-----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, Wu8S1Wh8qr/AQipywy3KeZDCe8tMFH7VK8X+J0qxeDs5sNX4rO1ChdlhHi3fWR7c Ght6Q4NziEgucbbY+5L6yQ== 0001157523-06-004445.txt : 20060502 0001157523-06-004445.hdr.sgml : 20060502 20060502142745 ACCESSION NUMBER: 0001157523-06-004445 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20060428 FILED AS OF DATE: 20060502 DATE AS OF CHANGE: 20060502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Ternium S.A. CENTRAL INDEX KEY: 0001342874 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 000000000 STATE OF INCORPORATION: N4 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-32734 FILM NUMBER: 06798855 BUSINESS ADDRESS: STREET 1: 46A, AVENUE JOHN F. KENNEDY 2ND FLOOR CITY: LUXEMBOURG STATE: N4 ZIP: L-1855 BUSINESS PHONE: (352) 4661-11-3815 MAIL ADDRESS: STREET 1: 46A, AVENUE JOHN F. KENNEDY 2ND FLOOR CITY: LUXEMBOURG STATE: N4 ZIP: L-1855 6-K 1 a5136829.txt TERNIUM 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 04/28/2006 Ternium S.A. (Translation of Registrant's name into English) Ternium S.A. 46a, Avenue John F. Kennedy - 2nd floor L-1855 Luxembourg (352) 4661-11-3815 (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): Not applicable 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 Ternium S.A.'s consolidated condensed interim financial statements as of March 31, 2006. TERNIUM S.A. CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF MARCH 31, 2006 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2006 AND 2005 46a, Avenue John F. Kennedy, 2nd floor L - 1855 R.C.S. Luxembourg : B 98 668 TERNIUM S.A. Consolidated condensed interim financial statements as of March 31, 2006 and for the three-month periods ended March 31, 2006 and 2005 (All amounts in USD thousands) CONSOLIDATED CONDENSED INTERIM INCOME STATEMENTS
Three-month period ended March, 31 ------------------------------------------ Notes 2006 2005 ----------------- -------------------- -------------------- (Unaudited) Net sales 4 & 12 1,528,883 767,589 Cost of sales 4, 5 & 12 (987,185) (418,165) -------------------- -------------------- Gross profit 4 541,698 349,424 Selling , General and administrative expenses 6 (150,993) (64,980) Other operating income (expenses), net 1,819 (1,015) -------------------- -------------------- Operating income 392,524 283,429 Financial expenses, net 7 & 12 (123,530) (38,901) Excess of fair value of net assets acquired over cost - 188,356 Equity in (losses) earnings of associated companies 8 (1,828) 19,309 -------------------- -------------------- Income before income tax expense 267,166 452,193 Income tax expense (72,653) (48,616) -------------------- -------------------- Net income for the period 194,513 403,577 -------------------- -------------------- Attributable to: Equity holders of the Company 165,043 337,619 Minority interest 29,470 65,958 -------------------- -------------------- 194,513 403,577 -------------------- -------------------- Weighted average number of shares outstanding 1,729,329,115 1,168,943,632 Basic and diluted earnings per share for profit attributable to the equity holders of the Company (expressed in USD per share) 0.10 0.29
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 Combined Consolidated Financial Statements and notes for the fiscal year ended December 31, 2005. -2- TERNIUM S.A. Consolidated condensed interim financial statements as of March 31, 2006 and for the three-month periods ended March 31, 2006 and 2005 (All amounts in USD thousands) CONSOLIDATED CONDENSED BALANCE SHEETS
Notes March 31, 2006 December 31, 2005 ----------- ------------------------- ----------------------- (Unaudited) ASSETS Non-current assets Property, plant and equipment, net 9 5,418,401 5,463,871 Intangible assets, net 9 547,818 552,882 Investments in associated companies, net 8 7,323 9,122 Other investments, net 12,267 12,607 Deferred tax assets 40,626 29,126 Other Assets 996 952 Receivables, net 53,323 6,080,754 47,863 6,116,423 ------------- ----------- ----------- ----------- Current assets Receivables 293,490 291,302 Other Assets - 3,160 Derivative financial instruments 8,420 5,402 Inventories, net 1,061,634 1,000,119 Trade receivables, net 495,860 472,760 Other investments 5,296 5,185 Cash and cash equivalents 902,884 2,767,584 765,630 2,543,558 ------------- ----------- ----------- ----------- Non-current assets classified