-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GWiM7ugybff6i/WEIbHBZtj50lFBInDpq2E94489Nr/nH0AWUEtYilmKKpYQAOIc Y+EPCf0K75MCMklXtiIbuA== 0001157523-04-007470.txt : 20040806 0001157523-04-007470.hdr.sgml : 20040806 20040806145208 ACCESSION NUMBER: 0001157523-04-007470 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20040806 FILED AS OF DATE: 20040806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TENARIS SA CENTRAL INDEX KEY: 0001190723 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-31518 FILM NUMBER: 04957621 BUSINESS ADDRESS: STREET 1: 420 FIFTH AVENUE STREET 2: 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 212-376-6500 MAIL ADDRESS: STREET 1: 23 AVENUE MONTEREY CITY: LUXEMBOURG STATE: N4 ZIP: L 2086 6-K 1 a4697235.txt TENARIS, S.A. 6-K 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 August 6, 2004 TENARIS, S.A. (Translation of Registrant's name into English) TENARIS, S.A. 13, rue Beaumont L-1219 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 consolidated condensed interim financial statements for the period ended June 30, 2004. 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: August 6, 2004 Tenaris, S.A. By: /s/ Cecilia Bilesio - ----------------------- Cecilia Bilesio Corporate Secretary TENARIS S.A. CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS JUNE 30, 2004 Rue Beaumont 13 L - 1219 Luxembourg
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2004 - --------------------------------------------------------------------------------------------------------------------------- Consolidated condensed interim income statement (all amounts in USD thousands, Three-month period ended Six-month period ended unless otherwise stated) June 30, June 30, ------------------------------------------------ Notes 2004 2003 2004 2003 (Unaudited) Net sales 1 996,849 868,892 1,856,195 1,658,471 Cost of sales 2 (677,655) (604,122) (1,298,112) (1,162,656) ------------------------------------------------ Gross profit 319,194 264,770 558,083 495,815 Selling, general and administrative expenses 3 (167,547) (146,238) (307,365) (279,236) Other operating income and expenses 2,065 (6,078) 5,565 (5,557) ------------------------------------------------ Operating income 153,712 112,454 256,283 211,022 Financial income (expenses), net 4 (3,885) (10,892) (19,323) (33,583) ------------------------------------------------ Income before equity in earnings of associated companies, income tax and minority interest 149,827 101,562 236,960 177,439 Equity in earnings of associated companies (Note 10 (ii)) 40,130 14,677 39,669 5,643 ------------------------------------------------ Income before income tax and minority interest 189,957 116,239 276,629 183,082 Income tax 5 (60,911) (18,694) (99,980) (36,621) ------------------------------------------------ Net income before minority interest 129,046 97,545 176,649 146,461 Minority interest (1,732) (7,870) (967) (11,274) ------------------------------------------------ Net income for the period 127,314 89,675 175,682 135,187 ================================================ Weighted average number of ordinary shares in issue (thousands) 1,180,537 1,160,701 1,180,477 1,160,701 Basic and diluted earnings per share (USD per share) 0.11 0.08 0.15 0.12 The accompanying notes are an integral part of these consolidated condensed interim financial statements. The limited review report of the independent auditor on these consolidated condensed interim financial statements is issued as a separate document.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2004 - ----------------------------------------------------------------------------------------------------------------------- Consolidated condensed interim balance sheet (all amounts in USD thousands) At June 30, 2004 At December 31, 2003 ------------------------- ------------------------ Notes (Unaudited) ASSETS Non-current assets Property, plant and equipment, net 6 1,889,604 1,960,314 Intangible assets, net 6 57,619 54,037 Investments in associated companies 68,941 45,814 Other investments 23,240 23,155 Deferred tax assets 129,788 130,812 Receivables 57,687 2,226,879 59,521 2,273,653 ----------- ----------- Current assets Inventories 916,653 831,879 Receivables and prepayments 178,058 165,134 Trade receivables 7 871,183 652,782 Other investments 139,051 138,266 Cash and cash equivalents 268,969 2,373,914 247,834 2,035,895 ----------- ----------- ----------- ----------- Total assets 4,600,793 4,309,548 =========== =========== EQUITY AND LIABILITIES Shareholders' Equity 1,859,365 1,841,280 Minority interest 114,334 119,984 Non-current liabilities Borrowings 8 397,440 374,779 Deferred tax liabilities 396,804 418,333 Other liabilities 200,468 191,540 Provisions 29,879 23,333 Trade payables 11,265 1,035,856 11,622 1,019,607 ----------- ----------- Current liabilities Borrowings 8 710,957 458,872 Current tax liabilities 120,192 108,071 Other liabilities 162,037 207,594 Provisions 32,116 39,624 Customers advances 77,747 54,721 Trade payables 488,189 1,591,238 459,795 1,328,677 ----------- ----------- ----------- ----------- Total liabilities 2,627,094 2,348,284 ----------- ----------- Total equity and liabilities 4,600,793 4,309,548 =========== =========== Contingencies, commitments and restrictions to the distribution of profits (Note 10) The accompanying notes are an integral part of these consolidated condensed interim financial statements. The limited review report of the independent auditor on these consolidated condensed interim financial statements is issued as a separate document.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2004 - --------------------------------------------------------------------------------------------------------------------------------- Consolidated condensed interim statement of changes in shareholders' equity (all amounts in USD thousands) Statutory balances according to Luxembourg Law Total at June 30, ----------------------------------------------------------- ----------- -------------------- ----------=------------ Other Currency Share Legal Share Distributable Retained Adjustments translation Retained Capital Reserves Premium Reserve Earnings Total to IFRS adjustments Earnings 2004 2003 --------- -------- ------- ------------- -------- --------- ----------- ----------- -------- ----------- ----------- (Unaudited) Balance at January 1, 1,180,288 118,029 609,269 96,555 201,480 2,205,621 (634,759) (34,194) 304,612 1,841,280 1,694,054 Currency translation differences - - - - - - - (23,364) - (23,364) 20,843 Capital Increase (Note 11) 249 25 464 82 - 820 - - - 820 - Dividends paid in cash - - - (96,555) (38,498) (135,053) - - - (135,053) (115,002) Net income - - - - 243,750 243,750 (243,750) - 175,682 175,682 135,187 --------------------------------------------------------------------------------------------------------------------- Balance at June 30, 1,180,537 118,054 609,733 82 406,732 2,315,138 (878,509) (57,558) 480,294 1,859,365 1,735,082 ===================================================================================================================== For additional disclosure related to the Distributable Reserve and the Retained Earnings calculated under Luxembourg Law see Note 10 (vi). The accompanying notes are an integral part of these consolidated condensed interim financial statements. The limited review report of the independent auditor on these consolidated condensed interim financial statements is issued as a separate document.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2004 - --------------------------------------------------------------------------------------------------------------------- Consolidated condensed interim cash flow statement (all amounts in USD thousands) Six-month period ended June 30, ------------------------------- 2004 2003 (Unaudited) Net income for the period 175,682 135,187 Depreciation and amortization 101,829 98,487 Tax accruals less payments 8,110 (84,080) Equity in earnings of associated companies (39,669) (5,643) Interest accruals less payments (2,993) (362) Net provisions (962) 7,354 Minority interest 967 11,274 Change in working capital (311,021) (73,931) Currency translation adjustment and others (14,843) 10,677 ------------------------------- Net cash (used in) provided by operations (82,900) 98,963 ------------------------------- Capital expenditure (82,783) (88,633) Cash advanced for the Dalmine tender offer - (21,382) Acquisitions of subsidiaries and associates (188) (42,546) Proceeds from disposition of property, plant and equipment 8,969 1,564 Proceeds from associated companies - 106 Convertible loan to associated companies - (31,128) Dividends received 16,802 - ------------------------------- Net cash used in investment activities (57,200) (182,019) ------------------------------- Dividends paid (135,053) (115,002) Dividends paid to minority interest in subsidiaries (23) (3,499) Proceeds from borrowings 370,763 227,638 Repayments of borrowings (77,152) (183,669) ------------------------------- Net cash provided by (used in) financing activities 158,535 (74,532) ------------------------------- Increase (decrease) in cash and cash equivalents 18,435 (157,588) =============================== Cash and cash equivalents at January 1, 247,834 304,536 Effect of exchange rate changes on cash and cash equivalents 2,700 2,015 Increase (decrease) in cash and cash equivalents 18,435 (157,588) ------------------------------- Cash and cash equivalents at June 30, 268,969 148,963 =============================== Non-cash financing activity: Fair value adjustment of minority interest acquired - 925 =============================== The accompanying notes are an integral part of these consolidated condensed interim financial statements. The limited review report of the independent auditor on these consolidated condensed interim financial statements is issued as a separate document.