-----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, UArmI5ustVuQdULeKNlLiD2aBDuG5Jl0YDeK0VB77ur8X01UuM5zhj6bqz/KlStc fwhRBAFRufsMmtQsgNJAFA== 0001157523-05-009896.txt : 20051109 0001157523-05-009896.hdr.sgml : 20051109 20051109130959 ACCESSION NUMBER: 0001157523-05-009896 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20051109 FILED AS OF DATE: 20051109 DATE AS OF CHANGE: 20051109 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: 051188908 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 a5016623.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 November 9, 2005 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 -------- ----- 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's press release announcing its results for the third quarter of 2005 and interim dividend. Tenaris Announces 2005 Third Quarter Results and Interim Dividend LUXEMBOURG--(BUSINESS WIRE)--Nov. 8, 2005--The financial and operational information contained in this press release is based on unaudited consolidated condensed interim financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and presented in U.S. dollars. Tenaris S.A. (NYSE:TS) (BCBA:TS) (BMV:TS) (BI:TEN) ("Tenaris") today announced its results for the quarter ended September 30, 2005 with comparison to its results for the quarter ended September 30, 2004. Summary of 2005 Third Quarter Results Increase/ Q3 2005 Q3 2004 (Decrease) --------- --------- ---------- Net sales (US$ million) 1,640.4 1,007.2 63% Operating income (US$ million) 475.2 201.9 135% Net income (US$ million)(a) 350.9 148.8 136% Shareholders' net income (US$ million) 318.9 141.6 125% Earnings per ADS (US$) 2.70 1.20 125% Earnings per share (US$) 0.270 0.120 125% Av. number of shares (million) 1,180.5 1,180.5 EBITDA(b) (US$ million) 528.1 250.4 111% EBITDA margin (% of net sales) 32% 25% a) As required by IAS 1 (revised) as from January 1, 2005 the income for the period disclosed in the income statement does not show minority interest. Earnings per share continue to be calculated on the net income attributable solely to the equity holders of Tenaris. (b) EBITDA equals operating income plus depreciation and amortization charges These third quarter results reflect the continuing strength in demand for our tubular products from the global oil and gas industry. Notwithstanding seasonally lower seamless pipe sales volumes, earnings per share showed a sequential increase over that recorded in the second quarter of 2005 and a 125% increase over the same period of 2004. Higher sales volumes in the Middle East and Africa region reflect the increase in exploration and production activity and our leading position in the region. Our consolidated EBITDA and operating margins and our seamless pipe gross margin all increased moderately over the level of the first two quarters as increases in seamless pipe selling prices offset the impact of cost increases. Free cash flow (net cash provided by operations less capital expenditures) was US$423.5 million and net debt decreased to US$314.0 million. Payment of Interim Dividend Tenaris's board of directors approved the payment of an interim dividend of US$0.127 per share (US$1.27 per ADS), or approximately US$150 million, on November 16, 2005, with an ex-dividend date of November 11. Market Background and Outlook Global demand for seamless pipes remains strong led by higher drilling activity in the oil and gas industry. The international count of active drilling rigs, as published by Baker Hughes, averaged 911 during the third quarter of 2005, an increase of 8% compared to the same quarter of the previous year. The corresponding percentage rig count increases in the Canadian and U.S. markets, which are more sensitive to natural gas prices, were 53% and 16% respectively. Strong demand for our seamless pipe products from the energy sector, particularly for the high-end pipes in which we increasingly specialize, resulted in significant increases in the average selling price for our seamless pipe products in the first two quarters of the year and a further increase in this third quarter. This has enabled us to record strong sales growth and improved operating margins in the year to date as selling price increases have more than offset the impact of higher raw material, energy and labor costs. We expect market conditions, particularly demand for our products and services from oil and gas customers, to remain favorable in the fourth quarter and through the first half of 2006, and that any further cost increases will be offset by higher selling prices. Demand for our welded pipe products has been benefiting from gas pipeline projects in Brazil, where there are a number of gas pipeline projects under development to build up the country's gas pipeline infrastructure, and in Argentina, where there are projects to increase capacity in and extend the existing gas pipeline infrastructure. Sales and operating margins on welded pipes may be affected