-----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, LfTWfBVkyNKpqNbiuw5jdI8ywJkUCD8a0kDj8cPVNESLlKc4rEnDl+ax8S3Q3RHy gwX0vhsfGPjQh7cYPtQu9A== 0001157523-06-011120.txt : 20061109 0001157523-06-011120.hdr.sgml : 20061109 20061109140708 ACCESSION NUMBER: 0001157523-06-011120 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20061109 FILED AS OF DATE: 20061109 DATE AS OF CHANGE: 20061109 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: 061201097 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 a5271024.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, 2006 TENARIS, S.A. (Translation of Registrant's name into English) TENARIS, S.A. 46a, Avenue John F. Kennedy L-1855 Luxembourg (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or 40-F. Form 20-F X Form 40-F ----- ----- Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12G3-2(b) under the Securities Exchange Act of 1934. Yes No X ----- ----- If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- . - TENARIS S.A. CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2006 46a, Avenue John F. Kennedy - 2nd Floor. L - 1855 Luxembourg Tenaris S.A. Consolidated Condensed Interim Financial Statements for the nine month period ended September 30, 2006 - -------------------------------------------------------------------------------- CONSOLIDATED CONDENSED INTERIM INCOME STATEMENT
(all amounts in thousands of U.S. dollars, unless Three-month period ended Nine-month period ended otherwise stated) September 30, September 30, ------------------------------------------------------- Notes 2006 2005 2006 2005 ------------------------------------------------------- (Unaudited) Net sales 2 1,922,491 1,640,385 5,667,908 4,837,623 Cost of sales 2 & 3 (982,487) (962,929) (2,974,015) (2,871,831) ------------------------------------------------------- Gross profit 940,004 677,456 2,693,893 1,965,792 Selling, general and administrative expenses 4 (246,506) (205,937) (712,882) (603,530) Other operating income, net 2,274 3,696 8,465 9,265 ------------------------------------------------------- Operating income 695,772 475,215 1,989,476 1,371,527 Financial income (expenses), net 5 (3,743) (5,141) 10,918 (89,591) ------------------------------------------------------- Income before equity in earnings of associated 692,029 470,074 2,000,394 1,281,936 companies and income tax Equity in earnings of associated companies 29,653 26,502 76,725 94,944 ------------------------------------------------------- Income before income tax 721,682 496,576 2,077,119 1,376,880 Income tax (211,726) (145,678) (629,709) (404,392) ------------------------------------------------------- Income for the period 509,956 350,898 1,447,410 972,488 Attributable to: Equity holders of the Company 479,105 318,897 1,370,564 896,587 Minority interest 30,851 32,001 76,846 75,901 ------------------------------------------------------- 509,956 350,898 1,447,410 972,488 ------------------------------------------------------- Earnings per share attributable to the equity holders of the Company during the period Weighted average number of ordinary shares (thousands) 1,180,537 1,180,537 1,180,537 1,180,537 Earnings per share (U.S. dollars per share) 0.41 0.27 1.16 0.76 Earnings per ADS (U.S. dollars per ADS) 0.81 0.54 2.32 1.52
The ratio of ordinary shares per American Depositary Shares (ADSs) was changed from a ratio of one ADS equal to ten ordinary shares to a new ratio of one ADS equal to two ordinary shares. The implementation date for this change was April 26, 2006, for shareholders of record at April 17, 2006. Earnings per ADS reflected above have been adjusted for this change in the conversion ratio. The accompanying notes are an integral part of these consolidated condensed interim financial statements. The Report of the Independent Registered Public Accounting Firm on these consolidated condensed interim financial statements is issued as a separate document. These consolidated condensed interim financial statements should be read in conjunction with our audited Consolidated Financial Statements and notes for the fiscal year ended December 31, 2005.
