tsfinancial3q10_6k.htm - Generated by SEC Publisher for SEC Filing

 

FORM 6 - K

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

                                                                                                                       

 

Report of Foreign Private Issuer

Pursuant to Rule 13a - 16 or 15d - 16 of

the Securities Exchange Act of 1934

 

 

As of November 8, 2010

 

 

 

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  Ö    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  Ö    

 

 

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 nine-month period ended September 30, 2010.

 

 

 

SIGNATURE

 

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

Date: November 8, 2010

 

 

 

Tenaris, S.A.

 

 

 

 

By: /s/ Cecilia Bilesio                    

Cecilia Bilesio

Corporate Secretary

 

 

 

 

 

 

 

 

 

2


 

 

TENARIS S.A.

 

 

 

 

 

 

 

CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2010

 

 

 

 

 

 

 

 

 

 

 

46a, Avenue John F. Kennedy - 2nd Floor.

L - 1855 Luxembourg

3


 

 

Tenaris S.A.  Consolidated Condensed Interim Financial Statements for the nine-month period ended September 30, 2010

CONSOLIDATED CONDENSED INTERIM INCOME STATEMENT

 

(all amounts in thousands of U.S. dollars, unless otherwise stated)

 

Three-month period
ended September 30,

Nine-month period
ended September 30,

 

Notes

2010

2009

2010

2009

Continuing operations

 

(Unaudited)

(Unaudited)

Net sales

3

2,027,242

1,771,475

5,647,725

6,302,107

Cost of sales

3 & 4

(1,252,583)

(1,080,161)

(3,423,055)

(3,708,372)

Gross profit

 

774,659

691,314

2,224,670

2,593,735

Selling, general and administrative expenses

3 & 5

(370,267)

(327,234)

(1,108,798)

(1,110,240)

Other operating income (expense), net

3

694

(3,528)

3,857

(504)

Operating income

 

405,086

360,552

1,119,729

1,482,991

Interest income

6

13,968

10,435

25,468

23,172

Interest expense

6

(10,003)

(31,007)

(51,961)

(94,589)

Other financial results

6

(16,223)

(15,377)

(15,900)

(67,643)

Income before equity in earnings of associated companies and income tax

 

392,828

324,603

1,077,336

1,343,931

Equity in earnings of associated companies

 

15,575

10,294

58,389

68,229

Income before income tax

 

408,403

334,897

1,135,725

1,412,160

Income tax

 

(105,696)

(97,583)

(315,838)

(417,175)

Income for continuing operations

 

302,707

237,314

819,887

994,985

 

 

 

 

 

 

Discontinued operations

 

 

 

 

 

Result for discontinued operations

12

 - 

 - 

 - 

(28,138)

Income for the period

 

302,707

237,314

819,887

966,847

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

Equity holders of the Company

 

304,812

229,873

806,459

939,188

Non-controlling interests

 

(2,105)

7,441

13,428

27,659

 

 

302,707

237,314

819,887

966,847

 

 

 

 

 

 

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 and Discontinued operations

 

 

 

 

 

Basic and diluted earnings per share (U.S. dollars per share)

7

0.26

0.19

0.68

0.80

Basic and diluted earnings per ADS (U.S. dollars per ADS)

7

0.52

0.39

1.37

1.59

Continuing operations

 

 

 

 

 

Basic and diluted earnings per share (U.S. dollars per share)

 

0.26

0.19

0.68

0.81

Basic and diluted earnings per ADS (U.S. dollars per ADS)

 

0.52

0.39

1.37

1.62

 

 

CONSOLIDATED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME

 

(all amounts in thousands of U.S. dollars)

 

Three-month period
ended September 30,

Nine-month period
ended September 30,

 

 

2010

2009

2010

2009

 

 

(Unaudited)

(Unaudited)

Income for the period

 

302,707

237,314

819,887

966,847

 

 

 

 

 

 

Currency translation adjustment

 

215,268

161,570

64,382

323,432

Changes in the fair value of derivatives held as cash flow hedges

 

7,108

5,227

4,913

(3,122)

Share of other comprehensive income of associates:

 

 

 

 

 

   - Currency translation adjustment

 

7,647

(3,840)

9,672

(8,270)

   - Changes in the fair value of derivatives held as cash flow hedges

 

283

356

514

2,171

Income tax relating to components of other comprehensive income

 

(1,928)

(134)

(1,466)

2,742

Other comprehensive income for the period, net of tax

 

228,378

163,179

78,015

316,953

Total comprehensive income for the period

 

531,085

400,493

897,902

1,283,800

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

Equity holders of the Company

 

496,330

345,729

855,727

1,161,117

Non-controlling interests

 

34,755

54,764

42,175

122,683

 

 

531,085

400,493

897,902

1,283,800

 

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, 2009.

