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 04/28/2006
Ternium S.A.
(Translation of Registrant's name into English)
Ternium S.A.
46a, Avenue John F. Kennedy - 2nd floor
L-1855 Luxembourg
(352) 4661-11-3815
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or 40-F.
Form 20-F X Form 40-F
--- ---
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12G3-2(b) under the Securities Exchange Act of 1934.
Yes No X
--- ---
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):
Not applicable
The attached material is being furnished to the Securities and Exchange
Commission pursuant to Rule 13a-16 and Form 6-K under the Securities Exchange
Act of 1934, as amended.
This report contains Ternium S.A.'s consolidated condensed interim financial
statements as of March 31, 2006.
TERNIUM S.A.
CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS AS OF MARCH 31, 2006
AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 2006 AND 2005
46a, Avenue John F. Kennedy, 2nd floor
L - 1855
R.C.S. Luxembourg : B 98 668
TERNIUM S.A.
Consolidated condensed interim financial statements as of March 31, 2006
and for the three-month periods ended March 31, 2006 and 2005
(All amounts in USD thousands)
CONSOLIDATED CONDENSED INTERIM INCOME STATEMENTS
Three-month period ended March, 31
------------------------------------------
Notes 2006 2005
----------------- -------------------- --------------------
(Unaudited)
Net sales 4 & 12 1,528,883 767,589
Cost of sales 4, 5 & 12 (987,185) (418,165)
-------------------- --------------------
Gross profit 4 541,698 349,424
Selling , General and administrative expenses 6 (150,993) (64,980)
Other operating income (expenses), net 1,819 (1,015)
-------------------- --------------------
Operating income 392,524 283,429
Financial expenses, net 7 & 12 (123,530) (38,901)
Excess of fair value of net assets acquired over cost - 188,356
Equity in (losses) earnings of associated companies 8 (1,828) 19,309
-------------------- --------------------
Income before income tax expense 267,166 452,193
Income tax expense (72,653) (48,616)
-------------------- --------------------
Net income for the period 194,513 403,577
-------------------- --------------------
Attributable to:
Equity holders of the Company 165,043 337,619
Minority interest 29,470 65,958
-------------------- --------------------
194,513 403,577
-------------------- --------------------
Weighted average number of shares outstanding 1,729,329,115 1,168,943,632
Basic and diluted earnings per share for profit
attributable to the equity holders of the Company
(expressed in USD per share) 0.10 0.29
The accompanying notes are an integral part of these consolidated condensed
interim financial statements. The Report of the Independent Registered Public
Accounting Firm on these consolidated condensed interim financial statements is
issued as a separate document. These consolidated condensed interim financial
statements should be read in conjunction with our audited Combined Consolidated
Financial Statements and notes for the fiscal year ended December 31, 2005.
-2-
TERNIUM S.A.
Consolidated condensed interim financial statements as of March 31, 2006
and for the three-month periods ended March 31, 2006 and 2005
(All amounts in USD thousands)
CONSOLIDATED CONDENSED BALANCE SHEETS
Notes March 31, 2006 December 31, 2005
----------- ------------------------- -----------------------
(Unaudited)
ASSETS
Non-current assets
Property, plant and equipment, net 9 5,418,401 5,463,871
Intangible assets, net 9 547,818 552,882
Investments in associated companies, net 8 7,323 9,122
Other investments, net 12,267 12,607
Deferred tax assets 40,626 29,126
Other Assets 996 952
Receivables, net 53,323 6,080,754 47,863 6,116,423
------------- ----------- ----------- -----------
Current assets
Receivables 293,490 291,302
Other Assets - 3,160
Derivative financial instruments 8,420 5,402
Inventories, net 1,061,634 1,000,119
Trade receivables, net 495,860 472,760
Other investments 5,296 5,185
Cash and cash equivalents 902,884 2,767,584 765,630 2,543,558
------------- ----------- ----------- -----------
Non-current assets classified as held for sale 9,792 -
----------- -----------
----------- -----------
Total assets 8,858,130 8,659,981
----------- -----------
EQUITY
Capital and reserves attributable to the company's
equity holders 3,146,384 1,842,454
Minority interest 1,700,949 1,733,465
----------- -----------
Total equity 4,847,333 3,575,919
LIABILITIES
Non-current liabilities
Provisions 54,697 53,479
Deferred income tax 1,040,943 1,048,188
Non-current tax liabilities 36,917 -
Other liabilities 197,902 187,917
Trade payables 1,233 1,167
Borrowings 1,209,366 2,541,058 2,399,878 3,690,629
------------- ----------- ----------- -----------
Current liabilities
Provisions 746 659
Current tax liabilities 103,145 126,972
Other liabilities 186,149 194,073
Trade payables 637,303 555,330
Borrowings 542,396 1,469,739 516,399 1,393,433
------------- ----------- ----------- -----------
Total liabilities 4,010,797 5,084,062
----------- -----------
Total equity and liabilities 8,858,130 8,659,981
----------- -----------
Contingencies, commitments and restrictions to the distribution of profits are
disclosed in Note 10.
