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
April 30, 2009
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 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' notice of Annual General Meeting of
Shareholders and the Shareholder Meeting Brochure and Proxy Statement and the
Company’s 2008 annual report (which includes the Company’s consolidated
financial statements for the years ended December 31, 2008, 2007 and 2006 and
the Company’s annual accounts as at December 31, 2008, together with the
independent auditors’ reports and the Board of Directors’ management report and
certification).
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:
April 30, 2009
Tenaris,
S.A.
By: /s/ Cecilia
Bilesio
Cecilia
Bilesio
Corporate
Secretary
Dear
Tenaris Shareholder and ADR Holder,
I am
pleased to invite you to attend the Annual General Meeting of Shareholders of
the Company. The meeting will be held on Wednesday, June 3, 2009, at 46A, Avenue
John F. Kennedy L-1855 Luxembourg and will begin promptly at 11:00 a.m. (Central
European Time).
At the
Annual General Meeting, you will have the opportunity to hear a report on the
Company’s business, financial condition and results of operation and to vote on
various matters, including the approval of the Company’s financial statements,
the election of the members of the Board of Directors and the appointment of the
independent auditors.
The
Notice and Agenda for the meeting, the Shareholder Meeting Brochure and Proxy
Statement and the Company’s 2008 annual report (which includes the Company’s
consolidated financial statements for the years ended December 31, 2008, 2007
and 2006 and the Company’s annual accounts as at December 31, 2008, together
with the independent auditors’ reports and the Board of Directors’ management
report and certification), are available free of charge at the Company's
registered office in Luxembourg and on our website at www.tenaris.com/investors.
They may also be obtained upon request, by calling (352) 26-47-89-78 (if you are
in Luxembourg), 1-800-555-2470 (if you are in the United States), or
+1-267-468-0786 (if you are in another jurisdiction).
Even if
you only own a few shares or ADRs, I hope that you will exercise your right to
vote at the meeting. You can vote your shares personally or by proxy.
If you choose to vote by proxy, you may use the enclosed dedicated proxy
form. If you are a holder of ADRs, please see the letter from THE
BANK OF NEW YORK MELLON, depositary bank, for instructions on how to exercise
your vote by proxy.
Yours
sincerely,
Paolo
Rocca
Chairman
and Chief Executive Officer
April 24,
2009
Re:
TENARIS S.A.
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To:
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Registered
Holders of American Depositary Receipts
(“ADRs”)
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for
shares of common stock, US$1 Par Value (“Common Stock”),
of
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Tenaris
S.A. (the “Company”):
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The
Company has announced that its Annual General Meeting of Shareholders will be
held on June 3, 2009, at 11:00 a.m. (Central European Time). The meeting will
take place at 46A, Avenue John F. Kennedy L-1855 Luxembourg. A copy of the Company’s Notice of
Annual General Meeting of Shareholders, including the agenda for such meeting,
is enclosed.
The
Notice of Annual General Meeting of Shareholders, the Shareholder Meeting
Brochure and Proxy Statement, and the Company’s 2008 annual report (which
includes the Company’s financial statements for the years ended December 31,
2008, 2007 and 2006 and the Company’s annual accounts as at December 31, 2008,
together with the independent auditors’ report and the Board of Directors’
management report and certification), are available on the website at www.tenaris.com/investors and may also be
obtained upon request, by calling 1-800-555-2470 (if you are in the United
States) or +1-267-468-0786 (if you are outside the United States). These
materials are provided to allow the shares of Common Stock represented by your
ADRs to be voted at the meeting.
Each
holder of ADRs as of each of April 27, 2009 and May 20, 2009, is entitled to
instruct THE BANK OF NEW YORK MELLON, as Depositary (the “Depositary”), as to
the exercise of the voting rights pertaining to the Company’s shares of Common
Stock represented by such holder’s ADRs. Although voting instructions
are sent to holders and proxy materials are available on the website beginning
on May 1, 2009, only those holders of record at each of April 27, 2009 and May
20, 2009 will be entitled to provide the Depositary with voting
instructions. Notwithstanding that holders of ADRs must have held
ADRs on each such date, in order to avoid the possibility of double vote, only those positions on May 20, 2009
will be counted for voting instruction purposes. Eligible ADR holders who
desire to have their shares represented by their ADRs voted at the meeting must
complete, date and sign a proxy form and return it to the Depositary at THE BANK
OF NEW YORK MELLON, Proxy Processing P.O. Box 3549, S. Hackensack,
NJ 07606-9249, U.S.A. If the Depositary receives properly completed
instructions by 5:00 p.m., New
York City time, on May 28, 2009, then it shall vote or cause to be voted
the shares underlying such ADRs in the manner prescribed by the instructions.
However, if by 5:00 p.m., New York time, on May 28, 2009, the Depositary
receives no instructions from the holder of ADRs, or the instructions are not in
proper form, then the Depositary shall deem such holder to have instructed the
Depositary to vote the
underlying shares of Common Stock represented by any such ADRs in favor of any
proposals or recommendations of the Company, for which purposes the
Depositary shall issue a proxy to a person appointed by the Company to vote such
underlying shares in favor of any proposals or recommendations of the Company
(including any recommendation by the Company to vote such underlying shares on
any given issue in accordance with the majority shareholder vote on that issue).
No instruction shall be deemed given and no proxy shall be given with respect to
any matter as to which the Company informs the Depositary that (i) it does not
wish such proxy given, (ii) it has knowledge that substantial opposition exists
with respect to the action to be taken at the meeting, or (iii) the matter
materially and adversely effects the rights of the holders of ADRs.
Any
holder of ADRs entitled to have the shares represented by its ADRs voted at the
meeting, is entitled to revoke any instructions which it has previously given to
the Depositary by filing with the Depositary a written revocation or duly
executed instructions bearing a later date at any time prior to 5:00 p.m., New York time, on May 28,
2009. No
instructions, revocations or revisions thereof shall be accepted by the
Depositary after that time.
IF
YOU WANT YOUR VOTE TO BE COUNTED, THE DEPOSITARY MUST RECEIVE YOUR VOTING
INSTRUCTIONS PRIOR TO 5:00 P.M. (NEW YORK CITY TIME) ON MAY 28,
2009.
THE BANK OF NEW YORK
MELLON
Depositary
April 24,
2009
New York,
New York
Tenaris S.A.
Société
Anonyme Holding
46A,
avenue John F. Kennedy
L-1855,
Luxembourg
(a) RCS
Luxembourg B 85 203
Notice
of the Annual General Meeting of Shareholders to be held on June 3,
2009
Notice is
hereby given to holders of shares of common stock of Tenaris S.A. (the
“Company”) that the Annual General Meeting of Shareholders will be held on June
3, 2009, at 11:00 a.m. (Central European Time). The meeting will be held at
46A, avenue John F. Kennedy L-1855 Luxembourg. In the Annual General Meeting,
shareholders will vote with respect to the items listed below under the heading
“Annual General Meeting of Shareholders”.
Agenda
Annual
General Meeting of Shareholders
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1.
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Consideration
of the Board of Directors’ and independent auditors’ reports on the
Company’s consolidated financial statements. Approval of the Company’s
consolidated financial statements for the years ended December 31, 2008,
2007 and 2006.
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2.
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Consideration
of the Board of Directors’ and independent auditors’ reports on the
Company’s annual accounts. Approval of the Company’s annual accounts as at
December 31, 2008.
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3.
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Allocation
of results and approval of dividend
payment.
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4.
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Discharge
to the members of the Board of Directors for the exercise of their mandate
during the year ended December 31,
2008.
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5.
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Election
of the members of the Board of
Directors.
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6.
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Compensation
of the members of the Board of
Directors.
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7.
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Appointment
of the independent auditors for the fiscal year ending December 31, 2009
and approval of their fees.
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8.
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Authorisation
to the Board of Directors and the board of directors or other governing
bodies of the Company’s subsidiaries to acquire Company
shares.
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9.
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Authorisation
to the Board of Directors to cause the distribution of all shareholder
communications, including its shareholder meeting and proxy materials and
annual reports to shareholders, by such electronic means as is permitted
by any applicable laws or
regulations.
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Pursuant
to the Company’s Articles of Association, resolutions at the Annual General
Meeting of Shareholders will be passed by simple majority vote, irrespective of
the number of shares present or represented.
Procedures
for Attending the Meeting
Holders
of shares wishing to attend the meeting must obtain an admission ticket by
depositing their certificates representing their common stock, not later than
4:00 p.m. (local time) on May
29, 2009, at the Company’s office in Luxemburg or at the offices of any
of the Company’s subsidiaries set forth below:
Luxembourg: 46A,
Avenue John F. Kennedy
L-1855
Luxembourg
Attn:
Adélia Soares
Argentina: c/o
Siderca S.A.I.C.
Carlos
María della Paolera 299, piso 16°
(C1001ADA)
Buenos Aires
Attn:
Horacio de las Carreras and/or Eleonora Cimino
Italy: c/o
Dalmine S.p.A.
Piazza
Caduti 6 luglio 1944 n. 1 24044
Dalmine
(BG)
Attn:
Marco Tajana and/or Teresa Gaini
Mexico: c/o
Tubos de Acero de México, S.A.
Campos
Elíseos 400-17
Col.
Chapultepec Polanco
11560
México D.F.
Attn:
Félix Todd and/or Luis Armando Leviaguirre
Holders
of shares holding their shares through fungible securities accounts wishing to
attend the meeting must present a certificate (issued by the financial
institution or professional depositary holding such shares) evidencing such
deposit and certifying the number of shares recorded in the relevant account as
of May 29, 2009. Such certificate must be filed not later than 4:00 p.m. (local time) on May 29,
2009, at any of the addresses indicated above and, in the case of shares
held in Mexico, with S.D. Indeval, S.A. de C.V. (Paseo de la Reforma #255, 2o. y
3er. piso Col. Cuauhtémoc, Mexico City).
Holders
of shares as of May 29, 2009, may also vote by proxy. To vote by proxy, holders
must file the required certificate evidencing their holdings of shares and a
completed proxy form not later than 4:00 p.m. (local time) on May 29,
2009 at any of the addresses indicated above or, in the case of shares
held in Mexico, with S.D. Indeval, S.A. de C.V, in Mexico City.
Holders
of American Depositary Receipts (“ADRs”) as of April 27, 2009, which continue to
hold such ADRs on May 20, 2009, are entitled to instruct THE BANK OF NEW YORK
MELLON, as Depositary (the “Depositary”), as to the exercise of the voting
rights pertaining to the Company’s shares of common stock represented by such
holder’s ADRs. Although voting instructions are sent to holders and proxy
materials are available at our website beginning on May 1, 2009, only those
holders of record as of each of April 27, 2009 and May 20, 2009 will be entitled
to provide the Depositary with voting instructions. Notwithstanding
that holders of ADRs must have held ADRs on each such date, in order to avoid
the possibility of double vote, only those positions on May 20, 2009, will be
counted for voting instruction purposes. Eligible ADR holders who desire to vote
at the meeting must complete, date and sign a proxy form and return it to the
Depositary, at THE BANK OF NEW YORK MELLON, Proxy Processing P.O. Box 3549, S.
Hackensack, NJ 07606-9249, U.S.A., by 5:00 p.m., New York City time,
on May 28, 2009.
The
Shareholder Meeting Brochure and Proxy Statement (which contains reports on each
item of the agenda for the meeting, and further details on voting procedures)
and the forms furnished by the Company in connection with the meeting, may be
obtained at any of the addresses indicated above or upon request by calling
(352) 26-47-89-78 (if you are in Luxembourg), 1-800-555-2470 (if you are in the
United States), or +1-267-468-0786 (if you are in another jurisdiction), but
also from the Depositary, Borsa Italiana SpA (Piazza degli Affari 6, 20123,
Milan, Italy) and S.D. Indeval S.A. de C.V., as from May 1, 2009, between 10:00
a.m. and 5:00 p.m. (local time).
Copies of
the Shareholder Meeting Brochure and Proxy Statement and the forms are also
available at www.tenaris.com/investors.
Copies of the Company’s 2008 annual report (including the Company’s consolidated
financial statements for the years ended December 31, 2008, 2007 and 2006 and
the Company’s annual accounts as at December 31, 2008, together with the
independent auditors’ report and management report and certification, and the
documents referred to in the preceding sentence) may also be obtained free of
charge at the Company's registered office in Luxembourg or upon request by
calling (352) 26-47-89-78 (if you are in Luxembourg), 1-800-555-2470 (if you are
in the United States), or +1-267-468-0786 (if you are in another
jurisdiction).
Cecilia
Bilesio
Secretary
to the Board of Directors
April 24,
2009
Luxembourg
Tenaris
S.A.
Société
Anonyme Holding
46A,
avenue John F. Kennedy
L-1855,
Luxembourg
RCS
Luxembourg B 85 203
Shareholder
Meeting Brochure and Proxy Statement
Annual
General Meeting of Shareholders to be held on June 3, 2009
This
Shareholder Meeting Brochure and Proxy Statement is furnished by Tenaris S.A.
(the “Company”) in connection with the Annual General Meeting of Shareholders to
be held, for the purposes set forth in the accompanying Notice of the Annual
General Meeting of Shareholders (the “Notice”), on June 3, 2009, starting at
11:00 a.m., at 46A, avenue John F. Kennedy L-1855 Luxembourg.
As of
April 24, 2009, there were issued and outstanding 1,180,536,830 shares of common
stock, each entitled to one vote, US$1 par value each, of the Company (the
“Common Stock”), including the shares of Common Stock (the “Deposited Shares”)
deposited with various agents for THE BANK OF NEW YORK MELLON, as depositary
(the “Depositary”), under the Amended and Restated Deposit Agreement, dated as
of February 28, 2008 (the “Deposit Agreement”), among the Company, the
Depositary and all holders
from time to time of American Depositary Receipts (the “ADRs”) issued
thereunder. The Deposited Shares are represented by American Depositary Shares,
which are evidenced by the ADRs (one ADR equals two Deposited
Shares).
Each
holder of shares of Common Stock is entitled to one vote per share. Holders of
shares wishing to attend the meeting must obtain an admission ticket by
depositing their certificates confirming their holding of Common Stock, not
later than 4:00 p.m. (local time) on May 29, 2009, at any of the addresses
indicated in the Notice. Holders of shares that hold shares through fungible
securities accounts and wish to attend the meeting must present a certificate
(issued by the financial institution or professional depositary holding such
shares) evidencing such deposit and certifying the number of shares recorded in
the relevant account on May 29, 2009. Such certificate must be filed not later
than 4:00 p.m. (local time) on May 29, 2009, at any of the addresses indicated
in the Notice, or, in the case of shares held in Mexico, with S.D. Indeval, S.A.
de C.V., in Mexico City.
Holders
of shares as of May 29, 2009, may also vote by proxy. To vote by proxy, holders must file the required
certificate evidencing their holdings of shares and a completed proxy form not
later than 4:00 p.m. (local time), on May 29, 2009, at any of the addresses
indicated in the Notice, or, in the case of shares held in Mexico, with S.D.
Indeval, S.A. de C.V., in Mexico City.
Each
holder of ADRs as of April
27, 2009, which continues to hold such ADRs on May 20, 2009, is entitled to
instruct the Depositary, as to the exercise of the voting rights pertaining to
the Company’s shares of Common Stock represented by such holder’s ADRs. Although voting
instructions are sent to holders
and proxy materials are available at our website beginning on May 1,
2009, only those holders
of record as of each of April 27, 2009 and May 20, 2009 will be entitled
to provide the Depositary with voting instructions. Notwithstanding
that holders of ADRs must
have held ADRs on each such date, in order to avoid the possibility of double
vote, only those positions on May 20, 2009 will be counted for voting
instruction purposes. Eligible holders of ADRs who desire to
have their shares represented by their ADRs voted at the meeting must complete,
date and sign a proxy form and return it to the Depositary, at THE BANK OF NEW
YORK MELLON, Proxy Processing P.O. Box 3549, S. Hackensack,
NJ 07606-9249, U.S.A. If the Depositary receives properly completed
instructions by 5:00 p.m., New York City time, on May 28, 2009, then it shall
vote or cause to be voted the shares underlying such ADRs in the manner
prescribed by the instructions. However, if by 5:00 p.m., New York time, on May
28, 2009, the Depositary receives no instructions from the holder of ADRs, or the
instructions are not in proper form, then the Depositary shall deem such holder to have instructed the
Depositary to vote the underlying shares of Common Stock represented by any such
ADRs in favor of any proposals or recommendations of the Company, for which
purposes the Depositary shall issue a proxy to a person appointed by the Company
to vote such underlying shares in favor of any proposals or recommendations of
the Company (including any recommendation by the Company to vote such underlying
shares on any given issue in accordance with the majority shareholder vote on
that issue). No instruction shall be deemed given and no proxy shall be given
with respect to any matter as to which the Company informs the Depositary that
(i) it does not wish such proxy given (ii) it has knowledge that substantial
opposition exists with respect to the action to be taken at the meeting, or
(iii) the matter materially and adversely effects the rights of the holders of ADRs. Any holder of ADRs entitled to have
the shares represented by its ADRs voted at the meeting is entitled to revoke
any instructions which it has previously given to the Depositary by filing with
the Depositary a written revocation or duly executed instructions bearing a
later date at any time prior to 5:00 p.m., New York time, on May 28, 2009. No
instructions, revocations or revisions thereof shall be accepted by the
Depositary after that time.
Due to
regulatory differences and market practices in each country where the Company’s
shares or ADRs are listed, holders of shares traded on the
Argentine and Italian stock exchanges who have requested admission to the
meeting, or who have issued a voting proxy, must have their shares blocked for
trading until the date of the meeting, while holders of shares traded in the
Mexican stock exchange and holders of ADRs traded in the
New York stock exchange need not have their shares or ADRs, as the case may be,
blocked for trading. However, the votes of holders of shares traded in the
Mexican stock exchange who sell their shares between May 28, 2009 and June 2,
2009, shall be disregarded for voting purposes.
Under
Luxembourg legislation implementing the EU Transparency Directive, investors in
the Company’s securities should notify the Company and the Luxembourg Commission de Surveillance du
Secteur Financier (CSSF) on an ongoing basis whenever their direct or
indirect ownership or other control rights over shares of the Company’s capital
or rights to vote such shares either reaches, exceeds or falls below any of the
following thresholds: 5%, 10%, 15%, 20%, 25%, 33.33%, 50% and 66.66%. The total
number of issued and outstanding shares and votes set forth in the Shareholder
Meeting Brochure and Proxy Statement should be used for purposes of determining
whether an investor reaches or exceeds each such threshold. Any such
notification shall be made as indicated in the Company’s website at www.tenaris.com/investors
and in accordance with CSSF regulations. Failure to make such notification shall
cause the suspension of the exercise of voting rights relating to the shares
exceeding the fraction that should have been notified.
The
meeting will appoint a chairperson pro tempore to preside the
meeting. The chairperson pro
tempore will have broad authority to conduct the meeting in an orderly
and timely manner and to establish rules for shareholders who wish to address
the meeting; the chairperson may exercise broad discretion in recognizing
shareholders who wish to speak and in determining the extent of discussion on
each item of the agenda.
Pursuant
to the Company’s Articles of Association, resolutions at the Annual General
Meeting of Shareholders will be passed by simple majority of the votes cast,
irrespective of the number of shares present or represented.
The
meeting is called to address and vote on the following agenda:
Annual
General Meeting of Shareholders
1.
Consideration of the Board of Directors’ and independent auditors’ reports on
the Company’s consolidated financial statements. Approval of the Company’s
consolidated financial statements for the years ended December 31, 2008, 2007
and 2006.
The Board
of Directors recommends a vote FOR approval of the Company’s consolidated
financial statements for the years ended December 31, 2008, 2007 and 2006, after
due consideration of the reports from each of the Board of Directors and the
independent auditors on such consolidated financial statements. The consolidated
balance sheets and the related consolidated statements of income, of cash flows
and of changes in equity and the notes to such consolidated financial
statements, the independent auditors’ report on such consolidated financial
statements, and the Board of Directors’ management report on and certification
to such consolidated financial statements are included in the Company’s 2008
annual report, a copy of which is available on our website at www.tenaris.com/investors and may also be obtained
upon request, by calling (352) 26-47-89-78 (if you are in Luxembourg),
1-800-555-2470 (if you are in the United States), or +1-267-468-0786 (if you are
in another jurisdiction).
2. Consideration
of the Board of Directors’ and independent auditors’ reports on the Company’s
annual accounts. Approval of the Company’s annual accounts as at December 31,
2008.
The Board
of Directors recommends a vote FOR approval of the Company’s annual accounts as
at December 31, 2008, after due consideration of the reports from each of the
Board of Directors and the independent auditors on such annual accounts. The
balance sheet, the profit and loss account and the notes to such annual
accounts, the independent auditors’ report on such annual accounts, and the
Board of Directors’ management report -which has been combined with its
management report on the Company’s consolidated financial statements- and
certification to such annual accounts are included in the Company's 2008 annual
report, a copy of which is available on our website at www.tenaris.com/investors
and may also be obtained upon request, by calling (352) 26-47-89-78 (if you are
in Luxembourg), 1-800-555-2470 (if you are in the United States), or
+1-267-468-0786 (if you are in another jurisdiction).
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3. Allocation
of results and approval of dividend payment.
The Board
of Directors recommends a vote FOR approval of a dividend in U.S. dollars, in
the amount of US$0.43 per share of Common Stock currently issued and outstanding
and US$0.86 per ADR currently issued and outstanding. As required by
Luxembourg law, this dividend includes the interim dividend of US$0.13 per share
(US$0.26 per ADR) paid on November 27, 2008. Accordingly, if this dividend
proposal is approved, the Company will make a dividend payment on June 25, 2009,
in the amount of US$ 0.30 per share of Common Stock currently issued and
outstanding and US$ 0.60 per ADR currently issued and outstanding.
The
aggregate amount of US$ 153,469,787.90 distributed as interim dividend on
November 27, 2008, was paid from reserves of earnings from the nine-month period
ended September 30, 2008. The aggregate amount of US$ 354,161,049.00 to be
distributed as dividend on June 25, 2009, is to be paid from profits earned
during the year ended December 31, 2008. The balance of the fiscal year’s
profits will be allocated to the Company’s retained earnings
account.
Upon
approval of this resolution, it is proposed that the Board of Directors be
authorized to determine or amend, in its discretion, the terms and conditions of
the dividend payment.
4. Discharge
to the members of the Board of Directors for the exercise of their mandate
during the year ended December 31, 2008.
In
accordance with applicable Luxembourg law and regulations, it is proposed that,
upon approval of the Company’s annual accounts as at December 31, 2008, the
members of the Board of Directors be discharged from any liability in connection
with the management of the Company’s affairs during such year.
5. Election
of the members of the Board of Directors.
The
Company’s Articles of Association provide for the annual election by the holders
of shares of Common Stock of a Board of Directors of not less than five
and not more than fifteen members. Members of the Board of Directors have a term
of office of one year, but may be reappointed.
Under the
Company’s Articles of Association and applicable U.S. laws and regulations,
effective as of July 15, 2005, the Company is required to have an Audit
Committee comprised solely of directors who are independent.
The
present Board of Directors of the Company consists of ten directors. Three
members of the Board of Directors (Messrs. Jaime Serra Puche, Amadeo Vázquez y
Vázquez and Roberto Monti) qualify as independent directors under the Company’s
Articles of Association and applicable law and are members of the Audit
Committee.
It is
proposed that the number of members of the Board of Directors be maintained at
ten and that all of the current members of the Board of Directors be
re-elected.
Set forth
below is summary biographical information of each of the
candidates:
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1.
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Roberto Bonatti. Mr.
Bonatti is a member of our board of directors. He is a grandson of
Agostino Rocca, founder of the Techint group, a group of companies
controlled by San Faustin N.V. (“San Faustin”). Throughout his career in
the Techint group he has been involved specifically in the engineering and
construction and corporate sectors. He was first employed by the Techint
group in 1976, as deputy resident engineer in Venezuela. In 1984, he
became a director of San Faustin, and since 2001 he has served as its
president. In addition, Mr. Bonatti currently serves as president of
Tecpetrol S.A. (“Tecpetrol”) and Techint Compañia Técnica Internacional
S.A.C.I. He is also a member of the board of directors of Ternium S.A.
(“Ternium”), Siderca S.A.I.C. (“Siderca”) and Siderar S.A.I.C.
(“Siderar”). Mr. Bonatti is an Italian
citizen.
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2.
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Carlos Condorelli. Mr.
Condorelli is a member of our board of directors. He served as our chief
financial officer from October 2002 until September 2007. He is also
a board member of Ternium. He began his career within the Techint group in
1975 as an analyst in the accounting and administration department of
Siderar. He has held several positions within Tenaris and other Techint
group companies, including finance and administration director of
Tubos de Acero de México, S.A. (“Tamsa”) and president of the board of
directors of Empresa Distribuidora La Plata S.A., or Edelap, an
Argentine utilities company. Mr. Condorelli is an Argentine
citizen.
|
|
3.
|
Carlos Franck. Mr.
Franck is a member of our board of directors. He is president of Santa
María S.A.I.F. and Inverban S.A., vice president of Siderca and a member
of the board of directors of Techint Financial Corporation N.V., III
Industrial Investments Inc., Siderar, Tecpetrol and Tecgas N.V. He has
financial, planning and control responsibilities in subsidiaries of San
Faustin. Mr. Franck is an Argentine
citizen.
|
|
4.
|
Roberto Monti. Mr. Monti
is a member of our board of directors. He is the non-executive chairman of
Trefoil Limited and a member of the board of directors of Petrobras
Energia and of John Wood Group PLC. He has served as vice president of
Exploration and Production of Repsol YPF and chairman and CEO of YPF.
He was also president of Dowell, a subsidiary of Schlumberger
and president of Schlumberger Wire & Testing division for East
Hemisphere Latin America. Mr. Monti is an Argentine
citizen.
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|
5.
|
Gianfelice Rocca. Mr.
Rocca is a member of our board of directors. He is a grandson of Agostino
Rocca. He is chairman of the board of directors of San Faustin, a member
of the board of directors of Tamsa and Ternium, president of the Humanitas
Group and president of the board of directors of Techint Compagnia Tecnica
Internazionale S.p.A. and Tenova S.p.A. In addition, he sits on
the board of directors or executive committees of several companies,
including Allianz S.p.A, RCS Quotidiani, and Buzzi Unicem. He is vice
president of Confindustria, the leading association of Italian
industrialists. He is a member of the Advisory Board of Allianz Group, the
Trilateral Commission and the European Advisory Board of the Harvard
Business School. Mr. Rocca is an Italian
citizen.
|
|
6.
|
Paolo Rocca. Mr. Rocca
is chairman of our board of directors and our chief executive officer. He
is a grandson of Agostino Rocca. He is also chairman of the board of
directors of Tamsa, and vice president of Confab. He is also chairman of
the board of directors of Ternium, director and vice president of San
Faustin and director of Techint Financial Corporation N.V. Mr. Rocca is
the vicechairman of the World Steel Association and member of the
International Advisory Committee of the NYSE Euronext (New York Stock
Exchange). Mr. Rocca is an Italian
citizen.
|
|
7.
|
Jaime Serra Puche. Mr.
Serra Puche is a member of our board of directors. He is chairman of SAI
Consultores, a Mexican consulting firm, and a member of the board of
directors of Chiquita Brands International, the Mexico Fund, Grupo Vitro
and Grupo Modelo. Mr. Serra Puche served as Mexico’s Undersecretary of
Revenue, Secretary of Trade and Industry, and Secretary of Finance. He led
the negotiation and implementation of NAFTA. Mr. Serra Puche is a Mexican
citizen.
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|
8.
|
Alberto Valsecchi. Mr.
Valsecchi is a member of our board of directors. He served as our chief
operating officer from February 2004 until July 2007. He joined the
Techint group in 1968 and has held various positions within Tenaris and
other Techint group companies. He has retired from his executive
positions. He is also a member of the board of directors of San Faustin
and has been elected as the chairman of the board of directors of Dalmine,
a position he assumed in May 2008. Mr. Valsecchi is an Italian
citizen.
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|
9.
|
Amadeo Vázquez y Vázquez.
Mr. Vázquez y Vázquez is a member of our board of directors. He is
an independent member of the board of directors of Gas Natural Ban S.A. He
is a member of the executive committee of the Asociación Empresaria
Argentina, and of the Fundación Mediterránea, and he is a member of the
Advisory Board of the Fundación de Investigaciones Económicas
Latinoamericanas. He served as CEO of the Banco Río de la Plata S.A. until
August 1997 and was also the chairman of the board of directors of Telecom
Argentina S.A. until April 2007. Mr. Vázquez y Vázquez is a Spanish and
Argentine citizen.
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|
10.
|
Guillermo Vogel. Mr.
Vogel is a member of our board of directors. He is vice chairman of Tamsa,
chairman of Grupo Collado S.A.B. de C.V, vice chairman of Estilo y
Vanidad S.A. de C.V. and member of the board of directors of Alfa S.A.B.
de C.V., the American Iron and Steel Institute, the North American
Steel Council and the North American Competitiveness Council. In
addition, he is a member of the board of directors and of the investment
committee of the Corporación Mexicana de Inversiones de Capital and a
member of the board of directors and the audit committee of HSBC
(México). Mr. Vogel is a Mexican
citizen.
|
Each
elected director will hold office until the next Annual General Meeting of
Shareholders. Under the current Company’s Articles of Association, such meeting
is required to be held on June 2, 2010.
The
Company’s Board of Directors met nine times during 2008. On January 31, 2003,
the Board of Directors created an Audit Committee pursuant to Article 11 of the
Company’s Articles of Association. As permitted under applicable laws and
regulations, the Board of Directors does not have any executive, nominating or
compensation committee, or any committees exercising similar
functions.
6. Compensation
of the members of the Board of Directors.
It is
proposed that each of the members of the Board of Directors receive an amount of
US$ 70,000 as compensation for their services during the fiscal year 2009. It is
further proposed that the members of the Board of Directors who are members of
the Audit Committee receive an additional fee of US$50,000 and that the Chairman
of such Audit Committee receive, further, an additional fee of
US$10,000.
7.
Appointment of the independent auditors for the fiscal year ending December 31,
2009 and approval of their fees.
Based on
the recommendation from the Audit Committee, the Board of Directors recommends a
vote FOR the appointment of PricewaterhouseCoopers (acting, in connection with
the Company’s annual accounts and annual consolidated financial statements
required under Luxembourg law, through PricewaterhouseCoopers S.àr.l., Réviseur
d'entreprises, and, in connection with the Company’s annual and interim
consolidated financial statements required under the laws of any other relevant
jurisdiction, through Pricewaterhouse & Co. S.R.L.) as the Company’s
independent auditors for the fiscal year ending December 31, 2009, to be engaged
until the next Annual General Meeting of Shareholders that will be convened to
decide on the 2009 accounts.
In
addition, the Board of Directors recommends a vote FOR approval of the
independent auditors’ fees for audit, audit-related and other services to be
rendered during the fiscal year ending December 31, 2009, broken-down into four
currencies (Argentine Pesos, Euro, Mexican Pesos, and U.S. Dollars), up to a
maximum amount for each currency equal to AR$6,860,409, €491,221, MX$4,204,640
and US$1,446,582. Such fees would cover the audit of the Company’s consolidated
financial statements and annual accounts, the audit of the Company’s internal
controls over financial reporting as mandated by the Sarbanes-Oxley Act of 2002,
other audit-related services, and other services rendered by the independent
auditors. For information purposes, based on the exchange rate between the U.S.
Dollar and each applicable other currency as of December 1, 2008, the aggregate
amount of fees for audit, audit-related and other services to be rendered by the
independent auditors during the fiscal year ending December 31, 2009, is
equivalent to US$4,403,368. The Board of Directors also recommends that its
Audit Committee be authorised to approve any increase or reallocation of the
independent auditors’ fees as may be necessary, appropriate or desirable under
the circumstances.
8.
Authorisation to the Board of Directors and the board of directors or other
governing bodies of the Company’s subsidiaries to acquire Company
shares.
It is
recommended that an authorisation be granted to the Company and to the Company’s
subsidiaries to acquire, from time to time, shares of Common Stock, including
shares of Common Stock represented by ADRs. Any such acquisition of
shares of Common Stock must be made on the following terms and
conditions:
|
1.
|
The
nominal value of the shares of Common Stock so acquired, together with
shares of Common Stock previously acquired by the Company, the Company’s
wholly-owned subsidiaries or any other person acting on the Company’s
behalf, and not cancelled, shall not exceed 10 % of the Company’s issued
and outstanding shares of Common Stock or, in the case of
acquisitions of shares of Common Stock made through a stock exchange in
which the Company’s shares or ADRs are traded, such lower amount as may
not be exceeded pursuant to any applicable laws or regulations of such
market.
|
|
2.
|
The
acquisitions of shares of Common Stock may be made in one or more
transactions as the Board of Directors or the board of directors or other
governing bodies of the relevant entity, as applicable, considers
advisable. The number of shares of Common Stock acquired as a
block may amount to the maximum permitted amount of
purchases.
|
|
3.
|
The
purchase price per share to be paid in cash may not exceed 125% (excluding
transaction costs and expenses), nor may it be lower than 75% (excluding
transaction costs and expenses), in each case of the average of the
closing prices of the Company’s shares of Common Stock or ADRs in the
stock exchange through which the Company’s shares of Common Stock are
acquired, during the five trading days in which transactions in the shares
were recorded in such stock exchange preceding (but excluding) the
day on which the Company’s shares of Common Stock are
purchased. For over-the-counter or off-market transactions, the
purchase price per ADR to be paid in cash may not exceed 125% (excluding
transaction costs and expenses), nor may it be lower than 75% (excluding
transaction costs and expenses), in each case of the average of the
closing prices of the Company’s ADRs in the New York Stock Exchange
during the five trading days in which transactions in ADRs were recorded
in the New York Stock Exchange preceding (but excluding) the day on which
the Company’s ADRs are purchased; and, in the case of purchases of shares
other than in the form of ADRs, such maximum and minimum purchase prices
shall be calculated based on the number of underlying shares represented
by such ADRs.
|
|
4.
|
The
above maximum and minimum purchase prices shall, in the event of a change
in the par value of the shares of Common Stock, a capital increase by
means of a capitalization of reserves, a distribution of shares of Common
Stock under compensation or similar programs, a stock split or reverse
stock split, a distribution of reserves or any other assets, the
redemption of capital, or any other transaction impacting on the Company’s
equity be adapted automatically, so that the impact of any such
transaction on the value of the shares of Common Stock shall be
reflected.
|
|
5.
|
The
acquisitions of shares of Common Stock may not have the effect of reducing
the Company’s net assets below the sum of the Company’s capital stock plus
its undistributable reserves.
|
|
6.
|
Only
fully paid-up shares of Common Stock may be purchased pursuant to this
authorisation.
|
|
7.
|
The
acquisitions of shares of Common Stock may be carried out for any purpose,
as may be permitted under applicable laws and regulations, including
without limitation to reduce the share capital of the Company, to offer
such shares to third parties in the context of corporate mergers or
acquisitions of other entities or participating interests therein, for
distribution to the Company’s or the Company’s subsidiaries’ directors,
officers or employees or to meet obligations arising from convertible
debt instruments.
|
|
8.
|
The
acquisitions of shares of Common Stock may be carried out by any and all
means, as may be permitted under applicable laws and regulations,
including through any stock exchange in which the Company’s shares or
other securities representing shares are traded, through public offers to
all shareholders of the Company to buy shares of Common Stock, through the
use of derivative financial instruments or option strategies, or in over
the counter or off-market transactions or in any other
manner.
|
|
9.
|
The
acquisitions of shares of Common Stock may be carried out at any time,
during the duration of the authorisation, including during a tender offer
period, as may be permitted under applicable laws and
regulations.
|
|
10.
|
The
authorisation granted to acquire shares of Common Stock shall be valid for
such maximum period as may be provided for under applicable
Luxembourg law as in effect from time to time (such maximum period being,
as of to date, 18 months).
|
|
11.
|
The
acquisitions of shares of Common Stock shall be made at such times and on
such other terms and conditions as may be determined by the Board of
Directors or the board of directors or other governing bodies of the
relevant entity, provided that, any such purchase shall comply
with Article 49-2 et.seq. of the
Luxembourg Law of 10 August 1915 on commercial companies, as amended (or
any successor law) and, in the case of acquisitions of shares of Common
Stock made through a stock exchange in which the Company’s shares or other
securities representing shares are traded, with any applicable laws and
regulations of such market.
|
It is
recommended that the Annual General Meeting of Shareholders grant this
authorization and further grant all powers to the Board of Directors and to the
board of directors or other governing bodies of the Company’s subsidiaries, in
each case with powers to delegate in accordance with applicable laws, the
Company’s Articles of Association or the articles of association of other
applicable organizational documents of the relevant Company’s subsidiary, to
decide on and implement this authorisation, to define, if necessary, the terms
and procedures for carrying out any purchase of shares of Common Stock, and, in
particular, to place any stock exchange orders, conclude any agreements,
including for keeping registers of purchases and sales of shares of Common
Stock, make any declarations to the applicable regulatory authorities, carry out
all formalities and, generally, do all such other acts and things as may be
necessary, appropriate or desirable under the circumstances. The Board of
Directors is expressly authorized to delegate to its Chairman, with the latter
having the option to sub-delegate to any other person(s), the performance of the
actions entrusted to the Board of Directors, pursuant to, or in connection with,
this authorisation.
9.
Authorisation to the Board of Directors to cause the distribution of all
shareholder communications, including its shareholder meeting and proxy
materials and annual reports to shareholders, by such electronic means as is
permitted by any applicable laws or regulations.
In order
to expedite shareholder communications and ensure their timely delivery, the
Board of Directors recommends that it be authorised to cause the distribution of
all shareholder communications, including its shareholder meeting and proxy
materials and annual reports to shareholders (either in the form of a separate
annual report containing financial statements of the Company and its
consolidated subsidiaries or in the form of an annual report on Form 20-F or
similar document, as filed with the securities authorities or stock markets) by
such electronic means as are permitted or required by any applicable laws or
regulations (including any interpretations thereof), including, without
limitation, by posting such communication on the Company's website, or by
sending electronic communications (emails) with attachment(s) in a widely used
format or with a hyperlink to the applicable filing by the Company on the
website of the above referred authorities or stock markets, or by any other
existing or future electronic means of communication as is or may be permitted
by any applicable laws or regulations.
In this
resolution the Company seeks authorisation under Article 16 of the Luxembourg
Transparency Law of 11 January 2008 to give, send or supply information
(including any notice or other document) that is required or authorised to be
given, sent or supplied to a shareholder by the Company whether required under
the Company’s Articles of Association or by any applicable law or any other
rules or regulations to which the Company may be subject, by making such
information (including any notice or other document) available on the Company’s
website or through other electronic means.
* * * * *
The
Company anticipates that the next Annual General Meeting of Shareholders will be
held on June 2, 2010. Any holder of shares who intends to present a proposal to
be considered at the next Annual General Meeting of Shareholders is requested to
submit its proposal in writing to the Company at any of the offices indicated in
the Notice not later than 4:00 P.M. (local time) on March 31, 2010, or in
accordance with the procedures set forth under applicable Luxembourg law, in
order for such proposal to be considered for inclusion on the agenda for the
2010 Annual General Meeting of Shareholders.
PricewaterhouseCoopers
are the Company’s independent auditors. A representative of the independent
auditors will be present at the meeting to respond to questions.
Cecilia
Bilesio
Secretary
to the Board of Directors
TENARIS
S.A.
ANNUAL
REPORT 2008
NY12527:166450.2
TABLE
OF CONTENTS
company
profile
Tenaris
is a leading supplier of tubes and related services for the world’s energy
industry and certain other industrial applications. Our mission is to deliver
value to our customers through product development, manufacturing excellence and
supply chain management. We minimize risk for our customers and help them reduce
costs, increase flexibility and improve time-to-market. Our employees around the
world are committed to continuous improvement by sharing knowledge across a
single global organization.
2
Letter
From The Chairman
Dear
Shareholders,
The
extraordinary expansion cycle that we experienced over the past six years in the
oil and gas industry and the global economy came to an abrupt end in the third
quarter of 2008. Oil and gas prices have plummeted as has global industrial
production. It may take several years before the level of global oil consumption
returns to the level seen in 2007. Tenaris has profited from the expansion cycle
and stands well positioned to emerge even stronger from the
downturn.
2008 was
another record year in terms of results. Sales rose to US$12.1 billion, EBITDA
to US$4.1 billion and net income to US$2.3 billion. Over the past five years net
sales and EBITDA have grown at compound annual rates of 34% and 54%
respectively. Shareholders’ equity has more than quadrupled. We took advantage
of a favorable operating environment to expand our operations into Eastern
Europe and in North America, to grow in the high-end OCTG market through putting
together an exceptional range of premium connections, and to increase our
operating margins.
We
managed this expansion while extending our organization globally and
diversifying our employee base. At the end of 2008, we had close to 24,000
employees, an increase of 65% over five years; more than 40% of these employees
come from countries outside our traditional roots. Indicators for our safety and
environmental performance have steadily improved as we integrated a global
industrial system operating with single quality and HSE management systems.
Another focus of our investments has been the expansion of our R&D and
technical service capabilities. In the past three years, we have opened new
R&D centers in Mexico and Italy, creating a global R&D network. We will
continue investing in this area to help our customers meet new environmental and
technological challenges.
During
2008, we made significant progress in consolidating our integrated product and
service offer in the U.S. market and have secured many of the larger oil and gas
operators as customers and alliance partners. We successfully sold off the
Hydril pressure control business, which had limited synergies with our core
tubular products and services business, prior to the change in market
conditions. In Colombia, Ecuador and Peru, several customers migrated to our
just-in-time service model as we built up our logistics capabilities in the
region.
The
market environment, however, has changed. Lower commodity prices and a more
demanding credit environment mean that many of our customers have no option but
to cut back on their investments. Others may choose to do so to bring the market
back into balance. We expect demand for our products and services to be lower
over the next two years. We are adjusting our operations to these lower demand
levels and reducing our working capital. Our investment plans are being reviewed
to focus on those that will enhance our long-term competitiveness. We are
postponing those projects aimed at increasing capacity, with the exception of
our project to increase rolling mill capacity in Mexico, where exploration and
production investment is increasing to offset declining rates of oil
production.
One area
where we will continue to invest is in building up our presence in regional
markets. The current global downturn will lead to increased pressure for local
production capabilities and our industry is no exception. We recently made an
agreement to acquire a majority shareholding in an OCTG processing business in
Indonesia with heat treatment and premium connection threading operations. With
its natural gas reserves and LNG exports, Indonesia is a market where the majors
have significant operations and there is a high demand for premium products.
Similarly, we are investing in setting up a premium threading operation in Saudi
Arabia and expanding our Nigerian operation.
Although
we do not yet know when the global economy will begin a new phase of expansion,
we do know that our industry will be among the first to see a recovery in
demand. The reduction in investments in oil and gas production will accentuate
already high decline rates and bring forward the need for new investment in the
future. In the meantime, our solid financial position, the diversity and global
nature of our customer base, the strength of an industrial system which can
respond rapidly and flexibly to changing levels of demand, our competitive cost
structure and capable team all add to our confidence that we will emerge in good
shape from this downturn.