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2004 - ------------------------------------------------------------------------------------------------------------- Accounting policies Index to accounting policies A Business of the Company and basis of presentation B Translation of financial statements and transactions in currencies other than the measurement currency C Use of estimates D Summary of accounting policies regarding specific asset and liability categories E Revenue recognition F Earnings per share
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the - ------------------------------------------------------------------------ six-month period ended June 30, 2004 - ------------------------------------ Accounting policies The consolidated condensed interim financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") adopted by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB. 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 the consolidated condensed interim financial statements are consistent with those used in the consolidated financial statements for the year ended December 31, 2003, unless specified. Further reference regarding the accounting policies applied is included in the notes to the Company's consolidated financial statements for the year ended December 31, 2003. The following is a summary of the principal accounting policies followed in the preparation of these consolidated condensed interim financial statements. This summary has been included for the convenience of the reader and should not be regarded as a complete explanation of the accounting policies used by the Company. A Business of the Company and basis of presentation Tenaris S.A. (the "Company" or "Tenaris"), a Luxembourg corporation, was incorporated on December 17, 2001, to hold investments in steel pipe manufacturing and distributing companies. The Company holds, either directly or indirectly, controlling interests in certain subsidiary companies. A detail of the principal holdings is included in Note 15. These consolidated condensed interim financial statements consolidate the financial information of Tenaris with those of its subsidiaries at June 30, 2004 and 2003 and for the six-month periods then ended. Subsidiary companies are entities in which Tenaris has an interest of more than 50% of the voting rights or otherwise has the power to exercise control over their operations. Certain comparative amounts have been reclassified to conform to changes in presentation in the current period. Elimination of all material intercompany transactions and balances among the Company and its consolidated subsidiaries has been made. These consolidated condensed interim financial statements were approved by Tenaris's Board of Directors on August 5, 2004. B Translation of financial statements and transactions in currencies other than the measurement currency The measurement currency of Tenaris is the U.S. dollar. Although the Company is located in Luxembourg, Tenaris operates in several countries with different currencies. The U.S. dollar is the currency that best reflects the economic substance of the underlying events and circumstances relevant to Tenaris as a whole. Generally, the measurement currency of the main companies in these financial statements is the respective local currency. As further explained in the Company's consolidated financial statements for the year ended December 31, 2003, the measurement currency for Siderca and its Argentine subsidiaries is the U.S. dollar, because: o Siderca is located in Argentina and its local currency has been affected by recurring severe economic crises; o Sales are denominated and settled in U.S. dollars or, if in a currency other than the U.S. dollar, the price is sensitive to movements in the exchange rate with the U.S. dollar; o Purchases of critical raw materials are financed in U.S. dollars generated by financing or operating activities; o Most of the net financial assets and liabilities are mainly obtained and retained in U.S. dollars. Tenaris S.A. Consolidated Condensed Interim Financial Statements for the - ------------------------------------------------------------------------ six-month period ended June 30, 2004 - ------------------------------------ Income statements of subsidiary companies stated in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates for the quarter, while balance sheets are translated at the exchange rates at period end. Translation differences are recognized in shareholders' equity. Should any such subsidiary be sold or otherwise disposed of, any accumulated translation difference would be recognized in the income statement as part of the gain or loss on sale. Transactions in currencies other than the measurement currency are accounted for at the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in currencies other than the measurement currency are recognized in the income statement. Further reference regarding the accounting policies applied for the translation of financial statements and transactions subject to the consolidation process is included in the notes to the Company's consolidated financial statements for the year ended December 31, 2003. C Use of estimates The preparation of financial statements requires management to make estimates and assumptions that might affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet dates, and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from these estimates. D Summary of accounting policies regarding specific asset and liability categories An overview of relevant accounting policies applied in the recognition and valuation of assets and liabilities is described below. A more detailed description is included in the notes to the Company's consolidated financial statements for the year ended December 31, 2003. (1) Property, plant and equipment and Intangible assets Property, plant and equipment are recognized at historical acquisition or construction cost less depreciation, calculated using the straight line method to amortize the cost of each asset over its estimated useful life. In the case of business acquisitions proper consideration to the fair value of the assets has been given as explained in the notes to the consolidated financial statements for the year ended December 31, 2003. Major overhaul and rebuilding expenditures are capitalized as property, plant and equipment only when the investment enhances the condition of an asset beyond its original condition. Intangible assets including goodwill; certain costs directly related to the development, acquisition and implementation of information systems; and expenditures on acquired patents, trademarks, technology transfer and licenses are capitalized and amortized using the straight line method over their useful lives; the useful lives of Tenaris's intangible assets average 5 years. Research and development expenditure is recognized as expenses as incurred. Negative goodwill is recognized as income on a systematic basis over the remaining weighted average useful life of the identifiable acquired depreciable assets. (2) Impairment Circumstances affecting the recoverability of tangible and intangible assets and investments in other companies may change. If this happens, the recoverable amount of the relevant assets is estimated. The recoverable amount is determined as the higher of the asset's net selling price -when available- and the present value of the estimated future cash flows. If the recoverable amount of the asset has dropped below its carrying amount the asset is written down immediately to its recoverable amount. No impairment provisions are recorded, other than the investment in Amazonia, as