tenaris6k.htm
 
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 5, 2011



TENARIS, S.A.
(Translation of Registrant's name into English)


TENARIS, S.A.
29 avenue de la Porte-Neuve
3rd Floor
L-2227 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 ü  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 ü  


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 for the six-month period ended June 30, 2011.



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 5, 2011



Tenaris, S.A.




By: /s/ Cecilia Bilesio
Cecilia Bilesio
Corporate Secretary




2
 
 





TENARIS S.A.





CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS


JUNE 30, 2011










29, Avenue de la Porte-Neuve – 3rd Floor.
L - 2227 Luxembourg
 
 
 
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Tenaris S.A.  Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2011
CONSOLIDATED CONDENSED INTERIM INCOME STATEMENT

(all amounts in thousands of U.S. dollars, unless otherwise stated)
        
Three-month period
ended June 30,
    
Six-month period
ended June 30,
  
   
Notes
    
2011
    
2010
    
2011
    
2010
  
Continuing operations
        
(Unaudited)
    
(Unaudited)
  
Net sales
    3       2,403,122       1,981,762       4,727,087       3,620,483  
Cost of sales
  
3 & 4
       (1,523,448 )     (1,183,429 )     (2,957,810 )     (2,170,472 )
Gross profit
             879,674       798,333       1,769,277       1,450,011  
Selling, general and administrative expenses
  
3 & 5
       (468,341 )     (391,144 )     (918,115 )     (738,531 )
Other operating income (expense), net
    3       1,028       (1,886 )     2,649       3,163  
Operating income
             412,361       405,303       853,811       714,643  
Interest income
    6       6,513       4,352       14,200       11,500  
Interest expense
    6       (12,248 )     (21,889 )     (25,289 )     (41,958 )
Other financial results
    6       (12,408 )     (7,368 )     (11,350 )     323  
Income before equity in earnings of associated companies and income tax
             394,218       380,398       831,372       684,508  
Equity in earnings of associated companies
             22,720       19,288       47,005       42,814  
Income before income tax
             416,938       399,686       878,377       727,322  
Income tax
             (112,235 )     (104,716 )     (249,477 )     (210,142 )
Income for the period
             304,703       294,970       628,900       517,180  
Attributable to:
                                        
Equity holders of the Company
             287,218       282,098       606,592       501,647  
Non-controlling interests
             17,485       12,872       22,308       15,533  
              304,703       294,970       628,900       517,180  
                                         
Earnings per share attributable to the equity holders of the Company during the period:
                                        
Weighted average number of ordinary shares (thousands)
    7       1,180,537       1,180,537       1,180,537       1,180,537  
Continuing  operations
                                        
Basic and diluted earnings per share (U.S. dollars per share)
    7       0.24       0.24       0.51       0.42  
Basic and diluted earnings per ADS (U.S. dollars per ADS)
    7       0.49       0.48       1.03       0.85  


CONSOLIDATED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME

(all amounts in thousands of U.S. dollars)
  
Three-month period
ended June 30,
    
Six-month period
ended June 30,
  
   
2011
    
2010
    
2011
    
2010
  
   
(Unaudited)
    
(Unaudited)
  
Income for the period
     304,703       294,970       628,900       517,180  
Other comprehensive income:
                                
Currency translation adjustment
     80,713       (145,777 )     235,492       (150,886 )
Changes in the fair value of derivatives held as cash flow hedges
     (2,572 )     1,088       5,790       (2,195 )
Share of other comprehensive income of associates:
                                
   - Currency translation adjustment
     (5 )     (4,704 )     5,649       2,025  
   - Changes in the fair value of derivatives held as cash flow hedges
     378       175       832       231  
Income tax relating to components of other comprehensive income (*)
     215       (659 )     (1,672 )     462  
Other comprehensive income for the period, net of tax
     78,729       (149,877 )     246,091       (150,363 )
Total comprehensive income for the period
     383,432       145,093       874,991       366,817  
Attributable to:
                                
Equity holders of the Company
     341,775       128,962       820,500       359,397  
Non-controlling interests
     41,657       16,131       54,491       7,420  
      383,432       145,093       874,991       366,817  
 (*) Relates to cash flow hedges

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, 2010.
 