3
Earnings
per share rose 10% for the year to USD 1.80, or USD 3.60 per ADS. Given these
results, our solid financial position and our confidence in the future, we
propose to increase the annual dividend from last year’s level by 13% to USD
0.43 per share (USD 0.86 per ADS) and to pay a dividend, net of the interim we
paid in November, of USD 0.30 per share (USD 0.60 per ADS) in June.
The
decisions that we make in these more difficult times concerning our long-term
relationship with customers, suppliers, employees and the communities where we
operate will define the future of our company. We are committed to containing
the impact of the crisis while enhancing our competitiveness over the long-term.
In this context, I would like to thank our employees not only for their past
efforts but also for their commitment to our company in the difficult
environment we are facing. I also wish to express my thanks to our customers,
suppliers and shareholders for their continuing support and confidence in
Tenaris.
April 21,
2009
Paolo
Rocca
4
Management
Report
|
·
|
CERTAIN DEFINED
TERMS
|
Unless
otherwise specified or if the context so requires:
|
·
|
References
in this annual report to “the Company” refer exclusively to Tenaris S.A.,
a Luxembourg joint stock corporation (société anonyme
holding).
|
|
·
|
References
in this annual report to “Tenaris”, “we”, “us” or “our” refer to Tenaris
S.A. and its consolidated subsidiaries. See Accounting Policies A, B and L
to our audited consolidated financial statements included in this annual
report.
|
|
·
|
References
in this annual report to “San Faustin” refer to San Faustin N.V., a
Netherlands Antilles corporation and the Company’s controlling
shareholder.
|
|
·
|
“Shares”
refers to ordinary shares, par value $1.00 of the
Company.
|
|
·
|
“ADSs”
refers to the American Depositary Shares, which are evidenced by American
Depositary Receipts.
|
|
·
|
“tons”
refers to metric tons; one metric ton is equal to 1,000 kilograms,
2,204.62 pounds, or 1.102 U.S. (short)
tons.
|
|
·
|
“billion”
refers to one thousand million, or
1,000,000,000.
|
|
·
|
PRESENTATION
OF CERTAIN FINANCIAL AND OTHER
INFORMATION
|
Accounting
Principles
We
prepare our consolidated financial statements in conformity with International
Financial Reporting Standards, or IFRS as issued by the International Accounting
Standards Board (“IASB”) and adopted by the European Union.
We
publish consolidated financial statements expressed in U.S. dollars. Our
consolidated financial statements in this annual report are those for the years
ended December 31, 2008, 2007 and 2006.
Rounding;
Comparability of Data
Certain
monetary amounts, percentages and other figures included in this annual report
have been subject to rounding adjustments. Accordingly, figures shown as totals
in certain tables may not be the arithmetic aggregation of the figures that
precede them, and figures expressed as percentages in the text may not total
100% or, as applicable, when aggregated may not be the arithmetic aggregation of
the percentages that precede them.
|
·
|
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
|
This
annual report and any other oral or written statements made by us to the public
may contain “forward-looking statements”.
Forward looking statements are based on management’s current
views and assumptions and involve known and unknown risks that could cause
actual results, performance or events to differ materially from
those expressed or implied by those statements.
We use
words such as “aim”, “will likely result”, “will continue”, “contemplate”, “seek
to”, “future”, “objective”, “goal”, “should”, “will pursue”, “anticipate”,
“estimate”, “expect”, “project”, “intend”, “plan”, “believe” and words and terms
of similar substance to identify forward-looking statements, but they are not
the only way we identify such statements. This annual report contains
forward-looking statements, including with respect to certain of our plans and
current goals and expectations relating to Tenaris’s future financial condition
and performance. Sections of this annual report that by their nature contain
forward-looking statements include, but are not limited to, “Business Overview”,
“Principal Risks and Uncertainties”, and “Operating and Financial Review and
Prospects”. In addition to the risks related to our business discussed under
“Principal Risks and Uncertainties”, other factors could cause actual results to
differ materially from those described in the forward-looking statements. These
factors include, but are not limited to:
5
|
·
|
our
ability to implement our business strategy or to grow through
acquisitions, joint ventures and other investments;
|
|
·
|
our
ability to price our products and services in accordance with our
strategy;
|
|
·
|
trends
in the levels of investment in oil and gas exploration and drilling
worldwide;
|
|
·
|
general
macroeconomic and political conditions in the countries in which we
operate or distribute pipes; and
|
|
·
|
our
ability to absorb cost increases and to secure supplies of essential raw
materials and energy.
|
By their
nature, certain disclosures relating to these and other risks are only estimates
and could be materially different from what actually occurs in the future. As a
result, actual future gains or losses that may affect our financial condition
and results of operations could differ materially from those that have been
estimated. You should not place undue reliance on the forward-looking
statements, which speak only as of the date of this annual report. Except as
required by law, we are not under any obligation, and expressly disclaim any
obligation, to update or alter any forward-looking statements, whether as a
result of new information, future events or otherwise.
6
Leading
indicators
|
2008
|
2007
|
2006
|
||||||||||
|
SALES
VOLUMES (thousands of metric tons)
|
||||||||||||
|
Seamless
pipes
|
2,861 | 2,870 | 2,919 | |||||||||
|
Welded
pipes
|
1,648 | 1,439 | 578 | |||||||||
|
Total
steel pipes
|
4,509 | 4,309 | 3,497 | |||||||||
|
PRODUCTION
VOLUMES (thousands of metric tons)
|
||||||||||||
|
Seamless
pipes
|
2,888 | 2,836 | 3,013 | |||||||||
|
Welded
pipes
|
1,547 | 1,408 | 642 | |||||||||
|
Total
steel pipes
|
4,435 | 4,244 | 3,655 | |||||||||
|
FINANCIAL
INDICATORS (millions of USD)
|
||||||||||||
|
Net
sales
|
12,132 | 10,042 | 7,728 | |||||||||
|
Operating
income
|
3,028 | 2,957 | 2,792 | |||||||||
|
EBITDA
(1)
|
4,064 | 3,449 | 3,046 | |||||||||
|
Net
income
|
2,276 | 2,076 | 2,059 | |||||||||
|
Cash
flow from operations
|
1,465 | 2,021 | 1,811 | |||||||||
|
Capital
expenditures
|
443 | 448 | 441 | |||||||||
|
BALANCE
SHEET (millions of USD)
|
||||||||||||
|
Total
assets
|
15,101 | 15,245 | 12,595 | |||||||||
|
Total
financial debt
|
2,977 | 4,020 | 3,651 | |||||||||
|
Net
financial debt (2)
|
1,392 | 2,970 | 2,095 | |||||||||
|
Total
liabilities
|
6,399 | 7,715 | 6,894 | |||||||||
|
Shareholders’
equity including minority interest
|
8,702 | 7,530 | 5,702 | |||||||||
|
PER
SHARE / ADS DATA (USD PER SHARE / PER ADS (3))
|
||||||||||||
|
Number
of shares outstanding (4) (thousands of shares)
|
1,180,537 | 1,180,537 | 1,180,537 | |||||||||
|
Earnings
per share
|
1.80 | 1.63 | 1.65 | |||||||||
|
Earnings
per ADS
|
3.60 | 3.26 | 3.30 | |||||||||
|
Dividends
per share (5)
|
0.43 | 0.38 | 0.30 | |||||||||
|
Dividends
per ADS (5)
|
0.86 | 0.76 | 0.60 | |||||||||
|
ADS
Stock price at year-end
|
20.98 | 44.73 | 49.89 | |||||||||
|
Number
of employees (4)
|
23,873 | 23,372 | 21,751 | |||||||||
|
1.
|
Defined
as operating income plus depreciation, amortization and impairment
charges.
|
|
2.
|
Defined
as borrowings less cash and cash equivalents and other current
investments.
|
|
3.
|
On
April 26, 2006 the ratio of ADSs to ordinary shares was changed from 1:10
to 1:2. ADS data is stated using the new
ratio.
|
|
4.
|
As
of December 31.
|
|
5.
|
Proposed
or paid in respect of the year.
|
7
Tenaris
in numbers
8
9
Information
on the Company
Overview
We are a
leading global manufacturer and supplier of steel pipe products and related
services for the world’s energy industry as well as for other industrial
applications. Our customers include most of the world’s leading oil and gas
companies as well as engineering companies engaged in constructing oil and gas
gathering, transportation and processing facilities. Our principal products
include casing, tubing, line pipe, and mechanical and structural
pipes.
In the
last fifteen years, we have expanded our business globally through a series of
strategic investments, and, in the last three years, we have transformed our
presence in the North American market through the acquisitions of Maverick, a
leading North American producer of steel pipe products for the oil and gas
industry with operations in the U.S., Canada and Colombia, and Hydril, a leading
North American manufacturer of premium connections for steel pipe products used
in the oil and gas industry with an established reputation worldwide. We now
operate an integrated worldwide network of steel pipe manufacturing, research,
finishing and service facilities with industrial operations in North and South
America, Europe, Asia and Africa and a direct presence in most major oil and gas
markets.
Our
business is organized in three business segments: Tubes, Projects, and
Others.
|
·
|
Tubes
includes our operations that consist in the production, distribution and
sale of seamless and welded tubular products and related services mainly
for energy and select industrial
applications.
|
|
·
|
Projects
includes our operations that consist in the production, distribution and
sale of welded pipes mainly used in the construction of major pipeline
projects.
|
|
·
|
Others
includes our operations that consist mainly in the production,
distribution and sale of sucker rods, welded steel pipes for electric
conduits, industrial equipment and raw materials, such as hot briquetted
iron, or HBI, that exceed our internal
requirements.
|
History
and Development of the Company
Tenaris
began with the formation of Siderca S.A.I.C., or Siderca, the sole Argentine
producer of seamless steel pipe products, by San Faustin’s predecessor in
Argentina in 1948. Siat, an Argentine welded steel pipe manufacturer, was
acquired in 1986. We grew organically in Argentina and then, in the early 1990s,
began to evolve beyond this initial base into a global business through a series
of strategic investments. These investments included the acquisition, directly
or indirectly, of controlling or substantial interests in the following
companies:
|
·
|
Tubos
de Acero de México S.A., or Tamsa, the sole Mexican producer of seamless
steel pipe products (June 1993);
|
|
·
|
Dalmine
S.p.A., or Dalmine, a leading Italian producer of seamless steel pipe
products (February 1996);
|
|
·
|
Tubos
de Acero de Venezuela S.A., or Tavsa, the sole Venezuelan producer of
seamless steel pipe products (October
1998);
|
|
·
|
Confab
Industrial S.A., or Confab, the leading Brazilian producer of welded steel
pipe products (August 1999);
|
|
·
|
NKKTubes,
a leading Japanese producer of seamless steel pipe products (August
2000);
|
|
·
|
Algoma
Tubes Inc., or AlgomaTubes, the sole Canadian producer of seamless steel
pipe products (October 2000);
|
|
·
|
S.C.
Silcotub S.A., or Silcotub, a leading Romanian producer of seamless steel
pipe products (July 2004);
|
|
·
|
Maverick
Tube Corporation, or Maverick, a leading North American producer of welded
steel pipe products with operations in the U.S., Canada and Colombia
(October 2006); and
|
|
·
|
Hydril
Company, or Hydril, a leading North American manufacturer of premium
connection products for oil and gas drilling production (May
2007).
|
10
In
addition, we have established a global network of pipe finishing, distribution
and service facilities with a direct presence in most major oil and gas markets
and a global network of research and development centers.
In
February 2009, we signed an agreement to acquire a 77.45% holding in Seamless
Pipe Indonesia Jaya, or SPIJ, an Indonesian OCTG processing business with heat
treatment and premium connection threading facilities and an annual production
capacity of approximately 120,000 tons.
Business
Overview
Our
business strategy is to continue expanding our operations worldwide and further
consolidate our position as a leading global supplier of high-quality tubular
products and services to the energy and other industries by:
|
·
|
pursuing
strategic investment opportunities in order to strengthen our presence in
local and global markets;
|
|
·
|
expanding
our comprehensive range of products and developing new high-value products
designed to meet the needs of customers operating in increasingly
challenging environments;
|
|
·
|
securing
an adequate supply of production inputs and reducing the manufacturing
costs of our core products; and
|
|
·
|
enhancing
our offer of technical and pipe management services designed to enable
customers to optimize their selection and use of our products and reduce
their overall operating costs.
|
Pursuing
strategic investment opportunities and alliances
We have a
solid record of growth through strategic investments and acquisitions. We pursue
selective strategic investments and acquisitions as a means to expand our
operations and presence in selected markets, enhance our global competitive
position and capitalize on potential operational synergies. For example, in
September 2008, we announced that we would invest in a project to build new
capacity at our seamless pipe facility in Mexico in order to enhance our ability
to serve local and global markets. In May 2007, we acquired Hydril, a leading
North American manufacturer of premium connections for steel pipe products used
in oil and gas drilling production and, in October 2006, we acquired Maverick, a
North American producer of steel pipe products for the energy industry,
expanding our operations in North America.
Developing
high-value products
We have
developed an extensive range of high-value products suitable for most of our
customers’ operations using our network of specialized research and testing
facilities and by investing in our manufacturing facilities. As our customers
expand their operations, we seek to supply high-value products that reduce costs
and enable them to operate safely in increasingly challenging
environments.
Securing
inputs for our manufacturing operations
We seek
to secure our existing sources of raw material and energy inputs, and to gain
access to new sources, of low-cost inputs which can help us maintain or reduce
the cost of manufacturing our core products over the long term.
Enhancing
our offer of technical and pipe management services
We
continue to enhance our offer of technical and pipe management services for our
customers worldwide. Through the provision of these services, we seek to enable
our customers to optimize their operations, reduce costs and to concentrate on
their core businesses. They are also intended to differentiate us from our
competitors and further strengthen our relationships with our customers
worldwide through long-term agreements.
Our
Competitive Strengths
We
believe our main competitive strengths include:
|
·
|
our
global production, commercial and distribution capabilities, offering a
full product range with flexible supply options backed up by local service
capabilities in important oil and gas producing and industrial regions
around the world;
|
|
·
|
our
ability to develop, design and manufacture technologically advanced
products;
|
11
|
·
|
our
solid and diversified customer base and historic relationships with major
international oil and gas companies around the world, and our strong and
stable market shares in the countries in which we have manufacturing
operations;
|
|
·
|
our
human resources around the world with their diverse knowledge and
skills;
|
|
·
|
our
low-cost operations, primarily at state-of-the-art, strategically located
production facilities with favorable access to raw materials, energy and
labor, and 50 years of operating experience; and
|
|
·
|
our
strong balance sheet.
|
Business
Segments
Our
business is organized in three business segments: Tubes, Projects, and
Others.
|
·
|
Tubes
includes our operations that consist in the production, distribution and
sale of seamless and welded tubular products and related services mainly
for energy and select industrial
applications.
|
|
·
|
Projects
includes our operations that consist in the production, distribution and
sale of welded pipes mainly used in the construction of major pipeline
projects.
|
|
·
|
Others
includes our operations that consist mainly in the production,
distribution and sale of sucker rods, welded steel pipes for electric
conduits, industrial equipment and raw materials, such as hot briquetted
iron, or HBI, that exceed our internal
requirements.
|
Our
Products
Our
principal finished products are seamless and welded steel casing and tubing,
line pipe and various other mechanical and structural steel pipes for different
uses. Casing and tubing are also known as oil country tubular goods or OCTG. In
our Projects business segment we also produce large diameter welded steel pipes
for oil and gas pipelines. We manufacture our steel pipe products in a wide
range of specifications, which vary in diameter, length, thickness, finishing,
steel grades, threading and coupling. For most complex applications, including
high pressure and high temperature applications, seamless steel pipes are
usually specified and, for some standard applications, welded steel pipes can
also be used.
Casing. Steel casing is used
to sustain the walls of oil and gas wells during and after
drilling.
Tubing. Steel tubing is used
to conduct crude oil and natural gas to the surface after drilling has been
completed.
Line pipe. Steel line pipe is
used to transport crude oil and natural gas from wells to refineries, storage
tanks and loading and distribution centers.
Mechanical and structural
pipes. Mechanical and structural pipes are used by general industry for
various applications, including the transportation of other forms of gas and
liquids under high pressure.
Cold-drawn pipe. The
cold-drawing process permits the production of pipes with the diameter and wall
thickness required for use in boilers, superheaters, condensers, heat
exchangers, automobile production and several other industrial
applications.
Premium joints and couplings.
Premium joints and couplings are specially designed connections used to join
lengths of steel casing and tubing for use in high temperature or high pressure
environments. A significant portion of our steel casing and tubing products are
supplied with premium joints and couplings. We own an extensive range of premium
connections, and following the integration of Hydril’s premium connections
business, we market our premium connection products under the TenarisHydril
brand name. In addition, we hold licensing rights to manufacture and sell the
Atlas Bradford range of premium connections outside of the United
States.
Coiled tubing. Coiled tubing
is used for oil and gas drilling and well workovers and for subsea
pipelines.
Other Products. We also
manufacture sucker rods used in oil extraction activities, industrial equipment
of various specifications and diverse applications, including liquid and gas
storage equipment, and welded steel pipes for electric conduits used in the
construction industry. In addition, we sell raw materials, such as HBI, that
exceed our internal requirements.
12
Research
and Development
Research
and development, or R&D, activities are carried out primarily at our
specialized research facilities located at our Veracruz plant in Mexico, at the
product testing facilities of NKKTubes in Japan, at our Campana plant in
Argentina, and at the research facilities of the Centro Sviluppo Materiali S.p.A,
or CSM, in Rome. We have an 8% interest in CSM, which was acquired in
1997. In addition, in October 2008, we commissioned a new research facitliy at
our Dalmine plant, in Italy. Product development and research currently being
undertaken include:
|
·
|
proprietary
premium joint products including Dopeless®
technology;
|
|
·
|
heavy
wall deep water line pipe and
risers;
|
|
·
|
tubes
and components for the car industry and mechanical
applications;
|
|
·
|
tubes
for boilers; and
|
|
·
|
welded
pipes for oil and gas and other
applications.
|
In
addition to R&D aimed at new or improved products, we continuously study
opportunities to optimize our manufacturing processes. Recent projects in this
area include modeling of rolling and finishing process and the development of
different process controls, with the goal of improving product quality and
productivity at our facilities.
We spent
$77.3 million for R&D in 2008, compared to $61.7 million in
2007.
13
14
15
16
Principal
Risks and Uncertainties
We face
certain risks associated to our business and the industry in which we operate.
The recent worldwide financial and credit crisis that caused the current
economic downturn may negatively affect our business and could have a material
adverse effect on our revenues, profitability and financial position. For
example, the current global economic crisis has resulted in a significant
decline in oil and gas prices, which affected the level of drilling activity and
thus demand for our products and services. Similarly, our sales of steel pipe
products for pipeline projects depend mainly on the implementation of major
regional projects, which projects are likely to be adversely affected by the
global downturn. In turn, increases in the cost of raw materials and energy may
hurt our profitability if we are not able to recover them through increased
prices of our products.
We have
significant operations in various countries, including Argentina, Brazil,
Canada, Colombia, Italy, Japan, Mexico, Romania, the United States and
Venezuela, and we sell our products and services throughout the world.
Therefore, like other companies with worldwide operations, we are exposed to
risks from fluctuations in foreign currency exchange rates, interest rates and
inflation, governmental policies regarding spending, exchange controls,
regulatory and taxation changes, and other adverse political, economic or social
developments in such countries, which could affect our revenues, profitability
and financial condition. We have operations in Venezuela, and we can give no
assurance that the Venezuelan government will not seek in the future the
nationalization of such operations; in addition, developments in Venezuela may
adversely affect our operations in that country or our sales to companies
incorporated in Venezuela, including Petróleos de Venezuela, or PDVSA, the
state-owned oil company, and consequently our revenues and results could be
adversely affected.
A key
element of our business strategy is to identify and pursue growth-enhancing
strategic opportunities. Failure to successfully implement our strategy or to
integrate future acquisitions and strategic partnerships could affect our
ability to grow, our competitive position and our sales and profitability. In
addition, failure to agree with our joint venture partner in Japan on the
strategic direction of our joint operations, may have an adverse impact on our
operations in Japan.
At
December 31, 2008, we had $1,890.6 million in goodwill and intangible assets
with indefinite useful life, which are exposed to impairment tests and
correspond mainly to the acquisition of Maverick ($919.9 million) and Hydril
($772.0 million). In 2008 we recorded an impairment charge for $502.9 million
(of which $394.3 million correspond to Maverick); however, we can give no
assurances that further impairment charges will not be required in the
future.
Potential
environmental, product liability and other claims arising from the inherent
risks associated with the products we sell and the services we render, including
well failures, line pipe leaks, bursts and fires, that could result in death,
personal injury, property damage, environmental pollution or loss of production
could create significant liabilities for us. In addition, we are subject to a
wide range of local, provincial and national laws, regulations, permit
requirements and decrees relating to the protection of human health and the
environment and the cost of complying with such regulations as well as
unforeseen environmental liabilities may increase our operating costs or
negatively impact our net worth.
As a
holding company, our ability to pay expenses, debt service and cash dividends
depends on the results of operations and financial condition of our
subsidiaries, which could be restricted by legal, contractual or other
limitations, including exchange controls or transfer restrictions, and other
agreements and commitments of our subsidiaries.
The
Company’s controlling shareholder may be able to take actions that do not
reflect the will or best interests of other shareholders.
The
Company’s tax-exempt status will terminate on December 31, 2010. If we are
unable to mitigate the consequences of the termination of the preferential tax
regime applying to the Company, we or our shareholders may be subject to a
higher tax burden in the future.
Our
financial risk management is described in Section III. Financial Risk
Management, and our provisions and contingent liabilities are described in
accounting policy Q and notes 23, 24 and 26 of our consolidated financial
statements included in this annual report.
Operating
and Financial Review and Prospects
The
following discussion and analysis of our financial condition and results of
operations are based on, and should be read in conjunction with, our audited
consolidated financial statements and the related notes included elsewhere in
this annual report. This discussion and analysis presents our financial
condition and results of operations on a consolidated basis. We prepare our
consolidated financial statements in conformity with IFRS, as issued by the IASB
and adopted by the European Union.
17
Certain
information contained in this discussion and analysis and presented elsewhere in
this annual report, including information with respect to our plans and strategy
for our business, includes forward-looking statements that involve risks and
uncertainties. See “Cautionary Statement Concerning Forward-Looking Statements”.
In evaluating this discussion and analysis, you should specifically consider the
various risk factors identified in “Principal Risks and Uncertainties”, other
risk factors identified elsewhere in this annual report and other factors that
could cause results to differ materially from those expressed in such
forward-looking statements.
Overview
We
are a leading global manufacturer and supplier of steel pipe products and
related services for the energy industry and other industries.
We are a
leading global manufacturer and supplier of steel pipe products and related
services for the world’s energy industry as well as for other industrial
applications. Our customers include most of the world’s leading oil and gas
companies as well as engineering companies engaged in constructing oil and gas
gathering and processing facilities. In the last fifteen years, we have expanded
our business globally through a series of strategic investments, and, in the
last three years, we have transformed our presence in the North American market
and significantly expanded the range of products we can offer our customers
through the acquisitions of Maverick, a leading North American producer of steel
pipe products for the oil and gas industry with operations in the United States,
Canada and Colombia, and Hydril, a leading North American manufacturer of
premium connection products for the oil and gas industry. We now operate an
integrated worldwide network of steel pipe manufacturing, research, finishing
and service facilities with industrial operations in North and South America,
Europe, Asia and Africa and a direct presence in most major oil and gas
markets.
Our
main source of revenue is the sale of products and services to the oil and gas
industry, and the level of such sales is sensitive to international oil and gas
prices and their impact on drilling activities.
Demand
for our products and services from the global oil and gas industry, particularly
for tubular products and services used in drilling operations, represents a
substantial majority of our total sales. Our sales, therefore, depend on the
condition of the oil and gas industry and our customers’ willingness to invest
capital in oil and gas exploration and development as well as in associated
downstream processing activities. The level of these expenditures is sensitive
to oil and gas prices as well as the oil and gas industry’s view of such prices
in the future. Over the past four years, persistently high oil and gas prices
encouraged oil and gas companies to increase their spending and drilling
activity to offset declining rates of production from mature fields and to
explore and develop new reserves. Global oil prices rose strongly in the first
half of 2008, peaking in July in excess of $140 per barrel, but started falling
abruptly in the second half of the year to their current levels of around $50
per barrel, reflecting expectations of a significant reduction in demand in the
current recessionary environment. Drilling activity has risen in 2008; the
annual average of the global count of active drilling rigs, published by Baker
Hughes, rose 7% in 2008 compared to 2007. The corresponding rig count in the
U.S., which is more sensitive to North American gas prices, increased 6% in 2008
compared to 2007, rising steadily in the first part of the year to peak at 2,031
during the month of September and falling in the fourth quarter to end the year
at 1,623 and has subsequently fallen to 1,039 at the end of March, 2009. In
Canada, the corresponding rig count, which is also sensitive to North American
gas prices and where oil and gas drilling activity is affected by seasonal
factors, increased 11% in 2008 compared to 2007.
A growing
proportion of exploration and production spending by oil and gas companies has
been directed at offshore, deep drilling and non-conventional drilling
operations in which high-value tubular products, including special steel grades
and premium connections, are usually specified. Technological advances in
drilling techniques and materials are opening up new areas for exploration and
development. More complex drilling conditions would be expected to demand new
and high value products and services in most areas of the world. We estimate
that apparent demand for OCTG rose in 2008 compared to 2007. However, global
business and market conditions changed markedly during 2008 as the financial
crisis intensified in September and spread rapidly to other sectors all over the
world. It has become increasingly clear that the impact on the real economy is
likely to be severe and long-lasting. We expect that apparent demand for OCTG
will suffer a strong adjustment in 2009, reflecting an expected decline in oil
and gas drilling activity and efforts to reduce inventories, particularly in
North America where an unprecedented level of Chinese imports has fueled a
strong surge in inventories of OCTG during 2008. Demand for premium and other
high-end OCTG products should hold up better than for standard product grades as
oil and gas companies maintain their investments in complex projects already
underway. Similarly, demand for our large-diameter pipes for pipeline projects
in South America rose during 2008 as we made deliveries to a number of pipeline
projects in Brazil, Argentina and Colombia. However, sales are expected to
decline in 2009 as the current order backlog is lower than last year and
customers delay the implementation of new projects.
18
Our
business is highly competitive.
The
global market for steel pipes is highly competitive, with the primary
competitive factors being price, quality, service and technology. We sell our
products in a large number of countries worldwide and compete primarily against
European and Japanese producers in most markets outside North America. In the
United States and Canada we compete against a wide range of local and foreign
producers. Competition in markets worldwide has been increasing, particularly
for products used in standard applications, as producers in countries like China
and Russia increase production capacity and enter export markets.
Our
production costs are sensitive to prices of steelmaking raw materials and other
steel products.
We
purchase substantial quantities of steelmaking raw materials, including ferrous
steel scrap, direct reduced iron (DRI), pig iron, iron ore and ferroalloys, for
use in our production of our seamless pipe products. In addition, we purchase
substantial quantities of steel coils and plate for use in the production of our
welded pipe products. Our production costs, therefore, are sensitive to prices
of steelmaking raw materials and certain steel products, which reflect supply
and demand factors in the global steel industry and in the countries where we
have our manufacturing facilities.
In recent
years, the costs of steelmaking raw materials have increased significantly due
to increased global demand for steel products in general. Likewise, the cost of
purchasing steel coils and plate has also increased. Such costs rose steeply in
the first half of 2008, but fell even more steeply during the second half of the
year as the recessionary environment had an almost immediate impact on global
steelmaking activity. Pipe prices, which had risen during 2008, offsetting cost
increases are expected to decline in 2009, reflecting the decline in demand and
the correction in raw material and energy costs.
19
Results
of Operations
The
following discussion and analysis of our financial condition and results of
operations are based on our audited consolidated financial statements included
elsewhere in this annual report. Accordingly, this discussion and analysis
present our financial condition and results of operations on a consolidated
basis. See accounting policies A and B to our audited consolidated financial
statements included in this annual report. The following discussion should be
read in conjunction with our audited consolidated financial statements and the
related notes included in this annual report.
20
|
Thousands
of U.S. dollars (except number of shares and per share
amounts)
|
For
the year ended
December
31,
|
|||||||
|
2008
|
2007
|
|||||||
|
Selected
consolidated income statement data
|
||||||||
|
IFRS
|
||||||||
|
Continuing
Operations
|
||||||||
|
Net
sales
|
12,131,836 | 10,042,008 | ||||||
|
Cost
of
sales
|
(6,799,189 | ) | (5,515,767 | ) | ||||
|
Gross
profit
|
5,332,647 | 4,526,241 | ||||||
|
Selling,
general and administrative expenses
|
(1,819,011 | ) | (1,573,949 | ) | ||||
|
Other
operating income (expenses), net
|
(485,772 | ) | 4,933 | |||||
|
Operating
income
|
3,027,864 | 2,957,225 | ||||||
|
Interest
income
|
48,873 | 93,392 | ||||||
|
Interest
expense
|
(185,836 | ) | (275,648 | ) | ||||
|
Other
financial
results
|
(104,272 | ) | (22,754 | ) | ||||
|
Income before
equity in earnings of associated companies and income tax
|
2,786,629 | 2,752,215 | ||||||
|
Equity
in earnings of associated companies
|
89,556 | 113,276 | ||||||
|
Income
before income tax
|
2,876,185 | 2,865,491 | ||||||
|
Income
tax
|
(1,011,675 | ) | (823,924 | ) | ||||
|
Income
for continuing operations (1)
|
1,864,510 | 2,041,567 | ||||||
|
Discontinued
Operations
|
||||||||
|
Income
(loss) for discontinued operations
|
411,110 | 34,492 | ||||||
|
Income
for the year (1)
|
2,275,620 | 2,076,059 | ||||||
|
Income
attributable to (1):
|
||||||||
|
Equity
holders of the Company……………………...
|
2,124,802 | 1,923,748 | ||||||
|
Minority
interest
|
150,818 | 152,311 | ||||||
|
Income
for the year(1)
|
2,275,620 | 2,076,059 | ||||||
|
Depreciation
and amortization
|
(532,934 | ) | (514,820 | ) | ||||
|
Weighted
average number of shares
outstanding
|
1,180,536,830 | 1,180,536,830 | ||||||
|
Basic
and diluted earnings per share for continuing operations
|
1.45 | 1.60 | ||||||
|
Basic
and diluted earnings per
share
|
1.80 | 1.63 | ||||||
|
Dividends
per share(2)
|
0.43 | 0.38 | ||||||
|
|
_______________
|
|
(1)
|
International
Accounting Standard No. 1 (“IAS 1”) (revised), requires that income for
the year as shown on the income statement not exclude minority interest.
Earnings per share, however, continue to be calculated on the basis of
income attributable solely to the equity holders of the
Company.
|
|
(2)
|
Dividends
per share correspond to the dividends proposed or paid in respect of the
year.
|
21
|
Thousands
of U.S. dollars (except number of shares)
|
At
December 31,
|
||||||
|
2008
|
2007
|
||||||
|
Selected
consolidated balance sheet data
|
|||||||
|
IFRS
|
|||||||
| Current assets | 7,252,417 | (1) | 6,514,043 | ||||
|
Property,
plant and equipment, net
|
2,982,871 | 3,269,007 | |||||
|
Other
non-current assets
|
4,865,424 | 5,461,537 | |||||
|
Total
assets
|
15,100,712 | 15,244,587 | |||||
| Current liabilities | 3,790,017 | (1) | 3,328,066 | ||||
|
Non-current
borrowings
|
1,241,048 | 2,869,466 | |||||
|
Deferred
tax liabilities
|
1,053,838 | 1,233,836 | |||||
|
Other
non-current liabilities
|
313,922 | 283,369 | |||||
|
Total
liabilities
|
6,398,825 | 7,714,737 | |||||
|
Capital
and reserves attributable to the Company’s equity holders
|
8,176,571 | 7,006,277 | |||||
|
Minority
interest
|
525,316 | 523,573 | |||||
|
Total
liabilities and equity
|
15,100,712 | 15,244,587 | |||||
|
Number
of shares outstanding(Fa
|
1,180,536,830 | 1,180,536,830 | |||||
|
(1)
|
In
2007, current assets include current and non current assets held for sale
($651.2 million), related to the divestment of Hydril’s pressure control
business and current liabilities include liabilities associated with such
assets ($267.0 million).
|
22
|
|
The
following table sets forth our operating and other costs and expenses as a
percentage of net sales for the periods
indicated.
|
|
Percentage
of net sales
|
For
the year ended
December
31,
|
|||||||
|
2008
|
2007
|
|||||||
|
Continuing
Operations
|
||||||||
|
Net
sales
|
100.0 | 100.0 | ||||||
|
Cost
of sales
|
(56.0 | ) | (54.9 | ) | ||||
|
Gross
profit
|
44.0 | 45.1 | ||||||
|
Selling,
general and administrative expenses
|
(15.0 | ) | (15.7 | ) | ||||
|
Other
operating income (expenses), net
|
(4.0 | ) | 0.0 | |||||
|
Operating
income
|
25.0 | 29.4 | ||||||
|
Interest
income
|
0.4 | 0.9 | ||||||
|
Interest
expense
|
(1.5 | ) | (2.7 | ) | ||||
|
Other
financial results
|
(0.9 | ) | (0.2 | ) | ||||
| Income before equity in earnings of associated companies and income tax | 23.0 | 27.4 | ||||||
|
Equity
in earnings of associated companies
|
0.7 | 1.1 | ||||||
|
Income
before income tax
|
23.7 | 28.5 | ||||||
|
Income
tax
|
(8.3 | ) | (8.2 | ) | ||||
|
Income
for continuing operations
|
15.4 | 20.3 | ||||||
|
Discontinued
Operations
|
||||||||
|
Income
(loss) for discontinued operations
|
3.4 | 0.3 | ||||||
|
Income
for the year
|
18.8 | 20.7 | ||||||
|
Income
attributable to:
|
||||||||
|
Equity
holders of the Company
|
17.5 | 19.2 | ||||||
|
Minority
interest
|
1.2 | 1.5 | ||||||
Fiscal
Year Ended December 31, 2008, Compared to Fiscal Year Ended December 31,
2007
Net
Sales, Cost of Sales and Operating Income
The
following table shows our net sales by business segment for the periods
indicated below:
|
Millions
of U.S. dollars
|
For
the year ended December 31,
|
Increase
/ (Decrease)
|
|||
|
2008
|
2007
|
||||
|
Tubes
|
10,115.0
|
83%
|
8,552.6
|
85%
|
18%
|
|
Projects
|
1,270.9
|
10%
|
876.3
|
9%
|
45%
|
|
Others
|
745.9
|
6%
|
613.1
|
6%
|
22%
|
|
Total
|
12,131.8
|
100%
|
10,042.0
|
100%
|
21%
|
The
following table indicates our sales volume of seamless and welded pipes by
business segment for the periods indicated below:
|
Thousands
of tons
|
For
the year ended December 31,
|
Increase
/ (Decrease)
|
|
|
2008
|
2007
|
||
|
Tubes
– Seamless
|
2,861
|
2,870
|
(0%)
|
|
Tubes
– Welded
|
1,057
|
965
|
10%
|
|
Tubes
– Total
|
3,918
|
3,835
|
2%
|
|
Projects
– Welded
|
591
|
474
|
25%
|
|
Total
– Tubes + Projects
|
4,509
|
4,309
|
5%
|
Tubes
The
following table indicates, for our Tubes business segment, net sales by
geographic region, cost of sales as a percentage of net sales, operating income
and operating income as a percentage of net sales for the periods indicated
below:
23
|
Millions
of U.S. dollars
|
For
the year ended December 31,
|
Increase
/ (Decrease)
|
|
|
2008
|
2007
|
||
|
Net
sales
|
|||
|
-
North America
|
4,519.2
|
2,921.7
|
55%
|
|
-
South America
|
1,353.7
|
1,221.7
|
11%
|
|
-
Europe
|
1,705.6
|
1,661.4
|
3%
|
|
-
Middle East & Africa
|
1,809.9
|
2,057.6
|
(12%)
|
|
-
Far East & Oceania
|
726.6
|
690.2
|
5%
|
|
Total
net sales
|
10,115.0
|
8,552.6
|
18%
|
|
Cost
of sales (% of sales)
|
53%
|
52%
|
|
|
Operating
income
|
2,822.1
|
2,713.9
|
4%
|
|
Operating
income (% of sales)
|
28%
|
32%
|
|
Net sales of tubular products and
services rose 18% to $10,115.0 million in 2008, compared to $8,552.6
million in 2007, due to higher average selling prices and higher volumes of
welded pipe sales. In North America, demand for our products increased
throughout the region, particularly for our OCTG products as we consolidated our
integrated product and service offering following the acquisition of Hydril in
May 2007 in an expanding market. In South America, sales increased due primarily
to higher OCTG demand in Venezuela and Ecuador. In Europe, sales increased, as
higher average selling prices offset a decrease in volumes due to lower
industrial activity and an increase in Chinese imports. In the Middle East and
Africa, sales were affected by inventory adjustments and lower sales of American
Petroleum Institute, or API, OCTG products. In the Far East and Oceania, sales
increased as higher average selling prices more than offset a decrease in
volumes.
Cost of sales of tubular products
and services, expressed as a percentage of net sales, rose from 52% to
53%, reflecting a steep increase in raw material costs for our seamless pipe
products and steel costs for our welded pipe products in the first half of the
year, which then started to correct towards the end of the year.
Operating income from tubular
products and services, which included $368.5 million in impairment
charges, rose 4% to $2,822.1 million in 2008, from $2,713.9 million in 2007 as
higher sales more than offset a lower margin resulting from the impairment
charges. These impairment charges reflect the impact on the value of the
intangible assets coming from our Maverick acquisition due to changes in our
operating environment in North America, particularly in respect of the outlook
for natural gas drilling in the region over the next two years.
Projects
The
following table indicates, for our Projects business segment, net sales, cost of
sales as a percentage of net sales, operating income and operating income as a
percentage of net sales for the periods indicated below:
|
Millions
of U.S. dollars
|
For
the year ended December 31,
|
Increase
/ (Decrease)
|
|
|
2008
|
2007
|
||
|
Net
sales
|
1,270.9
|
876.3
|
45%
|
|
Cost
of sales (% of sales)
|
70%
|
71%
|
|
|
Operating
income
|
249.0
|
184.8
|
35%
|
|
Operating
income (% of sales)
|
20%
|
21%
|
|
Net sales of pipes for pipeline
projects rose 45% to $1,270.9 million in 2008, compared to $876.3 million
in 2007, reflecting strong shipments to gas and other pipeline projects in
Brazil, Argentina and Colombia and higher average selling prices.
Operating income from pipes for
pipeline projects rose 35% to $249.0 million in 2008, from $184.8 million
in 2007, due to the increase in net sales and a relatively stable operating
margin.
Others
The
following table indicates, for our Others business segment, net sales, cost of
sales as a percentage of net sales, operating income and operating income as a
percentage of net sales for the periods indicated below:
|
Millions
of U.S. dollars
|
For
the year ended December 31,
|
Increase
/ (Decrease)
|
|
|
2008
|
2007
|
||
|
Net
sales
|
745.9
|
613.1
|
22%
|
|
Cost
of sales (% of sales)
|
73%
|
76%
|
|
|
Operating
income
|
(43.3)
|
58.5
|
(174%)
|
|
Operating
income (% of sales)
|
(6%)
|
10%
|
|
24
Net sales of other products and
services rose 22% to $745.9 million in 2008, compared to $613.1 million
in 2007, reflecting higher sales of electric conduits, sucker rods, industrial
equipment and excess raw materials.
Operating income from other products
and services, for the year 2008 were affected by impairment charges of
$134.4 million on our assets in this segment. As previously mentioned, the
downturn in the North American economy negatively affected the value of the
intangible assets coming from the acquisition of Maverick, in this case those
associated with the welded steel pipes for electric conduits business. In the
same way, we also registered impairment charges associated to our raw materials
producing business (HBI), which has suffered the steep decline in the prices of
raw materials which occurred in the second half of the year.
Selling, general and administrative
expenses, or SG&A, decreased as a percentage of net sales to 15.0% in
2008 compared to 15.7% in 2007 but increased in absolute terms to $1,819.0
million compared to $1,573.9 million in 2007. SG&A increased in absolute
terms due to higher commissions, freight and other selling expenses, higher
labor costs and higher taxes and services and fees. These increases were related
primarily to higher activity in terms of net sales.
Other operating income and expenses
resulted in net expenses of $485.8 million in 2008, compared to net
income of $4.9 million in 2007, as in 2008 we recorded impairment charges
amounting to $502.9 million. These charges reflect changes in our operating
environment, particularly in respect of the outlook for natural gas drilling in
North America over the next two years.
Net interest expenses
totalled $137.0 million in 2008, compared to net interest expenses of
$182.3 million in 2007, reflecting a lower net debt position and lower interest
rates.
Other financial results
generated a loss of $104.3 million in 2008, compared to a loss of $22.8
million during 2007. These results largely reflect gains and losses on net
foreign exchange transactions and the fair value of derivative instruments and
are to a large extent offset by changes to our net equity position. These gains
and losses are mainly attributable to variations in the exchange rates between
our subsidiaries’ functional currencies (other than the US dollar) and the US
dollar in accordance with IFRS, principally the variations of the
Mexican peso, the Euro, the Brazilian real and the Yen against the US
dollar.
Equity in earnings of associated
companies generated a gain of $89.6 million in 2008, compared to a gain
of $113.3 million in 2007. These gains were derived mainly from our equity
investment in Ternium S.A., or Ternium, but, in 2007, also included a gain of
$18.4 million recorded on the sale of our remaining 25% participation in Dalmine
Energie.
Income tax charges of
$1,011.7 million were recorded during 2008. Excluding the effect of impairment
losses during the year amounting to $502.9 million, the tax rate was equivalent
to 31% of income before equity in earnings of associated companies and income
tax. In 2007, we recorded income tax charges amounting to $823.9 million,
equivalent to 30% of income before equity in earnings of associated companies
and income tax.
Income from discontinued operations
amounted to $411.1 million in 2008, compared to $34.5 million in 2007.
The 2008 income included the result of the sale of Hydril’s pressure control
business, completed on April 1, 2008, amounting to $394.3 million.
Net income rose to $2,275.6
million in 2008, compared to $2,076.1 million in 2007, reflecting a 2% increase
in the operating income after impairment charges and the result of the sale of
Hydril’s pressure control business.
Income attributable to equity
holders was $2,124.8 million, or $1.80 per share ($3.60 per ADS), in
2008, compared to $1,923.7 million, or $1.63 per share ($3.26 per ADS) in
2007.
Income attributable to minority
interest was $150.8 million in 2008, compared to $152.3 million in 2007
as higher results at Confab were offset by lower results at NKKTubes and losses
at other subsidiaries.
