COVER SHEET

Transcription

COVER SHEET
August 10, 2004
COVER SHEET
1 8 0 3
S.E.C. Registration Numer
A B S - C B N
B ROA DCA S T I NG
C O R P O R A T I ON
(Company's Full Name)
A B S - C B N
B ROA DCA S T I NG
S G T . E S G U ERRA
CENT E R
A V E . QUE Z ON
CI T Y
(Business Address: No. Street City / Town / Province)
Randolph T. Estrellado
415-2272
Contact Person
1 2
3 1
Day
Month
Fiscal Year
Company Telephone Number
1 7 - Q
0 4
Day
Month
Annual Meeting
FORM TYPE
Secondary License Type, If Applicable
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
8 5 8 3
Total No. of Stockholders
Domestic
To be accomplished by SEC Personnel concerned
File Number
LCU
Document I.D.
Cashier
STAMPS
Foreign
ABS-CBN BROADCASTING CORPORATION
SEC FORM 17-Q
QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES
REGULATION CODE AND SRC RULE 17(b)(2) THEREUNDER
1.
For the quarterly period ended June 30, 2004
2.
SEC Identification No. 1803
3.
BIR Tax Identification No. VAT 000-406-761-000
4.
Exact name of registrant as specified in its charter : ABS-CBN Broadcasting Corporation
5.
Philippines
_
Province, Country or other jurisdiction of incorporation or organization
6.
Industry Classification Code : _________ (SEC Use Only)
7.
ABS-CBN Broadcasting Center Complex, Sgt. Esguerra
Avenue cor. Mo. Ignacia St.,Quezon City, Metro Manila
Address of principal office
1100 _
Postal Code
8.
(632) 924-41-01 up to 22 / 415-22-72
Registrant’s telephone no. and area code
9.
Not applicable
_
Former name, address, and fiscal year, if changed since last report
10.
Securities registered pursuant to Sections 4 & 8 of the RSA:
No. of Shares of Common Stock
Outstanding &/or Amount of Debt Outstanding
Title of Each Class
779,583,312 shares
Common Stock, P 1 par value
11.
Are any or all of these securities listed on the Philippine Stock Exchange?
Yes [x]
12.
No [ ]
Indicate by check mark whether the registrant:
(a)
has filed all reports required to be filed by Section 17 of the Securities Regulation
Code and Sections 26 and 141 of the Corporation Code of the Philippines during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports):
Yes [x]
(b)
No [ ]
has been subject to such filing requirements for the past 90 days.
Yes [x]
No [ ]
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
Item 1 Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Item 2 Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income and
Unappropriated Retained Earnings
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Financial Statements
PART II -- OTHER FINANCIAL INFORMATION
Exhibit 1
Schedule of Investments and Advances
Exhibit 2
Aging of Accounts Receivable
Exhibit 3
Business Segment Results
Exhibit 4
Roll-forward of PPE
SIGNATURES
Management’s Discussion and Analysis of Financial Condition and Results of
Operations for the Quarter and Six Months Ended June 30, 2004
ABS-CBN Broadcasting Corporation registered a net income of P560 million in the first half of
2004, reflecting a 10% growth year-on-year (YoY). The growth in net income was primarily
brought about by overall revenue growth as well as lower interest expense.
Airtime revenues and broadcast related revenues
Airtime revenues and broadcast related revenues increased by 5% to P5,556 million in the first
half of the year (1H’04) primarily driven by higher revenues from TV Channel 2. Airtime
revenues from TV Channel 2 grew by 5% in 1H’04 brought about by a combination of an increase
in advertising rates and an increase in advertising minutes where total VHF industry minutes
was down by 1%.
Airtime revenues from other platforms, on the other hand, fell by 7% as advertisers adopted a
wait-and-see attitude in view of the national elections. While political advertising was higher in
this recently concluded elections compared to the 2001 elections, over 90% of the approximately
P480 million political ads was placed in Channel 2, which has a wider audience reach compared
to the other platforms owned by the company.
Other broadcasting related revenues composed primarily of SMS related revenues increased by
38% in 1H’04 as the nature of SMS activities has evolved from audience interaction via SMS in
Game K N B? to the more lucrative downloading of new services such as polytones, java games,
and wallpapers. SMS revenues also grew with the introduction of promos which include voting
for the Star Circle Quest, Star in a Million and Sana’y Wala Nang Wakas ending.
Net sales and services
The company’s net sales and services continued to post healthy growth rates as 1H’04 increased
by 23% to P2,055 million with ABS-CBN Global continuing to account for bulk of net sales and
services.
In the first half of the year, ABS-CBN Global reported net revenues of P1,412 million, up 24%
from P1,135 million in 1H’03. ABS-CBN Global’s reach continued to expand as its viewer ship
grew 24% YoY to 1.5 million by end-June 2004 from 1.2 million the year ago. To reach even more
viewers, ABS-CBN Global launched its own DTH service in Australia last June where ABS-CBN’s
channels were previously distributed by a third party DTH provider.
Other subsidiaries turned in equally notable results with a growth of 21% in 1H’04 to P643
million from P531 million in 1H’03. ABS-CBN Films continued to produce blockbuster movies
with the showing of Milan and All My Life which grossed over P100 million each from box-office
receipts and from shares in video sales. Star Records and ABS-CBN Publishing likewise
registered strong double digit growth rates in the first half of the year. Net sales of Star Records
grew primarily from video sales of movies produced by ABS-CBN Films while, ABS-CBN
Publishing’s revenue growth came from an increase in circulation as well as an increase in ad
page rate.
