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 5/3/2007
Ternium S.A.
(Translation of Registrant's name into English)
Ternium S.A.
46a, Avenue John F. Kennedy
L-1855 Luxembourg
(Address of principal executive offices)
Indicate by check mark whether the
registrant files or will file
annual reports under cover Form
20-F or 40-F.
Form 20-F X Form 40-F
--- ---
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12G3-2(b) under the Securities Exchange Act of
1934.
Yes No
--- ---
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 financial statements as of
March 31, 2007.
TERNIUM S.A.
CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS AS OF MARCH 31, 2007
AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 2007 AND 2006
46a, Avenue John F. Kennedy, 2nd floor
L - 1855
R.C.S. Luxembourg : B 98 668
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Ternium S.A.:
We have reviewed the accompanying consolidated condensed balance sheet of
Ternium S.A. and its subsidiaries as of March 31, 2007, and the related
consolidated condensed statements of income and of changes in shareholders'
equity for each of the three-month periods ended March 31, 2007 and 2006 and the
consolidated condensed statements of cash flows for the three-month periods
ended March 31, 2007 and 2006. These interim financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated condensed interim financial statements
for them to be in conformity with International Financial Reporting Standards.
We previously audited in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet as of
December 31, 2006, and the related consolidated statements of income, of changes
in shareholders' equity and of cash flows for the year then ended (not presented
herein), and in our report dated February 27, 2007 we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet information
as of December 31, 2006, is fairly stated in all material respects in relation
to the consolidated balance sheet from which it has been derived
Buenos Aires, Argentina
May 3, 2007
PRICE WATERHOUSE & CO. S.R.L.
by (Partner)
---------------------------------------------------------------
Marcelo D. Pfaff
TERNIUM S.A.
Consolidated condensed interim financial statements as of March 31, 2007
and for the three-month periods ended March 31, 2007 and 2006
(All amounts in USD thousands)
CONSOLIDATED CONDENSED INTERIM INCOME STATEMENTS
Three-month period
ended March 31,
-----------------------------
Notes 2007 2006
--------- -------------- --------------
(Unaudited)
Net sales 3 1,798,293 1,530,999
Cost of sales 3 & 4 (1,223,890) (989,657)
-------------- --------------
Gross profit 3 574,403 541,342
Selling, general and administrative expenses 3 & 5 (164,548) (151,017)
Other operating income, net 3 5,561 2,199
-------------- --------------
Operating income 3 415,416 392,524
Interest expense (16,948) (34,314)
Interest income 10,817 12,153
Other financial expenses, net 6 (76,122) (101,369)
Equity in losses of associated companies (1,003) (1,828)
-------------- --------------
Income before income tax expense 332,160 267,166
Income tax expense (80,532) (72,653)
-------------- --------------
Net income for the period 251,628 194,513
-------------- --------------
Attributable to:
Equity holders of the Company 222,133 165,043
Minority interest 29,495 29,470
-------------- --------------
251,628 194,513
-------------- --------------
Weighted average number of shares outstanding 2,004,743,442 1,729,329,115
Basic earnings per share for profit attributable to
the equity holders of the Company (expressed in
USD per share) 0.11 0.10
Diluted earnings per share for profit attributable to
the equity holders of the Company (expressed in
USD per share) 0.11 0.09
The accompanying notes are an integral part of these consolidated condensed
interim financial statements. These consolidated condensed interim financial
statements should be read in conjunction with our audited Consolidated Financial
Statements and notes for the fiscal year ended December 31, 2006.
2
TERNIUM S.A.
