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Tenaris S.A. Form 6-K Summary

Business Context and Reporting Period

This filing contains the Consolidated Financial Statements for Tenaris S.A., a global manufacturer of steel tubular products, for the fiscal years ended December 31, 2009, 2008, and 2007. The report was filed on March 4, 2010. Tenaris operates primarily in two segments: Tubes (seamless and welded steel tubular products) and Projects (welded steel pipe for pipeline construction). The company is a Luxembourg holding company with significant operations in North and South America, Europe, and the Middle East.

Key Financial Metrics (Year Ended Dec 31, 2009)

Margins (2009): Gross Margin was 40.3%; Operating Margin was 22.3%.
Liquidity: The company maintained a strong cash position of approximately $1.54 billion. The debt-to-total-equity ratio improved significantly to 0.13 in 2009 from 0.25 in 2008.

Material Changes vs. Prior Period

• Revenue Decline: Net sales decreased by 32% to $8.15 billion, driven by a global economic downturn and a sharp decline in oil and gas drilling activity, particularly in North America.
• Profitability Impact: Net income attributable to equity holders fell by 45% to $1.16 billion. Operating income dropped 42% to $1.81 billion.
• Debt Reduction: Total borrowings were reduced by approximately 51% to $1.45 billion, reflecting aggressive deleveraging and the use of strong operating cash flows to repay debt.
• Discontinued Operations: Results for Venezuelan subsidiaries (Tavsa, Matesi, Comsigua) are presented as discontinued operations following their nationalization by the Venezuelan government in 2009. This resulted in a loss of $28.1 million for the year.
• Impairment Charges: Unlike 2008, which saw a $502.9 million impairment charge, no impairment charges were recorded in 2009 as management anticipated a recovery in activity levels.

Outlook, Risks, and Contingencies

• Management Commentary: Management noted that while 2009 was challenging due to the recession and low rig counts, they expect activity levels to recover in 2010 with better competitive conditions and higher oil and gas prices.
• Venezuela Nationalization: The company ceased consolidating Venezuelan subsidiaries as of June 30, 2009. Tenaris has reserved its rights to seek compensation under international investment treaties and is pursuing arbitration. Outstanding receivables from these entities total $27.7 million.
• FCPA Investigation: The company disclosed an ongoing internal investigation regarding sales agency payments in Central Asia that may have violated the U.S. Foreign Corrupt Practices Act (FCPA). The company has voluntarily notified the SEC and DOJ. The potential financial impact is currently indeterminable.
• Legal Contingencies: Significant pending matters include asbestos-related litigation against Italian subsidiary Dalmine (estimated potential liability of $18.4 million) and a U.S. IRS examination of Maverick Tube Corporation tax returns.
• Dividends: The Board proposed an annual dividend of $0.34 per share ($0.68 per ADS) for shareholder approval in June 2010.

Key Facts for Investor Verification

• FCPA Investigation Status: Verify the outcome of the internal investigation regarding Central Asia payments and any potential fines or penalties from the SEC or DOJ.
• Venezuela Compensation: Monitor the status of compensation negotiations and arbitration proceedings regarding the nationalized Venezuelan assets (Tavsa, Matesi).
• Debt Covenants: Confirm continued compliance with financial covenants (leverage and interest coverage ratios) on syndicated loan facilities, particularly given the reduced revenue base.
• Oil and Gas Rig Counts: Track North American rig counts and oil prices as primary drivers of demand for the Tubes segment.
• IRS Audit Resolution: Follow the resolution of the IRS field examination regarding Maverick's 2005 and 2006 tax returns, which involves potential adjustments of up to $87.3 million.