With net airtime and broadcast related revenues growing by 5% and net sales and services
growing by 23%, total net revenues grew 10% to P6,614 million.
1
Operating expenses
Operating expenses grew 15% YoY to P5,594 million from P4,885 million in 1H’03. This growth
came from an increase in cash operating expenses consisting of production cost, general and
administrative costs, and cost of sales and services. These cash expenses grew by 19% to P4,541
million from P3,832 million in the same period last year.
Production costs in 1H’04 increased by 21% to P1,911 million from P1,576 million with the
increase due in part to the cost of covering the recently concluded national elections. Without the
cost of the Halalan 2004 coverage, production cost increased by 19% as the company produced
two new shows in the non-primetime afternoon slot in place of canned animation programs.
Furthermore, the growth in production cost also reflected the impact of the reduction in movie
nights starting in June 2003.
Also contributing to production cost growth was the re-launch of Studio 23 with its new tagline
“Kabarkada Mo!” in efforts to widen its youth market. Studio 23’s re-launch included a reprogramming strategy to produce more programs such as Wazzup Wazzup (a daily news program
with a comic twist), Sports TV (sports news delivered in a fast-paced style), and Nginig:Hidden
Files (a reality TV horror program).
General and administrative expenses (GAEX) grew by 17% to P1,592 million from P1,356 million.
The growth in GAEX came from expenses of ABS-CBN Europe which began start-up operations
in June 2003 and partly from ABS-CBN Films which was incorporated only in 2Q’03. Without the
expenses due to ABS-CBN Europe and the 1Q’04 impact of ABS-CBN Films, recurring GAEX YoY
growth was at 10%. This growth was due to various training programs for employees as well as
repairs and maintenance costs that were slashed the previous year as a result of cost cutting
measures.
Cost of sales and services, the cost related to net sales and services, increased by 15% to P1,038
million from P900 million in 1H’03. Cost of sales as a per cent to net sales and services was down
to 51% in 1H’04 from 54% the year ago reflecting the improving operating margins of the
subsidiaries.
Non-cash operating expenses consisting of depreciation and amortization of program rights was
flat from the same period last year at P1,053 million as the reduction in depreciation expense was
tempered by an increase in amortization of program rights. Depreciation expense decreased by
11% to P561 million with the reduction in the company’s capital spending compared to the
previous years.
Amortization of program rights, on the other hand, increased by 17% YoY to P493 million in
1H’04 from P421 million in 1H’03 due to the impact of an aggressive amortization policy adopted
at the beginning of the year.
Overall, since consolidated net revenues grew at a slower rate than operating expenses, operating
income fell 11% to P1,020 million, bringing operating margin to 15% from 19% the year before.
Net income and EBITDA
Tempering the decline in operating income were significantly lower other expenses. Other
expenses in 1H’04 were lower by 37% at P193 million from P307 million in 1H’03. The
improvement in other expenses was due to lower interest expense as the company paid down
2
P1.5 billion worth of maturing debt obligations from internally generated cash in the first half of
the year. However, beginning July 2004, interest expense is expected to increase with the signing
of the US$120 million loan of which around US$100 million was drawn in June.
With operating income at over P1.0 billion and with the improvement in other expenses, net
income grew by 10% to P560 million from P507 million the year ago. Earnings before interest,
taxes, depreciation, and amortization (EBITDA) stood at P2,132 million, a slight decline of 3%
from the P2,197 in 1’H’03 as cash expenses overtook revenue growth in 1H’04.
Asset and Capitalization
Total consolidated assets reached P24,538 million by end-June 2003, up by 11% from end-2003
levels.
Accounts receivables stood at P4,277 million with trade receivables accounting for 98% of the
total at P4,174 million. Parent trade days sales outstanding (DSO) was at 75-days from 72 days in
2003. Consolidated trade DSO, meanwhile, was at 99-days from 83-days in 2003.
Total interest bearing debt reached P6,019 million as the company signed a five year syndicated
loan agreement for US$120 million in June 2004. Part of the US$120 million loan was used to
refinance all existing loans of ABS-CBN while US$30 million will be invested in Beyond Cable in
the form of a convertible debt instrument which will be converted into equity after two years.
The foreign exchange exposure of the principal amount is fully hedged hence the company will
not be exposed to foreign exchange risk other than on the interest.
Despite a higher debt level from December 2003, the company continued to keep a strong balance
sheet, maintaining a debt-to-equity ratio of 78%.
