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 Notes to Consolidated Financial Statements
 1. General
 The records of the company are kept in Mexican new pesos (NP) and the accompanying financial statements are presented in thousands of Mexican new pesos. The company manufactures steel drill pipe, casing, tubing and line pipe primarily for use in the petroleum industry.
 2. Recognition of the effects of inflation on the financial information.
 Beginning in 1984, the company adopted the accounting principles prescribed by Statement Bulletin B10 and by Circular 11-10 issued by the Mexican Institute of Public Accountants (the institute) and the Mexican National Securities Commission, respectively. On Jan. 1, 1990, accounting rules prescribed by Bulletin "Third Document of Amendments to Bulletin B-10" issued by the Mexican Institute of Public Accountants became effective. This bulletin requires, in periods of high inflation that all financial statements presented be expressed in Mexican new pesos with purchasing power as of the date of the latest statement of financial position presented, using the National Consumers Price Index (NCPI). The new bulletin also requires that all adjustments to shareholder's equity be reflected in each equity account affected and not combined in one general caption as was previously required. As a result, the 1992 amounts included in the consolidated financial statements and notes have been restated into constant new pesos as of March 31, 1993. This is due to the fact that beginning Jan. 1, 1993, a new monetary unit denominated new peso "nuevo peso" was established. The new peso "nuevo peso" is equivalent to 1,000 pesos (P1,000) of the ones current until Dec. 31, 1992. The concepts and methods followed by the company for preparing the accompanying statements are described in the following notes.
 2A. Inventories and Cost of Sales
 At March 31, 1993 and 1992, inventories are stated at their replacement cost not in excess of net realizable value as of that date (see notes 3B and 10). Cost of sales for 1993 and 1992 has been computed by the LIFO method.
 2B. Property, Plant and Equipment
 Property, plant and equipment is recorded at replacement cost by the method described in notes 3C and 4B.
 2C. Loss from holding of non-monetary assets.
 This item represents the increase in the restated value of non- monetary assets, under the rate of inflation determined on the NCPI.
 2D. Gain on net monetary position.
 This item represents the effect of inflation as measured by the NCPI on the company's average monetary assets and liabilities during the periods ended March 31, 1993 and 1992 monetary liabilities exceeded monetary assets and, as a consequence, there was a gain on net monetary position for each of those years, which was allocated as follows:
 Periods Ended 1993 1992
 To integral financing cost NP 30,097 NP 37,130
 To installations and constructions -- --
 in progress
 Total NP 30,097 NP 37,130
 2E Integral financing (cost) income.
 Integral financing cost includes the
 following items:
 Gain on net monetary position NP 30,097 NP 37,130
 Interest and financing expenses (27,273) (35,578)
 Foreign exchange loss 12,809 1,210
 Total NP 15,633 NP 2,762
 2F. Consolidated statements of changes in financial position.
 In accordance with the requirements established in bulletin B-12 "Statement of changes in the financial situation," this statement must disclose the changes in the financial position measured in pesos with an equivalent purchasing power.
 Bulletin B-12 identifies the generation and application of resources representing differences between beginning and ending balances of the statement of financial position, in constant pesos. Also, bulletin B-12 requires that (1) monetary and foreign exchange gains and losses not be treated as noncash items in the determination of resources provided by operations, (2) the reduction in long-term debt (including its current portion) due to its restatement in constant pesos be presented in the statement of changes in financial position as a resource used by financing activities, and (3) the gain (or loss) from monetary position be considered as a component of operating activities. The accounting principles generally accepted in the United States do not provide guidance as to the application of inflation principles to the preparation of statements of changes in financial position.
 Note 3. Summary of accounting policies
 3A. Principles of consolidation.
 The consolidated financial statements include the accounts of Tubos de Acero de Mexico, S.A. and its eight subsidiaries (the company): Inmobiliaria Tamsa, S.A. de C.V., Siderurgica Tamsa, S.A., Inmobiliaria de la Zona Industrial de Framboyan, S.A., Inmobiliaria Paris-Madrid S.A., Tamsider, S.A., Corporacion Tamsa, S.A., Tamtrade Ltd. and Tamtrade, S.A. de C.V. All significant intercompany accounts and transactions have been eliminated in consolidation.
 Investments in associated companies in which the company owns more than 20 percent of the common stock are accounted for by the equity method of accounting under which the company includes in periodic income its proportionate share of the reported net results for the associated companies most recently ended fiscal year. Investments in less than 20 percent owned companies are carried at cost.
 3B. Inventories.
 As of March 31, 1993 and 1992, inventories are stated in conformity with the method described in Note 2A.
 In accordance with trade practices in Mexico, all accessories, spare parts and general stores have been classified as current assets, even though not all of them may be used within one year and although some of them, when used, may be capitalized as additions to, or replacement of, plant and equipment.
