Document 6526280

Transcription

Document 6526280

COVER SHEET
1 6 3 6 7 1
SEC Registration Number
P R I M E
O R I O N
P H I L I P P I N E S ,
I N C .
(Company’s Full Name)
2 0 / F
L K G
M A K A T I
T OW E R
6 8 0 1
A Y A L A
A V E N U E
C I T Y
(Business Address: No. Street City/Town/Province)
ATTY. DAISY L. PARKER
884-1106
(Contact Person)
(Company Telephone Number)
0 6
3 0
SEC Form
1 7 - Q
Month
Day
(Form Type)
Month
(Fiscal Year)
Day
(Annual Meeting)
(Secondary License Type, If Applicable)
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders
Domestic
Foreign
To be accomplished by SEC Personnel concerned
File Number
LCU
Document ID
Cashier
STAMPS
Remarks: Please use BLACK ink for scanning purposes.
PRIME ORION PHILIPPINES, INC. AND SUBSIDIARIES
Unaudited Interim Consolidated Financial Statements
March 31, 2010 and June 30, 2009
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands, Except Par Value and Number of Shares)
UNAUDITED
March 31, 2010
ASSETS
Current Assets
Cash and cash equivalents (Note 4)
Receivables - net (Note 5)
Inventories – net (Note 6)
Real estate held for sale and development (Note 7)
Amounts owed by related parties - net (Note 19)
Available-for-sale (AFS) investments (Note 9)
Other current assets - net (Note 8)
Total Current Assets
Noncurrent Assets
Investments in associates - net (Note 11)
Leasehold rights - net
Held-to-maturity (HTM) investments (Note 10)
Investment properties - net (Note 13)
Property, plant and equipment - net (Note 12)
At cost
At revalued amounts
Deferred income tax assets
Other noncurrent assets - net (Note 14)
Total Noncurrent Assets
TOTAL ASSETS
LIABILITIES AND EQUITY (CAPITAL DEFICIENCY)
Current Liabilities
Accounts payable and accrued expenses (Notes 18)
Loans payable (Notes 15)
Long-term debt (Note 16)
Rental deposits and advances
Convertible note (Note 17)
Amounts owed to related parties (Note 19)
Total Current Liabilities
Noncurrent Liabilities
Retirement benefit obligation
Deferred income tax liabilities
Subscriptions payable
Total Noncurrent Liabilities
Total Liabilities
(Forward)
AUDITED
June 30, 2009
P
=155,374
731,402
213,827
352,345
5,122
616,520
179,962
2,254,552
=469,436
P
429,644
250,741
388,031
5,196
449,614
172,366
2,165,028
530,521
33,251
26,000
612,270
530,721
39,946
19,931
739,880
46,822
612,662
84,149
129,238
2,074,913
P
=4,329,465
41,041
630,059
83,866
93,387
2,178,831
=4,343,859
P
P
=1,236,219
–
–
198,128
–
2,877
1,437,224
=2,036,349
P
156,441
140,000
197,081
1,251,339
16,647
3,797,857
54,609
194,504
528,470
777,583
2,214,807
51,379
212,438
528,470
792,287
4,590,144
-2-
Equity (Capital Deficiency) Attributable to Equity Holders of the
Parent
Capital stock - =
P1 par value
Authorized - 2,400,000,000 shares
Issued and subscribed – 2,367,149,383 shares (net of subscriptions
receivable of P
=300,797)
Additional paid-in capital
Revaluation increment in property, plant and equipment
Revaluation reserve on investment properties at deemed cost
Unrealized valuation gain (loss) on AFS investments
Deficit
Minority interest
Total Equity (Capital Deficiency)
TOTAL LIABILITIES AND EQUITY (CAPITAL DEFICIENCY)
UNAUDITED
March 31, 2010
AUDITED
June 30, 2009
P
=2,066,352
829,904
198,428
235,889
163,622
(1,444,483)
2,049,712
64,946
2,114,658
P
=4,329,465
=2,066,352
P
829,904
198,428
235,889
(8,709)
(3,638,908)
(317,044)
70,759
(246,285)
=4,343,859
P
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Earnings (Loss) Per Share)
QUARTER ENDED MARCH 31
NINE MONTHS ENDED MARCH 31
2010
2009
2010
2009
Merchandise sales - net
171,420
162,323
520,523
526,046
Rental
REVENUES
114,583
110,416
377,071
357,044
Insurance premiums and commissions
42,575
27,726
109,455
73,835
Real estate sales
78,045
-
79,423
-
406,623
300,465
1,086,472
956,925
Operating expenses (Note 20)
129,828
117,885
371,243
341,690