discussed in the Company's consolidated financial statements at December 31, 2003 and in Note 10 (ii) to these consolidated financial statements. (3) Cash and cash equivalents, Other investments and Derivative Financial Instruments Cash and cash equivalents and highly liquid short-term securities are carried at fair market value. Tenaris S.A. Consolidated Condensed Interim Financial Statements for the - ------------------------------------------------------------------------ six-month period ended June 30, 2004 - ------------------------------------ Under IAS 39 "Financial Instruments: Recognition and Measurement", investments have to be classified into the following categories: held-for-trading, held-to-maturity, originated loans and available-for-sale, depending on the purpose for which the investments were made. Investments that do not fulfill the specific requirements of IAS 39 for held-for-trading, held-to-maturity or originated loan categories have to be included in the residual "available-for-sale" category. All of Tenaris's investments, which include primarily deposits in trust funds and insurance companies, are currently classified as available-for-sale as defined by IFRS, despite the fact that they are not technically available for disposition according to the terms of the underlying contracts. Trust funds comprise mainly financial resources placed by Argentine and Brazilian subsidiaries within trusts, the objective of which is exclusively to ensure that the financial needs for normal development of their operations are met. At June 30, 2004 the trustee has informed us that it had allocated USD95.0 million of such funds to create guarantees within the scope of the trust agreement. All purchases and sales of investments are recognized on the trade date, not significantly different from the settlement date, which is the date that Tenaris commits to purchase or sell the investment. Subsequent to their acquisition, available-for-sale investments are carried at fair value. Realized and unrealized gains and losses arising from changes in the fair value in those investments are included in the income statement for the period in which they arise. Derivative financial instruments are initially recognized in the balance sheet at cost and subsequently remeasured at fair value. Changes in the fair value of any derivative instruments are recognized immediately in the income statements as financial results. (4) Inventories Inventories are stated at the lower of cost and net realizable value as a whole. The cost of finished goods and work in progress comprises raw materials, direct labor, other direct costs and related production overhead costs. Net realizable value is estimated collectively for inventories as the selling price in the ordinary course of business, less the costs of completion and selling expenses. Goods in transit at period end are valued at supplier invoice cost. An allowance for obsolescence or slow-moving inventory is made in relation to supplies and spare parts and based on the management's analysis of their aging, the capacity of such materials to be used based on their levels of preservation and maintenance and the potential obsolescence due to technological changes. An allowance for slow-moving inventory is made in relation to finished goods based on management's analysis of their aging. (5) Trade receivables Trade receivables are carried at original invoice amount less an estimate made for doubtful accounts. The Company analyzes its trade accounts receivable on a regular basis and, when aware of a certain client's difficulty to meet its commitments to Tenaris, it impairs the amounts due by means of a charge to the provision for doubtful accounts. This provision is adjusted periodically based on management's analysis of their aging. (6) Borrowings Borrowings are recognized initially for an amount equal to the proceeds received net of transaction costs. In subsequent periods, borrowings are stated at amortized cost; any difference between proceeds and the redemption value is recognized in the income statement over the period of the borrowings. (7) Income Taxes - Current and deferred Under present Luxembourg law, so long as the Company maintains its status as a holding billionaire company, no income tax, withholding tax (including with respect to dividends), or capital gain tax is payable in Luxembourg by the Company. The current income tax charge is calculated on the basis of the tax laws in force in the countries where Tenaris's subsidiaries operate. Deferred income taxes are calculated using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. A more detailed description of temporary differences can be found in the Company's consolidated financial statements for the year ended December 31, 2003. Tenaris S.A. Consolidated Condensed Interim Financial Statements for the - ------------------------------------------------------------------------ six-month period ended June 30, 2004 - ------------------------------------ (8) Employee-related liabilities (a) Employees' statutory profit sharing Under Mexican law, Tenaris's Mexican subsidiary companies are required to pay their employees an annual benefit calculated using a similar basis to the one used for the calculation of the income tax. Employees' statutory profit sharing is provided under the liability method. This provision amounts to USD58.0 million at June 30, 2004 and USD51.1 million at December 31, 2003. Temporary differences arise between the "statutory" bases of assets and liabilities used in the determination of the profit sharing and their carrying amounts in the financial statements. (b) Employees' severance indemnity This provision comprises the liability accrued on behalf of employees at Tenaris's Italian and Mexican subsidiaries at the balance sheet date in accordance with current legislation and the labor contracts in effect in the respective countries. Employees' severance indemnity costs are assessed annually using the projected unit credit method: the cost of providing this obligation is charged to the income statement over the service lives of employees in accordance with the advice of the actuaries. This provision is measured at the present value of the estimated future cash outflows using applicable interest rates. This provision amounts to USD62.5 million and USD66.4 million at June 30, 2004 and December 31, 2003, respectively. (c) Pension obligations Certain Tenaris officers are covered by a defined benefit employee retirement plan designed to provide retirement, termination and other benefits to those officers. Tenaris is accumulating assets for the ultimate payment of those benefits in the form of investments that carry time limitation for their redemption. The investments are neither part of a particular plan nor segregated from Tenaris's other assets. Due to these conditions, the plan is classified as "unfunded" under the IFRS definition. Retirement costs are assessed using the projected unit credit method: the cost of providing retirement benefits is charged to the income statement over the service lives of employees based on actuarial calculations. This provision is measured at the present value of the estimated future cash outflows using applicable interest rates and amounts to USD9.3 million and USD8.6 million at June 30, 2004 and December 31, 2003, respectively. Actuarial gains and losses are recognized over the average remaining service lives of employees. Benefits provided by the plan are in U.S. dollars, and are calculated based on a three-year or seven-year salary average (whichever is more favorable to the beneficiary) for those executives who have retired or were terminated before December 31, 2003. After this date, the benefits of the plan are calculated on a seven-year salary average. (9) Provisions and Other liabilities Provisions are accrued to reflect estimates of amounts due relating to expenses as they are incurred based on information available as of the date of preparation of the financial statements. Furthermore, Tenaris accrues liabilities when it is probable that future cost could be incurred and that cost can be reasonably estimated in relation to a contingent liability or potential claim, resulting from lawsuits and other proceedings. Tenaris S.A. Consolidated Condensed Interim Financial Statements for the - ------------------------------------------------------------------------ six-month period ended June 30, 2004 - ------------------------------------ E Revenue recognition Sales are recognized as revenues when earned and realized or realizable. This includes satisfying the following criteria: the arrangement with the customer is evident, usually through the receipt of a purchase order; the sales price is fixed or determinable; delivery -as defined by