1


 

 

Tenaris S.A.  Consolidated Condensed Interim Financial Statements for the nine-month period ended September 30, 2010

CONSOLIDATED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION

 

(all amounts in thousands of U.S. dollars)

 

At September 30, 2010

 

At December 31, 2009

 

Notes

(Unaudited)

 

 

ASSETS

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

  Property, plant and equipment, net

8

3,576,154

 

 

3,254,587

 

  Intangible assets, net

9

3,543,508

 

 

3,670,920

 

  Investments in associated companies

 

657,911

 

 

602,572

 

  Other investments

 

43,091

 

 

34,167

 

  Deferred tax assets

 

220,528

 

 

197,603

 

  Receivables

 

121,721

8,162,913

 

101,618

7,861,467

Current assets

 

 

 

 

 

 

  Inventories

 

2,270,276

 

 

1,687,059

 

  Receivables and prepayments

 

274,457

 

 

220,124

 

  Current tax assets

 

230,605

 

 

260,280

 

  Trade receivables

 

1,531,564

 

 

1,310,302

 

  Available for sale assets

14

21,572

 

 

21,572

 

  Other investments

 

641,998

 

 

579,675

 

  Cash and cash equivalents

 

919,027

5,889,499

 

1,542,829

5,621,841

 

 

 

 

 

 

 

Total assets

 

 

14,052,412

 

 

13,483,308

EQUITY 

 

 

 

 

 

 

Capital and reserves attributable to the Company’s equity holders

 

 

9,699,612

 

 

9,092,164

Non-controlling interests

 

 

649,233

 

 

628,672

Total equity

 

 

10,348,845

 

 

9,720,836

LIABILITIES

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

  Borrowings

 

376,204

 

 

655,181

 

  Deferred tax liabilities

 

885,230

 

 

860,787

 

  Other liabilities

 

189,815

 

 

192,467

 

  Provisions

 

88,608

 

 

80,755

 

  Trade payables

 

3,387

1,543,244

 

2,812

1,792,002

Current liabilities

 

 

 

 

 

 

  Borrowings

 

713,703

 

 

791,583

 

  Current tax liabilities

 

221,095

 

 

306,539

 

  Other liabilities

 

289,894

 

 

192,190

 

  Provisions

 

26,059

 

 

28,632

 

  Customer advances

 

86,710

 

 

95,107

 

  Trade payables

 

822,862

2,160,323

 

556,419

1,970,470

Total liabilities

 

 

3,703,567

 

 

3,762,472

Total equity and liabilities

 

 

14,052,412

 

 

13,483,308

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, 2009.

2


 

 

Tenaris S.A.  Consolidated Condensed Interim Financial Statements for the nine-month period ended September 30, 2010

 

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, 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

 - 

 - 

 - 

 - 

 - 

806,459

806,459

13,428

819,887

 

 

 

 

 

 

 

 

 

 

Currency translation adjustment

 - 

 - 

 - 

35,862

 - 

 - 

35,862

28,520

64,382

Hedge reserve, net of tax

 - 

 - 

 - 

 - 

3,220

 - 

3,220

227

3,447

Share of other comprehensive income of associates

 - 

 - 

 - 

9,672

514

 - 

10,186

 - 

10,186

Other comprehensive income for the period

 - 

 - 

 - 

45,534

3,734

 - 

49,268

28,747

78,015

Total comprehensive income for the period

 - 

 - 

 - 

45,534

3,734

806,459

855,727

42,175

897,902

Acquisition and increase of non-controlling interests

 - 

 - 

 - 

 - 

(366)