2
ABS-CBN BROADCASTING CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 2004 and December 31, 2003
(In Thousands, Except Par Value and Number of Shares)
2004
June
Unaudited
ASSETS
Current Assets
Cash and cash equivalents
Accounts Receivable - net
Program rights - Current
Other Current Assets
Total Current Assets
Due from Affiliated Companies
Investment and Advances
Property and Equipment - net
Program rights - Non Current
Assets of Discontinuing Operations
Other Assets
Total Non Current Assets
LIABILITIES AND
STOCKHOLDER'S EQUITY
Current Liabilities
Bank Loans
Accounts Payable and accrued expenses
Income Tax Payable
Obligations for program rights - Current
Current portion of long-term debt
Total Current Liabilities
Due to Affiliated Companies
Long Term Debt (net of current portion)
Obligations for program rights - Non Current
Liabilities of Discontinuing Operations
Deferred Income Tax
Total Noncurrent Liabilities
Minority Interest
Stockholders' equity
Capital Stock - P1 par value
Authorized - 1,500,000,000 shares
Issued and outstanding 779,583,312 shares
Capital Paid in excess of par
Revaluation Increment
Translation Adjustment
Retained Earnings
Appropriated for expansion projects
Uappropriated
Notes Convertible to common shares
2003
December
Audited
2,797,899
4,277,183
990,789
806,791
8,872,661
303,401
355,236
10,631,126
829,129
17,118
3,528,977
15,664,987
24,537,649
1,580,355
3,787,808
880,975
574,486
6,823,624
273,303
342,111
10,843,512
936,212
17,118
2,966,841
15,379,097
22,202,721
44,118
3,772,750
218,576
321,361
216,369
4,573,173
29,542
5,758,667
130,914
16,652
213,905
6,149,681
146,714
220,577
2,442,234
124,357
256,183
2,115,971
5,159,322
75,473
3,453,903
13,370
16,652
224,870
3,784,268
151,049
779,583
706,047
779,583
706,047
130,251
130,251
8,300,000
3,952,199
13,868,080
(200,000)
13,668,080
24,537,649
8,300,000
3,392,201
13,308,082
(200,000)
13,108,082
22,202,721
ABS-CBN BROADCASTING CORPORATION AND SUBSIDIARIES
Consolidated Statement of Income and Expenses
For the period ended June 30
(Unaudited)
(In Thousands)
AIRTIME & OTHER BROADCASTING RELATED REVENUE
Less: Agency commission, marketing expenses
and co-producers' share
NET SALES & SERVICES
OPERATING EXPENSES
Production costs
General & administrative
Cost of sales and services
Depreciation and amortization
Amortization of program rights
INCOME FROM OPERATIONS
OTHER INCOME ( EXPENSES)
Interest-net
Equity in net income (losses) of investees
Miscellaneous-net
INCOME BEFORE INCOME TAX
PROVISON FOR INCOME TAX
NET INCOME BEFORE DISCONTINUED OPERATIONS
LOSS FROM DISCONTINUED OPERATIONS
NET INCOME
EBITDA
EARNINGS PER SHARE (EPS)
Basic EPS
Diluted EPS
Computation of EPS:
(a) Net income
(b) Weighted average shares outstanding
(c) Adj weighted average common shares - diluted
Basic EPS (a/b)
Diluted EPS (a/c)
For the quarter ended
June 30
2004
2003
3,144,140
3,032,152
For the period ended
June 30
2004
2003
5,556,467
5,279,020
560,884
2,583,256
1,029,770
3,613,025
522,727
2,509,425
922,217
3,431,641
996,643
4,559,825
2,054,620
6,614,445
918,286
4,360,734
1,666,351
6,027,085
999,687
817,298
554,741
280,062
269,781
2,921,570
691,456
802,324
736,966
504,215
305,939
255,875
2,605,319
826,323
1,910,519
1,591,817
1,038,470
560,524
492,769
5,594,100
1,020,345
1,576,257
1,355,557
900,063
631,449
421,313
4,884,638
1,142,447
(124,360)
7,564
46,050
(70,747)
620,709
184,799
435,909
435,909
(159,927)
(10,525)
(2,607)
(173,059)
653,264
253,837
399,427
399,427
(250,981)
(15,573)
73,966
(192,588)
827,757
267,759
559,998
559,998
(308,384)
(33,747)
35,489
(306,642)
835,805
328,822
506,983
506,983
1,294,912
1,375,005
2,132,031
2,196,950
0.57
0.57
435,909
769,583
769,583
0.57
0.57
0.52
0.52
399,427
769,583
769,583
0.52
0.52
0.73
0.73
559,998
769,583
769,583
0.73
0.73
0.66
0.66
506,983
769,583
769,583
0.66
0.66
ABS-CBN BROADCASTING CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Changes in Stockholders' Equity
For the six months ended June 30, 2004 and 2003
(In Thousands, Except Par Value and Number of Shares)
2004
June
2003
June
CAPITAL STOCK-P1 par value
Authorized - P1,500,000,000 shares
Issued and Outstanding - 779,583,312 shares
779,583
779,583
CAPITAL PAID IN EXCESS OF PAR VALUE
706,047
706,047
EQUITY ADJUSTMENT FROM TRANSLATION OF SUBSIDIARIES
Balance at beginning of year
Translation adjustments during the year
Balance at end of year
130,251
130,251
109,201
4,534
113,735
8,300,000
8,300,000
8,300,000
8,300,000
RETAINED EARNINGS
Appropriated:
Balance at beginning of year
Appropriation for expansion projects
Balance at end of year
Unappropriated:
Balance at beginning of year
Net Income
Cash and scrip dividends
Appropriation for expansion projects
Balance at end of year
PHILIPPINE DEPOSIT RECEIPTS CONVERTIBLE TO COMMON SHARES
3,392,201
559,998
3,952,199
12,252,199
(200,000)
13,668,080
2,396,317
506,983
(13,291)
2,890,009
11,190,009
(200,000)
12,589,374
ABS-CBN BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS
For the period ended June 30
(Unaudited)
(In Thousands)
For the quarter ended
June 30
2004
2003
For the period ended
June 30
2004
2003
435,909
399,427
559,998
506,983
280,062
269,781
184,799
124,360
305,939
255,875
253,837
159,927
560,524
492,769
267,759
250,981
631,449
421,313
328,822
308,384
EBITDA
Less Interest - net
1,294,912
124,360