in the coming quarters by a slowdown in the implementation of these projects. Ternium Exchange On September 9, Tenaris exchanged its 12.6% indirect equity interest in Sidor and its participation in Ylopa for an equity interest in Ternium S.A. Ternium is a Luxembourg-registered company, which was formed to consolidate the Techint Group's holdings in flat and long steel producers Hylsamex (Mexico), Siderar (Argentina) and Sidor (Venezuela). On October 27, Usiminas, a Brazilian steel producer, exchanged its equity interests in Siderar and Sidor for an equity interest in Ternium. Following this transaction, the equity interest of Tenaris in Ternium stands at 15.0% and Ternium owns (i) together with Siderar 99.7% of Hylsamex, (ii) 56% of Siderar and (iii) together with Hylsamex and Siderar 58.5% of Sidor. In addition, Tenaris has the right to receive additional shares in Ternium to the value of US$39.9 million in the event of Ternium making an initial public offering and certain other events, which amount corresponds to Tenaris's share of Sidor's excess cash distribution during the second and third quarters of 2005 and is recorded as a convertible loan. Tenaris has recorded the value of its equity investment in Ternium at the carrying value of its prior equity investment in Sidor (US$229.7 million). Analysis of 2005 Third Quarter Results (metric tons) Increase/ Sales volume Q3 2005 Q3 2004 (Decrease) - -------------------------------------- --------- --------- ---------- North America 198,000 179,000 11% Europe 140,000 154,000 (9%) Middle East & Africa 149,000 113,000 32% Far East & Oceania 92,000 98,000 (6%) South America 104,000 93,000 12% Total seamless pipes 682,000 638,000 7% Welded pipes 124,000 112,000 11% Total steel pipes 806,000 750,000 7% Sales volume of seamless pipes increased by 7% to 682,000 tons in the third quarter of 2005 from 638,000 tons in the same period of 2004. Sales volume increased significantly in the Middle East and Africa region where there has been a significant increase in oil and gas exploration and production activity. Sales volume also increased in the North and South American regions reflecting higher demand from oil and gas customers particularly in Canada and Venezuela. Sales volume decreased in Europe and Far East and Oceania reflecting a decline in sales to industrial sector customers. Sales volumes of welded pipes increased by 11% to 124,000 tons in the third quarter of 2005 from 112,000 tons in the same period of 2004. The increase in sales was due to higher demand for welded pipes for gas pipeline projects in Brazil. (US$ million) Increase/ Net sales Q3 2005 Q3 2004 (Decrease) - -------------------------------------- --------- --------- ---------- Seamless pipes 1,253.9 794.3 58% Welded pipes 221.0 114.2 94% Energy 106.4 80.6 32% Others 59.1 18.1 227% Total 1,640.4 1,007.2 63% Net sales in the quarter ended September 30, 2005 increased 63% to US$1,640.4 million, compared to US$1,007.2 million in the corresponding quarter of 2004. Net sales of seamless pipes rose by 58%, due to higher average selling prices and higher sales volumes. Net sales of welded pipes, which included US$18 million in sales of metal structures made by our Brazilian welded pipe subsidiary in the third quarter of 2005 and US$18 million of such sales in the third quarter of 2004, rose by 94% due to higher selling prices and sales volume. Net sales of energy rose by 32% due to higher sales of natural gas. Net sales of other goods and services increased 227% due to sales of pre-reduced hot briquetted iron from our plant in Venezuela, which we acquired in July 2004 and was not in operation during the third quarter of 2004, and higher sales of sucker rods used in oil extraction. (percentage of net sales) Cost of sales Q3 2005 Q3 2004 - ------------------------------------------------- --------- --------- Seamless pipes 53% 60% Welded pipes 69% 67% Energy 100% 97% Others 63% 59% Total 59% 64% Cost of sales, expressed as a percentage of net sales, decreased to 59% in the third quarter of 2005, compared to 64% in the same period of 2004 reflecting a higher gross margin on our sales of seamless pipe products. Cost of sales for seamless pipe products, expressed as a percentage of net sales, decreased to 53% in the third quarter of 2005 compared to 60% in the same period of 2004 as higher average selling prices offset increased raw material, energy and labor costs. Selling, general and administrative expenses, or SG&A, declined as a percentage of net sales to 12.6% in the quarter ended September 30, 2005 compared to 16.8% in the corresponding quarter of 2004 but rose in absolute terms to US$205.9 million compared to US$168.9 million. Net financial expenses rose to US$5.1 million in the third quarter of 2005, compared to net financial expenses of US$3.1 million in the same period of 2004. Net interest expenses decreased to US$3.7 million compared to US$9.7 million, reflecting a lower net debt