CONSOLIDATED CONDENSED INTERIM BALANCE SHEET (all amounts in thousands of U.S. dollars) At September 30, 2006 At December 31, 2005 ---------------------------- ----------------------------- Notes (Unaudited) ASSETS Non-current assets Property, plant and equipment, net 6 2,403,926 2,230,038 Intangible assets, net 6 165,673 159,099 Investments in associated companies 392,011 257,234 Other investments 27,473 25,647 Deferred tax assets 248,032 194,874 Receivables 39,310 3,276,425 65,852 2,932,744 -------------- -------------- Current assets Inventories 1,668,723 1,376,113 Receivables and prepayments 192,433 143,282 Current tax assets 144,307 102,455 Trade receivables 1,438,470 1,324,171 Other investments 134,651 119,907 Cash and cash equivalents 1,295,184 4,873,768 707,356 3,773,284 ---------------------------- ----------------------------- Total assets 8,150,193 6,706,028 ============== =============== EQUITY Capital and reserves attributable to the Company's equity holders Share capital 1,180,537 1,180,537 Legal reserves 118,054 118,054 Share premium 609,733 609,733 Currency translation adjustments (29,371) (59,743) Other reserves 28,835 2,718 Retained earnings 2,822,834 4,730,622 1,656,503 3,507,802 -------------- -------------- Minority interest 328,255 268,071 -------------- --------------- Total equity 5,058,877 3,775,873 -------------- --------------- LIABILITIES Non-current liabilities Borrowings 554,094 678,112 Deferred tax liabilities 361,974 353,395 Other liabilities 163,582 154,378 Provisions 80,079 43,964 Trade payables 521 1,160,250 1,205 1,231,054 -------------- -------------- Current liabilities Borrowings 321,217 332,180 Current tax liabilities 463,448 452,534 Other liabilities 187,524 138,875 Provisions 9,037 36,945 Customer advances 180,381 113,243 Trade payables 769,459 1,931,066 625,324 1,699,101 ---------------------------- ----------------------------- Total liabilities 3,091,316 2,930,155 ============== =============== Total equity and liabilities 8,150,193 6,706,028 ============== ===============
Contingencies, commitments and restrictions to the distribution of profits are disclosed in Note 8. The accompanying notes are an integral part of these consolidated condensed interim financial statements. The Report of the Independent Registered Public Accounting Firm on these consolidated condensed interim financial statements is issued as a separate document. These consolidated condensed interim financial statements should be read in conjunction with our audited Consolidated Financial Statements and notes for the fiscal year ended December 31, 2005.
CONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (all amounts in thousands of U.S. dollars) Attributable to equity holders of the Company ---------------------------------------------------------------------- Currency Share Legal Share Other translation Retained Minority Capital Reserves Premium Reserves adjustment Earnings (*) Interest Total ------------------------------------------------------------------------------------------- (Unaudited) Balance at January 1, 2006 1,180,537 118,054 609,733 2,718 (59,743) 1,656,503 268,071 3,775,873 ------------------------------------------------------------------------------------------- Currency translation differences - - - - 30,372 - 13,090 43,462 Change in equity reserves (see Notes 1 and 9) - - - 26,117 - - - 26,117 Acquisition of minority interest - - - - - - (10,131) (10,131) Dividends paid in cash - - - - - (204,233) (19,621) (223,854) Income for the period - - - - - 1,370,564 76,846 1,447,410 ------------------------------------------------------------------------------------------- Balance at September 30, 2006 1,180,537 118,054 609,733 28,835 (29,371) 2,822,834 328,255 5,058,877 ------------------------------------------------------------------------------------------- Attributable to equity holders of the Company ---------------------------------------------------------------------- Currency Share Legal Share Other translation Retained Minority Capital Reserves Premium Reserves adjustment Earnings Interest Total ------------------------------------------------------------------------------------------- (Unaudited) Balance at January 1, 2005 1,180,537 118,054 609,733 82 (30,020) 617,538 165,271 2,661,195 Effect of adopting IFRS 3 (see Note 1) - - - - - 110,775 - 110,775 ------------------------------------------------------------------------------------------- Adjusted balance at January 1, 2005 1,180,537 118,054 609,733 82 (30,020) 728,313 165,271 2,771,970 Currency translation differences - - - - (17,457) - 18,137 680 Acquisition and increase of minority interest - - - - - - 969 969 Dividends paid in cash - - - (82) - (199,429) (7,924) (207,435) Income for the period - - - - - 896,587 75,901 972,488 ------------------------------------------------------------------------------------------- Balance at September 30, 2005 1,180,537 118,054 609,733 - (47,477) 1,425,471 252,354 3,538,672 -------------------------------------------------------------------------------------------