Cost of goods sold and services
169,634
166,057
495,541
591,798
Rental and utilities
55,310
59,925
166,563
179,815
Insurance underwriting deductions
27,038
7,460
86,231
41,195
COST AND EXPENSES
Cost of real estate sold
50,396
-
51,352
-
432,206
351,327
1,170,930
1,154,498
3,159
(29,685)
12,311
(95,428)
-
-
1,246,640
-
OTHER INCOME (CHARGES)
Interest and others – net
Gain on extinguishment of debt
Gain (Loss) on sale of assets
Reversal (provision) for probable losses
Foreign exchange gains (losses) - net
Reversal of allowance for doubtful accounts
Dividend income
Others – net
INCOME (LOSS) BEFORE INCOME TAX
BENEFIT FROM INCOME TAX
NET INCOME (LOSS)
-
497
419,457
(9,120)
(2,498)
4,600
544,962
4,600
172
(70)
261
(167)
8,559
2,368
8,559
6,401
-
188
22,540
15,933
7,168
4,379
21,975
24,030
16,560
(17,723)
2,276,705
(53,750)
415,646
369,050
(1,105,775)
1,208,248
(9,023)
(68,585)
2,192,247
(251,323)
(778)
(2,313)
1,101
(6,129)
(8,245)
(66,272)
2,191,146
(245,194)
(9,336)
(72,515)
2,194,425
(247,945)
1,091
6,243
(3,279)
2,751
(8,245)
(66,272)
2,191,146
(245,194)
(0.004)
(0.031)
0.927
(0.105)
ATTRIBUTABLE TO:
Equity holders of the company
Minority interest
EARNINGS (LOSS) PER SHARE (Note 21)
Basic, for income (loss) for the period attributable to
ordinary equity holders of
the parent
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in Thousands, Except Earnings (Loss) Per Share)
QUARTER ENDED
MARCH 31
2010
2009
NET INCOME (LOSS) FOR THE PERIOD
NINE MONTHS PERIOD
ENDED MARCH 31
2010
2009
(8,245)
(66,272)
2,191,146
(245,194)
38,852
18,469
172,332
(235,655)
30,607
(47,803)
2,363,478
(480,849)
28,897
(57,242)
2,366,776
(483,600)
1,710
9,439
(3,298)
2,751
30,607
(47,803)
2,363,478
(480,849)
Other comprehensive income (loss):
Changes in fair value of available for sale
investments in equity securities
TOTAL COMPREHENSIVE INCOME (LOSS)
FOR THE PERIOD
Total comprehensive income (loss) attributable to:
Equity holders of the company
Minority interest
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CAPITAL DEFICIENCY)
FOR THE PERIOD ENDED MARCH 31, 2010 AND 2009
(Amounts in Thousands)
Balances at June 30, 2008
Capital Stock
Additional
Paid-in
Capital
=
P2,066,352
P
=829,904
Revaluation
Reserve on
Investment
Properties at
Deemed cost
Unrealized
Valuation
Gain (Loss) on
AFS Investments
=
P203,372
=281,181
P
=144,137
P
Revaluation
Increment in
Property,
Plant and
Equipment
Deficit
(P
=3,399,279)
Minority
Interest
Total
=72,199
P
=197,866
P
–
–
–
(235,655)
(247,945)
Balances at March 31, 2009
=
P2,066,352
P
=829,904
=
P203,372
=281,181
P
(P
=91,518)
(P
=3,647,224)
=68,475
P
(P
=289,458)
Balances at June 30, 2009
=
P2,066,352
P
=829,904
=
P198,428
=235,889
P
(P
=8,709)
(P
=3,638,908)
=70,759
P
(P
=246,285)
Total comprehensive income (loss) for the period
Acquisition of minority interest
Total comprehensive income (loss) for the period
Balances at March 31, 2010
–
–
=
P2,066,352
P
=829,904
(3,724)
(487,324)
-
-
-
–
(2,534)
(2,534)
–
–
172,332
2,194,425
(3,279)
2,363,478
=163,622
P
(P
=1,444,483)
=
P198,428
=235,889
P
=64,946
P
=2,114,658
P
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
Nine Months Ended March 31
2009
2010
CASH FLOWS FROM OPERATING ACTIVITIES
Income (Loss) before income tax
Adjustments for:
Interest expense
Depreciation and amortization
Provisions for (reversal of):
Probable losses
Doubtful accounts
Unrealized foreign exchange losses (gains)
Loss (Gain) on sale of assets
Gain on extinguishment of debt
Interest income
Dividend income
Operating income before working capital changes
Decrease (increase) in:
Receivables
Inventories
Real estate held for sale and development
Other current assets
Increase (decrease) in:
Accounts payable and accrued expenses
Net cash flows from (used in) operations
Interest received
Interest paid