25
Liquidity
and Capital Resources
The
following table provides certain information related to our cash generation and
changes in our cash and cash equivalents position for each of the last two
years:
|
Millions
of U.S. dollars
|
For
the year ended December 31,
|
|||||||
|
2008
|
2007
|
|||||||
|
Net
cash provided by operating activities
|
1,465.0 | 2,020.6 | ||||||
|
Net
cash provided by (used in) investing activities
|
722.4 | (2,287.1 | ) | |||||
|
Net
cash (used in) provided by financing activities
|
(1,570.4 | ) | (196.7 | ) | ||||
|
Increase
(Decrease) in cash and cash equivalents
|
617.0 | (463.2 | ) | |||||
|
Effect
of exchange rate changes
|
(46.3 | ) | 52.5 | |||||
|
Cash
and cash equivalents at the beginning of year
|
954.3 | 1,365.0 | ||||||
|
Cash
and cash equivalents at the end of year
|
1,525.0 | 954.3 | ||||||
Our
financing strategy is to maintain adequate financial resources and access to
additional liquidity. During 2008, we have counted on cash flows from operations
as well as additional bank financing to fund our transactions. Short-term bank
borrowings were used as needed throughout the year.
We
believe that funds from operations, availability of liquid financial assets and
our access to external borrowing through the financial markets will be
sufficient to satisfy our working capital needs and to service our debt in the
foreseeable future. Net financial debt (total financial debt less cash and cash
equivalents and other current investments) at December 31, 2008 amounted to
$1,392.4 million. We believe that our liquidity and capital resources give us
adequate flexibility to manage our planned capital spending programs, to service
our debt and to address short-term changes in business conditions.
We have a
conservative approach to the management of our liquidity, which consist mainly
of cash and cash equivalents, comprising cash in banks, short-term money market
funds and highly liquid short-term securities with a maturity of less than 90
days at the date of purchase. Assets recorded in cash and cash equivalents are
carried at fair market value, or at historical cost which approximates fair
market value.
We hold
primarily money market investments and variable or fixed-rate securities from
investment grade issuers. We concentrate our cash in major financial centers
(mainly New York and London). We hold our cash and cash equivalents primarily in
U.S. dollars. As of December 31, 2008, U.S. dollar denominated liquid assets
represented around 70% of total liquid financial assets, while Euro denominated
liquid assets represented around 19%. Liquid financial assets as a whole
(excluding current investments) were 10.2% of total assets compared to 6.3% at
the end of 2007.
Cash and
cash equivalents (excluding bank overdraft) increased from $962.5 million at
December 31, 2007, to $1,538.8 million at December 31, 2008. In addition, we had
other current investments which amounted to $45.9 million as of December 31,
2008 and to $87.5 million as of December 31, 2007.
Fiscal
Year Ended December 31, 2008, Compared to Fiscal Year Ended December 31,
2007
Operating
activities
Net cash
provided by operations during 2008 decreased to $1,465.0 million compared to
$2,020.6 million in 2007, primarily reflecting an increase in working capital
which more than offset the increase in operating income, excluding non cash
impairment charges, to $3,530.8 million in 2008, from $2,957.2 million in 2007.
Working capital increased by $1,051.6 million in 2008, compared to a $110.4
million increase in 2007. The increase in working capital comprised
mainly:
|
·
|
an
increase in inventories of $492.5 million, reflecting primarily an
increase in business activity and input
costs;
|
|
·
|
an
increase in trade receivables of $374.5 million, mainly due to higher
sales; and
|
|
·
|
a decrease
in
customer advances and other liabilities of $174.0 million, and
$71.6 million respectively, partially offset by an increase in
trade payables of $48.9 million.
|
26
Investing
activities
Net cash
provided by investing activities in 2008 was $722.4 million, compared to net
cash used in investing activities amounting to $2,287 million in 2007. The main
differences were as follows:
|
·
|
in
2008, we received the proceeds from the sale of Hydril’s pressure control
business, amounting to approximately $1.1
billion;
|
|
·
|
in
2007, we spent approximately $2.0 billion to acquire
Hydril;
|
|
·
|
capital
expenditures for 2008 amounted $443.2 million, a similar amount to the
$447.9 million spent in 2007; and
|
|
·
|
in
2008, we reduced our investments in short-term securities as a result of
dispositions in an aggregate amount of $41.7 million, compared to
dispositions of $96.1 million in
2007.
|
Financing
activities
Net cash
used in financing activities, including dividends paid, proceeds and repayments
of borrowings, was $1,570.4 million in 2008, compared to net cash used in
financing activities in 2007 of $196.7 million.
Dividends
paid, including dividends paid to minority interests in subsidiaries, amounted
to $535.8 million in 2008, of which $295 million were paid to equity holders in
respect of the 2007 fiscal year and $153 million were paid to equity holders in
November 2008, as an interim dividend in respect of the dividend for the 2008
fiscal year. This compares to $567.9 million paid in 2007, of which $354 million
were paid in respect of the 2006 fiscal year and $153 million were paid to
equity holders in November 2007, as an interim dividend for the 2007 fiscal
year.
Net
repayments of borrowings (proceeds less repayments) totaled $1,034.6 million in
2008, compared to net proceeds from borrowings of $371.2 million in
2007.
Our total
liabilities to total assets ratio decreased to 0.42:1 as of December 31, 2008,
compared to 0.51:1 as of December 31, 2007.
Principal
Sources of Funding
Financial
liabilities
Total
financial debt decreased by $1,043.2 million to $2,977.0 million at December 31,
2008 from $4,020.2 million at December 31, 2007.
Our
financial liabilities (other than trade payables and derivative financial
instruments) consist mainly of bank loans. As of December 31, 2008 U.S.
dollar-denominated financial debt and Euro-denominated financial debt
represented 81.7% and 12.7%, respectively, of total financial debt. For further
information about our financial debt, please see note 20 “Borrowings” to our
consolidated financial statements included in this annual report.
The
following table shows the composition of our financial debt at December 31, 2008
and 2007:
|
Thousands
of U.S. dollars
|
2008
|
2007
|
|
Bank
borrowings
|
2,820,398
|
3,953,696
|
|
Bank
overdrafts
|
13,747
|
8,194
|
|
Other
loans
|
141,938
|
56,592
|
|
Finance
lease
liabilities
|
932
|
1,763
|
|
Total
borrowings
|
2,977,015
|
4,020,245
|
The
weighted average interest rates before tax shown below were calculated using the
rates set for each instrument in its corresponding currency as of December 31,
2008 and 2007. The changes in interest rate are basically due to
changes in floating interest rate.
27
|
2007
|
||||||||
|
Bank
borrowings
|
5.23 | % | 5.80 | % | ||||
|
Other
loans
|
4.99 | % | 5.50 | % | ||||
|
Finance
lease
liabilities
|
7.74 | % | 2.52 | % | ||||
The
maturity of our financial debt is as follows:
|
Thousands
of U.S. dollars
At
December 31, 2008
|
1
year or less
|
1
- 2
years
|
2
– 3 years
|
3
- 4
years
|
4
- 5 years
|
Over
5 years
|
Total
|
|
|
Financial
lease
|
368
|
165
|
160
|
160
|
79
|
-
|
932
|
|
|
Other
borrowings
|
1,735,599
|
527,379
|
511,125
|
135,615
|
50,064
|
16,301
|
2,976,083
|
|
|
Total
borrowings
|
1,735,967
|
527,544
|
511,285
|
135,775
|
50,143
|
16,301
|
2,977,015
|
|
|
Estimated
interest to be accrued
|
98,668
|
24,163
|
16,329
|
5,896
|
1,920
|
2,030
|
149,006
|
|
|
Total
borrowings plus estimated interest to be accrued
|
1,834,635
|
551,707
|
527,614
|
141,671
|
52,063
|
18,331
|
3,126,021
|
Our
current debt to total debt ratio increased from 0.29:1 as of December 31, 2007
to 0.58:1 as of December 31 2008.
For
information on our derivative financial instruments, please see note 25
“Derivative financial instruments” to our audited consolidated financial
statements included in this annual report.
Significant
Borrowings
Our most
significant borrowings as of December 31, 2008 are as follows:
|
Millions
of U.S. dollars
|
|||||
|
Date
|
Borrower
|
Type
|
Original
Principal
amount
|
Outstanding
Principal
amount
as of
December
31, 2008
|
Maturity
|
|
March
2005
|
Tamsa
|
Syndicated
loan
|
300.0
|
180.0
|
March
2010
|
|
October
2006
|
Maverick
|
Syndicated
loan
|
750.0
|
452.3
|
October
2011
|
|
October
2006
|
Tamsa
|
Syndicated
loan
|
700.0
|
466.7
|
October
2011
|
|
October
2006
|
Siderca
|
Syndicated
loan
|
480.5
|
288.3
|
October
2009
|
|
October
2006
|
Dalmine
|
Syndicated
loan
|
150.0
|
100.0
|
October
2011
|
|
May
2007
|
Tenaris
|
Syndicated
loan
|
1,000.0
|
250.0
|
May
2009 (*)
|
|
May
2007
|
Hydril
|
Syndicated
loan
|
300.0
|
233.0
|
May
2012
|
|
June
2008
|
Dalmine
|
Bilateral
|
150.0
|
150.0
|
June
2013
|
(*)This
loan may be extended at the Company's option until May 2012, upon notice to the
agent no later than three business days prior to the original maturity
date.
The main
covenants on these loan agreements are limitations on liens and encumbrances,
limitations on the sale of certain assets, restrictions on investments and
compliance with financial ratios (e.g., leverage ratio and interest coverage
ratio in Tamsa’s, Maverick’s, Siderca’s, Dalmine’s and Hydril’s syndicated loan
agreements, leverage ratio and debt service coverage ratio in the Company’s
syndicated loan agreement, and leverage ratio and net debt to equity ratio in
Dalmine’s bilateral loan). In addition, except for the Company’s syndicated loan
agreement, these syndicated loans have certain restrictions on capital
expenditures. As of December 31, 2008, Tenaris was in compliance with all of its
covenants.
Tenaris’s
consolidated debt includes $57 million of Dalmine’s debt and $11 million of
Confab’s debt secured by certain properties of these subsidiaries.
For
further information on our borrowings, please see note 20 “Borrowings” to our
audited consolidated financial statements included in this annual
report.
Recent
Developments
Acquisition of Seamless Pipe
Indonesia Jaya
28
In
February 2009, we entered into an agreement to acquire from
Bakrie & Brothers TbK, Green Pipe International Limited and Cakrawala Baru a
77.45% holding in Seamless Pipe Indonesia Jaya, or SPIJ, an Indonesian OCTG
processing business with heat treatment and premium connection threading
facilities, for a purchase price of $73.5 million, with $24.9 million being
payable as consideration for SPIJ’s equity and $ 48.6 million as consideration
for the assignment of certain sellers’ loan to SPIJ. SPIJ has an annual
processing capacity of 120,000 tons and has had a commercial alliance with us
for more than a decade. SPIJ employs around 500 persons and had revenues of
approximately $140 million in 2008.
The
acquisition, whose completion is subject to customary conditions, including
regulatory approval and compliance with certain minority shareholder rights,
would allow us to strengthen our global production capabilities and local
presence in Indonesia, one of the world’s leading producers of liquified natural
gas, or LNG.
Dividend
payment
In
February 2009, our board of directors proposed, for the approval of the annual
general shareholders’ meeting to be held on June 3, 2009, the payment of an
annual dividend of $0.43 per share ($0.86 per ADS), or approximately $507
million, which includes the interim dividend of $0.13 per share ($0.26 per ADS)
paid on November 27, 2008. If the annual dividend is approved by the
shareholders, a dividend of $0.30 per share ($0.60 per ADS), or approximately
$354 million will be paid on June 25, 2009, with an ex-dividend date of June 22,
2009.
Health,
Safety and Environment
We are
subject to a wide range of local, provincial and national laws, regulations,
permits and decrees in the countries where we have manufacturing operations
concerning, among other things, human health, discharges to the air and water
and the handling and disposal of solid and hazardous wastes. Compliance with
these environmental laws and regulations is a significant factor in our
business.
Tenaris
is committed to protecting the health and safety of its employees and the
communities in which it operates, as well as to minimizing its own impact on the
environment and supporting broader industry and public efforts to protect the
environment.
In
accordance with the principle of sustainable development, our efforts in this
area are focused on improving the efficiency of our operations, designing our
processes with a sustainable approach, reducing energy consumption, minimizing
and recycling waste, and employee training. We continue to work on the
implementation and improvement of our integrated Health, Safety and Environment
(HSE) management system. Based on international standards such as ISO 14000 and
OHSA 18000, the system applies ecoefficiency and integral safety concepts to all
of our operations. Following the further development and deployment of an
integrated IT safety and environmental tool, we are able to record, track and
analyze safety and environment accidents and incidents at our plants, follow up
with corrective actions and track HSE performance.
We
believe that accidents do not happen by chance and that we should make every
effort to prevent injuries and work-related illnesses. To achieve this objective
we have instituted innovative programs that reward safe behavior through
accident prevention and hold weekly meetings with managers, safety staff and
workers at each of our mills to discuss accidents and share ideas to improve
safety. We dedicate a percentage of working hours to safety
training. At Tenaris, investments in training, processes and
workplace behavior are complemented by capital investments in the mills. A
significant proportion of our capital investment pending is allocated toward
improving safety in our operations. A significant portion of
Tenaris’s new investments contributes to reduce the environmental impact of
operations, products and services. We adopt the most appropriate and
ecoefficient designs and technologies available and continuously review our HSE
performance so as to improve it. We monitor the operations of our subcontractors
in addition to our own, seeking to maximize the efficiency in the use of energy
and material resources, to recycle by-products – both at our own facilities and
by third parties – and or minimize generation of waste, emissions and effluents
in the supply chain. Perhaps one of our most significant contributions to the
environment comes from the delivery of products that can perform in the most
demanding conditions and on whose quality our customers rely. We work constantly
on improving the quality and reliability of our products, developing new
products that help our customers to reduce the impact of their operations on the
environment, and we aim to supply using an integrated supply chain concept that
aims to reduce risk and impact as well costs.
We
actively participate in different governmental and non-governmental forums and
associations focused on sustainability issues. These include the environmental
commissions and working groups of organizations like the World Steel
Association, the Latin American Iron & Steel Institute and various national
chapters of the World Business Council for Sustainable Development. Some of the
most relevant issues addressed by these organizations are global climate change,
by-products and water management, and the definition of sustainability
indexes.
29
We have
not been subject to any material penalty for any material environmental violation in the last five years, and we are not aware of any current
material legal or administrative proceedings pending against us with respect to
environmental matters which could have an adverse material impact on our
financial condition or results of operations.
Related
Party Transactions
Tenaris
is a party to several related party transactions, which include, among others,
purchases and sales of goods (including steel pipes, flat steel products, steel
bars, raw materials, gas and electricity) and services (including engineering
services and related services) from or to entities controlled by San Faustin or
in which San Faustin holds significant interests. Material related party
transactions are subject to the review of the audit committee of the Company’s
board of directors and the requirements of the Company’s articles of association
and Luxembourg law, as explained below. For further detail on Tenaris’s related
party transactions, see Note 30 “Related party transactions” to our consolidated
financial statements, included in this annual report.
Corporate
Governance
Our
corporate governance practices are governed by Luxembourg Law (particularly the
law of August 10, 1915 on commercial companies and the law of July 31, 1929, as
amended) and our articles of association. As a Luxembourg company listed on the
New York Stock Exchange (the NYSE), the Bolsa Mexicana de Valores, S.A. de C.V.
(the Mexican Stock Exchange), the Bolsa de Comercio de Buenos Aires (the Buenos
Aires Stock Exchange) and Borsa Italiana S.p.A. (the Italian Stock Exchange), we
are not required to comply with some of the corporate governance standards of
these exchanges. We, however, believe that our corporate governance practices
meet, in all material respects, the corporate governance standards that are
generally required for controlled companies by all of the exchanges on which our
securities trade.
For a
summary of the significant ways in which our corporate governance practices
differ from the corporate governance standards required for controlled companies
by the exchanges on which our shares trade, please visit our website at
http://www.tenaris.com/investors/
Board
of Directors
Management
of the Company is vested in a board of directors with the broadest power to act
on behalf of the Company and accomplish or authorize all acts and transactions
of management and disposal that are within its corporate purpose and which are
not specifically reserved in the articles of association or by applicable law to
the general shareholders’ meeting. The Company’s articles of association provide
for a board of directors consisting of a minimum of three and a maximum of
fifteen directors; however, if the Company’s shares are listed on a stock
exchange, the minimum number of directors must be five. The board of directors
meets at least four times per year, or as often as required by the interests of
the Company. A majority of the members of the board of directors constitutes a
quorum, and resolutions may be adopted by the vote of a majority of the
directors present or represented. In the case of a tie, the chairman is entitled
to cast the deciding vote.
Directors
are elected at the annual ordinary general shareholders’ meeting to serve
one-year renewable terms, as determined by the shareholders. The general
shareholders’ meeting may dismiss all or any one member of the board of
directors at any time, with or without cause, by resolution passed by a simple
majority vote. For as long as our shares are listed on at least one
stock exchange, the Company must have an audit committee composed of three
independent members, two of which, at least, must qualify as independent
directors.
Under the
Company’s articles of association, an independent director is a director
who:
|
·
|
is
not and has not been employed by us or our subsidiaries in an executive
capacity for the preceding five
years;
|
|
·
|
is
not a person that controls us, directly or indirectly, and is not a member
of the board of directors of a company controlling us, directly or
indirectly;
|
|
·
|
does
not have (and is not affiliated with a company or a firm that has) a
significant business relationship with us, our subsidiaries or our
controlling shareholder;
|
|
·
|
is
not and has not been affiliated with or employed by a present or former
auditor of us, our subsidiaries or our controlling shareholder for the
preceding five years; and
|
|
·
|
is
not a spouse, parent, sibling or relative up to the third degree of any of
the above persons.
|
30
Our
current board of directors is comprised of ten directors, three of which are
independent directors. The following table sets forth the name of the Company’s
current directors, their respective positions on the board, their principal
occupation, their years of service as board members and their age.
|
Name
|
Position
|
Principal
Occupation
|
Years
as
Director
|
Age
at
December
31, 2008
|
|
Roberto
Bonatti(1)
|
Director
|
President
of San Faustin
|
6
|
59
|
|
Carlos
Condorelli
|
Director
|
Director
of Tenaris and Ternium
|
2
|
57
|
|
Carlos
Franck
|
Director
|
President
of Santa María
|
6
|
58
|
|
Roberto
Monti
|
Director
|
Non-executive
chairman of Trefoil Limited and member of the board of directors of
Petrobras Energia, and of John Wood Group PLC
|
4
|
69
|
|
Gianfelice
Mario Rocca(1)
|
Director
|
Chairman
of the board of directors of San Faustin
|
6
|
60
|
|
Paolo
Rocca(1)
|
Director
|
Chairman
and chief executive officer of Tenaris
|
7
|
56
|
|
Jaime
Serra Puche
|
Director
|
Chairman
of SAI Consultores
|
6
|
57
|
|
Alberto
Valsecchi
|
Director
|
Director
of Tenaris
|
1
|
64
|
|
Amadeo
Vázquez y Vázquez
|
Director
|
Director
of Gas Natural Ban S.A. and vocal of the executive committee of Asociación
Empresaria Argentina
|
6
|
66
|
|
Guillermo
Vogel
|
Director
|
Vice
chairman of Tamsa
|
6
|
58
|
|
|
___________
|
|
(1)
|
Paolo
Rocca and Gianfelice Rocca are brothers, and Roberto Bonatti is Paolo and
Gianfelice Rocca’s first cousin.
|
Roberto Bonatti. Mr. Bonatti is a member
of our board of directors. He is a grandson of Agostino Rocca, founder of the
Techint group, a group of companies controlled by San Faustin. Throughout his
career in the Techint group he has been involved specifically in the engineering
and construction and corporate sectors. He was first employed by the Techint
group in 1976, as deputy resident engineer in Venezuela. In 1984, he became a
director of San Faustin, and since 2001 he has served as its president. In
addition, Mr. Bonatti currently serves as president of Tecpetrol S.A. and
Techint Compañia Técnica Internacional S.A.C.I. He is also a member of the board
of directors of Ternium, Siderca and Siderar S.A.I.C., or
Siderar. Mr. Bonatti is an Italian citizen.
Carlos
Condorelli. Mr. Condorelli is a
member of our board of directors. He served as our chief financial officer from
October 2002 until September 2007. He is also a board member of Ternium. He
began his career within the Techint group in 1975 as an analyst in the
accounting and administration department of Siderar. He has held several
positions within Tenaris and other Techint group companies, including
finance and administration director of Tamsa and president of the board of
directors of Empresa Distribuidora La Plata S.A., an Argentine utilities
company. Mr. Condorelli is an Argentine citizen.
Carlos Franck. Mr.
Franck is a member of our board of directors. He is president of Santa María
S.A.I.F. and Inverban S.A., vice president of Siderca and a member of the board
of directors of Techint Financial Corporation N.V., III Industrial Investments
Inc., Siderar, Tecpetrol and Tecgas N.V. He has financial planning and control
responsibilities in subsidiaries of San Faustin. Mr. Franck is an Argentine
citizen.
Roberto Monti. Mr. Monti is a member of
our board of directors. He is the non-executive chairman of Trefoil Limited and
a member of the board of directors of Petrobras Energia and of John Wood
Group PLC. He has served as vice president of Exploration and Production of
Repsol YPF and chairman and CEO of YPF. He was also president of Dowell, a
subsidiary of Schlumberger and president of Schlumberger Wire & Testing
division for East Hemisphere Latin America. Mr. Monti is an Argentine
citizen.
Gianfelice Mario
Rocca. Mr. Rocca is a member of our board of directors. He is a grandson
of Agostino Rocca. He is chairman of the board of directors of San Faustin, a
member of the board of directors of Tamsa and Ternium, president of the
Humanitas Group and president of the board of directors of Techint Compagnia
Tecnica Internazionale S.p.A. and Tenova S.p.A. In addition, he sits
on the board of directors or executive committees of several companies,
including Allianz S.p.A, RCS Quotidiani, and Buzzi Unicem. He is vice president
of Confindustria, the leading association of Italian industrialists. He is a
member of the Advisory Board of Allianz Group, the Trilateral Commission and the
European Advisory Board of the Harvard Business School. Mr. Rocca is an Italian
citizen.
31
Paolo Rocca. Mr. Rocca is chairman of
our board of directors and our chief executive officer. He is a grandson of
Agostino Rocca. He is also chairman of the board of directors of Tamsa, and vice
president of Confab. He is also chairman of the board of directors of Ternium,
director and vice president of San Faustin and director of Techint Financial
Corporation N.V. Mr. Rocca is the vicechairman of the World Steel Association
and member of the International Advisory Committee of the NYSE Euronext (New
York Stock Exchange). Mr. Rocca is an Italian citizen.
Jaime Serra
Puche. Mr.
Serra Puche is a member of our board of directors. He is chairman of SAI
Consultores, a Mexican consulting firm, and a member of the board of directors
of Chiquita Brands International, the Mexico Fund, Grupo Vitro and Grupo Modelo.
Mr. Serra Puche served as Mexico’s Undersecretary of Revenue, Secretary of Trade
and Industry, and Secretary of Finance. He led the negotiation and
implementation of NAFTA. Mr. Serra Puche is a Mexican citizen.
Alberto Valsecchi.
Mr. Valsecchi is a member of our board of directors. He served as our chief
operating officer from February 2004 until July 2007. He joined the Techint
group in 1968 and has held various positions within Tenaris and other Techint
group companies. He has retired from his executive positions. He is also a
member of the board of directors of San Faustin and has been elected as the
chairman of the board of directors of Dalmine, a position he assumed in May
2008. Mr. Valsecchi is an Italian citizen.
Amadeo Vázquez y
Vázquez. Mr.
Vázquez y Vázquez is a member of our board of directors. He is an independent
member of the board of directors of Gas Natural Ban S.A. He is a member of the
executive committee of the Asociación Empresaria Argentina, and of the Fundación
Mediterránea, and he is a member of the Advisory Board of the Fundación de
Investigaciones Económicas Latinoamericanas. He served as CEO of the Banco Río
de la Plata S.A. until August 1997 and was also the chairman of the board of
directors of Telecom Argentina S.A. until April 2007. Mr. Vázquez y Vázquez is a
Spanish and Argentine citizen.
Guillermo Vogel. Mr. Vogel is a member of
our board of directors. He is vice chairman of Tamsa, chairman of Grupo
Collado S.A.B. de C.V, vice chairman of Estilo y Vanidad S.A. de C.V. and
member of the board of directors of Alfa S.A.B. de C.V., the American Iron
and Steel Institute, the North American Steel Council and the North
American Competitiveness Council. In addition, he is a member of the board of
directors and of the investment committee of the Corporación Mexicana de Inversiones
de Capital and a member of the board of directors and the audit committee
of HSBC (México). Mr. Vogel is a Mexican citizen.
Director
Liability
Under
Luxembourg law, a director may be liable to us for any damage caused by
management errors, such as wrongful acts committed during the execution of his
or her mandate, and to the Company, its shareholders and third parties in the
event that the Company, its shareholders or third parties suffer a loss due to
an infringement of either the Luxembourg Company Law or the Company’s articles
of association. Under Luxembourg law, related-party transactions involving
directors may be subject to approval procedures established by Luxembourg law
and are to be reported at the next following shareholders’ meeting. Any director
may be removed from or reappointed to office at any time by a shareholders’
resolution passed by majority vote, irrespective of the number of shares present
or represented at the meeting.
A
director will not be liable if, notwithstanding his presence at the board
meeting at which a resolution was adopted or notwithstanding his opposition to
that resolution, he advised the board of directors of his knowledge thereto and
caused a record of his statement to be included in the minutes of the meeting.
The director must report his opposition at the next shareholders’ meeting before
any other resolution is voted on.
The
Company may initiate actions against directors for damages with the approval of
shareholders by a vote of more than 50% of votes cast and without the presence
of a quorum. Actions against directors who misappropriate corporate assets or
commit a breach of trust may be brought by any shareholder.
Audit
Committee
The
Company’s board of directors has an audit committee consisting of three members.
On June 4, 2008, the Company’s board of directors reappointed Jaime Serra Puche,
Amadeo Vázquez y Vázquez and Roberto Monti as members of our audit committee.
All three members of the audit committee qualify as independent directors under
the Company’s articles of association.
Under the
Company’s articles of association and the audit committee charter, the audit
committee assists the board of directors in fulfilling its oversight
responsibilities relating to the integrity of the financial statements of the
Company, the Company’s system of internal controls and the independence and
performance of the Company’s internal and independent auditors.
32
In
addition, the audit committee is required to review “material” transactions, as
such term is defined in the Company’s articles of association, to be entered
into by the Company or its subsidiaries with “related parties,” as such term is
defined in the Company’s articles of association, in order to determine whether
their terms are consistent with market conditions or are otherwise fair to the
Company and/or its subsidiaries. In the case of material transactions entered
into by the Company’s subsidiaries with related parties, the Company’s audit
committee will review those transactions entered into by those subsidiaries
whose boards of directors do not have independent members. Confab is currently
our only subsidiary with independent board members.
Under the
Company’s articles of association, as supplemented by the audit committee’s
charter, a material transaction is:
|
·
|
any
transaction between the Company or its subsidiaries with related parties
(x) with an individual value equal to or greater than $10 million, or
(y) with an individual value lower than $10 million, when the
aggregate sum – as reflected in the financial statements of the four
fiscal quarters of the Company preceding the date of determination- of any
series of transactions for such lower value that can bee deemed to be
parts of a unique or single transaction (but excluding any transactions
that were reviewed and approved by Company’s audit committee or board of
directors, as applicable, or the independent members of the board of
directors of any of its subsidiaries) exceeds 1.5% of the Company’s
consolidated net sales made in the fiscal year preceding the year on which
the determination is made;
|
|
·
|
any
corporate reorganization transaction (including a merger, spin-off or bulk
transfer of a business) affecting the Company for the benefit of, or
involving, a related party; and
|
|
·
|
any
corporate reorganization transaction (including a merger, spin-off or bulk
transfer of a business) not reviewed and approved by the independent
members of the board of directors of any of the Company’s direct or
indirect subsidiaries, affecting any of the Company’s direct or indirect
subsidiaries for the benefit of, or involving, a related
party.
|
The audit
committee has the power (to the maximum extent permitted by applicable laws) to
request that the Company or relevant subsidiary provide any information
necessary for it to review any material transaction. A related party transaction
shall not be entered into unless (i) the circumstances underlying the proposed
transaction justify that it be entered into before it can be reviewed by the
Company’s audit committee or approved by the board of directors and (ii) the
related party agrees to unwind the transaction if the Company’s audit committee
or board of directors does not approve it.
In
addition, the audit committee has the authority to conduct any investigation
appropriate to fulfill its responsibilities, and has direct access to the
Company’s internal and external auditors as well as to the Company’s management
and employees and, subject to applicable laws, its subsidiaries.
The audit
committee also performs other duties entrusted to it by the Company’s board of
directors.
Senior
Management
Our
current senior management consists of:
|
Name
|
Position
|
Age
at
December
31, 2008
|
|
Paolo
Rocca
|
Chairman
and Chief Executive Officer
|
56
|
|
Ricardo
Soler
|
Chief
Financial Officer
|
57
|
|
Carlos
San Martín
|
Technology
Director
|
65
|
|
Alejandro
Lammertyn
|
Commercial
Director
|
43
|
|
Renato
Catallini
|
Supply
Chain Director
|
42
|
|
Marco
Radnic
|
Human
Resources Director
|
59
|
|
Marcelo
Ramos
|
Quality
Director
|
45
|
|
Sergio
Tosato
|
Industrial
Coordination Director
|
59
|
|
Germán
Curá
|
North
American Area Manager
|
46
|
|
Sergio
de la Maza
|
Central
American Area Manager
|
52
|
|
Guillermo
Noriega
|
South
American Area Manager
|
58
|
|
Vincenzo
Crapanzano
|
European
Area Manager
|
56
|
|
Carlos
Pappier
|
Planning
Director
|
47
|
|
Claudio
Leali
|
Managing
Director, Japanese Operations
|
58
|
33
Paolo Rocca. Mr.
Rocca is chairman of our board of directors and our chief executive officer. He
is a grandson of Agostino Rocca. He is also chairman of the board of directors
of Tamsa, and vice president of Confab. He is also chairman of the board of
directors of Ternium, director and vice president of San Faustin and director of
Techint Financial Corporation N.V. Mr. Rocca is the vicechairman of the World
Steel Association and member of the International Advisory Committee of the NYSE
Euronext (New York Stock Exchange). Mr. Rocca is an Italian
citizen.
Ricardo
Soler. Mr Soler currently serves as our chief financial
officer, a position that he assumed in October 2007. Previously he served as
chief executive officer of Hydril and from 1999 until November 2006 served as
managing director of our welded pipe operations in South America and as
executive vice-president of Confab and Siat. He started his career in the
Techint group in 1973 as a planning analyst at Siderar. He served as Siderca’s
financial director from 1993 until 1995. Mr. Soler is an Argentine
citizen.
Carlos San
Martín. Mr. San Martín currently serves as our technology
director with responsibility for R&D activities, as well as acting as
honorary chairman of NKKTubes. He joined the Techint group in 1968 and has held
various positions within the Techint group and Tenaris, including marketing
director of Siderca and managing director of NKKTubes. From August 2000 to
August 2002, Mr. San Martín was Chairman of NKKTubes. He assumed his current
position in October 2002. Mr. San Martín is an Argentine citizen.
Alejandro
Lammertyn. Mr. Lammertyn currently serves as our commercial
director. Previously he served as supply chain director. He began his career
with Tenaris in 1990 as special projects analyst in Siderca. In 2000, he was
assistant to the CEO for marketing, organizational model and mill allocation
matters. He assumed his current position in August 2007. Mr. Lammertyn is an
Argentine citizen.
Renato
Catallini. Mr. Catallini currently serves as our supply chain
director, with responsibility for the execution of all contractual deliveries to
customers. He joined Tenaris in 2001 in the supply management area, as a general
manager of Exiros Argentina. In July 2002, he was appointed operations director
and subsequently, in January 2005, became managing director of Exiros. Before
joining Tenaris, he worked for ten years in the energy sector, working for TGN,
Nova Gas Internacional, TransCanada Pipelines and TotalFinaElf, among others. He
assumed his current position in August 2007. Mr. Catallini is an Argentine
citizen.
Marco
Radnic. Mr. Radnic currently serves as our human resources
director. He began his career within the Techint group in the Industrial
Engineering Department of Siderar in 1975. Later he held several positions in
the technical departments of Siderca and various companies within the Techint
group. After holding several positions in the marketing and procurement areas in
Europe, in 1996 he became commercial director of Dalmine. In 1998, he became the
director of our Process and Power Services business unit. In 2001, he was
appointed chief of staff for Paolo Rocca in Buenos Aires. He assumed his current
position in December 2002. Mr. Radnic is an Argentine citizen.
Marcelo
Ramos. Mr. Ramos currently serves as our quality director.
Previously he served as managing director of NKKTubes and our Japanese
operations. He joined the Techint group in 1987 and has held various positions
within Tenaris including quality control director at Siderca. He assumed his
current position in 2006. Mr. Ramos is an Argentine citizen.
Sergio
Tosato. Mr. Tosato currently serves as our industrial
coordination director. He first joined Dalmine in 1974 in the personnel
organization area, and has held many positions within Tenaris, including
director of operations in Siderca and manufacturing director in Dalmine, before
assuming his current position in 2003. Mr. Tosato is an Italian
citizen.
Germán
Curá. Mr. Curá currently serves as our North American area
manager. He is a marine engineer and was first employed with Siderca in 1988.
Previously, he served as Siderca’s exports director, Tamsa’s exports director
and commercial director, sales and marketing manager of our Middle East office,
president of Algoma Tubes, director of our Oilfield Services business unit and
commercial director. He is also a member of the board of directors of the
American Petroleum Institute (API). He assumed his current position in October
2006. Mr. Curá is an Argentine citizen.
Sergio de la
Maza. Mr. de la Maza currently serves as our Central American
area manager and also serves as a director and executive vice-president of
Tamsa. Previously he served as our Mexican area manager. He first joined Tamsa
in 1980. From 1983 to 1988, Mr. de la Maza worked in several positions in Tamsa
and Dalmine. He then became manager of Tamsa’s new pipe factory and later served
as manufacturing manager and quality director of Tamsa. Subsequently, he was
named manufacturing director of Siderca. He assumed his current position in
2006. Mr. de la Maza is a Mexican citizen.
Guillermo
Noriega. Mr.
Noriega currently serves as our South American area manager and also serves as
managing director of Siderca. He began his career at Siderca as an industrial
engineer in 1981. Previously, he served as Siderca’s commercial director for the
Argentine market. He assumed his current position with Siderca in 2000. Mr.
Noriega is an Argentine citizen.
34
Vincenzo
Crapanzano. Mr. Crapanzano currently
serves as our European area manager and also serves as managing director of
Dalmine. Previously he served as our Mexican area manager and executive vice
president of Tamsa. Prior to joining Tenaris, he held various positions at Grupo
Falck from 1979 to 1989. When Dalmine acquired the tubular assets of Grupo Falck
in 1990, he was appointed managing director of the cold drawn tubes division. He
is also vice president of Centro Sviluppo Materiali S.p.A, and of Federacciai.
He assumed his current position in January 2004. Mr. Crapanzano is an Italian
citizen.
Carlos Pappier. Mr. Pappier currently
serves as our planning director, a position that he assumed in October 2006. He
began his career within the Techint group in 1984 as a cost analyst in Siderar.
After holding several positions within Tenaris and other Techint group companies
in 2002 he became chief of staff of Tenaris. Mr. Pappier is an Argentine
citizen.
Claudio
Leali. Mr. Leali currently serves as managing director of our
Japanese operations, a position that he assumed in November 2006. He began his
career at Dalmine as a development product technician in 1976. From March 1994
to October 1995 he served as technical managing director of DMV, a joint venture
between Dalmine, Vallourec and Mannesmann. Before assuming his current position
he also served as quality director and as executive assistant of the technology
department. Mr. Leali is an Italian citizen.
Compensation
The
compensation of the members of the Company’s board of directors is determined at
the annual ordinary general shareholders’ meeting. Each member of the board of
directors received as compensation for such position a fee of $70
thousand.
The
chairman of the audit committee received as additional compensation a fee of $60
thousand, while the other members of the audit committee received an additional
fee of $50 thousand. Under the Company’s articles of association, the members of
the audit committee are not eligible to participate in any incentive
compensation plan for employees of the Company or any of its
subsidiaries.
The
aggregate compensation earned by directors and executive officers during 2008
amounted to $22.5 million.
There are
no service contracts between any director and Tenaris that provide for benefits
upon termination of employment.
Employee
retention and incentive program
On
January 1, 2007, we adopted an employee retention and long term incentive
program. Pursuant to this program, certain senior executives have been granted a
number of units equivalent in value to the equity book value per share
(excluding minority interest). The units will be vested over a period of four
years and Tenaris will redeem vested units following a period of seven years
from the grant date, or when the employee ceases employment, at the equity book
value per share at the time of the payment. Beneficiaries also receive a cash
amount per unit equivalent to the dividend paid per share whenever the Company
pays a cash dividend to its shareholders. Annual compensation under this program
is not expected to exceed 35%, on average, of the total annual compensation of
the beneficiaries.
The total
value of the units granted under the program, based on the number of units and
the book value per share as of December 31, 2008, was $16.8 million. As of
December 31, 2008, we have recorded a total liability of $10.4 million, based on
actuarial calculations provided by independent advisors.
Auditors
The
Company’s articles of association require the appointment of at least one
independent auditor chosen from among the members of the Luxembourg Institute of
Independent Auditors. The primary responsibility of the independent auditor is
to audit the Company’s annual accounts and to submit a report on the accounts to
shareholders at the annual shareholders’ meeting. Following a recommendation
from our audit committee, auditors are appointed by the general shareholders’
meeting through a resolution passed by a simple majority vote. Shareholders may
determine the number and the term of office of the auditors at the ordinary
general shareholders’ meeting, provided however that an auditor’s term shall not
exceed one year and that any auditor may be reappointed or dismissed by the
general shareholders meeting at any time, with our without cause. Luxembourg law
does not allow directors to serve concurrently as independent
auditors. As part of their duties, the auditors report directly to
the audit committee.
PricewaterhouseCoopers
(acting, in connection with the Company’s annual accounts and annual
consolidated financial statements required under Luxembourg law, through
PricewaterhouseCoopers S.á.r.l., Réviseur d’entreprises and,
in connection with the Company’s annual and interim consolidated financial
statements required under the laws of any other relevant jurisdiction, through
Price Waterhouse & Co. S.R.L.) were appointed as the Company’s independent
auditors for the fiscal year ending December 31, 2008, at the ordinary general
shareholders’ meeting held on June 4, 2008.
35
Fees
Paid to the Company’s Principal Accountant
In 2008
PricewaterhouseCoopers served as the principal external auditor for the Company.
Fees payable to PricewaterhouseCoopers in 2008 are detailed below.
|
Thousands
of U.S. dollars
|
For
the year ended
December
31, 2008
|
|
Audit
Fees
|
4,405
|
|
Audit-Related
Fees
|
76
|
|
Tax
Fees
|
138
|
|
All
Other Fees
|
-
|
|
Total
|
4,619
|
Audit
Fees
Audit
fees were paid for professional services rendered by the auditors for the audit
of the consolidated financial statements and internal control over financial
reporting of the Company, the statutory financial statements of the Company and
its subsidiaries, and any other audit services required for US Securities and
Exchange Commission or other regulatory filings.
Audit-Related
Fees
Audit-related
fees are typically services that are reasonably related to the performance of
the audit or review of the consolidated financial statements of the Company and
the statutory financial statements of the Company and its subsidiaries and are
not reported under the audit fee item above. This item includes fees for
attestation services on financial information of the Company and its
subsidiaries included in their annual reports that are filed with their
respective regulators.
Tax
Fees
Tax fees
paid for tax compliance professional services.
All
Other Fees
In 2008,
PricewaterhouseCoopers did not perform any services other than those described
above.
Employees
The
following table shows the number of persons employed by Tenaris:
|
At
December 31,
|
|
|
2008
|
|
|
Argentina
|
6,723
|
|
Mexico
|
3,519
|
|
United
States
|
3,235
|
|
Italy
|
2,972
|
|
Brazil
|
2,275
|
|
Canada
|
1,304
|
|
Romania
|
1,278
|
|
Japan
|
695
|
|
Other
Countries
|
1,872
|
|
Total
employees
|
23,873
|
At
December 31, 2007 and December 31, 2006 the number of persons employed by
Tenaris was 23,372 and 21,751 respectively. The number of our employees remained
relatively flat during 2008.
Approximately
50% of our employees are unionized. We believe that we enjoy good or
satisfactory relations with our employees and their unions in each of the
countries in which we have manufacturing facilities, and we have not experienced
any major strikes or other labor conflicts with a material impact on our
operations over the last five years.
36
Share
Ownership
To our
knowledge, the total number of the Company’s shares (in the form of ordinary
shares or ADSs) beneficially owned by our directors and executive officers as of
March 31, 2009 was 1,990,839, which represents 0.2% of our outstanding
shares.
The
following table provides information regarding share ownership by our directors
and executive officers:
|
Director
or Officer
|
Number
of Shares Held
|
|
Guillermo
Vogel
|
1,915,446
|
|
Carlos
Condorelli
|
67,211
|
|
Ricardo
Soler
|
8,182
|
|
Total
|
1,990,839
|
Major
Shareholders
The
following table shows the beneficial ownership of our ordinary shares, as of
March 31, 2009, by (1) our principal shareholders (persons or entities that own
beneficially 5% or more of the Company’s shares), (2) our directors and
executive officers as a group, and (3) non-affiliated public
shareholders.
|
Identity
of Person or Group
|
Number
|
Percent
|
|
San
Faustin(1)
|
717,440,187
|
60.8%
|
|
Capital
World Investors(2)
|
64,633,440
|
5.5%
|
|
Directors
and executive officers as a
group
|
1,990,839
|
0.2%
|
|
Public
|
396,472,364
|
33.5%
|
|
Total
|
1,180,536,830
|
100.0%
|
|
__________
|
|
(1)
|
Shares
held by III CI, a wholly-owned subsidiary of San Faustin. Rocca &
Partners S.A. controls a significant portion of the voting power of San
Faustin and has the ability to influence matters affecting, or submitted
to a vote of, the shareholders of San
Faustin.
|
|
(2)
|
Capital
World Investors is a division of Capital Research and Management Company
(CRMC). Capital World Investors is deemed to be the beneficial owner of
these shares as a result of CRMC acting as investment adviser to various
investment companies. Accordingly, Capital World Investors does not own
any shares for its own account; rather, they are owned by accounts under
the discretionary management of Capital World Investors. Capital World
Investors’ shares beneficial ownership percentage was notified to the
Company on February 24,
2009.
|
The
voting rights of our major shareholders do not differ from the voting rights of
other shareholders. None of our outstanding shares have any special control
rights. There are no restrictions on voting rights, nor are there, to the
Company’s knowledge, any agreements among shareholders of the Company that might
result in restrictions on the transfer of securities or the exercise of voting
rights.
The
Company does not know of any significant agreements or other arrangements to
which the Company is a party and which take effect, alter or terminate in the
event of a change of control of the Company.