 - 

(366)

(2,595)

(2,961)

Dividends paid in cash

 - 

 - 

 - 

 - 

 - 

(247,913)

(247,913)

(19,019)

(266,932)

Balance at September 30, 2010

1,180,537

118,054

609,733

75,067

13,852

7,702,369

9,699,612

649,233

10,348,845

 

 

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, 2009

1,180,537

118,054

609,733

(223,779)

2,127

6,489,899

8,176,571

525,316

8,701,887

Income for the period

 - 

 - 

 - 

 - 

 - 

939,188

939,188

27,659

966,847

 

 

 

 

 

 

 

 

 

 

Currency translation adjustment

 - 

 - 

 - 

225,426

 - 

 - 

225,426

98,006

323,432

Hedge reserve, net of tax

 - 

 - 

 - 

 - 

2,602

 - 

2,602

(2,982)

(380)

Share of other comprehensive income of associates

 - 

 - 

 - 

(8,270)

2,171

 - 

(6,099)

 - 

(6,099)

Other comprehensive income for the period

 - 

 - 

 - 

217,156

4,773

 - 

221,929

95,024

316,953

Total comprehensive income for the period

 - 

 - 

 - 

217,156

4,773

939,188

1,161,117

122,683

1,283,800

Acquisition and decrease of non-controlling interests

 - 

 - 

 - 

 - 

(783)

 - 

(783)

3,445

2,662

Change in equity reserves

 - 

 - 

 - 

 - 

21

 - 

21

 - 

21

Dividends paid in cash

 - 

 - 

 - 

 - 

 - 

(354,161)

(354,161)

(32,698)

(386,859)

Balance at September 30, 2009

1,180,537

118,054

609,733

(6,623)

6,138

7,074,926

8,982,765

618,746

9,601,511

 

(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 September 30, 2010, there were 1,180,536,830 shares issued. All issued shares are fully paid.

(2) Retained Earnings as of September 30, 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, 2009.

3


 

 

 

Tenaris S.A.  Consolidated Condensed Interim Financial Statements for the six-month period ended June 30, 2003

CONSOLIDATED CONDENSED INTERIM STATEMENT OF CASH FLOWS

 

 

 

 

Nine-month period ended September 30,

(all amounts in thousands of U.S. dollars)

Notes

2010

2009

Cash flows from operating activities

 

(Unaudited)

(Unaudited)

Income for the period

 

819,887

966,847

Adjustments for:

 

 

 

Depreciation and amortization

8 & 9

377,890

375,850

Income tax accruals less payments

 

(67,542)

(345,431)

Equity in earnings of associated companies

 

(58,885)

(67,367)

Interest accruals less payments, net

 

20,313

(17,957)

 

 

 

 

Changes in provisions

 

5,280

4,026

Changes in working capital

 

(491,392)

1,534,948

Other, including currency translation adjustment

 

11,430

196,070

Net cash provided by operating activities

 

616,981

2,646,986

 

 

 

 

Cash flows from investing activities

 

 

 

Capital expenditures

8 & 9

(561,218)

(327,795)

Acquisition of subsidiaries

11

 - 

(64,029)

Proceeds from disposal of property, plant and equipment and intangible assets

 

6,961

12,004

Dividends received from associated companies

 

13,732

8,903

Investments in short terms securities

 

(62,323)

(482,998)

Net cash used in investing activities

 

(602,848)

(853,915)

Cash flows from financing activities

 

 

 

Changes in non-controlling interests

11

(2,961)

(9,535)

Dividends paid

 

(247,913)

(354,161)

Dividends paid to non-controlling interests in subsidiaries

 

(19,019)

(32,698)

Proceeds from borrowings

 

369,718

509,802

Repayments of borrowings

 

(733,868)

(1,704,173)

Net cash used in financing activities

 

(634,043)

(1,590,765)

 

 

 

 

(Decrease) Increase in cash and cash equivalents

 

(619,910)

202,306

 

 

 

 

Movement in cash and cash equivalents

 

 

 

At the beginning of the period

 

1,528,707

1,525,022

Effect of exchange rate changes

 

(8,028)

15,788

Decrease due to deconsolidation

 

 - 

(9,696)

(Decrease) Increase in cash and cash equivalents

 

(619,910)

202,306

At September 30,

 

900,769

1,733,420

 

 

 

 

 

 

At September 30,

Cash and cash equivalents

 

2010

2009

Cash and bank deposits

 

919,027

1,741,352

Bank overdrafts

 

(18,258)

(7,932)

 

 

900,769

1,733,420

 

 

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, 2009.