Consolidated condensed interim financial statements as of March 31, 2007
and for the three-month periods ended March 31, 2007 and 2006
(All amounts in USD thousands)
CONSOLIDATED CONDENSED BALANCE SHEETS
Notes March 31, 2007 December 31, 2006
------- ----------------------- ------------------------------
(Unaudited)
ASSETS
Non-current assets
Property, plant and equipment, net 7 5,351,398 5,420,683
Intangible assets, net 8 547,814 551,587
Investments in associated companies 15,277 16,285
Other investments, net 13,464 13,387
Deferred tax assets 35,044 36,439
Receivables, net 93,039 6,056,036 78,903 6,117,284
--------- ----------- -------- ---------
Current assets
Receivables 163,953 175,818
Derivative financial instruments 9,803 7,852
Inventories, net 1,181,399 1,241,325
Trade receivables, net 640,385 577,866
Cash and cash equivalents 983,690 2,979,230 643,352 2,646,213
----------- --------- ---------
Non-current assets classified as held for sale 5,964 7,042
----------- ---------
Total assets 9,041,230 8,770,539
----------- ---------
EQUITY
Capital and reserves attributable to the company's equity holders 3,938,739 3,757,558
Minority interest 1,747,641 1,729,583
Total equity 5,686,380 5,487,141
LIABILITIES
Non-current liabilities
Provisions 64,815 60,543
Deferred income tax 962,727 985,155
Tax liabilities 1,168 -
Other liabilities 289,954 274,566
Trade payables 7,152 7,229
Borrowings 399,722 1,725,538 548,401 1,875,894
--------- ----------- ---------- ----------
Current liabilities
Current tax liabilities 177,169 103,195
Other liabilities 205,389 158,374
Trade payables 686,952 621,754
Derivative financial instruments 10 15,487
Borrowings 559,792 1,629,312 508,694 1,407,504
---------- ------------ ----------- -----------
Total liabilities 3,354,850 3,283,398
------------ -----------
Total equity and liabilities 9,041,230 8,770,539
------------ -----------
Contingencies, commitments and restrictions to the distribution of profits are
disclosed in Note 10.
The accompanying notes are an integral part of these consolidated condensed
interim financial statements. These consolidated condensed interim financial
statements should be read in conjunction with our audited Consolidated Financial
Statements and notes for the fiscal year ended December 31, 2006.
3
TERNIUM S.A.
Consolidated condensed interim financial statements as of March 31, 2007
and for the three-month periods ended March 31, 2007 and 2006
(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
public Revaluation issue Currency
Capital offering and other discount translation Retained Minority Total
stock expenses reserves (2) adjustment earnings Total interest Equity
-----------------------------------------------------------------------------------------------------
Balance at January
1, 2007 2,004,744 (23,295) 2,047,199 (2,324,866) (121,608) 2,175,384 3,757,558 1,729,583 5,487,141
Currency
translation
adjustment (40,952) (40,952) (11,283) (52,235)
Net income for the
period 222,133 222,133 29,495 251,628
-----------------------------------------------------------------------------------------------------
Total recognized
income for the
period 2,004,744 (23,295) 2,047,199 (2,324,866) (162,560) 2,397,517 3,938,739 1,747,795 5,686,534
Dividends paid in
cash and other
distributions by
subsidiary
companies (154) (154)
-----------------------------------------------------------------------------------------------------
Balance at March
31, 2007 2,004,744 (23,295) 2,047,199 (2,324,866) (162,560) 2,397,517 3,938,739 1,747,641 5,686,380
-----------------------------------------------------------------------------------------------------
Balance at January
1, 2006 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
Currency
translation
adjustment (42,139) (42,139) (14,988) (57,127)
Net income for the
period 165,043 165,043 29,470 194,513
-----------------------------------------------------------------------------------------------------
Total recognized
income for the
period (42,139) 165,043 122,904 14,482 137,386
Contributions from
shareholders 33,801 43,100 (26,818) 50,083 (46,998) 3,085
Conversion of
Subordinated
Convertible Loans 302,962 302,962 605,924 605,924
Initial Public
Offering 271,429 (17,839) 271,429 525,019 525,019
-----------------------------------------------------------------------------------------------------
Balance at March
31, 2006 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
-----------------------------------------------------------------------------------------------------
(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 from shareholders under Luxembourg GAAP and IFRS.
Dividends may be paid by Ternium to the extent distributable retained
earnings calculated in accordance with Luxembourg law and regulations 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. These consolidated condensed interim financial
statements should be read in conjunction with our audited Consolidated
Financial Statements and notes for the fiscal year ended December 31, 2006.
4
TERNIUM S.A.
