TS

Tenaris S.A. Restated Financial Summary (Year Ended Dec 31, 2014)

Business Context and Reporting Period

This filing presents the Restated Consolidated Financial Statements for Tenaris S.A. for the years ended December 31, 2014, 2013, and 2012. The 2014 figures have been restated following discussions with the SEC regarding the carrying value of the Company's investment in Usiminas. The restatement, treated as a correction of an error, reduced the carrying amount of the Usiminas investment by $161.2 million and adjusted the investment in Ternium. The Company operates primarily in the "Tubes" segment, manufacturing seamless and welded steel tubular products for the oil and gas industry.

Key Financial Metrics (2014 vs. 2013)

Material Changes and Drivers

• Restatement Impact: The primary driver for the change in 2014 reported figures is the $184.8 million reduction in equity earnings due to the Usiminas impairment. This reduced Net Income by $184.8 million and EPS by $0.16 per share compared to previously reported figures.
• Revenue Decline: Net sales decreased 2.4% year-over-year, reflecting lower demand in the oil and gas sector.
• Impairment Charges: The Company recorded a $205.8 million impairment charge in Q4 2014 related to welded pipe assets in Colombia and Canada, driven by falling oil prices (from >$100/bbl to <$50/bbl) and reduced drilling activity.
• Equity in Non-Consolidated Companies: This line item swung from a gain of $46.1 million in 2013 to a loss of $164.6 million in 2014, primarily due to the Usiminas impairment.
• Capital Expenditures: Increased significantly to $1.09 billion in 2014 from $0.75 billion in 2013, largely due to the construction of a new seamless facility in Bay City, Texas.

Outlook, Risks, and Contingencies

• Market Risk: The Company faces significant exposure to oil and gas price volatility, which directly impacts drilling activity and demand for OCTG products. Management notes that further deterioration in oil prices or rig counts could trigger additional impairment charges.
• Legal Contingencies:
  • Venezuela Nationalization: Ongoing arbitration proceedings (ICSID) regarding the expropriation of Venezuelan subsidiaries (Tavsa, Matesi, Comsigua). Claims include principal sums of ~$299 million plus interest.
  • Italy Tax Assessment: Disputes regarding withholding tax on dividends. While a 2007 assessment was reduced to ~$11 million, a 2008 assessment remains at ~$301 million. Management believes a material obligation is not probable.
  • CSN Claims: Litigation regarding the 2012 acquisition of Usiminas shares. Tenaris believes claims are groundless; no provision has been recorded.
• Dividends: The Board proposed an annual dividend of $0.45 per share ($0.90 per ADS) for 2014, approved by shareholders in May 2015. A subsequent dividend of $0.30 per share was paid in May 2015.

Investor Verification Checklist

• Usiminas Valuation: Verify the assumptions used in the "value in use" calculation for the Usiminas investment, specifically the discount rate (10.4%) and steel price forecasts, given the sensitivity to these inputs.
• Impairment Sensitivity: Review the sensitivity analysis for the welded OCTG CGU in the USA, where a 100 bps increase in the discount rate could generate an additional $179 million impairment.
• Cash Flow vs. Net Income: Note the divergence between Net Income ($1.18B) and Operating Cash Flow ($2.04B), driven by non-cash impairment charges and working capital changes.
• Debt Maturity: Confirm the maturity profile of the $999 million in borrowings, noting that approximately 73% of the total debt balance corresponds to fixed-rate borrowings with original periods of 360 days or less.
• Venezuela Arbitration Status: Monitor the timeline for the ICSID award regarding the Venezuelan nationalization, as the outcome could materially impact future cash flows.