the risk transfer provisions of the sales contracts- has occurred, which may include delivery to the customer storage facility at one of the Company's subsidiaries; and collectability is reasonably assured. Interest income is recognized on an effective yield basis. F Earnings per share Earnings per share are calculated by dividing the net income attributable to shareholders by the daily weighted average number of ordinary shares issued during the period. Tenaris S.A. Consolidated Condensed Interim Financial Statements for the - ------------------------------------------------------------------------ six-month period ended June 30, 2004 - ------------------------------------ Notes to the consolidated condensed interim financial statements Index to the notes to the consolidated condensed interim financial statements 1 Segment information 2 Cost of sales 3 Selling, general and administrative expenses 4 Financial income (expenses), net 5 Tax charge 6 Property, plant and equipment and Intangible assets, net 7 Trade receivables 8 Borrowings 9 Derivative financial instruments 10 Contingencies, commitments and restrictions to the distribution of profits 11 2002 exchange offer and other events with impact on minority interest 12 Business and other acquisitions 13 Subsequent events 14 Related party transactions 15 Principal subsidiaries
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2004 - ------------------------------------------------------------------------------------------------------------- Notes to the consolidated condensed interim financial statements (In the notes all amounts are shown in USD thousands, unless otherwise stated) 1 Segment information Primary reporting format: business segments ---------------------------------------------------------------------------- Welded & Other Metallic Seamless Products Energy Other Total ---------------------------------------------------------------------------- Six-month period ended (Unaudited) June 30, 2004 Net sales 1,471,735 156,224 196,727 31,509 1,856,195 Cost of sales (970,402) (116,220) (190,461) (21,029) (1,298,112) Gross profit 501,333 40,004 6,266 10,480 558,083 Depreciation and amortization 91,440 6,056 1,949 2,384 101,829 Six-month period ended June 30, 2003 Net sales 1,203,017 216,395 154,504 84,555 1,658,471 Cost of sales (784,412) (158,738) (149,874) (69,632) (1,162,656) Gross profit 418,605 57,657 4,630 14,923 495,815 Depreciation and amortization 89,522 4,281 2,157 2,527 98,487 Tenaris's main business segment is the manufacture of seamless steel pipes.
Secondary reporting format: geographical segments --------------------------------------------------------------------------- Middle Far East South North East & & America Europe America Africa Oceania Total --------------------------------------------------------------------------- Six-month period ended (Unaudited) June 30, 2004 Net sales 362,789 593,340 479,133 230,083 190,850 1,856,195 Depreciation and amortization 47,916 31,225 19,425 16 3,247 101,829 Six-month period ended June 30, 2003 Net sales 404,070 486,025 371,177 209,590 187,609 1,658,471 Depreciation and amortization 57,480 24,969 13,141 6 2,891 98,487 Allocation of net sales is based on the customers' location. Allocation of depreciation and amortization is based on the related assets' location. Although Tenaris's business is managed on a worldwide basis, the companies forming part of Tenaris operate in the five main geographical areas detailed above.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the - ------------------------------------------------------------------------ six-month period ended June 30, 2004 - ------------------------------------ 2 Cost of sales Six-month period ended June 30, -------------------------- 2004 2003 -------------------------- (Unaudited) Raw materials, energy and consumables used and change in inventories 852,021 725,854 Services and fees 122,564 151,207 Labor cost 174,686 144,407 Depreciation of property, plant and equipment 86,712 87,722 Amortization of intangible assets 5,132 2,653 Maintenance expenses 37,749 24,321 Allowance for contingencies 155 2,164 Allowance for obsolescence 10,517 6,349 Taxes 1,194 2,181 Others 7,382 15,798 -------------------------- 1,298,112 1,162,656 ========================== 3 Selling, general and administrative expenses Six-month period ended June 30, -------------------------- 2004 2003 -------------------------- (Unaudited) Commissions, freights and other selling expenses 115,327 95,754 Labor cost 70,486 65,759 Services and fees 55,832 65,824 Taxes 26,301 20,795 Depreciation of property, plant and equipment 4,918 1,887 Amortization of intangible assets 5,067 6,225 Provisions for contingencies 4,571 2,351 Allowance for doubtful accounts 4,796 1,243 Others 20,067 19,398 -------------------------- 307,365 279,236 ========================== 4 Financial income (expenses), net Six-month period ended June 30, -------------------------- 2004 2003 -------------------------- (Unaudited) Interest expense (19,224) (15,428) Interest income 6,883 6,112 Net foreign exchange transaction losses (12,746) (26,164) Others 5,764 1,897 -------------------------- (19,323) (33,583) ========================== Tenaris S.A. Consolidated Condensed Interim Financial Statements for the - ------------------------------------------------------------------------ six-month period ended June 30, 2004 - ------------------------------------ 5 Tax charge Income tax Six-month period ended June 30, -------------------------- 2004 2003 -------------------------- (Unaudited) Current tax (a) 110,798 77,817 Deferred tax (2,941) (18,675) Effect of currency translation on tax base (b) (7,877) (22,521) -------------------------- 99,980 36,621 ========================== (a) Current tax amounts recorded in the first semester of 2004 include adjustments made to the preliminary provisions recorded at December 31, 2003, corresponding to Income Tax Filings for the year 2003. (b) Tenaris, using the liability method, recognizes a deferred income tax charge on temporary differences between the tax bases of its assets and their carrying amounts in the financial statements. By application of this method, Tenaris recognized gains and losses on deferred income tax due to the effect of the change in the value of the Argentine peso on the tax bases of the fixed assets of its Argentine subsidiaries. 6 Property, plant and equipment and Intangible assets, net Net Property, Plant and Net Intangible Equipment Assets ------------- -------------- (Unaudited) (Unaudited) Six-month period ended June 30, 2004 Opening net book amount 1,960,314 54,037 Translation differences (40,699) 1,586 Additions 70,660 12,123 Disposals (8,794) (175) Transfers (247) 247 Depreciation/ Amortization charge (91,630) (10,199) ------------- -------------- At June 30, 2004 1,889,604 57,619 ============= ============== 7 Trade receivables At June 30, At December 2004 31, 2003 ------------------------------ (Unaudited) Current accounts 829,177 605,119 Notes receivables 69,666 71,666 ------------------------------ 898,843 676,785 Allowance for doubtful accounts (27,660) (24,003) ------------------------------ 871,183 652,782 ============================== Tenaris S.A. Consolidated Condensed Interim Financial Statements for the - ------------------------------------------------------------------------ six-month period ended June 30, 2004 - ------------------------------------ 8 Borrowings At June 30, At December 31, 2004 2003 ------------------------------ (Unaudited) Non-current Bank borrowings 389,412 299,965 Debentures - 65,375 Finance lease liabilities 8,028 9,439 ------------------------------ 397,440 374,779 ------------------------------ Current Bank borrowings 467,386 273,607 Bank overdrafts 13,664 9,804 Debentures and other loans 226,344 171,062 Finance lease liabilities 3,732 5,266 Costs for issue of debt (169) (867) ------------------------------ 710,957 458,872 ------------------------------ Total borrowings 1,108,397 833,651 ============================== 9 Derivative financial instruments The net fair values of derivative financial instruments at the balance sheet date, in accordance with IAS 39, were: Net fair value of derivative financial At June 30, At December 31, instruments 2004 2003 ------------------------------ (Unaudited) Contracts with positive fair values: Forward foreign exchange contracts 903 2,947 Commodities contracts 1,856 1,197 Contracts with negative fair values: Interest rate swaps contracts (3,408) (3,505) Forward foreign exchange contracts (4,970) (2,937) Commodities contracts (2,311) (1,592) 10 Contingencies, commitments and restrictions to the distribution of profits Tenaris is involved in litigation arising from time to time in the ordinary course of business (exception made of the