) (199,511)
Dividends paid to minority interest in subsidiaries (19,621) (7,924)
Proceeds from borrowings 293,845 775,930
Repayments of borrowings (443,328) (1,019,006)
-----------------------------------
Net cash used in financing activities (373,337) (450,511)
-----------------------------------
Increase in cash and cash equivalents 600,772 248,695
Movement in cash and cash equivalents
At beginning of the period 680,591 293,824
Effect of exchange rate changes (4,951) (11,057)
Increase in cash and cash equivalents 600,772 248,695
-----------------------------------
At September 30, 1,276,412 531,462
-----------------------------------
-----------------------------------
Cash and cash equivalents At September 30,
-----------------------------------
2006 2005
Cash and bank deposits 1,295,184 567,773
Bank overdrafts (18,751) (32,871)
Restricted bank deposits (21) (3,440)
-----------------------------------
1,276,412 531,462
-----------------------------------
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
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 Dividends per share
8 Contingencies, commitments and restrictions to the distribution of
profits
9 Business acquisitions, incorporation of subsidiaries and other
significant events
10 Related party disclosures
2
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 9 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 (expenses), 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. Amounts
accumulated in equity are charged in the income statement in the periods when
the hedged item affects profit or loss. 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 of whether the derivatives that are used in hedging transactions are
expected to be effective in offsetting changes in cash flows of hedged items. At
September 30, 2006, the effective portion of designated cash flow hedges amounts
to $1.2 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 November 8, 2006.
3
2 Segment information
Primary reporting format: business segments
-------------------------------------------------------------------------
(all amounts in thousands of U.S. dollars) Welded & Other
Seamless Metallic Products Energy Other Total
-------------------------------------------------------------------------
Nine-month period ended September 30, 2006 (Unaudited)
Net sales 4,657,469 362,519 403,722 244,198 5,667,908
Cost of sales (2,151,812) (262,752) (390,534) (168,917) (2,974,015)
-------------------------------------------------------------------------
Gross profit 2,505,657 99,767 13,188 75,281 2,693,893
Depreciation and amortization 140,241 15,879 1,503 8,385 166,008
Nine-month period ended September 30, 2005
Net sales 3,667,049 636,849 362,593 171,132 4,837,623
Cost of sales (1,987,376) (425,808) (354,959) (103,688) (2,871,831)
-------------------------------------------------------------------------
Gross profit 1,679,673 211,041 7,634 67,444 1,965,792
Depreciation and amortization 133,040 11,185 1,973 10,456 156,654
Secondary reporting format: geographical segments
-------------------------------------------------------------------------
(all amounts in thousands of U.S. dollars) Middle
South North East & Far East &
America Europe America Africa Oceania Total
-------------------------------------------------------------------------
Nine-month period ended September 30, 2006 (Unaudited)
Net sales 1,091,230 1,394,850 1,321,558 1,335,281 524,989 5,667,908
Depreciation and amortization 69,723 46,306 44,940 583 4,456 166,008
Nine-month period ended September 30, 2005
Net sales 1,353,356 1,114,478 1,281,329 636,435 452,025 4,837,623
Depreciation and amortization 62,151 53,755 35,925 50 4,773 156,654
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.
4
3 Cost of sales
Nine-month period ended
September 30,
-----------------------------------
(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 2,372,914 2,242,620
Services and fees 275,865 243,318
Labor cost 346,522 313,733
Depreciation of property, plant and equipment 144,390 134,778
Amortization of intangible assets 2,163 4,278
Maintenance expenses 82,128 75,507
Provisions for contingencies - 1,200
Allowance for obsolescence 6,932 6,808
Taxes 2,964 2,317
Other 32,747 22,902
-----------------------------------
3,266,625 3,047,461
Less: Inventories at the end of the period (1,668,723) (1,445,100)
-----------------------------------
2,974,015 2,871,831
-----------------------------------
4 Selling, general and administrative expenses
Nine-month period ended
September 30,
-----------------------------------
(all amounts in thousands of U.S. dollars) 2006 2005
-----------------------------------
(Unaudited)
Services and fees 87,477 90,190
Labor cost 194,589 159,578
Depreciation of property, plant and equipment 6,473 7,465
Amortization of intangible assets 12,982 10,133
Commissions, freight and other selling expenses 261,127 212,174
Provisions for contingencies 7,915 9,629
Allowances for doubtful accounts 1,991 6,059
Taxes 81,684 65,282
Other 58,644 43,020
-----------------------------------
712,882 603,530
-----------------------------------
5 Financial income (expenses), net
Nine-month period ended
September 30,