(*) Retained Earnings calculated in accordance with Luxembourg Law are disclosed in Note 8 (ii). The accompanying notes are an integral part of these consolidated condensed interim financial statements. The Report of the Independent Registered Public Accounting Firm on these consolidated condensed interim financial statements is issued as a separate document. These consolidated condensed interim financial statements should be read in conjunction with our audited Consolidated Financial Statements and notes for the fiscal year ended December 31, 2005. 3
CONSOLIDATED CONDENSED INTERIM CASH FLOW STATEMENT Nine-month period ended September 30, ----------------------------------- (all amounts in thousands of U.S. dollars) 2006 2005 ----------------------------------- (Unaudited) Cash flows from operating activities Income for the period 1,447,410 972,488 Adjustments for: Depreciation and amortization 166,008 156,654 Income tax accruals less payments 1,947 104,425 Equity in earnings of associated companies (76,725) (94,944) Interest accruals less payments, net 1,456 3,006 Income from disposal of investment (6,933) - Changes in provisions 8,207 (423) Proceeds from Fintecna arbitration award net of BHP settlement - 66,594 Changes in working capital (250,654) (301,376) Other, including currency translation adjustment 21,447 25,549 ----------------------------------- Net cash provided by operating activities 1,312,163 931,973 ----------------------------------- Cash flows from investing activities Capital expenditures (302,077) (194,428) Acquisitions of subsidiaries (see Note 9) (39,828) (48,002) Convertible loan to associated companies - (39,944) Proceeds from disposal of property, plant and equipment and intangible assets 16,568 5,413 Dividends and distributions received from associated companies - 59,127 Changes in restricted bank deposits 2,027 10,060 Reimbursement from trust funds - 119,666 Investments in short terms securities (14,744) (144,659) ----------------------------------- Net cash used in investing activities (338,054) (232,767) ----------------------------------- Cash flows from financing activities Dividends paid (204,233) (199,511) Dividends paid to minority interest in subsidiaries (19,621) (7,924) Proceeds from borrowings 293,845 775,930 Repayments of borrowings (443,328) (1,019,006) ----------------------------------- Net cash used in financing activities (373,337) (450,511) ----------------------------------- Increase in cash and cash equivalents 600,772 248,695 Movement in cash and cash equivalents At beginning of the period 680,591 293,824 Effect of exchange rate changes (4,951) (11,057) Increase in cash and cash equivalents 600,772 248,695 ----------------------------------- At September 30, 1,276,412 531,462 ----------------------------------- ----------------------------------- Cash and cash equivalents At September 30, ----------------------------------- 2006 2005 Cash and bank deposits 1,295,184 567,773 Bank overdrafts (18,751) (32,871) Restricted bank deposits (21) (3,440) ----------------------------------- 1,276,412 531,462 -----------------------------------
The accompanying notes are an integral part of these consolidated condensed interim financial statements. The Report of the Independent Registered Public Accounting Firm on these consolidated condensed interim financial statements is issued as a separate document. These consolidated condensed interim financial statements should be read in conjunction with our audited Consolidated Financial Statements and notes for the fiscal year ended December 31, 2005. 1 NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS Index to the notes to the consolidated condensed interim financial statements 1 General information and basis of presentation 2 Segment information 3 Cost of sales 4 Selling, general and administrative expenses 5 Financial income (expenses), net 6 Property, plant and equipment and Intangible assets, net 7 Dividends per share 8 Contingencies, commitments and restrictions to the distribution of profits 9 Business acquisitions, incorporation of subsidiaries and other significant events 10 Related party disclosures 2 NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS (In the notes all amounts are shown in U.S. dollars, unless otherwise stated) 1 General information and basis of presentation Tenaris S.A. (the "Company" or "Tenaris"), a Luxembourg corporation (societe anonyme holding), was incorporated on December 17, 2001 as a holding company for investments in steel pipe manufacturing and distribution companies. The Company consolidates its subsidiary companies, as detailed in Note 31 to the audited Consolidated Financial Statements for the year ended December 31, 2005, and modified as discussed in Note 9 to these consolidated condensed interim financial statements. These consolidated condensed interim financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting". The accounting policies used in the preparation of these consolidated condensed interim financial statements are consistent with those used in the audited consolidated financial statements for the year ended December 31, 2005. These consolidated condensed interim financial statements should be read in conjunction with the audited Consolidated Financial Statements for the year ended December 31, 2005, which have been prepared in accordance with International Financial Reporting Standards ("IFRS"). The preparation of consolidated condensed interim financial statements in conformity with IFRS requires management to make certain accounting estimates and assumptions that might affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet dates, and also the reported amounts of revenues and expenses for the reported periods. Actual results may differ from these estimates. Material intercompany transactions and balances between Tenaris subsidiaries have been eliminated in consolidation. However, some financial gains and losses do arise from intercompany transactions because certain subsidiaries use their respective local currencies as their functional currency for accounting purposes. Such gains and losses are included in the consolidated income statement under Financial income (expenses), net. The Company applies hedge accounting treatment for certain qualifying financial instruments. These transactions are classified as cash flow hedges (mainly currency forward contracts on highly probable forecast transactions and interest rate swaps). The effective portion of the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in equity. Amounts accumulated in equity are charged in the income statement in the periods when the hedged item affects profit or loss. The gain or loss relating to the ineffective portion is recognized in the income statement. The fair value of the Company's derivative financial instruments (asset or liability) is reflected on the Balance Sheet. For transactions designated and qualifying for hedge accounting, the Company documents at the time of designation of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives. The Company also documents its assessment at hedge designation and at each period end of whether the derivatives that are used in hedging transactions are expected to be effective in offsetting changes in cash flows of hedged items. At September 30, 2006, the effective portion of designated cash flow hedges amounts to $1.2 million and is included in Other reserves in equity. Upon the adoption of IFRS 3, which was adopted together with the revised IAS 38, "Intangible Assets", and IAS 36, "Impairment of Assets", previously accumulated negative goodwill is required to be derecognized through an adjustment to retained earnings. The derecognition of negative goodwill in this manner resulted in an increase of $110.8 million in the beginning balance of the Company's equity at January 1, 2005. These consolidated condensed interim financial statements were approved for issue by the Tenaris Board of Directors on November 8, 2006. 3 2 Segment information
Primary reporting format: business segments ------------------------------------------------------------------------- (all amounts in thousands of U.S. dollars) Welded & Other Seamless Metallic Products Energy Other Total ------------------------------------------------------------------------- Nine-month period ended September 30, 2006 (Unaudited) Net sales 4,657,469 362,519 403,722 244,198 5,667,908 Cost of sales (2,151,812) (262,752) (390,534) (168,917) (2,974,015) ------------------------------------------------------------------------- Gross profit 2,505,657 99,767 13,188 75,281 2,693,893 Depreciation and amortization 140,241 15,879 1,503 8,385 166,008 Nine-month period ended September 30, 2005 Net sales 3,667,049 636,849 362,593 171,132 4,837,623 Cost of sales (1,987,376) (425,808) (354,959) (103,688) (2,871,831) ------------------------------------------------------------------------- Gross profit 1,679,673 211,041 7,634 67,444 1,965,792 Depreciation and amortization 133,040 11,185 1,973 10,456 156,654 Secondary reporting format: geographical segments ------------------------------------------------------------------------- (all amounts in thousands of U.S. dollars) Middle South North East & Far East & America Europe America Africa Oceania Total ------------------------------------------------------------------------- Nine-month period ended September 30, 2006 (Unaudited) Net sales 1,091,230 1,394,850 1,321,558 1,335,281 524,989 5,667,908 Depreciation and amortization 69,723 46,306 44,940 583 4,456 166,008 Nine-month period ended September 30, 2005 Net sales 1,353,356 1,114,478 1,281,329 636,435 452,025 4,837,623 Depreciation and amortization 62,151 53,755 35,925 50 4,773 156,654