as held for sale 9,792 - ----------- ----------- ----------- ----------- Total assets 8,858,130 8,659,981 ----------- ----------- EQUITY Capital and reserves attributable to the company's equity holders 3,146,384 1,842,454 Minority interest 1,700,949 1,733,465 ----------- ----------- Total equity 4,847,333 3,575,919 LIABILITIES Non-current liabilities Provisions 54,697 53,479 Deferred income tax 1,040,943 1,048,188 Non-current tax liabilities 36,917 - Other liabilities 197,902 187,917 Trade payables 1,233 1,167 Borrowings 1,209,366 2,541,058 2,399,878 3,690,629 ------------- ----------- ----------- ----------- Current liabilities Provisions 746 659 Current tax liabilities 103,145 126,972 Other liabilities 186,149 194,073 Trade payables 637,303 555,330 Borrowings 542,396 1,469,739 516,399 1,393,433 ------------- ----------- ----------- ----------- Total liabilities 4,010,797 5,084,062 ----------- ----------- Total equity and liabilities 8,858,130 8,659,981 ----------- -----------
Contingencies, commitments and restrictions to the distribution of profits are disclosed in Note 10. 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 Combined Consolidated Financial Statements and notes for the fiscal year ended December 31, 2005. -3- TERNIUM S.A. Consolidated condensed interim financial statements as of March 31, 2006 and for the three-month periods ended March 31, 2006 and 2005 (All amounts in USD thousands) CONSOLIDATED CONDENSED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Attributable to the Company's equity holders (1) ------------------------------------------------------------------------- Capital Initial stock Total Total public Revaluation issue Currency Equity at Equity at Capital offering and other discount translation Retained Minority March 31, March 31, stock expenses reserves (2) adjustment earnings Total interest 2006 2005 -------------------------------------------------------------------------------------------------------- Balance at January 1 1,396,552 (5,456) 1,462,137 (2,298,048) (92,691) 1,379,960 1,842,454 1,733,465 3,575,919 1,771,851 Currency translation adjustment (42,139) (42,139) (14,988) (57,127) (78,948) Net income 165,043 165,043 29,470 194,513 403,577 -------------------------------------------------------------------------------------------------------- Total recognized income for the period (42,139) 165,043 122,904 14,482 137,386 324,629 Dividends paid in cash and other distributions (123,919) Acquisition of business 916,617 Contributions from shareholders (see Note 3) 33,801 43,100 (26,818) 50,083 (46,998) 3,085 Conversion of Subordinated Convertible Loans (see Note 3) 302,962 302,962 605,924 605,924 Initial Public Offering (see Note 3) 271,429 (17,839) 271,429 525,019 525,019 Revaluation and other reserves 432,385 -------------------------------------------------------------------------------------------------------- Balance at March 31 2,004,744 (23,295) 2,079,628 (2,324,866) (134,830) 1,545,003 3,146,384 1,700,949 4,847,333 3,321,563 --------------------------------------------------------------------------------------------------------
(1) Shareholders equity determined in accordance with accounting principles generally accepted in Luxembourg is disclosed in Note 10 (ii). (2) Represents the difference between book value of non monetary contributions received form shareholders under Luxembourg GAAP and IFRS. Dividends may be paid by Ternium to the extent distributable retained earnings calculated in accordance with Luxembourg GAAP exist. Therefore, retained earnings included in these consolidated condensed interim financial statements may not be wholly distributable. See Note 10 (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 Combined Consolidated Financial Statements and notes for the fiscal year ended December 31, 2005. -4- TERNIUM S.A. Consolidated condensed interim financial statements as of March 31, 2006 and for the three-month periods ended March 31, 2006 and 2005 (All amounts in USD thousands) CONSOLIDATED CONDENSED INTERIM CASH FLOW STATEMENTS