Consolidated condensed interim financial statements as of March 31, 2007
and for the three-month periods ended March 31, 2007 and 2006
(All amounts in USD thousands)
CONSOLIDATED CONDENSED INTERIM CASH FLOW STATEMENTS
Three-month period
Notes ended March 31,
-------- -------------------
2007 2006
-------------------
(Unaudited)
Cash flows from operating activities
Net income for the period 251,628 194,513
Adjustments for:
Depreciation and amortization 7 & 8 115,259 106,300
Income tax accruals less payments 57,976 10,948
Derecognition of property, plant and equipment 7 - 1,619
Equity in losses of associated companies 1,003 1,828
Interest accruals less payments (4,735) (15,893)
Changes in provisions (3,316) 11,420
Changes in working capital 110,349 (12,581)
Others 2,129 (1,107)
--------- ---------
Net cash provided by operating activities 530,293 297,047
--------- ---------
Cash flows from investing activities
Capital expenditures 7 & 8 (102,385) (89,998)
Acquisition of business - (55,183)
Proceeds from the sale of property, plant and equipment 5,174 528
--------- ---------
Net cash used in investing activities (97,211) (144,653)
--------- ---------
Cash flows from financing activities
Net proceeds from Initial Public Offering - 525,019
Contributions from shareholders - 3,085
Proceeds from borrowings 120,141 11,381
Repayments of borrowings (212,527) (553,452)
--------- ---------
Net cash used in financing activities (92,386) (13,967)
--------- ---------
--------- ---------
Increase in cash and cash equivalents 340,696 138,427
--------- ---------
Movement in cash and cash equivalents
At January 1, (1) 633,002 754,980
Effect of exchange rate changes (380) (813)
Increase in cash and cash equivalents 340,696 138,427
--------- ---------
Cash and cash equivalents at March 31, (1) 973,318 892,594
--------- ---------
Non-cash transactions
Conversion of debt instruments into shares - 605,925
(1) In addition, the Company has restricted cash for USD 10,372 and USD 10,350
at March 31, 2007 and December 31, 2006, respectively.
The accompanying notes are an integral part of these consolidated condensed
interim financial statements. These consolidated condensed interim financial
statements should be read in conjunction with our audited Consolidated Financial
Statements and notes for the fiscal year ended December 31, 2006.
5
TERNIUM S.A.
Consolidated condensed interim financial statements as of March 31, 2007
and for the three-month periods ended March 31, 2007 and 2006
(All amounts in USD thousands)
INDEX TO THE NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS
1 General information and basis of presentation
2 Accounting policies
3 Segment information
4 Cost of sales
5 Selling, general and administrative expenses
6 Other financial expenses, net
7 Property, plant and equipment, net
8 Intangible assets, net
9 Distribution of dividends
10 Contingencies, commitments and restrictions on the distribution of profits
11 Related party transactions
12 Subsequent event: Grupo Imsa S.A.B. de C.V. ("Grupo Imsa")
13 Recent accounting pronouncements
6
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)
1 General information and 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.
Following a corporate reorganization carried out during fiscal year 2005, in
January 2006 the Company successfully completed its registration process with
the United States Securities and Exchange Commission ("SEC"). As from February
1, 2006, the Company's shares are listed in the New York Stock Exchange.
The name and percentage of ownership of subsidiaries that have been included in
consolidation in these Consolidated Condensed Interim Financial Statement is
disclosed in Note 2 to the audited Consolidated Financial Statement for the year
ended December 31, 2006.
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 Consolidated Financial Statements for the year ended December 31, 2006,
which have been prepared in accordance with International Financial Reporting
Standards ("IFRS").
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 "Other financial expenses, net".
These Consolidated Condensed Interim Financial Statements were approved by the
Board of Directors of Ternium on May 3, 2007.
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
Consolidated Financial Statements for the year ended December 31, 2006.
Recently issued accounting pronouncements were applied by the Company as from
their respective dates.