Information
required under the Luxembourg Law on takeovers of May 19, 2006
We have
an authorized share capital of a single class of 2,500,000,000 shares with a par
value of USD 1.00 per share. Our authorized share capital is fixed by our
articles of association as amended from time to time with the approval of our
shareholders in an extraordinary shareholders’ meeting. There were 1,180,536,830
shares issued as of December 31, 2008. All shares are fully paid.
Under our
articles of association, our board of directors is authorized until August 2,
2012, to increase from time to time our issued share capital wholly or in part,
within the limits of the authorized capital.
Tenaris
is controlled by San Faustin, which owns 60.8% of our outstanding shares,
through its wholly owned subsidiary I.I.I. Industrial Investments Inc., a Cayman
Islands corporation. Rocca & Partners S.A., or Rocca & Partners,
controls a significant portion of the voting power of San Faustin and has the
ability to influence matters affecting, or submitted to a vote of the
shareholders of, San Faustin, such as the election of directors, the approval of
certain corporate transactions and other matters concerning the company’s
policies. There are no controlling shareholders for Rocca & Partners. Our
directors and executive officers as a group own 0.2% of our outstanding shares,
while the remaining 39.0% are publicly traded. Our shares trade on the Italian
Stock Exchange, the Buenos Aires Stock Exchange and the Mexican Stock Exchange;
in addition, our American Depositary Securities (ADSs) trade on the New York
Stock Exchange. See “Corporate Governance – Major Shareholders”.
37
None of
our outstanding securities has any special control rights. There are no
restrictions on voting rights, nor are there, to our knowledge, any agreements
among our shareholders that might result in restrictions on the transfer of
securities or the exercise of voting rights.
There are
no significant agreements to which we are a party and which take effect, alter
or terminate in the event of a change in the control of Tenaris following a
takeover bid, thereby materially and adversely affecting us, nor are there any
agreements between us and members of our board of directors or employees that
provide for compensation if they resign or are made redundant without reason, or
if their employment ceases pursuant to a takeover bid.
Management
is vested in a board of directors. Directors are elected at the annual ordinary
shareholders’ meeting to serve one-year renewable terms.
Under our
articles of association, any issuance of new shares pursuant to the
authorization granted to our board of directors, must grant our existing
shareholders a preferential right to subscribe for such newly-issued shares,
except:
|
·
|
in
circumstances in which the shares are issued for consideration other than
money
|
|
·
|
with
respect to shares issued as compensation to directors, officers, agents or
employees, its subsidiaries or affiliates,
and
|
|
·
|
with
respect to shares issued to satisfy conversion or option rights created to
provide compensation to directors, officers, agents or employees, its
subsidiaries or affiliates.
|
Any
shares to be issued as compensation or to satisfy conversion or option rights
may not exceed 1.5% of our issued capital stock.
Our
articles of association do not contain any redemption or sinking fund
provisions, nor do they impose any restrictions on the transfer of our
shares.
Amendment
of our articles of association requires the approval of shareholders on an
extraordinary shareholders’ meeting with a two-thirds majority of the votes
present or represented.
38
Management
Certification
We
confirm, to the best of our knowledge, that:
|
1.
|
the
consolidated financial statements prepared in conformity with
International Financial Reporting Standards, included in this annual
report, give a true and fair view of the assets, liabilities, financial
position and profit or loss of Tenaris S.A. and its consolidated
subsidiaries, taken as a whole;
|
|
2.
|
the
annual accounts prepared in accordance with Luxembourg legal and
regulatory requirements, included in this annual report, give a true and
fair view of the assets, liabilities, financial position and profit or
loss of Tenaris S.A.; and
|
|
3.
|
the
consolidated management report, which has been combined with the
management report for Tenaris S.A., included in this annual report, gives
a fair review of the development and performance of the business and the
position of Tenaris S.A., or Tenaris S.A. and its consolidated
subsidiaries, taken as a whole, as applicable, together with a description
of the principal risks and uncertainties they
face.
|
Chief
Executive Officer
Paolo
Rocca
April 21,
2009
Chief
Financial Officer
Ricardo
Soler
April 21,
2009
39
Financial
Information
Consolidated
Financial Statements
For
the years ended December 31, 2008, 2007 and 2006
40
| Price Waterhouse & Co. S.R.L. | |
| Firma miembro de | |
| PricewaterhouseCoopers | |
| Bouchard 557, piso 7° | |
| C1106ABG – Ciudad de Buenos Aires | |
| Tel.: (54-11) 4850-0000 | |
| Fax.: (54-11) 4850-1800 | |
| www.pwc.com/ar |
Report
of Independent Registered Public Accounting Firm
To the
Board of Directors and Shareholders of
Tenaris
S.A.
In our
opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of cash flows and of changes in equity
present fairly, in all material respects, the financial position of Tenaris S.A.
and its subsidiaries at December 31, 2008 and 2007, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2008 in conformity with International Financial Reporting Standards
as issued by the International Accounting Standards Board and in conformity with
International Financial Reporting Standards as adopted by the European
Union. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our
audits of these statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
Buenos
Aires, Argentina
February
25, 2009
| PRICE WATERHOUSE & CO. S.R.L. | |
| by (Partner) | |
|
Diego
Niebuhr
|
41
Tenaris
S.A. Consolidated Financial Statements for the years ended
December 31, 2008, 2007 and 2006
CONSOLIDATED
INCOME STATEMENTS
|
(all
amounts in thousands of U.S. dollars, unless otherwise
stated)
|
Year
ended December 31,
|
|||
|
Notes
|
2008
|
2007
|
2006
|
|
|
Continuing
operations
|
||||
|
Net
sales
|
1
|
12,131,836
|
10,042,008
|
7,727,745
|
|
Cost
of sales
|
1
& 2
|
(6,799,189)
|
(5,515,767)
|
(3,884,226)
|
|
Gross
profit
|
5,332,647
|
4,526,241
|
3,843,519
|
|
|
Selling,
general and administrative expenses
|
1
& 3
|
(1,819,011)
|
(1,573,949)
|
(1,054,806)
|
|
Other
operating income
|
5
(i)
|
35,892
|
28,704
|
13,077
|
|
Other
operating expenses
|
5
(ii)
|
(521,664)
|
(23,771)
|
(9,304)
|
|
Operating
income
|
3,027,864
|
2,957,225
|
2,792,486
|
|
|
Interest
income
|
6
|
48,873
|
93,392
|
60,798
|
|
Interest
expense
|
6
|
(185,836)
|
(275,648)
|
(92,576)
|
|
Other
financial results
|
6
|
(104,272)
|
(22,754)
|
26,826
|
|
Income
before equity in earnings of associated companies and income
tax
|
2,786,629
|
2,752,215
|
2,787,534
|
|
|
Equity
in earnings of associated companies
|
7
|
89,556
|
113,276
|
94,667
|
|
Income
before income tax
|
2,876,185
|
2,865,491
|
2,882,201
|
|
|
Income
tax
|
8
|
(1,011,675)
|
(823,924)
|
(869,977)
|
|
Income
for continuing operations
|
1,864,510
|
2,041,567
|
2,012,224
|
|
|
Discontinued
operations
|
||||
|
Income
for discontinued operations
|
29
|
411,110
|
34,492
|
47,180
|
|
Income
for the year
|
2,275,620
|
2,076,059
|
2,059,404
|
|
|
Attributable
to:
|
||||
|
Equity
holders of the Company
|
2,124,802
|
1,923,748
|
1,945,314
|
|
|
Minority
interest
|
150,818
|
152,311
|
114,090
|
|
|
2,275,620
|
2,076,059
|
2,059,404
|
||
|
Earnings
per share attributable to the equity holders of the Company during
year
|
||||
|
Weighted
average number of ordinary shares (thousands)
|
9
|
1,180,537
|
1,180,537
|
1,180,537
|
|
Earnings
per share (U.S. dollars per share)
|
9
|
1.80
|
1.63
|
1.65
|
|
Earnings
per ADS (U.S. dollars per ADS)
|
9
|
3.60
|
3.26
|
3.30
|
The
accompanying notes are an integral part of these consolidated financial
statements.
42
CONSOLIDATED
BALANCE SHEETS
|
(all
amounts in thousands of U.S. dollars)
|
At
December 31, 2008
|
At
December 31, 2007
|
||||
|
Notes
|
||||||
|
ASSETS
|
||||||
|
Non-current
assets
|
||||||
|
Property,
plant and equipment, net
|
10
|
2,982,871
|
3,269,007
|
|||
|
Intangible
assets, net
|
11
|
3,826,987
|
4,542,352
|
|||
|
Investments
in associated companies
|
12
|
527,007
|
509,354
|
|||
|
Other
investments
|
13
|
38,355
|
35,503
|
|||
|
Deferred
tax assets
|
21
|
390,323
|
310,590
|
|||
|
Receivables
|
14
|
82,752
|
7,848,295
|
63,738
|
8,730,544
|
|
|
Current
assets
|
||||||
|
Inventories
|
15
|
3,091,401
|
2,598,856
|
|||
|
Receivables
and prepayments
|
16
|
251,481
|
222,410
|
|||
|
Current
tax assets
|
17
|
201,607
|
242,757
|
|||
|
Trade
receivables
|
18
|
2,123,296
|
1,748,833
|
|||
|
Other
investments
|
19
|
45,863
|
87,530
|
|||
|
Cash
and cash equivalents
|
19
|
1,538,769
|
7,252,417
|
962,497
|
5,862,883
|
|
|
Current
and non current assets held for sale
|
29
|
-
|
651,160
|
|||
|
7,252,417
|
6,514,043
|
|||||
|
Total
assets
|
15,100,712
|
15,244,587
|
||||
|
EQUITY
|
||||||
|
Capital
and reserves attributable to the Company’s equity holders
|
8,176,571
|
7,006,277
|
||||
|
Minority
interest
|
525,316
|
523,573
|
||||
|
Total
equity
|
8,701,887
|
7,529,850
|
||||
|
LIABILITIES
|
||||||
|
Non-current
liabilities
|
||||||
|
Borrowings
|
20
|
1,241,048
|
2,869,466
|
|||
|
Deferred tax
liabilities
|
21
|
1,053,838
|
1,233,836
|
|||
|
Other
liabilities
|
22
(i)
|
223,142
|
185,410
|
|||
|
Provisions
|
23
(ii)
|
89,526
|
97,912
|
|||
|
Trade
payables
|
1,254
|
2,608,808
|
47
|
4,386,671
|
||
|
Current
liabilities
|
||||||
|
Borrowings
|
20
|
1,735,967
|
1,150,779
|
|||
|
Current
tax liabilities
|
610,313
|
341,028
|
||||
|
Other
liabilities
|
22
(ii)
|
242,620
|
252,204
|
|||
|
Provisions
|
24
(ii)
|
28,511
|
19,342
|
|||
|
Customer
advances
|
275,815
|
449,829
|
||||
|
Trade
payables
|
896,791
|
3,790,017
|
847,842
|
3,061,024
|
||
|
Liabilities
associated with current and non-current assets held for
sale
|
29
|
-
|
267,042
|
|||
|
3,790,017
|
3,328,066
|
|||||
|
Total
liabilities
|
6,398,825
|
7,714,737
|
||||
|
Total
equity and liabilities
|
15,100,712
|
15,244,587
|
||||
|
Contingencies,
commitments and restrictions to the distribution of profits are disclosed
in Note 26.
|
||||||
The
accompanying notes are an integral part of these consolidated financial
statements.
43
CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY
(all
amounts in thousands of U.S. dollars)
|
Attributable
to equity holders of the Company
|
||||||||||||||||||||||||||||||||
|
Share
Capital
|
Legal
Reserves
|
Share
Premium
|
Currency
Translation Adjustment
|
Other
Reserves
|
Retained
Earnings (*)
|
Minority
Interest
|
Total
|
|||||||||||||||||||||||||
|
Balance
at January 1, 2008
|
1,180,537 | 118,054 | 609,733 | 266,049 | 18,203 | 4,813,701 | 523,573 | 7,529,850 | ||||||||||||||||||||||||
|
Currency
translation differences
|
- | - | - | (489,828 | ) | - | - | (47,812 | ) | (537,640 | ) | |||||||||||||||||||||
|
Change
in equity reserves (see Section III D)
|
- | - | - | - | (14,334 | ) | - | 2,780 | (11,554 | ) | ||||||||||||||||||||||
|
Acquisition
and decrease of minority interest
|
- | - | - | - | (1,742 | ) | - | (16,843 | ) | (18,585 | ) | |||||||||||||||||||||
|
Dividends
paid in cash
|
- | - | - | - | - | (448,604 | ) | (87,200 | ) | (535,804 | ) | |||||||||||||||||||||
|
Income
for the year
|
- | - | - | - | - | 2,124,802 | 150,818 | 2,275,620 | ||||||||||||||||||||||||
|
Balance
at December 31, 2008
|
1,180,537 | 118,054 | 609,733 | (223,779 | ) | 2,127 | 6,489,899 | 525,316 | 8,701,887 | |||||||||||||||||||||||
(*) The
Distributable Reserve and Retained Earnings calculated according to Luxembourg
Law are disclosed in Note 26.
The
accompanying notes are an integral part of these consolidated financial
statements.
44
CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY (Cont.)
(all
amounts in thousands of U.S. dollars)
|
Attributable
to equity holders of the Company
|
||||||||||||||||||||||||||||||||
|
Share
Capital
|
Legal
Reserves
|
Share
Premium
|
Currency
Translation Adjustment
|
Other
Reserves
|
Retained
Earnings
|
Minority
Interest
|
Total
|
|||||||||||||||||||||||||
|
Balance
at January 1, 2007
|
1,180,537 | 118,054 | 609,733 | 3,954 | 28,757 | 3,397,584 | 363,011 | 5,701,630 | ||||||||||||||||||||||||
|
Currency
translation differences
|
- | - | - | 262,095 | - | - | 47,766 | 309,861 | ||||||||||||||||||||||||
|
Change
in equity reserves (see Section III D)
|
- | - | - | - | (10,554 | ) | - | - | (10,554 | ) | ||||||||||||||||||||||
|
Acquisition
and decrease of minority interest
|
- | - | - | - | - | - | 20,748 | 20,748 | ||||||||||||||||||||||||
|
Dividends
paid in cash
|
- | - | - | - | - | (507,631 | ) | (60,263 | ) | (567,894 | ) | |||||||||||||||||||||
|
Income
for the year
|
- | - | - | - | - | 1,923,748 | 152,311 | 2,076,059 | ||||||||||||||||||||||||
|
Balance
at December 31, 2007
|
1,180,537 | 118,054 | 609,733 | 266,049 | 18,203 | 4,813,701 | 523,573 | 7,529,850 | ||||||||||||||||||||||||
|
Attributable
to equity holders of the Company
|
||||||||||||||||||||||||||||||||
|
Share
Capital
|
Legal
Reserves
|
Share
Premium
|
Currency
Translation Adjustment
|
Other
Reserves
|
Retained
Earnings
|
Minority
Interest
|
Total
|
|||||||||||||||||||||||||
|
Balance
at January 1, 2006
|
1,180,537 | 118,054 | 609,733 | (59,743 | ) | 2,718 | 1,656,503 | 268,071 | 3,775,873 | |||||||||||||||||||||||
|
Currency
translation differences
|
- | - | - | 63,697 | - | - | 15,225 | 78,922 | ||||||||||||||||||||||||
|
Change
in equity reserves (see Section III D and Note 27 (d))
|
- | - | - | - | 26,039 | - | - | 26,039 | ||||||||||||||||||||||||
|
Acquisition
of minority interest
|
- | - | - | - | - | - | (11,181 | ) | (11,181 | ) | ||||||||||||||||||||||
|
Dividends
paid in cash
|
- | - | - | - | - | (204,233 | ) | (23,194 | ) | (227,427 | ) | |||||||||||||||||||||
|
Income
for the year
|
- | - | - | - | - | 1,945,314 | 114,090 | 2,059,404 | ||||||||||||||||||||||||
|
Balance
at December 31, 2006
|
1,180,537 | 118,054 | 609,733 | 3,954 | 28,757 | 3,397,584 | 363,011 | 5,701,630 | ||||||||||||||||||||||||
The
accompanying notes are an integral part of these consolidated financial
statements
45
CONSOLIDATED
CASH FLOW STATEMENTS
|
Year
ended December 31,
|
||||
|
(all
amounts in thousands of U.S. dollars)
|
Note
|
2008
|
2007
|
2006
|
|
Cash
flows from operating activities
|
||||
|
Income
for the year
|
2,275,620
|
2,076,059
|
2,059,404
|
|
|
Adjustments
for:
|
||||
|
Depreciation
and amortization
|
10
& 11
|
532,934
|
514,820
|
255,004
|
|
Income
tax accruals less payments
|
28
(ii)
|
(225,038)
|
(393,055)
|
56,836
|
|
Equity
in earnings of associated companies
|
(89,556)
|
(94,888)
|
(94,667)
|
|
|
Interest
accruals less payments, net
|
28
(iii)
|
55,492
|
(21,302)
|
21,909
|
|
Income
from disposal of investment and other
|
(394,323)
|
(18,388)
|
(46,481)
|
|
|
Changes
in provisions
|
783
|
(421)
|
8,894
|
|
|
Impairment
charge
|
5
|
502,899
|
-
|
-
|
|
Changes
in working capital
|
28
(i)
|
(1,051,632)
|
(110,425)
|
(469,517)
|
|
Other,
including currency translation adjustment
|
(142,174)
|
68,224
|
19,474
|
|
|
Net
cash provided by operating activities
|
1,465,005
|
2,020,624
|
1,810,856
|
|
|
Cash
flows from investing activities
|
||||
|
Capital
expenditures
|
10
& 11
|
(443,238)
|
(447,917)
|
(441,472)
|
|
Acquisitions
of subsidiaries and minority interest
|
27
|
(18,585)
|
(1,927,262)
|
(2,387,249)
|
|
Other
disbursements relating to the acquisition of Hydril
|
-
|
(71,580)
|
-
|
|
|
Proceeds
from the sale of pressure control business (*)
|
29
|
1,113,805
|
-
|
-
|
|
Decrease
in subsidiaries / associated
|
-
|
27,321
|
52,995
|
|
|
Proceeds
from disposal of property, plant and equipment and intangible
assets
|
17,161
|
24,041
|
15,347
|
|
|
Dividends
and distributions received from associated companies
|
12
|
15,032
|
12,170
|
-
|
|
Changes
in restricted bank deposits
|
-
|
21
|
2,027
|
|
|
Investments
in short terms securities
|
41,667
|
96,074
|
(63,697)
|
|
|
Other
|
(3,428)
|
-
|
-
|
|
|
Net
cash provided by (used in) investing activities
|
722,414
|
(2,287,132)
|
(2,822,049)
|
|
|
Cash
flows from financing activities
|
||||
|
Dividends
paid
|
(448,604)
|
(507,631)
|
(204,233)
|
|
|
Dividends
paid to minority interest in subsidiaries
|
(87,200)
|
(60,263)
|
(23,194)
|
|
|
Proceeds
from borrowings
|
1,087,649
|
2,718,264
|
3,033,230
|
|
|
Repayments
of borrowings
|
(2,122,268)
|
(2,347,054)
|
(1,105,098)
|
|
|
Net
cash (used in) provided by financing activities
|
(1,570,423)
|
(196,684)
|
1,700,705
|
|
|
Increase
(decrease) in cash and cash equivalents
|
616,996
|
(463,192)
|
689,512
|
|
|
Movement
in cash and cash equivalents
|
||||
|
At
the beginning of the period
|
954,303
|
1,365,008
|
680,591
|
|
|
Effect
of exchange rate changes
|
(46,277)
|
52,487
|
(5,095)
|
|
|
Increase
(decrease) in cash and cash equivalents
|
616,996
|
(463,192)
|
689,512
|
|
|
At
December 31,
|
28
(iv)
|
1,525,022
|
954,303
|
1,365,008
|
|
Non-cash
financing activity
|
||||
|
Conversion
of debt to equity in subsidiaries
|
-
|
35,140
|
-
|
(*)
Includes $394 million of after-tax gain, $381 million of assets and liabilities
held for sale and $339 million of income tax charges and related
expenses.
The
accompanying notes are an integral part of these consolidated financial
statements.
46
INDEX
TO THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
I.
|
GENERAL
INFORMATION
|
IV.
|
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
1
|
Segment
information
|
||
|
II.
|
ACCOUNTING
POLICIES (“AP”)
|
2
|
Cost
of sales
|
|
A
|
Basis
of presentation
|
3
|
Selling,
general and administrative expenses
|
|
B
|
Group
accounting
|
4
|
Labor
costs (included in Cost of sales and in Selling, general and
administrative expenses)
|
|
C
|
Segment
information
|
5
|
Other
operating items
|
|
D
|
Foreign
currency translation
|
6
|
Financial
results
|
|
E
|
Property,
plant and equipment
|
7
|
Equity
in earnings of associated companies
|
|
F
|
Intangible
assets
|
8
|
Income
tax
|
|
G
|
Impairment
of non financial assets
|
9
|
Earnings
and dividends per share
|
|
H
|
Other
investments
|
10
|
Property,
plant and equipment, net
|
|
I
|
Inventories
|
11
|
Intangible
assets, net
|
|
J
|
Trade
receivables
|
12
|
Investments
in associated companies
|
|
K
|
Cash
and cash equivalents
|
13
|
Other
investments - non current
|
|
L
|
Shareholders’
Equity
|
14
|
Receivables
- non current
|
|
M
|
Borrowings
|
15
|
Inventories
|
|
N
|
Current
and Deferred Income Tax
|
16
|
Receivables
and prepayments
|
|
O
|
Employee
benefits
|
17
|
Current
tax assets
|
|
P
|
Employees’
statutory profit sharing
|
18
|
Trade
receivables
|
|
Q
|
Provisions
and other liabilities
|
19
|
Cash
and cash equivalents, and Other investments
|
|
R
|
Trade
payables
|
20
|
Borrowings
|
|
S
|
Revenue
recognition
|
21
|
Deferred
income tax
|
|
T
|
Cost
of sales and sales expenses
|
22
|
Other
liabilities
|
|
U
|
Earnings
per share
|
23
|
Non-current
allowances and provisions
|
|
V
|
Financial
instruments
|
24
|
Current
allowances and provisions
|
|
25
|
Derivative
financial instruments
|
||
|
26
|
Contingencies,
commitments and restrictions on the distribution of
profits
|
||
|
27
|
Business
combinations and other acquisitions
|
||
|
III.
|
FINANCIAL
RISK MANAGEMENT
|
28
|
Cash
flow disclosures
|
|
29
|
Current
and non current assets held for sale and discontinued
operations
|
||
|
A
|
Financial
Risk Factors
|
30
|
Related
party transactions
|
|
B
|
Financial
instruments by category
|
31
|
Principal
subsidiaries
|
|
C
|
Fair
value estimation
|
32
|
Investment
in Ternium: Sidor nationalization process
|
|
D
|
Accounting
for derivatives financial instruments and hedging
activities
|
33
|
Subsequent
events
|
47
I.
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
financial statements to “Tenaris” refer to Tenaris S.A. and its consolidated
subsidiaries.
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 Financial Statements were approved for issue by the Company’s Board
of Directors on February 25,
2009.
II.
ACCOUNTING POLICIES
A Basis
of presentation
The
Consolidated Financial Statements of Tenaris and its subsidiaries have been
prepared in accordance with International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting Standards Board (“IASB”) and
adopted by the European Union, under the historical cost convention, as modified
by the revaluation of financial assets and liabilities (including derivative
instruments) at fair value through profit or loss. The Consolidated
Financial Statements are presented in thousands of U.S. dollars
(“$”).
Certain
comparative amounts have been reclassified to conform to changes in presentation
in the current year.
The
preparation of consolidated 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 at the balance sheet dates, and the
reported amounts of revenues and expenses during the reporting years. Actual
results may differ from these estimates.
|
(1)
|
Standards
early adopted by Tenaris
|
Tenaris
early adopted IFRS 8 “Operating Segments” as from January 1, 2006, which
replaces IAS 14 and requires an entity to report financial and descriptive
information about its reportable segments (as aggregations of operating
segments). Financial information is required to be reported on the same basis as
is used internally for evaluating operating segment performance and deciding how
to allocate resources to operating segments also giving certain descriptive
information. See Section II C.
|
(2)
|
Interpretations
and amendments to published standards that are not yet effective and have
not been early adopted
|
|
§
|
IAS
1 Revised, Presentation of Financial
Statements
|
IAS 1
(effective from January 1, 2009) has been revised to enhance the usefulness of
information presented in the financial statements. The principal changes, among
others, are: the introduction of a new statement of comprehensive income;
additional disclosures about income tax, relating to each component of other
comprehensive income; the introduction of new terminology, although not
obligatory. Tenaris will apply IAS 1 Revised for annual periods beginning on
January 1, 2009.
|
§
|
IAS
23 Revised, Borrowing Costs
|
IAS 23
(effective from January 1, 2009) eliminates the option of expensing all
borrowing costs and requires borrowing costs to be capitalized if they are
directly attributable to the acquisition, construction or production of a
qualifying asset. These amendments apply to borrowing costs incurred on
qualifying assets for which the commencement date for capitalization is on or
after January 1, 2009. Tenaris will apply IAS 23 Revised for annual periods
beginning on January 1, 2009.
The
Company’s management estimates that the application of IAS 23 revised will not
have a material effect on the Company’s financial condition or results of
operations.
48
A Basis
of presentation (Cont.)
|
(2)
|
Interpretations
and amendments to published standards that are not yet effective and have
not been early adopted (Cont.)
|
|
§
|
IAS
27 (amended 2008), “Consolidated and separate financial
statements”
|
In
January 2008, the IASB issued International Accounting Standard 27 (amended
2008), “Consolidated and separate financial statements” (“IAS 27 - amended”).
IAS 27 - amended includes modifications that are related, primarily, to
accounting for non-controlling interests and the loss of control of a
subsidiary.
IAS 27 -
amended must be applied for annual periods beginning on or after July 1, 2009,
although earlier application is permitted. However, an entity must not apply the
amendments contained in IAS 27 - amended for annual periods beginning before
July 1, 2009 unless it also applies IFRS 3 (as revised in 2008).
The
Company's management has not assessed the potential impact that the application
of IAS 27 - amended may have on the Company's financial condition or results of
operations.
|
§
|
IFRS
3 (revised January 2008), “Business
Combinations”
|
In
January 2008, the IASB issued International Financial Reporting Standard 3
(revised January 2008), “Business Combinations” (“IFRS 3 - revised”). IFRS 3
revised includes amendments that are meant to provide guidance for applying the
acquisition method.
IFRS 3
revised replaces IFRS 3 (as issued in 2004) and comes into effect for business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after July 1, 2009.
Earlier application is permitted, provided that IAS 27 – amended is applied at
the same time.
This
standard does not impact the current financial statements, and future impact is
dependent on the existence of business combinations.
|
§
|
Amendment
to IFRS 5 “Non-current Assets held for sale and Discontinued
Operations”
|
In May
2008, the IASB amended International Financial Reporting Standard 5 “Non-current
Assets held for sale and Discontinued Operations” by requiring this
classification although the entity retains a non-controlling
interest.
Entities
shall apply these amendments for annual periods beginning on or after July 1,
2009. Earlier application is permitted, provided that IAS 27 – amended is
applied at the same time.
This
standard does not impact the current financial statements, and future impact is
dependent on the existence of discontinued operations.
|
§
|
Improvements
to International Financial Reporting
Standards
|
In May
2008, the IASB issued “Improvements to International Financial Reporting
Standards” by which it amended several international accounting and financial
reporting standards. Entities shall apply these amendments for annual periods
beginning on or after July 1, 2009. If entities apply these amendments for an
earlier period, they shall disclose that fact.
The
Company’s management estimates that the application of these amendments will not
have a material effect on the Company’s financial condition or results of
operations.
49
A Basis
of presentation (Cont.)
(2) Interpretations
and amendments to published standards that are not yet effective and have not
been early adopted (Cont.)
|
§
|
IFRIC
Interpretation 17 – “Distribution of Non Cash Assets to
Owners”
|
In
November 2008, the IFRIC issued IFRIC Interpretation 17 “Distribution of Non
Cash Assets to Owners” (“IFRIC 17”). IFRIC 17 applies to an entity that
distributes non-cash items and gives owners the choice of receiving either
non-cash assets or a cash alternative.
An entity
shall apply this Interpretation for annual periods beginning on or after July 1,
2009. Earlier application is permitted. If an entity applies this interpretation
for a period beginning before July 1, 2009, it shall disclose that
fact.
The
Company’s management estimates that the application of IFRIC 17 will not have a
material effect on the Company’s financial condition or results of
operations.
Management
assessed the relevance of other new standards, amendments or interpretations not
yet effective and concluded that they are not relevant to Tenaris.
B Group
accounting
(1) Subsidiaries
Subsidiaries
are entities which are controlled by Tenaris as a result of its ability to
govern an entity’s financial and operating policies generally accompanying a
shareholding of more than 50% of the voting rights. Subsidiaries are
consolidated from the date on which control is exercised by the Company and are
no longer consolidated from the date control ceases.
The
purchase method of accounting is used to account for the acquisition of
subsidiaries by Tenaris. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of acquisition, plus costs directly attributable to the
acquisition. Identifiable assets acquired, liabilities and contingent
liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date. The excess of the cost of acquisition over
the fair value of Tenaris share of the identifiable net assets acquired is
recorded as goodwill. If the cost of acquisition is less than the fair value of
the net assets of the subsidiary acquired, the difference is recognized directly
in the income statement.
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 Income
Statement under Other
financial results.
See Note
31 for the list of the principal subsidiaries.
(2) Associates
Associates
are entities in which Tenaris has significant influence but not control,
generally accompanying a shareholding of between 20% and 50% of the voting
rights. Investments in associates are accounted for by the equity method of
accounting and initially recognized at cost.
Unrealized
results on transactions between Tenaris and its associated companies are
eliminated to the extent of Tenaris’ interest in the associated companies.
Unrealized losses are also eliminated unless the transaction provides evidence
of an impairment indicator of the asset transferred. Financial statements of
associated companies have been adjusted where necessary to ensure consistency
with IFRS.
The
Company’s pro-rata share of earnings in associates is recorded in Equity in earnings of associated
companies. The Company’s pro-rata share of changes in other reserves is
recognized in reserves in the Statement of Changes in Equity.
50
B Group
accounting (Cont.)
(2) Associates
(Cont.)
The
Company’s investment in Ternium S.A. (“Ternium”) has been accounted for by the
equity method, as Tenaris has significant influence as defined by IAS 28, Investments in Associates.
At December 31, 2008, Tenaris holds 11.46% of Ternium’s common stock. The
Company’s investment in Ternium is carried at incorporation cost plus
proportional ownership of Ternium’s earnings and other shareholders’ equity
accounts. Because the exchange of its holdings in Amazonia and Ylopa for shares
in Ternium was considered to be a transaction between companies under common
control of San Faustin N.V., Tenaris recorded its initial ownership interest in
Ternium at $229.7 million, the carrying value of the investments exchanged. This
value was $22.6 million less than Tenaris’ proportional ownership of Ternium’s
shareholders’ equity at the transaction date. As a result of this treatment,
Tenaris’ investment in Ternium will not reflect its proportional ownership of
Ternium’s net equity position. Ternium carried out an initial public offering
(“IPO”) of its shares on February 1, 2006, listing its ADS on the New York Stock
Exchange.
Tenaris review investments in
associated companies for impairment whenever events or changes in circumstances
indicate that the asset’s balance sheet carrying amount may not be recoverable,
such as a significant or prolonged decline in fair value below the carrying
value. Tenaris carries its investment in Ternium at its proportional equity
value, with no additional goodwill or intangible assets recognized. Ternium did
not record any impairment provisions in its financial statements. At December
31, 2008, 2007 and 2006, no impairment provisions were recorded on Tenaris’
investment in Ternium.
C Segment
information
The
Company is organized in three major business segments: Tubes, Projects and
Other.
The Tubes
segment includes the operations that consist of the production and selling of
both seamless and welded steel tubular products and related services mainly for
energy and industrial applications.
The
Projects segment includes the operations that consist of the production and
selling of welded steel pipe products mainly used in the construction of major
pipeline projects.
The Other
segment includes the operations that consist of the production and selling of
sucker rods, welded steel pipes for electric conduits, industrial equipment and
raw materials, such as hot briquetted iron, or HBI, that exceed Tenaris’s
internal requirements.
In May
2007, Tenaris acquired Hydril Company (“Hydril”), a company engaged in
engineering, manufacturing and selling of premium connections and pressure
control products for oil and gas drilling production. Hydril’s premium
connections business was allocated to the Tubes segment. On April 1, 2008,
Tenaris sold to General Electric Company (GE) the pressure control business
acquired as part of the Hydril transaction; in accordance with IFRS 5, the
pressure control business has been disclosed as current and non current assets
and liabilities held for sale at December 31, 2007 and discontinued operations
at December 31, 2008 and 2007.
Corporate
general and administrative expenses have been allocated to the Tubes
segment.
Tenaris
groups its geographical information in five areas: North America, South America,
Europe, Middle East and Africa, and Far East and Oceania. For purposes of
reporting geographical information, net sales are allocated to geographical
areas based on the customer’s location; allocation of assets and capital
expenditures and associated depreciation and amortization are based on the
geographic location of the assets.
51
D Foreign
currency translation
(1) Functional
and presentation currency
IAS 21
(revised) defines the functional currency as the currency of the primary
economic environment in which an entity operates.
The
functional and presentation currency of the Company is the U.S. dollar. The U.S.
dollar is the currency that best reflects the economic substance of the
underlying events and circumstances relevant to Tenaris’ global
operations.
Generally,
the functional currency of the Company’s subsidiaries is the respective local
currency. Tenaris argentine operations, however, which consist of Siderca
S.A.I.C. (“Siderca”) and its Argentine subsidiaries, have determined their
functional currency to be the U.S. dollar, based on the following
considerations:
|
·
|
Sales
are mainly negotiated, denominated and settled in U.S. dollars. If priced
in a currency other than the U.S. dollar, the price considers exposure to
fluctuation in the exchange rate versus the U.S.
dollar;
|
|
·
|
Prices
of critical raw materials and inputs are priced and settled in U.S.
dollars;
|
|
·
|
The
exchange rate of the currency of Argentina has long-been affected by
recurring and severe economic crises;
and
|
|
·
|
Net
financial assets and liabilities are mainly received and maintained in
U.S. dollars.
|
In
addition to Siderca, the Colombian subsidiaries and most of the Company’s
distributing subsidiaries and intermediate holding subsidiaries have the U.S.
dollar as their functional currency, reflecting the transaction environment and
cash flow of these operations.
(2) Translation
of financial information in currencies other than the functional
currency
Results
of operations for subsidiaries whose functional currencies are not the U.S.
dollar are translated into U.S. dollars at the average exchange rates for each
quarter of the year. Balance sheet positions are translated at the end-of-year
exchange rates. Translation differences are recognized in equity as currency
translation adjustments. In the case of a sale or other disposal of any such
subsidiary, any accumulated translation difference would be recognized in income
as a gain or loss from the sale.
(3) Transactions
in currencies other than the functional currency
Transactions
in currencies other than the functional currency are accounted for at the
exchange rates prevailing at the date of the transactions. Gains and losses
resulting from the settlement of such transactions, including inter-company
transactions, and from the translation of monetary assets and liabilities
denominated in currencies other than the functional currency, are recorded as
gains and losses from foreign exchange and included in Other Financial
results in the income statement.
E Property,
plant and equipment
Property,
plant and equipment are recognized at historical acquisition or construction
cost less accumulated depreciation and impairment losses; historical cost
includes expenditure that is directly attributable to the acquisition of the
items. Property, plant and equipment acquired through acquisitions accounted for
as business combinations have been valued initially at the fair market value of
the assets acquired.
Major
overhaul and rebuilding expenditures are capitalized as property, plant and
equipment only when the investment enhances the condition of assets beyond its
original condition. The carrying amount of the replaced part is
derecognized.
Ordinary
maintenance expenses on manufacturing properties are recorded as cost of
products sold in the year in which they are incurred.
52
E Property,
plant and equipment (Cont.)
Borrowing
costs that are attributable to the acquisition or construction of certain
capital assets are capitalized as part of the cost of the asset, in accordance
with IAS
23 (“Borrowing Costs”). Capital assets for which borrowing
costs are capitalized are those that require a substantial period of time to
prepare for their intended use.
Land is
not depreciated. Depreciation on other assets is calculated using the
straight-line method to depreciate the cost of each asset to its residual value
over its estimated useful life, as follows:
|
Buildings
and improvements
|
30-50
years
|
|
|
Plant
and production equipment
|
10-20
years
|
|
|
Vehicles,
furniture and fixtures, and other equipment
|
4-10
years
|
The
residual values and useful lives of significant plant and equipment are
reviewed, and adjusted if appropriate, at each year-end date.
Management’s
re-estimation of assets useful lives, performed in accordance with IAS 16
(“Property plant and equipment”), did not materially affect depreciation
expenses for 2008.
Tenaris
depreciates each significant part of an item of property, plant and equipment
for its different production facilities that (i) can be properly identified as
an independent component with a cost that is significant in relation to the
total cost of the item, and (ii) has a useful operating life that is different
from another significant part of that same item of property, plant and
equipment.
Gains and
losses on disposals are determined by comparing net proceeds with the carrying
amount of assets. These are included in Other
operating income or Other
operating expenses in the Income
Statement.
F Intangible
assets
(1) Goodwill
Goodwill
represents the excess of the acquisition cost over the fair value of Tenaris’
share of net identifiable assets acquired as part of business combinations
determined mainly by independent valuations. Goodwill is tested annually for
impairment and carried at cost less accumulated impairment losses. In the event
of impairment, reversals are not allowed. Goodwill is included in Intangible
assets, net on the Balance Sheet.
Goodwill
is allocated to cash-generating units (“CGU’s”) for the purpose of impairment
testing, which represents a subsidiary or group of subsidiaries that are
expected to benefit from the business combination which generated the goodwill
being tested.
(2) Information
systems projects
Costs
associated with developing or maintaining computer software programs are
generally recognized as an expense as incurred. However, costs directly related
to the development, acquisition and implementation of information systems are
recognized as intangible assets if it is probable they have economic benefits
exceeding one year.
Information
systems projects recognized as assets are amortized using the straight-line
method over their useful lives, not exceeding a period of 3 years. Amortization
charges are classified as Selling,
general and administrative expenses in the Income Statement.
53
F Intangible
assets (Cont.)
|
(3)
|
Licenses,
patents, trademarks and proprietary
technology
|
Licenses,
patents, trademarks, and proprietary technology acquired in a business
combination are initially recognized at fair value at the acquisition date, and
subsequently shown at historical cost.
Expenditures
on acquired patents, trademarks, technology transfer and licenses are
capitalized and amortized using the straight-line method over their estimated
useful lives, not exceeding a period of 10 years.
Trademarks
acquired through acquisitions amounting to $85.3 million and $149.1
million at December 31, 2008 and 2007 respectively, out of which $57.1 million
were disclosed within current and non current assets held for sale at December
31, 2007, have indefinite useful lives according to external appraisal. Main
factors considered in the determination of the indefinite useful lives, include
the years that they have been in service and their recognition among customers
in the industry.
|
(4)
|
Research
and development
|
Research
expenditures as well as development costs that do not fulfill the criteria for
capitalization are recorded as Cost of sales in the income
statement as incurred. Research and development expenditures included in Cost of sales for the years
2008, 2007 and 2006 totaled $77.3 million $61.7 million and $46.9 million,
respectively.
|
(5)
|
Customer
relationships acquired in a business
combination
|
In
accordance with IFRS 3 and IAS 38, Tenaris has recognized the value of customer
relationships separately from goodwill attributable to the acquisition of
Maverick and Hydril.
Customer
relationships acquired in a business combination are recognized at fair value at
the acquisition date. Customer relationships acquired in a business combination
have a finite useful life and are carried at cost less accumulated amortization.
Amortization is calculated using the straight line method over the expected life
of approximately 14 years for Maverick and 10 years for Hydril.
G Impairment
of non financial assets
Long-lived
assets including identifiable intangible assets and goodwill are regularly
reviewed for impairment.
Long-lived
assets are tested for impairment whenever events or changes in circumstances
indicate that the balance sheet carrying amount of an asset may not be
recoverable. Intangible assets with indefinite useful life, including goodwill
are subject to at least an annual impairment test.
The
recoverable amount is the higher of the value in use and the fair value less
cost to sell. When evaluating long-lived assets for potential impairment, the
Company estimates the recoverable amount based on the ‘value in use’ of the
corresponding CGU. The value in use of these units is determined on the basis of
the present value of net future cash flows which will be generated by the assets
tested. Cash flows are discounted at a pre-tax rate that reflect specific
country and currency risks. See Note 11.
In
certain circumstances, the ‘fair value less cost to sale’ is estimated if value
in use is lower than the carrying value. For the purpose of calculating the fair
value less cost to sale, the Company uses mainly the estimated future cash flows
a market participant could generate from the CGU, discounted at a post-tax
rate.
Management
judgment is required to estimate discounted future cash flows and appropriate
discounts rates. Accordingly, actual cash flows and values could vary
significantly from the forecasted future cash flows and related values derived
using discounting techniques.
54
H Other investments
Other
investments consist primarily of investments in financial debt
instruments.
Tenaris
investments are classified as financial assets “at fair value through profit or
loss”.
Purchases
and sales of financial investments are recognized as of the settlement date. The
change in fair value of financial investments designated as held at fair value
through profit or loss is charged to Financial results in the
income statement.
Results
from financial investments are recognized in Financial results in the
income statement.
The fair
values of quoted investments are based on current bid prices (see Section III
Financial Risk Management). If the market for a financial investment is not
active or the securities are not listed, Tenaris estimates the fair value by
using standard valuation techniques.
I Inventories
Inventories
are stated at the lower of cost (calculated principally on the
first-in-first-out “FIFO” method) and net realizable value. The cost of finished
goods and goods in process is comprised of raw materials, direct labor, other
direct costs and related production overhead costs. Tenaris estimates net
realizable value of inventories by grouping, where applicable, similar or
related items. Net realizable value is the estimated selling price in the
ordinary course of business, less any estimated costs of completion and selling
expenses. Goods in transit at year end are valued based on supplier’s invoice
cost.
Tenaris
establishes an allowance for obsolete or slow-moving inventory related to
finished goods, supplies and spare parts. For slow moving or obsolete finished
products, an allowance is established based on management’s analysis of product
aging. An allowance for slow-moving inventory of supplies and spare
parts is established based on management's analysis of such items to be used as
intended and the consideration of potential obsolescence due to technological
changes.
J Trade
receivables
Trade
receivables are recognized initially at fair value, generally the original
invoice amount. Tenaris analyzes its trade accounts receivable on a regular
basis and, when aware of a specific client’s difficulty or inability to meet its
obligations to Tenaris, impairs any amounts due by means of a charge to an
allowance for doubtful accounts receivable. Additionally, this allowance is
adjusted periodically based on the aging of receivables.
K Cash
and cash equivalents
Cash and
cash equivalents are comprised of cash in banks, short-term money market funds
and highly liquid short-term securities with a maturity of less than 90 days at
the date of purchase. Assets recorded in cash and cash equivalents are carried
at fair market value.