----------------------------------- Notes Three-month period ended March, 31 ---------- ----------------------------------- 2006 2005 ----------------------------------- (Unaudited) Cash flows from operating activities Net income for the period 194,513 403,577 Adjustments for: Depreciation and amortization 9 106,300 48,940 Income tax accruals less payments 10,948 30,044 Excess of fair value of net assets acquired over cost - (188,356) Equity in earnings of associated companies 8 1,828 (19,309) Interest accruals less payments (15,893) 3,185 Changes in provisions 11,420 2,856 Changes in working capital (12,581) 106,152 Currency translation adjustment and others (2,973) 4,421 ---------------- ---------------- Net cash provided by operating activities 293,562 391,510 ---------------- ---------------- Cash flows from investing activities Capital expenditures 9 (89,998) (36,866) Changes in trust funds - 83,570 Acquisition of business 11 (55,183) - Proceeds from the sale of property, plant and equipment 4,013 1,867 ---------------- ---------------- Net cash (used in) provided by investing activities (141,168) 48,571 ---------------- ---------------- Cash flows from financing activities Dividends paid in cash and other distributions to company's equity shareholders - (99,743) Dividends paid in cash and other distributions to minority shareholders - (24,176) Net proceeds from Initial Public Offering 525,019 - Contributions from shareholders 3,085 - Proceeds from borrowings 11,381 26,884 Repayments of borrowings (553,452) (133,391) ---------------- ---------------- Net cash used in financing activities (13,967) (230,426) ---------------- ---------------- ---------------- ---------------- Increase in cash and cash equivalents. 138,427 209,655 ---------------- ---------------- Movement in cash and cash equivalents At January 1, (1) 754,980 194,875 Acquisition of business - 305,342 Effect of exchange rate changes (813) (32,507) Increase in cash and cash equivalents 138,427 209,655 ---------------- ---------------- Cash and cash equivalents at March 31, (1) 892,594 677,365 ---------------- ---------------- Non-cash transactions Conversion of debt instruments into shares 605,925 127,576
(1) In addition, the Company has restricted cash for USD 10,290 and USD 10,650 at March 31, 2006 and December 31, 2005, respectively. 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 Combined Consolidated Financial Statements and notes for the fiscal year ended December 31, 2005. -5- TERNIUM S.A. Consolidated condensed interim financial statements as of March 31, 2006 and for the three-month periods ended March 31, 2006 and 2005 (All amounts in USD thousands) INDEX TO THE NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS 1 Basis of presentation 2 Accounting policies 3 Initial Public Offering 4 Segment information 5 Cost of sales 6 Selling, general and administrative expenses 7 Financial expenses, net 8 Investments in associated companies, net 9 Property, plant and equipment and Intangible assets, net 10 Contingencies, commitments and restrictions on the distribution of profits 11 Acquisition of business 12 Related party transactions 13 Recent accounting pronouncements 14 Post balance sheet events -6- TERNIUM S.A. Notes to the Consolidated Condensed Interim Financial Statements 1 Basis of presentation Ternium S.A. (the "Company" or "Ternium"), a Luxembourg Corporation (Societe Anonyme), was incorporated on December 22, 2003 under the name of Zoompart Holding S.A. to hold investments in flat and long steel manufacturing and distributing companies. The extraordinary shareholders' meeting held on August 18, 2005, changed the corporate name to Ternium S.A. These consolidated condensed interim financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting". These consolidated condensed interim financial statements should be read in conjunction with the audited combined consolidated financial statements for the year ended December 31, 2005. Certain comparative amounts have been reclassified to conform to changes in presentation in the current period. The preparation of consolidated condensed interim 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 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 have been eliminated in consolidation. However, the fact that the functional currency of the Company's subsidiaries differ, results in the generation of foreign exchange gains (losses) that are included in the consolidated condensed interim income statement under "Financial expenses, net". These consolidated condensed interim financial statements were approved by the Board of Directors of Ternium on April 28, 2006. 