4


 

 

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

Business combinations and other acquisitions

12

Discontinued operations

13

Related party transactions

14

Process in Venezuela

15

Subsequent events

 

 

 

 

 

 

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”), a Luxembourg corporation (societé anonyme holding), was incorporated on December 17, 2001 as a holding company in steel pipe manufacturing and distributing operations. The Company holds, either directly or indirectly, controlling interests in various subsidiaries. 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, 2009.

 

These Consolidated Condensed Interim Financial Statements were approved for issue by the Company’s Board of Directors on November 4, 2010.

 

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, 2009. These Consolidated Condensed Interim Financial Statements should be read in conjunction with the audited Consolidated Financial Statements for the year ended December 31, 2009, which have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standard Board and adopted by the European Union (“IFRS”).

 

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 Continuing operations

Total Discontinued operations (*)

Nine-month period ended September 30, 2010

 

 

 

 

 

Net sales

4,917,357

282,593

447,775

5,647,725

 - 

Cost of sales

(2,914,316)

(185,042)

(323,697)

(3,423,055)

 - 

Gross profit

2,003,041

97,551

124,078

2,224,670

 - 

Selling, general and administrative expenses

(998,796)

(59,519)

(50,483)

(1,108,798)

 - 

Other operating income (expenses), net

(1,910)

2,104

3,663

3,857

 - 

Operating income

1,002,335

40,136

77,258

1,119,729

 - 

Depreciation  and amortization

351,468

14,730

11,692

377,890

 - 

Capital expenditures

524,419

33,681

3,118

561,218

 - 

 

 

 

 

 

 

Nine-month period ended September 30, 2009

 

 

 

 

 

Net sales

5,170,370

765,365

366,372

6,302,107

18,558

Cost of sales

(2,861,165)

(551,530)

(295,677)

(3,708,372)

(31,866)

Gross profit

2,309,205

213,835

70,695

2,593,735

(13,308)

Selling, general and administrative expenses

(995,938)

(61,147)

(53,155)

(1,110,240)

(9,540)

Other operating income (expenses), net

(1,131)

1,357

(730)

(504)

(179)

Operating income

1,312,136

154,045

16,810

1,482,991

(23,027)

Depreciation  and amortization

345,429

13,341

17,053

375,823

27

Capital expenditures

299,925

24,421

3,449

327,795

 

 

Geographical information

 

(Unaudited)

(all amounts in thousands of U.S. dollars)

North America

South America

Europe

Middle East & Africa

Far East & Oceania

Total Continuing operations

Total Discontinued operations (*)

Nine-month period ended September 30, 2010

 

 

 

 

 

 

 

Net sales

2,391,673

1,391,724

586,708

964,960

312,660

5,647,725

 - 

Depreciation and amortization

192,572

78,830

85,796

950

19,742

377,890

 - 

Capital expenditures

370,141

81,536

90,661

11,003

7,877

561,218

 - 

 

 

 

 

 

 

 

 

Nine-month period ended September 30, 2009

 

 

 

 

 

 

 

Net sales

2,291,127

1,722,656

691,382

1,209,255

387,687

6,302,107

18,558

Depreciation and amortization

207,867

73,021

80,316

937

13,682

375,823

27

Capital expenditures

177,958

73,576

51,476

1,024

23,761

327,795

 

 

(*) Corresponds to the Venezuelan Companies (year 2009).

 

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.

 

For geographical information purposes, “North America” comprises principally Canada, Mexico and the United States of America; “South America” comprises principally Argentina, Brazil, Colombia, Ecuador and Venezuela; “Europe” comprises principally Italy, Norway, Romania and the United Kingdom; “Middle East and Africa” comprises principally Algeria, Angola, Egypt, Iraq, Nigeria and Saudi Arabia; “Far East and Oceania” comprises principally China, Indonesia and Japan.

