6-K 1 a5394767.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 5/3/2007 Ternium S.A. (Translation of Registrant's name into English) Ternium 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): 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 financial statements as of March 31, 2007. TERNIUM S.A. CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF MARCH 31, 2007 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2007 AND 2006 46a, Avenue John F. Kennedy, 2nd floor L - 1855 R.C.S. Luxembourg : B 98 668 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Ternium S.A.: We have reviewed the accompanying consolidated condensed balance sheet of Ternium S.A. and its subsidiaries as of March 31, 2007, and the related consolidated condensed statements of income and of changes in shareholders' equity for each of the three-month periods ended March 31, 2007 and 2006 and the consolidated condensed statements of cash flows for the three-month periods ended March 31, 2007 and 2006. These interim financial statements are the responsibility of the Company's management. We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated condensed interim financial statements for them to be in conformity with International Financial Reporting Standards. We previously audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2006, and the related consolidated statements of income, of changes in shareholders' equity and of cash flows for the year then ended (not presented herein), and in our report dated February 27, 2007 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2006, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived Buenos Aires, Argentina May 3, 2007 PRICE WATERHOUSE & CO. S.R.L. by (Partner) --------------------------------------------------------------- Marcelo D. Pfaff TERNIUM S.A. Consolidated condensed interim financial statements as of March 31, 2007 and for the three-month periods ended March 31, 2007 and 2006 (All amounts in USD thousands) CONSOLIDATED CONDENSED INTERIM INCOME STATEMENTS
Three-month period ended March 31, ----------------------------- Notes 2007 2006 --------- -------------- -------------- (Unaudited) Net sales 3 1,798,293 1,530,999 Cost of sales 3 & 4 (1,223,890) (989,657) -------------- -------------- Gross profit 3 574,403 541,342 Selling, general and administrative expenses 3 & 5 (164,548) (151,017) Other operating income, net 3 5,561 2,199 -------------- -------------- Operating income 3 415,416 392,524 Interest expense (16,948) (34,314) Interest income 10,817 12,153 Other financial expenses, net 6 (76,122) (101,369) Equity in losses of associated companies (1,003) (1,828) -------------- -------------- Income before income tax expense 332,160 267,166 Income tax expense (80,532) (72,653) -------------- -------------- Net income for the period 251,628 194,513 -------------- -------------- Attributable to: Equity holders of the Company 222,133 165,043 Minority interest 29,495 29,470 -------------- -------------- 251,628 194,513 -------------- -------------- Weighted average number of shares outstanding 2,004,743,442 1,729,329,115 Basic earnings per share for profit attributable to the equity holders of the Company (expressed in USD per share) 0.11 0.10 Diluted earnings per share for profit attributable to the equity holders of the Company (expressed in USD per share) 0.11 0.09
The accompanying notes are an integral part of these consolidated condensed interim financial statements. 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, 2006. 2 TERNIUM S.A. Consolidated condensed interim financial statements as of March 31, 2007 and for the three-month periods ended March 31, 2007 and 2006 (All amounts in USD thousands) CONSOLIDATED CONDENSED BALANCE SHEETS
Notes March 31, 2007 December 31, 2006 ------- ----------------------- ------------------------------ (Unaudited) ASSETS Non-current assets Property, plant and equipment, net 7 5,351,398 5,420,683 Intangible assets, net 8 547,814 551,587 Investments in associated companies 15,277 16,285 Other investments, net 13,464 13,387 Deferred tax assets 35,044 36,439 Receivables, net 93,039 6,056,036 78,903 6,117,284 --------- ----------- -------- --------- Current assets Receivables 163,953 175,818 Derivative financial instruments 9,803 7,852 Inventories, net 1,181,399 1,241,325 Trade receivables, net 640,385 577,866 Cash and cash equivalents 983,690 2,979,230 643,352 2,646,213 ----------- --------- --------- Non-current assets classified as held for sale 5,964 7,042 ----------- --------- Total assets 9,041,230 8,770,539 ----------- --------- EQUITY Capital and reserves attributable to the company's equity holders 3,938,739 3,757,558 Minority interest 1,747,641 1,729,583 Total equity 5,686,380 5,487,141 LIABILITIES Non-current liabilities Provisions 64,815 60,543 Deferred income tax 962,727 985,155 Tax liabilities 1,168 - Other liabilities 289,954 274,566 Trade payables 7,152 7,229 Borrowings 399,722 1,725,538 548,401 1,875,894 --------- ----------- ---------- ---------- Current liabilities Current tax liabilities 177,169 103,195 Other liabilities 205,389 158,374 Trade payables 686,952 621,754 Derivative financial instruments 10 15,487 Borrowings 559,792 1,629,312 508,694 1,407,504 ---------- ------------ ----------- ----------- Total liabilities 3,354,850 3,283,398 ------------ ----------- Total equity and liabilities 9,041,230 8,770,539 ------------ -----------