During 2007, Ternium launched an incentive retention program (the "Program")
applicable to certain senior officers and employees of the Company, who will be
granted a number of Units throughout the duration of the Program. The value of
each of these Units will be based on Ternium's shareholders' equity (excluding
minority interest). Also, the beneficiaries of the Program will be entitled to
receive cash amounts based on (i) the amount of dividend payments made by
Ternium to its shareholders, and (ii) the number of Units held by each
beneficiary to the Program. Units vest ratably over a period of four years
beginning January 1, 2007 and will be redeemed by the Company ten years after
grant date. As of March 31, 2007, the outstanding liability corresponding to the
Program amounts to USD 2.1 million.
7
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)
3 Segment information
Primary reporting format - business segments
Business segments: for management purposes, the Company is organized on a
worldwide basis into the following segments: flat steel products, long steel
products and others.
The flat steel products segment comprises the manufacturing and marketing of hot
rolled coils and sheets, cold rolled coils and sheets, tin plate, welded pipes,
hot dipped galvanized and electrogalvanized sheets, pre-painted sheets and other
tailor-made products to serve its customers' requirements.
The long steel products segment comprises the manufacturing and marketing of
billets (steel in its basic, semifinished state), wire rod and bars.
The other products segment includes products other than flat and long steel,
mainly pig iron and pellets.
Long
Flat steel steel
products products Other Total
-----------------------------------------
(Unaudited)
Three-month period ended March 31, 2007
Net sales 1,392,938 357,737 47,618 1,798,293
Cost of sales (941,703) (249,290) (32,897) (1,223,890)
---------- --------- -------- -----------
Gross profit 451,235 108,447 14,721 574,403
Selling, general and administrative expenses (129,361) (30,526) (4,661) (164,548)
Other operating income, net 3,826 903 832 5,561
---------- --------- -------- -----------
Operating income 325,700 78,824 10,892 415,416
Depreciation - PP&E 90,990 15,644 3,318 109,952
Long
Flat steel steel
products products Other Total
-----------------------------------------
(Unaudited)
Three-month period ended March 31, 2006
Net sales 1,198,472 282,578 49,949 1,530,999
Cost of sales (758,349) (206,038) (25,270) (989,657)
---------- --------- -------- -----------
Gross profit 440,123 76,540 24,679 541,342
Selling, general and administrative expenses (119,962) (25,843) (5,212) (151,017)
Other operating (expenses) income, net (776) 213 2,762 2,199
---------- --------- -------- -----------
Operating income 319,385 50,910 22,229 392,524
Depreciation - PP&E 85,191 13,740 2,722 101,653
8
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)
3 Segment information (continued)
Secondary reporting format - geographical segments
The secondary reporting format is based on a geographical location. Ternium
sells its products to three main geographical areas: South and Central America,
North America, and Europe and others. 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.
South
and Europe
Central North and
America America others Total
---------- -------- ------- ----------
(Unaudited)
Three-month period ended March 31, 2007
Net sales 1,011,159 733,236 53,898 1,798,293
Depreciation - PP&E 75,445 34,480 27 109,952
Three-month period ended March 31, 2006
Net sales 829,466 676,247 25,286 1,530,999
Depreciation - PP&E 68,445 33,201 7 101,653
4 Cost of sales
Three-month period
ended March 31,
-----------------------
2007 2006
----------- -----------
(Unaudited)
Inventories at the beginning of the year 1,241,325 1,000,119
Acquisition of business - 8,180
Plus: Charges for the period
Raw materials and consumables used and other movements 772,759 697,105
Services and fees 43,195 35,312
Labor cost 131,678 120,462
Depreciation of property, plant and equipment 106,701 97,849
Amortization of intangible assets 3,687 3,348
Maintenance expenses 95,987 67,745
Office expenses 1,719 1,513
Freight and transportation 6,451 5,666
Insurance 2,462 2,641
Provision for obsolescence (4,424) 9,390
Recovery from sales of scrap and by-products (20,498) (13,846)
Others 24,247 15,807
Less: Inventories at the end of the period (1,181,399) (1,061,634)
----------- -----------
Cost of sales 1,223,890 989,657