7


 

 

4              Cost of sales               

 

 

Nine-month period ended September 30,

(all amounts in thousands of U.S. dollars)

2010

2009

 

(Unaudited)

Inventories at the beginning of the period

1,687,059

3,091,401

 

 

 

Plus: Charges of the period

 

 

Raw materials, energy, consumables and other

2,696,198

1,411,365

Increase in inventory due to business combinations

 - 

53,541

Services and fees

242,266

179,522

Labor cost

690,777

532,148

Depreciation of property, plant and equipment

215,221

192,219

Amortization of intangible assets

2,610

1,998

Maintenance expenses

132,662

117,420

Provisions for contingencies

 - 

1,447

Allowance for obsolescence

(30,104)

64,468

Taxes

5,334

5,646

Other

51,308

35,344

 

4,006,272

2,595,118

Transfer to assets available for sale

 - 

(43,726)

Less: Inventories at the end of the period

(2,270,276)

(1,902,555)

 

3,423,055

3,740,238

From Discontinued operations

 - 

(31,866)

 

3,423,055

3,708,372

 

 

5           Selling, general and administrative expenses

 

 

 

Nine-month period ended September 30,

(all amounts in thousands of U.S. dollars)

2010

2009

 

(Unaudited)

Services and fees

154,218

151,784

Labor cost

332,500

306,655

Depreciation of property, plant and equipment

9,415

8,460

Amortization of intangible assets

150,644

173,173

Commissions, freight and other selling expenses

306,534

282,562

Provisions for contingencies

25,028

24,929

Allowances for doubtful accounts

(14,496)

19,869

Taxes

88,412

84,117

Other

56,543

68,231

 

1,108,798

1,119,780

From Discontinued operations

 - 

(9,540)

 

1,108,798

1,110,240

 

 

8


 

 

6              Financial results

 

 

(all amounts in thousands of U.S. dollars)

Nine-month period ended September 30,

 

2010

2009

 

(Unaudited)

Interest income

25,468

23,327

Interest expense (*)

(51,961)

(98,169)

Interest net

(26,493)

(74,842)

 

 

 

Net foreign exchange transaction results

(12,450)

(60,613)

Foreign exchange derivatives contracts results (**)

(1,490)

(3,754)

Other

(1,960)

(4,158)

Other financial results

(15,900)

(68,525)

 

 

 

Net financial results

(42,393)

(143,367)

From Discontinued operations

 - 

4,307

 

(42,393)

(139,060)

 

Each item included in this note differs from its corresponding line in the Consolidated Condensed Interim Income Statement because it includes discontinued operations’ results.

 

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.

 

(*) Interest rate swaps losses, included under “Interest expense” for the nine-month period ended September 30, 2010 and September 30, 2009 amount to $11.6 million and $14.1 million, respectively.

 

(**)Tenaris has identified certain embedded derivatives and in accordance with IAS 39 (“Financial Instruments: Recognition and Measurement”) has accounted them separately from their host contracts. A loss of $2.0 million and a gain of $23 million arising from the valuation of these contracts have been recognized for the nine-month period ended September 30, 2010 and September 30, 2009, 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.

 

 

Nine-month period ended September 30,

 

2010

2009

 

(Unaudited)

Weighted average number of ordinary shares in issue (thousands)

1,180,537

1,180,537

Net income attributable to equity holders

806,459

939,188

Basic and diluted earnings per share (U.S. dollars per share)

0.68

0.80

Basic and diluted earnings per ADS (U.S. dollars per ADS) (*)

1.37

1.59

 

 

 

Result for discontinued operations attributable to equity holders

 - 

(16,454)

Basic and diluted earnings per share (U.S. dollars per share)

 - 

(0.01)

Basic and diluted earnings per ADS (U.S. dollars per ADS) (*)

 - 

(0.03)

 

(*) Each ADS equals two shares

 

On June 2, 2010, 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 2009, 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 24, 2010. In the aggregate, the interim dividend paid in November 2009 and the balance paid in June 2010 amounted to approximately $401 million.