 
 
 
1
 
 
Tenaris S.A.  Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2011
CONSOLIDATED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION


(all amounts in thousands of U.S. dollars)
        
At June 30, 2011
    
At December 31, 2010
  
   
Notes
    
(Unaudited)
        
ASSETS
                              
Non-current assets
                              
  Property, plant and equipment, net
    8       4,212,424             3,780,580        
  Intangible assets, net
    9       3,509,504             3,581,816        
  Investments in associated companies
             704,764             671,855        
  Other investments
             45,616             43,592        
  Deferred tax assets
             227,591             210,523        
  Receivables
             137,980       8,837,879       120,429       8,408,795  
Current assets
                                        
  Inventories
             2,765,885               2,460,384          
  Receivables and prepayments
             268,912               282,536          
  Current tax assets
             227,666               249,317          
  Trade receivables
             1,723,037               1,421,642          
  Available for sale assets
    13       21,572               21,572          
  Other investments
             870,906               676,224          
  Cash and cash equivalents
             424,287       6,302,265       843,861       5,955,536  
                                         
Total assets
                     15,140,144               14,364,331  
EQUITY
                                        
Capital and reserves attributable to the Company’s equity holders
                     10,469,669               9,902,359  
Non-controlling interests
                     682,426               648,221  
Total equity
                     11,152,095               10,550,580  
LIABILITIES
                                        
Non-current liabilities
                                        
  Borrowings
             160,636               220,570          
  Deferred tax liabilities
             929,052               934,226          
  Other liabilities
             214,345               193,209          
  Provisions
             91,736               83,922          
  Trade payables
             2,611       1,398,380       3,278       1,435,205  
Current liabilities
                                        
  Borrowings
             1,069,673               1,023,926          
  Current tax liabilities
             213,144               207,652          
  Other liabilities
             313,359               233,590          
  Provisions
             37,203               25,101          
  Customer advances
             66,223               70,051          
  Trade payables
             890,067       2,589,669       818,226       2,378,546  
Total liabilities
                     3,988,049               3,813,751  
Total equity and liabilities
                     15,140,144               14,364,331  

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, 2010.

 
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Tenaris S.A.  Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2011
CONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
(all amounts in thousands of U.S. dollars)


   
Attributable to equity holders of the Company
                    
   
Share
 Capital (1)
    
Legal
Reserves
    
Share
Premium
    
Currency Translation Adjustment
    
Other
 Reserves
    
Retained
Earnings (2)
    
Total
    
Non-controlling interests
    
Total
  
                                                   
(Unaudited)
  
Balance at January 1, 2011
     1,180,537       118,054       609,733       108,419       15,809       7,869,807       9,902,359       648,221       10,550,580  
                                                                         
Income for the period
     -       -       -       -       -       606,592       606,592       22,308       628,900  
Currency translation adjustment
     -       -       -       203,002       -       -       203,002       32,490       235,492  
Hedge reserve, net of tax
     -       -       -       -       4,425       -       4,425       (307 )     4,118  
Share of other comprehensive income of associates
     -       -       -       5,649       832       -       6,481       -       6,481  
Other comprehensive income for the period
     -       -       -       208,651       5,257       -       213,908       32,183       246,091  
Total comprehensive income for the period
     -       -       -       208,651       5,257       606,592       820,500       54,491       874,991  
Acquisition of non-controlling interests
     -       -       -       -       (1,938 )     -       (1,938 )     (14,551 )     (16,489 )
Treasury shares held by associated companies
     -       -       -       -       (3,339 )     -       (3,339 )     -       (3,339 )
Dividends paid in cash
     -       -       -       -       -       (247,913 )     (247,913 )     (5,735 )     (253,648 )
Balance at June 30, 2011
     1,180,537       118,054       609,733       317,070       15,789       8,228,486       10,469,669       682,426       11,152,095  



   
Attributable to equity holders of the Company
                    
   
Share
Capital (1)
    
Legal
Reserves
    
Share
Premium
    
Currency Translation Adjustment
    
Other
Reserves
    
Retained
 Earnings
    
Total
    
Non-controlling interests
    
Total
  
                                                   
(Unaudited)
  
Balance at January 1, 2010
     1,180,537       118,054       609,733       29,533       10,484       7,143,823       9,092,164       628,672       9,720,836  
                                                                         
Income for the period
     -       -       -       -       -       501,647       501,647       15,533       517,180  
Currency translation adjustment
     -       -       -       (142,770 )     -       -       (142,770 )     (8,116 )     (150,886 )
Hedge reserve, net of tax
     -       -       -       -       (1,736 )     -       (1,736 )     3       (1,733 )
Share of other comprehensive income of associates
     -       -       -       2,025       231       -       2,256       -       2,256  
Other comprehensive income for the period
     -       -       -       (140,745 )     (1,505 )     -       (142,250 )     (8,113 )     (150,363 )
Total comprehensive income for the period
     -       -       -       (140,745 )     (1,505 )     501,647       359,397       7,420       366,817  
Acquisition and increase of non-controlling interests
     -       -       -       -       (366 )     -       (366 )     (2,990 )     (3,356 )
Dividends paid in cash
     -       -       -       -       -       (247,913 )     (247,913 )     (14,577 )     (262,490 )
Balance at June 30, 2010
     1,180,537       118,054       609,733       (111,212 )     8,613       7,397,557       9,203,282       618,525       9,821,807  