Net cash flows from (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in:
Investment property
Investment in shares of stocks
Other noncurrent assets
AFS investments - net
HTM investments
Dividends received from associates
Proceeds from sale of investment property
Proceeds from sale of AFS investments
Acquisition of minority interest
Increase in amounts owed by related parties
Acquisitions of property, plant and equipment
Net cash flows from investing activities
(Forward)
P
=2,192,247
(P
=251,323)
139,726
115,342
149,613
(544,962)
7,430
(261)
(419,457)
(1,246,640)
(12,496)
(22,540)
93,047
(4,600)
(15,210)
84
9,120
(19,914)
(15,933)
(32,821)
(285,247)
31,132
35,686
(7,596)
52,833
79,474
(2,455)
(16,766)
76,831
1,047
(55,100)
12,496
–
(42,604)
(121,355)
9,165
(31,925)
19,914
(12,011)
200
(35,051)
4,868
(6,069)
22,540
24,179
2,564
(2,534)
(1,566)
(17,324)
(8,193)
(116)
(7,526)
48,813
7
15,933
(11,506)
45,605
-2-
Nine Months Ended March 31
2009
2010
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in amounts owed to related parties
Payments of:
Convertible note
Loans
Long-term debt
Net cash used in financing activities
(P
=13,769)
(P
=3,545)
(183,453)
(34,853)
(31,190)
(263,265)
–
–
–
(3,545)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
(314,062)
30,050
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR
469,436
330,972
CASH AND CASH EQUIVALENTS
AT END OF PERIOD (Note 4)
P
=155,374
=361,022
P
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate Information
Prime Orion Philippines, Inc. (the Parent Company) was incorporated and registered with the
Philippine Securities and Exchange Commission on May 19, 1989. The Company’s registered
office address is 20th Floor, LKG Tower, 6801 Ayala Avenue, Makati City. The Parent
Company’s primary purpose is to acquire by purchase, exchange, assign, donate or otherwise, and
to hold, own and use, for investment or otherwise and to sell, assign, transfer, exchange, lease, let,
develop, mortgage, pledge, traffic, deal in and with, and otherwise operate, enjoy and dispose of
any and all properties of every kind and description and wherever situated, as and to the extent
permitted by law, including but not limited to, buildings, tenements, warehouses, factories,
edifices and structures and other improvements, and bonds, debentures, promissory notes, shares
of capital stock, or other securities and obligations, created, negotiated or issued by any
corporation, association, or other entity, domestic or foreign.
Prime Orion Philippines, Inc. and Subsidiaries, collectively referred to as “the Group”, have
principal business interests in real estate, financial services and manufacturing.
The unaudited condensed consolidated financial statements of the Group as of March 31, 2010 and
June 30, 2009 and for the nine months ended March 31, 2010 and 2009 were approved and
authorized for issue by the Audit Committee and the Board of Directors on May 19, 2010.
2. Summary of Significant Accounting Policies
Basis of Preparation
The unaudited condensed consolidated financial statements have been prepared on a historical cost
basis, except for certain property, plant and equipment that are carried at revalued amounts and
AFS investments that are carried at fair values. The unaudited condensed financial statements do
not include all of the information and disclosures required in the June 30, 2009 annual audited
consolidated financial statements, and should be read in conjunction with the Group’s annual
consolidated financial statements as of end of the year ended June 30, 2009.
The unaudited consolidated financial statements are presented in Philippine peso, which is the
Group’s functional and presentation currency.
Statement of Compliance
The financial statements of the Group have been prepared in compliance with Philippine Financial
Reporting Standards (PFRS).