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. 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, 2006. 3 TERNIUM S.A. Consolidated condensed interim financial statements as of March 31, 2007 and for the three-month periods ended March 31, 2007 and 2006 (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 public Revaluation issue Currency Capital offering and other discount translation Retained Minority Total stock expenses reserves (2) adjustment earnings Total interest Equity ----------------------------------------------------------------------------------------------------- Balance at January 1, 2007 2,004,744 (23,295) 2,047,199 (2,324,866) (121,608) 2,175,384 3,757,558 1,729,583 5,487,141 Currency translation adjustment (40,952) (40,952) (11,283) (52,235) Net income for the period 222,133 222,133 29,495 251,628 ----------------------------------------------------------------------------------------------------- Total recognized income for the period 2,004,744 (23,295) 2,047,199 (2,324,866) (162,560) 2,397,517 3,938,739 1,747,795 5,686,534 Dividends paid in cash and other distributions by subsidiary companies (154) (154) ----------------------------------------------------------------------------------------------------- Balance at March 31, 2007 2,004,744 (23,295) 2,047,199 (2,324,866) (162,560) 2,397,517 3,938,739 1,747,641 5,686,380 ----------------------------------------------------------------------------------------------------- Balance at January 1, 2006 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 Currency translation adjustment (42,139) (42,139) (14,988) (57,127) Net income for the period 165,043 165,043 29,470 194,513 ----------------------------------------------------------------------------------------------------- Total recognized income for the period (42,139) 165,043 122,904 14,482 137,386 Contributions from shareholders 33,801 43,100 (26,818) 50,083 (46,998) 3,085 Conversion of Subordinated Convertible Loans 302,962 302,962 605,924 605,924 Initial Public Offering 271,429 (17,839) 271,429 525,019 525,019 ----------------------------------------------------------------------------------------------------- Balance at March 31, 2006 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 -----------------------------------------------------------------------------------------------------
(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 from shareholders under Luxembourg GAAP and IFRS. Dividends may be paid by Ternium to the extent distributable retained earnings calculated in accordance with Luxembourg law and regulations 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. 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, 2006. 4 TERNIUM S.A. Consolidated condensed interim financial statements as of March 31, 2007 and for the three-month periods ended March 31, 2007 and 2006 (All amounts in USD thousands) CONSOLIDATED CONDENSED INTERIM CASH FLOW STATEMENTS
Three-month period Notes ended March 31, -------- ------------------- 2007 2006 ------------------- (Unaudited) Cash flows from operating activities Net income for the period 251,628 194,513 Adjustments for: Depreciation and amortization 7 & 8 115,259 106,300 Income tax accruals less payments 57,976 10,948 Derecognition of property, plant and equipment 7 - 1,619 Equity in losses of associated companies 1,003 1,828 Interest accruals less payments (4,735) (15,893) Changes in provisions (3,316) 11,420 Changes in working capital 110,349 (12,581) Others 2,129 (1,107) --------- --------- Net cash provided by operating activities 530,293 297,047 --------- --------- Cash flows from investing activities Capital expenditures 7 & 8 (102,385) (89,998) Acquisition of business - (55,183) Proceeds from the sale of property, plant and equipment 5,174 528 --------- --------- Net cash used in investing activities (97,211) (144,653) --------- --------- Cash flows from financing activities Net proceeds from Initial Public Offering - 525,019 Contributions from shareholders - 3,085 Proceeds from borrowings 120,141 11,381 Repayments of borrowings (212,527) (553,452) --------- --------- Net cash used in financing activities (92,386) (13,967) --------- --------- --------- --------- Increase in cash and cash equivalents 340,696 138,427 --------- --------- Movement in cash and cash equivalents At January 1, (1) 633,002 754,980 Effect of exchange rate changes (380) (813) Increase in cash and cash equivalents 340,696 138,427 --------- --------- Cash and cash equivalents at March 31, (1) 973,318 892,594 --------- --------- Non-cash transactions Conversion of debt instruments into shares - 605,925