litigation with the consortium led by BHP -see (i) below-). Based on management's assessment and the advice of legal counsel, it is not anticipated that the ultimate resolution of existing litigation will result in amounts in excess of recorded provisions that would be material to Tenaris's consolidated financial position or income statement. (i) Claim against Dalmine On December 30, 2003, Dalmine and a consortium led by BHP Billiton ("BHP") reached a full and final settlement to put an end to a litigation commenced in 1998. According to the terms of the settlement, a total of GBP108.0 million was agreed as compensation to the consortium, inclusive of expenses. The final settlement set forth a three-year instalments payment scheme for the balance amount agreed net of advances previously made . The three yearly installments of GBP30.3 million, GBP30.4 million and GBP30.4 million, are due in January 2004, December 2004 and December 2005, respectively. A Libor + 1% interest rate applies to the outstanding amounts. During January 2004 the first such installment was paid. Tenaris S.A. Consolidated Condensed Interim Financial Statements for the - ------------------------------------------------------------------------ six-month period ended June 30, 2004 - ------------------------------------ The pipe that has been the subject of the litigation with BHP was manufactured and sold, and the tort alleged by BHP took place, prior to the privatization of Dalmine. Techint Investments Netherlands BV ("Tenet") -the Tenaris subsidiary party to the contract pursuant to which Dalmine was privatized-has commenced arbitration proceedings against Fintecna S.p.A.-which controlled Dalmine prior to its privatization- to compel it to indemnify Dalmine for any amounts Dalmine paid or payable to BHP. Fintecna has denied that it has any contractual obligation to indemnify, asserting that the indemnification claim is time-barred under the terms of the privatization contract and, in any event, subject to a cap of EUR13 million. Tenet disputes this assertion. No assurances can be given as to when the arbitration proceedings currently in progress will conclude or that Finctecna will be required to reimburse any amounts paid or payable to BHP. For additional information regarding the litigation with BHP, refer to the Company's consolidated financial statements at December 31, 2003. (ii) Consorcio Siderurgia Amazonia, Ltd. The financial restructuring of Siderurgica del Orinoco CA ("Sidor") and Consorcio Siderurgia Amazonia, Ltd. ("Amazonia") concluded during 2003 ("2003 Restructuring") entailed the termination of certain guarantees and commitments to further finance Amazonia and Sidor that Tenaris had entered into as a result of the privatization of Sidor and previous restructuring agreements. The restructuring agreements contemplate, however, certain continuing obligations and restrictions to protect the claims held by the financial creditors of Sidor. These obligations and restrictions include pledges over all of Amazonia's existing shares and shares of Sidor held in its possession, that mature in the third quarter of 2005. During 2003, as part of the 2003 Restructuring, Tenaris obtained a 24.4% equity stake in Ylopa Servicos de Consultadoria Lda ("Ylopa"), a special purpose vehicle incorporated in Madeira, created to support Sidor and Amazonia -an associated company of Tenaris- in their financial restructuring. The acquisition was made by means of an aggregate cash contribution of USD32.9 million, primarily in the form of subordinated convertible debt. As a result of the consummation of the 2003 Restructuring, Ylopa (a) received new debt instruments of Amazonia, convertible into 67.4% of the common stock of Amazonia at Ylopa's choice, and (b) became Sidor's creditor (in a "Participation Account Agreement") of a non interest bearing loan, payable if and when Sidor reaches certain financial goals defined as "Excess Cash". The 2003 Restructuring set forth a mechanism for Sidor to repay its debts under the "Participation Account Agreement" whereby Ylopa is entitled to receive its percentage on the participation of Sidor's Excess Cash (determined in accordance with a specific formula). Sidor has been distributing Excess Cash to Ylopa on a semiannual basis starting October 2003. Tenaris participation in Ylopa's result as well as the adjustment of Amazonia's impairment provision are included in the income statement under "Equity in earnings of associated companies". (iii) Tax claims Siderca On December 18, 2000, the Argentine tax authorities notified Siderca of an income tax assessment related to the conversion of tax loss carry-forwards into Debt Consolidation Bonds under Argentine Law No. 24,073. The adjustments proposed by the tax authorities represent an estimated contingency of ARP56.6 million (approximately USD19.2 million) at June 30, 2004 in taxes and penalties. Based on the views of Siderca's tax advisors, Tenaris believes that the ultimate resolution of the matter will not result in a material obligation. Accordingly, no provision was recorded in the financial statements. Argentine subsidiaries Tenaris S.A. Consolidated Condensed Interim Financial Statements for the - ------------------------------------------------------------------------ six-month period ended June 30, 2004 - ------------------------------------ In their respective calculations of income tax liabilities for the year ended December 31, 2002, Siderca and Siat, two subsidiaries of Tenaris domiciled in Argentina used the inflation adjustment procedure set forth in Title VI of the Argentine Income Tax Law. The application of such procedure, however, has been suspended since March 1992, pursuant to article 39 of Law 24.073, which was passed in the context of price stability prompted by the introduction of the convertibility regime that pegged the peso to the United States dollar at a fixed rate of ARP1=USD1. Both subsidiaries have started legal proceedings objecting to the constitutional grounds for the above mentioned suspension, on the ground that compliance with it would render artificial gains arising from the impact of inflation on monetary positions during 2002 fully taxable. Moreover and in order to protect themselves from potential legal actions from the tax authority aimed at collection of the resulting differences, the subsidiaries have obtained an injunction that prevents the tax authorities from obtaining summary judgment while resolution of the proceedings is pending. The injunction has been appealed by the Argentine Tax Authority before the Federal Court of Appeals. Irrespective of the final result of the legal proceedings under way, the Company maintains a reserve for the full potential tax liability on the alleged artificial gains plus statutory interest, but excluding fines or any other potential punitive charges. At June 30, 2004 the referred contingent reserve totaled ARP74.9 million (approximately USD25.4 million). (iv) Other proceedings Dalmine is currently subject to six civil proceedings and a consolidated criminal proceeding before the Court of Bergamo, Italy, for work-related injuries arising from the use of asbestos in its manufacturing processes from 1960 to 1980. Of the 21 cases originally involved in the consolidated criminal proceeding, 20 have been settled. In addition to the civil and criminal cases, another 24 asbestos related out-of-court claims have been forwarded to Dalmine. Dalmine estimates that its potential liability in connection with the claims not yet settled or covered by insurance is approximately EUR8.8 million (USD10.7 million). (v) Commitments The following are the main off-balance sheet commitments: (a) Tenaris entered into an off-take contract with Complejo Siderurgico de Guayana C.A. ("Comsigua") to purchase on a take-or-pay basis 75,000 tons of hot briquetted iron, or HBI, annually for twenty years beginning in April 1998 with an option to terminate the contract at any time after the tenth year upon one year's notice. Pursuant to this off-take contract, Tenaris would be required to purchase the HBI at a formula price reflecting Comsigua's production costs during the first eight contract years; thereafter, it would purchase the HBI at a slight discount to market price. The agreements among the parties provide that, if during the eight-year period the average market price is lower than the formula price paid during such period, Tenaris would be entitled to a reimbursement of the difference plus interest, payable after the project financing and other specific credits are repaid. In addition, under the shareholders' agreements, Tenaris has the option to purchase on an annual basis up to a further 80,000 tons of HBI produced by Comsigua at market prices. Under its off-take contract with Comsigua, as