Allocation of net sales to geographical segments is based on customer location. Allocation of depreciation and amortization is based on the geographical location of the underlying assets. 4 3 Cost of sales
Nine-month period ended September 30, ----------------------------------- (all amounts in thousands of U.S. dollars) 2006 2005 ----------------------------------- (Unaudited) Inventories at the beginning of the period 1,376,113 1,269,470 Plus: Charges of the period Raw materials, energy, consumables and other 2,372,914 2,242,620 Services and fees 275,865 243,318 Labor cost 346,522 313,733 Depreciation of property, plant and equipment 144,390 134,778 Amortization of intangible assets 2,163 4,278 Maintenance expenses 82,128 75,507 Provisions for contingencies - 1,200 Allowance for obsolescence 6,932 6,808 Taxes 2,964 2,317 Other 32,747 22,902 ----------------------------------- 3,266,625 3,047,461 Less: Inventories at the end of the period (1,668,723) (1,445,100) ----------------------------------- 2,974,015 2,871,831 ----------------------------------- 4 Selling, general and administrative expenses Nine-month period ended September 30, ----------------------------------- (all amounts in thousands of U.S. dollars) 2006 2005 ----------------------------------- (Unaudited) Services and fees 87,477 90,190 Labor cost 194,589 159,578 Depreciation of property, plant and equipment 6,473 7,465 Amortization of intangible assets 12,982 10,133 Commissions, freight and other selling expenses 261,127 212,174 Provisions for contingencies 7,915 9,629 Allowances for doubtful accounts 1,991 6,059 Taxes 81,684 65,282 Other 58,644 43,020 ----------------------------------- 712,882 603,530 ----------------------------------- 5 Financial income (expenses), net Nine-month period ended September 30, ----------------------------------- (all amounts in thousands of U.S. dollars) 2006 2005 ----------------------------------- (Unaudited) Interest expense (42,292) (40,122) Interest income 43,818 15,449 Net foreign exchange transaction results and changes in fair value of derivative instruments 9,304 (70,162) Other 88 5,244 ----------------------------------- 10,918 (89,591) -----------------------------------
5 6 Property, plant and equipment and Intangible assets, net
Net Property, Plant and Net Intangible Assets Equipment ------------------------- ----------------------- (all amounts in thousands of U.S. dollars) (Unaudited) (Unaudited) Nine-month period ended September 30, 2006 Opening net book amount 2,230,038 159,099 Currency translation differences 48,098 835 Transfers (125) 125 Additions 282,621 19,456 Disposals (28,735) (99) Increase due to business acquisition 22,892 1,402 Depreciation / Amortization charge (150,863) (15,145) ------------------------- ----------------------- At September 30, 2006 2,403,926 165,673 ------------------------- -----------------------
7 Dividends per share The shareholders' meeting held on June 7, 2006 approved the payment of a dividend in the amount of $0.30 per share or approximately $354.1 million, corresponding to operating results for 2005. This amount included the interim dividend paid in November, 2005, in the amount of $0.127 per share or approximately $149.9 million. Tenaris paid the balance of the annual dividend amounting to approximately $204.2 million corresponding to $0.173 per share during 2006. During 2005 Tenaris paid $199.5 million corresponding to $0.169 per share. 