----------- -----------
9
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)
5 Selling, general and administrative expenses
Three-month period
ended March 31,
----------------------------------
2007 2006
-------------- -------------
(Unaudited)
Services and fees 11,237 14,454
Labor cost 39,713 33,996
Depreciation of property plant and equipment 3,251 3,804
Amortization of intangible assets 1,620 1,299
Maintenance expenses 3,584 3,791
Taxes 15,547 12,563
Office expenses 5,975 7,205
Freight and transportation 80,104 66,833
Insurance 268 401
Provision for impairment of trade receivables (2,155) 380
Others 5,404 6,291
-------------- -------------
Selling, general and administrative expenses 164,548 151,017
-------------- -------------
6 Other financial expenses, net
Three-month period
ended March 31,
-----------------------------
2007 2006
---------- ---------
(Unaudited)
Net foreign exchange transaction gains and change in fair value of derivative instruments 18,904 (5,496)
Debt issue costs (1,063) (9,030)
Loss from Participation Account (90,701) (83,305)
Others (3,262) (3,538)
---------- ---------
Other financial expenses, net (76,122) (101,369)
---------- ---------
7 Property, plant and equipment, net
Three-month period
ended March 31,
---------------------
2007 2006
---------- ----------
(Unaudited)
At the beginning of the year 5,420,683 5,463,871
Currency translation differences (47,820) (64,426)
Transfers - (9,633)
Additions 92,403 86,430
Disposals (3,916) (2,394)
Derecognition - (1,619)
Increase due to business acquisition - 47,825
Depreciation charge (109,952) (101,653)
---------- ----------
At the end of the period 5,351,398 5,418,401
---------- ----------
10
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)
8 Intangible assets, net
Three-month period
ended March 31,
-----------------------------
2007 2006
--------- --------
(Unaudited)
At the beginning of the year 551,587 552,882
Currency translation differences (8,448) (3,985)
Additions 9,982 3,568
Amortization charge (5,307) (4,647)
--------- --------
At the end of the period 547,814 547,818
--------- --------
9 Distribution of dividends
On February 27, 2007, the Board of Directors proposed a dividend distribution of
US$0.05 per share (US$0.50 per ADS), or approximately US$100.2 million in the
aggregate, which is subject to shareholder approval at the Company's annual
general shareholders' meeting to be held on June 6, 2007. If the annual dividend
is approved at the annual general shareholders' meeting, the payment date is
expected to be on June 12, 2007.
10 Contingencies, commitments and restrictions on the distribution of profits
This note should be read in conjunction with Note 28 to the Company's audited
Consolidated Financial Statements for the year ended December 31, 2006.
Significant changes or events since the date of the annual report are as
follows:
(i) Consorcio Siderurgia Amazonia Ltd .- PDVSA-Gas C.A. claim
In June 2004, the arbitration proceedings brought by Sidor against PDVSA Gas,
C.A. (on the basis that PDVSA Gas had charged Sidor higher than agreed-upon
prices in its supplies of gas against the application of the most favored client
clause) were resolved in Sidor's favor. Accordingly, in its financial statements
at December 31, 2004, Sidor reversed the USD41.4 million provision it had
recorded at December 31, 2003. In July 2004, PDVSA Gas, C.A. filed an appeal
with the Venezuelan courts seeking to void the arbitral award. Sidor believes
that applicable Venezuelan law does not allow the courts to void an arbitral
award under the circumstances and that the likelihood of loss thereunder is
remote. Accordingly, Sidor did not record any liabilities in connection with the
appeal. At March 31, 2007, Sidor's potential exposure under this litigation
amounted to USD 134.7 million.
(ii) Restrictions on the distribution of profits
Under the credit agreements entered into to finance the acquisition of Hylsamex,
the Company and its affiliates have some restrictions to the payment of
dividends in excess of certain amounts, among other limitations (see Note 3e) to
the audited Consolidated Financial Statements for the year ended December 31,
2006).
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 equals 10% of the share capital. At March 31, 2007, this
reserve reached the above-mentioned threshold.
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
financial statements may not be wholly distributable.
