FORM 6 - K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
As of August 7, 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- . -
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 June 30, 2006.
TENARIS S.A.
CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2006
46a, Avenue John F. Kennedy - 2nd Floor.
L - 1855 Luxembourg
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
six-month period ended June 30, 2006
--------------------------------------------------------------------------------
CONSOLIDATED CONDENSED INTERIM INCOME STATEMENT
(all amounts in thousands of U.S. Three-month period ended Six-month period ended
dollars, unless otherwise stated) June 30, June 30,
--------------------------------------------------
Notes 2006 2005 2006 2005
--------------------------------------------------
(Unaudited)
Net sales 2 1,962,265 1,744,311 3,745,417 3,197,238
Cost of sales 3 (1,019,036) (1,043,774) (1,991,528) (1,908,902)
--------------------------------------------------
Gross profit 943,229 700,537 1,753,889 1,288,336
Selling, general and administrative
expenses 4 (248,492) (212,510) (466,376) (397,593)
Other operating income (expenses), net (1,939) 2,602 6,191 5,569
--------------------------------------------------
Operating income 692,798 490,629 1,293,704 896,312
Financial income (expenses), net 5 4,065 (42,643) 14,661 (84,450)
--------------------------------------------------
Income before equity in earnings of
associated companies and income tax 696,863 447,986 1,308,365 811,862
Equity in earnings of associated
companies 25,551 38,279 47,072 68,442
--------------------------------------------------
Income before income tax 722,414 486,265 1,355,437 880,304
Income tax (226,650) (144,645) (417,983) (258,714)
--------------------------------------------------
Income for the period 495,764 341,620 937,454 621,590
Attributable to:
Equity holders of the Company 471,771 313,456 891,459 577,690
Minority interest 23,993 28,164 45,995 43,900
--------------------------------------------------
495,764 341,620 937,454 621,590
--------------------------------------------------
Earnings per share attributable to the
equity holders of the Company during
the period
Weighted average number of ordinary
shares in issue (thousands) 1,180,537 1,180,537 1,180,537 1,180,537
Earnings per share (U.S. dollars per
share) 0.40 0.27 0.76 0.49
Earnings per ADS (U.S. dollars per ADS) 0.80 0.53 1.51 0.98
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 are 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.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
six-month period ended June 30, 2006
--------------------------------------------------------------------------------
CONSOLIDATED CONDENSED INTERIM BALANCE SHEET
(all amounts in thousands of U.S. dollars) At June 30, 2006 At December 31, 2005
---------------------- ----------------------
Notes (Unaudited)
ASSETS
Non-current assets
Property, plant and equipment, net 6 2,319,381 2,230,038
Intangible assets, net 6 164,993 159,099
Investments in associated companies 355,652 257,234
Other investments 25,711 25,647
Deferred tax assets 213,715 194,874
Receivables 27,706 3,107,158 65,852 2,932,744
----------- -----------
Current assets
Inventories 1,550,704 1,376,113
Receivables and prepayments 182,332 143,282
Current tax assets 127,163 102,455
Trade receivables 1,458,265 1,324,171
Other investments 296,437 119,907
Cash and cash equivalents 776,146 4,391,047 707,356 3,773,284
---------------------- ----------------------
Total assets 7,498,205 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 (62,218) (59,743)
Other reserves 29,331 2,718
Retained earnings 2,343,729 4,219,166 1,656,503 3,507,802
----------- -----------
Minority interest 304,525 268,071
----------- ----------
Total equity 4,523,691 3,775,873
----------- ----------
LIABILITIES
Non-current liabilities
Borrowings 584,962 678,112
Deferred tax liabilities 354,716 353,395
Other liabilities 159,661 154,378
Provisions 48,464 43,964
Trade payables 703 1,148,506 1,205 1,231,054
----------- -----------
Current liabilities
Borrowings 405,389 332,180
Current tax liabilities 345,605 452,534
Other liabilities 178,955 138,875
Provisions 37,976 36,945
Customer advances 96,753 113,243
Trade payables 761,330 1,826,008 625,324 1,699,101
---------------------- ----------------------
Total liabilities 2,974,514 2,930,155
=========== ===========
Total equity and liabilities 7,498,205 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.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
six-month period ended June 30, 2006
--------------------------------------------------------------------------------
CONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
(all amounts in thousands of U.S. dollars)
------------------------------------------------------------------------------------
Attributable to equity holders of the Company
---------------------------------------------------------------
Currency Retained
Share Legal Share Other translation Earnings Minority
Capital Reserves Premium Reserves adjustment (*) 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 - - - - (2,475) - 16,131 13,656
Change in equity reserves (see Notes 1
and 9) - - - 26,613 - - - 26,613
Acquisition of minority interest - - - - - - (9,671) (9,671)
Dividends paid in cash - - - - - (204,233) (16,001) (220,234)
Income for the period - - - - - 891,459 45,995 937,454
------------------------------------------------------------------------------------
Balance at June 30, 2006 1,180,537 118,054 609,733 29,331 (62,218) 2,343,729 304,525 4,523,691
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
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 - - - - (21,602) - 10,453 (11,149)
Acquisition and increase of minority
interest - - - - - - 986 986
Dividends paid in cash - - - (82) - (199,429) (2,730) (202,241)
Income for the period - - - - - 577,690 43,900 621,590
------------------------------------------------------------------------------------
Balance at June 30, 2005 1,180,537 118,054 609,733 - (51,622) 1,106,574 217,880 3,181,156
------------------------------------------------------------------------------------
(*) 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.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
six-month period ended June 30, 2006
--------------------------------------------------------------------------------
CONSOLIDATED CONDENSED INTERIM CASH FLOW STATEMENT
Six-month period
ended June 30,
--------------------
(all amounts in thousands of U.S. dollars) 2006 2005
--------------------
(Unaudited)
Cash flows from operating activities
Income for the period 937,454 621,590
Adjustments for:
Depreciation and amortization 109,790 103,743
Income tax accruals less payments (90,160) 35,756
Equity in earnings of associated companies (47,072) (68,442)
Interest accruals less payments, net (1,464) 6,210
Income from disposal of Investment (6,933) -
Changes in provisions 5,531 (2,636)
Proceeds from Fintecna arbitration award net of BHP
settlement - 66,594
Changes in working capital (219,541) (334,106)
Other, including currency translation adjustment 26,472 16,979
--------------------
Net cash provided by operating activities 714,077 445,688
====================
Cash flows from investing activities
Capital expenditures (169,101) (131,634)
Acquisitions of subsidiaries (see Note 9) (39,110) (47,930)
Proceeds from disposal of property, plant and equipment and
intangible assets 3,388 2,890
Dividends and distributions received from associated
companies - 41,118
Changes in restricted bank deposits 627 9,634
Reimbursement from trust funds - 119,666
Investments in short terms securities (176,530) -
--------------------
Net cash used in investing activities (380,726) (6,256)
====================
Cash flows from financing activities
Dividends paid (204,233) (199,511)
Dividends paid to minority interest in subsidiaries (16,001) (2,730)
Proceeds from borrowings 234,563 645,763
Repayments of borrowings (270,159) (734,247)
--------------------
Net cash used in financing activities (255,830) (290,725)
====================
Increase in cash and cash equivalents 77,521 148,707
Movement in cash and cash equivalents
At beginning of the period 680,591 293,824
Effect of exchange rate changes (5,853) (12,247)
Increase in cash and cash equivalents 77,521 148,707
--------------------
At June 30, 752,259 430,284
====================
--------------------
Cash and cash equivalents At June 30,
--------------------
2006 2005
Cash and bank deposits 776,146 450,586
Bank overdrafts (22,466) (16,436)
Restricted bank deposits (1,421) (3,866)
--------------------
752,259 430,284
====================
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.
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
six-month period ended June 30, 2006
--------------------------------------------------------------------------------
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
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
six-month period ended June 30, 2006
--------------------------------------------------------------------------------
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
June 30, 2006, the effective portion of designated cash flow hedges amounts to
$1.8 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 August 3, 2006.