1,375,004
159,927
2,132,031
250,981
2,196,950
308,384
CASH FROM NET INCOME
Adjustments to reflect cash from operations:
Lower (higher) accounts receivable
Lower (higher) other current assets
Acquisitions of film rights
Increase (decrease) in other liabilities
Decrease (increase) in other assets
Net Cash provided by operations
CASH FROM INVESTING ACTIVITIES
Net Investments in capital expenditures
Net Investments in subsidiaries and affiliates
Decrease (Increase) in assets of discontinuing operations
Increase (Decrease) in liabilities of discontinuing operations
1,170,552
1,215,078
1,881,050
1,888,567
NET INCOME
Add back:
Depreciation & Amortization
Amortization of film rights
Provision for income tax
Interest - net
(32,193)
92,382
(165,270)
88,680
(587,934)
566,216
(652,203)
37,200
(188,779)
(187,749)
126,698
350,244
(489,375)
(232,305)
(377,955)
1,206,854
(562,136)
1,426,132
(676,447)
(94,876)
(401,758)
100,094
154,023
969,602
(143,136)
(76,085)
(219,221)
(171,644)
242
(2,095)
7,073
(166,423)
(348,138)
(89,154)
(437,292)
(399,577)
(1,059)
(2,095)
7,073
(395,657)
(176,459)
1,309,507
1,133,048
(21)
(20,366)
(13,291)
(33,678)
(176,459)
405,162
228,703
1,771
(39,999)
(13,291)
(51,519)
EFFECT OF ADJUSTMENTS ARISING FROM CHANGE
IN FOREIGN EXCHANGE RATES
NET INCREASE(DECREASE) IN CASH
1,480,043
4,534
154,677
1,217,543
4,534
526,960
CASH BALANCE, BEGINNING
1,317,855
1,087,871
1,580,355
715,588
CASH BALANCE, END
2,797,898
1,242,548
2,797,898
1,242,548
CASH FROM FINANCING ACTIVITIES
Decrease (increase) in short term investments
Increase (decrease) in bank loans
Payment of long term debt
Payment of Scrip Dividends
ABS-CBN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Amounts in Thousands Unless Otherwise Specified)
1. Basis of Preparation
The accompanying consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the Philippines under the historical cost convention.
2. Accounting Policies and Methods
The same accounting policies and methods of computation are followed in the interim financial
statements as compared with the most recent annual financial statements.
3. Seasonality or Cyclicality of Interim Operations
The company’s operations are not generally affected by any seasonality or cyclicality.
4. Nature and Amount of Changes of Estimates
The effect of changes in estimates or amounts reported in prior interim periods do not have a
material effect in the current interim period.
5. Repayments of Debt
Repayments of long-term debt are scheduled as follows:
2005
2006
2007
2008
2009
Total
649,834
1,226,317
1,497,081
1,627,787
974,259
5,975,278
6. Dividends paid
No dividends were paid in the current interim period. On June 30, 2004, the company disclosed
that its Board of Directors declared a sixty-four centavo (P0.64) per share cash dividend to all
stockholders of record as of July 26, 2004, payable on August 10, 2004.
7. Earnings Per Share Computation
Basic earnings per share are calculated by dividing the net income for the period attributable to
common shareholders by the weighted average number of common shares outstanding during
the period. Weighted average shares outstanding is 769,583,312.
10
8. Material Events
A. Any known trends, demands, commitments, events or uncertainties that will have a material
impact on the issuer's liquidity.
In June 2004, the Company successfully signed a syndicated loan for US$120 million to
refinance the Company’s existing debts and to fund further investments in cable television
operations. The new loan will be secured by the Company’s real property and certain
equipment and other assets and will be guaranteed by certain of the Company’s subsidiaries.
B. Any material commitments for capital expenditures, the general purpose of such
commitments and the expected sources of funds for such expenditures.
-- For 2004, ABS-CBN Broadcasting Corp. is budgeting Php1.5 billion for capital expenditures
and acquisition of film and program rights. This will be financed through internally
generated funds. For the January to June 2004 period, the Company disbursed 48% of the full
year budget.
C. Any known trends, events or uncertainties that have had or that are reasonably expected to
have a material favorable or unfavorable impact on net sales/revenues/income from
continuing operations.
-- ABS-CBN Broadcasting Corp.’s results of operations depend largely on the ability to sell
airtime for advertising. The company’s business may be affected by the general condition of
the economy of the Philippines.
D. Any significant elements of income or loss that did not arise from the issuer’s continuing
operations.
-- There were no significant elements of income or loss that did not arise from the issuer’s
continuing operations for the interim period.
E. Any seasonal aspects that had a material effect on the financial condition or results of
operations.
-- There were no seasonal aspects that had a material effect on the financial condition or
results of operations for the interim period.
F. Any material events that were unusual because of their nature, size or incidents affecting
assets, liabilities, equity, net income, or cash flows
-- There were no material events that were unusual because of their nature, size or incidents
affecting assets, liabilities, equity, net income, or cash flows.