11
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)
10 Contingencies, commitments and restrictions on the distribution of profits
(continued)
Shareholders' equity under Luxembourg law and regulations comprises the
following captions:
At March 31, 2007
---------------------
(Unaudited)
Share capital 2,004,744
Legal reserve 200,474
Distributable reserves 402,149
Non distributable reserves 1,414,122
Accumulated profit at January 1, 2007 499,842
Profit for the period 60,401
---------------------
Total shareholders' equity under Luxembourg GAAP 4,581,732
---------------------
11 Related party transactions
The Company is controlled by San Faustin N.V., a Netherlands Antilles
corporation, which has 70.52% of the Company's voting rights, 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
---------------------------
2007 2006
--------- -------
(Unaudited)
(i) Transactions
(a) Sales of goods and services
Sales of goods to associated parties 27 2,671
Sales of goods to other related parties 24,677 21,572
Sales of services and others to associated parties 829 508
Sales of services and others to other related parties 2,854 -
--------- -------
28,387 24,751
--------- -------
(b) Purchases of goods and services
Purchases of goods from associated parties 20,101 14,390
Purchases of goods from other related parties 11,373 9,675
Purchases of services and others from associated parties 5,688 -
Purchases of services and others from other related parties 57,843 23,202
--------- -------
95,005 47,267
--------- -------
(c) Financial results
Income with associated parties 1,161 -
Expenses with other related parties (12) (147)
--------- -------
1,149 (147)
--------- -------
12
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)
11 Related party transactions (continued)
At March 31, At December
2007 31, 2006
-----------------------------
(Unaudited)
(ii) Period-end balances
(a) Arising from sales/purchases of goods/services
Receivables from associated parties 68,355 67,558
Receivables from other related parties 38,424 48,533
Payables to associated parties (13,035) (5,588)
Payables to other related parties (48,874) (48,032)
-------------- --------------
44,870 62,471
-------------- --------------
b) Other investments
-------------- --------------
Time deposit 11,356 11,249
-------------- --------------
(c) Financial debt
-------------- --------------
Borrowings with other related parties (2,161) (2,161)
-------------- --------------
12 Subsequent event: Grupo Imsa S.A.B. de C.V. ("Grupo Imsa")
On April 30, 2007 Ternium announced that it has entered into a definitive
agreement under which it expects to obtain control of Grupo Imsa for a total
consideration of approximately US$1.7 billion.
Under the agreement, Ternium, or any of its subsidiaries, will make a tender
offer in accordance with applicable Mexican law for all of the issued and
outstanding share capital of Grupo Imsa at a price of US$6.40 per share.
Concurrently with the consummation of the tender offer, Grupo Imsa's majority
shareholders, owning approximately 90.4% of Grupo Imsa's issued and outstanding
share capital, will have their shares redeemed in cash at the same price per
share. Ternium will finance the transactions primarily through debt, for which
bank commitments have been secured.
The transaction is subject to Mexican and U.S. antitrust clearances, approval by
the Mexican securities regulator, and other customary conditions. It is expected
to close in the third quarter of 2007.
Grupo Imsa is a steel manufacturer with operations in Mexico, the United States
and Guatemala. It has an annual production capacity of 2.2 million tons of hot
rolled coils, 1.8 million tons of cold rolled products and 1.7 million tons of
galvanized products. In addition, Grupo Imsa produces panels and other steel
products.
13 Recent accounting pronouncements
(i) International Accounting Standard 23 (revised 2007), "Borrowing Costs"
In March 2007, the International Accounting Standards Board issued International
Accounting Standard 23 (revised 2007), "Borrowing Costs" (the "Standard"). The
Standard provides that borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset form part of the
cost of that asset, while all other borrowing costs shall be recognized as an
expense.
The Standard supersedes IAS 23 (revised 1993) and is applicable for annual
periods beginning on or after 1 January 2009. Earlier application is permitted.
If an entity applies the Standard from a date before 1 January 2009, it shall
disclose that fact.
The Company's management has not assessed the potential impact that the
application of the Standard may have on the Company's financial condition or
results of operations.
Roberto Philipps
Chief Financial Officer
13
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
-------------------- -------------------
Name: Roberto Philipps Name: Daniel Novegil
Title: Chief Financial Officer Title: Chief Executive Officer
Dated: May 3, 2007