For the
purposes of the cash flow statement, cash and cash equivalents is comprised of
cash, bank accounts and short-term highly liquid investments and
overdrafts.
On the
Balance Sheet, bank overdrafts are included in borrowings in current
liabilities.
L Shareholders’
Equity
(1) Shareholders’
components
The
consolidated statement of changes in equity includes:
|
·
|
The
value of share capital, legal reserve, share premium and other
distributable reserve calculated in accordance with Luxembourg
Law;
|
|
·
|
The
currency translation adjustment, other reserves, retained earnings and
minority interest calculated in accordance with
IFRS.
|
55
L Shareholders’
Equity (Cont.)
(2)
Share capital
Total
ordinary shares issued and outstanding as of December 31, 2008, 2007 and 2006 is
1,180,536,830 with a par value of $1.00 per share with one vote each. All issued
shares are fully paid.
(3)
Dividends paid by the Company to shareholders
Dividends
payable are recorded in the Company’s financial statements in the year in which
they are approved by the Company’s shareholders, or when interim dividends are
approved by the Board of Directors in accordance with the by-laws of the
Company.
Dividends
may be paid by the Company to the extent that it has distributable retained
earnings, calculated in accordance with Luxembourg law. As a result, retained
earnings included in the Consolidated Financial Statements may not be wholly
distributable (see Note 26).
M Borrowings
Borrowings
are recognized initially at fair value net of transaction costs incurred. In
subsequent years, borrowings are stated at amortized cost.
N Current
and Deferred income tax
Under
present Luxembourg law, the Company is not subject to income tax, withholding
tax on dividends paid to shareholders or capital gains tax payable in Luxembourg
as long as the Company maintains its status as a “1929 Holding Billionaire
Company”. Following a previously announced decision by the European Commission,
the Grand-Duchy of Luxembourg has terminated its 1929 holding company regime,
effective January 1, 2007. However, under the implementing legislation,
pre-existing publicly listed companies -including the Company- will be entitled
to continue benefiting from their current tax regime until December 31,
2010.
The tax
expense for the period comprises current and deferred tax. Tax is recognized in
the income statement, except to the extent that it relates to items recognized
directly in equity. In this case, the tax is also recognized in
equity.
The
current income tax charge is calculated on the basis of the tax laws in effect
in the countries where the Company’s subsidiaries operate and generate taxable
income. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulations are subject to
interpretation and establishes provisions when appropriate.
Deferred
income tax is recognized applying the liability method on temporary differences
arising between the tax basis of assets and liabilities and their carrying
amounts in the financial statements. The principal temporary differences arise
from fair value adjustments of assets acquired in business combinations, the
effect of currency translation on fixed assets, depreciation on property, plant
and equipment, valuation of inventories and provisions for pensions. Deferred
tax assets are also recognized for net operating loss carry-forwards. Deferred
tax assets and liabilities are measured at the tax rates that are expected to
apply in the time period when the asset is realized or the liability is settled,
based on tax laws that have been enacted or substantively enacted by the balance
sheet date.
Deferred
tax assets are recognized to the extent it is probable that future taxable
income will be available against which the temporary differences can be
utilized.
56
O Employee
benefits
(a) Employee
severance indemnity
Employee
severance indemnity costs are assessed annually using the projected unit credit
method. Employee severance indemnity obligations are measured at the present
value of the estimated future cash outflows, based on actuarial calculations
provided by independent advisors and in accordance with current legislation and
labor contracts in effect in each respective country. The cost of this
obligation is charged to the income statement over the expected service lives of
employees.
This
provision is primarily related to the liability accrued for employees at
Tenaris’ Italian and Mexican subsidiaries.
As from
January 1, 2007 as a consequence of a change in an Italian law, employees were
entitled to make contributions to external funds or to maintain the
contributions within the company. If the employee chooses to make contributions
to the external funds Tenaris’ Italian subsidiary pays every year the matured
contribution to the funds and no more obligation will be in charge of it. As a
consequence of the abovementioned, the structure of the plan could be changed
from a defined benefit plan to a defined contribution plan effective from the
date of the choice, but only limited to the contributions of 2007
onwards.
(b) Defined
benefit pension obligations
Post-retirement
costs are assessed using the projected unit credit method. Post-retirement
obligations are measured at the present value of the estimated future cash
outflows, based on actuarial calculations provided by independent
advisors.
Certain
officers of Tenaris are covered by defined benefit employee retirement plans
designed to provide post-retirement, and other benefits.
Benefits
provided under this plan are provided in U.S. dollars, and are calculated based
on seven-year salary averages. Tenaris accumulates assets for the payment of
benefits expected to be disbursed by this plan in the form of investments that
are subject to time limitations for redemption. These investments are neither
part of a specific pension plan nor are they segregated from Tenaris’ other
assets. As a result, this plan is considered to be “unfunded” under IFRS
definitions.
Tenaris
sponsors other four funded and unfunded non-contributory defined benefit pension
plans in certain subsidiaries. The plans provide defined benefits based on years
of service and, in the case of salaried employees, final average
salary.
All of
Tenaris’ plans recognize actuarial gains and losses over the average remaining
service lives of employees.
(c) Other
compensation obligations
Employee
entitlements to annual leave and long-service leave are accrued as
earned.
Other
length of service based compensation to employees in the event of dismissal or
death is charged to income in the year in which it becomes payable.
(d)
Employee retention and long term incentive program
On
January 1, 2007 Tenaris adopted an employee retention and long term incentive
program. Pursuant to this program, certain senior executives will be granted
with a number of units’ equivalent in value to the equity book value per share
(excluding minority interest). The units will be vested over four years period
and Tenaris will redeem vested units following a period of seven years from the
grant date, or when the employee ceases employment, at the equity book value per
share at the time of payment. Beneficiaries will also receive a cash amount per
unit equivalent to the dividend paid per share whenever the Company pays a cash
dividend to its shareholders.
57
O Employee
benefits (Cont.)
(d)
Employee retention and long term incentive program (Cont.)
Annual
compensation under this program is not expected to exceed 35% in average of the
total annual compensation of the beneficiaries.
The total
value of the units granted to date under the program, considering the number of
units and the book value per share as of December 31, 2008, is $16.8 million. As of December
31, 2008, Tenaris has recorded a total liability of $10.4 million, based on
actuarial calculations provided by independent advisors.
P Employee
statutory profit sharing
Under
Mexican law, the Company’s Mexican subsidiaries are required to pay to their
employees an annual benefit calculated on a similar basis to that used for local
income tax purposes. Employee statutory profit sharing is calculated using the
liability method, and is recorded in Current
other liabilities and Non-current
other liabilities on the balance
sheet. Because Mexican employee statutory profit sharing is determined on
a similar basis to that used for determining local income taxes, Tenaris
accounts for temporary differences arising between the statutory calculation and
reported expense as determined under IFRS in a manner similar to the calculation
of deferred income tax.
Q Provisions
and other liabilities
Tenaris
is subject to various claims, lawsuits and other legal proceedings, including
customer claims, in which a third party is seeking payment for alleged damages,
reimbursement for losses or indemnity. Tenaris’ potential liability with respect
to such claims, lawsuits and other legal proceedings cannot be estimated with
certainty. Management periodically reviews the status of each significant matter
and assesses potential financial exposure. If a potential loss from a claim or
proceeding is considered probable and the amount can be reasonably estimated, a
liability is recorded. Accruals for loss contingencies reflect a reasonable
estimate of the losses to be incurred based on information available to
management as of the date of preparation of the financial statements, and take
into consideration Tenaris’ litigation and settlement strategies. These
estimates are primarily constructed with the assistance of legal counsel. As the
scope of liabilities become better defined, there may be changes in the
estimates of future costs which could have a material adverse effect on its
results of operations, financial condition and net worth.
If
Tenaris expects to be reimbursed for an accrued expense, as would be the case
for an expense or loss covered under an insurance contract, and reimbursement is
considered virtually certain, the expected reimbursement is recognized as a
receivable.
R Trade
payables
Trade
payables are recognized initially at fair value and subsequently measured at
amortized cost.
S Revenue
recognition
Revenue
comprises the fair value consideration received or receivable for the sale of
goods and services in the ordinary course of Tenaris’ activities. Revenue is
shown net of value-added tax, returns, rebates and discounts and after
eliminating sales within the group.
Tenaris’ products and services are sold
based upon purchase orders, contracts or upon other persuasive evidence of an
arrangement with customers, including that the sales price is known or
determinable. Sales are recognized as revenue upon delivery and when collection
is reasonably assured. Delivery is defined by the transfer of risk, provision of
sales contracts and may include delivery to a storage facility located at one of
the Company’s subsidiaries.
58
S Revenue
recognition (Cont.)
The
Pressure Control business (disclosed as discontinued operations) and industrial
equipment (included in the Other segment) recognize revenues from long term
contracts. These contracts are recognized using the percentage of completion
method measured by the percentage of costs incurred to estimated final
costs.
Other
revenues earned by Tenaris are recognized on the following bases:
|
·
|
Interest
income: on the effective yield
basis.
|
|
·
|
Dividend
income from investments in other companies: when Tenaris’ right to collect
is established.
|
T Cost
of sales and sales expenses
Cost of
sales and sales expenses are recognized in the income statement on the accrual
basis of accounting.
Commissions,
freight and other selling expenses, including shipping and handling costs, are
recorded in Selling, general and administrative expenses in the income
statement.
U Earnings
per share
Earnings
per share are calculated by dividing the income attributable to equity holders
of the Company by the daily weighted average number of common shares outstanding
during the year.
V Financial
instruments
Non
derivative financial instruments comprise investment in equity and debt
securities, trade and other receivables, cash and cash equivalents, borrowings,
and trade and other payables. Tenaris non derivative financial instruments are
classified into the following categories:
|
·
|
Financial
instruments at fair value through profit and
loss.
|
|
·
|
Loans
and receivables: measured at amortized cost using the effective interest
rate method less any impairment.
|
|
·
|
Other
financial liabilities: measured at amortized cost using the effective
interest rate method.
|
The
classification depends on the nature and purpose of the financial instrument and
is determined at the time of initial recognition.
Financial
assets and liabilities are recognized and derecognized on the settlement
date.
Accounting
for derivative financial instruments and hedging activities is included within
the Section III, Financial Risk Management.
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. This result has been recognized under “Net
foreign exchange transaction results and changes in fair value of derivative
instruments”.
III.
FINANCIAL RISK MANAGEMENT
The
multinational nature of Tenaris’ operations and customer base expose the Company
to a variety of risks, mainly related to market risks (including the effects of
changes in foreign currency exchange rates and interest rates) and capital risk.
To manage the volatility related to these exposures, management evaluates
exposures on a consolidated basis to take advantage of logical exposure netting.
For the remaining exposures, the Company or its subsidiaries may enter into
various derivative transactions in order to manage potential adverse impacts on
the Tenaris’ financial performance. Such derivative transactions are executed in
accordance with internal policies in areas such as counterparty exposure and
hedging practices.
59
A.
Financial Risk Factors
(i) Capital
Risk
Tenaris
seeks to maintain an adequate debt to total equity ratio considering the
industry and the markets where it operates. The year end ratio of debt to total
equity (where “debt” comprises all financial borrowings and “equity” is the sum
of financial borrowings and shareholders’ equity) is 0.25 as of December 31,
2008, in comparison with 0.35 as of December 31, 2007. The Company does not have
to comply with regulatory capital adequacy requirements as known in the
financial services industry.
(ii) Foreign
exchange risk
Tenaris
manufactures and sells its products in a number of countries throughout the
world and consequently is exposed to foreign exchange rate risk. Since the
Company’s functional currency is the U.S. dollar the purpose of Tenaris’ foreign
currency hedging program is mainly to reduce the risk caused by changes in
exchange rates against the U.S. dollar.
Tenaris’
exposure to currency fluctuations is reviewed on a periodic basis. A number of
derivative transactions are performed in order to achieve an efficient coverage.
Almost all of these hedging transactions are forward exchange rates contracts
(see Note 25 Derivative financial instruments).
Tenaris
does not hold or issue derivative financial instruments for speculative trading
purposes.
Because a
number of subsidiaries have functional currencies other than the U.S. dollar,
the results of hedging activities, reported in accordance with IFRS, may not
reflect management’s assessment of its foreign exchange risk hedging program.
Inter-company balances between Tenaris subsidiaries may generate financial gains
(losses) to the extent that functional currencies differ.
The
following table shows a breakdown of Tenaris’ assessed long / (short) balance
sheet exposure to currency risk as of December 31, 2008, including the effect of
forward exchange rate contracts in place. These balances include inter-company
positions where the intervening parties have different functional
currencies.
|
Monetary
position
|
Functional
Currency (in thousand $)
|
|||||||||||||||||||||||||||||||||||||||
|
exposure
|
USD
|
EUR
|
MXN
|
GBP
|
BRL
|
JPY
|
CAD
|
RON
|
VEB
|
CNY
|
||||||||||||||||||||||||||||||
|
USD
|
(n/a | ) | (383,161 | ) | (180,510 | ) | (379 | ) | 305,586 | 139,517 | (4,224 | ) | (59,888 | ) | (47,139 | ) | (35,770 | ) | ||||||||||||||||||||||
|
EUR
|
94,846 | (n/a | ) | 162,587 | - | 37,104 | (16 | ) | (490 | ) | 110 | (1,779 | ) | (15 | ) | |||||||||||||||||||||||||
|
MXN
|
(2 | ) | - | (n/a | ) | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||
|
GBP
|
1,277 | (1,230 | ) | (7 | ) | (n/a | ) | - | 1 | - | 218 | - | - | |||||||||||||||||||||||||||
|
BRL
|
- | - | - | - | (n/a | ) | - | - | - | - | - | |||||||||||||||||||||||||||||
|
JPY
|
(731 | ) | (56 | ) | (70 | ) | - | - | (n/a | ) | (15 | ) | - | - | (1,291 | ) | ||||||||||||||||||||||||
|
CAD
|
(92,169 | ) | 216 | 8,422 | - | - | (17 | ) | (n/a | ) | - | - | - | |||||||||||||||||||||||||||
|
RON
|
(44,280 | ) | - | - | - | - | - | - | (n/a | ) | - | - | ||||||||||||||||||||||||||||
|
VEB
|
(2,034 | ) | - | - | - | - | - | - | - | (n/a | ) | - | ||||||||||||||||||||||||||||
|
ARS
|
(141,452 | ) | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
|
Other
|
849 | 9 | - | - | - | (29 | ) | - | - | - | - | |||||||||||||||||||||||||||||
The
Company estimates that the impact under IFRS in the net exposure at December 31,
2008 of a simultaneous 1% favorable / unfavorable movement in the main exchange
rates would result in a maximum pre-tax gain / loss of approximately $15.8
million as compared with a maximum pre-tax gain / loss of approximately $12.7
million at December 31, 2007.
Considering
the above mentioned assumptions the maximum effect in shareholder’s equity
originated in monetary assets and liabilities would result in approximately $7.8
million and $6.1 million for 2008 and 2007, respectively.
Additionally,
the Company has recognized an embedded derivative in connection to a ten year
steel supply agreement signed in 2007 by a Canadian subsidiary which as of
December 31, 2008 has an outstanding amount of $266.4 million. The Company
estimates that the impact of 1% favorable / unfavorable movement in USD/CAD the
exchange rate would result in a maximum pre-tax gain / loss of approximately
$2.1 million. See fair value of this embedded derivative in Note
25.
60
A.
Financial Risk Factors (Cont.)
|
(iii)
|
Interest
rate risk
|
The
following table summarizes the proportions of variable-rate and fixed-rate debt
as of each year end (see Note 25 Derivative financial instruments).
|
As
of December 31,
|
||||
|
2008
|
2007
|
|||
|
Amount
in million of $
|
Percentage
|
Amount
in million of $
|
Percentage
|
|
|
Fixed
rate
|
222.9
|
7%
|
282.9
|
7%
|
|
Variable
rate
|
2,754.1
|
93%
|
3,737.3
|
93%
|
Tenaris’
financing strategy is to manage interest expense using a mixture of fixed-rate
and variable-rate debt.
In order
to partially hedge future interest payments related to long-term debt, as well
as to convert borrowings from floating to fixed rates, Tenaris has entered into
interest rate swaps and swaps with an embedded knock-in option (See Note
25).
Considering
the above, if interests rates on the aggregate average notional of US dollar
denominated borrowings held during 2008, would have been 100 basis points higher
with all other variables held constant, total profit for the year ended December
31, 2008 would have been $30.1 million lower.
(iv) Credit
risk
Credit
risk arises from cash and cash equivalents, deposits with banks and financial
institutions, as well as credit exposures to customers, including outstanding
receivables and committed transactions. The Company has established credit
guidelines in place to ensure that derivative and treasury counterparties are
limited to high credit quality financial institutions.
There is
no significant concentration of credit risk from customers. No single customer
comprised more than 10% of Tenaris’ net sales in 2008 and 2007.
Tenaris’
credit policies related to sales of products and services are designed to
identify customers with acceptable credit history, and to allow Tenaris to
require the use of credit insurance, letters of credit and other instruments
designed to minimize credit risks whenever deemed necessary. Tenaris maintains
allowances for impairment for potential credit losses (See Note II
J).
As of
December 31, 2008 trade receivables amount to $2,123 million. These trade
receivables have guarantees under letter of credit and other bank guarantees of
$242.8 million, credit insurance of $621.2 million and other guarantess of $65.6
million.
As of
December 31, 2008 trade receivables amounting to $465.9 were past due but not
impaired. These relate to a number of customers for whom there is no recent
history of default.
The
amount of the allowance for doubtful accounts was $34.1 million as of December
31, 2008. This allowance for doubtful accounts and the existing guarantees are
sufficient to cover doubtful overdue trade receivables.
Derivative
counterparties and cash transactions are limited to high credit quality
financial institutions normally investment grade. More than 94.9% of
Tenaris’ cash equivalents and short term investments correspond to Investment
Grade-rated instruments as of December 31, 2008, in comparison with 98.6% as of
December 31, 2007.
61
A.
Financial Risk Factors (Cont.)
(v) Liquidity
risk
Management
maintains sufficient cash and marketable securities to finance normal operations
and believes that Tenaris also has access to market for short-term working
capital needs.
Tenaris
financing strategy is to maintain adequate financial resources and access to
additional liquidity. During 2008, Tenaris has counted on cash flows from
operations as well as additional bank financing to fund its
transactions.
Tenaris
has a conservative approach to the management of its liquidity, which consists
of cash and cash equivalents, comprising cash in banks, short-term money market
funds and highly liquid short-term securities with a maturity of less than 90
days at the date of purchase. Assets recorded in cash and cash equivalents are
carried at fair market value.
Tenaris
holds primarily liquidity and Treasuries money market investments and variable
or fixed-rate securities from investment grade issuers. Tenaris holds its cash
and cash equivalents primarily in U.S. dollars. As of December 31, 2008 and
2007, U.S. dollar denominated liquid assets represented around 70% of total
liquid financial assets. Liquid financial assets as a whole (excluding current
investments) were 10.2% of total assets compared to 6.3% at the end of
2007.
B.
Financial instruments by category
The
accounting policies for financial instruments have been applied to the line
items below:
|
December
31, 2008
|
Assets
at fair value through profit and loss
|
Loans
and receivables
|
Total
|
|
Assets
as per balance sheet
|
|||
|
Derivative
financial instruments
|
41,509
|
-
|
41,509
|
|
Trade
receivables
|
-
|
2,123,296
|
2,123,296
|
|
Other
receivables
|
-
|
97,683
|
97,683
|
|
Other
investments
|
84,218
|
-
|
84,218
|
|
Cash
and cash equivalents
|
1,538,769
|
-
|
1,538,769
|
|
Total
|
1,664,496
|
2,220,979
|
3,885,475
|
|
Liabilities
at fair value through profit and loss
|
Other
financial liabilities
|
Total
|
|
|
December
31, 2008
|
|||
|
Liabilities
as per balance sheet
|
|||
|
Borrowings
|
-
|
2,977,015
|
2,977,015
|
|
Derivative
financial instruments
|
77,792
|
-
|
77,792
|
|
Trade
and other payables (*)
|
-
|
952,660
|
952,660
|
|
Total
|
77,792
|
3,929,675
|
4,007,467
|
(*) The
maturity of trade payables is of one year or less.
62
B.
Financial instruments by category (Cont.)
|
December
31, 2007
|
Assets
at fair value through profit and loss
|
Loans
and receivables
|
Total
|
|
Assets
as per balance sheet
|
|||
|
Derivative
financial instruments
|
15,258
|
-
|
15,258
|
|
Trade
receivables
|
-
|
1,748,833
|
1,748,833
|
|
Other
receivables
|
-
|
96,001
|
96,001
|
|
Other
investments
|
123,033
|
-
|
123,033
|
|
Cash
and cash equivalents
|
962,497
|
962,497
|
|
|
Total
|
1,100,788
|
1,844,834
|
2,945,622
|
|
Liabilities
at fair value through profit and loss
|
Other
financial liabilities
|
Total
|
|
|
December
31, 2007
|
|||
|
Liabilities
as per balance sheet
|
|||
|
Borrowings
|
-
|
4,020,245
|
4,020,245
|
|
Derivative
financial instruments
|
15,551
|
-
|
15,551
|
|
Trade
and other payables
|
-
|
896,736
|
896,736
|
|
Total
|
15,551
|
4,916,981
|
4,932,532
|
C.
Fair value estimation
The
carrying amount of financial assets and liabilities with maturities of less than
one year approximates to their fair value.
Since
most of the Company’s cash and marketable securities are short-term instruments,
a change of 50 basis points in the reference interest rates would not have a
significant impact in the fair value of financial assets.
Most
borrowings are comprised of variable rate debt with a short term portion where
interest has already been fixed. Tenaris estimates that the fair value of its
main financial liabilities is approximately 98.9% of its carrying amount
including interests accrued in 2008 as compared with 100.4% in 2007. Tenaris
estimates that a change of 50 basis points in the reference interest rates would
have an estimated impact of less than 0.1% in the fair value of borrowings as of
December 31, 2008 and 0.1% in 2007. Fair values were calculated using standard
valuation techniques for floating rate instruments and comparable market rates
for discounting flows.
Specific
derivative instruments are priced using valuation tools in order to obtain
market values.
D.
Accounting for derivative financial instruments and hedging
activities
Derivative
financial instruments are initially recognized in the balance sheet at fair
value on the date a derivative contract is entered into and are subsequently
remeasured at fair value. Specific tools are used for calculation of each
instrument’s fair value and these tools are tested for consistency on a
quarterly basis. Market rates are used for all pricing operations. These include
exchange rates, deposit rates and other discount rates matching the nature of
each underlying risk.
As a
general rule, Tenaris recognizes the full amount related to the change in fair
value of derivative financial instruments in Financial results in the
income statement.
63
D.
Accounting for derivative financial instruments and hedging activities
(Cont.)
Tenaris
designates certain derivatives as hedges of a particular risk associated with a
recognized asset or liability or a highly probable forecast transaction. 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 recognized in the income statement in the same period than offsetting
losses and gains on the hedged item. The gain or loss relating to the
ineffective portion is recognized immediately in the income statement. The fair
value of Tenaris derivative financial instruments (asset or liability) continues
to be reflected on the balance sheet.
For
transactions designated and qualifying for hedge accounting, Tenaris documents
at the inception of the transaction the relationship between hedging instruments
and hedged items, as well as its risk management objectives and strategy for
undertaking various hedge transactions. At December 31, 2008, the effective
portion of designated cash flow hedges amounts to $17 million, not including tax
effect, and is included in Other Reserves in equity (see Note 25 Derivative
financial instruments). Tenaris also documents its assessment on an ongoing
basis, of whether the derivatives that are used in hedging transactions are
highly effective in offsetting changes in fair values or cash flow of hedged
items.
The fair
values of various derivative instruments used for hedging purposes are disclosed
in Note 25. Movements in the hedging reserve included within Other Reserves in
shareholder’s equity are also shown in Note 25. The full fair value of a hedging
derivative is classified as a non current asset or liability when the remaining
hedged item is more than 12 months and as a current asset or liability when the
remaining maturity of the hedged item is less than 12 months.
64
IV.
OTHER NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In
the notes all amounts are shown in thousands of U.S. dollars, unless otherwise
stated)
1 Segment
information
Reportable
operating segments
|
(all
amounts in thousands of U.S. dollars)
|
Tubes
|
Projects
|
Other
|
Unallocated
|
Total
Continuing operations
|
Total
Discontinued operations (*)
|
||||||||||||||||||
|
Year
ended December 31, 2008
|
||||||||||||||||||||||||
|
Net
sales
|
10,114,994 | 1,270,915 | 745,927 | - | 12,131,836 | 98,388 | ||||||||||||||||||
|
Cost
of sales
|
(5,374,409 | ) | (883,534 | ) | (541,246 | ) | - | (6,799,189 | ) | (57,712 | ) | |||||||||||||
|
Gross
profit
|
4,740,585 | 387,381 | 204,681 | - | 5,332,647 | 40,676 | ||||||||||||||||||
|
Selling,
general and administrative expenses
|
(1,571,569 | ) | (136,923 | ) | (110,519 | ) | - | (1,819,011 | ) | (13,799 | ) | |||||||||||||
|
Other
operating income (expenses), net
|
(346,919 | ) | (1,415 | ) | (137,438 | ) | - | (485,772 | ) | 129 | ||||||||||||||
|
Operating
income
|
2,822,097 | 249,043 | (43,276 | ) | - | 3,027,864 | 27,006 | |||||||||||||||||
|
Segment
assets
|
13,154,333 | 941,519 | 477,853 | 527,007 | 15,100,712 | - | ||||||||||||||||||
|
Segment
liabilities
|
5,860,736 | 377,497 | 160,592 | - | 6,398,825 | - | ||||||||||||||||||
|
Capital
expenditures
|
412,298 | 17,284 | 13,656 | - | 443,238 | 3,429 | ||||||||||||||||||
|
Depreciation and
amortization
|
484,303 | 20,084 | 28,547 | - | 532,934 | 8,965 | ||||||||||||||||||
|
Impairment
charge
|
368,519 | - | 134,380 | - | 502,899 | - | ||||||||||||||||||
|
Year
ended December 31, 2007
|
||||||||||||||||||||||||
|
Net
sales
|
8,552,641 | 876,289 | 613,078 | - | 10,042,008 | 238,220 | ||||||||||||||||||
|
Cost
of sales
|
(4,427,868 | ) | (620,836 | ) | (467,063 | ) | - | (5,515,767 | ) | (157,356 | ) | |||||||||||||
|
Gross
profit
|
4,124,773 | 255,453 | 146,015 | - | 4,526,241 | 80,864 | ||||||||||||||||||
|
Selling,
general and administrative expenses
|
(1,391,114 | ) | (94,702 | ) | (88,133 | ) | (1,573,949 | ) | (36,441 | ) | ||||||||||||||
|
Other
operating income (expenses), net
|
(19,731 | ) | 24,089 | 575 | - | 4,933 | (431 | ) | ||||||||||||||||
|
Operating
income
|
2,713,928 | 184,840 | 58,457 | - | 2,957,225 | 43,992 | ||||||||||||||||||
|
Segment
assets
|
12,453,156 | 1,085,254 | 545,663 | 509,354 | 14,593,427 | 651,160 | ||||||||||||||||||
|
Segment
liabilities
|
6,727,523 | 579,376 | 140,796 | - | 7,447,695 | 267,042 | ||||||||||||||||||
|
Capital
expenditures
|
404,545 | 17,969 | 16,822 | - | 439,336 | 8,581 | ||||||||||||||||||
|
Depreciation
and amortization
|
446,050 | 19,563 | 26,489 | - | 492,102 | 22,718 | ||||||||||||||||||
|
Year
ended December 31, 2006
|
||||||||||||||||||||||||
|
Net
sales
|
6,826,868 | 453,536 | 447,341 | - | 7,727,745 | 503,051 | ||||||||||||||||||
|
Cost
of sales
|
(3,234,015 | ) | (326,402 | ) | (323,809 | ) | - | (3,884,226 | ) | (486,312 | ) | |||||||||||||
|
Gross
profit
|
3,592,853 | 127,134 | 123,532 | - | 3,843,519 | 16,739 | ||||||||||||||||||
|
Selling,
general and administrative expenses
|
(923,328 | ) | (71,546 | ) | (59,932 | ) | - | (1,054,806 | ) | (8,025 | ) | |||||||||||||
|
Other
operating income (expenses), net
|
1,022 | 749 | 2,002 | - | 3,773 | 2,469 | ||||||||||||||||||
|
Operating
income
|
2,670,547 | 56,337 | 65,602 | - | 2,792,486 | 11,183 | ||||||||||||||||||
|
Segment
assets
|
10,807,345 | 803,060 | 561,879 | 422,958 | 12,595,242 | - | ||||||||||||||||||
|
Segment
liabilities
|
6,242,969 | 448,493 | 202,150 | - | 6,893,612 | - | ||||||||||||||||||
|
Capital
expenditures
|
408,965 | 23,979 | 7,507 | - | 440,451 | 1,021 | ||||||||||||||||||
|
Depreciation
and amortization
|
220,368 | 19,345 | 13,394 | - | 253,107 | 1,897 | ||||||||||||||||||
Transactions
between segments, which were eliminated in consolidation, include sales of scrap
and pipe protectors from the Others segment to the Tubes segment for $191,036,
$109,574 and $88,118 in 2008, 2007 and 2006, respectively.
65
1 Segment
information (Cont.)
Geographical
information
|
(all
amounts in thousands of U.S. dollars)
|
North
America
|
South
America
|
Europe
|
Middle
East & Africa
|
Far
East & Oceania
|
Unallocated
|
Total
Continuing operations
|
Total
Discontinued operations (*)
|
||||||||||||||||||||||||
|
Year
ended December 31, 2008
|
||||||||||||||||||||||||||||||||
|
Net
sales
|
4,809,330 | 2,959,654 | 1,824,684 | 1,810,695 | 727,473 | - | 12,131,836 | 98,388 | ||||||||||||||||||||||||
|
Total
assets
|
7,083,508 | 3,460,729 | 3,033,555 | 436,179 | 559,734 | 527,007 | 15,100,712 | - | ||||||||||||||||||||||||
|
Trade
receivables
|
786,867 | 432,987 | 379,794 | 386,786 | 136,862 | - | 2,123,296 | - | ||||||||||||||||||||||||
|
Property.
plant and equipment, net
|
1,180,738 | 796,009 | 861,892 | 10,128 | 134,104 | - | 2,982,871 | - | ||||||||||||||||||||||||
|
Capital
expenditures
|
159,990 | 141,174 | 101,050 | 6,705 | 34,319 | - | 443,238 | 3,429 | ||||||||||||||||||||||||
|
Depreciation
and amortization
|
298,240 | 107,732 | 111,040 | 1,246 | 14,676 | - | 532,934 | 8,965 | ||||||||||||||||||||||||
|
Year
ended December 31, 2007
|
||||||||||||||||||||||||||||||||
|
Net
sales
|
3,187,753 | 2,352,975 | 1,707,788 | 2,093,916 | 699,576 | - | 10,042,008 | 238,220 | ||||||||||||||||||||||||
|
Total
assets
|
7,471,569 | 3,342,206 | 2,315,187 | 507,331 | 447,780 | 509,354 | 14,593,427 | 651,160 | ||||||||||||||||||||||||
|
Trade
receivables
|
418,081 | 344,743 | 435,384 | 455,965 | 94,660 | - | 1,748,833 | 79,220 | ||||||||||||||||||||||||
|
Property.
plant and equipment, net
|
1,349,863 | 906,211 | 913,642 | 4,672 | 94,619 | - | 3,269,007 | 63,629 | ||||||||||||||||||||||||
|
Capital
expenditures
|
149,434 | 149,355 | 112,165 | 1,879 | 26,503 | - | 439,336 | 8,581 | ||||||||||||||||||||||||
|
Depreciation
and amortization
|
283,358 | 110,389 | 87,311 | 1,139 | 9,905 | - | 492,102 | 22,718 | ||||||||||||||||||||||||
|
Year
ended December 31, 2006
|
||||||||||||||||||||||||||||||||
|
Net
sales
|
2,182,936 | 1,520,210 | 1,398,458 | 1,957,707 | 668,434 | - | 7,727,745 | 503,051 | ||||||||||||||||||||||||
|
Total
assets
|
6,334,227 | 2,780,977 | 2,045,856 | 623,572 | 387,652 | 422,958 | 12,595,242 | - | ||||||||||||||||||||||||
|
Trade
receivables
|
425,734 | 189,779 | 392,060 | 519,022 | 98,646 | - | 1,625,241 | - | ||||||||||||||||||||||||
|
Property.
plant and equipment, net
|
1,209,277 | 864,425 | 787,058 | 2,813 | 75,668 | - | 2,939,241 | - | ||||||||||||||||||||||||
|
Capital
expenditures
|
121,976 | 145,956 | 137,608 | 367 | 34,544 | - | 440,451 | 1,021 | ||||||||||||||||||||||||
|
Depreciation
and amortization
|
98,967 | 90,224 | 57,037 | 780 | 6,099 | - | 253,107 | 1,897 | ||||||||||||||||||||||||
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 and Venezuela; “Europe” comprises
principally, Italy, Romania and the United Kingdom; “Middle East and Africa”
comprises principally Algeria, Kuwait, Saudi Arabia and the United Arab
Emirates; “Far East and Oceania” comprises principally China and
Japan.
(*)
Corresponds to Pressure Control (years 2008 and 2007) and Dalmine Energie (year
2006) operations (See Note 29).
66
2 Cost
of sales
|
Year
ended December 31,
|
||||||||||||
|
(all
amounts in thousands of U.S. dollars)
|
2008
|
2007
|
2006
|
|||||||||
|
Inventories
at the beginning of the year
|
2,598,856 | 2,372,308 | 1,376,113 | |||||||||
|
Plus:
Charges of the year
|
||||||||||||
|
Raw
materials, energy, consumables and other
|
5,430,147 | 4,183,577 | 3,514,396 | |||||||||
|
Increase
in inventory due to business combinations
|
- | 152,500 | 592,341 | |||||||||
|
Services
and fees
|
395,104 | 392,531 | 384,223 | |||||||||
|
Labor
cost
|
927,132 | 766,173 | 512,854 | |||||||||
|
Depreciation
of property, plant and equipment
|
282,407 | 263,813 | 187,564 | |||||||||
|
Amortization
of intangible assets
|
2,170 | 1,737 | 2,738 | |||||||||
|
Maintenance
expenses
|
203,207 | 180,502 | 120,664 | |||||||||
|
Provisions
for contingencies
|
12 | 3,191 | (87 | ) | ||||||||
|
Allowance
for obsolescence
|
(2,055 | ) | 24,371 | (8,006 | ) | |||||||
|
Taxes
|
8,655 | 7,651 | 4,568 | |||||||||
|
Other
|
102,667 | 82,453 | 55,478 | |||||||||
| 7,349,446 | 6,058,499 | 5,366,733 | ||||||||||
|
Deconsolidation
/ Transfer to assets held for sale
|
- | (158,828 | ) | - | ||||||||
|
Less:
Inventories at the end of the year
|
(3,091,401 | ) | (2,598,856 | ) | (2,372,308 | ) | ||||||
| 6,856,901 | 5,673,123 | 4,370,538 | ||||||||||
|
From
Discontinued operations
|
(57,712 | ) | (157,356 | ) | (486,312 | ) | ||||||
| 6,799,189 | 5,515,767 | 3,884,226 | ||||||||||
3 Selling,
general and administrative expense
|
Year
ended December 31,
|
||||||||||||
|
(all
amounts in thousands of U.S. dollars)
|
2008
|
2007
|
2006
|
|||||||||
|
Services
and fees
|
214,010 | 193,389 | 133,304 | |||||||||
|
Labor
cost
|
447,150 | 402,919 | 279,768 | |||||||||
|
Depreciation
of property, plant and equipment
|
12,096 | 13,272 | 9,926 | |||||||||
|
Amortization
of intangible assets
|
245,226 | 235,998 | 54,776 | |||||||||
|
Commissions,
freight and other selling expenses
|
571,823 | 462,640 | 361,655 | |||||||||
|
Provisions
for contingencies
|
37,101 | 30,738 | 13,881 | |||||||||
|
Allowances
for doubtful accounts
|
13,823 | 5,035 | 1,199 | |||||||||
|
Taxes
|
167,686 | 147,326 | 122,789 | |||||||||
|
Other
|
123,895 | 119,073 | 85,533 | |||||||||
| 1,832,810 | 1,610,390 | 1,062,831 | ||||||||||
|
From
Discontinued operations
|
(13,799 | ) | (36,441 | ) | (8,025 | ) | ||||||
| 1,819,011 | 1,573,949 | 1,054,806 | ||||||||||
67
4
Labor
costs (included in Cost of sales and in Selling, general and administrative
expenses)
|
Year
ended December 31,
|
||||||||||||
|
(all
amounts in thousands of U.S. dollars)
|
2008
|
2007
|
2006
|
|||||||||
|
Wages,
salaries and social security costs
|
1,349,195 | 1,139,587 | 778,573 | |||||||||
|
Employees'
severance indemnity
|
19,168 | 10,931 | 11,588 | |||||||||
|
Pension
benefits - defined benefit plans
|
6,633 | 7,454 | 2,461 | |||||||||
|
Employee
retention and long term incentive program
|
(714 | ) | 11,120 | - | ||||||||
| 1,374,282 | 1,169,092 | 792,622 | ||||||||||
|
From
Discontinued operations
|
(17,773 | ) | (43,058 | ) | (4,898 | ) | ||||||
| 1,356,509 | 1,126,034 | 787,724 | ||||||||||
At the
year-end, the number of employees was 23,873 in 2008, 23,372 in 2007
and 21,751 in 2006.
5 Other
operating items
|
Year
ended December 31,
|
|||||||||||||
|
(all
amounts in thousands of U.S. dollars)
|
2008
|
2007
|
2006
|
||||||||||
|
(i)
|
Other
operating income
|
||||||||||||
|
Reimbursement
from insurance companies and other third parties
|
10,511 | 2,611 | 1,611 | ||||||||||
|
Net
income from other sales
|
23,704 | 21,957 | 4,512 | ||||||||||
|
Net
income from sale of investments
|
- | - | 6,933 | ||||||||||
|
Net
rents
|
1,971 | 2,437 | 2,490 | ||||||||||
|
Other
|
- | 1,834 | - | ||||||||||
| 36,186 | 28,839 | 15,546 | |||||||||||
|
From
Discontinued operations
|
(294 | ) | (135 | ) | (2,469 | ) | |||||||
| 35,892 | 28,704 | 13,077 | |||||||||||
|
(ii)
|
Other
operating expenses
|
||||||||||||
|
Contributions
to welfare projects and non-profits organizations
|
2,871 | 2,283 | 4,463 | ||||||||||
|
Provisions
for legal claims and contingencies
|
(22 | ) | (51 | ) | - | ||||||||
|
Loss
on fixed assets and material supplies disposed / scrapped
|
461 | 5,742 | 4,145 | ||||||||||
|
Settlement
of outstanding redemptions on Maverick’s 2005 notes
|
- | 10,275 | - | ||||||||||
|
Loss
from natural disasters
|
1,743 | 5,693 | - | ||||||||||
|
Allowance
for doubtful receivables
|
(184 | ) | 395 | (375 | ) | ||||||||
|
Losses
on prepayment to suppliers
|
3,830 | - | - | ||||||||||
|
Impairment
charge
|
502,899 | - | - | ||||||||||
|
Other
|
10,231 | - | 1,071 | ||||||||||
| 521,829 | 24,337 | 9,304 | |||||||||||
|
From
Discontinued operations
|
(165 | ) | (566 | ) | - | ||||||||
| 521,664 | 23,771 | 9,304 | |||||||||||
68
5 Other
operating items (Cont.)
Long-lived
assets including identifiable intangible assets and goodwill are regularly
reviewed for impairment.
Long-lived
assets are tested for impairment whenever events or changes in circumstances
indicate that the balance sheet carrying amount of an asset may not be
recoverable. Intangible assets with indefinite useful life, including goodwill
are subject to at least an annual impairment test.
The
recoverable amount is the higher of the value in use and the fair value less
cost to sell. When evaluating long-lived assets for potential impairment,
Tenaris estimates the recoverable amount based on the value in use of the
corresponding Cash Generating Unit (“CGU”) .The value in use of these units is
determined on the basis of the present value of net future cash flows which will
be generated by the assets tested. Cash flows are discounted at a pre-tax rate
that reflects specific country and currency risks.
In
certain circumstances the fair value less cost to sale is estimated if value in
use is lower than the carrying amount. For the purpose of calculating the fair
value less cost to sale Tenaris used the estimated value of future cash flows a
market participant could generate from the CGU discounted at a post tax
rate.
The
present value of future cash flows involves highly sensitive estimates and
assumptions specific to the nature of CGU’s activities such as the selected
discount rate, the expected changes in market prices and the expected changes in
the demand of Tenaris products and services.
For the
December 2008 impairment test, Tenaris used cash flow projections for a five
year period with a terminal value calculated based on perpetuity.
The
discount rates are the weighted average cost of capital (WACC) which is
considered to be a good indicator of the capital cost. For each CGU where the
assets are allocated a specific WACC was determined taking into account the
industry, the country and the size of the business.
As a
consequence of changes in economic and financial market conditions Tenaris
recorded an impairment charge for $502.9 million; of which $394.3 million
impairment charge corresponds to intangible assets originated in the acquisition
of Maverick in 2006. This charge impacted the following CGU: OCTG (USA and
Colombia), Coiled Tubing, Prudential (Canada) and Electric
Conduits.
The
pretax rates used in the calculation range from 11% to 14 % p.a. and for the
cash flows beyond the fifth year and inflation and growth rate of 2% was
considered.
6 Financial
results
|
(all
amounts in thousands of U.S. dollars)
|
Year
ended December 31,
|
|||||||||||
|
2008
|
2007
|
2006
|
||||||||||
|
Interest
income
|
49,114 | 93,458 | 61,401 | |||||||||
|
Interest
expense
|
(185,851 | ) | (275,763 | ) | (93,638 | ) | ||||||
|
Interest
net
|
(136,737 | ) | (182,305 | ) | (32,237 | ) | ||||||
|
Net
foreign exchange transaction results and changes in fair value of
derivative instruments (*)
|
(84,522 | ) | (10,782 | ) | 29,129 | |||||||
|
Other
|
(19,738 | ) | (11,969 | ) | (1,828 | ) | ||||||
|
Other
financial results
|
(104,260 | ) | (22,751 | ) | 27,301 | |||||||
|
Net
financial results
|
(240,997 | ) | (205,056 | ) | (4,936 | ) | ||||||
|
From
Discontinued operations
|
(238 | ) | 46 | (16 | ) | |||||||
| (241,235 | ) | (205,010 | ) | (4,952 | ) | |||||||
Each item
included in this note differs from its corresponding line in the income
statement because it includes discontinued operations’ results.
(*)
Includes a loss of $40.7 million and a gain of $9.7 million for 2008 and 2007
respectively of embedded derivatives.