-----------------------------------
(all amounts in thousands of U.S. dollars) 2006 2005
-----------------------------------
(Unaudited)
Interest expense (42,292) (40,122)
Interest income 43,818 15,449
Net foreign exchange transaction results and changes in fair value of
derivative instruments 9,304 (70,162)
Other 88 5,244
-----------------------------------
10,918 (89,591)
-----------------------------------
5
6 Property, plant and equipment and Intangible assets, net
Net Property, Plant and Net Intangible Assets
Equipment
------------------------- -----------------------
(all amounts in thousands of U.S. dollars) (Unaudited) (Unaudited)
Nine-month period ended September 30, 2006
Opening net book amount 2,230,038 159,099
Currency translation differences 48,098 835
Transfers (125) 125
Additions 282,621 19,456
Disposals (28,735) (99)
Increase due to business acquisition 22,892 1,402
Depreciation / Amortization charge (150,863) (15,145)
------------------------- -----------------------
At September 30, 2006 2,403,926 165,673
------------------------- -----------------------
7 Dividends per share
The shareholders' meeting held on June 7, 2006 approved the payment of a
dividend in the amount of $0.30 per share or approximately $354.1 million,
corresponding to operating results for 2005. This amount included the interim
dividend paid in November, 2005, in the amount of $0.127 per share or
approximately $149.9 million. Tenaris paid the balance of the annual dividend
amounting to approximately $204.2 million corresponding to $0.173 per share
during 2006. During 2005 Tenaris paid $199.5 million corresponding to $0.169
per share.
8 Contingencies, commitments and restrictions to the distribution of
profits
This note should be read in conjunction with Note 26 to the Company's audited
Consolidated Financial Statements for the year ended December 31, 2005.
Significant changes or events since the date of such financial statements 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 September 30,
2006 amounts to approximately EUR701.9 million ($888.6 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 EUR205.2
million ($259.8 million), based on prices prevailing at September 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 EUR5.0 million per year. Tenaris provided bank guarantees
in the amount of EUR15.1 million in support of Dalmine Energie. The value
of the bank guarantees corresponds to the termination penalties that
would be due to TAG in the event of termination due to shipper's default.
6
8 Contingencies, commitments and restrictions to the distribution of
profits (Cont'd)
(ii) Restrictions to the distribution of profits and payment of dividends
As of September 30, 2006, shareholders' equity as defined under Luxembourg law
and regulations consisted of the following:
(all amounts in thousands of U.S. dollars) (unaudited)
Share capital 1,180,537
Legal reserve 118,054
Share premium 609,733
Retained earnings including net income for the nine-month period
ended September 30, 2006 1,392,057
-------------------
Total shareholders equity in accordance with Luxembourg law
3,300,381
-------------------
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 September 30, 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 September 30, 2006, Tenaris's retained earnings under Luxembourg law totalled
$1,392.1 million, as detailed below.
(all amounts in thousands of U.S. dollars) (unaudited)
Retained earnings at December 31, 2005 under Luxembourg law 1,171,738
Dividends received 416,831
Other income and expenses for the nine-month period ended September
30, 2006 7,721
Dividends paid (204,233)
-------------------
Retained earnings at September 30, 2006 under Luxembourg law 1,392,057
-------------------
9 Business acquisitions, incorporation of subsidiaries and other
significant events
(a) Acquisition of Maverick Tube Corporation ("Maverick")
On October 5, 2006, Tenaris completed its acquisition of Maverick, pursuant
to which, Maverick merged with and into a wholly owned subsidiary of
Tenaris. On that date, Tenaris transferred to the paying agent for the
transaction $65 per share in cash for each issued and outstanding share of
Maverick's common stock. The transaction was valued at $3,185 million,
including Maverick's net debt.
To finance the acquisition and the payment of related obligations, Tenaris
and some of its subsidiaries entered into syndicated five-year term loan
facilities in an aggregate of up to $2.7 billion; the balance was met from
cash on hand. Tenaris will consolidate Maverick's balance sheet and results
of operations in its consolidated financial statements beginning in the
fourth quarter of 2006.
With operations in the United States, Canada and Colombia, Maverick is a
producer of welded oil country tubular goods (OCTG), line pipe and coiled
tubing for use in oil and natural gas wells, also producing welded pipes for
electrical conduits. Maverick has a combined annual capacity of two million
short tons of steel pipes with a size range from one-quarter inch to 16
inches, and approximately 4,650 employees. In 2005, Maverick reported net
revenues of approximately $1.8 billion, of which 82% were from its energy
products division.