8 Contingencies, commitments and restrictions to the distribution of profits This note should be read in conjunction with Note 26 to the Company's audited Consolidated Financial Statements for the year ended December 31, 2005. Significant changes or events since the date of such financial statements are the following: (i) Commitments (a) In August 2001, Dalmine Energie S.p.A. ("Dalmine Energie") entered into a ten-year contract ending October 1, 2011 with Eni S.p.A. Gas & Power Division ("Eni") for the purchase of natural gas with certain take-or-pay conditions. The outstanding value of these commitments at September 30, 2006 amounts to approximately EUR701.9 million ($888.6 million). (b) Under the Gas Release Program enacted by Eni, in August 2004, Dalmine Energie increased its supply of natural gas for the period from October 1, 2004 to September 30, 2008. The gas purchase and sale agreements entered into with Eni contain customary take-or-pay conditions. The additional gas supply mentioned above is valued at approximately EUR205.2 million ($259.8 million), based on prices prevailing at September 2006. Dalmine Energie has also obtained the necessary capacity on the interconnection infrastructure at the Italian border to transport the natural gas to Italy for the supply period. (c) Dalmine Energie has entered into arrangements and expects to obtain additional gas transportation capacity on the Trans Austria Gasleitung GmbH ("TAG") pipeline, which is presently under construction. This capacity will allow Dalmine Energie to import an incremental 1,176.5 million cubic meters of natural gas per year. The additional transportation capacity, which is subject to "ship or pay" provisions, will be available on a firm basis on the TAG pipeline beginning October 2008 and through September 2028. The expected annual value of this "ship or pay" commitment is approximately EUR5.0 million per year. Tenaris provided bank guarantees in the amount of EUR15.1 million in support of Dalmine Energie. The value of the bank guarantees corresponds to the termination penalties that would be due to TAG in the event of termination due to shipper's default. 6 8 Contingencies, commitments and restrictions to the distribution of profits (Cont'd) (ii) Restrictions to the distribution of profits and payment of dividends As of September 30, 2006, shareholders' equity as defined under Luxembourg law and regulations consisted of the following:
(all amounts in thousands of U.S. dollars) (unaudited) Share capital 1,180,537 Legal reserve 118,054 Share premium 609,733 Retained earnings including net income for the nine-month period ended September 30, 2006 1,392,057 ------------------- Total shareholders equity in accordance with Luxembourg law 3,300,381 -------------------
At least 5% of the net income per year as calculated in accordance with Luxembourg law and regulations must be allocated to the creation of a legal reserve equivalent to 10% of share capital. As of September 30, 2006, this reserve is fully allocated and additional allocations to the reserve are not required under Luxembourg law. Dividends may not be paid from this reserve. Tenaris may pay dividends to the extent, among other conditions, that it has distributable retained earnings calculated in accordance with Luxembourg law and regulations. At September 30, 2006, Tenaris's retained earnings under Luxembourg law totalled $1,392.1 million, as detailed below.
(all amounts in thousands of U.S. dollars) (unaudited) Retained earnings at December 31, 2005 under Luxembourg law 1,171,738 Dividends received 416,831 Other income and expenses for the nine-month period ended September 30, 2006 7,721 Dividends paid (204,233) ------------------- Retained earnings at September 30, 2006 under Luxembourg law 1,392,057 -------------------
9 Business acquisitions, incorporation of subsidiaries and other significant events (a) Acquisition of Maverick Tube Corporation ("Maverick") On October 5, 2006, Tenaris completed its acquisition of Maverick, pursuant to which, Maverick merged with and into a wholly owned subsidiary of Tenaris. On that date, Tenaris transferred to the paying agent for the transaction $65 per share in cash for each issued and outstanding share of Maverick's common stock. The transaction was valued at $3,185 million, including Maverick's net debt. To finance the acquisition and the payment of related obligations, Tenaris and some of its subsidiaries entered into syndicated five-year term loan facilities in an aggregate of up to $2.7 billion; the balance was met from cash on hand. Tenaris will consolidate Maverick's balance sheet and results of operations in its consolidated financial statements beginning in the fourth quarter of 2006. With operations in the United States, Canada and Colombia, Maverick is a producer of welded oil country tubular goods (OCTG), line pipe and coiled tubing for use in oil and natural gas wells, also producing welded pipes for electrical conduits. Maverick has a combined annual capacity of two million short tons of steel pipes with a size range from one-quarter inch to 16 inches, and approximately 4,650 employees. In 2005, Maverick reported net revenues of approximately $1.8 billion, of which 82% were from its energy products division. 