9


 

 

8           Property, plant and equipment, net

 

 

(all amounts in thousands of U.S. dollars)

2010

2009

 

(Unaudited)

Nine-month period ended September 30,

 

 

Opening net book amount

3,254,587

2,982,871

Currency translation adjustment

16,971

92,987

Increase due to business combinations

 - 

24,123

Additions

543,394

313,583

Disposals

(6,937)

(11,458)

Transfers

(7,225)

(2,088)

Depreciation charge

(224,636)

(200,679)

Disposals due to deconsolidation

 - 

(6,060)

At September 30,

3,576,154

3,193,279

 

 

9           Intangible assets, net

 

 

(all amounts in thousands of U.S. dollars)

2010

2009

 

(Unaudited)

Nine-month period ended September 30,

 

 

Opening net book amount

3,670,920

3,826,987

Currency translation adjustment

6,420

40,774

Additions

17,824

14,212

Disposals

(24)

(546)

Transfers

1,622

2,088

Amortization charge

(153,254)

(175,171)

Disposals due to deconsolidation

 - 

(430)

At September 30,

3,543,508

3,707,914

 

 

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, 2009. 

 

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 ARS96.0 million (approximately $24.4 million) at September 30, 2010, in taxes and penalties. Based on the views of Siderca’s tax advisors, 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.

 

10


 

 

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

 

Contingencies (Cont.)

 

Ongoing investigation

 

The Company has 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. The Audit Committee of the Company’s Board of Directors has engaged external counsel in connection with a review of these payments and related matters, and the Company has voluntarily notified the U.S. Securities and Exchange Commission and the U.S. Department of Justice. The Company is sharing the results of this review with the appropriate regulatory agencies, and will cooperate with any investigations that may be conducted by such agencies. At this time, the Company cannot predict the outcome of these matters or estimate the range of potential loss or extent of risk, if any, to the Company’s business that may result from resolution of these matters.

 

Commitments

 

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

 

 

 

 

Restrictions to the distribution of profits and payment of dividends

 

As of September 30, 2010, equity as defined under Luxembourg law and regulations consisted of:

 

   

(all amounts in thousands of U.S. dollars)

(Unaudited)

Share capital

1,180,537

Legal reserve

118,054

Share premium

609,733

Retained earnings including net income for the nine month period ended September 30, 2010

4,478,164

Total equity in accordance with Luxembourg law

6,386,488

 

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 September 30, 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.

11


 

 

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

 

Restrictions to the distribution of profits and payment of dividends (Cont.)

 

At September 30, 2010, distributable amount for the financial period of Tenaris under Luxembourg law totals $5.1 billion, as detailed below.

 

   

(all amounts in thousands of U.S. dollars)  

(Unaudited)

Retained earnings at December 31, 2009 under Luxembourg law

3,916,482

Dividends received

814,609

Other income and expenses for the nine month period ended September 30, 2010

(5,014)

Dividends paid

(247,913)

Retained earnings at September 30, 2010 under Luxembourg law

4,478,164

Share premium

609,733

Distributable amount at September 30, 2010 under Luxembourg law

5,087,897

 

11           Business combinations and other acquisitions 

 

(a) Tenaris acquired control of Seamless Pipe Indonesia Jaya

 

In April 2009, Tenaris completed the acquisition from Bakrie & Brothers TbK, Green Pipe International Limited and Cakrawala Baru of a 77.45% holding in Seamless Pipe Indonesia Jaya (“SPIJ”), an Indonesian OCTG processing business with heat treatment and premium connection threading facilities, for a purchase price of $69.5 million, with $21.9 million being payable as consideration for SPIJ's equity and $47.6 million as consideration for the assignment of certain sellers' loan to SPIJ. Tenaris began consolidating SPIJ’s balance sheet and results of operations since April 2009.

 

 (b) Non-controlling interests

 

During the nine-month period ended September 30, 2010 and 2009, additional shares of certain Tenaris subsidiaries were acquired from non-controlling shareholders for approximately $3.4 million and $9.5 million, respectively.