a result of weak market prices for HBI, Tenaris paid -on average- higher-than-market prices for its HBI and according to the original contract accumulated a credit. During the first half of 2004, Tenaris paid lower-than-market prices for its HBI purchases, which resulted in a decrease to the previously recorded amount. At June 30, 2004, Tenaris credit with the off-taker amounted to approximately USD10.9 million, which were completely offset by a provision. Tenaris S.A. Consolidated Condensed Interim Financial Statements for the - ------------------------------------------------------------------------ six-month period ended June 30, 2004 - ------------------------------------ In connection with Tenaris's original 6.9% equity interest in Comsigua, Tenaris paid USD8.0 million and agreed to cover its share of Comsigua's cash operating and debt service shortfalls. In addition, Tenaris pledged its shares in Comsigua and provided a proportional guarantee of USD11.7 million (USD4.0 million outstanding as of June 30, 2004) in support of the USD156 million (USD54.3 million outstanding as of June 30, 2004) project financing loan made by the International Finance Corporation, or IFC, to Comsigua. Tenaris has been also required to pay an aggregate of USD1.5 million, representing its share of a shortfall of USD14.7 million payable by Comsigua under the IFC loan and additional operating shortfalls of USD5.3 million. Comsigua's financial condition was adversely affected by the consistently weak international market conditions for HBI since its start-up in 1998. Market conditions improved during 2003 and therefore, Tenaris has no longer been required to pay additional amounts as a sponsor in Comsigua. If current conditions prevail at similar levels, Tenaris would not be required to make additional proportional payments in respect of its participation in Comsigua and its purchases of HBI under the off-take contract would be paid in lower-than-market prices. (b) In August 2001, Dalmine Energie S.p.A. signed a ten year agreement with Eni S.p.A. Gas & Power Division for the purchase of natural gas with certain take or pay conditions until October 1st, 2011. In August 2003 Dalmine Energie S.p.A. received confirmation from Snam Rete Gas, the transportation company, of the yearly allocation of the necessary capacity on the international connection infrastructure until October 1st 2010. The outstanding value of the contract at June 30, 2004 is approximately EUR573.0 million (USD696.5 million) taking into consideration prices prevailing as of the time of the confirmation. In due course, Dalmine Energie S.p.A will be requesting Snam Rete Gas, the necessary capacity for the last year of purchase contract. Such capacity is allocated following regulations enacted by the Italian energy regulatory authority taking into consideration all allocation capacity requests. (c) Under a lease agreement between Gade Srl (Italy) and Dalmine, executed in 2001, relating to a building site in Sabbio Bergamasco used by Dalmine's former subsidiary Tad Commerciale, Dalmine is obligated to bid in the auction for the purchase of a building from Gade for a minimum amount of EUR8.3 million (USD10.1 million). The notice of the auction, according to the contract, was not to take place before January 1, 2003. Up to the date of these financial statements, the auction was not yet announced. (d) On October 24, 2003 Tenaris subsidiaries Siderca and Generadora del Parana S.A. ("Generadora"), together with Siderar, a related party to Tenaris, entered into a joint gas purchase agreement with Repsol-YPF. Under the agreement, which incorporates certain take-or-pay conditions, Tenaris commited to purchase up to 800 million cubic meters of gas during the life of the four-year contract, expiring at the end of 2006 at a price to be negotiated by the parties on a yearly basis. In December 2003, Generadora transferred all of its assets and the rights originated in the purchase agreement with YPF to Siderca. Considering its Campana facility and the facilities received from Generadora, Siderca has an annual estimated gas consumption of 800 million cubic meters. At June 30, 2004, the parties to the joint agreement had fulfilled the purchase commitments originated therein, as a result of which all outstanding obligations resulting from the take-or-pay provisions ceased to exist. (e) On April 27, 2004 Tenaris Financial Services S.A., a subsidiary of the Company, made a deposit of USD10 million at Bank San Paolo IMI S,p.A. as a collateral for a financial transaction between the mentioned bank and another Tenaris subsidiary. (vi) Restrictions to the distribution of profits Under Luxembourg law, at least 5% of the net income per year calculated in accordance with Luxembourg law and regulations must be allocated to the creation of a reserve until such reserve has reached to an amount equal to 10% of the share capital. At June 30, 2004 the Company has created this reserve in full. Tenaris S.A. Consolidated Condensed Interim Financial Statements for the - ------------------------------------------------------------------------ six-month period ended June 30, 2004 - ------------------------------------ Shareholders' equity at June 30, 2004 under Luxembourg law and regulations comprises the following captions: ------------- Thousands of USD ------------- Share capital 1,180,537 Legal reserve 118,054 Share premium 609,733 Other distributable reserve 82 Retained earnings including net income for the six month period ended June 30, 2004 406,732 ------------- Total shareholders equity according to Luxembourg law 2,315,138 ============= Dividends may be paid by Tenaris to the extent distributable retained earnings and distributable reserve calculated in accordance with Luxembourg law and regulations exist. At June 30, 2004, the distributable reserve and retained earnings of Tenaris under Luxembourg law totalled USD406.8 million - as detailed below- and were lower than the consolidated retained earnings of the Company, calculated under IFRS. ------------- Thousands of USD ------------- Distributable reserve and retained earnings at December 31, 298,035 2003 under Luxembourg law Dividends received 242,348 Other income and expenses for the six-month period ended June 30, 2004 1,402 Increase in reserve due to capital increase (see Note 11 (b)) 82 Dividends paid (135,053) ------------- Distributable reserve and retained earnings at June 30, 2004 under Luxembourg law 406,814 ============= 11 2002 exchange offer and other events with impact on minority interest (a) 2002 exchange offer On October 18, 2002, Sidertubes -at that time the controlling shareholder- contributed all of its assets to Tenaris in exchange for shares of its common stock. The assets that Sidertubes contributed included the shares and voting rights that it held directly in Siderca S.A.I.C. ("Siderca"), Tubos de Acero de Mexico S.A. ("Tamsa"), Dalmine S.pA. ("Dalmine"), Tenaris Global Services S.A. and Invertub S.A. Siderca held additional participations in Tamsa, Dalmine, Metalmecanica S.A and Metalcentro S.A. During 2002, Tenaris successfully completed an offer to exchange shares and ADSs of its common stock for all outstanding Class A ordinary shares and ADSs of Siderca, all outstanding common shares and ADSs of Tamsa and all outstanding ordinary shares of Dalmine ("the 2002 Exchange Offer"). These acquisitions were accounted for under the purchase method and the acquisition costs, which totalled USD811.3 million gave rise to a net negative goodwill of USD5.2 million. Tenaris S.A. Consolidated Condensed Interim Financial Statements for the - ------------------------------------------------------------------------ six-month period ended June 30, 2004 - ------------------------------------ (b) Subsequent acquisitions and residual offers Acquisition of Remaining Minority Interest in Tamsa and Capital Increase On September 15, 2003 Tenaris concluded an exchange offer in the United States for shares and ADSs of Tamsa. As per the commitment assumed by Tenaris at the time of the 2002 Exchange Offer, the exchange ratio used was equal to that of the 2002 Exchange Offer. Thus, in exchange for the Tamsa shares received, Tenaris issued 19,586,870 new shares of its common stock for USD51,611 thousand The acquisition cost was determined on the bases of the price of Tenaris's shares on September 12, 2003. For the 356,392 shares of Tamsa's common stock outstanding in the Mexican market, Tenaris and Sidertubes, the company formerly controlling Tenaris, established a fiduciary account with Banamex, in which Sidertubes deposited the necessary number of Tenaris's shares to provide for the exchange of the remaining interests in Tamsa. According to the terms of the fiduciary account, holders of Tamsa's common stock