(1) The Company has an authorized share capital of a single class of 2.5 billion shares having a nominal value of USD1.00 per share. As of June 30, 2011 and 2010 there were 1,180,536,830 shares issued. All issued shares are fully paid.
(2) The Distributable Reserve and Retained Earnings as of December 31, 2010 calculated in accordance with Luxembourg Law 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, 2010
 
 
 
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Tenaris S.A.  Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2011
CONSOLIDATED CONDENSED INTERIM STATEMENT OF CASH FLOWS



(all amounts in thousands of U.S. dollars)
        
Six-month period ended June 30,
  
   
Note
    
2011
    
2010
  
Cash flows from operating activities
        
(Unaudited)
  
Income for the period
           628,900       517,180  
Adjustments for:
                      
Depreciation and amortization
  
8 & 9
       265,401       251,916  
Income tax accruals less payments
           36,629       (115,948 )
Equity in earnings of associated companies
           (47,005 )     (43,310 )
Interest accruals less payments, net
           (27,820 )     19,496  
Changes in provisions
           19,916       1,684  
Changes in working capital
           (487,951 )     (63,493 )
Other, including currency translation adjustment
           102,716       (72,632 )
Net cash provided by operating activities
           490,786       494,893  
                       
Cash flows from investing activities
                      
Capital expenditures
  
8 & 9
       (461,791 )     (348,393 )
Proceeds from disposal of property, plant and equipment and intangible assets
           1,967       5,746  
Dividends and distributions received from associated companies
           17,229       12,958  
Investments in short terms securities
           (194,682 )     75,052  
Net cash used in investing activities
           (637,277 )     (254,637 )
                       
Cash flows from financing activities
                      
Dividends paid
           (247,913 )     (247,913 )
Dividends paid to non-controlling interests in subsidiaries
           (5,735 )     (14,577 )
Acquisitions of non-controlling interests
    11       (16,489 )     (3,356 )
Proceeds from borrowings
             489,795       349,856  
Repayments of borrowings
             (541,112 )     (588,754 )
Net cash used in financing activities
             (321,454 )     (504,744 )
                         
Decrease in cash and cash equivalents
             (467,945 )     (264,488 )
Movement in cash and cash equivalents
                        
At the beginning of the period
             820,165       1,528,707  
Effect of exchange rate changes
             9,823       (19,818 )
Decrease in cash and cash equivalents
             (467,945 )     (264,488 )
At June 30,
             362,043       1,244,401  
                         
           
At June 30,
  
Cash and cash equivalents
             2011       2010  
Cash and bank deposits
             424,287       1,276,814  
Bank overdrafts
             (62,244 )     (32,413 )
              362,043       1,244,401  

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, 2010.
 
 
 
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NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS


1
General information
2
Accounting policies and basis of presentation
3
Segment information
4
Cost of sales
5
Selling, general and administrative expenses
6
Financial results
7
Earnings and dividends per share
8
Property, plant and equipment, net
9
Intangible assets, net
10
Contingencies, commitments and restrictions to the distribution of profits
11
Other acquisitions
12
Related party transactions
13
Process in Venezuela - Nationalization of Venezuelan Subsidiaries
14
Recently issued accounting pronouncements relevant for Tenaris




 
5
 



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

Tenaris S.A. (the "Company") was established as a public limited liability company (societé anonyme) under the laws of the Grand-Duchy of Luxembourg on December 17, 2001. The Company holds, either directly or indirectly, controlling interests in various subsidiaries in the steel pipe manufacturing and distribution businesses. References in these Consolidated Condensed Interim Financial Statements to "Tenaris" refer to Tenaris S.A. and its consolidated subsidiaries. A list of the principal Company’s subsidiaries is included in Note 31 to the audited Consolidated Financial Statements for the year ended December 31, 2010.

The Company’s shares trade on the Milan Stock Exchange, the Buenos Aires Stock Exchange and the Mexico City Stock Exchange; the Company’s American Depositary Securities (“ADS”) trade on the New York Stock Exchange.

These Consolidated Condensed Interim Financial Statements were approved for issue by the Company’s Board of Directors on August 4, 2011.

2
Accounting policies and basis of presentation

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, 2010. These Consolidated Condensed Interim Financial Statements should be read in conjunction with the audited Consolidated Financial Statements for the year ended December 31, 2010, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board (“IASB”) and adopted by the European Union (“EU”).