2 Accounting policies The accounting policies used in the preparation of these consolidated condensed interim financial statements are consistent with those used in the audited combined consolidated financial statements for the year ended December 31, 2005. A detail of the accounting policies followed by the Company in the preparation of these financial statements, other than those followed in the preparation of the audited combined consolidated financial statements for the year ended December 31, 2005 follows: - - Non-current assets (disposal groups) classified as held for sale Non-current assets (disposal groups) are classified as assets held for sale and stated at the lower of carrying amount and fair value less cost to sell if their carrying amount is recovered principally through a sale transaction rather than through a continuing use. The carrying value of non-current assets classified as held for sale total USD 9.8 million and include principally land and other real estate items. Sale is expected to be completed within a one year period. 3 Initial public offering In January 2006, the Company successfully completed its registration process with the United States Securities and Exchange Commission ("SEC") and announced the commencement of its offer to sell 24,844,720 American Depositary Shares ("ADS") representing 248,447,200 shares of common stock through Citigroup Global Markets Inc., Deutsche Bank Securities Inc., JP Morgan Securities Inc., Morgan Stanley & Co. Incorporated, BNP Paribas Securities Corp., Caylon Securities (USA) Inc. and Bayerische Hypo-und Vereinsbank AG (collectively, the "Underwriters" and the offering thereunder, the "Initial Public Offering"). The gross proceeds from the Initial Public Offering totaled USD 496.9 million and have been used to fully repay Tranche A of the Ternium Credit facility, after deducting related expenses. Also, the Company has granted to the Underwriters an option, exercisable for 30 days from January 31, 2006, to purchase up to 3,726,708 additional ADSs at the public offering price of USD20 per ADS less an underwriting discount of USD0.55 per ADS. On February 23, 2006 the underwriter exercised such option to purchase 2,298,136 ADSs at the public offering price of USD20 per ADS less an underwriting discount of USD0.55 per ADS. The gross proceeds from this transaction totaled USD 46.0 million. -7- TERNIUM S.A. Notes to the Consolidated Condensed Interim Financial Statements (Contd.) 3 Initial public offering (continued) In addition, the Company entered into the Subordinated Convertible Loan Agreements for a total aggregate amount of USD594 million to fund the acquisition of Hylsamex. As per the provisions contained in the Subordinated Convertible Loan Agreements, the Subordinated Convertible Loans would be converted into shares of the Company upon delivery of Ternium's ADSs to the Underwriters. On February 6, 2006 the Company delivered the above mentioned ADSs and, accordingly, the Subordinated Convertible Loans (including interest accrued through January 31, 2006) were converted into shares at a conversion price of USD2 per share, resulting in the issuance of 302,962,261 new shares. Furthermore, in November 2005, Sidetur, a subsidiary of Sivensa, exchanged with ISL its 3.42% equity interest in Amazonia and USD 3,1 million in cash for shares of the Company. ISL has contributed such interest in Amazonia to the Company in exchange for shares of the Company after the settlement of the Initial Public Offering. 4 Segment information Primary reporting format - business segments Flat steel Long steel products products Other Total ------------------------------------------------ Three-month period ended March 31, 2006 Net sales 1,197,327 282,864 48,692 1,528,883 Cost of sales (748,689) (198,525) (39,971) (987,185) ------------------------------------------------ Gross profit 448,638 84,339 8,721 541,698 Depreciation - PP&E 89,938 11,407 308 101,653 Flat steel Long steel products products Other Total ----------- ------------------------------------ Three-month period ended March 31, 2005 Net sales 681,591 69,930 16,068 767,589 Cost of sales (369,528) (38,617) (10,020) (418,165) ----------- ------------------------------------ Gross profit 312,063 31,313 6,048 349,424 Depreciation - PP&E 43,289 4,204 - 47,493 Secondary reporting format - geographical segments Allocation of net sales is based on the customers' location. Allocation of assets and capital expenditures is based on the assets' location. Ternium's subsidiaries operate for three main geographical areas. The North American segment comprises principally United States, Canada and Mexico. The South and Central American segment comprises principally Argentina, Brazil, Colombia, Venezuela and Ecuador. -8- TERNIUM S.A. Notes to the Consolidated Condensed Interim Financial Statements (Contd.) 