(1) In addition, the Company has restricted cash for USD 10,372 and USD 10,350 at March 31, 2007 and December 31, 2006, respectively. The accompanying notes are an integral part of these consolidated condensed interim financial statements. 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, 2006. 5 TERNIUM S.A. Consolidated condensed interim financial statements as of March 31, 2007 and for the three-month periods ended March 31, 2007 and 2006 (All amounts in USD thousands) INDEX TO THE NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS 1 General information and basis of presentation 2 Accounting policies 3 Segment information 4 Cost of sales 5 Selling, general and administrative expenses 6 Other financial expenses, net 7 Property, plant and equipment, net 8 Intangible assets, net 9 Distribution of dividends 10 Contingencies, commitments and restrictions on the distribution of profits 11 Related party transactions 12 Subsequent event: Grupo Imsa S.A.B. de C.V. ("Grupo Imsa") 13 Recent accounting pronouncements 6 TERNIUM S.A. Notes to the Consolidated Condensed Interim Financial Statements (Contd.) 1 General information and 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. Following a corporate reorganization carried out during fiscal year 2005, in January 2006 the Company successfully completed its registration process with the United States Securities and Exchange Commission ("SEC"). As from February 1, 2006, the Company's shares are listed in the New York Stock Exchange. The name and percentage of ownership of subsidiaries that have been included in consolidation in these Consolidated Condensed Interim Financial Statement is disclosed in Note 2 to the audited Consolidated Financial Statement for the year ended December 31, 2006. 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 Consolidated Financial Statements for the year ended December 31, 2006, which have been prepared in accordance with International Financial Reporting Standards ("IFRS"). 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 "Other financial expenses, net". These Consolidated Condensed Interim Financial Statements were approved by the Board of Directors of Ternium on May 3, 2007. 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 Consolidated Financial Statements for the year ended December 31, 2006. Recently issued accounting pronouncements were applied by the Company as from their respective dates. During 2007, Ternium launched an incentive retention program (the "Program") applicable to certain senior officers and employees of the Company, who will be granted a number of Units throughout the duration of the Program. The value of each of these Units will be based on Ternium's shareholders' equity (excluding minority interest). Also, the beneficiaries of the Program will be entitled to receive cash amounts based on (i) the amount of dividend payments made by Ternium to its shareholders, and (ii) the number of Units held by each beneficiary to the Program. Units vest ratably over a period of four years beginning January 1, 2007 and will be redeemed by the Company ten years after grant date. As of March 31, 2007, the outstanding liability corresponding to the Program amounts to USD 2.1 million. 7 TERNIUM S.A. Notes to the Consolidated Condensed Interim Financial Statements (Contd.) 3 Segment information Primary reporting format - business segments Business segments: for management purposes, the Company is organized on a worldwide basis into the following segments: flat steel products, long steel products and others. The flat steel products segment comprises the manufacturing and marketing of hot rolled coils and sheets, cold rolled coils and sheets, tin plate, welded pipes, hot dipped galvanized and electrogalvanized sheets, pre-painted sheets and other tailor-made products to serve its customers' requirements. The long steel products segment comprises the manufacturing and marketing of billets (steel in its basic, semifinished state), wire rod and bars. The other products segment includes products other than flat and long steel, mainly pig iron and pellets.