Whenever necessary, comparative amounts have been reclassified to conform to changes in presentation in the current year.

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 the reported amounts of revenues and expenses for the reported periods. Actual results may differ from these estimates.

Material inter-company transactions, balances and unrealized gains (losses) on transactions between Tenaris subsidiaries have been eliminated in consolidation. However, since the functional currency of some subsidiaries is its respective local currency, some financial gains (losses) arising from inter-company transactions are generated. These are included in the Consolidated Condensed Interim Income Statement under Other financial results.
 
 
 
 
6
 
 
3           Segment information

Reportable operating segments

   
(Unaudited)
  
(all amounts in thousands of U.S. dollars)
  
Tubes
    
Projects
    
Other
    
Total
  
Six-month period ended June 30, 2011
                        
Net sales
     3,965,103       387,347       374,637       4,727,087  
Cost of sales
     (2,445,269 )     (257,250 )     (255,291 )     (2,957,810 )
Gross profit
     1,519,834       130,097       119,346       1,769,277  
Selling, general and administrative expenses
     (828,614 )     (46,418 )     (43,083 )     (918,115 )
Other operating income (expenses), net
     2,876       (413 )     186       2,649  
Operating income
     694,096       83,266       76,449       853,811  
Depreciation  and amortization
     247,093       11,104       7,204       265,401  
Capital expenditures
     430,805       28,558       2,428       461,791  
Six-month period ended June 30, 2010
                                
Net sales
     3,131,830       187,248       301,405       3,620,483  
Cost of sales
     (1,830,262 )     (122,129 )     (218,081 )     (2,170,472 )
Gross profit
     1,301,568       65,119       83,324       1,450,011  
Selling, general and administrative expenses
     (666,222 )     (39,086 )     (33,223 )     (738,531 )
Other operating income (expenses), net
     (643 )     1,479       2,327       3,163  
Operating income
     634,703       27,512       52,428       714,643  
Depreciation  and amortization
     234,511       9,695       7,710       251,916  
Capital expenditures
     325,564       20,817       2,012       348,393  

Geographical information

   
(Unaudited)
  
(all amounts in thousands of U.S. dollars)
  
North
America
    
South
America
    
Europe
    
Middle East
& Africa
    
Far East
& Oceania
    
Total
  
Six-month period ended June 30, 2011
                                    
Net sales
     2,030,437       1,267,790       557,254       601,406       270,200       4,727,087  
Depreciation and amortization
     137,402       53,393       60,280       633       13,693       265,401  
Capital expenditures
     307,681       72,695       66,618       9,152       5,645       461,791  
                                                 
Six-month period ended June 30, 2010
                                                
Net sales
     1,498,143       885,707       413,644       626,348       196,641       3,620,483  
Depreciation and amortization
     128,205       52,664       57,181       707       13,159       251,916  
Capital expenditures
     241,145       54,015       37,878       9,138       6,217       348,393  

Allocation of net sales to geographical information is based on customer location. Allocation of depreciation and amortization is based on the geographical location of the underlying assets.

There are no revenues from external customers attributable to the Company’s country of incorporation (Luxembourg). For geographical information purposes, “North America” comprises Canada, Mexico and the USA; “South America” comprises principally Argentina, Brazil, Colombia, Ecuador, Peru and Venezuela; “Europe” comprises principally Italy, Norway and Romania; “Middle East and Africa” comprises principally Algeria, Egypt, Kazakhstan, Kuwait, Nigeria, Saudi Arabia and United Arab Emirates; “Far East and Oceania” comprises principally Australia, China, Indonesia and Japan.


 
7
 
 
4           Cost of sales

   
Six-month period ended June 30,
  
(all amounts in thousands of U.S. dollars)
  
2011
    
2010
  
   
(Unaudited)
  
Inventories at the beginning of the period
     2,460,384       1,687,059  
Plus: Charges of the period
                
Raw materials, energy, consumables and other
     2,233,203       1,710,431  
Services and fees
     176,782       154,792  
Labor cost
     549,561       454,205  
Depreciation of property, plant and equipment
     154,648       140,364  
Amortization of intangible assets
     2,409       2,090  
Maintenance expenses
     99,975       87,339  
Allowance for obsolescence
     (553 )     (34,346 )
Taxes
     2,418       3,561  
Other
     44,868       27,821  
      3,263,311       2,546,257  
Less: Inventories at the end of the period
     (2,765,885 )     (2,062,844 )
      2,957,810       2,170,472  

5           Selling, general and administrative expenses

   
Six-month period ended June 30,
  
(all amounts in thousands of U.S. dollars)
  