The accompanying notes are an integral part of these consolidated condensed
interim financial statements. The Report of the Independent Registered Public
Accounting Firm on these consolidated condensed interim financial statements is
issued as a separate document. These consolidated condensed interim financial
statements should be read in conjunction with our audited Combined Consolidated
Financial Statements and notes for the fiscal year ended December 31, 2005.
-3-
TERNIUM S.A.
Consolidated condensed interim financial statements as of March 31, 2006
and for the three-month periods ended March 31, 2006 and 2005
(All amounts in USD thousands)
CONSOLIDATED CONDENSED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Attributable to the Company's equity holders (1)
-------------------------------------------------------------------------
Capital
Initial stock Total Total
public Revaluation issue Currency Equity at Equity at
Capital offering and other discount translation Retained Minority March 31, March 31,
stock expenses reserves (2) adjustment earnings Total interest 2006 2005
--------------------------------------------------------------------------------------------------------
Balance at January 1 1,396,552 (5,456) 1,462,137 (2,298,048) (92,691) 1,379,960 1,842,454 1,733,465 3,575,919 1,771,851
Currency translation
adjustment (42,139) (42,139) (14,988) (57,127) (78,948)
Net income 165,043 165,043 29,470 194,513 403,577
--------------------------------------------------------------------------------------------------------
Total recognized income
for the period (42,139) 165,043 122,904 14,482 137,386 324,629
Dividends paid in cash and
other distributions (123,919)
Acquisition of business 916,617
Contributions from
shareholders (see Note 3) 33,801 43,100 (26,818) 50,083 (46,998) 3,085
Conversion of Subordinated
Convertible Loans
(see Note 3) 302,962 302,962 605,924 605,924
Initial Public Offering
(see Note 3) 271,429 (17,839) 271,429 525,019 525,019
Revaluation and other
reserves 432,385
--------------------------------------------------------------------------------------------------------
Balance at March 31 2,004,744 (23,295) 2,079,628 (2,324,866) (134,830) 1,545,003 3,146,384 1,700,949 4,847,333 3,321,563
--------------------------------------------------------------------------------------------------------
(1) Shareholders equity determined in accordance with accounting principles
generally accepted in Luxembourg is disclosed in Note 10 (ii).
(2) Represents the difference between book value of non monetary contributions
received form shareholders under Luxembourg GAAP and IFRS.
Dividends may be paid by Ternium to the extent distributable retained earnings
calculated in accordance with Luxembourg GAAP exist. Therefore, retained
earnings included in these consolidated condensed interim financial statements
may not be wholly distributable. See Note 10 (ii).
The accompanying notes are an integral part of these consolidated condensed
interim financial statements. The Report of the Independent Registered Public
Accounting Firm on these consolidated condensed interim financial statements is
issued as a separate document. These consolidated condensed interim financial
statements should be read in conjunction with our audited Combined Consolidated
Financial Statements and notes for the fiscal year ended December 31, 2005.
-4-
TERNIUM S.A.