69
7 Equity
in earnings of associated companies
|
Year
ended December 31,
|
||||||||||||
|
(all
amounts in thousands of U.S. dollars)
|
2008
|
2007
|
2006
|
|||||||||
|
From
associated companies
|
89,556 | 94,888 | 95,260 | |||||||||
|
Gain
on sale of associated companies and other
|
- | 18,388 | (593 | ) | ||||||||
| 89,556 | 113,276 | 94,667 | ||||||||||
8 Income
tax
|
Year
ended December 31,
|
||||||||||||
|
(all
amounts in thousands of U.S. dollars)
|
2008
|
2007
|
2006
|
|||||||||
|
Current
tax
|
1,255,759 | 936,831 | 897,427 | |||||||||
|
Deferred
tax
|
(244,331 | ) | (97,799 | ) | (17,386 | ) | ||||||
| 1,011,428 | 839,032 | 880,041 | ||||||||||
|
Effect
of currency translation on tax base (a)
|
10,704 | (5,654 | ) | (6,060 | ) | |||||||
| 1,022,132 | 833,378 | 873,981 | ||||||||||
|
From
Discontinued operations
|
(10,457 | ) | (9,454 | ) | (4,004 | ) | ||||||
| 1,011,675 | 823,924 | 869,977 | ||||||||||
The tax
on Tenaris’ income before tax differs from the theoretical amount that would
arise using the tax rate in each country as follows:
|
Year
ended December 31,
|
||||||||||||
|
(all
amounts in thousands of U.S. dollars)
|
2008
|
2007
|
2006
|
|||||||||
|
Income
before income tax
|
2,876,185 | 2,865,491 | 2,882,201 | |||||||||
|
Tax
calculated at the tax rate in each country
|
878,330 | 844,191 | 901,580 | |||||||||
|
Non
taxable income / Non deductible expenses (*)
|
122,161 | 2,860 | (32,562 | ) | ||||||||
|
Changes
in the tax rates
|
(4,476 | ) | (27,479 | ) | - | |||||||
|
Effect
of currency translation on tax base (a)
|
10,704 | (5,654 | ) | (6,060 | ) | |||||||
|
Effect
of taxable exchange differences
|
8,878 | 11,660 | 10,069 | |||||||||
|
Utilization
of previously unrecognized tax losses
|
(3,922 | ) | (1,654 | ) | (3,050 | ) | ||||||
|
Tax
charge
|
1,011,675 | 823,924 | 869,977 | |||||||||
(*)
Includes the effect of the impairment charge
|
(a)
|
Tenaris
applies the liability method to recognize deferred income tax expense on
temporary differences between the tax bases of assets and their carrying
amounts in the financial statements. By application of this method,
Tenaris recognizes gains and losses on deferred income tax due to the
effect of the change in the value of the Argentine peso on the tax bases
of the fixed assets of its Argentine subsidiaries, which have the U.S.
dollar as their functional currency. These gains and losses are required
by IFRS even though the devalued tax basis of the relevant assets will
result in a reduced dollar value of amortization deductions for tax
purposes in future periods throughout the useful life of those assets. As
a result, the resulting deferred income tax charge does not represent a
separate obligation of Tenaris that is due and payable in any of the
relevant periods.
|
70
9 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 year.
|
Year
ended December 31,
|
||||||||||||
|
2008
|
2007
|
2006
|
||||||||||
|
Net
income attributable to equity holders
|
2,124,802 | 1,923,748 | 1,945,314 | |||||||||
|
Weighted
average number of ordinary shares in issue (thousand)
|
1,180,537 | 1,180,537 | 1,180,537 | |||||||||
|
Basic
and diluted earnings per share ( U.S. dollars per share)
|
1.80 | 1.63 | 1.65 | |||||||||
|
Basic
and diluted earnings per ADS ( U.S. dollars per ADS) (*)
|
3.60 | 3.26 | 3.30 | |||||||||
|
Dividends
paid
|
(448,604 | ) | (507,631 | ) | (204,233 | ) | ||||||
|
Dividends
per share
|
0.38 | 0.43 | 0.17 | |||||||||
|
Dividends
per ADS (*)
|
0.76 | 0.86 | 0.35 | |||||||||
|
Net
income from discontinued operations
|
411,110 | 34,492 | 47,180 | |||||||||
|
Basic
and diluted earnings per share
|
0.35 | 0.03 | 0.04 | |||||||||
|
Basic
and diluted earnings per ADS (*)
|
0.70 | 0.06 | 0.08 | |||||||||
(*)
Each ADS equals to two shares
On
November 6, 2008 Tenaris’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 27, 2008 (or, only in those jurisdictions where such date is not a
business day, on November 28, 2008), with an ex-dividend date of November
24.
On June
4, 2008, the Company’s shareholders approved an annual dividend in the amount of
$0.38 per share ($0.76 per ADS) of common stock currently issued and
outstanding. This amount approved included the interim dividend previously paid
in November 2007, in the amount of $0.13 per share ($0.26 per ADS). The balance,
amounting to $0.25 per share ($0.50 per ADS), was paid on June 26, 2008. In the
aggregate, the interim dividend paid in November 2007 and the balance paid in
June 2008 amounted to approximately $449 million.
On
November 7, 2007, 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 22, 2007, with an ex-dividend date of November
19.
On
June 6, 2007, the Company’s shareholders approved an annual dividend in the
amount of $0.30 per share of common stock currently issued and outstanding,
which in the aggregate amounted to approximately $354 million. The cash dividend
was paid on June 21, 2007.
On
June 7, 2006, the Company’s shareholders approved an annual dividend in the
amount of $0.30 per share of common stock currently issued and outstanding. The
amount approved included the interim dividend previously paid on
November 16, 2005, in the amount of $0.127 per share. Tenaris paid the
balance of the annual dividend amounting to $0.173 per share ($0.346 per ADS) on
June 16, 2006. In the aggregate, the interim dividend paid in November 2005
and the balance paid in June 2006 amounted to approximately $354
million.
71
10 Property,
plant and equipment, net
|
Year
ended December 31, 2008
|
Land,
building and improvements
|
Plant
and production equipment
|
Vehicles,
furniture and fixtures
|
Work
in progress
|
Spare
parts and equipment
|
Total
|
|
Cost
|
||||||
|
Values
at the beginning of the year
|
642,269
|
6,570,777
|
196,538
|
327,019
|
35,818
|
7,772,421
|
|
Translation
differences
|
(87,144)
|
(436,811)
|
(9,720)
|
(26,315)
|
(2,008)
|
(561,998)
|
|
Additions
|
16,125
|
7,769
|
2,110
|
381,375
|
4,603
|
411,982
|
|
Disposals
/ Consumptions
|
(7,986)
|
(161,804)
|
(49,958)
|
-
|
(3,796)
|
(223,544)
|
|
Transfers
/ Reclassifications
|
125,909
|
258,492
|
56,658
|
(446,222)
|
3,833
|
(1,330)
|
|
Values
at the end of the year
|
689,173
|
6,238,423
|
195,628
|
235,857
|
38,450
|
7,397,531
|
|
Depreciation
and impairment
|
||||||
|
Accumulated
at the beginning of the year
|
163,919
|
4,196,295
|
132,729
|
-
|
10,471
|
4,503,414
|
|
Translation
differences
|
(25,416)
|
(249,212)
|
(6,729)
|
-
|
(339)
|
(281,696)
|
|
Depreciation
charge
|
19,431
|
239,990
|
31,622
|
-
|
1,206
|
292,249
|
|
Transfers
/ Reclassifications
|
558
|
10,186
|
(10,744)
|
-
|
-
|
-
|
|
Disposals
/ Consumptions
|
(2,628)
|
(157,296)
|
(47,914)
|
-
|
(116)
|
(207,954)
|
|
Impairment
charge (see Note 5)
|
2,579
|
96,075
|
149
|
7,200
|
2,644
|
108,647
|
|
Accumulated
at the end of the year
|
158,443
|
4,136,038
|
99,113
|
7,200
|
13,866
|
4,414,660
|
|
At
December 31, 2008
|
530,730
|
2,102,385
|
96,515
|
228,657
|
24,584
|
2,982,871
|
|
Year
ended December 31, 2007
|
Land,
building and improvements
|
Plant
and production equipment
|
Vehicles,
furniture and fixtures
|
Work
in progress
|
Spare
parts and equipment
|
Total
|
|
Cost
|
||||||
|
Values
at the beginning of the year
|
542,947
|
5,991,966
|
168,173
|
392,843
|
28,412
|
7,124,341
|
|
Translation
differences
|
19,840
|
184,258
|
4,845
|
20,324
|
1,345
|
230,612
|
|
Additions
|
10,502
|
12,321
|
2,753
|
393,579
|
6,417
|
425,572
|
|
Disposals
/ Consumptions
|
(9,289)
|
(37,596)
|
(8,230)
|
-
|
(1,113)
|
(56,228)
|
|
Transfers
/ Reclassifications
|
48,939
|
393,632
|
28,230
|
(473,857)
|
770
|
(2,286)
|
|
Increase
due to business combinations (see Note 27)
|
55,551
|
81,418
|
6,973
|
8,598
|
-
|
152,540
|
|
Deconsolidation
/ Transfer to assets held for sale
|
(26,221)
|
(55,222)
|
(6,206)
|
(14,468)
|
(13)
|
(102,130)
|
|
Values
at the end of the year
|
642,269
|
6,570,777
|
196,538
|
327,019
|
35,818
|
7,772,421
|
|
Depreciation
|
||||||
|
Accumulated
at the beginning of the year
|
146,941
|
3,917,941
|
112,900
|
-
|
7,318
|
4,185,100
|
|
Translation
differences
|
4,842
|
84,371
|
3,400
|
-
|
417
|
93,030
|
|
Depreciation
charge
|
17,259
|
233,637
|
24,936
|
-
|
1,253
|
277,085
|
|
Transfers
/ Reclassifications
|
4
|
(1,418)
|
(81)
|
-
|
1,483
|
(12)
|
|
Disposals
/ Consumptions
|
(2,382)
|
(24,310)
|
(5,992)
|
-
|
-
|
(32,684)
|
|
Deconsolidation
/ Transfer to assets held for sale
|
(2,745)
|
(13,926)
|
(2,434)
|
-
|
-
|
(19,105)
|
|
Accumulated
at the end of the year
|
163,919
|
4,196,295
|
132,729
|
-
|
10,471
|
4,503,414
|
|
At
December 31, 2007
|
478,350
|
2,374,482
|
63,809
|
327,019
|
25,347
|
3,269,007
|
Property, plant and equipment include
capitalized interest for net amounts at December 31, 2008 and 2007 of
$2,548 and $2,943,
respectively.
72
11 Intangible
assets, net
|
Year
ended December 31, 2008
|
Information
system projects
|
Licenses, patents
and trademarks
(*)
|
Goodwill
(**)
|
Customer
relationships
|
Total
|
|
Cost
|
|||||
|
Values
at the beginning of the year
|
186,073
|
500,523
|
2,149,037
|
2,072,006
|
4,907,639
|
|
Translation
differences
|
(9,906)
|
(7,469)
|
(16,836)
|
(100,264)
|
(134,475)
|
|
Additions
|
26,970
|
4,286
|
-
|
-
|
31,256
|
|
Transfers
/ Reclassifications
|
635
|
(1,606)
|
-
|
3,512
|
2,541
|
|
Disposals
|
(160)
|
(77)
|
(1,402)
|
-
|
(1,639)
|
|
Values
at the end of the year
|
203,612
|
495,657
|
2,130,799
|
1,975,254
|
4,805,322
|
|
Amortization
and impairment
|
|||||
|
Accumulated
at the beginning of the year
|
124,164
|
67,200
|
-
|
173,923
|
365,287
|
|
Translation
differences
|
(8,041)
|
(163)
|
(684)
|
(14,144)
|
(23,032)
|
|
Amortization
charge
|
17,851
|
63,198
|
-
|
159,636
|
240,685
|
|
Transfers
/ Reclassifications
|
-
|
-
|
-
|
1,211
|
1,211
|
|
Impairment
charge (see Note 5)
|
-
|
-
|
326,124
|
68,128
|
394,252
|
|
Disposals
|
-
|
(68)
|
-
|
-
|
(68)
|
|
Accumulated
at the end of the year
|
133,974
|
130,167
|
325,440
|
388,754
|
978,335
|
|
At
December 31, 2008
|
69,638
|
365,490
|
1,805,359
|
1,586,500
|
3,826,987
|
|
Year
ended December 31, 2007
|
Information
system projects
|
Licenses, patents
and trademarks (*)
|
Goodwill
(**)
|
Customer
relationships
|
Total
|
|
Cost
|
|||||
|
Values
at the beginning of the year
|
155,155
|
103,140
|
1,227,720
|
1,493,800
|
2,979,815
|
|
Translation
differences
|
6,988
|
1,297
|
13,188
|
77,526
|
98,999
|
|
Additions
|
22,174
|
171
|
-
|
-
|
22,345
|
|
Increase
due to business combinations (see Note 27)
|
1,600
|
497,780
|
1,042,015
|
593,800
|
2,135,195
|
|
Transfers
|
1,004
|
5,925
|
-
|
-
|
6,929
|
|
Reclassifications
|
-
|
460
|
(11,758)
|
231
|
(11,067)
|
|
Disposals
|
(506)
|
(209)
|
-
|
-
|
(715)
|
|
Deconsolidation
/ Transfer to assets held for sale
|
(342)
|
(108,041)
|
(122,128)
|
(93,351)
|
(323,862)
|
|
Values
at the end of the year
|
186,073
|
500,523
|
2,149,037
|
2,072,006
|
4,907,639
|
|
Amortization
and impairment
|
|||||
|
Accumulated
at the beginning of the year
|
95,079
|
12,761
|
-
|
27,477
|
135,317
|
|
Translation
differences
|
5,537
|
903
|
-
|
3,189
|
9,629
|
|
Amortization
charge
|
23,819
|
56,423
|
-
|
157,493
|
237,735
|
|
Transfers
|
-
|
4,655
|
-
|
-
|
4,655
|
|
Disposals
|
(9)
|
(209)
|
-
|
-
|
(218)
|
|
Deconsolidation
/ Transfer to assets held for sale
|
(262)
|
(7,333)
|
-
|
(14,236)
|
(21,831)
|
|
Accumulated
at the end of the year
|
124,164
|
67,200
|
-
|
173,923
|
365,287
|
|
At
December 31, 2007
|
61,909
|
433,323
|
2,149,037
|
1,898,083
|
4,542,352
|
(*) Includes
Proprietary Technology.
(**)
Goodwill at December 31, 2008 and December 31, 2007 corresponds principally to
the Tubes segment.
73
11 Intangible
assets, net (Cont.)
The
geographical allocation of goodwill is presented below.
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
South
America
|
189,376 | 190,778 | ||||||
|
Europe
|
769 | 769 | ||||||
|
North
America
|
1,615,214 | 1,957,490 | ||||||
| 1,805,359 | 2,149,037 | |||||||
Out of
$1,890.6 million of goodwill and intangible assets with indefinite useful life,
$772.0 million and $919.9 million correspond to the acquisitions of Maverick and
Hydril, respectively. For the purpose of impairment testing, goodwill is
allocated to each of the Tenaris’ CGU’s that are expected to benefit from the
synergies of the combination.
12 Investments
in associated companies
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
At
the beginning of the year
|
509,354 | 422,958 | ||||||
|
Translation
differences
|
(51,004 | ) | 3,595 | |||||
|
Equity
in earnings of associated companies
|
89,556 | 94,888 | ||||||
|
Dividends
and distributions received
|
(15,032 | ) | (12,170 | ) | ||||
|
Reorganization
of Dalmine Energie, Lomond and others
|
- | 83 | ||||||
|
Increase
in equity reserves in Ternium and other
|
(5,867 | ) | - | |||||
|
At
the end of the year
|
527,007 | 509,354 | ||||||
The
principal associated companies are:
|
Percentage
of ownership and voting rights at December 31,
|
Value
at December 31,
|
||||
|
Company
|
Country
of incorporation
|
2008
|
2007
|
2008
|
2007
|
|
Ternium
S.A.
|
Luxembourg
|
11.46%
|
11.46%
|
504,288
|
487,705
|
|
Others
|
-
|
-
|
-
|
22,719
|
21,649
|
|
527,007
|
509,354
|
||||
Summarized
financial information of each significant associated company, including the
aggregated amounts of assets, liabilities, revenues and profit or loss is as
follows:
|
Ternium
S.A.
|
||||||||
|
2008
|
2007
|
|||||||
|
Non-current
assets
|
5,491,408 | 8,553,123 | ||||||
|
Current
assets
|
5,179,839 | 5,095,959 | ||||||
|
Total
assets
|
10,671,247 | 13,649,082 | ||||||
|
Non-current
liabilities
|
3,374,964 | 5,401,549 | ||||||
|
Current
liabilities
|
1,734,819 | 1,989,610 | ||||||
|
Total
liabilities
|
5,109,783 | 7,391,159 | ||||||
|
Minority
interest
|
964,094 | 1,805,243 | ||||||
|
Revenues
|
8,464,885 | 5,633,366 | ||||||
|
Gross
profit
|
2,336,858 | 1,345,695 | ||||||
|
Income
from discontinued operations
|
157,095 | 579,925 | ||||||
|
Net
income for the period attributable to equity holders of the
company
|
715,418 | 784,490 | ||||||
74
13 Other
investments – non current
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Deposits
with insurance companies
|
18,487 | 14,661 | ||||||
|
Investments
in other companies
|
12,370 | 12,568 | ||||||
|
Others
|
7,498 | 8,274 | ||||||
| 38,355 | 35,503 | |||||||
14 Receivables
– non current
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Government
entities
|
5,138 | 5,637 | ||||||
|
Employee
advances and loans
|
13,512 | 10,464 | ||||||
|
Tax
credits
|
10,013 | 13,547 | ||||||
|
Trade
receivables
|
208 | 1,135 | ||||||
|
Receivables
from related parties
|
495 | 633 | ||||||
|
Receivables
on off- take contract
|
114 | 4,439 | ||||||
|
Legal
deposits
|
15,812 | 19,724 | ||||||
|
Advances
to suppliers and other advances
|
38,862 | - | ||||||
|
Derivative
financial instruments
|
- | 9,677 | ||||||
|
Other
|
3,615 | 9,065 | ||||||
| 87,769 | 74,321 | |||||||
|
Allowances
for doubtful accounts (see Note 23 (i))
|
(5,017 | ) | (10,583 | ) | ||||
| 82,752 | 63,738 | |||||||
15 Inventories
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Finished
goods
|
1,122,147 | 1,050,634 | ||||||
|
Goods
in process
|
665,982 | 544,020 | ||||||
|
Raw
materials
|
659,973 | 402,476 | ||||||
|
Supplies
|
430,488 | 389,188 | ||||||
|
Goods
in transit
|
306,155 | 314,749 | ||||||
| 3,184,745 | 2,701,067 | |||||||
|
Allowance
for obsolescence (Note 24 (i))
|
(93,344 | ) | (102,211 | ) | ||||
| 3,091,401 | 2,598,856 | |||||||
16 Receivables
and prepayments
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Prepaid
expenses and other receivables
|
41,244 | 37,727 | ||||||
|
Government
entities
|
3,793 | 3,225 | ||||||
|
Employee
advances and loans
|
14,552 | 10,886 | ||||||
|
Advances
to suppliers and other advances
|
33,063 | 58,701 | ||||||
|
Government
tax refunds on exports
|
35,319 | 34,519 | ||||||
|
Receivables
from related parties
|
45,735 | 35,551 | ||||||
|
Derivative
financial instruments
|
41,509 | 5,581 | ||||||
|
Miscellaneous
|
41,513 | 43,504 | ||||||
| 256,728 | 229,694 | |||||||
|
Allowance
for other doubtful accounts (see Note 24 (i))
|
(5,247 | ) | (7,284 | ) | ||||
| 251,481 | 222,410 | |||||||
75
17 Current
tax assets
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
V.A.T.
credits
|
167,691 | 126,674 | ||||||
|
Prepaid
taxes
|
33,916 | 116,083 | ||||||
| 201,607 | 242,757 | |||||||
18 Trade
receivables
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Current
accounts
|
2,066,698 | 1,651,012 | ||||||
|
Notes
receivables
|
71,448 | 104,747 | ||||||
|
Receivables
from related parties
|
19,278 | 17,604 | ||||||
| 2,157,424 | 1,773,363 | |||||||
|
Allowance
for doubtful accounts (see Note 24 (i))
|
(34,128 | ) | (24,530 | ) | ||||
| 2,123,296 | 1,748,833 | |||||||
The
following table sets forth details of the age of trade receivables:
|
Trade
Receivables
|
Not
Due
|
Past
due
|
||
|
1
- 180 days
|
>
180 days
|
|||
|
At
December 31, 2008
|
||||
|
Guaranteed
|
929,566
|
742,854
|
173,687
|
13,025
|
|
Not
guaranteed
|
1,227,858
|
914,784
|
281,946
|
31,128
|
|
Guaranteed
and not guaranteed
|
2,157,424
|
1,657,638
|
455,633
|
44,153
|
|
Allowance
for doubtful accounts
|
(34,128)
|
(246)
|
(2,997)
|
(30,885)
|
|
Net
Value
|
2,123,296
|
1,657,392
|
452,636
|
13,268
|
|
At
December 31, 2007
|
||||
|
Guaranteed
|
886,970
|
746,722
|
97,407
|
42,841
|
|
Not
guaranteed
|
886,393
|
704,031
|
158,735
|
23,627
|
|
Guaranteed
and not guaranteed
|
1,773,363
|
1,450,753
|
256,142
|
66,468
|
|
Allowance
for doubtful accounts
|
(24,530)
|
-
|
(789)
|
(23,741)
|
|
Net
Value
|
1,748,833
|
1,450,753
|
255,353
|
42,727
|
No
material financial assets that are fully performing have been renegotiated in
the last year.
19 Cash
and cash equivalents, and Other investments
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Other
investments
|
||||||||
|
Financial
assets
|
45,863 | 87,530 | ||||||
|
Cash
and cash equivalents
|
||||||||
|
Cash
and short - term liquid investments
|
1,538,769 | 962,497 | ||||||
76
|
20
|
Borrowings
|
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Non-Current
|
||||||||
|
Bank
borrowings
|
1,225,267 | 2,858,122 | ||||||
|
Other
loans
|
22,803 | 24,071 | ||||||
|
Finance
lease liabilities
|
564 | 1,067 | ||||||
|
Costs
of issue of debt
|
(7,586 | ) | (13,794 | ) | ||||
| 1,241,048 | 2,869,466 | |||||||
|
Current
|
||||||||
|
Bank
Borrowings
|
1,608,467 | 1,119,004 | ||||||
|
Other
loans
|
119,135 | 32,521 | ||||||
|
Bank
Overdrafts
|
13,747 | 8,194 | ||||||
|
Finance
lease liabilities
|
368 | 696 | ||||||
|
Costs
of issue of debt
|
(5,750 | ) | (9,636 | ) | ||||
| 1,735,967 | 1,150,779 | |||||||
|
Total
Borrowings
|
2,977,015 | 4,020,245 | ||||||
The
maturity of borrowings is as follows:
|
1
year or less
|
1
- 2 years
|
2
– 3 years
|
3
- 4 years
|
4
- 5 years
|
Over
5 years
|
Total
|
||
|
At
December 31, 2008
|
||||||||
|
Financial
lease
|
368
|
165
|
160
|
160
|
79
|
-
|
932
|
|
|
Other
borrowings
|
1,735,599
|
527,379
|
511,125
|
135,615
|
50,064
|
16,301
|
2,976,083
|
|
|
Total
borrowings
|
1,735,967
|
527,544
|
511,285
|
135,775
|
50,143
|
16,301
|
2,977,015
|
|
|
Interest
to be accrued
|
98,668
|
24,163
|
16,329
|
5,896
|
1,920
|
2,030
|
149,006
|
|
|
Total
borrowings plus interest to be accrued
|
1,834,635
|
551,707
|
527,614
|
141,671
|
52,063
|
18,331
|
3,126,021
|
Significant
borrowings include:
|
In
million of $
|
|||||
|
Disbursement
date
|
Borrower
|
Type
|
Original
|
Outstanding
|
Final
maturity
|
|
May
2007
|
Tenaris
|
Syndicated
|
1,000.0
|
250.0
|
May
2009 (*)
|
|
October
2006
|
Siderca
|
Syndicated
|
480.5
|
288.3
|
October
2009
|
|
March
2005
|
Tamsa
|
Syndicated
|
300.0
|
180.0
|
March
2010
|
|
October
2006
|
Tamsa
|
Syndicated
|
700.0
|
466.7
|
October
2011
|
|
October
2006
|
Maverick
|
Syndicated
|
750.0
|
452.3
|
October
2011
|
|
October
2006
|
Dalmine
|
Syndicated
|
150.0
|
100.0
|
October
2011
|
|
May
2007
|
Hydril
|
Syndicated
|
300.0
|
233.0
|
May
2012
|
|
June
2008
|
Dalmine
|
Bilateral
|
150.0
|
150.0
|
June
2013
|
(*) At
the Company’s option this loan may be extended until May 2012 notifying the
agent at least three labor days before original maturity.
The main
covenants on these loan agreements are stated in Note 27 a) and c).
77
20 Borrowings
(Cont.)
Tenaris’
consolidated debt includes $57 million of Dalmine and $11 million of Confab
secured by certain properties of these subsidiaries.
As of
December 31, 2008, Tenaris was in compliance with all of its
covenants.
The
weighted average interest rates before tax shown below were calculated using the
rates set for each instrument in its corresponding currency as of December 31,
2008 and 2007. The changes in interest rate are basically due to
changes in floating interest rate.
|
2008
|
2007
|
|
|
Bank
borrowings
|
5.23%
|
5.80%
|
|
Other
loans
|
4.99%
|
5.50%
|
|
Finance
lease liabilities
|
7.74%
|
2.52%
|
Breakdown
of long-term borrowings by currency and rate is as follows:
Non
current bank borrowings
|
Year
ended December 31,
|
|||||||||
|
Currency
|
Interest
rates
|
2008
|
2007
|
||||||
|
USD
|
Variable
|
2,268,381 | 3,448,850 | ||||||
|
USD
|
Fixed
|
20 | 18 | ||||||
|
EUR
|
Variable
|
14,310 | 34,268 | ||||||
|
EUR
|
Fixed
|
5,133 | 6,772 | ||||||
|
BRL
|
Variable
|
11,397 | 20,596 | ||||||
| 2,299,241 | 3,510,504 | ||||||||
|
Less:
Current portion of medium and long - term loans
|
(1,073,974 | ) | (652,382 | ) | |||||
|
Total
non current bank borrowings
|
1,225,267 | 2,858,122 | |||||||
Non
current other loans
|
Year
ended December 31,
|
|||||||||
|
Currency
|
Interest
rates
|
2008
|
2007
|
||||||
|
USD
|
Variable
|
28,032 | 26,412 | ||||||
| 28,032 | 26,412 | ||||||||
|
Less:
Current portion of medium and long - term loans
|
(5,229 | ) | (2,341 | ) | |||||
|
Total
non current other loans
|
22,803 | 24,071 | |||||||
Non
current finance lease liabilities
|
Year
ended December 31,
|
|||||||||
|
Currency
|
Interest
rates
|
2008
|
2007
|
||||||
|
EUR
|
Fixed
|
195 | 367 | ||||||
|
EUR
|
Variable
|
- | 66 | ||||||
|
COP
|
Variable
|
- | 74 | ||||||
|
USD
|
Fixed
|
737 | 14 | ||||||
|
JPY
|
Fixed
|
- | 1,242 | ||||||
| 932 | 1,763 | ||||||||
|
Less:
Current portion of medium and long - term loans
|
(368 | ) | (696 | ) | |||||
|
Total
non current finance leases
|
564 | 1,067 | |||||||
78
20 Borrowings
(Cont.)
The
carrying amounts of Tenaris’ assets pledged as collateral of liabilities are as
follows:
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Property,
plant and equipment mortgages
|
247,143 | 366,960 | ||||||
Breakdown
of short-term borrowings by currency and rate is as follows:
Current
bank borrowings
|
Year
ended December 31,
|
|||||||||
|
Currency
|
Interest rates
|
2008
|
2007
|
||||||
|
USD
|
Variable
|
1,134,416 | 626,946 | ||||||
|
USD
|
Fixed
|
76,472 | 194,098 | ||||||
|
EUR
|
Variable
|
251,138 | 209,418 | ||||||
|
EUR
|
Fixed
|
837 | 1,432 | ||||||
|
CNY
|
Variable
|
3,951 | - | ||||||
|
BRL
|
Variable
|
5,370 | 6,665 | ||||||
|
ARS
|
Fixed
|
115,541 | 32,383 | ||||||
|
MXN
|
Fixed
|
- | 40,981 | ||||||
|
VEB
|
Variable
|
20,509 | - | ||||||
|
VEB
|
Fixed
|
233 | 7,081 | ||||||
|
Total
current bank borrowings
|
1,608,467 | 1,119,004 | |||||||
Bank
overdrafts
|
Year
ended December 31,
|
||||||||
|
Currency
|
2008
|
2007
|
||||||
|
USD
|
51 | 260 | ||||||
|
EUR
|
24 | 40 | ||||||
|
ARS
|
8,871 | 5,523 | ||||||
|
VEB
|
44 | 57 | ||||||
|
CAD
|
- | 9 | ||||||
|
NGN
|
4,051 | 2,187 | ||||||
|
COP
|
706 | 116 | ||||||
|
RON
|
- | 2 | ||||||
|
Total
current bank overdrafts
|
13,747 | 8,194 | ||||||
Current
other loans
|
Year
ended December 31,
|
|||||||||
|
Currency
|
Interest rates
|
2008
|
2007
|
||||||
|
EUR
|
Variable
|
111,448 | 28,920 | ||||||
|
USD
|
Variable
|
2,186 | 3,530 | ||||||
|
USD
|
Fixed
|
5,229 | - | ||||||
|
CAD
|
Variable
|
1 | - | ||||||
|
AED
|
Variable
|
271 | 71 | ||||||
|
Total
Current other loans
|
119,135 | 32,521 | |||||||
79
20 Borrowings
(Cont.)
Current
finance lease liabilities
|
Year
ended December 31,
|
|||||||||
|
Currency
|
Interest rates
|
2008
|
2007
|
||||||
|
EUR
|
Fixed
|
189 | 173 | ||||||
|
EUR
|
Variable
|
- | 24 | ||||||
|
COP
|
Variable
|
- | 74 | ||||||
|
JPY
|
Fixed
|
- | 420 | ||||||
|
USD
|
Fixed
|
179 | 5 | ||||||
|
Total
current finance leases
|
368 | 696 | |||||||
21 Deferred
income tax
Deferred
income taxes are calculated in full on temporary differences under the liability
method using the tax rate of each country.
The
movement on the deferred income tax account is as follows:
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
At
the beginning of the year
|
923,246 | 700,304 | ||||||
|
Translation
differences
|
(49,022 | ) | 27,666 | |||||
|
Increase
due to business combinations
|
- | 353,845 | ||||||
|
Deconsolidation
/ Transfer to held for sale
|
(464 | ) | (68,086 | ) | ||||
|
Reclassifications
|
2,421 | - | ||||||
|
Income
statement credit
|
(240,754 | ) | (97,799 | ) | ||||
|
Effect
of currency translation on tax base
|
10,704 | (5,654 | ) | |||||
|
Deferred
employees' statutory profit sharing charge
|
17,384 | 12,970 | ||||||
|
At
the end of the year
|
663,515 | 923,246 | ||||||
The
evolution of deferred tax assets and liabilities during the year are as
follows:
Deferred
tax liabilities
|
Fixed
assets
|
Inventories
|
Intangible
and Other (a)
|
Total
|
|||||||||||||
|
At
the beginning of the year
|
300,459 | 39,620 | 893,757 | 1,233,836 | ||||||||||||
|
Translation
differences
|
(37,609 | ) | (5,137 | ) | (22,281 | ) | (65,027 | ) | ||||||||
|
Deconsolidation
/ Transfer to held for sale
|
- | - | (464 | ) | (464 | ) | ||||||||||
|
Income
statement charge / (credit)
|
(20,424 | ) | 14,693 | (108,776 | ) | (114,507 | ) | |||||||||
|
At
December 31,2008
|
242,426 | 49,176 | 762,236 | 1,053,838 | ||||||||||||
80
21
Deferred income tax (Cont.)
|
Fixed
assets
|
Inventories
|
Intangible
and Other (a)
|
Total
|
|||||||||||||
|
At
the beginning of the year
|
317,148 | 51,367 | 623,430 | 991,945 | ||||||||||||
|
Translation
differences
|
14,411 | 139 | 20,876 | 35,426 | ||||||||||||
|
Increase
due to business combinations
|
14,668 | 8,467 | 365,633 | 388,768 | ||||||||||||
|
Deconsolidation
/ Transfer to held for sale
|
(4,641 | ) | (7,611 | ) | (63,661 | ) | (75,913 | ) | ||||||||
|
Income
statement charge / (credit)
|
(41,127 | ) | (12,742 | ) | (52,521 | ) | (106,390 | ) | ||||||||
|
At
December 31,2007
|
300,459 | 39,620 | 893,757 | 1,233,836 | ||||||||||||
(a)
Includes the effect of currency translation on tax base explained in Note
8
Deferred
tax assets
|
Provisions
and allowances
|
Inventories
|
Tax
losses
|
Other
|
Total
|
||||||||||||||||
|
At
the beginning of the year
|
(46,737 | ) | (143,652 | ) | (1,396 | ) | (118,805 | ) | (310,590 | ) | ||||||||||
|
Translation
differences
|
5,243 | 211 | 46 | 10,505 | 16,005 | |||||||||||||||
|
Reclassifications
|
- | - | - | 2,421 | 2,421 | |||||||||||||||
|
Income
statement charge / (credit)
|
(17,569 | ) | (75,528 | ) | (394 | ) | (4,668 | ) | (98,159 | ) | ||||||||||
|
At
December 31, 2008
|
(59,063 | ) | (218,969 | ) | (1,744 | ) | (110,547 | ) | (390,323 | ) | ||||||||||
|
Provisions
and allowances
|
Inventories
|
Tax
losses
|
Other
|
Total
|
||||||||||||||||
|
At
the beginning of the year
|
(42,270 | ) | (142,843 | ) | (3,634 | ) | (102,894 | ) | (291,641 | ) | ||||||||||
|
Translation
differences
|
(4,815 | ) | (1,033 | ) | (436 | ) | (1,476 | ) | (7,760 | ) | ||||||||||
|
Increase
due to business combinations
|
(29,919 | ) | (3,235 | ) | (235 | ) | (1,534 | ) | (34,923 | ) | ||||||||||
|
Deconsolidation
/ Transfer to assets held for sale
|
9,655 | 3,321 | 51 | (5,200 | ) | 7,827 | ||||||||||||||
|
Income
statement charge / (credit)
|
20,612 | 138 | 2,858 | (7,701 | ) | 15,907 | ||||||||||||||
|
At
December 31, 2007
|
(46,737 | ) | (143,652 | ) | (1,396 | ) | (118,805 | ) | (310,590 | ) | ||||||||||
Deferred
income tax assets and liabilities are offset when (1) there is a legally
enforceable right to setoff current tax assets against current tax liabilities
and (2) the deferred income taxes relate to the same fiscal authority. The
following amounts, determined after appropriate setoff, are shown in the
consolidated balance sheet:
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Deferred
tax assets
|
(390,323 | ) | (310,590 | ) | ||||
|
Deferred
tax liabilities
|
1,053,838 | 1,233,836 | ||||||
| 663,515 | 923,246 | |||||||
The
amounts shown in the balance sheet include the following:
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Deferred
tax assets to be recovered after 12 months
|
(71,849 | ) | (74,741 | ) | ||||
|
Deferred
tax liabilities to be recovered after 12 months
|
1,002,325 | 1,214,468 | ||||||
81
22 Other
liabilities
|
(i)
|
Other
liabilities – Non current
|
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Employee
liabilities
|
||||||||
|
Employee's
statutory profit sharing
|
26,381 | 51,217 | ||||||
|
Employee
severance indemnity (a)
|
56,939 | 59,862 | ||||||
|
Pension
benefits (b)
|
39,130 | 41,877 | ||||||
|
Employee
retention and long term incentive program
|
10,406 | 11,120 | ||||||
| 132,856 | 164,076 | |||||||
|
Taxes
payable
|
12,605 | 8,723 | ||||||
|
Derivative
financial instruments
|
55,926 | 45 | ||||||
|
Miscellaneous
|
21,755 | 12,566 | ||||||
| 90,286 | 21,334 | |||||||
| 223,142 | 185,410 | |||||||
(a)
Employees’ severance indemnity
The
amounts recognized in the balance sheet are as follows:
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Total
included in non - current Employee liabilities
|
56,939 | 59,862 | ||||||
The
amounts recognized in the income statement are as follows:
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Current
service cost
|
16,343 | 7,877 | ||||||
|
Interest
cost
|
2,825 | 3,054 | ||||||
|
Total
included in Labor costs
|
19,168 | 10,931 | ||||||
The
principal actuarial assumptions used were as follows:
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Discount
rate
|
4% - 5 | % | 4% - 5 | % | ||||
|
Rate
of compensation increase
|
2% - 4 | % | 2% - 4 | % | ||||
(b)
Pension benefits
|
§
|
Unfunded
|
The
amounts recognized in the balance sheet are determined as follows:
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Present
value of unfunded obligations
|
40,336 | 36,153 | ||||||
|
Unrecognized
actuarial losses
|
(14,577 | ) | (13,137 | ) | ||||
|
Liability
in the balance sheet
|
25,759 | 23,016 | ||||||
82
22 Other
liabilities (Cont.)
|
(i)
|
Other
liabilities – Non current (Cont.)
|
(b)
Pension benefits (Cont.)
|
§
|
Unfunded
(Cont.)
|
The
amounts recognized in the income statement are as follows:
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Current
service cost
|
555 | 423 | ||||||
|
Interest
cost
|
1,776 | 1,548 | ||||||
|
Net
actuarial losses recognized in the year
|
395 | 195 | ||||||
|
Total
included in Labor costs
|
2,726 | 2,166 | ||||||
Movement
in the liability recognized in the balance sheet:
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
At
the beginning of the year
|
23,016 | 19,657 | ||||||
|
Translation
differences
|
(1,857 | ) | 1,617 | |||||
|
Transfers,
reclassifications and new participants of the plan
|
3,013 | 422 | ||||||
|
Total
expense
|
2,726 | 2,166 | ||||||
|
Contributions
paid
|
(1,139 | ) | (5,499 | ) | ||||
|
Increase
due to business combinations
|
- | 7,103 | ||||||
|
Deconsolidation
/ Transfer to held for sale
|
- | (2,450 | ) | |||||
|
At
the end of the year
|
25,759 | 23,016 | ||||||
The
principal actuarial assumptions used were as follows:
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Discount
rate
|
6% - 7 | % | 5% - 7 | % | ||||
|
Rate
of compensation increase
|
2% - 3 | % | 2% - 5 | % | ||||
|
§
|
Funded
|
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Present
value of funded obligations
|
120,360 | 142,452 | ||||||
|
Unrecognized
actuarial losses
|
(7,476 | ) | (1,404 | ) | ||||
|
Fair
value of the plan assets
|
(99,513 | ) | (122,187 | ) | ||||
|
Liability
in the balance sheet
|
13,371 | 18,861 | ||||||
The
amounts recognized in the income statement are as follows:
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Current
service cost
|
2,327 | 4,826 | ||||||
|
Interest
cost
|
6,995 | 6,391 | ||||||
|
Net
actuarial gains recognized in the year
|
(60 | ) | (4,452 | ) | ||||
|
Expected
return on plan assets
|
(5,043 | ) | (1,477 | ) | ||||
|
Curtailments
and settlements
|
(312 | ) | - | |||||
|
Total
included in Labor costs
|
3,907 | 5,288 | ||||||
83
22 Other
liabilities (Cont.)
(i) Other
liabilities – Non current (Cont.)
(b)
Pension benefits (Cont.)
|
§
|
Funded
(Cont.)
|
Movement
in the liability recognized in the balance sheet:
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
At
the beginning of the year
|
142,452 | 87,153 | ||||||
|
Translation
differences
|
(21,016 | ) | 14,240 | |||||
|
Transfers,
reclassifications and new participants of the plan
|
6,735 | (839 | ) | |||||
|
Total
expense
|
8,696 | 10,437 | ||||||
|
Increase
due to business combinations
|
- | 35,816 | ||||||
|
Actuarial
gains and losses
|
(10,767 | ) | 3,455 | |||||
|
Benefits
paid
|
(5,740 | ) | (7,730 | ) | ||||
|
Other
|
- | (80 | ) | |||||
|
At
the end of the year
|
120,360 | 142,452 | ||||||
Movement
in the fair value of plan assets:
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
At
the beginning of the year
|
(123,591 | ) | (70,743 | ) | ||||
|
Reclassifications,
transfers and new participants of the plan
|
(6,213 | ) | - | |||||
|
Expected
return on plan assets
|
(5,043 | ) | (7,074 | ) | ||||
|
Actuarial
gains and losses
|
11,021 | (1,530 | ) | |||||
|
Translation
differences
|
17,452 | (11,992 | ) | |||||
|
Contributions
paid
|
(6,355 | ) | (5,694 | ) | ||||
|
Benefits
paid
|
5,740 | 7,730 | ||||||
|
Increase
due to business combinations
|
- | (34,288 | ) | |||||
|
At
the end of the year
|
(106,989 | ) | (123,591 | ) | ||||
The
principal actuarial assumptions used were as follows:
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Discount
rate
|
6% - 7 | % | 5% - 7 | % | ||||
|
Rate
of compensation increase
|
2% - 3 | % | 2% - 5 | % | ||||
|
(ii)
|
Other
liabilities – current
|
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Payroll
and social security payable
|
166,139 | 187,851 | ||||||
|
Liabilities
with related parties
|
1,424 | 7,846 | ||||||
|
Derivative
financial instruments
|
21,866 | 15,506 | ||||||
|
Miscellaneous
|
53,191 | 41,001 | ||||||
| 242,620 | 252,204 | |||||||
84
23 Non-current
allowances and provisions
(i) Deducted
from non current receivables
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Values
at the beginning of the year
|
(10,583 | ) | (14,120 | ) | ||||
|
Translation
differences
|
1,157 | 141 | ||||||
|
Reversals
/ Additional allowances
|
(71 | ) | (558 | ) | ||||
|
Reclassifications
|
(551 | ) | - | |||||
|
Used
|
5,031 | 3,954 | ||||||
|
At
December 31,
|
(5,017 | ) | (10,583 | ) | ||||
(ii) Liabilities
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Values
at the beginning of the year
|
97,912 | 92,027 | ||||||
|
Translation
differences
|
(12,636 | ) | 6,747 | |||||
|
Increase
due to business combinations
|
- | 2,997 | ||||||
|
Deconsolidation
/ Transfer to held for sale
|
- | (780 | ) | |||||
|
Reversals
/ Additional provisions
|
25,604 | 22,393 | ||||||
|
Reclassifications
|
(8,408 | ) | (4,534 | ) | ||||
|
Used
|
(12,946 | ) | (20,938 | ) | ||||
|
At
December 31,
|
89,526 | 97,912 | ||||||
24 Current
allowances and provisions
(i) Deducted
from assets
|
Year
ended December 31, 2008
|
Allowance
for doubtful accounts - Trade receivables
|
Allowance
for other doubtful accounts - Other receivables
|
Allowance
for inventory obsolescence
|
|||||||||
|
Values
at the beginning of the year
|
(24,530 | ) | (7,284 | ) | (102,211 | ) | ||||||
|
Translation
differences
|
709 | 208 | 6,552 | |||||||||
|
Reversals
/ Additional allowances
|
(13,901 | ) | 238 | 2,355 | ||||||||
|
Reclassifications
|
- | 551 | - | |||||||||
|
Used
|
3,594 | 1,040 | (40 | ) | ||||||||
|
At
December 31, 2008
|
(34,128 | ) | (5,247 | ) | (93,344 | ) | ||||||
|
Year
ended December 31, 2007
|
||||||||||||
|
Values
at the beginning of the year
|
(22,786 | ) | (7,784 | ) | (79,473 | ) | ||||||
|
Translation
differences
|
(1,383 | ) | (385 | ) | (3,949 | ) | ||||||
|
Increase
due to business combinations
|
(1,222 | ) | (534 | ) | (13,517 | ) | ||||||
|
Deconsolidation
/ Transfer to assets held for sale
|
904 | 1 | 14,308 | |||||||||
|
Reversals
/ Additional allowances
|
(5,065 | ) | 193 | (24,371 | ) | |||||||
|
Reclassifications
|
- | - | (3,527 | ) | ||||||||
|
Used
|
5,022 | 1,225 | 8,318 | |||||||||
|
At
December 31, 2007
|
(24,530 | ) | (7,284 | ) | (102,211 | ) | ||||||
85
24 Current
allowances and provisions (Cont.)