2011
    
2010
  
   
(Unaudited)
  
Services and fees
     114,189       106,609  
Labor cost
     268,658       225,087  
Depreciation of property, plant and equipment
     5,583       8,936  
Amortization of intangible assets
     102,761       100,526  
Commissions, freight and other selling expenses
     252,757       187,838  
Provisions for contingencies
     30,221       21,923  
Allowances for doubtful accounts
     4,118       (11,569 )
Taxes
     72,996       56,008  
Other
     66,832       43,173  
      918,115       738,531  

6                                                Financial results

   
Six-month period ended June 30,
  
(all amounts in thousands of U.S. dollars)
  
2011
    
2010
  
   
(Unaudited)
  
Interest income
     14,200       11,500  
Interest expense (*)
     (25,289 )     (41,958 )
Interest net
     (11,089 )     (30,458 )
Net foreign exchange transaction results
     (15,395 )     3,743  
Foreign exchange derivatives contracts results (**)
     4,521       (2,078 )
Other
     (476 )     (1,342 )
Other financial results
     (11,350 )     323  
Net financial results
     (22,439 )     (30,135 )

 
 
8
 
 
6                                            Financial results (Cont.)

Net foreign exchange transaction results include those amounts that affect the gross margin of certain subsidiaries which functional currencies are different from the U.S. dollar.

(*) Includes interest rate swap losses of $5.2 million and $7.9 million for the six-month period ended June 30, 2011 and June 30, 2010, respectively.

(**) Includes a gain of $6.1 million and a loss of $7.8 million on an identified embedded derivative for the six-month periods ended June 30, 2011 and June 30, 2010, respectively.

7           Earnings and dividends per share

Earnings per share are calculated by dividing the net income attributable to equity holders of the Company by the daily weighted average number of ordinary shares in issue during the period.
   
Six-month period ended June 30,
  
   
2011
    
2010
  
   
(Unaudited)
  
Net income attributable to equity holders
     606,592       501,647  
Weighted average number of ordinary shares in issue (thousands)
     1,180,537       1,180,537  
Basic and diluted earnings per share (U.S. dollars per share)
     0.51       0.42  
Basic and diluted earnings per ADS (U.S. dollars per ADS) (*)
     1.03       0.85  


(*) Each ADS equals two shares

On June 1, 2011 the Company’s shareholders approved an annual dividend in the amount of $0.34 per share ($0.68 per ADS). The amount approved included the interim dividend previously paid in November 2010, in the amount of $0.13 per share ($0.26 per ADS). The balance, amounting to $0.21 per share ($0.42 per ADS), was paid on June 23, 2011. In the aggregate, the interim dividend paid in November 2010 and the balance paid in June 2011 amounted to approximately $401 million.

8                                   Property, plant and equipment, net
 (all amounts in thousands of U.S. dollars)
  
2011
    
2010
  
   
(Unaudited)
  
Six-month period ended June 30,
            
Opening net book amount
     3,780,580       3,254,587  
Currency translation adjustment
     150,477       (105,832 )
Additions
     443,757       337,534  
Disposals
     (1,967 )     (5,722 )
Transfers
     (192 )     (1,518 )
Depreciation charge
     (160,231 )     (149,300 )
At June 30,
     4,212,424       3,329,749  

9                                               Intangible assets, net
 (all amounts in thousands of U.S. dollars)
  
2011
    
2010
  
   
(Unaudited)
  
Six-month period ended June 30,
            
Opening net book amount
     3,581,816       3,670,920  
Currency translation adjustment
     14,632       (4,316 )
Additions
     18,034       10,859  
Disposals
     -       (24 )
Transfers
     192       1,518  
Amortization charge
     (105,170 )     (102,616 )
At June 30,
     3,509,504       3,576,341  

 
 
9
 
 
10           Contingencies, commitments and restrictions to the distribution of profits

Contingencies

This note should be read in conjunction with Note 26 to the Company’s audited Consolidated Financial Statements for the year ended December 31, 2010.

Conversion of tax loss carry-forwards

On December 18, 2000, the Argentine tax authorities notified Siderca S.A.I.C., a Tenaris subsidiary organized in Argentina (“Siderca”), of an income tax assessment related to the conversion of tax loss carry-forwards into Debt Consolidation Bonds under Argentine Law No. 24.073. The adjustments proposed by the tax authorities represent an estimated contingency of ARS 102 million (approximately $25 million) at June 30, 2011, in taxes and penalties. Tenaris believes that it is not probable that the ultimate resolution of the matter will result in an obligation. Accordingly, no provision was recorded in these Consolidated Condensed Interim Financial Statements.
 