Consolidated condensed interim financial statements as of March 31, 2006
and for the three-month periods ended March 31, 2006 and 2005
(All amounts in USD thousands)
CONSOLIDATED CONDENSED INTERIM CASH FLOW STATEMENTS
-----------------------------------
Notes Three-month period ended March, 31
---------- -----------------------------------
2006 2005
-----------------------------------
(Unaudited)
Cash flows from operating activities
Net income for the period 194,513 403,577
Adjustments for:
Depreciation and amortization 9 106,300 48,940
Income tax accruals less payments 10,948 30,044
Excess of fair value of net assets
acquired over cost - (188,356)
Equity in earnings of associated companies 8 1,828 (19,309)
Interest accruals less payments (15,893) 3,185
Changes in provisions 11,420 2,856
Changes in working capital (12,581) 106,152
Currency translation adjustment and others (2,973) 4,421
---------------- ----------------
Net cash provided by operating activities 293,562 391,510
---------------- ----------------
Cash flows from investing activities
Capital expenditures 9 (89,998) (36,866)
Changes in trust funds - 83,570
Acquisition of business 11 (55,183) -
Proceeds from the sale of property, plant and
equipment 4,013 1,867
---------------- ----------------
Net cash (used in) provided by investing activities (141,168) 48,571
---------------- ----------------
Cash flows from financing activities
Dividends paid in cash and other distributions to
company's equity shareholders - (99,743)
Dividends paid in cash and other distributions to
minority shareholders - (24,176)
Net proceeds from Initial Public Offering 525,019 -
Contributions from shareholders 3,085 -
Proceeds from borrowings 11,381 26,884
Repayments of borrowings (553,452) (133,391)
---------------- ----------------
Net cash used in financing activities (13,967) (230,426)
---------------- ----------------
---------------- ----------------
Increase in cash and cash equivalents. 138,427 209,655
---------------- ----------------
Movement in cash and cash equivalents
At January 1, (1) 754,980 194,875
Acquisition of business - 305,342
Effect of exchange rate changes (813) (32,507)
Increase in cash and cash equivalents 138,427 209,655
---------------- ----------------
Cash and cash equivalents at March 31, (1) 892,594 677,365
---------------- ----------------
Non-cash transactions
Conversion of debt instruments into shares 605,925 127,576
(1) In addition, the Company has restricted cash for USD 10,290 and USD 10,650
at March 31, 2006 and December 31, 2005, respectively.
The accompanying notes are an integral part of these consolidated condensed
interim financial statements. The Report of the Independent Registered Public
Accounting Firm on these consolidated condensed interim financial statements is
issued as a separate document. These consolidated condensed interim financial
statements should be read in conjunction with our audited Combined Consolidated
Financial Statements and notes for the fiscal year ended December 31, 2005.
-5-
TERNIUM S.A.
Consolidated condensed interim financial statements as of March 31, 2006
and for the three-month periods ended March 31, 2006 and 2005
(All amounts in USD thousands)
INDEX TO THE NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS
1 Basis of presentation
2 Accounting policies
3 Initial Public Offering
4 Segment information
5 Cost of sales
6 Selling, general and administrative expenses
7 Financial expenses, net
8 Investments in associated companies, net
9 Property, plant and equipment and Intangible assets, net
10 Contingencies, commitments and restrictions on the distribution of profits
11 Acquisition of business
12 Related party transactions
13 Recent accounting pronouncements
14 Post balance sheet events
-6-
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements
1 Basis of presentation
Ternium S.A. (the "Company" or "Ternium"), a Luxembourg Corporation (Societe
Anonyme), was incorporated on December 22, 2003 under the name of Zoompart
Holding S.A. to hold investments in flat and long steel manufacturing and
distributing companies. The extraordinary shareholders' meeting held on August
18, 2005, changed the corporate name to Ternium S.A.
These consolidated condensed interim financial statements have been prepared in
accordance with IAS 34, "Interim Financial Reporting".
These consolidated condensed interim financial statements should be read in
conjunction with the audited combined consolidated financial statements for the
year ended December 31, 2005.
Certain comparative amounts have been reclassified to conform to changes in
presentation in the current period.