Long Flat steel steel products products Other Total ----------------------------------------- (Unaudited) Three-month period ended March 31, 2007 Net sales 1,392,938 357,737 47,618 1,798,293 Cost of sales (941,703) (249,290) (32,897) (1,223,890) ---------- --------- -------- ----------- Gross profit 451,235 108,447 14,721 574,403 Selling, general and administrative expenses (129,361) (30,526) (4,661) (164,548) Other operating income, net 3,826 903 832 5,561 ---------- --------- -------- ----------- Operating income 325,700 78,824 10,892 415,416 Depreciation - PP&E 90,990 15,644 3,318 109,952 Long Flat steel steel products products Other Total ----------------------------------------- (Unaudited) Three-month period ended March 31, 2006 Net sales 1,198,472 282,578 49,949 1,530,999 Cost of sales (758,349) (206,038) (25,270) (989,657) ---------- --------- -------- ----------- Gross profit 440,123 76,540 24,679 541,342 Selling, general and administrative expenses (119,962) (25,843) (5,212) (151,017) Other operating (expenses) income, net (776) 213 2,762 2,199 ---------- --------- -------- ----------- Operating income 319,385 50,910 22,229 392,524 Depreciation - PP&E 85,191 13,740 2,722 101,653
8 TERNIUM S.A. Notes to the Consolidated Condensed Interim Financial Statements (Contd.) 3 Segment information (continued) Secondary reporting format - geographical segments The secondary reporting format is based on a geographical location. Ternium sells its products to three main geographical areas: South and Central America, North America, and Europe and others. 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.
South and Europe Central North and America America others Total ---------- -------- ------- ---------- (Unaudited) Three-month period ended March 31, 2007 Net sales 1,011,159 733,236 53,898 1,798,293 Depreciation - PP&E 75,445 34,480 27 109,952 Three-month period ended March 31, 2006 Net sales 829,466 676,247 25,286 1,530,999 Depreciation - PP&E 68,445 33,201 7 101,653
4 Cost of sales
Three-month period ended March 31, ----------------------- 2007 2006 ----------- ----------- (Unaudited) Inventories at the beginning of the year 1,241,325 1,000,119 Acquisition of business - 8,180 Plus: Charges for the period Raw materials and consumables used and other movements 772,759 697,105 Services and fees 43,195 35,312 Labor cost 131,678 120,462 Depreciation of property, plant and equipment 106,701 97,849 Amortization of intangible assets 3,687 3,348 Maintenance expenses 95,987 67,745 Office expenses 1,719 1,513 Freight and transportation 6,451 5,666 Insurance 2,462 2,641 Provision for obsolescence (4,424) 9,390 Recovery from sales of scrap and by-products (20,498) (13,846) Others 24,247 15,807 Less: Inventories at the end of the period (1,181,399) (1,061,634) ----------- ----------- Cost of sales 1,223,890 989,657 ----------- -----------
9 TERNIUM S.A. Notes to the Consolidated Condensed Interim Financial Statements (Contd.) 5 Selling, general and administrative expenses
Three-month period ended March 31, ---------------------------------- 2007 2006 -------------- ------------- (Unaudited) Services and fees 11,237 14,454 Labor cost 39,713 33,996 Depreciation of property plant and equipment 3,251 3,804 Amortization of intangible assets 1,620 1,299 Maintenance expenses 3,584 3,791 Taxes 15,547 12,563 Office expenses 5,975 7,205 Freight and transportation 80,104 66,833 Insurance 268 401 Provision for impairment of trade receivables (2,155) 380 Others 5,404 6,291 -------------- ------------- Selling, general and administrative expenses 164,548 151,017 -------------- -------------
6 Other financial expenses, net
Three-month period ended March 31, ----------------------------- 2007 2006 ---------- --------- (Unaudited) Net foreign exchange transaction gains and change in fair value of derivative instruments 18,904 (5,496) Debt issue costs (1,063) (9,030) Loss from Participation Account (90,701) (83,305) Others (3,262) (3,538) ---------- --------- Other financial expenses, net (76,122) (101,369) ---------- ---------