G. Any material events subsequent to the end of the interim period that have not been reflected
in the financial statements for the interim period.
-- There were no material events subsequent to the end of the interim period that have not
been reflected in the financial statements of the interim period.
11
9. Business Segment Results
Segment information is prepared on the following bases:
a.
Business segments
For management purposes, the Company is organized into three business activitiesbroadcasting, cable and satellite and other businesses. This segmentation is the basis
upon which the Company reports its primary segment information. The broadcasting
segment is principally the television and radio broadcasting activities which generates
revenue from sale of national and regional advertising time. Cable and satellite business
primarily develops and produces program for cable television, including delivery of
television programming outside the Philippines through its DTH satellite service, cable
television channels and blocked time on television stations. Other businesses include
movie production, consumer products and services.
b. Geographical Segments
Although the company is organized into three business activities, they operate in three
major geographical areas. In the Philippines, its home country, the Company is involved
in broadcasting, cable operations and other businesses. In the Unites States and other
locations (which includes Middle East and Milan), the company operates its cable and
satellite operations to bring television programming outside the Philippines.
c.
Inter-segment transactions
Segment revenue, segment expenses and segment results include transfers among
business segments and among geographical segments. Such transfers are accounted for
at competitive market prices charged to unaffiliated customers for similar services.
Those transfers are eliminated in consolidation.
Financial information on business segments and geographical segments is presented in Exhibit 3.
10. Changes in Composition of Issuer
Operations of Creative Creatures, Inc., a wholly owned subsidiary of ABS-CBN was discontinued
in October 2003.
11. Changes in Contingent Liabilities or Assets
There are no changes in contingent liabilities or contingent assets since the last annual balance
sheet date.
12. Material Contingencies
There are no contingent liabilities, events or transactions that will materially affect the company’s
financial position and results of operations.
13. SFAS 16/IAS 16, “Property, Plant and Equipment.”
(See Exhibit 4)
11
14. SFAS 24/IAS 24, “Related Party Disclosures.”
In the consolidated financial statements, transactions of the Company with its associates and
related parties follow:
Amcara(a)
Blocktime fees paid by Studio 23 to
Expenses and charges paid for by the Parent
Company which are reimbursed by the
concerned related parties
License fees charged by CPI to Central, PCC and
Homecable(b)
2nd Qtr 2004
33,994
2nd Qtr 2003
37,509
17,738
23,743
68,721
67,877
Other transactions with associates include cash advances for working capital requirements.
The amounts and balances resulting from the above transactions are reflected in the consolidated
balance sheets in the following accounts:
Advances
Due from related parties
Due to related parties
a.
June
2004
62,057
303,401
29,542
December
2003
56,104
273,303
75,473
Blocktime Fees Paid to Amcara
Studio 23, Inc. owns the program rights being aired in UHF Channel 23 of Amcara. On
July 1, 2000, it entered into a blocktime agreement with Amcara for its provincial
operations.
b.
License Fees Charged to Central
On December 29, 2000, the Parent Company and CPI entered into a Sale Agreement with
Central, an associate engaged in cable operations, for the acquisition of the following
assets:
!
!
!
Production and distribution business and the related program rights and property
and equipment of three cable channels, namely, Lifestyle Channel, Pinoy Blockbuster
Channel and Video-ok Channel for P
=671,141;
100% equity in Shopping Network, Inc. for P
=25,259; and
49% equity in SNN for P
=3,600.
CPI entered into a channel carriage agreement (Agreement) with Central for the airing of
these channels to the franchise areas of Central and its cable affiliates. The Agreement
with Central is for a period of five years effective January 1, 2001, renewable upon
mutual agreement. Under the terms of the Agreement, CPI will receive license fees from
Central computed based on agreed rates and on the number of subscribers of Central. As
the owner of the said cable channels, CPI will develop and produce its own shows and
acquire program rights from various foreign and local suppliers.
11
15. SFAS 27/IAS 27, “Consolidated Financial Statements and Accounting for Investments in
Subsidiaries
The consolidated financial statements of the Company include the Parent Company and its
Subsidiaries as of June 30, 2004.
Subsidiaries are consolidated from the date on which control is transferred to the group and
cease to be consolidated from the date on which control is transferred out of the group.
The purchase method of accounting is used for acquired businesses. Companies acquired or
disposed of during the year are included in the consolidated financial statements from the date of
acquisition to the date of disposal.
Consolidated financial statements are prepared using uniform accounting policies for like
transactions and other events in similar circumstances. Intercompany balances and transactions,
including intercompany profits and unrealized profits and losses are eliminated.
In the Parent Company financial statements, investments in subsidiaries and associates are
accounted for under the equity method of accounting.
All other investments held on a long-term basis are valued at cost less any permanent decline in
value and are included in the “Investments and Advances” account in the consolidated balance
sheets
Investments in subsidiaries and associates follow:
Place of
Company
Incorporation
Subsidiaries
Continuing Operations
ABS-CBN Center for Communication Arts, Inc. Philippines
ABS-CBN Global Ltd. (ABS-CBN Global)
Cayman
Islands
ABS-CBN Interactive, Inc.
Philippines
ABS-CBN Publishing, Inc.
Philippines
Principal Activities
Services
Holding company
Services
Consumer products publishing
Services
Broadcasting
Services
Ownership Interest
2004
2003
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Creative Creatures, Inc. (CCI)
Creative Programs, Inc. (CPI)
Professional Services for Television & Radio,
Inc.