The preparation of consolidated condensed interim financial statements requires
management to make estimates and assumptions that might affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities as of the balance sheet dates, and also the reported amounts of
revenues and expenses for the reported periods. Actual results may differ from
these estimates.
Material intercompany transactions and balances have been eliminated in
consolidation. However, the fact that the functional currency of the Company's
subsidiaries differ, results in the generation of foreign exchange gains
(losses) that are included in the consolidated condensed interim income
statement under "Financial expenses, net".
These consolidated condensed interim financial statements were approved by the
Board of Directors of Ternium on April 28, 2006.
2 Accounting policies
The accounting policies used in the preparation of these consolidated condensed
interim financial statements are consistent with those used in the audited
combined consolidated financial statements for the year ended December 31, 2005.
A detail of the accounting policies followed by the Company in the preparation
of these financial statements, other than those followed in the preparation of
the audited combined consolidated financial statements for the year ended
December 31, 2005 follows:
- Non-current assets (disposal groups) classified as held for sale
Non-current assets (disposal groups) are classified as assets held for sale and
stated at the lower of carrying amount and fair value less cost to sell if their
carrying amount is recovered principally through a sale transaction rather than
through a continuing use.
The carrying value of non-current assets classified as held for sale total USD
9.8 million and include principally land and other real estate items. Sale is
expected to be completed within a one year period.
3 Initial public offering
In January 2006, the Company successfully completed its registration process
with the United States Securities and Exchange Commission ("SEC") and announced
the commencement of its offer to sell 24,844,720 American Depositary Shares
("ADS") representing 248,447,200 shares of common stock through Citigroup Global
Markets Inc., Deutsche Bank Securities Inc., JP Morgan Securities Inc., Morgan
Stanley & Co. Incorporated, BNP Paribas Securities Corp., Caylon Securities
(USA) Inc. and Bayerische Hypo-und Vereinsbank AG (collectively, the
"Underwriters" and the offering thereunder, the "Initial Public Offering"). The
gross proceeds from the Initial Public Offering totaled USD 496.9 million and
have been used to fully repay Tranche A of the Ternium Credit facility, after
deducting related expenses.
Also, the Company has granted to the Underwriters an option, exercisable for 30
days from January 31, 2006, to purchase up to 3,726,708 additional ADSs at the
public offering price of USD20 per ADS less an underwriting discount of USD0.55
per ADS. On February 23, 2006 the underwriter exercised such option to purchase
2,298,136 ADSs at the public offering price of USD20 per ADS less an
underwriting discount of USD0.55 per ADS.
The gross proceeds from this transaction totaled USD 46.0 million.
-7-
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)
3 Initial public offering (continued)
In addition, the Company entered into the Subordinated Convertible Loan
Agreements for a total aggregate amount of USD594 million to fund the
acquisition of Hylsamex. As per the provisions contained in the Subordinated
Convertible Loan Agreements, the Subordinated Convertible Loans would be
converted into shares of the Company upon delivery of Ternium's ADSs to the
Underwriters. On February 6, 2006 the Company delivered the above mentioned ADSs
and, accordingly, the Subordinated Convertible Loans (including interest accrued
through January 31, 2006) were converted into shares at a conversion price of
USD2 per share, resulting in the issuance of 302,962,261 new shares.
Furthermore, in November 2005, Sidetur, a subsidiary of Sivensa, exchanged with
ISL its 3.42% equity interest in Amazonia and USD 3,1 million in cash for shares
of the Company. ISL has contributed such interest in Amazonia to the Company in
exchange for shares of the Company after the settlement of the Initial Public
Offering.
4 Segment information
Primary reporting format - business segments
Flat steel Long steel
products products Other Total
------------------------------------------------
Three-month period ended
March 31, 2006
Net sales 1,197,327 282,864 48,692 1,528,883
Cost of sales (748,689) (198,525) (39,971) (987,185)
------------------------------------------------
Gross profit 448,638 84,339 8,721 541,698
Depreciation - PP&E 89,938 11,407 308 101,653
Flat steel Long steel
products products Other Total
----------- ------------------------------------
Three-month period ended
March 31, 2005
Net sales 681,591 69,930 16,068 767,589
Cost of sales (369,528) (38,617) (10,020) (418,165)
----------- ------------------------------------
Gross profit 312,063 31,313 6,048 349,424
Depreciation - PP&E 43,289 4,204 - 47,493
Secondary reporting format - geographical segments
Allocation of net sales is based on the customers' location. Allocation of
assets and capital expenditures is based on the assets' location.