4 Segment information (continued) South and Europe Central North and America America others Total ---------- ---------- ---------- ---------- Three-month period ended March 31, 2006 Net sales 827,884 686,704 14,295 1,528,883 Depreciation - PP&E. 68,445 33,201 7 101,653 Three-month period ended March 31, 2005 Net sales 482,639 162,648 122,302 767,589 Depreciation - PP&E. 47,482 4 7 47,493 5 Cost of sales
Three-month period ended March 31, -------------------------------- 2006 2005 -------------------------------- (Unaudited) Inventories at the beginning of the period 1,000,119 254,286 Acquisition of business 8,180 284,676 Plus: Charges for the period Raw materials and consumables used and other movements 695,571 243,159 Services and fees 35,312 17,677 Labor cost 118,292 45,687 Depreciation of property, plant and equipment 95,181 44,615 Amortization of intangible assets 3,348 1,019 Maintenance expenses 71,601 33,070 Office expenses 1,513 502 Freight and transportation 5,666 5,168 Insurance 2,641 759 Provision for obsolescence 9,390 2,014 Recovery from sales of scrap and by-products (13,846) (6,810) Others 15,851 5,254 Less: Inventories at the end of the period (1,061,634) (512,911) ------------- ------------------ Cost of sales 987,185 418,165 ------------- ------------------ 6 Selling, General and administrative expenses ------------------------------- Three-month period ended March 31, ------------------------------- 2006 2005 ------------------------------- (Unaudited) Services and fees 16,020 5,148 Labor cost 33,233 10,713 Depreciation of property plant and equipment 6,472 2,878 Amortization of intangible assets 1,299 428 Maintenance and expenses 3,791 811 Taxes 10,295 6,469 Office expenses 6,461 2,271 Freight and transportation 66,833 33,742 Insurance 401 171 Others 6,188 2,349 ------------- ----------------- Selling, General and administrative expenses 150,993 64,980 ------------- -----------------
-9- TERNIUM S.A. Notes to the Consolidated Condensed Interim Financial Statements (Contd.) 7 Financial expenses, net Three-month period ended March 31, ------------------------- 2006 2005 ------------------------- (Unaudited) Interest expense (37,376) (5,175) Interest income 12,153 3,895 Net foreign exchange transaction gains and change in fair value of derivative instruments (5,496) (28,465) Write-off of debt issue costs (9,030) - Income from Participation Account (i) - 44,050 Loss from Participation Account (i) (83,305) (53,100) Others (476) (106) ---------- ------------ Financial expenses, net (123,530) (38,901) ---------- ------------ (i) Until February 15, 2005, the Company accounted for its investment in Amazonia under the equity method of accounting. Thus, income arising from the Participation Account Agreement has been recorded under Income from Participation Account within Financial expenses, net. Upon conversion of the Amazonia Convertible Debt Instrument on February 15, 2005, the Company acquired control over Amazonia and began accounting for such investment on a consolidated basis. Accordingly, income resulting from Ternium's share of the Participation Account as from February 15, 2005, has been offset against Amazonia's loss for the same concept and shown net under Loss from Participation Account line item. 8 Investments in associated companies, net Three-month period ended March 31, ----------------------------------- 2006 2005 ----------------------------------- (Unaudited) At the beginning of the year 9,122 309,318 Translation adjustment 29 (3,425) Equity in (losses) earnings of associated companies (1,828) 19,309 Consolidation of Amazonia - (318,166) ----------------- ----------------- At the end of the period 7,323 7,036 ----------------- ----------------- 9 Property, plant and equipment and Intangible assets, net Net Property, Plant and Net Intangible Equipment Assets ---------------- ----------------- (Unaudited) (Unaudited) Three-month period ended March 31, 2006 At the beginning of the year 5,463,871 552,882 Currency translation differences (64,426) (3,985) Transfers (9,633) - Additions 86,430 3,568 Disposals (4,013) - Increase due to business acquisition 47,825 - Depreciation/ Amortization charge (101,653) (4,647) ---------------- ----------------- At the end of the period 5,418,401 547,818 ---------------- ----------------- -10- TERNIUM S.A. Notes to the Consolidated Condensed Interim Financial Statements (Contd.) 