Settlement with U.S. governmental authorities

In 2009, Tenaris announced that it had learned from one of its customers in Central Asia that certain sales agency payments made by one of the Company’s subsidiaries may have improperly benefited employees of the customer and other persons, potentially in violation of the U.S. Foreign Corrupt Practices Act (FCPA).  The audit committee of the Company’s board of directors engaged external counsel in connection with a review of these payments and related matters. The Company voluntarily notified the Securities and Exchange Commission (“SEC”) and the Department of Justice (“DOJ”), shared the results of the audit committee’s review with the SEC and the DOJ, and cooperated in the investigations conducted by the SEC and the DOJ.

On May 17, 2011, Tenaris settled the SEC’s and the DOJ’s FCPA investigations. The settlements describe conduct by former Tenaris regional sales personnel relating to payments to officials of a state controlled oil and gas production company in the Caspian region, as well as certain record keeping and internal control failures relating to this conduct.  The settlements also state that Tenaris voluntarily disclosed this conduct to the SEC and the DOJ in a timely and complete manner, conducted an internal investigation, provided thorough, real time cooperation to the SEC and the DOJ, and undertook remediation efforts, including voluntary enhancements to its compliance program.  In the settlement with the SEC, Tenaris agreed to pay approximately $5.4 million in disgorgement of profits and interest, and in the settlement with the DOJ Tenaris agreed to pay a $3.5 million penalty. Tenaris timely paid those amounts to the DOJ and the SEC.

Commitments

Set forth is a description of Tenaris’s main outstanding commitments:

·  
A Tenaris company is a party to a five-year contract with Nucor Corporation, under which it committed to purchase from Nucor steel coils, with deliveries starting in January 2007 on a monthly basis. The Tenaris company has negotiated a one-year extension to the original contract, through December 2012. Prices are adjusted quarterly in accordance with market conditions. As of June 30, 2011 the estimated aggregate amount of the contract at current prices is approximately $545 million.

·  
A Tenaris company is a party to a ten year raw material purchase contract with Rio Tinto Fer et Titane (ex- QIT), under which it committed to purchase steel bars, with deliveries starting in July 2007. As of June 30, 2011 the estimated aggregate amount of the remaining commitments on the contract at current prices is approximately $215 million. The contract allows the Tenaris company to claim lower commitments in market downturns and severe market downturns subject to certain limitations.

 
 
 
10
 
 
10           Contingencies, commitments and restrictions to the distribution of profits (Cont.)

Restrictions to the distribution of profits and payment of dividends

As of December 31, 2010, equity as defined under Luxembourg law and regulations consisted of:

(all amounts in thousands of U.S. dollars)
Share capital
     1,180,537  
Legal reserve
     118,054  
Share premium
     609,733  
Retained earnings including net income for the year ended December 31, 2010
     16,631,947  
Total equity in accordance with Luxembourg law
     18,540,271  

At least 5% of the Company’s 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 the Company’s share capital. As of December 31, 2010, this reserve is fully allocated and additional allocations to the reserve are not required under Luxembourg law. Dividends may not be paid out of the legal reserve.

The Company may pay dividends to the extent, among other conditions, that it has distributable retained earnings calculated in accordance with Luxembourg law and regulations.

At December 31, 2010, distributable amount under Luxembourg law totals $17.2 billion, as detailed below.

(all amounts in thousands of U.S. dollars)
Retained earnings at December 31, 2009 under Luxembourg law
     3,916,482  
Gain from the transfer of shares in affiliated undertakings
     12,020,184  
Dividends received
     1,100,175  
Other income and expenses for the year ended December 31, 2010
     (3,511 )
Dividends paid
     (401,383 )
Retained earnings at December 31, 2010 under Luxembourg law
     16,631,947  
Share premium
     609,733  
Distributable amount at December 31, 2010 under Luxembourg law
     17,241,680  

11           Other acquisitions

Non-controlling interests

During the six-month period ended June 30, 2011 and 2010, additional shares of certain Tenaris subsidiaries were acquired from non-controlling shareholders for approximately $16.4 million and $3.4 million, respectively.
 
12           Related party transactions

As of June 30, 2011:    
 
·  
San Faustin S.A., a Luxembourg public limited liability company (société anonyme) (“San Faustin”), owned 713,605,187 shares in the Company, representing 60.45% of the Company’s capital and voting rights.
 
·  
San Faustin owned all of its shares in the Company through its wholly-owned subsidiary Techint Holdings S.ar.l., a Luxembourg  private limited liability company (société à responsabilité limitée) (“Techint”).
 
·  
Rocca & Partners Stichting Administratiekantoor Aandelen San Faustin, a Dutch private foundation (Stichting)  (“RP STAK”) held  shares in San Faustin sufficient in number to control San Faustin.
 