position. Equity in earnings of associated companies generated a gain of US$26.5 million in the third quarter of 2005, compared to a gain of US$17.3 million in the third quarter of 2004. These gains were derived mainly from our equity investment in Sidor. On September 9, we exchanged our equity investment in Sidor for an equity investment in Ternium. In these third quarter results, we recognized gains derived from our investment in Sidor as if that investment had been held for the entire period. Going forward, we will recognize the proportion of gains or losses corresponding to our equity interest in Ternium. Income tax charges rose to US$145.7 million in the third quarter of 2005, equivalent to 31% of income before equity in earnings of associated companies and income tax, compared to US$67.2 million, or 34% of income before equity in earnings of associated companies and income tax, in the corresponding quarter of 2004. Income attributable to minority interest rose to US$32.0 million in the third quarter of 2005, compared to US$7.2 million in the corresponding quarter of 2004 reflecting an improvement in operating and financial results at our Confab and NKKTubes subsidiaries. Cash Flow and Liquidity Net cash provided by operations during the third quarter of 2005 was US$486.3 million (US$932.0 million during the nine months). Working capital decreased by US$32.7 million during the third quarter but has increased by US$301.4 million in the year to date. Net cash used in capital expenditures during the third quarter was US$62.8 million. In the year to date, total financial debt has decreased by US$232.9 million to US$1,026.4 million at September 30, 2005 from US$1,259.3 million at December 31, 2004. Net financial debt decreased by US$514.1 million to US$314.0 million at September 30, 2005 during the same period. Analysis of Nine Month Results Results for the nine months period ended September 30, 2005 with comparison to the results for the corresponding period of 2004. Net income attributable to equity holders in the company during the first nine months of 2005 was US$896.6 million, or US$0.760 per share (US$7.60 per ADS), or 19% of net sales, which compares with net income attributable to equity holders in the company during the first nine months of 2004 of US$317.3 million, or US$0.269 per share (US$2.69 per ADS), or 11% of net sales. Operating income was US$1,371.5 million, or 28% of net sales, compared to US$458.1 million, or 16% of net sales. Operating income plus depreciation and amortization was US$1,528.2 million, or 32% of net sales, compared to US$608.5 million, or 21% of net sales. (metric tons) Increase/ Sales volume 9M 2005 9M 2004 (Decrease) - ---------------------------------- ----------- ----------- ---------- North America 651,000 531,000 23% Europe 484,000 493,000 (2%) Middle East & Africa 378,000 320,000 18% Far East & Oceania 292,000 315,000 (7%) South America 328,000 281,000 17% Total seamless pipes 2,132,000 1,940,000 10% Welded pipes 392,000 267,000 47% Total steel pipes 2,523,000 2,206,000 14% (US$ million) Increase/ Net sales 9M 2005 9M 2004 (Decrease) - -------------------------------------- --------- --------- ---------- Seamless pipes 3,667.0 2,267.1 62% Welded pipes 636.8 270.4 136% Energy 362.6 277.3 31% Others 171.1 48.6 252% Total 4,837.6 2,863.4 69% Net sales in the nine months ended September 30, 2005 increased 69% to US$4,837.6 million, compared to US$2,863.4 million in the corresponding period of 2004. Net sales of seamless pipes rose by 62% due to higher average selling prices and higher sales volume reflecting strong market demand. Net sales of welded pipes, which included US$47 million in sales of metal structures made by our Brazilian welded pipe subsidiary in the first nine months of 2005 and US$51 million of such sales in the first nine months of 2004, increased 136% due to higher sales volumes reflecting increased demand from gas pipeline projects in Brazil and Argentina and higher average selling prices. Net sales of electricity and natural gas by Dalmine Energie increased by 31% reflecting higher sales of natural gas and the higher average value of the Euro against the US dollar. Net sales of other goods and services increased 252% due to sales of pre-reduced hot briquetted iron from the plant in Venezuela that we acquired in July 2004 and higher sales of sucker rods used in oil extraction. (percentage of net sales) Cost of sales 9M 2005 9M 2004 - ------------------------------------------------- --------- --------- Seamless pipes 54% 64% Welded pipes 67% 71% Energy 98% 97% Others 61% 59% Total 59% 68% Cost of sales, expressed as a percentage of net sales, decreased to 59% in the first nine months of 2005, compared to 68% in the same period of 2004 due to higher gross margins on our sale of seamless and welded pipe products. Cost of sales for seamless pipe products, expressed as a percentage of net sales, decreased to 54% in the first nine months