10 Contingencies, commitments and restrictions on the distribution of profits This note should be read in conjunction with Note 29 to the Company's audited Combined Consolidated Financial Statements for the year ended December 31, 2005. Significant changes or events since the date of the annual report are as follows: (i) Consorcio Siderurgia Amazonia Ltd .- PDVSA-Gas C.A. claim As a consequence of the commercial transactions entered into by Sidor and PDVSA-Gas during the three-month period ended March 31, 2006, Sidor's potential exposure under its litigation against that company increased by USD 7.8 million, thus reaching a total amount of USD 102.1 million. (ii) Restrictions on the distribution of profits Under Luxembourg law, at least 5% of net income per year calculated in accordance with Luxembourg law and regulations must be allocated to a reserve until such reserve has reached an amount equal to 10% of the share capital. Ternium may pay dividends to the extent that it has distributable retained earnings and distributable reserves calculated in accordance with Luxembourg law and regulations. Therefore, retained earnings included in the consolidated condensed interim financial statements may not be wholly distributable. Shareholders' equity under Luxembourg law and regulations comprises the following captions (amounts in USD thousands): At March 31, 2006 ----------------- Share capital 2,004,744 Initial Public Offering expenses (14,928) Legal reserve 200,474 Distributable reserves 402,149 Non distributable reserves 1,414,122 Accumulated profit at January 1, 2006 107,612 Profit for the period 18,337 ----------------- Total shareholders' equity under Luxembourg GAAP 4,132,510 ----------------- 11 Acquisition of business On November 18 2005, Ternium's Argentine subsidiary, Siderar, agreed to acquire assets and facilities of Acindar Industria Argentina de Aceros S.A. ("Acindar") related to the production of welded steel pipes in the province of Santa Fe in Argentina, as well as 100% of the issued and outstanding shares of Impeco S.A., which in turn owns a plant located in the province of San Luis in Argentina. Purchase price paid totaled USD 55.2 million, subject to subsequent adjustments. These two plants have a production capacity of 140 thousand tons per year of tubes to be used in the construction, agricultural and manufacturing industries. The acquisition has been approved by the Argentine competition authorities and was completed on January 31, 2006. This acquisition did not give rise to goodwill. The acquired business contributed revenues of USD 9.9 million in the three month period ended March 31, 2006. The fair value of assets and liabilities arising from acquisition are as follows: USD thousands ---------------- Property, plant and equipment 47,825 Inventories 8,180 Cash and cash equivalents - Deferred tax liabilities (875) Others assets and liabilities, net 53 ---------------- Net 55,183 ---------------- -11- TERNIUM S.A. Notes to the Consolidated Condensed Interim Financial Statements (Contd.) 12 Related parties transactions The Company is controlled by San Faustin N.V., a Netherlands Antilles corporation, which owns 70.52% of the Company's outstanding shares, either directly or indirectly. The ultimate controlling entity of the Company is Rocca & Partners, a British Virgin Islands corporation. The following transactions were carried out with related parties:
Three-month period ended March, 31 ------------------------------------- 2006 2005 ------------------- ----------------- (Unaudited) (i) Transactions (a) Sales of goods and services Sales of goods to other related parties 24,243 9,113 Sales of services to associated parties 508 275 Sales of services to other related parties - 663 ------------------- ----------------- 24,751 10,051 ------------------- ----------------- (b) Purchases of goods and services Purchases of goods from associated parties 14,390 21,603 Purchases of goods from other related parties 21,983 9,237 Purchases of services from other related parties 10,894 8,678 ------------------- ----------------- 47,267 39,518 ------------------- ----------------- (c) Financial results Income with associated parties - 44,697 Expenses with other related parties (147) (1,013) ------------------- ----------------- (147) 43,684 ------------------- ----------------- ------------------------------------- At March 31, At December 31, 2006 2005 ------------------ ------------------ (Unaudited) (ii) Period-end balances (a) Arising from sales/purchases of goods/services Receivables from associated parties 66,753 71,317 Receivables from other related parties 25,193 18,175 Payables to associated parties (5,123) (13,644) Payables to other related parties (23,318) (17,914) ------------------ ------------------ 63,505 57,934 ------------------ ------------------ (b) Other investments ------------------ ------------------ Time deposit 10,147 10,450 ------------------ ------------------ (c) Other balances ------------------ ------------------ Trust fund with other related parties - 5,185 ------------------ ------------------ (d) Financial debt ------------------ ------------------ Borrowings with other related parties (3,789) (607,472) ------------------ ------------------
(iii) Officers and Directors' compensation The aggregate compensation of Officers and Directors earned during the three-month period ended March 31, 2006 amounts to USD 3,426 thousands. -12- 13 Recent accounting pronouncements IFRIC Interpretation 9, Reassessment of Embedded Derivatives In February 2006, the International Financial Reporting Interpretations Committee ("IFRIC") issued IFRIC Interpretation 9 "Reassessment of Embedded Derivatives" ("IFRIC 9"). IFRIC 9 applies to all embedded derivatives within the scope of International Accounting Standard No. 39. However, it does not address (i) remeasurement issues arising from a reassessment of embedded derivatives, or (ii) the acquisition of contracts with embedded derivatives in a business combination nor their possible reassessment at the date of acquisition. Paragraph 7 of IFRIC 9 states that an entity shall assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required. Also, paragraph 8 of IFRIC 9 states that a first-time adopter shall assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative on the basis of the conditions that existed at the later of the date it first became a party to the contract and the date a reassessment is required by paragraph 7. An entity shall apply this Interpretation for annual periods beginning on or after 1 June 2006, although earlier application is encouraged. If an entity applies the Interpretation for a period beginning before 1 June 2006, it shall disclose that fact. The Interpretation shall be applied retrospectively. The Company's management has not assessed the potential impact that the application of IFRIC 9 may have on the Company's financial condition or results of operations. 14 Post balance sheet events The following are the main post balance sheet events: a) In April 2006, the Company acquired a 50% equity interest in Acerex S.A. de C.V. ("Acerex") through its subsidiary Hylsa S.A. de C.V. Total purchase price accounted for USD 44.6 million. Upon completion of this transaction (which is expected to occur in the second quarter of fiscal year 2006 following the approval by the Mexican competition authorities) Hylsa S.A. de C.V. will own 100% of Acerex. Acerex is a service center dedicated to processing steel to produce short-length and steel sheets in various widths. Acerex operates as a cutting and processing plant for Ternium's Mexican operations and as an independent processor for other steel companies. b) On April 19, 2006, the Shareholders' Meeting of Siderar, approved the distribution of dividends in cash for 122.8 million of Argentine pesos (approximately USD 40.0 million). Roberto Philipps Chief Financial Officer -13- 1 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. TERNIUM S.A. By: /s/ Roberto Philipps By: /s/ Daniel Novegil -------------------------- -------------------------- Name: Roberto Philipps Name: Daniel Novegil Title: Chief Financial Officer Title: Chief Executive Officer Dated: April 28, 2006 -----END PRIVACY-ENHANCED MESSAGE-----