 3C. Property, plant and equipment and installations and construction in progress.
 Property, plant and equipment, and installations and construction in progress are stated initially at acquisition cost. This is updated annually as described in Note 4B.
 3D. Employee termination compensation.
 In accordance with Mexican law, employees are entitled to a compensation payment upon retirement after 15 years of service or, without considering any period of service, upon death or dismissal. The actuarial liability thereto is not material.
 Further, in accordance with Mexican labor law, the company is contingently liable for severance pay to employees who may be dismissed without cause.
 3E. Net earnings per common share.
 Net earnings per common share for each one of the three-month period ended March 31, 1993 and 1992 were computed by dividing consolidated net earnings by the weighted average number of share (54,815,000 in 1993; and 1992) of common stock outstanding.
 3F. Revenue recognition.
 Sales are recorded upon delivery to customers.
 Note 4. Mexican peso devaluation and appraisal of property, plant and equipment.
 4A. Mexican peso devaluation.
 In 1982, the Mexican Central Bank established a controlled and free market rate system. The controlled rate was to be used mainly for buying US dollars for payments of interest and debt payable in foreign currencies to foreign banks and suppliers registered or to be registered with the Mexican government. On Nov. 11, 1991 the controlled rate system was abrogated.
 Substantially all of the company's US dollar denominated accounts related to property, plant, and equipment and installations and construction in progress. As prescribed by the Mexican Institute of Public Accountants' rules in force before Bulletin B10 became effective, net differences resulting from devaluation of the Mexican peso which were related to plant financing were charged to the corresponding assets. In 1993 and 1992, the amounts of NP 12,809 and NP 1,210 were discharged to results from operations. At March 31, 1993 remaining net differences to property, plant and equipment amounted to NP 136,652.
 At March 31, 1993 and 1992, the company had assets and liabilities denominated in foreign currencies, mainly in US dollars, as follows:
 Periods Ended March 31, 1993 1992
 Equivalent Equivalent
 US$ New Pesos US$ New Pesos
 Current notes
 payable to banks 279,532 864,788 190,244 644,395
 Other current liabilities 18,350 56,766 28,184 95,466
 Long-term debt 235,331 728,043 240,250 813,775
 Total liabilities of two
 wholly-owned subsidiaries
 located in the United
 States and Cayman Islands 766 2,370 39,794 134,790
 533,979 1,651,967 498,472 1,688,426
 Less assets:
 Cash 3,873 11,982 5,185 17,564
 Other current assets 39,248 121,422 63,031 213,500
 Total assets of two wholly
 -owned subsidiaries located
 in the United States and
 Cayman Islands 2,700 8,354 39,408 133,486
 45,821 141,758 107,624 364,550
 Net liability position 488,158 1,510,209 390,848 1,323,876
 The total assets and liabilities of the two wholly-owned subsidiaries were translated to Mexican new pesos at the free market rate. Substantially all assets and liabilities listed above were translated and adjusted at March 31, 1993 and 1992 into Mexican new pesos at the free market and controlled rate of 3.0937 and 3.0683 Mexican new pesos for one US dollar (or 0.32 and 0.33 US dollars per one Mexican new peso,) respectively.
 4B. Appraisal of property, plant and equipment
 As of each period end, the company increased the carrying amounts of its property, plant and equipment to reflect the depreciated replacement cost of its production facilities as of those dates, based on appraisals by Techint, S.A., considered an independent appraiser for purposes of the Mexican National Securities Commission. One of the company's principal shareholders National Securities Commission. One of the company's principal shareholders, San Faustin, S.A. indirectly owns a substantial portion of Groupo Techint, S.A. which owns 80 percent of Techint, S.A. Also, certain members of the company's board of directors are directors and officers of San Faustin, S.A. or its subsidiaries and affiliated companies. Due to these relationships, Techint, S.A. would not be considered an independent appraiser under United States generally accepted accounting principles.
 3/31/93 3/31/92
 Adjusted carrying amount(A) Adjusted carrying amount(A)
 Land NP 158,939 NP 132,152
 Buildings 454,791 443,042
 Machinery and
 equipment 3,639,107 4,030,031
 Total 4,252,837 4,605,225
 Installations and
 construction in
 progress 37,935 61,744
 Allowance for
 depreciation (1,300,820) (1,410,927)
 Net property,
 plant and
 equipment NP 2,959,952 NP 3,256,042
 (A) Includes P 867,319 of interest expense during construction and expenses during the preoperating of major facilities. (See note 5).
 NOTE 5. Accounts and Notes Receivable
 Accounts and notes receivable are shown net of allowances for uncollectable accounts (1993 NP 1,925; 1992 NP 1,101). Current notes receivable amounted to NP 11,345; and NP 64,717 at March 31, 1993, and 1992, respectively. Accounts receivable from the company's principal customer, Petroleos Mexicanos (Pemex), the government agency that controls and manages the Mexican petroleum industry, amounted to NP 63,467; and NP 116,315 at March 31, 1993, and 1992 respectively. Sales to Pemex amounted to NP 39,146 in 1993, and NP 134,151 in 1992. The company's domestic sales prices were not increased in 1993, and 1992.
 -0- 5/3/93 AA NY091
 /PRNewswire -- May 3/

CO: Tubos de Acero de Mexico, S.A. ST: IN: MNG SU: ERN

GK-OS -- NY091A -- 4062 05/03/93 19:10 EDT
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Date:May 3, 1993

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