of 2005 compared to 64% in the same period of 2004 as higher average selling prices offset increased raw material, energy and labor costs. Cost of sales for welded pipe products, expressed as a percentage of net sales, decreased to 67% in the first nine months of 2005, compared to 71% in the same period of 2004, as higher average selling prices and volume-related efficiencies offset increased raw material prices. Selling, general and administrative expenses, or SG&A, declined as a percentage of net sales to 12.5% in the nine months ended September 30, 2005 compared to 16.6% in the corresponding period of 2004 but rose in absolute terms to US$603.5 million compared to US$476.3 million. Net financial expenses totalled US$89.6 million in the first nine months of 2005, compared to net financial expenses of US$22.5 million in the same period of 2004. Net interest expenses increased to US$24.7 million compared to US$22.0 million, reflecting increases in interest rates. Tenaris recorded a loss of US$70.2 million on net foreign exchange transactions and the fair value of derivative instruments in the first nine months of 2005, compared to a loss of US$6.4 million in the first nine months of 2004. Equity in earnings of associated companies generated a gain of US$94.9 million in the first nine months of 2005, compared to a gain of US$57.0 million in the first nine months of 2004. These gains were derived mainly from our equity investment in Sidor. During the third quarter we exchanged our equity investment in Sidor for an equity investment in Ternium. Income tax charges of US$404.4 million were recorded during the first nine months of 2005, equivalent to 32% of income before equity in earnings of associated companies and income tax, compared to income tax charges of US$167.2 million, equivalent to 38% of income before equity in earnings of associated companies and income tax, during the corresponding period of 2004. Income attributable to minority interest rose to US$75.9 million in the first nine months of 2005, compared to US$8.2 million in the first nine months of 2004 reflecting an improvement in operating and financial results at our Confab and NKKTubes subsidiaries. Some of the statements contained in this press release are "forward-looking statements." Forward-looking statements are based on management's current views and assumptions and involve known and unknown risks that could cause actual results, performance or events to differ materially from those expressed or implied by those statements. These risks include but are not limited to risks arising from uncertainties as to future oil prices and their impact on investment programs by oil companies. Consolidated condensed interim income statement (all amounts in thousands of U.S. dollars, unless Three-month period Nine-month period otherwise stated) ended September 30, ended September 30, --------------------- ----------------------- 2005 2004 2005 2004 ---------- ---------- ----------- ----------- (Unaudited) Net sales 1,640,385 1,007,157 4,837,623 2,863,352 Cost of sales (962,929) (641,293) (2,871,831) (1,939,405) ---------- ---------- ----------- ----------- Gross profit 677,456 365,864 1,965,792 923,947 Selling, general and administrative expenses (205,937) (168,922) (603,530) (476,287) Other operating income (expense), net 3,696 4,917 9,265 10,482 ---------- ---------- ----------- ----------- Operating income 475,215 201,859 1,371,527 458,142 Financial income (expense), net (5,141) (3,132) (89,591) (22,455) ---------- ---------- ----------- ----------- Income before equity in earnings (losses) of associated companies and income tax 470,074 198,727 1,281,936 435,687 Equity in earnings of associated companies 26,502 17,300 94,944 56,969 ---------- ---------- ----------- ----------- Income before income tax 496,576 216,027 1,376,880 492,656 Income tax (145,678) (67,204) (404,392) (167,184) ---------- ---------- ----------- ----------- Income for the period(a) 350,898 148,823 972,488 325,472 ========== ========== =========== =========== Attributable to(a): Equity holders of the Company 318,897 141,599 896,587 317,281 Minority interest 32,001 7,224 75,901 8,191 ---------- ---------- ----------- ----------- 350,898 148,823 972,488 325,472 ========== ========== =========== =========== (1) Prior to December 31, 2004 minority interest was shown in the income statement before net income, as required by International Financial Reporting Standards in effect. For periods beginning on or after January 1, 2005, IAS 1 (revised) requires that income for the period as shown on the income statement not exclude minority interest. Earnings per share, however, continue to be calculated on the basis of net income attributable solely to the equity holders of the Company Consolidated condensed interim balance sheet (all amounts in thousands of U.S. dollars) At September 30, 2005 At December 31, 2004 --------------------- --------------------- (Unaudited) ASSETS