Sarimanok News Network, Inc. (SNN)
Sky Films International, Inc. (Sky Films)
Philippines
Philippines
Philippines
Star Recording, Inc.
Philippines
Studio 23, Inc. (Studio 23)
TV Food Chefs Inc.
Philippines
Philippines
ABS-CBN Integrated & Strategic Property
Holdings, Inc.
E-Money Plus
Philippines
Broadcasting
Services - film
distribution
Consumer products audio recording
and distribution
Broadcasting
Restaurant and
catering services
Holding company
Philippines
Services
100.0
ABS-CBN Europe Ltd.
England and
Wales
Cable and satellite
operations
100.0
Philippines
Philippines
12
(a)
60.0
(a)
–
ABS-CBN FCLLZ Dubai
Dubai, KSA
ABS-CBN International, Inc. (ABS-CBN
International)
Cable and satellite
operations
Philippines
Movie production
Philippines
Services -post
production
California, USA Cable and satellite
operations
Discontinuing Operations
ABS-CBN Consumer Products, Inc. (b)
ABS-CBN Europe Societa Per Azioni (b)
Cinemagica, Inc. (b)
ABS-CBN Hongkong, Ltd. (b)
Shopping Network, Inc. (c)
Philippines
Italy
Philippines
Hong Kong
Philippines
Consumer products
Services
Services
Services
Consumer products
Philippines
Services
Philippines
Philippines
Movie production
Cable operation
ABS-CBN Film Productions, Inc.
Roadrunner Network, Inc. (Roadrunner)
Associates
AMCARA Broadcasting Network, Inc.
(Amcara)
Star Cinema Productions, Inc. (Star Cinema)
Sky Vision Corporation (Sky Vision)
(a)
100.0
100.0
–
–
98.9
98.9
80.0(a)
80.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
49.0
45.0
10.2
49.0
45.0
10.2
indirectly-owned through ABS-CBN Global
ceased commercial operations on December 31, 2002
(c)ceased commercial operations on December 31, 2001
(a)
(b)
16. SFAS 28/IAS 28, “Accounting for Investments in Associates.”
The group’s investment in its associate is accounted for under the equity method of accounting.
This is an entity in which the group has significant influence and which is not a subsidiary. The
investment in its associate is carried in the balance sheets at cost plus post-acquisition changes in
the group’s share of net assets of the associate, less any impairment in value. The statements of
income reflects the group’s share of the results of operations of the associate. Unrealized gains
arising from transactions with its associate are eliminated to the extent of the group’s interest in
the associate, against the investment in the associate. Unrealized losses are eliminated similarly
but only to the extent that there is no evidence of impairment of the asset transferred. The
group’s investment in its associate includes goodwill (net of accumulated amortization) on
acquisition, which is treated in accordance with the accounting policy for goodwill stated below.
The detailed carrying values of investments which are carried under the equity method follow:
Sky Vision
Amcara
June
2004
P
=247,507
45,673
P
= 293,180
12
December
2003
=
P240,334
45,673
=
P286,007
Combined financial information of unconsolidated associates follows:
Current Assets
Noncurrent Assets
Current Liabilities
Noncurrent Liabilities
Revenues
Cost and Expenses
Operating income (loss)
Net income (loss)
June
2004
1,232,616
7,311,137
3,322,141
5,586,801
1,022,515
1,134,502
(111,987)
(212,678)
June
2003
1,115,873
6,008,534
3,096,099
3,064,297
1,018,729
1,193,457
(174,728)
(267,657)
17. SFAS 31/IAS 31, “Financial Reporting of Interest in Joint Ventures”
Not Applicable.
18. SFAS 35/IAS 35, “Discontinuing Operations”
In 2002, following the rigid review of the operations of the various subsidiaries, the Parent
Company’s Board of Directors (BOD) approved the discontinuance of operations of ABS-CBN
Consumer Products, Inc., ABS-CBN Europe Societa Per Azioni, Cinemagica, Inc., ABS-CBN
Hongkong, Ltd. and Shopping Network, Inc., which have been incurring losses. These
subsidiaries are engaged in varied businesses including operating retail stores and direct sales
service centers, cable shopping network, concert production, remittances and telecom retail, and
local and foreign film productions, which were deemed not aligned with the Parent Company’s
core businesses.
The results of operations of the abovementioned subsidiaries for the period until discontinuance
have been presented in the statements of income as “Income (Loss) from Discontinuing
Operations After Income Tax.”
In accordance with SFAS 35/IAS 35, comparative information for the prior period have been
restated to segregate continuing and discontinuing assets, liabilities, income, expenses and cash
flows. Total assets and liabilities of the discontinued subsidiaries are presented in the
consolidated balance sheets separately as “Assets of discontinuing operations” and “Liabilities of
discontinuing operations”.