Ternium's subsidiaries operate for three main geographical areas. The North
American segment comprises principally United States, Canada and Mexico. The
South and Central American segment comprises principally Argentina, Brazil,
Colombia, Venezuela and Ecuador.
-8-
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)
4 Segment information (continued)
South and Europe
Central North and
America America others Total
---------- ---------- ---------- ----------
Three-month period ended
March 31, 2006
Net sales 827,884 686,704 14,295 1,528,883
Depreciation - PP&E. 68,445 33,201 7 101,653
Three-month period ended
March 31, 2005
Net sales 482,639 162,648 122,302 767,589
Depreciation - PP&E. 47,482 4 7 47,493
5 Cost of sales
Three-month period ended
March 31,
--------------------------------
2006 2005
--------------------------------
(Unaudited)
Inventories at the beginning of the period 1,000,119 254,286
Acquisition of business 8,180 284,676
Plus: Charges for the period
Raw materials and consumables used and other movements 695,571 243,159
Services and fees 35,312 17,677
Labor cost 118,292 45,687
Depreciation of property, plant and equipment 95,181 44,615
Amortization of intangible assets 3,348 1,019
Maintenance expenses 71,601 33,070
Office expenses 1,513 502
Freight and transportation 5,666 5,168
Insurance 2,641 759
Provision for obsolescence 9,390 2,014
Recovery from sales of scrap and by-products (13,846) (6,810)
Others 15,851 5,254
Less: Inventories at the end of the period (1,061,634) (512,911)
------------- ------------------
Cost of sales 987,185 418,165
------------- ------------------
6 Selling, General and administrative expenses
-------------------------------
Three-month period ended
March 31,
-------------------------------
2006 2005
-------------------------------
(Unaudited)
Services and fees 16,020 5,148
Labor cost 33,233 10,713
Depreciation of property plant and equipment 6,472 2,878
Amortization of intangible assets 1,299 428
Maintenance and expenses 3,791 811
Taxes 10,295 6,469
Office expenses 6,461 2,271
Freight and transportation 66,833 33,742
Insurance 401 171
Others 6,188 2,349
------------- -----------------
Selling, General and administrative expenses 150,993 64,980
------------- -----------------
-9-
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)
7 Financial expenses, net
Three-month period ended
March 31,
-------------------------
2006 2005
-------------------------
(Unaudited)
Interest expense (37,376) (5,175)
Interest income 12,153 3,895
Net foreign exchange transaction gains and
change in fair value of derivative instruments (5,496) (28,465)
Write-off of debt issue costs (9,030) -
Income from Participation Account (i) - 44,050
Loss from Participation Account (i) (83,305) (53,100)
Others (476) (106)
---------- ------------
Financial expenses, net (123,530) (38,901)
---------- ------------
(i) Until February 15, 2005, the Company accounted for its investment in
Amazonia under the equity method of accounting. Thus, income arising
from the Participation Account Agreement has been recorded under
Income from Participation Account within Financial expenses, net. Upon
conversion of the Amazonia Convertible Debt Instrument on February 15,
2005, the Company acquired control over Amazonia and began accounting
for such investment on a consolidated basis. Accordingly, income
resulting from Ternium's share of the Participation Account as from
February 15, 2005, has been offset against Amazonia's loss for the
same concept and shown net under Loss from Participation Account line
item.