were able to exchange their shares under the escrow arrangement during a six-month period. At the end of the six-month exchange offer period, investors had exchanged 235,512 shares of Tamsa for 249,166 shares of Tenaris. As a result, Tenaris was indebted to Sidertubes for 249,166 shares with a market value of USD0.8 million. On February 13, 2004, Tenaris increased its capital by issuing 249,166 new common shares, which were transferred to Sidertubes to pay off its outstanding loan. The capital increase was allocated USD0.249 million to share capital, USD0.025 million to legal reserve, USD0.464 million to a share premium and USD0.082 million to other distributable reserve, in accordance with Luxemburg law. As of June 30, 2004, Tenaris held, directly or indirectly, more than 99.9% of the common stock of Tamsa. Subsequent acquisitions of Dalmine Shareholding Pursuant to purchases made in the open market up to March 10, 2003, Tenaris held, directly or indirectly, 90.0003% of Dalmine's common stock. On July 11, 2003, Tenaris concluded a cash offer for the remaining minority interest in Dalmine and announced that it held directly or indirectly, 96.8% of the shares of Dalmine. At June 30, 2004, as a result of shares accepted and effectively paid during the tender offer as well as shares purchased in subsequent transactions, Tenaris held directly or indirectly 99.1% of the shares of Dalmine. Acquisition of Remaining Minority Interest in Siderca On April 3, 2003 the Argentine securities regulator approved Tenaris's proposal to acquire the remaining minority interest in Siderca, which amounted to 0.89% of the shares of such company. As a result of Tenaris's gaining beneficial control of 100% of the common stock of Siderca this company was effectively delisted and its ADR program terminated. 12 Business and other acquisitions As explained in Note 11 (b), during the six-month period ended June 30, 2004 Tenaris acquired 0.03 % of Tamsa and 0.31% of Dalmine, for considerations of USD0.3 million -in kind as noted in Note 11 (b)- and USD0.5 million, respectively. On January 23, 2004 Tenaris Investments Limited was incorporated in Ireland to assist the financial activities of the Company and its other subsidiaries; on that date, Tenaris underwrote all of the common shares of the new company and in March 2004, increased its capital to USD10,000. Additionally, on February 2, 2004, Tenaris completed the purchase of the land and manufacturing facilities that were previously leased by its Canadian operating subsidiary. The assets were acquired from Algoma Steel Inc. for the price of approximately USD9.6 million, plus transaction costs. Tenaris S.A. Consolidated Condensed Interim Financial Statements for the - ------------------------------------------------------------------------ six-month period ended June 30, 2004 - ------------------------------------ In June 2004, Materiales Siderurgicos Masisa S.A. ("Masisa") was incorporated in Venezuela to acquire an industrial facility for the production of pre-reduced hot briquetted iron. At June 30, 2004 Tenaris held 55% of Masisa. 13 Subsequent events On July 8, 2004 the Court of First Instance of the European Communities has upheld the decision made by the European Commission on December 8, 1999 to fine eight international steel pipe manufacturers, including Tenaris's Italian subsidiary Dalmine S.p.A., for violation of European competition laws. According to the Court's decision, Dalmine is required to pay a fine of EUR 10.1 million. Since the infringements for which the fine was imposed took place prior to the acquisition of Dalmine by Tenaris in 1996, Dalmine's former owner, who may instruct Dalmine to appeal, is required and has acknowledged its responsibility to pay 84.1% of the fine. The remaining 15.9% of the fine will be paid out of the provision that Dalmine established in 1999 for such proceeding. On July 9, 2004 Tenaris and Siderurgica del Orinoco, Sidor CA acquired from Posven, through the jointly owned company Materiales Siderurgicos Masisa S.A., its industrial facility for the production of pre-reduced hot briquetted iron, or HBI, located in Ciudad Guayana, Venezuela, for the price of USD120 million. Tenaris reduced the percentage of ownership, and now it holds 50.2% of Masisa, while Sidor ownes the remaining 49.8%. On July 26, 2004 Tenaris acquired all of the shares of Tubman International Ltd., a company incorporated under the laws of Gibraltar, which owns 84.86% of S. C. Silcotub S.A. and controlling interests in two minor subsidiaries, and all of the shares of Intermetal Com S.r.l., all of them incorporated in Romania. The shares of Tubman Intenational Ltd. and Intermetal Com S.r.l. where purchased for a price of USD42 million. S. C. Silcotub S.A. is the leading Romanian producer of small diameter seamless pipes for OCTG and other applications that has an annual production capacity of 180,000 tons of seamless pipes. Its facilities include a continuous mandrel mill, finishing facilities and a cold-drawing plant. S. C. Silcotub S.A. is listed in the Bucharest Stock Exchange, while two of the other subsidiaries are listed in the Romanian Electronic Exchange RASDAQ. 14 Related party transactions The Company is controlled by I.I.I. Industrial Investments Inc. B.V.I. which at June 30, 2004, owned 60.2% of Tenaris' shares and voting rights. At that date the remaining 39.8% was publicly traded. The following transactions were carried out with related parties: Six-month period ended June, ----------------------------- 2004 2003 ----------------------------- (Unaudited) (i) Transactions (a) Sales of goods and services Sales of goods 24,334 32,421 Sales of services 8,308 4,791 ----------------------------- 32,642 37,212 ============================= (b) Purchases of goods and services Purchases of goods 26,807 45,745 Purchases of services 22,589 41,155 ----------------------------- 49,396 86,900 ============================= Tenaris S.A. Consolidated Condensed Interim Financial Statements for the - ------------------------------------------------------------------------ six-month period ended June 30, 2004 - ------------------------------------ At June 30, At December 31, 2004 2003 ----------------------------- (Unaudited) (ii) Period-end balances (a) Arising from sales/purchases of goods/services Receivables from related parties 39,031 42,116 Payables to related parties (21,048) (37,219) ----------------------------- 17,983 4,897 ============================= (b) Cash and cash equivalents Time deposits 90 420 ============================= (c) Other balances Trust fund 118,759 118,087 Loan to Ylopa 36,070 33,508 ----------------------------- 154,829 151,595 ============================= (d) Financial debt Borrowings and overdrafts (5,396) (5,716) Borrowings from trust fund (1,789) (1,789) ----------------------------- (7,185) (7,505) ============================= 15 Principal subsidiaries The following is a list of Tenaris's subsidiaries and its direct or indirect percentage of ownership of each company at June 30, 2004 and 2003 is disclosed.
- --------------------------------------------------------------------------------------------------------------- Company Country of Main activity Percentage of Organization ownership at June 30, -------------- 2004 2003 - --------------------------------------------------------------------------------------------------------------- Algoma Tubes Inc. Canada Manufacturing of seamless steel 100% 98% pipes - --------------------------------------------------------------------------------------------------------------- Confab Industrial S.A. and subsidiaries (a) Brazil Manufacturing of welded steel 39% 39% pipes and capital goods - --------------------------------------------------------------------------------------------------------------- Dalmine Holding B.V. and subsidiaries Netherlands Holding company 99% 91% - --------------------------------------------------------------------------------------------------------------- Dalmine S.p.A. Italy Manufacturing of seamless steel 99% 91% pipes - --------------------------------------------------------------------------------------------------------------- Empresas Riga S.A. de C.V. Mexico Manufacturing of welded fittings 100% 94% for seamless steel pipes - --------------------------------------------------------------------------------------------------------------- Exiros S.A. (b) Uruguay Procurement services for 100% 100% industrial companies - --------------------------------------------------------------------------------------------------------------- Information Systems and Technologies N.V. Netherlands Software development and 75% 71% and subsidiaries maintenance - ---------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------- Inmobiliaria Tamsa