Assets and liabilities of discontinuing operations are as follows:
December
June
2003
2004
Assets:
Cash
Accounts receivables-net
Other current assets
Due from affiliated companies
Property and equipment
Other noncurrent assets
P13,191
1,023
653
67
167
2,017
P17,118
15
P13,191
1,023
653
67
167
2,017
P17,118
Liabilities:
Accounts payable and accrued
expenses
Due to affiliated companies
12,645
4,007
P16,652
12,645
4,007
P16,652
The results of discontinuing operations are as follows:
Net sales and services
Costs and expenses
Cost of sales and services
General and administrative
2ndQtr 2004
0
0
0
0
2nd Qtr 2003
0
0
0
0
Income (loss) from operations
Other income (expenses) - net:
Interest
Miscellaneous
0
0
0
0
0
0
Income (loss) from discontinuing operations before
income tax
Provision for income tax
Income (loss) after tax
0
0
0
0
0
0
19. SFAS 36/IAS 36, “Impairment of Assets.”
Starting January 1, 2002, an assessment is made at each balance sheet date whenever there is any
indication of impairment of any asset. If any such indication exists, the asset’s recoverable
amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s
value in use or its net selling price.
An impairment loss is recognized only if the carrying amount of an asset exceeds its recoverable
amount. An impairment loss is charged to operations in the period in which it arises.
A previously recognized impairment loss is reversed only if there has been a change in the
estimates used to determine the recoverable amount of an asset, however, not to an amount
higher than the carrying amount that would have been determined (net of any depreciation), had
no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss
is credited to current operations.
Pending the outcome of certain events, the Company has not and does not believe that it is
appropriate to perform an asset impairment analysis for its investments in and advances to Sky
Vision Corporation and the cable channels of Creative Programs, Inc. as of June 30, 2004.
20. Causes for Material Changes in the Financial Statements
Balance Sheet (June 30, 2004 vs December 31, 2003)
Accounts receivable-net increased by 13% to P4,277 million from end-2003 levels due to an
increase in the customer base of the company’s international business.
Program rights – current increased by 12% to P991 million from end-2003 levels as the Company
estimates a higher usage of program and film inventory in the 12 months going forward.
Other current assets increased by 40% to P807 million from end-2003 levels due to various
prepaid expenses typical at the start of the year.
Program rights – non current decreased by 11% to P829 million from end-2003 levels as the
company anticipates a higher usage of its existing program and film inventory and as acquisition
of film and program rights slowed down.
Other assets increased by 19% to P3,529 million from end-2003 levels due to deferred cost of the
new syndicated loan agreement.
Bank loans decreased by 80% to P44 million from end-2003 levels as the company used part of the
proceeds from its US$120 million loan to refinance all its previous short-term and long-term
loans.
Accounts payable and accrued expenses increased by 54% to P3,773 million from end-2003 due to
an increase in payables to suppliers.
Income tax payable increased by 76% to P219 million from end-2003 due to improved
profitability of the Company.
Current portion of long-term debt decreased by 90% to P216 million from end-2003 as first
principal amortization on the new five-year US$120 million syndicated loan is scheduled on June
2005.
Long-term debt (net of current portion) increased by 67% to P5,759 million with the signing of the
US$120 million syndicated loan in June 2004.
The change in due from and due to affiliated companies is the result of the ordinary course of
business of the Company.
The changes in obligations for program rights-current and obligations for program rights-non
current are due to new program rights acquisition in 2004.
Deferred income tax decreased by 5% to P214 million due to the ordinary course of business of
the Company.
21. Other Notes to 2Q 2004 Operations and Financials
21.1 The key performance indicators that we monitor are the following:
Net Airtime Revenues
Net Sales and Services
Operating Income
Net Income
EBITDA
EPS
YTD June 2004
4,560 million
2,055 million
1,020 million
560 million
2,132 million
0.73
YTD June 2003
4,361 million
1,666 million
1,142 million
507 million
2,197 million
0.66
Current Ratio
Net debt-to-Equity
Debt-to-EBITDA
EBITDA-to-Interest Expense
As of Jun 30, 2004
1.94x
0.24x
1.42x
7.25x
As of Dec 31, 2003
1.32x
0.32x
1.35x
6.73x
Consolidated Trade DSO
Parent Trade DSO
99 days
75 days
83 days
72 days
21.2 Any event that will trigger direct or contingent financial obligation that is material to the
company, including any default or acceleration of an obligation:
None
21.3 All material off-balance sheet transaction, arrangement, obligation (including contingent
obligations), and other relationships of the company with unconsolidated entities or other
persons created during the reporting period:
None
EXHIBIT 1
ABS-CBN BROADCASTING CORPORATION
Non-current Marketable Securities, Other long term Investments, and Other Investments
As of June 30, 2004
Name of Issuing Equity and
Description of Investment
Amount in Pesos
Unaudited
June
2004
At Equity:
Skyvision
Amcara Broadcasting Network, Inc.