Non-current assets Property, plant and equipment, net 2,222,228 2,164,601 Intangible assets, net 160,036 49,211 Investments in associated companies 233,177 99,451 Other investments 25,251 24,395 Deferred tax assets 169,560 161,173 Receivables 75,766 2,886,018 151,365 2,650,196 ---------- ---------- Current assets Inventories 1,445,100 1,269,470 Receivables and prepayments 160,961 279,450 Current tax assets 112,188 94,996 Trade receivables 1,163,876 936,931 Other investments 144,659 119,666 Cash and cash equivalents 567,773 3,594,557 311,579 3,012,092 ---------- ---------- ---------- ---------- Total assets 6,480,575 5,662,288 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 Other distributable reserve 82 Currency translation adjustments (47,477) (30,020) Retained earnings 1,425,471 3,286,318 617,538 2,495,924 ---------- ---------- Minority interest 252,354 165,271 ---------- ---------- Total equity 3,538,672 2,661,195 ---------- ---------- LIABILITIES Non-current liabilities Borrowings 642,434 420,751 Deferred tax liabilities 350,474 371,975 Other liabilities 160,454 172,442 Provisions 45,042 31,776 Trade payables 3,874 1,202,278 4,303 1,001,247 ---------- ---------- (all amounts in thousands of U.S. dollars) At September 30, At December 31, 2005 2004 ---------------- ---------------- Current liabilities Borrowings 383,971 838,591 Current tax liabilities 357,279 222,735 Other liabilities 183,736 194,945 Provisions 28,947 42,636 Customers advances 171,039 108,847 Trade payables 614,653 1,739,625 592,092 1,999,846 ---------- ---------- ---------- ---------- Total liabilities 2,941,903 3,001,093 Total equity and liabilities 6,480,575 5,662,288 Consolidated condensed interim cash flow statement Three-month period Nine-month period ended September 30, ended September 30, --------------------- ---------------------- (all amounts in thousands of U.S. dollars) 2005 2004 2005 2004 -------------------------------------------- (Unaudited) (Unaudited) Cash flows from operating activities Income for the period 350,898 148,823 972,488 325,472 Adjustments for: Depreciation and amortization 52,911 48,540 156,654 150,369 Income tax accruals less payments 68,669 27,826 104,425 35,936 Equity in earnings of associated companies (26,502) (17,300) (94,944) (56,969) Interest accruals less payments, net (3,204) 4,137 3,006 7,130 Changes in provisions 2,213 7,972 (423) 7,010 Proceeds from Fintecna arbitration award net of BHP settlement -- -- 66,594 -- Changes in working capital 32,730 (100,907) (301,376) (411,928) Other, including currency translation adjustment 8,570 10,093 25,549 (10,736) --------- --------- ----------- --------- Net cash provided by operating activities 486,285 129,184 931,973 46,284 --------- --------- ----------- --------- Cash flows from investing activities Capital expenditures (62,794) (39,695) (194,428) (122,478) Capital increase and acquisitions of subsidiaries and associated companies (72) (97,367) (48,002) (97,555) Convertible loan to associated companies (39,944) -- (39,944) -- Cost of disposition of property, plant and equipment and intangible assets 2,523 1,323 5,413 10,292 Dividends and distributions received from associated companies 18,009 23,793 59,127 40,595 Changes in restricted bank deposits 426 -- 10,060 -- Investments in short term securities (144,659) -- (144,659) -- Reimbursement from trust funds -- -- 119,666 -- --------- --------- ----------- --------- Net cash used in investing activities (226,511) (111,946) (232,767) (169,146) --------- --------- ----------- --------- Cash flows from financing activities Dividends paid -- -- (199,511) (135,053) Dividends paid to minority interest in subsidiaries (5,194) -- (7,924) (23) Proceeds from borrowings 130,167 114,721 775,930 456,192 Repayments of borrowings (284,759) (111,343) (1,019,006) (163,063) --------- --------- ----------- --------- Net cash (used in) provided by financing activities (159,786) 3,378 (450,511) 158,053 --------- ---------- ----------- --------- Increase in cash and cash equivalents 99,988 20,616 248,695 35,191 Movement in cash and cash equivalents At beginning of the period 430,284 255,305 293,824 238,030 Effect of exchange rate changes 1,190 284 (11,057) 2,984 Increase in cash and cash equivalents 99,988 20,616 248,695 35,191 At September 30, 531,462 276,205 531,462 276,205 Cash and cash equivalents At September, 30 At September, 30 - --------------------------------- ----------------- ----------------- 2005 2004 2005 2004 -------- -------- -------- -------- Cash and bank deposits 567,773 287,424 567,773 287,424 Bank overdrafts (32,871) (11,219) (32,871) (11,219) Restricted bank deposits (3,440) -- (3,440) -- 531,462 276,205 531,462 276,205 CONTACT: Tenaris Nigel Worsnop, 1-888-300-5432 www.tenaris.com 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, 2005 Tenaris, S.A. By: /s/ Cecilia Bilesio - ----------------------- Cecilia Bilesio Corporate Secretary -----END PRIVACY-ENHANCED MESSAGE-----