·  
No person or group of persons controls RP STAK.
 
Based on the information most recently available to the Company, Tenaris’ directors and senior management as a group owned 0.12% of the Company’s outstanding shares.
 
 
 
11
 

 
12           Related party transactions (Cont.)
 
At June 30, 2011, the closing price of the Ternium S.A. (“Ternium”) ADS as quoted on the New York Stock Exchange was $29.53 per ADS, giving Tenaris’ ownership stake a market value of approximately $678.3 million. At June 30, 2011, the carrying value of Tenaris’ ownership stake in Ternium, based on Ternium’s IFRS financial statements was approximately $685.9 million.

Transactions and balances disclosed as “Associated” companies are those with companies over which Tenaris exerts significant influence or joint control 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, 2011
  
(Unaudited)
  
     
Associated (1)
    
Other
    
Total
  
 (i)
Transactions
                  
 
(a) Sales of goods and services
                  
 
Sales of goods
     20,802       69,722       90,524  
 
Sales of services
     8,225       2,240       10,465  
        29,027       71,962       100,989  
                           
 
(b) Purchases of goods and services
                        
 
Purchases of goods
     45,969       9,464       55,433  
 
Purchases of services
     40,592       71,067       111,659  
        86,561       80,531       167,092  

 
Six-month period ended June 30, 2010
  
(Unaudited)
  
     
Associated (1)
    
Other
    
Total
  
(i)
Transactions
                  
 
(a) Sales of goods and services
                  
 
Sales of goods
     15,582       11,220       26,802  
 
Sales of services
     5,870       1,359       7,229  
        21,452       12,579       34,031  
                           
 
(b) Purchases of goods and services
                        
 
Purchases of goods
     84,303       9,291       93,594  
 
Purchases of services
     28,920       53,515       82,435  
        113,223       62,806       176,029  

 
At June 30, 2011
  
(Unaudited)
  
     
Associated (1)
    
Other
    
Total
  
(ii)
Period-end balances
                  
                     
 
(a) Arising from sales / purchases of goods / services
                  
 
Receivables from related parties
     50,794       12,779       63,573  
 
Payables to related parties
     (36,658 )     (14,554 )     (51,212 )
        14,136       (1,775 )     12,361  
                           
 
(b) Financial debt
                        
 
Borrowings
     (2,826 )     -       (2,826 )
 
  
 
 
 
12
 
 
12           Related party transactions (Cont.)
  
  
 
 
At December 31, 2010
                  
     
Associated (1)
    
Other
    
Total
  
(ii)
Year-end balances
                  
                     
 
(a) Arising from sales / purchases of goods / services
                  
 
Receivables from related parties
     39,761       28,557       68,318  
 
Payables to related parties
     (17,534 )     (19,110 )     (36,644 )
        22,227       9,447       31,674  
                           
 
(b) Financial debt
                        
 
Borrowings
     (3,843 )     -       (3,843 )

(1) Includes Ternium S.A. and its subsidiaries (“Ternium”), Condusid C.A. (“Condusid”), Finma S.A.I.F (“Finma”), Lomond Holdings B.V.
group (“Lomond”), Socotherm Brasil S.A. (“Socotherm”) and Hydril Jindal International Private Ltd (“Hydril Jindal”).
 
13           Process in Venezuela - Nationalization of Venezuelan Subsidiaries
 
Within the framework of Decree Law 6058, in May 2009, Venezuela’s President Hugo Chávez announced the nationalization of, among other companies, the Company's majority-owned subsidiaries TAVSA - Tubos de Acero de Venezuela S.A. ("Tavsa") and, Matesi Materiales Siderúrgicos S.A ("Matesi"), and Complejo Siderúrgico de Guayana, C.A ("Comsigua"), in which the Company has a non-controlling interest (collectively, the “Venezuelan Companies"). In July 2009, President Chávez issued Decree 6796, which ordered the acquisition of the Venezuelan Companies' assets and provided that Tavsa's assets would be held by the Ministry of Energy and Oil, while Matesi and Comsigua's assets would be held by the Ministry of Basic Industries and Mining. Decree 6796 also required the Venezuelan government to create certain committees at each of the Venezuelan Companies; each transition committee must ensure the nationalization of each Venezuelan Company and the continuity of its operations, and each technical committee (to be composed of representatives of Venezuela and the private sector) must negotiate over a 60-day period (extendable by mutual agreement) a fair price for each Venezuelan Company to be transferred to Venezuela. In the event the parties failed to reach agreement by the expiration of the 60-day period (or any extension thereof), the applicable Ministry would assume control and exclusive operation of the relevant Venezuelan Company, and the Executive Branch would be required to order their expropriation in accordance with the Venezuelan Expropriation Law. The Decree also specifies that all facts and activities thereunder are subject to Venezuelan law and any disputes relating thereto must be submitted to Venezuelan courts.