7 9 Business acquisitions, incorporation of subsidiaries and other significant events (Cont'd) (b) Letter of intent relating to sale of 75% interest in Dalmine Energie On September 13, 2006, Tenaris signed a letter of intent with E.ON Sales and Trading GmbH, an indirect subsidiary of E.ON AG, for the sale to E.ON of a 75% interest in Dalmine Energie, Tenaris's Italian energy supply business, for a purchase price of approximately EUR39 million, subject to adjustments. The transaction, which is subject to negotiation and execution of definitive documentation, clearance by the applicable competition authorities and customary due diligence conditions, is expected to close before the end of 2006. The Company cannot give assurance that the transaction will be completed. Should it be completed, Tenaris will represent the results of Dalmine Energie as results of discontinued operations in accordance with the requirements of IFRS 5 "Non-current Assets Held for Sale and Disontinued Operations". (c) Investment in Ternium S.A. ("Ternium") On September 9, 2005, the Company exchanged its 21.2% equity interest in Consorcio Siderurgia Amazonia Ltd. ("Amazonia") and its 24.4% equity interest in Ylopa Servicos de Consultadoria Ltda. ("Ylopa"), for 209,460,856 shares in Ternium, the company into which San Faustin N.V. (a Netherlands Antilles corporation and the controlling shareholder of Tenaris) consolidated its Latin American holdings in flat and long steel producers Siderar S.A.I.C. ("Siderar"), Sidor C.A. ("Sidor") and Hylsamex, S.A de C.V. As a result of the exchange, which was carried out based on fair values as determined by an internationally recognized investment bank engaged for this purpose, Tenaris obtained an initial ownership interest of approximately 17.9% in Ternium. Subsequently, on October 27, 2005, Usinas Siderurgicas de Minas Gerais S.A. reached an agreement with Ternium to exchange its interests in Amazonia, Ylopa and Siderar, plus additional consideration of approximately $114.1 million provided as a convertible loan, for an equity stake in Ternium. As a consequence of the additional shares issued under this transaction, Tenaris' ownership stake was reduced to 15.0% of Ternium's outstanding common stock at December 31, 2005. The effect of this transaction resulted in an increase of the Company's proportional ownership in Ternium's equity of approximately $2.7 million, which Tenaris recognized in Other Reserves in equity. In addition, in August 2005 Tenaris extended to Ternium two subordinated convertible loans consisting of principal amount of $39.7 million. The principal amount of these loans at the date issued corresponded to the amount of certain distributions received from Amazonia during the second and third quarters of 2005 in connection with Ternium's participation in Amazonia's financial debt restructuring in 2003. At the date of Ternium's initial public offering ("IPO"), the loans totaled approximately $40.5 million, including accrued interest. On February 6, 2006, Ternium completed its IPO, issuing an additional 248,447,200 shares (equivalent to 24,844,720 ADS) at a price of $2.00 per share, or $20.00 per ADS. Tenaris received an additional 20,252,338 shares upon the mandatory conversion of its loans to Ternium. In addition to the shares issued to Tenaris, Ternium issued shares to other shareholders corresponding to their mandatory convertible loans. On February 23, 2006, the underwriters of Ternium's IPO exercised an overallotment option under which Ternium issued an additional 37,267,080 shares (equivalent to 3,726,708 ADS). As a result of the IPO and the conversion of loans, as of February 6, 2006, Tenaris' ownership stake in Ternium amounted to 11.46%. The effect of these transactions resulted in an additional increase of the Company's proportional ownership in Ternium's equity of approximately $27.7 million, which Tenaris recognized in Other Reserves in equity. At September 30, 2006, the closing price of Ternium shares as quoted on the New York Stock Exchange was $23.16 per ADS, giving Tenaris' ownership stake a market value of approximately $532 million. At September 30, 2006, the carrying value of Tenaris's ownership stake in Ternium was approximately $389 million. 8 9 Business acquisitions, incorporation of subsidiaries and other significant events (Cont'd) (d) Acquisition of Welded Pipe Business in Argentina On January 31, 2006, Siat S.A., a subsidiary of Tenaris, completed its acquisition of the welded pipe assets and facilities located in Villa Constitucion, province of Santa Fe, Argentina, belonging to Industria Argentina de Acero, S.A. ("Acindar") for $29.3 million. The facilities acquired have an annual capacity of 80,000 tons of welded pipes whose small diameter range largely complements the range of welded pipes that Tenaris produces in Argentina. The acquired business did not materially contribute to the Company's revenue and income. The fair value of acquired assets and liabilities were: Nine-month period ended September 30, 2006 ------------------------------- (all amounts in thousands of U.S. dollars) (Unaudited) ------------------------------- Other assets and liabilities (net) 5,052 Property, plant and equipment 22,892 Goodwill 1,402 ------------------------------- Net assets acquired 29,346 ------------------------------- (e) Minority Interest During the nine-month period ended September 30, 2006, additional shares of Silcotub and Dalmine were acquired from minority shareholders for approximately $10.1 million. 