8 Investments in associated companies, net
Three-month period ended March 31,
-----------------------------------
2006 2005
-----------------------------------
(Unaudited)
At the beginning of the year 9,122 309,318
Translation adjustment 29 (3,425)
Equity in (losses) earnings of
associated companies (1,828) 19,309
Consolidation of Amazonia
- (318,166)
----------------- -----------------
At the end of the period 7,323 7,036
----------------- -----------------
9 Property, plant and equipment and Intangible assets, net
Net Property,
Plant and Net Intangible
Equipment Assets
---------------- -----------------
(Unaudited) (Unaudited)
Three-month period ended March 31, 2006
At the beginning of the year 5,463,871 552,882
Currency translation differences (64,426) (3,985)
Transfers (9,633) -
Additions 86,430 3,568
Disposals (4,013) -
Increase due to business acquisition 47,825 -
Depreciation/ Amortization charge (101,653) (4,647)
---------------- -----------------
At the end of the period 5,418,401 547,818
---------------- -----------------
-10-
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)
10 Contingencies, commitments and restrictions on the distribution of profits
This note should be read in conjunction with Note 29 to the Company's audited
Combined Consolidated Financial Statements for the year ended December 31, 2005.
Significant changes or events since the date of the annual report are as
follows:
(i) Consorcio Siderurgia Amazonia Ltd .- PDVSA-Gas C.A. claim
As a consequence of the commercial transactions entered into by Sidor and
PDVSA-Gas during the three-month period ended March 31, 2006, Sidor's potential
exposure under its litigation against that company increased by USD 7.8 million,
thus reaching a total amount of USD 102.1 million.
(ii) Restrictions on the distribution of profits
Under Luxembourg law, at least 5% of net income per year calculated in
accordance with Luxembourg law and regulations must be allocated to a reserve
until such reserve has reached an amount equal to 10% of the share capital.
Ternium may pay dividends to the extent that it has distributable retained
earnings and distributable reserves calculated in accordance with Luxembourg law
and regulations. Therefore, retained earnings included in the consolidated
condensed interim financial statements may not be wholly distributable.
Shareholders' equity under Luxembourg law and regulations comprises the
following captions (amounts in USD thousands):
At March 31, 2006
-----------------
Share capital 2,004,744
Initial Public Offering expenses (14,928)
Legal reserve 200,474
Distributable reserves 402,149
Non distributable reserves 1,414,122
Accumulated profit at January 1, 2006 107,612
Profit for the period 18,337
-----------------
Total shareholders' equity under Luxembourg GAAP 4,132,510
-----------------
11 Acquisition of business
On November 18 2005, Ternium's Argentine subsidiary, Siderar, agreed to acquire
assets and facilities of Acindar Industria Argentina de Aceros S.A. ("Acindar")
related to the production of welded steel pipes in the province of Santa Fe in
Argentina, as well as 100% of the issued and outstanding shares of Impeco S.A.,
which in turn owns a plant located in the province of San Luis in Argentina.
Purchase price paid totaled USD 55.2 million, subject to subsequent adjustments.
These two plants have a production capacity of 140 thousand tons per year of
tubes to be used in the construction, agricultural and manufacturing industries.
The acquisition has been approved by the Argentine competition authorities and
was completed on January 31, 2006. This acquisition did not give rise to
goodwill.
The acquired business contributed revenues of USD 9.9 million in the three month
period ended March 31, 2006. The fair value of assets and liabilities arising
from acquisition are as follows:
USD thousands
----------------
Property, plant and equipment 47,825
Inventories 8,180
Cash and cash equivalents -
Deferred tax liabilities (875)
Others assets and liabilities, net 53
----------------
Net 55,183
----------------
-11-
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)
12 Related parties transactions
The Company is controlled by San Faustin N.V., a Netherlands Antilles
corporation, which owns 70.52% of the Company's outstanding shares, either
directly or indirectly. The ultimate controlling entity of the Company is Rocca
& Partners, a British Virgin Islands corporation.