(ii) Liabilities
|
Year
ended December 31, 2008
|
Sales
risks
|
Other
claims and contingencies
|
Total
|
|||||||||
|
Values
at the beginning of the year
|
9,136 | 10,206 | 19,342 | |||||||||
|
Translation
differences
|
3 | (1,369 | ) | (1,366 | ) | |||||||
|
Reversals
/ Additional allowances
|
5,222 | 6,667 | 11,889 | |||||||||
|
Reclassifications
|
- | 8,408 | 8,408 | |||||||||
|
Used
|
(5,043 | ) | (4,719 | ) | (9,762 | ) | ||||||
|
At
December 31, 2008
|
9,318 | 19,193 | 28,511 | |||||||||
|
Year
ended December 31, 2007
|
||||||||||||
|
Values
at the beginning of the year
|
20,094 | 6,551 | 26,645 | |||||||||
|
Translation
differences
|
350 | 1,221 | 1,571 | |||||||||
|
Increase
due to business combinations
|
3,471 | - | 3,471 | |||||||||
|
Deconsolidation
/ Transfer to held for sale
|
(3,157 | ) | - | (3,157 | ) | |||||||
|
Reversals
/ Additional allowances
|
4,035 | 7,450 | 11,485 | |||||||||
|
Reclassifications
|
(3,527 | ) | - | (3,527 | ) | |||||||
|
Used
|
(12,130 | ) | (5,016 | ) | (17,146 | ) | ||||||
|
At
December 31, 2007
|
9,136 | 10,206 | 19,342 | |||||||||
25 Derivative
financial instruments
Net
fair values of derivative financial instruments
The net
fair values of derivative financial instruments disclosed within Other
liabilities and Receivables at the balance sheet date, in accordance with IAS
39, are:
|
Year
ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Contracts
with positive fair values
|
||||||||
|
Forward
foreign exchange contracts
|
41,509 | 15,258 | ||||||
|
Contracts
with negative fair values
|
||||||||
|
Interest
rate swap contracts
|
(29,220 | ) | (3,013 | ) | ||||
|
Forward
foreign exchange contracts
|
(17,814 | ) | (22,215 | ) | ||||
|
Embedded
Canadian Dollar forward purchases
|
(30,758 | ) | 9,677 | |||||
86
25 Derivative
financial instruments (Cont.)
Exchange
rate derivatives (Cont.)
The net
fair values of exchange rate derivatives, including embedded derivatives, were
as follows:
|
Currencies
|
Contract
|
Term
|
Fair
Value at Dec-08
|
Fair
Value at Dec-07
|
|
USD/EUR
|
Euro
Purchases
|
2009
|
11,320
|
1,408
|
|
USD/JPY
|
Japanese
Yen Purchases
|
2009
|
217
|
(1,157)
|
|
BRL/USD
|
Brazilian
Real Sales
|
2009
|
11,109
|
(126)
|
|
KWD/USD
|
Kuwaiti
Dinar Sales
|
2009
|
857
|
(10,821)
|
|
BRL/EUR
|
Euro
Purchases
|
2009
|
4,901
|
-
|
|
MXN/EUR
|
Euro
Purchases
|
2009
|
8,186
|
-
|
|
COP/USD
|
Colombian
Peso Sales
|
2008
|
-
|
111
|
|
GBP/USD
|
Great
Britain Pound Sales
|
2008
|
-
|
152
|
|
USD/MXN
|
Mexican
Peso Purchases
|
2008
|
-
|
327
|
|
CAD/USD
|
Canadian
Dollar Sales
|
2009
|
(1,631)
|
3,062
|
|
RON/USD
|
Romanian
Leu Sales
|
2009
|
(984)
|
87
|
|
USD/ARS
|
Argentine
Peso Purchases
|
2009
|
(10,280)
|
-
|
|
Subtotal
|
23,695
|
(6,957)
|
||
|
USD/CAD
|
Embedded
Canadian Dollar Purchases
|
2017
|
(30,758)
|
9,677
|
|
Total
|
(7,063)
|
2,720
|
In
addition to derivative transactions performed to achieve coverage against
foreign exchange rate risk, Tenaris has identified certain embedded derivatives
and in accordance with IAS 39 (“Financial Instruments: Recognition and
Measurement”) accounted them separately from their host contracts.
Variable
interest rate swaps
In order
to minimize the volatility effect of floating rates on future interest rate
payments, Tenaris has entered into a number of swaps with knock in, partially
hedging the outstanding debt. A knock-in swap is a type of barrier option, which
is activated if the reference rate reaches a set level (“knock in”) at the end
of certain period. A total notional amount of $500 million was covered by these
instruments. The first interest rate fixing dates on the underlying risk shall
occur in April, May and June 2009.
Derivative
financial instruments breakdown is as follows:
|
Type
of derivative
|
Receive
Reference rate
|
Term
|
Notional
amount
|
Fair
Value at Dec-08
|
Fair
Value at Dec-07
|
|
Interest
rate collars
|
Libor
6M
|
2008
|
800,000
|
-
|
(2,922)
|
|
Pay
fixed/Receive variable
|
Euribor
|
2009/2010
|
3,054
|
(82)
|
(91)
|
|
Swaps
with KI (2.50%)
|
Libor
6M
|
2011
|
500,000
|
(29,138)
|
-
|
|
1,303,054
|
(29,220)
|
(3,013)
|
87
25 Derivative
financial instruments (Cont.)
Hedge
Accounting
Tenaris
applies hedge acccounting for certain cash flow hedges of highly probable
forecast transactions. The following are the derivatives that were designated
for hedge accounting as of December 31, 2008.
|
·
|
Foreign
Exchange Hedge
|
|
Fair
Value
|
Hedge
Accounting Reserve
|
|||||
|
Year
ended December 31,
|
Year
ended December 31,
|
|||||
|
Currencies
|
Contract
|
Term
|
2008
|
2007
|
2008
|
2007
|
|
USD/EUR
|
Euro
Forward Purchases
|
2008
|
-
|
972
|
-
|
972
|
|
KWD/USD
|
Kuwaiti
Dinar Forward Sales
|
2008
|
-
|
(6,434)
|
-
|
(6,434)
|
|
BRL/EUR
|
Euro
Forward Purchases
|
2009
|
4,901
|
-
|
6,716
|
-
|
|
BRL/USD
|
Brazilian
Real Forward Sales
|
2008
|
-
|
-
|
362
|
-
|
|
MXN/EUR
|
Euro
Forward Purchases
|
2009
|
5,432
|
-
|
5,671
|
-
|
|
10,333
|
(5,462)
|
12,749
|
(5,462)
|
|||
|
·
|
Interest
Rate Hedge
|
|
Fair
Value
|
Hedge
Accounting Reserve
|
|||||||
|
Type of
|
Notional
|
Year
ended December 31,
|
Year
ended December 31,
|
|||||
|
Derivative
|
Rate
|
Term
|
Rate
|
Amount
|
2008
|
2007
|
2008
|
2007
|
|
Interest
rate collars
|
Libor
6M
|
2008
|
4.45%
- 5.4%
|
800,000
|
-
|
(2,922)
|
-
|
(2,922)
|
|
Pay
fixed / Receive variable
|
Euribor
|
2009/2010
|
5.72%
|
3,054
|
(82)
|
(91)
|
(106)
|
(91)
|
|
Swaps
with KI (2.50%)
|
Libor
6M
|
2011
|
4.60%
- 5.08%
|
500,000
|
(29,138)
|
-
|
(29,631)
|
-
|
|
(29,220)
|
(3,013)
|
(29,737)
|
(3,013)
|
|||||
During
2008, total ineffectiveness recognized in profit and loss originated in cash
flow hedge was $5.2 million.
The
following is a summary of the hedge reserve evolution not including tax
effect:
|
Equity
Reserve Dec-06
|
Movements
2007
|
Equity
Reserve Dec-07
|
Movements
2008
|
Equity
Reserve Dec-08
|
|
|
Foreign
Exchange
|
811
|
(6,273)
|
(5,462)
|
18,211
|
12,749
|
|
Interest
Rate
|
1,267
|
(4,280)
|
(3,013)
|
(26,724)
|
(29,737)
|
|
Total
Cash flow Hedge
|
2,078
|
(10,553)
|
(8,475)
|
(8,513)
|
(16,988)
|
26 Contingencies,
commitments and restrictions to the distribution of profits
Contingencies
Tenaris
is involved in litigation arising from time to time in the ordinary course of
business. Based on management’s assessment and the advice of legal counsel, it
is not anticipated that the ultimate resolution of pending litigation will
result in amounts in excess of recorded provisions (Notes 23 and 24) that would
be material to Tenaris’ consolidated financial position or results of
operations.
88
26 Contingencies,
commitments and restrictions to the distribution of profits (Cont.)
Contingencies
(Cont.)
Asbestos-related
litigation
Dalmine
S.p.A. (“Dalmine”), a Tenaris subsidiary organized in Italy is currently subject
to 16 civil proceedings for work-related injuries arising from the use of
asbestos in its manufacturing processes during the period from 1960 to 1980. In
addition, another 39 asbestos related out-of-court claims have been forwarded to
Dalmine.
As of
December 31, 2008, the total claims pending against Dalmine were 55 (of which,
none are covered by insurance): during 2008, 9 new claims were filed, 4 claims were adjudicated,
out of which 4 were
paid, no claim was
dismissed and 6 claims were settled.
Aggregate settlement costs to date for Tenaris are Euro 6.9 million ($9.6
million). Dalmine estimates that its potential liability in connection with the
claims not yet settled is approximately Euro 17 million ($23.7
million).
Accruals
for Dalmine’s potential liability are based on the average of the amounts paid
by Dalmine for asbestos-related claims plus an additional amount related to some
reimbursements requested by the social security authority. The maximum potential
liability is not determinable as in some cases the requests for damages do not
specify amounts, and instead is to be determined by the court. The timing of
payment of the amounts claimed is not presently determinable.
Maverick
litigation
On
December 11, 2006, The Bank of New York (“BNY”), as trustee for the holders of
Tenaris’ subsidiary Maverick Tube Corporation (“Maverick”) 2004 4% Convertible
Senior Subordinated Notes due 2033 issued pursuant to an Indenture between
Maverick and BNY (“Noteholders”), filed a complaint against Maverick and Tenaris
in the United States District Court for the Southern District of New York. The
complaint alleges that Tenaris’ acquisition of Maverick triggered the “Public
Acquirer Change of Control” provision of Indenture, asserting breach of contract
claim against Maverick for refusing to deliver the consideration specified in
the “Public Acquirer Change of Control” provision of the Indenture to
Noteholders who tendered their notes for such consideration. This complaint
seeks a declaratory judgment that Tenaris’ acquisition of Maverick was a “Public
Acquirer Change of Control” under the Indenture, and asserts claims for tortuous
interference with contract and unjust enrichment against Tenaris. Defendants
filed a motion to dismiss the complaint, or in the alternative, for summary
judgment on March 13, 2007. Plaintiff filed a motion for partial summary
judgment on the same date. On January 25, 2008, Law Debenture Trust Company of
New York, “Law Debenture” (as successor to BNY as trustee under the
Indenture) was substituted for BNY as plaintiff.
On
October 15, 2008, the court denied Law Debenture’s motion for partial summary
judgment and granted defendants’ motion for summary judgment dismissing the
complaint in its entirety. On November 20, 2008, Law Debenture filed a notice of
appeal in the United States Court of Appeals for the Second
Circuit.
Tenaris
believes that these claims are without merit. Accordingly, no provision was
recorded in these Consolidated Financial Statements. Were plaintiff to prevail,
Tenaris estimates that the recovery would be approximately $50 million, plus
interest.
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 ARS83.5 million
(approximately $24.3 million) at December 31, 2008, 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
Financial Statements.
89
26 Contingencies,
commitments and restrictions to the distribution of profits (Cont.)
Contingencies
(Cont.)
Customer
Claim
A lawsuit
was filed on September 6, 2007, against three Tenaris’ subsidiaries, alleging
negligence, gross negligence and intentional acts characterized as fraudulent
inducement concerning allegedly defective well casing. Plaintiff alleged the
complete loss of one natural gas production well and formation damage that
precludes further exploration and production at the well site. The lawsuit was
subsequently amended to add the Company and other of its subsidiaries as
defendants and to change the claims to be breach of contract and fraud. On
October 22, 2008, the Plaintiff again amended its petition to add new counts
(including strict liability) and increase its prayer for damages to $245
million, plus punitive damages, treble damages and attorney fees. Each petition
was tendered to a Tenaris subsidiary insurer, and the Tenaris subsidiary
received the insurer’s agreement to provide a defense. The insurer has reserved
its rights with respect to its indemnity obligations. The case is set for trial
on June 9, 2009. A provision in the amount of $2.3 million has been recorded in
these Consolidated Financial Statements.
Labor
Claim
In
January 2002 several workers filed a lawsuit against Tubos de Acero de Venezuela
S.A., a Tenaris’s subsidiary (“TAVSA”) arguing that such company had made
incomplete payment of severance obligations and other labor benefits due to them
upon the end of their employment. The claim’s value is approximately $31.8
million. A decision concerning the admissible number of plaintiff’s is currently
pending for oral arguments before the Supreme Court of Justice. TAVSA believes
it has meritorious defenses and is vigorously defending the litigation. A
provision in the amount of $2.1 million has been recorded
in these Consolidated Financial Statements.
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. Prices are adjusted quarterly in
accordance with market conditions and the estimated aggregate amount of
the contract at current prices is approximately $732
million.
|
|
·
|
A
Tenaris company is a party to a ten year raw material purchase contract
with QIT, under which it committed to purchase steel bars, with deliveries
starting in July 2007. The estimated aggregate amount of the contract at
current prices is approximately $266.4
million.
|
|
·
|
A
Tenaris company is a party to a three year gas purchase contract with E.ON
Energia spa, under which it committed to purchase a minimum quantity of
gas (“TOP”). The estimated aggregate amount of the contract at current
prices is approximately $117 million. The Tenaris company has the
possibility to reduce its commitment in a percentage of approximately
13%.
|
|
·
|
A
Tenaris company is a party to a contract with SMS Meer GmbH for the
purchase of equipment, engineering, training and other services related to
the equipment for an outstanding amount of approximately $165
million.
|
|
·
|
A
Tenaris company is a party to transportation capacity agreements with
Transportadora de Gas del Norte S.A. for purchasing capacity of 1,000,000
cubic meters per day until 2017. As of December 31, 2008, the outstanding
value of this commitment was approximately $39.7 million. The Tenaris
company also expects to obtain additional gas transportation capacity of
315,000 cubic meters per day until 2027. This commitment is subject to the
enlargement of certain pipelines in
Argentina.
|
90
26 Contingencies,
commitments and restrictions to the distribution of profits (Cont.)
Commitments
(Cont.)
|
·
|
In
August 2004 a Tenaris company organized in Venezuela, entered into a
ten-year off-take contract pursuant to which it is required to sell to
Sidor S.A. (“Sidor”) on a take-or-pay basis 29.9% of its HBI production.
In addition, Sidor has the right to increase its proportion on Tenaris
subsidiary production by an extra 19.9% until reaching 49.8% of its HBI
production. Under the contract, the sale price is determined on a
cost-plus basis. The contract is renewable for additional three year
periods unless Tenaris subsidiary or Sidor object its renewal upon
one-year notice.
|
|
·
|
In
July 2004, a Tenaris company entered into a twenty-year agreement with
C.V.G. Electrificación del Caroní, C.A. (“Edelca”) for the purchase of
electric power under certain take-or-pay conditions, with an option to
terminate the contract at any time upon three years notice. The estimated
aggregated amount of the contract at contract prices is approximately
$40.6 million.
|
|
·
|
A
Tenaris company is a party to a contract with Siderar for the supply of
steam generated at the power generation facility owned by Tenaris in San
Nicolas, Argentina. Under this contract, the Tenaris company is required
to provide 250 tn/hour of steam and Siderar has the obligation to take or
pay this volume. The contract is due to terminate in
2018.
|
Restrictions to the distribution of profits and payment of dividends
As of
December 31, 2008, shareholders' 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,
2008
|
3,174,932
|
|
Total
shareholders equity in accordance with Luxembourg law
|
5,083,256
|
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, 2008, 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, 2008, retained earnings and result for the financial period of
Tenaris under Luxembourg law totals $3.2 billion, as detailed
below.
(all
amounts in thousands of U.S.
dollars)
|
Retained
earnings at December 31, 2007 under Luxembourg law
|
2,399,973
|
|
Dividends
received
|
1,338,868
|
|
Other
income and expenses for the year ended December 31, 2008
|
(115,305)
|
|
Dividends
paid
|
(448,604)
|
|
Retained
earnings at December 31, 2008 under Luxembourg law
|
3,174,932
|
91
27 Business
combinations and other acquisitions
(a)
Acquisition of Hydril Company (“Hydril”)
On May 7,
2007, Tenaris paid $2.0 billion to acquire Hydril, a North American manufacturer
of premium connections and pressure control products for the oil and gas
industry. To finance the acquisition, Tenaris entered into syndicated loans in
the amount of $2.0 billion, of which $0.5 billion were used to refinance an
existing loan in the Company. The balance of the acquisition cost was paid out
of cash on hand. Of the loan amount, $1.7 billion was allocated to the Company
and the balance to Hydril.
The main
covenants on these loan agreements are limitations on liens and encumbrances,
limitations on the sale of certain assets, restrictions on investments and
compliance with financial ratios (e.g., leverage ratio and interest coverage
ratio in Hydril’s syndicated loan agreement, and leverage ratio and debt service
coverage ratio in the Company’s syndicated loan agreement). In addition,
Hydril’s syndicated loan agreement has certain restrictions in capital
expenditures.
In
November 2007, the Company prepaid loans under the Company’s syndicated loan
agreement in a principal amount of $0.7 billion plus accrued interest thereon to
such date. In May and July 2008, the Company prepaid loans under the Company’s
syndicated loan agreement in a principal amount of $0.75 billion plus accrued
interest thereon.
Tenaris
began consolidating Hydril’s balance sheet and results of operations as from
May, 2007.
The
assets and liabilities arising from the acquisitions are as
follows:
|
Year
ended
December
31, 2007
|
||||
|
Other
assets and liabilities (net)
|
(348,876 | ) | ||
|
Property,
plant and equipment
|
152,540 | |||
|
Customer
relationships
|
593,800 | |||
|
Trade
names
|
149,100 | |||
|
Proprietary
technology
|
333,400 | |||
|
Goodwill
|
1,042,015 | |||
|
Net
assets acquired
|
1,921,979 | |||
|
Minority
interest
|
5,283 | |||
|
Sub-total
|
1,927,262 | |||
|
Cash-acquired
|
117,326 | |||
|
Purchase
consideration
|
2,044,588 | |||
|
Liabilities
paid as part of purchase agreement
|
- | |||
|
Total
disbursement
|
2,044,588 | |||
(*)
Includes costs directly to the acquisition
During
2007, businesses acquired in that year contributed revenues of $430.8 million
and net income of $44.5 million to Tenaris. Net income does not include
financial costs related to the operations recorded in other subsidiaries
different from Hydril.
Pro
forma data including acquisitions for all of 2007
Had the
Hydril transaction been consummated on January 1, 2007, then Tenaris’s unaudited
pro forma net sales and net income from continuing operations would have been
approximately $10.1 billion and $2.0 billion, respectively. These pro forma
results were prepared based on public information and unaudited accounting
records maintained under U.S. GAAP prior to such acquisition and adjusted by
depreciation and amortization of tangible and intangible assets and interest
expense of the borrowing incurred for the acquisition as described in Note 27(a)
considering the repayment stated in Note 27(c). Carrying amounts of assets,
liabilities and contingent liabilities in Hydril’s books, determined in
accordance with IFRS, immediately before the combination are not disclosed
separately, as Hydril did not report IFRS information.
92
27 Business
combinations and other acquisitions (Cont.)
(b)
Minority Interest
During
the year ended December 31, 2008, additional shares of Confab, Dalmine, Donasid
and Energy Network were acquired from minority shareholders for
approximately $18.6 million.
(c) Acquisition
of Maverick
On
October 5, 2006, Tenaris completed the acquisition of Maverick, pursuant to
which Maverick was merged with and into a wholly owned subsidiary of Tenaris. On
that date, Tenaris paid $65 per share in cash for each issued and outstanding
share of Maverick’s common stock. The value of the transaction at the
acquisition date was $3,160 million, including Maverick’s financial debt.
Tenaris began consolidating Maverick’s balance sheet and results of operations
in the fourth quarter of 2006.
To
finance the acquisition and the payment of related obligations, the Company and
certain Tenaris entities entered into syndicated loan facilities in an aggregate
of $2.7 billion; the balance was met from cash on hand. The main
covenants on these loan agreements are limitations on liens and encumbrances,
limitations on the sale of certain assets, certain restrictions on capital
expenditures, restrictions on investments and compliance with financial ratios
(e.g, leverage ratio and interest coverage ratio).
During
2007, the Company’s syndicated loan facility in an aggregate amount of $500 was
fully prepaid, Maverick’s syndicated loan was partially prepaid in an amount of
$210 million and Tenaris’s subsidiary Algoma Tubes syndicated loan facility in
an aggregate amount of $100 million was prepaid in its entirety.
In 2008,
Maverick prepaid a principal amount of $ 78 million of its syndicated
loan.
(d)
Tenaris Capitalization of Mandatory Convertible debt into shares of Ternium S.A.
(“Ternium”)
On
February 6, 2006, Ternium completed its initial public offering, 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. The Company received an additional 20,252,338
shares upon the mandatory conversion of its loans to Ternium. In addition to the
shares issued to the Company, 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 $26.7 million, which Tenaris
recognized in Other Reserves in equity.
At
December 31, 2008, the closing price of Ternium’s ADSs as quoted on the New York
Stock Exchange was $8.57 per ADS, giving Tenaris’ ownership stake a market value
of approximately $197 million. At December 31, 2008, the carrying value of
Tenaris’ ownership stake in Ternium, based on Ternium’s IFRS financial
statements, was approximately $504 million. See Note II.B.2.
28 Cash
flow disclosures
|
(i)
|
Changes
in working capital
|
Year
ended December 31,
|
|||||||||||
|
2008
|
2007
|
2006
|
|||||||||||
|
Inventories
|
(492,545 | ) | (252,810 | ) | (455,567 | ) | |||||||
|
Receivables
and prepayments
|
12,079 | 2,080 | (181,878 | ) | |||||||||
|
Trade
receivables
|
(374,463 | ) | (115,838 | ) | (226,678 | ) | |||||||
|
Other
liabilities
|
(71,638 | ) | 127,434 | 7,605 | |||||||||
|
Customer
advances
|
(174,014 | ) | 113,548 | 236,446 | |||||||||
|
Trade
payables
|
48,949 | 15,161 | 150,555 | ||||||||||
| (1,051,632 | ) | (110,425 | ) | (469,517 | ) | ||||||||
93
28 Cash
flow disclosures (Cont.)
|
(ii)
|
Income
tax accruals less payments
|
Year
ended December 31,
|
|||||||||||
|
2008
|
2007
|
2006
|
|||||||||||
|
Tax
accrued (*)
|
1,011,675 | 833,378 | 873,967 | ||||||||||
|
Taxes
paid
|
(1,236,713 | ) | (1,226,433 | ) | (817,131 | ) | |||||||
| (225,038 | ) | (393,055 | ) | 56,836 | |||||||||
(*) Does
not include tax accrued on the sale of Pressure Control, which was included in
discontinued operations.
|
(iii)
|
Interest
accruals less payments, net
|
||||||||||||
|
Interest
accrued
|
136,737 | 183,995 | 32,237 | ||||||||||
|
Interest
received
|
83,241 | 62,697 | 11,150 | ||||||||||
|
Interest
paid
|
(164,486 | ) | (267,994 | ) | (21,478 | ) | |||||||
| 55,492 | (21,302 | ) | 21,909 | ||||||||||
|
(iv)
|
Cash
and cash equivalents
|
||||||||||||
|
Cash
and short term liquid investments
|
1,538,769 | 962,497 | 1,372,329 | ||||||||||
|
Bank
overdrafts
|
(13,747 | ) | (8,194 | ) | (7,300 | ) | |||||||
|
Restricted
bank deposits
|
- | - | (21 | ) | |||||||||
| 1,525,022 | 954,303 | 1,365,008 | |||||||||||
29 Current
and non current assets held for sale and discontinued operations
Sale
of the pressure control business
On April
1, 2008, Tenaris sold to General Electric Company (GE) the pressure control
business acquired as part of the Hydril transaction for an amount equivalent on
a debt-free basis to $1,114 million. The result of this transaction was an
after-tax gain of $394.3 million, calculated as the net proceeds of the sale
less the book value of net assets held for sale, the corresponding tax effect
and related expenses.
Book
value of the Assets and Liabilities disposed:
|
At
March 31, 2008
|
||||
|
Property,
plant and equipment, net
|
64,556 | |||
|
Intangible
assets, net
|
295,371 | |||
|
Inventories
|
173,110 | |||
|
Trade
receivables
|
78,018 | |||
|
Other
assets
|
39,643 | |||
|
Total
current and non current assets held for sale
|
650,698 | |||
|
Deferred
tax liabilities
|
71,434 | |||
|
Customer
advances
|
128,975 | |||
|
Trade
payables
|
54,175 | |||
|
Other
liabilities
|
15,291 | |||
|
Liabilities
associated with current and non-current assets held for
sale
|
269,875 | |||
Sale
of Dalmine Energie
On
December 1, 2006, Tenaris completed the sale of a 75% participation of Dalmine
Energie, its Italian supply business, to E.ON Sales and Trading GmbH, a wholly
owned subsidiary of E.ON Energie AG (“E.ON”) and an indirect subsidiary of E.ON
AG for a purchase price of $58.9 million.
On
November 5, 2007, Tenaris completed the sale of its remaining 25% interest in
Dalmine Energie to E.ON Sales and Trading GmbH, an indirect subsidiary of E.ON
AG (E.ON), for a purchase price of approximately $28 million.
94
29 Current
and non current assets held for sale and discontinued operations
(Cont.)
Analysis
of the result of discontinued operations:
(i)
Income for discontinued operations
|
(all
amounts in thousands of U.S. dollars)
|
(*)
Year ended December 31,
|
|||||||||||
|
2008
|
2007
|
2006
|
||||||||||
|
Income
for discontinued operations
|
16,787 | 34,492 | 7,195 | |||||||||
|
After
tax gain on disposal of operations
|
394,323 | - | 39,985 | |||||||||
|
Net
income for discontinued operations
|
411,110 | 34,492 | 47,180 | |||||||||
(*)
Corresponds to Pressure Control (years 2008 and 2007) and Dalmine Energie (year
2006) operations
(ii) Net
cash flows attributable to discontinued operations
Cash
flows provided by operating activities in 2008 and 2007 amounted to $40.7
million and $42.1 million, respectively. Cash flow used in investing activities
in 2008 and 2007 amounted to $3.4 million and $8.6 million, respectively. Cash
flows used in financing activities in 2007 amounted to $22.0 million. These
amounts were estimated only for disclosure purposes, as cash flows from these
discontinued operations were not managed separately from other cash
flows.
30 Related
party transactions
Based on
the information most recently available to the Company, as of December 31,
2008:
|
·
|
San
Faustin N.V. owned 717,440,187 shares in the Company, representing 60.77%
of the Company’s capital and voting
rights.
|
|
·
|
San
Faustín N.V. owned all of its shares in the Company through its
wholly-owned subsidiary I.I.I. Industrial Investments
Inc.
|
|
·
|
Rocca
& Partners S.A. controlled a significant portion of the voting power
of San Faustín N.V. and had the ability to influence matters affecting, or
submitted to a vote of the shareholders of San Faustín N.V., such as the
election of directors, the approval of certain corporate transactions and
other matters concerning the company’s
policies.
|
|
·
|
There were
no controlling shareholders for Rocca & Partners
S.A..
|
|
·
|
Tenaris’s
directors and executive officers as a group owned 0.2% of the Company’s
outstanding shares, while the remaining 39.03% were publicly
traded.
|
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”. The following transactions were carried out with related
parties:
|
Year
ended December 31, 2008
|
|||||||||||||
|
Associated
(1)
|
Other
|
Total
|
|||||||||||
|
(i)
|
Transactions
|
||||||||||||
|
(a)
Sales of goods and services
|
|||||||||||||
|
Sales
of goods
|
74,420 | 37,636 | 112,056 | ||||||||||
|
Sales
of services
|
19,444 | 4,205 | 23,649 | ||||||||||
| 93,864 | 41,841 | 135,705 | |||||||||||
|
(b)
Purchases of goods and services
|
|||||||||||||
|
Purchases
of goods
|
123,704 | 24,161 | 147,865 | ||||||||||
|
Purchases
of services
|
125,161 | 79,037 | 204,198 | ||||||||||
| 248,865 | 103,198 | 352,063 | |||||||||||
95
30 Related
party transactions (Cont.)
|
Year
ended December 31, 2007
|
|||||||||||||
|
Associated
(2)
|
Other
|
Total
|
|||||||||||
|
(i)
|
Transactions
|
||||||||||||
|
(a)
Sales of goods and services
|
|||||||||||||
|
Sales
of goods
|
98,141 | 39,307 | 137,448 | ||||||||||
|
Sales
of services
|
18,712 | 5,110 | 23,822 | ||||||||||
| 116,853 | 44,417 | 161,270 | |||||||||||
|
(b)
Purchases of goods and services
|
|||||||||||||
|
Purchases
of goods
|
254,063 | 27,277 | 281,340 | ||||||||||
|
Purchases
of services
|
94,152 | 70,205 | 164,357 | ||||||||||
| 348,215 | 97,482 | 445,697 | |||||||||||
|
Year
ended December 31, 2006
|
|||||||||||||
|
Associated
(3)
|
Other
|
Total
|
|||||||||||
|
(i)
|
Transactions
|
||||||||||||
|
(a)
Sales of goods and services
|
|||||||||||||
|
Sales
of goods
|
120,890 | 56,524 | 177,414 | ||||||||||
|
Sales
of services
|
18,852 | 3,664 | 22,516 | ||||||||||
| 139,742 | 60,188 | 199,930 | |||||||||||
|
(b)
Purchases of goods and services
|
|||||||||||||
|
Purchases
of goods
|
103,003 | 33,930 | 136,933 | ||||||||||
|
Purchases
of services
|
17,168 | 80,485 | 97,653 | ||||||||||
| 120,171 | 114,415 | 234,586 | |||||||||||
|
At
December 31, 2008
|
|||||||||||||
|
Associated
(1)
|
Other
|
Total
|
|||||||||||
|
(ii)
|
Year-end
balances
|
||||||||||||
|
(a)
Arising from sales / purchases of goods / services
|
|||||||||||||
|
Receivables
from related parties
|
50,137 | 15,504 | 65,641 | ||||||||||
|
Payables
to related parties
|
(44,470 | ) | (5,974 | ) | (50,444 | ) | |||||||
| 5,667 | 9,530 | 15,197 | |||||||||||
|
(b)
Financial debt
|
|||||||||||||
|
Borrowings
|
(2,294 | ) | - | (2,294 | ) | ||||||||
|
At
December 31, 2007
|
|||||||||||||
|
Associated
(1)
|
Other
|
Total
|
|||||||||||
|
(ii)
|
Year-end
balances
|
||||||||||||
|
(a)
Arising from sales / purchases of goods / services
|
|||||||||||||
|
Receivables
from related parties
|
45,773 | 8,015 | 53,788 | ||||||||||
|
Payables
to related parties
|
(61,597 | ) | (7,379 | ) | (68,976 | ) | |||||||
| (15,824 | ) | 636 | (15,188 | ) | |||||||||
|
(b)
Financial debt
|
|||||||||||||
|
Borrowings
(5)
|
(27,482 | ) | - | (27,482 | ) | ||||||||
96
30 Related
party transactions (Cont.)
|
At
December 31, 2006
|
|||||||||||||
|
Associated
(4)
|
Other
|
Total
|
|||||||||||
|
(ii)
|
Year-end
balances
|
||||||||||||
|
(a)
Arising from sales / purchases of goods / services
|
|||||||||||||
|
Receivables
from related parties
|
25,400 | 14,429 | 39,829 | ||||||||||
|
Payables
to related parties
|
(37,920 | ) | (13,388 | ) | (51,308 | ) | |||||||
| (12,520 | ) | 1,041 | (11,479 | ) | |||||||||
|
(b)
Other balances
|
|||||||||||||
|
Receivables
|
2,079 | - | 2,079 | ||||||||||
|
(c)
Financial debt
|
|||||||||||||
|
Borrowings
(6)
|
(60,101 | ) | - | (60,101 | ) | ||||||||
(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 Internacional Private
Ltd.
(2)
Includes Ternium, Condusid, Finma, Lomond, Dalmine Energie S.p.A. (“Dalmine
Energie”) (until October 2007), Socotherm, Hydril Jindal
Internacional Private Ltd. and TMK – Hydril JV.
(3)
Includes Ternium, Condusid, Finma (as from September 2006), Lomond (as from
October 2006) and Dalmine Energie (as from December 2006).
(4)
Includes Ternium, Condusid, Finma, Lomond and Dalmine Energie.
(5)
Includes loan from Sidor to Matesi of $26.4 million at December 31,
2007.
(6)
Includes loan from Sidor to Matesi of $58.4 at December 31, 2006.
Officers
and directors’ compensation
The
aggregate compensation of the directors and executive officers earned during
2008, 2007 and 2006 amounts to $22.5 million, $20.0 million and $16.8 million
respectively.
31 Principal
subsidiaries
The
following is a list of Tenaris principal subsidiaries and its direct and
indirect percentage of ownership of each controlled company at December 31,
2008, 2007 and 2006.
|
Company
|
Country
of Organization
|
Main
activity
|
Percentage
of ownership at December 31, (*)
|
||
|
2008
|
2007
|
2006
|
|||
|
ALGOMA
TUBES INC.
|
Canada
|
Manufacturing
of seamless steel pipes
|
100%
|
100%
|
100%
|
|
CONFAB
INDUSTRIAL S.A. and subsidiaries (a)
|
Brazil
|
Manufacturing
of welded steel pipes and capital goods
|
40%
|
39%
|
39%
|
|
DALMINE
S.p.A.
|
Italy
|
Manufacturing
of seamless steel pipes
|
99%
|
99%
|
99%
|
|
HYDRIL
COMPANY and subsidiaries (except detailed) (b)
|
USA
|
Manufacturing
of steel products
|
100%
|
100%
|
0%
|
|
HYDRIL
U.K. LTD.
|
United
Kingdom
|
Manufacturing
of steel products
|
100%
|
100%
|
0%
|
|
INVERSIONES
BERNA S.A.
|
Chile
|
Financial
Company
|
100%
|
100%
|
100%
|
|
MATESI.
MATERIALES SIDERURGICOS S.A.
|
Venezuela
|
Production
of hot briquetted iron (HBI)
|
50%
|
50%
|
50%
|
|
MAVERICK
C&P, INC.
|
USA
|
Manufacturing
of welded steel pipes
|
100%
|
100%
|
100%
|
|
MAVERICK
TUBE CORPORATION and subsidiaries (except detailed)
|
USA
|
Manufacturing
of welded steel pipes
|
100%
|
100%
|
100%
|
|
MAVERICK
TUBE. LLC (e)
|
USA
|
Manufacturing
of welded steel pipes
|
100%
|
100%
|
100%
|
|
NKKTUBES
|
Japan
|
Manufacturing
of seamless steel pipes
|
51%
|
51%
|
51%
|
97
31 Principal
subsidiaries (Cont.)
|
Company
|
Country
of Organization
|
Main
activity
|
Percentage
of ownership at December 31, (*)
|
||
|
2008
|
2007
|
2006
|
|||
|
PRUDENTIAL
STEEL ULC
|
Canada
|
Manufacturing
of welded steel pipes
|
100%
|
100%
|
100%
|
|
REPUBLIC
CONDUIT MANUFACTURING
|
USA
|
Manufacturing
of welded steel pipes
|
100%
|
100%
|
100%
|
|
S.C.
SILCOTUB S.A.
|
Romania
|
Manufacturing
of steel products
|
100%
|
99%
|
99%
|
|
SIAT
S.A.
|
Argentina
|
Manufacturing
of welded and seamless steel pipes
|
82%
|
82%
|
82%
|
|
SIDERCA
S.A.I.C. and subsidiaries (except detailed) (c)
|
Argentina
|
Manufacturing
of seamless steel pipes
|
100%
|
100%
|
100%
|
|
SIDTAM
LTD.
|
British
Virgin Islands
|
Holding
Company
|
100%
|
100%
|
100%
|
|
TALTA
- TRADING E MARKETING SOCIEDADE UNIPESSOAL LDA.
|
Madeira
|
Holding
Company
|
100%
|
100%
|
100%
|
|
TAVSA
- TUBOS DE ACERO DE VENEZUELA SA
|
Venezuela
|
Manufacturing
of seamless steel pipes
|
70%
|
70%
|
70%
|
|
TENARIS
CONNECTION AG LTD. and subsidiaries (except detailed)
|
Liechtenstein
|
Ownership
and licensing of steel technology
|
100%
|
100%
|
100%
|
|
TENARIS
FINANCIAL SERVICES S.A.
|
Uruguay
|
Financial
Company
|
100%
|
100%
|
100%
|
|
TENARIS
GLOBAL SERVICES (CANADA) INC.
|
Canada
|
Marketing
of steel products
|
100%
|
100%
|
100%
|
|
TENARIS
GLOBAL SERVICES (PANAMA) S.A. - Suc. Colombia
|
Colombia
|
Marketing
of steel products
|
100%
|
100%
|
100%
|
|
TENARIS
GLOBAL SERVICES (U.S.A.) CORPORATION
|
USA
|
Marketing
of steel products
|
100%
|
100%
|
100%
|
|
TENARIS
GLOBAL SERVICES (UK) LTD.
|
United
Kingdom
|
Marketing
of steel products
|
100%
|
100%
|
100%
|
|
TENARIS
GLOBAL SERVICES NORWAY A.S.
|
Norway
|
Marketing
of steel products
|
100%
|
100%
|
100%
|
|
TENARIS
GLOBAL SERVICES S.A. and subsidiaries (except detailed)
(d)
|
Uruguay
|
Holding
Company and marketing of steel products
|
100%
|
100%
|
100%
|
|
TENARIS
INVESTMENTS LTD and subsidiaries
|
Ireland
|
Holding
Company
|
100%
|
100%
|
100%
|
|
TUBOS
DE ACERO DE MEXICO SA
|
Mexico
|
Manufacturing
of seamless steel pipes
|
100%
|
100%
|
100%
|
|
TUBOS
DEL CARIBE LTDA.
|
Colombia
|
Manufacturing
of welded steel pipes
|
100%
|
100%
|
100%
|
(*) All
percentages rounded.
(a)
Tenaris holds 99% of the voting shares of Confab Industrial S.A. Tenaris holds
40% of Confab’s subsidiaries except for Tenaris Confab Hastes de Bombeio
S.A.where it holds 70%.
(b)
Tenaris holds 100% of Hydril’s subsidiaries except for Technical Drilling &
Production Services Nigeria Ltd. where it holds 60%.
(c)
Tenaris holds 100% of Siderca’s subsidiaries, except for Scrapservice S.A. where
it holds 75%.
(d)
Tenaris holds 95% of Tenaris Supply Chain S.A and 95% of Tenaris Saudi Arabia
Limited.
(e)
Continuing company of Maverick Tube LLC. and Tenaris Hickman L.P.
32 Investment
in Ternium: Sidor nationalization process
On
December 31, 2008, the Company held 11.46% of the capital stock of Ternium
S.A.
On March
31, 2008 Ternium controlled shares representing approximately 59.7% of Sidor’s
capital, while Corporación Venezolana de Guayana (“CVG”) (a Venezuelan
governmental entity) and Banco
de Desarrollo Económico y Social de Venezuela, or BANDES (a bank owned by
the Venezuelan government), held approximately 20.4% of Sidor and certain Sidor
employees and former employees held the remaining 19.9% interest.
On April
8, 2008, the Venezuelan government announced its intention to take control over
Sidor. Following the confirmation of the Venezuelan government’s decision to
nationalize Sidor, on April 29, 2008, the National Assembly of Venezuela passed
a resolution declaring that the shares of Sidor, together with all of its
assets, are of public and social interest. This resolution authorized the
Venezuelan government to take any action it may deem appropriate in connection
with any such assets, including expropriation.
98
32 Investment
in Ternium: Sidor nationalization process (Cont.)
On May
11, 2008, Decree Law 6058 of the President of Venezuela regulating the steel
production activity in the Guayana, Venezuela region, dated April 30, 2008 (the
“Decree”) was published. The Decree ordered that Sidor and its subsidiaries and
associated companies be transformed into state-owned enterprises (“empresas del estado”), with
Venezuela owning not less than 60% of their share capital. The Decree provided
for the creation of a committee to negotiate over a 60-day period a fair price
for the shares to be transferred to Venezuela.
On July
12, 2008, upon expiration of the above mentioned term, Venezuela, acting through
CVG, assumed operational control of Sidor. Following the change in operational
control, CVG assumed complete responsibility for Sidor's operations and Sidor's
board of directors ceased to function.