3
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
six-month period ended June 30, 2006
--------------------------------------------------------------------------------
2 Segment information
Primary reporting format: business segments
-----------------------------------------------------------
(all amounts in thousands of U.S. Welded &
dollars) Other Metallic
Seamless Products Energy Other Total
-----------------------------------------------------------
Six-month period ended June 30, 2006 (Unaudited)
Net sales 3,077,876 244,876 283,818 138,847 3,745,417
Cost of sales (1,442,438) (174,818) (273,516) (100,756) (1,991,528)
-----------------------------------------------------------
Gross profit 1,635,438 70,058 10,302 38,091 1,753,889
Depreciation and amortization 93,421 9,678 985 5,706 109,790
Six-month period ended June 30, 2005
Net sales 2,413,116 415,866 256,193 112,063 3,197,238
Cost of sales (1,320,512) (273,314) (248,406) (66,670) (1,908,902)
-----------------------------------------------------------
Gross profit 1,092,604 142,552 7,787 45,393 1,288,336
Depreciation and amortization 88,851 7,356 1,570 5,966 103,743
Secondary reporting format: geographical segments
--------------------------------------------------------
(all amounts in thousands of U.S. Middle Far East
dollars) South North East & &
America Europe America Africa Oceania Total
--------------------------------------------------------
Six-month period ended June 30, 2006 (Unaudited)
Net sales 701,398 946,622 919,647 828,315 349,435 3,745,417
Depreciation and amortization 45,233 30,758 30,469 387 2,943 109,790
Six-month period ended June 30, 2005
Net sales 884,884 789,659 879,846 360,206 282,643 3,197,238
Depreciation and amortization 41,578 35,471 23,472 30 3,192 103,743
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
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
six-month period ended June 30, 2006
--------------------------------------------------------------------------------
3 Cost of sales
Six-month period ended
June 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 1,588,691 1,513,516
Services and fees 177,990 153,656
Labor cost 227,144 201,826
Depreciation of property, plant and equipment 95,175 89,219
Amortization of intangible assets 1,508 3,541
Maintenance expenses 55,202 50,039
Provisions for contingencies - 1,200
Allowance for obsolescence (2,395) 1,202
Taxes 1,959 1,477
Other 20,845 13,387
------------------------
3,542,232 3,298,533
Less: Inventories at the end of the period (1,550,704) (1,389,631)
------------------------
1,991,528 1,908,902
========================
4 Selling, general and administrative expenses
Six-month period ended
June 30,
------------------------
(all amounts in thousands of U.S. dollars) 2006 2005
------------------------
(Unaudited)
Services and fees 56,380 63,130
Labor cost 124,272 97,324
Depreciation of property, plant and equipment 4,400 5,014
Amortization of intangible assets 8,707 5,969
Commissions, freight and other selling expenses 175,385 144,549
Provisions for contingencies 5,587 5,439
Allowances for doubtful accounts 2,288 6,936
Taxes 50,115 40,189
Other 39,242 29,043
------------------------
466,376 397,593
========================
5 Financial income (expenses), net
Six-month period ended
June 30,
------------------------
(all amounts in thousands of U.S. dollars) 2006 2005
------------------------
(Unaudited)
Interest expense (26,502) (29,746)
Interest income 25,868 8,781
Net foreign exchange transaction losses and changes in
fair value of derivative instruments 15,007 (66,564)
Other 288 3,079
------------------------
14,661 (84,450)
========================
5
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
six-month period ended June 30, 2006
--------------------------------------------------------------------------------
6 Property, plant and equipment and Intangible assets, net
Net Property, Plant Net Intangible
and Equipment Assets
------------------- --------------
(all amounts in thousands of U.S. dollars) (Unaudited) (Unaudited)
Six-month period ended June 30, 2006
Opening net book amount 2,230,038 159,099
Currency translation differences 26,863 662
Transfers (125) 125
Additions 154,847 14,254
Disposals (15,559) (95)
Increase due to business acquisition 22,892 1,163
Depreciation / Amortization charge (99,575) (10,215)
------------------- --------------
At June 30, 2006 2,319,381 164,993
=================== ==============
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 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
June 30, 2006 amounts to approximately EUR 724.5 million ($921.0
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 EUR 221.8 million ($281.9 million), based on prices
prevailing at June 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 EUR 5.0 million per year. Tenaris provided bank
guarantees in the amount of EUR 15.1 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
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
six-month period ended June 30, 2006
--------------------------------------------------------------------------------
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 June 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 six month period
ended June 30, 2006 1,102,589
-----------
Total shareholders equity in accordance with Luxembourg law 3,010,913
===========
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 June 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 June 30, 2006, Tenaris's retained earnings under Luxembourg law totalled
$1,102.6 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 130,000
Other income and expenses for the six-month period ended June 30,
2006 5,084
Dividends paid (204,233)
-----------
Retained earnings at June 30, 2006 under Luxembourg law 1,102,589
===========
9 Business acquisitions, incorporation of subsidiaries and other significant
events
(a) Agreement to acquire Maverick Tube Corporation ("Maverick")
On June 12, 2006, Tenaris entered into a merger agreement (the "agreement")
to acquire Maverick, pursuant to which Maverick will merge with and into a
wholly owned subsidiary of Tenaris. With operations in the United States,
Canada and Colombia, Maverick is a leading North American producer of
welded oil country tubular goods (OCTG), line pipe and coiled tubing for
use in oil and natural gas wells, and also produces 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, reported net revenues
of approximately $1.8 billion, of which 82% were from its energy products
division. The transaction remains subject to regulatory approvals, majority
approval of Maverick's shareholders and other customary conditions. The
transaction is valued at $3,185 million, including Maverick's net debt. The
value of the transaction is based on the assumption that the holders of
Maverick's convertible notes elect to exercise their conversion rights
pursuant to their applicable terms and conditions.
Tenaris expects to finance the Maverick acquisition mainly through debt.