The following transactions were carried out with related parties:
Three-month period ended March, 31
-------------------------------------
2006 2005
------------------- -----------------
(Unaudited)
(i) Transactions
(a) Sales of goods and services
Sales of goods to other related parties 24,243 9,113
Sales of services to associated parties 508 275
Sales of services to other related parties - 663
------------------- -----------------
24,751 10,051
------------------- -----------------
(b) Purchases of goods and services
Purchases of goods from associated parties 14,390 21,603
Purchases of goods from other related parties 21,983 9,237
Purchases of services from other related parties 10,894 8,678
------------------- -----------------
47,267 39,518
------------------- -----------------
(c) Financial results
Income with associated parties - 44,697
Expenses with other related parties (147) (1,013)
------------------- -----------------
(147) 43,684
------------------- -----------------
-------------------------------------
At March 31, At December 31,
2006 2005
------------------ ------------------
(Unaudited)
(ii) Period-end balances
(a) Arising from sales/purchases of goods/services
Receivables from associated parties 66,753 71,317
Receivables from other related parties 25,193 18,175
Payables to associated parties (5,123) (13,644)
Payables to other related parties (23,318) (17,914)
------------------ ------------------
63,505 57,934
------------------ ------------------
(b) Other investments
------------------ ------------------
Time deposit 10,147 10,450
------------------ ------------------
(c) Other balances
------------------ ------------------
Trust fund with other related parties - 5,185
------------------ ------------------
(d) Financial debt
------------------ ------------------
Borrowings with other related parties (3,789) (607,472)
------------------ ------------------
(iii) Officers and Directors' compensation
The aggregate compensation of Officers and Directors earned during the
three-month period ended March 31, 2006 amounts to USD 3,426 thousands.
-12-
13 Recent accounting pronouncements
IFRIC Interpretation 9, Reassessment of Embedded Derivatives
In February 2006, the International Financial Reporting Interpretations
Committee ("IFRIC") issued IFRIC Interpretation 9 "Reassessment of Embedded
Derivatives" ("IFRIC 9"). IFRIC 9 applies to all embedded derivatives within the
scope of International Accounting Standard No. 39. However, it does not address
(i) remeasurement issues arising from a reassessment of embedded derivatives, or
(ii) the acquisition of contracts with embedded derivatives in a business
combination nor their possible reassessment at the date of acquisition.
Paragraph 7 of IFRIC 9 states that an entity shall assess whether an embedded
derivative is required to be separated from the host contract and accounted for
as a derivative when the entity first becomes a party to the contract.
Subsequent reassessment is prohibited unless there is a change in the terms of
the contract that significantly modifies the cash flows that otherwise would be
required under the contract, in which case reassessment is required. Also,
paragraph 8 of IFRIC 9 states that a first-time adopter shall assess whether an
embedded derivative is required to be separated from the host contract and
accounted for as a derivative on the basis of the conditions that existed at the
later of the date it first became a party to the contract and the date a
reassessment is required by paragraph 7.
An entity shall apply this Interpretation for annual periods beginning on or
after 1 June 2006, although earlier application is encouraged. If an entity
applies the Interpretation for a period beginning before 1 June 2006, it shall
disclose that fact. The Interpretation shall be applied retrospectively.
The Company's management has not assessed the potential impact that the
application of IFRIC 9 may have on the Company's financial condition or results
of operations.
14 Post balance sheet events
The following are the main post balance sheet events:
a) In April 2006, the Company acquired a 50% equity interest in Acerex S.A. de
C.V. ("Acerex") through its subsidiary Hylsa S.A. de C.V. Total purchase price
accounted for USD 44.6 million. Upon completion of this transaction (which is
expected to occur in the second quarter of fiscal year 2006 following the
approval by the Mexican competition authorities) Hylsa S.A. de C.V. will own
100% of Acerex.
Acerex is a service center dedicated to processing steel to produce short-length
and steel sheets in various widths. Acerex operates as a cutting and processing
plant for Ternium's Mexican operations and as an independent processor for other
steel companies.
b) On April 19, 2006, the Shareholders' Meeting of Siderar, approved the
distribution of dividends in cash for 122.8 million of Argentine pesos
(approximately USD 40.0 million).
Roberto Philipps
Chief Financial Officer
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1 SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TERNIUM S.A.
By: /s/ Roberto Philipps By: /s/ Daniel Novegil
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Name: Roberto Philipps Name: Daniel Novegil
Title: Chief Financial Officer Title: Chief Executive Officer
Dated: April 28, 2006