7 Property, plant and equipment, net
Three-month period ended March 31, --------------------- 2007 2006 ---------- ---------- (Unaudited) At the beginning of the year 5,420,683 5,463,871 Currency translation differences (47,820) (64,426) Transfers - (9,633) Additions 92,403 86,430 Disposals (3,916) (2,394) Derecognition - (1,619) Increase due to business acquisition - 47,825 Depreciation charge (109,952) (101,653) ---------- ---------- At the end of the period 5,351,398 5,418,401 ---------- ----------
10 TERNIUM S.A. Notes to the Consolidated Condensed Interim Financial Statements (Contd.) 8 Intangible assets, net
Three-month period ended March 31, ----------------------------- 2007 2006 --------- -------- (Unaudited) At the beginning of the year 551,587 552,882 Currency translation differences (8,448) (3,985) Additions 9,982 3,568 Amortization charge (5,307) (4,647) --------- -------- At the end of the period 547,814 547,818 --------- --------
9 Distribution of dividends On February 27, 2007, the Board of Directors proposed a dividend distribution of US$0.05 per share (US$0.50 per ADS), or approximately US$100.2 million in the aggregate, which is subject to shareholder approval at the Company's annual general shareholders' meeting to be held on June 6, 2007. If the annual dividend is approved at the annual general shareholders' meeting, the payment date is expected to be on June 12, 2007. 10 Contingencies, commitments and restrictions on the distribution of profits This note should be read in conjunction with Note 28 to the Company's audited Consolidated Financial Statements for the year ended December 31, 2006. Significant changes or events since the date of the annual report are as follows: (i) Consorcio Siderurgia Amazonia Ltd .- PDVSA-Gas C.A. claim In June 2004, the arbitration proceedings brought by Sidor against PDVSA Gas, C.A. (on the basis that PDVSA Gas had charged Sidor higher than agreed-upon prices in its supplies of gas against the application of the most favored client clause) were resolved in Sidor's favor. Accordingly, in its financial statements at December 31, 2004, Sidor reversed the USD41.4 million provision it had recorded at December 31, 2003. In July 2004, PDVSA Gas, C.A. filed an appeal with the Venezuelan courts seeking to void the arbitral award. Sidor believes that applicable Venezuelan law does not allow the courts to void an arbitral award under the circumstances and that the likelihood of loss thereunder is remote. Accordingly, Sidor did not record any liabilities in connection with the appeal. At March 31, 2007, Sidor's potential exposure under this litigation amounted to USD 134.7 million. (ii) Restrictions on the distribution of profits Under the credit agreements entered into to finance the acquisition of Hylsamex, the Company and its affiliates have some restrictions to the payment of dividends in excess of certain amounts, among other limitations (see Note 3e) to the audited Consolidated Financial Statements for the year ended December 31, 2006). 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 equals 10% of the share capital. At March 31, 2007, this reserve reached the above-mentioned threshold. 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 financial statements may not be wholly distributable. 11 TERNIUM S.A. Notes to the Consolidated Condensed Interim Financial Statements (Contd.) 10 Contingencies, commitments and restrictions on the distribution of profits (continued) Shareholders' equity under Luxembourg law and regulations comprises the following captions:
At March 31, 2007 --------------------- (Unaudited) Share capital 2,004,744 Legal reserve 200,474 Distributable reserves 402,149 Non distributable reserves 1,414,122 Accumulated profit at January 1, 2007 499,842 Profit for the period 60,401 --------------------- Total shareholders' equity under Luxembourg GAAP 4,581,732 ---------------------