 

The assets and liabilities determined arising from the business combinations and the acquisitions are as follows:

 

(all amounts in thousands of U.S. dollars)

Nine-month period ended September 30, 2009

 

(Unaudited)

Other assets and liabilities (net)

(1,309)

Property, plant and equipment

24,123

Net assets acquired

22,814

Non-controlling interests

3,150

Sub-total

25,964

Assumed liabilities

47,600

Sub-total

73,564

Cash acquired

5,501

Purchase consideration

79,065

 

12           Discontinued operations

 

Nationalization of Venezuelan Subsidiaries

 

The results of operations and cash flows generated by the Venezuelan Companies (as defined in Note 14) are presented as discontinued operations in these Consolidated Condensed Interim Financial Statements. For further information see Note 14.

 

 

12


 

 

12           Discontinued operations (Cont.)

 

Analysis of the result of discontinued operations (*)

 

(i) Result for discontinued operations

(all amounts in thousands of U.S. dollars)

 

Nine-month period ended September 30, 2009

 

 

(Unaudited)

Gross loss

 

(13,308)

Operating loss

 

(23,027)

Result for discontinued operations

 

(28,138)

 

(ii) Net cash flows attributable to discontinued operations

(all amounts in thousands of U.S. dollars)

 

Nine-month period ended September 30, 2009

 

 

(Unaudited)

Net cash provided by operating activities

 

1,788

Net cash used in investing activities

 

(801)

Net cash provided by financing activities

 

5,306

 

(*) Corresponds to the Venezuelan Companies.

 

All amounts were estimated only for disclosure purposes, as cash flows from these discontinued operations were not managed separately from other cash flows.

 

13           Related party transactions

 

Based on the information most recently available to the Company, as of September 30, 2010:  

 

Based on the information most recently available to the Company, as of May 31, 2010 Tenaris’s directors and senior management as a group owned 0.12% of the Company’s outstanding shares, Aberdeen Asset Management PLC beneficially owned 5.04% of the Company’s outstanding shares, while the remaining 34.39% were publicly traded.

    

At September 30, 2010, the closing price of Ternium S.A. (“Ternium”) ADS as quoted on the New York Stock Exchange was $32.65 per ADS, giving Tenaris’s ownership stake a market value of approximately $750.0 million. At September 30, 2010, the carrying value of Tenaris’s ownership stake in Ternium was approximately $640.3 million.

 

Transactions and balances disclosed as with “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”.

 

 

13


 

 

13           Related party transactions (Cont.)

 

The following transactions were carried out with related parties:

 

(all amounts in thousands of U.S. dollars)  

(Unaudited)

 

Nine-month period ended September 30, 2010

 

 

 

Associated (1)

Other

Total

 (i)

Transactions

 

 

 

 

(a) Sales of goods and services

 

 

 

 

Sales of goods

26,432

41,965

68,397

 

Sales of services

8,580

2,128

10,708

 

 

35,012

44,093

79,105

 

 

 

 

 

 

(b) Purchases of goods and services

 

 

 

 

Purchases of goods

135,358

20,088

155,446

 

Purchases of services

43,865

106,595

150,460

 

 

179,223

126,683

305,906

 

 

(Unaudited)

 

Nine-month period ended September 30, 2009

 

 

 

 

 

Associated (1)

Other

Total

(i)

Transactions (2)

 

 

 

 

(a) Sales of goods and services

 

 

 

 

Sales of goods

17,659

68,421

86,080

 

Sales of services

9,555

3,475

13,030

 

 

27,214

71,896

99,110

 

 

 

 

 

 

(b) Purchases of goods and services

 

 

 

 

Purchases of goods

25,712

7,027

32,739

 

Purchases of services

69,646

50,679

120,325

 

 

95,358

57,706

153,064

 

 

 (Unaudited)

 

At September 30, 2010

 

 

 

 

 

Associated (1)

Other

Total

(ii)

Period-end balances

 

 

 

 

 

 

 

 

 

(a) Arising from sales / purchases of goods / services

 

 

 

 

Receivables from related parties

31,186

35,181

66,367

 

Payables to related parties

(28,121)

(26,963)

(55,084)

 

 

3,065

8,218

11,283

 

 

 

 

 

 

(b) Financial debt

 

 

 

 

Borrowings

(2,180)

 - 

(2,180)

                                                                                                                                                    

 

At December 31, 2009

 

 

 

 

 

Associated (1)

Other

Total

(ii)

Year-end balances

 

 

 

 

 

 

 

 

 

(a) Arising from sales / purchases of goods / services

 

 

 

 

Receivables from related parties

18,273

7,093

25,366

 

Payables to related parties

(23,898)

(5,856)

(29,754)

 

 

(5,625)

1,237

(4,388)

 

 

 

 

 

 

(b) Financial debt

 

 

 

 

Borrowings

(2,907)

 - 

(2,907)

 

(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”).