10 Related party disclosures The Company is controlled by San Faustin N.V., a Netherlands Antilles corporation, which owns 60.45% of the Company's outstanding shares, either directly or through its wholly-owned subsidiary I.I.I. Industrial Investments Inc., a Cayman Islands corporation. San Faustin N.V. is controlled by Rocca & Partners, a British Virgin Islands corporation. Transactions and balances disclosed as with "Associated" companies are those with companies in which Tenaris owns 20% to 50% of the voting rights or over which Tenaris exerts significant influence in accordance with IFRS, but does not have control. All other transactions with related parties which are not Associated and which are not consolidated are disclosed as "Other". The transactions and balances with related parties are shown below: (all amounts in thousands of U.S. dollars)
Nine-month period ended September 30, 2006 Associated (1) Other Total -------------------------------------------------- (i) Transactions (a) Sales of goods and services Sales of goods 96,672 44,332 141,004 Sales of services 13,586 2,661 16,247 -------------------------------------------------- 110,258 46,993 157,251 -------------------------------------------------- (b) Purchases of goods and services Purchases of goods 66,658 16,903 83,561 Purchases of services 8,368 58,254 66,622 -------------------------------------------------- 75,026 75,157 150,183 --------------------------------------------------
9 10 Related party disclosures (Cont'd)
Nine-month period ended September 30, 2005 Associated (2) Other Total -------------------------------------------------- (i) Transactions (a) Sales of goods and services Sales of goods 78,584 63,709 142,293 Sales of services 3,649 7,263 10,912 -------------------------------------------------- 82,233 70,972 153,205 -------------------------------------------------- (b) Purchases of goods and services Purchases of goods 31,215 33,144 64,359 Purchases of services 12,057 46,907 58,964 -------------------------------------------------- 43,272 80,051 123,323 -------------------------------------------------- At September 30, 2006 Associated (3) Other Total -------------------------------------------------- (ii) Period-end balances (a) Related to sales / purchases of goods / services Receivables from related parties 33,736 23,677 57,413 Payables to related parties (23,363) (15,397) (38,760) -------------------------------------------------- 10,373 8,280 18,653 -------------------------------------------------- (b) Other balances Receivables 2,079 - 2,079 (c) Financial debt Borrowings (6) (57,449) - (57,449) At December 31, 2005 Associated (4) Other Total -------------------------------------------------- (ii) Period-end balances (a) Related to sales / purchases of goods / services Receivables from related parties 30,988 15,228 46,216 Payables to related parties (21,034) (8,413) (29,447) -------------------------------------------------- 9,954 6,815 16,769 -------------------------------------------------- (b) Other balances (5) 42,437 - 42,437 (c) Financial debt Borrowings (6) (54,801) - (54,801)
(1) Includes Ternium S.A. and its subsidiaries, Condusid C.A. As from September 1, 2006, it also includes Finma S.A.I.F. (2) Includes: Condusid, Ylopa, Amazonia and Sidor. (3) Includes Ternium S.A. and its subsidiaries, Condusid C.A. and Finma S.A.I.F. (4) Includes Ternium S.A. and its subsidiaries and Condusid C.A. (5) Includes convertible loan to Ternium S.A. of $40.4 million. (6) Convertible loan from Sidor C.A. to Matesi (Materiales Siderurgicos S.A.). Carlos Condorelli Chief Financial Officer 10 The attached material is being furnished to the Securities and Exchange Commission pursuant to Rule 13a-16 and Form 6-K under the Securities Exchange Act of 1934, as amended. This report contains Tenaris' Consolidated Condensed Interim Financial Statements as of September 30, 2006. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: November 9, 2006 Tenaris, S.A. By: /s/ Cecilia Bilesio - ----------------------- Cecilia Bilesio Corporate Secretary -----END PRIVACY-ENHANCED MESSAGE-----