S.A. de C.V. Mexico Leasing of real estate 100% 94% - --------------------------------------------------------------------------------------------------------------- Insirger S.A. and subsidiaries (c) Argentina Electric power generation 100% 100% - --------------------------------------------------------------------------------------------------------------- Invertub S.A. and subsidiaries Argentina Holding of investments 100% 100% - --------------------------------------------------------------------------------------------------------------- Lomond Holdings B.V. and subsidiaries Netherlands Procurement services for 100% 96% industrial companies - --------------------------------------------------------------------------------------------------------------- Materiales Siderurgicos Masisa S.A. (d) Venezuela Manufacturing of steel products 55% - - --------------------------------------------------------------------------------------------------------------- Metalcentro S.A. Argentina Manufacturing of pipe-end 100% 100% protectors and lateral impact tubes - --------------------------------------------------------------------------------------------------------------- Metalmecanica S.A. Argentina Manufacturing of steel products 100% 100% for oil extraction - --------------------------------------------------------------------------------------------------------------- NKKTubes K.K. Japan Manufacturing of seamless steel 51% 51% pipes - --------------------------------------------------------------------------------------------------------------- Scrapservice S.A. Argentina Processing of scrap 75% 75% - --------------------------------------------------------------------------------------------------------------- Siat S.A. Argentina Manufacturing of welded steel 82% 82% pipes - --------------------------------------------------------------------------------------------------------------- Siderca International A.p.S. Denmark Holding company 100% 100% - --------------------------------------------------------------------------------------------------------------- Siderca S.A.I.C. Argentina Manufacturing of seamless steel 100% 100% pipes - --------------------------------------------------------------------------------------------------------------- Sidtam Limited B.V.I. Holding company 100% 97% - --------------------------------------------------------------------------------------------------------------- SO.PAR.FI Dalmine Holding S.A. Luxembourg Holding company 99% 91% - --------------------------------------------------------------------------------------------------------------- Sociedad Industrial Puntana S.A. (c) Argentina Manufacturing of steel products 100% - - --------------------------------------------------------------------------------------------------------------- Socominter S.A. Venezuela Marketing of steel products 100% 100% - --------------------------------------------------------------------------------------------------------------- Socominter Ltda. Chile Marketing of steel products 100% 100% - --------------------------------------------------------------------------------------------------------------- Talta - Trading e Marketing Lda. (d) Madeira Holding Company 100% - - --------------------------------------------------------------------------------------------------------------- Tenaris Global Services (Panama) S.A. Panama Marketing of steel products 100% 100% - --------------------------------------------------------------------------------------------------------------- Tamsider S.A. de C.V. and subsidiaries Mexico Promotion and organization of 100% 94% steel-related companies - --------------------------------------------------------------------------------------------------------------- Tamtrade S.A.de C.V. Mexico Marketing of steel products 100% 94% - --------------------------------------------------------------------------------------------------------------- Techint Investment Netherlands B.V. Netherlands Holding company 100% 100% - --------------------------------------------------------------------------------------------------------------- Tenaris Global Services Norway AS Norway Marketing of steel products 100% 100% - --------------------------------------------------------------------------------------------------------------- Tenaris Autopartes S.A. de C.V. (b) Mexico Manufacturing of supplies for 100% - the automotive industry - --------------------------------------------------------------------------------------------------------------- Tenaris Connections A.G. and subsidiaries Liechtenstein Ownership and licensing of steel 100% 95% technology - ---------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------- Tenaris Financial Services S.A. Uruguay Financial Services 100% 100% - --------------------------------------------------------------------------------------------------------------- Tenaris Global Services S.A. Uruguay Holding of investments and 100% 100% marketing of steel products - --------------------------------------------------------------------------------------------------------------- Tenaris Global Services (Canada) Inc. Canada Marketing of steel products 100% 100% - --------------------------------------------------------------------------------------------------------------- Tenaris Global Services (U.S.A.) Corporation U.S.A. Marketing of steel products 100% 100% - --------------------------------------------------------------------------------------------------------------- Tenaris Global Services (UK) Ltd United Kingdom Marketing of steel products 100% 100% - --------------------------------------------------------------------------------------------------------------- Tenaris Global Services (Japan) K.K. Japan Marketing of steel products 100% 100% - --------------------------------------------------------------------------------------------------------------- Tenaris Global Services B.V. Netherlands Sales agent of steel products 100% 100% - --------------------------------------------------------------------------------------------------------------- Tenaris Global Services de Bolivia S.R.L. Bolivia Marketing of steel products 100% 100% (previously Socominter de Bolivia S.R.L.) - --------------------------------------------------------------------------------------------------------------- Tenaris Global Services Far East Pte. Ltd. Singapore Marketing of steel products 100% 100% - --------------------------------------------------------------------------------------------------------------- Tenaris Global Services Korea (b) Korea Marketing of steel products 100% - - --------------------------------------------------------------------------------------------------------------- Tenaris Global Services LLC U.S.A. Sales agent of steel products 100% 100% - --------------------------------------------------------------------------------------------------------------- Tenaris Global Services (B.V.I.) Ltd. B.V.I. Holding company 100% 100% - --------------------------------------------------------------------------------------------------------------- Tenaris Global Services Nigeria Ltd. Nigeria Marketing of steel products 100% 100% (Previously Tubular DST Nigeria Ltd.) - --------------------------------------------------------------------------------------------------------------- Tenaris West Africa Ltd. United Kingdom Finishing of steel pipes 100% 99% - --------------------------------------------------------------------------------------------------------------- Texas Pipe Threaders Co. U.S.A. Finishing and marketing of steel 100% 100% pipes - --------------------------------------------------------------------------------------------------------------- Tubos de Acero de Mexico S.A. Mexico Manufacturing of seamless steel 100% 94% pipes - --------------------------------------------------------------------------------------------------------------- Tubos de Acero de Venezuela S.A. Venezuela Manufacturing of seamless steel 70% 66% pipes - --------------------------------------------------------------------------------------------------------------- Tenaris Global Services Ecuador S.A. (b) Ecuador Marketing of steel products 100% - - --------------------------------------------------------------------------------------------------------------- Tenaris Investments Ltd. (d) Ireland Holding company 100% - - ---------------------------------------------------------------------------------------------------------------
(a) Tenaris holds 99% of the voting shares of Confab Industrial S.A. and has, directly or indirectly, the majority of voting rights in all of its subsidiaries. (b) Incorporated during 2003 (c) Acquired during 2003 (d) Incorporated during 2004 Carlos Condorelli Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----