(2) Includes $2.5  million of purchases of nationalized Venezuelan subsidiaries.

14


 

 

14           Process in Venezuela

Nationalization of Venezuelan Subsidiaries

 

Within the framework of Decree Law 6058, on May 22, 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 Siderurgicos S.A (“Matesi”), and Complejo Siderurgico de Guayana, C.A (“Comsigua”), in which the Company has a non-controlling interest (collectively, “the Venezuelan Companies”). On May 25, 2009, the Minister of Basic Industries and Mines of Venezuela (“MIBAM”) issued official communications N°230/09 and 231/09, appointing the MIBAM’s representatives to the transition committees charged with overseeing the nationalization processes of Tavsa and Matesi. On May 29, 2009, the Company sent response letters to the MIBAM acknowledging the Venezuelan government’s decision to nationalize Tavsa and Matesi, appointing its representatives to the transition committees, and reserving all of its rights under contracts, investment treaties and Venezuelan and international law and the right to submit any controversy between the Company or its subsidiaries and Venezuela relating to Tavsa and Matesi’s nationalization to international arbitration, including arbitration administered by ICSID.

 

On July 14, 2009, President Chávez issued Decree 6796, which orders the acquisition of the Venezuelan Companies’ assets and provides that Tavsa’s assets will be held by the Ministry of Energy and Oil, while Matesi and Comsigua’s assets will be held by MIBAM. Decree 6796 also requires 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 fail to reach agreement by the expiration of the 60-day period (or any extension thereof), the applicable Ministry will assume control and exclusive operation of the relevant Venezuelan Company, and the Executive Branch will order their expropriation in accordance with the Venezuelan Expropriation Law. The Decree also specifies that all facts and activities there under are subject to Venezuelan law and any disputes relating thereto must be submitted to Venezuelan courts.

 

On August 19, 2009, the Company announced that Venezuela, acting through the transition committee appointed by the MIBAM, unilaterally assumed exclusive operational control over Matesi.

 

On November 17, 2009, the Company announced that Venezuela acting through PDVSA Industrial S.A. (a subsidiary of Petroleos de Venezuela S.A.), formally assumed exclusive operational control over the assets of Tavsa. Following this formal change in operational control, PDVSA Industrial assumed complete responsibility over Tavsa’s operations and management and since then Tavsa’s operations are being managed by the transition committee previously appointed by Venezuela. The Company’s representatives in Tavsa’s board of directors have ceased their functions.

 

On October 7, 2010, Venezuela’s National Assembly passed a law (“Acuerdo”) declaring all of Matesi’s assets to be of public and social interest and ordering the Executive Branch to take the necessary measures for the expropriation of such assets.

 

The Company’s investments in Tavsa, Matesi and Comsigua are protected under applicable bilateral investment treaties, including the bilateral investment treaty between Venezuela and the Belgian-Luxembourgish Union, and, as noted above, Tenaris continues to reserve all of its rights under contracts, investment treaties and Venezuelan and international law, and to consent 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 Venezuelan Companies results of operations and cash flows 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.

 

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.

 

 

 

15


 

 

14           Process in Venezuela (Cont.)

Nationalization of Venezuelan Subsidiaries (Cont.)           

 

Tenaris subsidiaries have also net receivables with the Venezuelan Companies as of September 30, 2010, for a total amount of $27.7 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.

 

15           Subsequent events

 

Annual Dividend Proposal

 

On November 4, 2010, the Company’s board of directors approved the payment of an interim dividend of $0.13 per share ($0.26 per ADS), or approximately $153 million, on November 25, 2010, with an ex-dividend date of November 22, 2010.

 

 

 

 

 

 

 

 

 

 

Ricardo Soler

Chief Financial Officer

 

16