BNP Paribas Securities Corp. and Citigroup Global Markets Inc. have
provided to Tenaris commitments for several syndicated five-year term loan
facilities in an aggregate principal amount of up to $2.7 billion. If
Tenaris enters into these facilities, the relevant loan documentation would
contain customary terms and covenants that may limit the Company's ability
to, among other things, pay dividends or make other restricted payments in
excess of amounts to be agreed, make capital expenditures in excess of
specified thresholds, dispose of material assets or amend certain
significant agreements. The loan documentation would also require the
Company and its subsidiaries to meet certain financial covenants, ratios
and other tests.
7
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
six-month period ended June 30, 2006
--------------------------------------------------------------------------------
9 Business acquisitions, incorporation of subsidiaries and other significant
events (Cont'd)
(a) Agreement to acquire Maverick Tube Corporation ("Maverick")(Cont'd)
This agreement could be terminated in certain circumstances at any time
upon the mutual written consent of the parties with certain exceptions. In
the event that Maverick's board accepts an unsolicited superior proposal,
there would be a termination fee of $72.5 million plus up to $5 million of
out-of-pocket expenses that Maverick would pay to Tenaris. If the agreement
is terminated because of failure to obtain required regulatory approvals,
Tenaris would pay Maverick a termination fee of $30 million.
(b) 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 issue 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 June 30, 2006, the closing price of Ternium shares as quoted on the New
York Stock Exchange was $24.17 per ADS, giving Tenaris' ownership stake a
market value of approximately $555 million. At June 30, 2006, the carrying
value of Tenaris's ownership stake in Ternium was approximately $353
million.
8
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
six-month period ended June 30, 2006
--------------------------------------------------------------------------------
9 Business acquisitions, incorporation of subsidiaries and other significant
events (Cont'd)
(c) 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 $29.1 million. The acquisition was
approved by the Argentine antitrust authorities (Comision Nacional de
Defensa de la Competencia). 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:
Six-month period ended
June 30, 2006
----------------------
(all amounts in thousands of U.S. dollars) (Unaudited)
----------------------
Other assets and liabilities (net) 5,033
Property, plant and equipment 22,892
Goodwill 1,163
----------------------
Net assets acquired 29,088
----------------------
(d) Minority Interest
During the six month period ended June 30, 2006, additional shares of
Silcotub and Dalmine were acquired from minority shareholders for
approximately $9.7 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 following transactions were carried out with related parties:
(all amounts in thousands of U.S. dollars)
Six-month period ended June 30, 2006
Associated (1) Other Total
(i) Transactions
(a) Sales of goods and services
Sales of goods 59,285 27,974 87,259
Sales of services 7,887 1,741 9,628
-------------------------------
67,172 29,715 96,887
===============================
(b) Purchases of goods and services
Purchases of goods 41,623 12,384 54,007
Purchases of services 2,419 33,545 35,964
-------------------------------
44,042 45,929 89,971
===============================
9
Tenaris S.A. Consolidated Condensed Interim Financial Statements for the
six-month period ended June 30, 2006
--------------------------------------------------------------------------------
10 Related party disclosures (Cont'd)
Six-month period ended June 30, 2005
Associated (2) Other Total
(i) Transactions
(a) Sales of goods and services
Sales of goods 51,322 42,806 94,128
Sales of services 1,541 4,800 6,341
-------------------------------
52,863 47,606 100,469
===============================
(b) Purchases of goods and services
Purchases of goods 21,079 21,821 42,900
Purchases of services 9,835 25,285 35,120
-------------------------------
30,914 47,106 78,020
===============================
At June 30, 2006
Associated Other Total
-------------------------------
(ii) Period-end balances
(a) Related to sales/purchases of goods/
services
Receivables from related parties 31,151 22,985 54,136
Payables to related parties (20,045) (9,456)(29,501)
-------------------------------
11,106 13,529 24,635
===============================
(b) Other balances
Receivables 2,079 - 2,079
(c) Financial debt
Borrowings (4) (56,500) - (56,500)
At December 31, 2005
Associated 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 (3) 42,437 - 42,437
(c) Financial debt
Borrowings (4) (54,801) - (54,801)
(1) Includes Ternium S.A. and its subsidiaries and Condusid C.A.
(2) Includes: Condusid, Ylopa, Amazonia and Sidor.
(3) Includes convertible loan to Ternium S.A. of $40.4 million.
(4) Convertible loan from Sidor C.A. to Matesi (Materiales Siderurgicos S.A.).
Carlos Condorelli
Chief Financial Officer
10
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: August 7, 2006
Tenaris, S.A.
By: /s/ Cecilia Bilesio
-----------------------
Cecilia Bilesio
Corporate Secretary