The term
provided in the Decree for the negotiation of the conditions under which all or
a significant part of Ternium’s interest in Sidor will be transferred to
Venezuela was extended until August 18, 2008. Negotiations continued even after
this additional term expired. On August 29, 2008, the President of
Venezuela publicly stated his rejection to the latest proposal submitted by
Ternium as part of their ongoing negotiations. The negotiations were
subsequently resumed and continue to be under way. As the date of issuance of
these financial statements, Ternium continues to retain formal title over the
Sidor shares.
Ternium
valued its investment in Sidor at its carrying amount of $1.3 billion. In
determining fair value using several valuation techniques, in all cases Ternium
concluded that the amount of expected compensation for its Sidor asset would be
higher than its carrying amount and, consequently, did not recognize any
impairment loss in connection with that asset. Ternium reported, however, that
the variability in the range of fair value estimates is significant and the
probabilities of the various estimates within that range cannot be reasonably
assessed. Accordingly, following the guidance set forth in paragraphs 46(c), AG
80 and AG 81 of IAS 39, Ternium continues to record the Sidor asset at its
carrying amount.
33 Subsequent
event
|
|
Annual
Dividend Proposal
|
On
February 25, 2009 the Company’s board of directors proposed, for the approval of
the annual general shareholders' meeting to be held on June 3, 2009, the payment
of an annual dividend of $0.43 per share ($0.86 per ADS), or approximately $507
million, which includes the interim dividend of $0.13 per share ($0.26 per ADS)
paid on November 27, 2008. If the annual dividend is approved by the
shareholders, a dividend of $0.30 per share ($0.60 per ADS), or approximately
$354 million will be paid. These Consolidated Financial Statements do not
reflect this dividend payable.
|
|
Tenaris
to acquire control of Seamless Pipe Indonesia
Jaya
|
Tenaris
has signed an agreement to acquire from Bakrie & Brothers TbK, Green Pipe
International Limited and Cakrawala Baru 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
$73.5 million, with $24.9 million being payable as consideration for SPIJ's
equity and $48.6 million as consideration for the assignment of certain sellers'
loan to SPIJ. SPIJ has an annual processing capacity of 120,000 tons and has had
a commercial alliance with Tenaris for more than a decade. SPIJ employs around
500 persons and had revenues of approximately $140 million in 2008.
The
acquisition is subject to customary conditions, including regulatory approval
and compliance with certain minority shareholder rights.
|
Ricardo
Soler
|
||
|
Chief
Financial Officer
|
99
Annual
Accounts
Luxembourg
GAAP as of December 31, 2008
100
| PricewaterhouseCoopers | |
| Société à responsabilité limitée | |
| Réviseur d'entreprises | |
| 400 Route d’Esch | |
| Independent Auditor’s report | B.P. 1443 |
| L-1014 Luxembourg | |
| Telephone +352 494848-1 | |
| To the Shareholders of | Facsimile +352 494848-2900 |
| Tenaris S.A. | www.pwc.com/lu |
| info@lu.pwc.com |
Report
on the annual accounts
We have
audited the accompanying annual accounts of Tenaris S.A., which comprise the
balance sheet as at December 31, 2008, and the profit and loss account for the
year then ended, and a summary of significant accounting policies and other
explanatory notes.
Board
of Directors’ responsibility for the annual accounts
The Board
of Directors is responsible for the preparation and fair presentation of these
annual accounts in accordance with Luxembourg legal and regulatory requirements
relating to the preparation of the annual accounts. This responsibility
includes: designing, implementing and maintaining internal control relevant to
the preparation and fair presentation of annual accounts that are free from
material misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are
reasonable in the circumstances.
Auditor’s
responsibility
Our
responsibility is to express an opinion on these annual accounts based on our
audit. We conducted our audit in accordance with International Standards on
Auditing as adopted by the “Institut des Réviseurs d’Entreprises”. Those
standards require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance whether the annual accounts are free
from material misstatement.
101
An audit
involves performing procedures to obtain audit evidence about the amounts and
disclosures in the annual accounts. The procedures selected depend on the
Auditor’s judgment, including the assessment of the risks of material
misstatement of the annual accounts, whether due to fraud or error. In making
those risk assessments, the Auditor considers internal control relevant to the
entity’s preparation and fair presentation of the annual accounts in order to
design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by
the Board of Directors, as well as evaluating the overall presentation of the
annual accounts.
We
believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our audit opinion.
Opinion
In our
opinion, these annual accounts give a true and fair view of the financial
position of Tenaris S.A. as of December 31, 2008 and of the results of its
operations for the year then ended in accordance with Luxembourg legal and
regulatory requirements relating to the preparation of annual
accounts.
Report
on other legal and regulatory requirements
The
management report, which is the responsability of the Board of Directors is in
accordance with the annual accounts.
| PricewaterhouseCoopers S.à r.l. |
Luxembourg,
April 21, 2009
|
| Réviseur d’entreprises |
Represented
by
Mervyn R.
Martins
102
Tenaris
S.A.
Balance
Sheet as at December 31, 2008
(expressed
in United States Dollars)
|
Note
|
2008
|
2007
|
||||||||||
|
USD
|
USD
|
|||||||||||
|
ASSETS
|
||||||||||||
|
Fixed
assets
|
||||||||||||
|
-
Intangible assets - Reorganization cost
|
3 | - | 267,500 | |||||||||
|
Financial
assets
|
||||||||||||
|
-
Shares in subsidiaries and associated companies
|
5.1 | 5,178,465,164 | 5,301,130,193 | |||||||||
|
-
Loans to subsidiaries companies
|
5.2 | 243,727,300 | 883,727,300 | |||||||||
|
-
Other receivables
|
4 | - | 1,038,855 | |||||||||
| 5,422,192,464 | 6,186,163,848 | |||||||||||
|
Current
assets
|
||||||||||||
|
-
Intercompany loans and receivables
|
6 | 35,998,143 | 32,391,204 | |||||||||
|
-
Other receivables
|
4 | 408,643 | 3,063,984 | |||||||||
|
-
Short term investments
|
7 | 204,625,104 | 612,476 | |||||||||
|
-
Cash at banks
|
90,583 | 283,821 | ||||||||||
| 241,122,473 | 36,351,485 | |||||||||||
|
Total
assets
|
5,663,314,937 | 6,222,515,333 | ||||||||||
|
LIABILITIES
|
||||||||||||
|
Shareholders'
equity
|
8 | |||||||||||
|
-
Subscribed capital
|
1,180,536,830 | 1,180,536,830 | ||||||||||
|
-
Share premium account
|
609,732,757 | 609,732,757 | ||||||||||
|
-
Legal reserve
|
9 | 118,053,683 | 118,053,683 | |||||||||
|
-
Retained earnings
|
10 | 1,951,369,792 | 1,019,465,873 | |||||||||
|
-
Profit for the financial year
|
1,223,562,643 | 1,380,507,915 | ||||||||||
| 5,083,255,705 | 4,308,297,058 | |||||||||||
|
Provisions
|
||||||||||||
|
-
Tax provision
|
12 | 513,042 | 419,485 | |||||||||
|
-
Other provisions
|
659,494 | 535,000 | ||||||||||
| 1,172,536 | 954,485 | |||||||||||
|
Debts
|
||||||||||||
|
-
Intercompany
|
13 | |||||||||||
|
-
due within a year
|
315,434,121 | 309,454,458 | ||||||||||
|
-
due within more than a year
|
6,250,000 | 592,006,213 | ||||||||||
|
-
Borrowings
|
14 | |||||||||||
|
-
due within a year
|
252,607,552 | 7,826,250 | ||||||||||
|
-
due within more than a year
|
- | 1,000,000,000 | ||||||||||
|
-
Accounts payable due within a year
|
4,595,023 | 3,976,869 | ||||||||||
| 578,886,696 | 1,913,263,790 | |||||||||||
|
Total
liabilities
|
5,663,314,937 | 6,222,515,333 | ||||||||||
|
The
accompanying notes are an integral part of these annual
accounts.
|
||||||||||||
103
Tenaris
S.A.
Profit
and loss account for the financial year ended December 31, 2008
(expressed
in United States Dollars)
|
Note
|
2008
|
2007
|
||||||||||
|
USD
|
USD
|
|||||||||||
|
CHARGES
|
||||||||||||
|
Amortization
of reorganization cost
|
3 | 267,500 | 3,162,504 | |||||||||
|
Administrative
and general expenses
|
15 | 7,843,048 | 10,105,755 | |||||||||
|
Value
adjustments in respect of financial assets
|
5.1 | 72,665,029 | - | |||||||||
|
Interest
expense - Intercompany
|
16 | 28,300,129 | 19,459,881 | |||||||||
|
Interest
expense - Syndicated loan
|
14 | 25,657,583 | 69,149,634 | |||||||||
|
Cost
for issue of debt
|
4 | 3,753,050 | 5,199,406 | |||||||||
|
Realized
loss on exchange
|
81,495 | 338,833 | ||||||||||
|
Other
financial results
|
2,802,000 | - | ||||||||||
|
Taxes
|
12 | 1,958,553 | 3,622,001 | |||||||||
|
Profit
for the financial year
|
1,223,562,643 | 1,380,507,915 | ||||||||||
|
Total
charges
|
1,366,891,030 | 1,491,545,929 | ||||||||||
|
INCOME
|
||||||||||||
|
Dividend
income
|
17 | 1,338,867,500 | 1,371,625,117 | |||||||||
|
Gain
from transactions with affiliated companies
|
5.1 | - | 49,436,049 | |||||||||
|
Interest
income - Intercompany
|
18 | 26,928,964 | 39,357,776 | |||||||||
|
Interest
income - Third parties
|
19 | 968,962 | 11,041,551 | |||||||||
|
Realized
gain on short term investments
|
64,384 | 4,498,575 | ||||||||||
|
Realized
gain on exchange
|
61,220 | 15,586,861 | ||||||||||
|
Total
income
|
1,366,891,030 | 1,491,545,929 | ||||||||||
|
The
accompanying notes are an integral part of these annual
accounts.
|
||||||||||||
104
Tenaris
S.A.
Notes
to audited annual accounts as at December 31 , 2008
Note 1 –
Background and description of the business
Tenaris
S.A. (the “Company” or “Tenaris”) was incorporated on December 17, 2001 under
the name of Tenaris Holding S.A. as a limited liability company (taking
advantage of the law of July 31, 1929, on holding companies) under the laws of
Luxembourg. Then, on June 26, 2002, it changed its name to Tenaris
S.A.
Tenaris’s
objective is to invest mainly in companies that manufacture and market steel
tubes and other businesses. Tenaris and its subsidiaries are leading global
suppliers of steel tubes and related services for the world’s energy industry
and certain other industrial applications.
Tenaris
prepares and publishes consolidated financial statements which include further
information on Tenaris and its subsidiaries. They are available at the
registered office of the Company, 46a avenue John F. Kennedy, L-1855,
Luxembourg.
Note 2 –
Summary of significant accounting policies
2.1 Accounts
The
annual accounts have been prepared in accordance with Luxembourg legal
requirements and accounting standards, on a basis consistent to that used in the
annual accounts for the financial year ended December 31, 2007.
2.2 Foreign
currency translation
Current
assets and liabilities denominated in currencies other than the United States
dollar (“USD”) are translated into USD at the rate of exchange at the balance
sheet date. The resulting gains or losses are reflected in the Profit and loss
account for the financial year. Income and expenses in currencies other than the
USD are translated into USD at the exchange rate prevailing at the date of each
transaction.
2.3 Reorganization
cost
Reorganization
cost mainly comprised fees for professional services that were incurred in the
reorganization process. These costs were fully amortized over a period of five
years (see Note 3).
2.4 Financial
assets
Shares in
subsidiaries and associated companies are stated at cost, adding to the price
paid the expenses incidental thereto. In case of other than a temporary decline
in the value of an investment, its carrying value will be reduced to recognize
this decline. Reductions in the carrying value will be reversed in case of a
rise in the value of the investment or when the reasons for the reduction no
longer exist.
Loans to
subsidiaries companies are stated at amortized cost.
2.5 Short
term investments
Short
term investments are valued at market value, expressed in USD, at the balance
sheet date.
105
Tenaris
S.A.
Notes
to audited annual accounts as at December 31 , 2008 (Cont’d)
Note 2 –
Summary of significant accounting policies (Cont’d)
2.6 Borrowings
Borrowings
are stated at amortized cost. The related transaction costs are initially
recognized as an asset included in “Other receivables”, and subsequently
amortized over the period of the debt, taking into account prepayments, if
any.
Note 3 –
Fixed assets – Intangible assets – Reorganization cost
|
2008
|
2007
|
|||||||
|
USD
|
USD
|
|||||||
|
Value
at the beginning of the financial year
|
15,800,610 | 15,800,610 | ||||||
|
Amortization
|
||||||||
|
-
at the beginning of the financial year
|
15,533,110 | 12,370,606 | ||||||
|
-
charge of the financial year
|
267,500 | 3,162,504 | ||||||
|
-
at the end of the financial year
|
15,800,610 | 15,533,110 | ||||||
|
Net
book value at the end of the financial year
|
- | 267,500 | ||||||
Note 4 –
Other receivables
|
2008
|
2007
|
|||||||||||||||
|
Current
|
Non-current
|
Current
|
Non-current
|
|||||||||||||
|
USD
|
USD
|
USD
|
USD
|
|||||||||||||
|
Value
at the beginning of the financial year
(1)
|
3,798,103 | 5,413,609 | 725,061 | 2,125,190 | ||||||||||||
|
Additions
(2)
|
26,354 | - | 3,073,042 | 3,288,419 | ||||||||||||
| 3,824,457 | 5,413,609 | 3,798,103 | 5,413,609 | |||||||||||||
|
Amortization
of cost for issue of debt
|
||||||||||||||||
|
-
at the beginning of the financial year
|
734,119 | 4,374,754 | 126,551 | - | ||||||||||||
|
-
charge of the financial year
(3)
|
2,681,695 | 1,038,855 | 607,568 | 4,374,754 | ||||||||||||
|
-
at the end of the financial year
|
3,415,814 | 5,413,609 | 734,119 | 4,374,754 | ||||||||||||
|
Net
book value at the end of the financial year
|
408,643 | - | 3,063,984 | 1,038,855 | ||||||||||||
|
(1)
corresponds to the deferred costs for issue of debt, except for prepaid
expenses included in the short term portion (2008: USD 124,587 and 2007:
USD 194,126).
|
||||||||||||||||
|
(2)
includes the net movement of prepaid expenses during the financial year
(2008: positive USD 26,354 and 2007: negative USD 69,539).
|
||||||||||||||||
|
(3)
amount included in the caption "Cost for issue of debt" in the Profit and
loss account for the financial years ended December 31, 2008 and
2007.
|
||||||||||||||||
106
Tenaris
S.A.
Notes
to audited annual accounts as at December 31 , 2008 (Cont’d)
Note 5 –
Financial assets
5.1 Shares
in subsidiaries and associated companies
Movements
of investments in subsidiaries and associated companies during the financial
year are as follows:
|
Company
|
Country
|
%
of ownership
|
Book
value at 12.31.2007
|
Additions
|
Decreases
|
Book
value at 12.31.2008
|
|
(*)
|
USD
|
USD
|
USD
|
USD
|
||
|
Maverick
Tube Corporation
|
U.S.A.
|
100.0%
|
1,790,421,829
|
-
|
(72,665,029)
|
1,717,756,800
|
|
Siderca
S.A.I.C.
|
Argentina
|
100.0%
|
1,604,950,726
|
-
|
-
|
1,604,950,726
|
|
Hydril
Company
|
U.S.A.
|
100.0%
|
960,208,982
|
-
|
-
|
960,208,982
|
|
Ternium
S.A.
|
Luxembourg
|
11.5%
|
459,970,986
|
-
|
-
|
459,970,986
|
|
Tubos
de Acero de México S.A.
|
México
|
100.0%
|
303,244,203
|
-
|
-
|
303,244,203
|
|
Tenaris
Investments Limited
|
Ireland
|
100.0%
|
100,010,000
|
-
|
(50,000,000)
|
50,010,000
|
|
Tenaris
Global Services S.A.
|
Uruguay
|
100.0%
|
63,047,650
|
-
|
-
|
63,047,650
|
|
Tenaris
Connections A.G.
|
Liechtenstein
|
100.0%
|
11,567,000
|
-
|
-
|
11,567,000
|
|
Sidtam
Limited
|
B.V.I.
|
100.0%
|
7,702,000
|
-
|
-
|
7,702,000
|
|
Talta
- Trading e Marketing, Sociedade Unipessoal Lda.
|
Madeira
|
100.0%
|
6,817
|
-
|
-
|
6,817
|
|
Shares
in subsidiaries and associated companies
|
5,301,130,193
|
-
|
(122,665,029)
|
5,178,465,164
|
||
|
(*)
It represents the equity interest held directly by Tenaris and through any
of its subsidiaries.
|
||||||
Hydril
Company (“Hydril”)
On May 7,
2007, Tenaris and its wholly owned subsidiary incorporated in February 2007,
Hokkaido Acquisition, Inc. (“Hokkaido”) paid USD 2.0 billion to acquire Hydril,
a North American manufacturer of premium connections and pressure control
products for the oil and gas industry. Pursuant to this acquisition, Hokkaido
merged with and into Hydril.
Relating
to this transaction the Company accounted for, in the financial year 2007, an
acquisition price of USD 960.2 million which comprises USD 950.0 million for a
capital contribution to Hokkaido and USD 10.2 million of associated
costs.
To
finance the acquisition, Tenaris and Hydril entered into syndicated loans of USD
1.7 billion and USD 0.3 billion, respectively, of which USD 0.5 billion were
used to refinance an existing loan in the Company (see Note 14). The balance of
the acquisition cost was paid out of cash on hand.
107
Tenaris
S.A.
Notes
to audited annual accounts as at December 31,
2008 (Cont’d)
On
January 28, 2008, Tenaris and Hydril entered into an agreement with General
Electric Company
108
Tenaris
S.A.
Notes
to audited annual accounts as at December 31 , 2008 (Cont’d)
Note 5 –
Financial assets (Cont’d)
5.1 Shares
in subsidiaries and associated companies (Cont’d)
Hydril
Company (“Hydril”) (Cont’d)
(“GE”)
pursuant to which Hydril agreed to sell to GE its pressure control business. On
April 1, 2008, the sale was completed for an amount equivalent on a debt-free
basis to USD 1.1 billion.
Tamsider
LLC (“Tamsider”)
On
November 30, 2007 Tenaris, as the sole member of Tamsider, decided to dissolve
and to cause the company to be wound up, liquidated and terminated.
Consequently, its remaining assets were distributed to Tenaris. Earlier on June
6, 2007 Tamsider shareholders’ meeting had resolved to decrease its capital
through a distribution of USD 137.1 million, to be offset against the
Receivables hold by this company with Tenaris. Related to these
transactions Tenaris:
Derecognized
the carrying amount of the investment in Tamsider (USD 87.8
million).
Recognized
under the caption “Gain from transactions with affiliated companies” in the
Profit and loss account for the financial year ended on December 31, 2007 a gain
of USD 49.4 million.
Maverick
Tube Corporation (“Maverick”)
At
December 31, 2008 Tenaris determined that, due to changes in economic and
financial market conditions, the carrying value of the shares in Maverick
exceeded its recoverable amount. As a consequence, the Company recognized an
impairment charge of USD 72.7 million under the caption "Value adjustments in
respect of financial assets" in the Profit and loss account for the financial
year ended December 31, 2008.
Tenaris
Investments Limited
On
October 24, 2008 Tenaris received from its subsidiary Tenaris Investments
Limited USD 50.0 million, paid out of its distributable reserves, as a repayment
of a cash contribution made by Tenaris for a total amount of USD 100.0 million,
paid in two equal installments on September 20, 2004 and October 24, 2005.
Related to this transaction, Tenaris reduced the carrying amount of the
investment in Tenaris Investments Limited.
5.2 Loans
to subsidiaries companies
|
2008
|
2007
|
|||||||
|
USD
|
USD
|
|||||||
|
Hydril
Company
|
133,727,300 | 773,727,300 | ||||||
|
Maverick
Tube Corporation
|
110,000,000 | 110,000,000 | ||||||
| 243,727,300 | 883,727,300 | |||||||
109
Tenaris
S.A.
Notes
to audited annual accounts as at December 31,
2008 (Cont’d)
In
connection with Hydril acquisition mentioned in Note 5.1, in May 2007 Tenaris
granted a loan to Hokkaido, subsequently merged with and into Hydril, for a
nominal amount of USD 806.6 million. This loan accrues interest at Libor plus 1%
and is payable in nine equal installments, the first one due in May 2011 and the
following eight every six months. This loan is subordinated and subject in right
of payment to the obligations of Hydril under the syndicated loan agreement
signed by Hydril on April 19, 2007 for a nominal amount of USD 300.0
million. Hydril
has partially prepaid the loan as follows: USD 34.0 million on November 19,
2007 (principal: USD 32.9 million and interest: USD 1.1 million); USD 531.2
million on April 28, 2008 (principal: USD 500.0 million and interest:
USD 31.2 million) and USD 140.9 million on July 7, 2008 (principal: USD
140.0 million and interest: USD 0.9 million). The outstanding principal
amounts to USD 133.7 million.
110
Tenaris
S.A.
Notes
to audited annual accounts as at December 31 , 2008 (Cont’d)
Note 5 –
Financial assets (Cont’d)
5.2 Loans
to subsidiaries companies (Cont’d)
On
December 27, 2007, Tenaris used the funds borrowed from Tenaris Financial
Services S.A. (see Note 13) to grant a loan to Maverick, for a nominal amount of
USD 110.0 million. This loan accrues interest at Libor plus 1%, payable every
six months. The aggregate principal amount is payable on December 27, 2012. The
loan granted by the Company is subordinated in priority of payment to the loans
granted with reference to the syndicated loan agreement dated September 21, 2006
and amended on November 24, 2006, April 20, 2007 and June 15, 2007 entered into
by Maverick for a nominal amount of USD 700.0 million.
Note 6 –
Intercompany loans and receivables
|
2008
|
2007
|
|||||||
|
USD
|
USD
|
|||||||
|
Hydril
Company (1)
|
35,954,504 | 32,303,357 | ||||||
|
Maverick
Tube Corporation (2)
|
43,542 | 87,503 | ||||||
|
Tenaris
Investments Limited
|
97 | 188 | ||||||
|
Tenaris
Financial Services S.A.
|
- | 156 | ||||||
| 35,998,143 | 32,391,204 | |||||||
|
(1)
includes the outstanding interests of the loan mentioned in Note 5.2.
(2008: USD 3,545,654 and 2007: USD 32,303,357).
|
||||||||
|
(2)
corresponds to outstanding interests of the loan mentioned in Note
5.2.
|
||||||||
On
September 12, 2008, Tenaris granted a loan to Hydril for a nominal amount of USD
32.0 million which accrues interest at Libor plus 1%. The aggregate principal
amount as well as interests accrued is due and payable on September 11, 2009.
This loan is subordinated and subject in right of payment to the obligations of
Hydril under the syndicated loan agreement signed by Hydril on April 19, 2007
for a nominal amount of USD 300.0 million.
Note 7 –
Short term investments
|
2008
|
2007
|
|||||||
|
USD
|
USD
|
|||||||
|
Liquidity
funds
|
204,563,681 | 510,081 | ||||||
|
Time
deposits with subsidiaries
|
61,423 | 102,395 | ||||||
| 204,625,104 | 612,476 | |||||||
111
Tenaris
S.A.
Notes
to audited annual accounts as at December 31 , 2008 (Cont’d)
Note 8 –
Shareholders’ equity
|
Item
|
Suscribed
capital
|
Share
premium account
|
Legal reserve
|
Retained
earnings
|
Shareholders'
equity
|
|
USD
|
USD
|
USD
|
USD
|
USD
|
|
|
Balance
at the beginning of the financial year
|
1,180,536,830
|
609,732,757
|
118,053,683
|
2,399,973,788
|
4,308,297,058
|
|
Dividend
paid (1)
|
-
|
-
|
-
|
(295,134,208)
|
(295,134,208)
|
|
Interim
dividend (2)
|
-
|
-
|
-
|
(153,469,788)
|
(153,469,788)
|
|
Profit
for the financial year
|
-
|
-
|
-
|
1,223,562,643
|
1,223,562,643
|
|
Balance
at the end of the financial year
|
1,180,536,830
|
609,732,757
|
118,053,683
|
3,174,932,435
|
5,083,255,705
|
|
(1)
As approved by the ordinary shareholders' meeting held on June 4,
2008.
|
|||||
|
(2)
As approved by the board of directors' meeting held on November 6, 2008
(see Note 11).
|
The
authorized capital of the Company amounts to USD 2.5 billion. The total
authorized share capital of the Company is represented by 2,500,000,000 shares
with a par value of USD 1 per share. The total capital issued and fully paid-up
at December 31, 2008 was 1,180,536,830 shares with a par value of USD 1 per
share.
The board
of directors is authorized until August 2, 2012 to increase the issued share
capital, through issues of shares within the limits of the authorized
capital.
Note
9 – Legal reserve
In
accordance with Luxembourg law, the Company is required to set aside a minimum
of 5% of its annual net profit for each financial year to a legal reserve. This
requirement ceases to be necessary once the balance on the legal reserve has
reached 10% of the issued subscribed capital. The Company’s reserve has already
reached this 10%. The legal reserve is not available for distribution to the
shareholders.
Note
10 – Retained earnings
Dividends
may be paid by Tenaris upon the ordinary shareholders’ meeting’s approval to the
extent distributable retained earnings exist.
At
December 31, 2008, the retained earnings and profit for the financial year of
Tenaris under Luxembourg law totalled USD 3.2 billion.
Note 11 –
Interim dividend paid
112
Tenaris
S.A.
Notes
to audited annual accounts as at December 31,
2008 (Cont’d)
In
November 2008, the Company paid an interim dividend of USD 153.5 million based
on the board of director’s decision of November 6, 2008 and in compliance with
the conditions set out in the amended law of August 10, 1915 on commercial
companies regarding the payment of interim dividends.
113
Tenaris
S.A.
Notes
to audited annual accounts as at December 31 , 2008 (Cont’d)
Note 12 –
Taxes
The
Company is subject to the tax regime applicable to billionaire holdings as
defined by the law dated July 31, 1929.
Following
a previously announced decision by the European Commission, the Grand-Duchy of
Luxembourg has terminated its 1929 holding company regime, effective January 1,
2007. However, under the implementing legislation, pre-existing publicly listed
companies -including Tenaris- will be entitled to continue benefiting from their
current tax regime until December 31, 2010.
In
addition to the corresponding charge of the above mentioned tax regime, the
Company included the withholding taxes on dividends received, amounting to USD
1.3 million and USD 3.0 million, under the caption “Taxes” in the Profit and
loss account for the financial years ended December 31, 2008 and 2007,
respectively.
Note 13 –
Debts – Intercompany
|
2008
|
2007
|
|||||||
|
USD
|
USD
|
|||||||
|
-
due within a year
|
||||||||
|
Accounts
payable
|
1,608,051 | 1,199,924 | ||||||
|
Overdrafts
and interests payable to subsidiaries
|
2,709 | - | ||||||
|
Loans
for acquisition of shares in subsidiaries companies (1)
|
313,823,361 | 214,628,087 | ||||||
|
Other
loans (2)
|
- | 93,626,447 | ||||||
| 315,434,121 | 309,454,458 | |||||||
|
-
due within more than a year
|
||||||||
|
Loans
for acquisition of shares in subsidiaries companies (1)
|
6,250,000 | 482,006,213 | ||||||
|
Other
loans (2)
|
- | 110,000,000 | ||||||
| 6,250,000 | 592,006,213 | |||||||
|
(1)
Terms and conditions of Loans for acquisition of shares in subsidiaries
companies:
|
|||||||
|
2008
|
2007
|
||||||
|
Lender
|
Due
|
Interest
rate (*)
|
Current
|
Non-current
|
Current
|
Non-current
|
|
|
USD
|
USD
|
USD
|
USD
|
||||
|
Siderca
International ApS
|
2009
|
L
+ 0.35%
|
220,715,607
|
-
|
213,341,605
|
-
|
|
|
Techint
Investments Netherlands B.V.
|
2011
|
L
+ 0.50%
|
67,971
|
6,250,000
|
86,568
|
6,250,000
|
|
|
Tenaris
Financial Services S.A. (a)
|
2012
|
L
+ 0.35%
|
93,039,783
|
-
|
289,136
|
410,000,000
|
|
|
Tenaris
Financial Services S.A.
|
2011
|
L
+ 0.50%
|
-
|
-
|
910,778
|
65,756,213
|
|
|
Loans
for acquisition of shares in subsidiaries companies
|
313,823,361
|
6,250,000
|
214,628,087
|
482,006,213
|
|||
|
(*)
L: LIBOR
|
|||||||
|
(a)
In January 2009, the Company fully prepaid this loan. Consequently, as at
December 31, 2008, the outstanding principal amount was classified as
current.
|
|||||||
114
Note
13 – Debts – Intercompany (Cont’d)
|
(2)
Terms and conditions of Other loans:
|
|||||||
|
2008
|
2007
|
||||||
|
Lender
|
Due
|
Interest
rate (*)
|
Current
|
Non-current
|
Current
|
Non-current
|
|
|
USD
|
USD
|
USD
|
USD
|
||||
|
Tenaris
Financial Services S.A.
|
2008
|
L
+ 0.25%
|
-
|
-
|
93,548,874
|
-
|
|
|
Tenaris
Financial Services S.A.
|
2012
|
L
+ 0.35%
|
-
|
-
|
77,573
|
110,000,000
|
|
|
Other
loans
|
-
|
-
|
93,626,447
|
110,000,000
|
|||
|
(*)
L: LIBOR
|
|||||||
During
the financial year Tenaris:
Partially
prepaid the loan granted by Tenaris Financial Services S.A. on December 27, 2007
for a principal amount of USD 410.0 million. The outstanding principal amounts
to USD 93.0 million.
Fully
prepaid the loan granted by Tenaris Financial Services S.A. on October 5, 2006
for a principal amount of USD 65.8 million.
Paid the
loan granted by Tenaris Financial Services S.A. on November 20, 2007 for a
principal amount of USD 93.0 million.
Fully
prepaid the loan granted by Tenaris Financial Services S.A. on December 27, 2007
for a principal amount of USD 110.0 million.
Note 14 –
Borrowings
|
2008
|
2007
|
|||||||
|
USD
|
USD
|
|||||||
|
-
due within a year
|
||||||||
|
Principal
- short term portion
|
250,000,000 | - | ||||||
|
Interest
accrued
|
2,607,552 | 7,826,250 | ||||||
| 252,607,552 | 7,826,250 | |||||||
|
-
due within more than a year
|
||||||||
|
Principal
- long term portion
|
- | 1,000,000,000 | ||||||
| - | 1,000,000,000 | |||||||
115
Tenaris
S.A.
Notes
to audited annual accounts as at December 31 , 2008 (Cont’d)
It
corresponds to the outstanding amounts relating to the syndicated loan
agreement entered into by the Company to finance the acquisition of Hydril
(explained in Note 5.1) and to refinance an existing loan in the
Company.
116
Tenaris
S.A.
Notes
to audited annual accounts as at December 31 , 2008 (Cont’d)
Note 14 –
Borrowings (Cont’d)
This loan
agreement comprised two tranches under the following terms:
|
Tranche
A
|
Tranche
B
|
|||
|
Principal
|
USD
1.0 billion
|
USD
0.7 billion
|
||
|
Interest
rate (*)
|
L +
0.365% for the first 2 years, and thereafter L + 0.5%
|
L +
0.45%
|
||
|
Term
|
2
years or 5 years, subject to Tenaris' decision
|
5
years
|
||
|
Repayment
|
1
installment, due in 2 years; or 7 equal installments, the 1st one due in
May 2009 and the following 6 due every 6 months
|
9
equal installments, the 1st one due in May 2008 and the following 8 due
every 6 months
|
||
|
(*)
L: LIBOR
|
On
November 8, 2007 the Company prepaid USD 720.8 million corresponding to the
outstanding principal amount of tranche B together with the interest accrued
thereon to such date. Additionally, the Company has partially prepaid the
tranche A as follows: USD 526.4 million on May 8, 2008 (principal: USD 500.0
million and interest: USD 26.4 million) and USD 251.1 million on July 8, 2008
(principal: USD 250.0 million and interest: USD 1.1 million).
The main
covenants on this loan agreement are limitations on liens and encumbrances,
limitations on the sale of certain assets, restrictions on investments and
compliance with financial ratios (e.g., leverage ratio and debt service coverage
ratio calculated in the Company’s consolidated and unconsolidated financial
statements, respectively). As at December 31, 2008, Tenaris was in
compliance with all of its covenants.
In
addition, the Company’s syndicated loan agreement was secured with a pledge of
100% of Hydril’s shares, percentage to be reduced proportionally immediately
upon each payment or prepayment under this agreement and to be completely
released immediately after the aggregate outstanding principal amount of the
loan is less than or equal to USD 600.0 million. As a result of Company’s
prepayments, the pledge of Hydril’s shares has been released and restrictions on
payments of dividends, repurchase or redemption of shares under the Company’s
syndicated loan are not applicable.
Note 15 –
Administrative and general expenses
|
2008
|
2007
|
|||||||
|
USD
|
USD
|
|||||||
|
Services
and fees
|
2,446,032 | 4,730,244 | ||||||
|
Board
of director's accrued fees
|
4,510,150 | 4,435,371 | ||||||
|
Labor
cost
|
131,574 | 121,474 | ||||||
|
Others
|
755,292 | 818,666 | ||||||
| 7,843,048 | 10,105,755 | |||||||
117
Tenaris
S.A.
Notes
to audited annual accounts as at December 31 , 2008 (Cont’d)
Note 16 –
Interest expense – Intercompany
During
the financial year, the Company accrued the following interest from its debts
and overdrafts with subsidiaries:
|
2008
|
2007
|
|||||||
|
USD
|
USD
|
|||||||
|
Tenaris
Financial Services S.A.
|
20,661,257 | 5,004,938 | ||||||
|
Siderca
International ApS
|
7,374,002 | 11,298,226 | ||||||
|
Techint
Investments Netherlands B.V.
|
264,845 | 367,464 | ||||||
|
Tenaris
Investments Limited
|
25 | 258,438 | ||||||
|
Dalmine
SpA
|
- | 1,572,998 | ||||||
|
Tamsider
LLC
|
- | 957,817 | ||||||
| 28,300,129 | 19,459,881 | |||||||
Note 17 –
Dividend income
During
the financial year, the Company received the following dividends from its
subsidiaries and associated companies:
|
2008
|
2007
|
|||||||
|
USD
|
USD
|
|||||||
|
Talta
- Trading e Marketing, Sociedade Unipessoal Lda.
|
400,000,000 | 31,540,185 | ||||||
|
Siderca
S.A.I.C.
|
364,606,197 | 675,203,612 | ||||||
|
Tubos
de Acero de México S.A.
|
301,975,184 | 427,671,301 | ||||||
|
Tenaris
Global Services S.A.
|
200,000,000 | 100,000,000 | ||||||
|
Tenaris
Connections A.G.
|
32,078,043 | 74,347,493 | ||||||
|
Tenaris
Investments Limited
|
20,000,000 | 39,000,000 | ||||||
|
Ternium
S.A.
|
11,485,660 | 11,485,660 | ||||||
|
Sidtam
Ltd.
|
8,722,416 | 12,376,866 | ||||||
| 1,338,867,500 | 1,371,625,117 | |||||||
Note 18 –
Interest income – Intercompany
During
the financial year, the Company accrued the following interest from its loans to
and time deposits with subsidiaries:
|
2008
|
2007
|
|||||||
|
USD
|
USD
|
|||||||
|
Hydril
Company
|
21,281,199 | 33,428,936 | ||||||
|
Maverick
Tube Corporation
|
5,512,777 | 87,504 | ||||||
|
Tenaris
Global Services S.A.
|
129,175 | 1,155,803 | ||||||
|
Tenaris
Investments Limited
|
5,446 | 8,149 | ||||||
|
Tenaris
Financial Services S.A.
|
367 | 6,784 | ||||||
118
Tenaris
S.A.
Notes
to audited annual accounts as at December 31,
2008 (Cont’d)
|
Talta
- Trading e Marketing, Sociedade Unipessoal Lda.
|
- | 4,670,600 | ||||||
| 26,928,964 | 39,357,776 |
119
Tenaris
S.A.
Notes
to audited annual accounts as at December 31 , 2008 (Cont’d)
Note 19 –
Interest income – Third parties
During
the financial year, the Company accrued the following interest from its short
term investments:
|
2008
|
2007
|
|||||||
|
USD
|
USD
|
|||||||
|
Liquidity
funds
|
931,500 | 10,997,426 | ||||||
|
Others
|
37,462 | 44,125 | ||||||
| 968,962 | 11,041,551 | |||||||
Note 20 –
Contingencies and Off balance sheet commitments
Maverick
litigation
On
December 11, 2006, The Bank of New York (“BNY”), as trustee for the holders of
Tenaris’s subsidiary Maverick 2004 4% Convertible Senior Subordinated Notes due
2033 issued pursuant to an Indenture between Maverick and BNY (“Noteholders”),
filed a complaint against Maverick and Tenaris in the United States District
Court for the Southern District of New York. The complaint alleges that
Tenaris’s acquisition of Maverick triggered the “Public Acquirer Change of
Control” provision of Indenture, asserting breach of contract claim against
Maverick for refusing to deliver the consideration specified in the “Public
Acquirer Change of Control” provision of the Indenture to Noteholders who
tendered their notes for such consideration. This complaint seeks a declaratory
judgement that Tenaris’s acquisition of Maverick was a “Public Acquirer Change
of Control” under the Indenture, and asserts claims for tortuous interference
with contract and unjust enrichment against Tenaris. Defendants filed a motion
to dismiss the complaint, or in the alternative, for summary judgment on March
13, 2007. Plaintiff filed a motion for partial summary judgment on the same
date. On January 25, 2008, Law Debenture Trust Company of New York, “Law
Debenture” (as successor to BNY as trustee under the Indenture) was
substituted for BNY as plaintiff.
On
October 15, 2008, the court denied Law Debenture’s motion for partial summary
judgment and granted defendants’ motion for summary judgment dismissing the
complaint in its entirety. On November 20, 2008, Law Debenture filed a notice of
appeal in the United States Court of Appeals for the Second
Circuit.
Tenaris
believes that these claims are without merit. Accordingly, no provision was
recorded in these annual accounts. Were plaintiff to prevail, Tenaris estimates
that the recovery would be approximately USD 50.0 million, plus
interest.
Customer
Claim
A lawsuit
was filed on September 6, 2007, against three Tenaris’ subsidiaries, alleging
negligence, gross negligence and intentional acts characterized as fraudulent
inducement concerning allegedly defective well casing. Plaintiff alleged the
complete loss of one natural gas production well and formation damage that
precludes further exploration and production at the well site. The lawsuit was
subsequently amended to add the Company and other of its subsidiaries as
defendants and to change the claims to be breach of contract and fraud. On
October 22, 2008, the Plaintiff again amended its petition to add new counts
(including strict liability) and increase its prayer for damages to USD 245.0
million, plus punitive damages, treble damages and attorney fees. Each petition
was tendered to a Tenaris subsidiary insurer, and the Tenaris subsidiary
received the insurer’s agreement to provide a defense.
120
Tenaris
S.A.
Notes
to audited annual accounts as at December 31 , 2008 (Cont’d)
The
insurer has reserved its rights with respect to its indemnity obligations. The
case is set for trial on June 9, 2009. A provision in the amount of USD 2.3
million has been recorded by a Tenaris subsidiary.
121
Tenaris
S.A.
Notes
to audited annual accounts as at December 31 , 2008 (Cont’d)
Note 20 –
Contingencies and Off balance sheet commitments (Cont’d)
Maverick
Convertible Senior Subordinated Notes’ guarantee
In
addition to the covenants of the syndicated loan agreement mentioned in Note 14,
and as result of the Maverick acquisition, the Company has fully and
unconditionally guaranteed to each holder of 1.875% Convertible Senior
Subordinated Notes (the “Notes”) issued by Maverick on November 15, 2005 and due
in 2025, the due and punctual payment of the principal of and any premium and
interest on such Notes.
Note 21 –
Parent Company
Based on
the information most recently available to the Company, as of December 31,
2008:
San
Faustín N.V. owned 717,440,187 shares in the Company, representing 60.77% of the
Company’s capital and voting rights.
San
Faustín N.V. owned all of its shares in the Company through its wholly-owned
subsidiary I.I.I. Industrial Investments Inc.
Rocca
& Partners S.A. controlled a significant portion of the voting power of San
Faustín N.V. and had the ability to influence matters affecting, or submitted to
a vote of the shareholders of San Faustín N.V., such as the election of
directors, the approval of certain corporate transactions and other matters
concerning the company’s policies.
There
were no controlling shareholders for Rocca & Partners S.A.
Tenaris’s
directors and executive officers as a group owned 0.2% of the Company’s
outstanding shares, while the remaining 39.03% were publicly
traded.
Note 22 –
Subsequent events
Dividends
received
On
January 8, 2009 Tenaris received a dividend payment from its subsidiaries Sidtam
Limited (USD 5.5 million) and Tubos de Acero de México S.A. (USD 191.5
million).
Annual
Dividend Proposal
On
February 25, 2009 the Company’s board of directors proposed, for the approval of
the annual general shareholders' meeting to be held on June 3, 2009, the payment
of an annual dividend of USD 0.43 per share (USD 0.86 per ADS), or approximately
USD 507.6 million, which includes the interim dividend of USD 0.13 per share
(USD 0.26 per ADS) paid on November 27, 2008. If the annual dividend is approved
by the shareholders, a dividend of USD 0.30 per share (USD 0.60 per ADS), or
approximately USD 354.1 million will be paid. These annual accounts do not
reflect this dividend payable.
|
Ricardo
Soler
Chief
Financial Officer
|
122
Corporate
Information
Registered
Office
46A,
avenue John F. Kennedy
L-1855
Luxembourg
(352) 26
47 89 78 tel
(352) 26
47 89 79 fax
Principal
Offices
Av. L. N.
Alem 1067 27th Floor
(C1001AAF)
Buenos Aires, Argentina
(54) 11
4018 4100 tel
(54) 11
4018 1000 fax
2200 West
Loop South, Suite 800
Houston,
TX 77027, USA
(1) 713
767 4400 tel
(1) 713
767 4444 fax
Piazza
Caduti 6 Luglio 1944, 1
24044
Dalmine (Bergamo), Italy
(39) 035
560 1111 tel
(39) 035
560 3827 fax
Edificio
Parque Reforma
Campos
Elíseos 400 17th Floor
11560
Mexico, D.F.
(52) 55
5282 9900 tel
(52) 55
5282 9961 fax
Investor
Relations Director
Giovanni
Sardagna
General
Inquiries
investors@tenaris.com
Phones
USA 1 888
300 5432
Argentina
(54) 11 4018 4020
Italy
(39) 02 4384 7654
Mexico
(52) 55 5282 9929
Stock
Information
New York
Stock Exchange (TS)
Bolsa
Mexicana de Valores, S.A. de C.V. (TS)
Mercado
de Valores de Buenos Aires (TS)
Mercato
Telematico Azionario (TEN)
ADS
Depositary Bank
The Bank
of New York
CUSIP No.
88031M019
Internet
www.tenaris.com
123