7
9 Business acquisitions, incorporation of subsidiaries and other
significant events (Cont'd)
(b) Letter of intent relating to sale of 75% interest in Dalmine Energie
On September 13, 2006, Tenaris signed a letter of intent with E.ON Sales and
Trading GmbH, an indirect subsidiary of E.ON AG, for the sale to E.ON of a
75% interest in Dalmine Energie, Tenaris's Italian energy supply business,
for a purchase price of approximately EUR39 million, subject to adjustments.
The transaction, which is subject to negotiation and execution of definitive
documentation, clearance by the applicable competition authorities and
customary due diligence conditions, is expected to close before the end of
2006.
The Company cannot give assurance that the transaction will be completed.
Should it be completed, Tenaris will represent the results of Dalmine
Energie as results of discontinued operations in accordance with the
requirements of IFRS 5 "Non-current Assets Held for Sale and Disontinued
Operations".
(c) 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.
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 issued 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 6, 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 6, 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 September 30, 2006, the closing price of Ternium shares as quoted on the
New York Stock Exchange was $23.16 per ADS, giving Tenaris' ownership stake
a market value of approximately $532 million. At September 30, 2006, the
carrying value of Tenaris's ownership stake in Ternium was approximately
$389 million.
8
9 Business acquisitions, incorporation of subsidiaries and other
significant events (Cont'd)
(d) 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 $29.3 million. 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:
Nine-month period ended
September 30, 2006
-------------------------------
(all amounts in thousands of U.S. dollars) (Unaudited)
-------------------------------
Other assets and liabilities (net) 5,052
Property, plant and equipment 22,892
Goodwill 1,402
-------------------------------
Net assets acquired 29,346
-------------------------------
(e) Minority Interest
During the nine-month period ended September 30, 2006, additional shares of
Silcotub and Dalmine were acquired from minority shareholders for
approximately $10.1 million.
10 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. 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 in accordance with IFRS, 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 transactions and balances with related parties are shown below:
(all amounts in thousands of U.S. dollars)
Nine-month period ended September 30, 2006
Associated (1) Other Total
--------------------------------------------------
(i) Transactions
(a) Sales of goods and services
Sales of goods 96,672 44,332 141,004
Sales of services 13,586 2,661 16,247
--------------------------------------------------
110,258 46,993 157,251
--------------------------------------------------
(b) Purchases of goods and services
Purchases of goods 66,658 16,903 83,561
Purchases of services 8,368 58,254 66,622
--------------------------------------------------
75,026 75,157 150,183
--------------------------------------------------
9
10 Related party disclosures (Cont'd)
Nine-month period ended September 30, 2005
Associated (2) Other Total
--------------------------------------------------
(i) Transactions
(a) Sales of goods and services
Sales of goods 78,584 63,709 142,293
Sales of services 3,649 7,263 10,912
--------------------------------------------------
82,233 70,972 153,205
--------------------------------------------------
(b) Purchases of goods and services
Purchases of goods 31,215 33,144 64,359
Purchases of services 12,057 46,907 58,964
--------------------------------------------------
43,272 80,051 123,323
--------------------------------------------------
At September 30, 2006
Associated (3) Other Total
--------------------------------------------------
(ii) Period-end balances
(a) Related to sales / purchases of goods /
services
Receivables from related parties 33,736 23,677 57,413
Payables to related parties (23,363) (15,397) (38,760)
--------------------------------------------------
10,373 8,280 18,653
--------------------------------------------------
(b) Other balances
Receivables 2,079 - 2,079
(c) Financial debt
Borrowings (6) (57,449) - (57,449)
At December 31, 2005
Associated (4) 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 (5) 42,437 - 42,437
(c) Financial debt
Borrowings (6) (54,801) - (54,801)
(1) Includes Ternium S.A. and its subsidiaries, Condusid C.A. As from
September 1, 2006, it also includes Finma S.A.I.F.
(2) Includes: Condusid, Ylopa, Amazonia and Sidor.
(3) Includes Ternium S.A. and its subsidiaries, Condusid C.A. and Finma
S.A.I.F.
(4) Includes Ternium S.A. and its subsidiaries and Condusid C.A.
(5) Includes convertible loan to Ternium S.A. of $40.4 million.
(6) Convertible loan from Sidor C.A. to Matesi (Materiales Siderurgicos
S.A.).
Carlos Condorelli
Chief Financial Officer
10
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 September 30, 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: November 9, 2006
Tenaris, S.A.
By: /s/ Cecilia Bilesio
- -----------------------
Cecilia Bilesio
Corporate Secretary