11 Related party transactions The Company is controlled by San Faustin N.V., a Netherlands Antilles corporation, which has 70.52% of the Company's voting rights, 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 --------------------------- 2007 2006 --------- ------- (Unaudited) (i) Transactions (a) Sales of goods and services Sales of goods to associated parties 27 2,671 Sales of goods to other related parties 24,677 21,572 Sales of services and others to associated parties 829 508 Sales of services and others to other related parties 2,854 - --------- ------- 28,387 24,751 --------- ------- (b) Purchases of goods and services Purchases of goods from associated parties 20,101 14,390 Purchases of goods from other related parties 11,373 9,675 Purchases of services and others from associated parties 5,688 - Purchases of services and others from other related parties 57,843 23,202 --------- ------- 95,005 47,267 --------- ------- (c) Financial results Income with associated parties 1,161 - Expenses with other related parties (12) (147) --------- ------- 1,149 (147) --------- -------
12 TERNIUM S.A. Notes to the Consolidated Condensed Interim Financial Statements (Contd.) 11 Related party transactions (continued)
At March 31, At December 2007 31, 2006 ----------------------------- (Unaudited) (ii) Period-end balances (a) Arising from sales/purchases of goods/services Receivables from associated parties 68,355 67,558 Receivables from other related parties 38,424 48,533 Payables to associated parties (13,035) (5,588) Payables to other related parties (48,874) (48,032) -------------- -------------- 44,870 62,471 -------------- -------------- b) Other investments -------------- -------------- Time deposit 11,356 11,249 -------------- -------------- (c) Financial debt -------------- -------------- Borrowings with other related parties (2,161) (2,161) -------------- --------------
12 Subsequent event: Grupo Imsa S.A.B. de C.V. ("Grupo Imsa") On April 30, 2007 Ternium announced that it has entered into a definitive agreement under which it expects to obtain control of Grupo Imsa for a total consideration of approximately US$1.7 billion. Under the agreement, Ternium, or any of its subsidiaries, will make a tender offer in accordance with applicable Mexican law for all of the issued and outstanding share capital of Grupo Imsa at a price of US$6.40 per share. Concurrently with the consummation of the tender offer, Grupo Imsa's majority shareholders, owning approximately 90.4% of Grupo Imsa's issued and outstanding share capital, will have their shares redeemed in cash at the same price per share. Ternium will finance the transactions primarily through debt, for which bank commitments have been secured. The transaction is subject to Mexican and U.S. antitrust clearances, approval by the Mexican securities regulator, and other customary conditions. It is expected to close in the third quarter of 2007. Grupo Imsa is a steel manufacturer with operations in Mexico, the United States and Guatemala. It has an annual production capacity of 2.2 million tons of hot rolled coils, 1.8 million tons of cold rolled products and 1.7 million tons of galvanized products. In addition, Grupo Imsa produces panels and other steel products. 13 Recent accounting pronouncements (i) International Accounting Standard 23 (revised 2007), "Borrowing Costs" In March 2007, the International Accounting Standards Board issued International Accounting Standard 23 (revised 2007), "Borrowing Costs" (the "Standard"). The Standard provides that borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset, while all other borrowing costs shall be recognized as an expense. The Standard supersedes IAS 23 (revised 1993) and is applicable for annual periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the Standard from a date before 1 January 2009, it shall disclose that fact. The Company's management has not assessed the potential impact that the application of the Standard may have on the Company's financial condition or results of operations. Roberto Philipps Chief Financial Officer 13 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: May 3, 2007