247,506,873
45,672,921
293,179,794
Advances:
AMCARA
Star Cinema
62,056,606
62,056,606
355,236,400
NOTE: Balance of investment to Star Cinema was charged against advances
NORMAL OPERATING CYCLE
1 TRADE RECEIVABLES
2 NON TRADE RECEIVABLES
ACCOUNTS RECEIVABLE DESCRIPTION
NET RECEIVABLES
ACCRUED INTEREST RECEIVABLE
ADVANCES TO SUPPLIERS & CONTRACTORS
ADVANCES TO TALENTS
ADVANCES AGAINST CLAIMS - SSS
AR NON-TRADE OTHERS
NET AR - NON TRADE
II. NON - TRADE RECEIVABLES
NET AR - TRADE
ALLOWANCE FOR DOUBTFUL ACCOUNTS
TRADE RECEIVABLES
I. TRADE RECEIVABLES
TYPE OF ACCOUNTS RECEIVABLE
ABS - CBN BROADCASTING CORPORATION
AGING OF ACCOUNTS RECEIVABLE
AS OF JUNE 30, 2004
EXHIBIT 2
9%
3,784,337
13%
486,356
47%
37%
387,648.41
CURRENT
1,783,075
1,543,082.76
NOT YET DUE
-calendar year
8%
286,509
7%
282,546.45
30 DAYS
- accumulated through the normal course of business i.e. sale of airing spots
- accumulated through transactions other than sale of airing spots
4,277,182.91
682
63,164
81,936
6,030
379,096
530,909
3,746,274.38
436,255.74
4,182,530.13
TOTAL
5%
199,452
6%
253,678.96
60 DAYS
4%
141,586
6%
262,759.90
90 DAYS
15%
562,569
20%
854,322.18
120 - 360 DAYS
15%
562,059
mar
-
PAST DUE & ITEMS
IN LITIGATION
14% jun
598,491.47
OVER 360 DAYS
Other Segment Information
Depreciation and amortization
Noncash expenses other than
depreciation and amortization
919,815
42,102
44,481
19,004,699
2,352,503
21,357,202
8,685,600
896,854
(314,710)
(17,532)
213,051
(266,097)
511,566
4,102,822
4,102,822
902,615
19,612,997
2,673,660
22,286,657
8,593,726
625,219
(256,120)
105,709
243,902
(209,468)
509,242
Results
Segment Result
Interest and other financial charges - net
Equity in net earnings (losses)
Others
Minority Interest
Income tax
Loss from Discontinued Operations
Net Income (Loss)
Assets and Liabilities
Segment Assets
Investment in equity method associates
Consolidated total assets
Segment Liabilities
4,315,379
4,315,379
BROADCASTING
2004
2003
Revenues
External Sales
Inter-segment sales
Total Revenues
ABS-CBN Broadcasting Corporation
Business Segment Data
In Thousands
EXHIBIT 3
44,465
96,458
3,885,144
3,885,144
2,167,041
138,463
1,256
(13,040)
(3,944)
(14,845)
107,891
1,673,798
47,508
1,721,307
44,936
63,294
2,088,524
2,088,524
762,914
24,975
57,015
955,001
955,001
388,137
95,243
3,883
9,248
(43,447)
64,928
625,267
26,317
651,584
6,659
69,653
938,293
938,293
422,132
69,934
1,082
9,156
(36,461)
43,711
479,296
58,616
537,912
For the period ended June 30
OTHER BUSINESSES
2004
2003
57
5,245
795
(5,739)
(26,265)
(25,907)
1,392,906
37,368
1,430,275
CABLE AND SATELLITE
2004
2003
-
(2,796)
(136,107)
(2,453,046)
(2,589,153)
(279,335)
161,420
(121,282)
(162,227)
27
(122,063)
(73,825)
(73,825)
6,043
-
121,734
(1,990,509)
(1,868,775)
55,223
175,601
(16,215)
(181,644)
(130)
(22,388)
52,061
(95,985)
(43,923)
ELIMINATIONS
2004
2003
113,921
1,053,293
24,317,035
220,614
24,537,649
10,869,569
1,020,345
(250,981)
(15,573)
77,883
(3,917)
(267,759)
559,998
6,614,445
6,614,445
99,740
1,052,762
22,153,249
361,994
22,515,243
9,925,869
1,142,447
(308,384)
(33,747)
41,358
(5,869)
(328,822)
506,983
6,027,085
6,027,085
CONSOLIDATED
2004
2003
.
At June 30
Accumulated depreciation:
Beginning Balance
Depreciation Charge for the year
Disposals
Reclassifications
Transfers from subsidiaries
At June 30
Net book value
Cost:
Beginning Balance
Additions
Disposals
Transfer w/in company
Reclassifications
Transfers to/ from subsidiaries
9,424,763
867,593
180,857
1,048,450
8,376,312
292,775
9,400,820
1,963
21,980
-
292,775
292,775
-
Radio, Movie
and
Improvements
Land
Improvements
3,754,161
182,708
(53)
3,936,817
1,100,922
5,037,739
4,930,469
82,455
24,815
-
and Auxiliary
Equipment
Television,
Building
Land and
ABS-CBN Broadcasting Corporation and Subsidiaries
Schedule of Property, Plant & Equipment Roll-Forward
As of June 30, 2004
EXHIBIT 4
1,784,639
196,959
(20,245)
53
1,961,405
660,679
2,622,084
2,454,982
104,357
(21,697)
84,442
-
Equipment
Other
200,437
200,437
171,217
160,458
(131,238)
In Progress
Construction
-
-
-
in Transit
Equipment
6,406,393
560,524
(20,245)
(0)
6,946,672
10,631,126
17,577,798
17,250,262
349,232
(21,697)
-
2004
June 30
240,191,692.47
6,406,494
10,843,511
5,224,855
1,218,101
(36,462)
-
17,250,004
-
16,491,309
825,042
(66,346)
2003
December 31
SIGNATURES
For SEC 17-Q Second Quarter 2004 Report
Pursuant to the requirements of the Securities Regulation Code, the issuer has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Registrant:
ABS-CBN BROADCASTING CORPORATION
By:
LUIS F. ALEJANDRO
President and Chief Operating Officer
RANDOLPH T. ESTRELLADO
Chief Financial Officer & VP-Finance
Date: 10 August 2004