In August 2009, Venezuela, acting through the transition committee appointed by the Minister of Basic Industries and Mines of Venezuela, unilaterally assumed exclusive operational control over Matesi, and in November, 2009, Venezuela, acting through PDVSA Industrial S.A. (a subsidiary of Petróleos de Venezuela S.A.), formally assumed exclusive operational control over the assets of Tavsa.

In 2010, Venezuela’s National Assembly declared Matesi’s assets to be of public and social interest and ordered the Executive Branch to take the necessary measures for the expropriation of such assets. In June 2011, President Chávez issued Decree 8280, which orders the expropriation of Matesi’s assets as may be required for the implementation of a state-owned project for the production, sale and distribution of briquettes, and further instructs to commence negotiations and take any actions required for the acquisition of such assets. On June 21, 2011, Tenaris announced that it will take legal actions against Venezuela to seek prompt, fair and adequate compensation for its entire interest (including assets and liabilities) in Matesi.

Tenaris’s investments in the Venezuelan companies are protected under applicable bilateral investment treaties, including the bilateral investment treaty between Venezuela and the Belgian-Luxembourgish Union, and Tenaris continues to reserve all of its rights under contracts, investment treaties and Venezuelan and international law. Tenaris have also consented to the jurisdiction of the ICSID in connection with the nationalization process.

Based on the facts and circumstances described above and following the guidance set forth by IAS 27R, the Company ceased consolidating the results of operations and cash flows of the Venezuelan Companies as from June 30, 2009, and classified its investments in the Venezuelan Companies as financial assets based on the definitions contained in paragraphs 11(c)(i) and 13 of IAS 32.
 
 
13
 
 
13           Process in Venezuela - Nationalization of Venezuelan Subsidiaries (Cont.)
 
The Company classified its interests in the Venezuelan Companies as available-for-sale investments since management believes they do not fulfill the requirements for classification within any of the remaining categories provided by IAS 39 and such classification is the most appropriate accounting treatment applicable to non-voluntary dispositions of assets.

Tenaris or its subsidiaries have net receivables with the Venezuelan Companies as of June 30, 2011 for a total amount of approximately $28 million.

The Company records its interest in the Venezuelan Companies at its carrying amount at June 30, 2009, and not at fair value, following the guidance set forth by paragraphs 46(c), AG80 and AG81 of IAS 39.

14           Recently issued accounting pronouncements relevant for Tenaris
 
(i) International Accounting Standard 19 (amended 2011), “Employee benefits”
 
 In June 2011, the IASB issued IAS 19 (amended 2011), “Employee benefits”, which makes significant changes to the recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all employee benefits. IAS 19 (amended 2011) must be applied for annual periods beginning on or after 1 January 2013.

(ii) International Accounting Standard 1 (amended 2011), “Presentation of financial statements”

In June 2011, the IASB issued IAS 1 (amended 2011), “Presentation of financial statements”. The amendment requires entities to separate items presented in OCI into two groups, based on whether or not they may be recycled to profit or loss in the future.  IAS 1 (amended 2011) must be applied for annual periods beginning on or after 1 July 2012.

(iii) International Financial Reporting Standard 10, “Consolidated financial statements”

In May 2011, the IASB issued IFRS 10, “Consolidated financial statements”. IFRS 10 replaces all of the guidance on control and consolidation in IAS 27 and SIC-12. IFRS 10 must be applied for annual periods beginning on or after 1 January 2013.

(iv) International Financial Reporting Standard 12, “Disclosures of interest in other entities”

In May 2011, the IASB issued IFRS 12, “Disclosures of interest in other entities”. This standard includes the disclosure requirements for all forms of interest in other entities. IFRS 12 must be applied for annual periods beginning on or after 1 January 2013.

(v) International Financial Reporting Standard 13, “Fair value measurement”

In May 2011, the IASB issued IFRS 13, “Fair value measurement”. IFRS 13 explains how to measure fair value and aims to enhance fair value disclosures. IFRS 13 must be applied for annual periods beginning on or after 1 January 2013.

These standards, amendments to standards and interpretations are not effective for the financial year beginning January 1, 2011 and have not been early adopted.

The Company's management has not assessed the potential impact that the application of these standards may have on the Company's financial condition or results of operations.




 
            Ricardo Soler
     Chief Financial Officer
 
 
 
 
 
14