-2-
Basis of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Parent
Company and its subsidiaries as of March 31, 2010 and June 30, 2009:
Effective Percentage
of Ownership
March 31,2010
June 30, 2009
Orion Land Inc. (OLI) and Subsidiaries:
OLI
Tutuban Properties, Inc. (TPI) and Subsidiaries:
22BAN Marketing, Inc.
TPI Holdings Corporation (TPIHC)
Orion Property Development, Inc. (OPDI) and
Subsidiary:
Orion Beverage, Inc.
Luck Hock Venture Holdings, Inc.
Orion I Holdings Philippines, Inc. (OIHPI) and Subsidiaries:
OIHPI
Lepanto Ceramics, Inc. (LCI)
Orion Brands International, Inc. (OBII)
OYL Holdings, Inc.
ZHI Holdings, Inc. (ZHI)
DHG Capital Holdings, Inc. (DCHI) and Subsidiaries:
DCHI
HLG Philippines, Inc. (HPI)
Orion Solutions, Inc. (OSI)
OE Holdings, Inc. (OEHI) and Subsidiaries:
OEHI
OE Enterprises Holdings, Inc. (OEEHI)
Orion Maxis Inc.
FLT Prime Insurance Corporation (FPIC)
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
60.00
100.00
100.00
60.00
100.00
100.00
100.00
60.00
100.00
100.00
100.00
100.00
60.00
100.00
100.00
100.00
100.00
100.00
96.00
100.00
100.00
100.00
70.00
100.00
100.00
100.00
70.00
All of the above companies are based in the Philippines.
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.
Consolidated financial statements are prepared using uniform accounting policies for like
transactions and other events in similar circumstances. All significant intercompany transactions
and balances between and among the Group, including intercompany profits and unrealized
profits, have been eliminated in the consolidation.
-3-
Minority interests represent interests in certain subsidiaries not held by the Group. The equity and
net income attributable to minority interests are shown separately in the consolidated balance sheet
and consolidated statement of income, respectively.
Changes in Accounting Policies
The accounting policies adopted in the preparation of unaudited condensed consolidated financial
statements are consistent with those of the previous financial year, except for the new Standards
effective January 1, 2009.
PFRS 1, First-time Adoption of PFRS - Cost of an Investment in a Subsidiary, Jointly Controlled
Entity or Associate
The amended PFRS 1 allows an entity, in its separate financial statements, to determine the cost of
investments in subsidiaries, jointly controlled entities or associates (in its opening PFRS financial
statements) as one of the following amounts: (a) cost determined in accordance with
PAS 27, Consolidated and Separate Financial Statements; (b) at the fair value of the investment at
the date of transition to PFRS, determined in accordance with PAS 39; or (c) previous carrying
amount (as determined under generally accepted accounting principles) of the investment at the
date of transition to PFRS.
PFRS 2, Share-based Payment - Vesting Condition and Cancellations
The standard has been revised to clarify the definition of a vesting condition and prescribes the
treatment for an award that is effectively cancelled. It defines a vesting condition as a condition
that includes an explicit or implicit requirement to provide services. It further requires non-vesting
conditions to be treated in a similar fashion to market conditions. Failure to satisfy a non-vesting
condition that is within the control of either the entity or the counterparty is accounted for as
cancellation. However, failure to satisfy a non-vesting condition that is beyond the control of
either party does not give rise to a cancellation.
PFRS 8, Operating Segments
PFRS 8 will replace PAS 14, Segment Reporting, and adopts a full management approach to
identifying, measuring and disclosing the results of an entity’s operating segments. The
information reported would be that which management uses internally for evaluating the
performance of operating segments and allocating resources to those segments. Such information
may be different from that reported in the balance sheet and statement of income and the Company
will provide explanations and reconciliations of the differences. This standard is only applicable to
an entity that has debt or equity instruments that are traded in a public market or that files (or is in
the process of filing) its financial statements with a securities commission or similar party.
Amendments to PAS 1, Presentation of Financial Statements
These amendments introduce a new statement of comprehensive income that combines all items of
income and expenses recognized in the profit or loss together with ‘other comprehensive income’.
Entities may choose to present all items in one statement, or to present two linked statements, a
separate statement of income and a statement of comprehensive income. These amendments also
prescribe additional requirements in the presentation of the balance sheet and owner’s equity as
well as additional disclosures to be included in the financial statements. Adoption of this
Amendment will not have significant impact on the Group except for the presentation of a
-4-
statement of comprehensive income.
PAS 23, Borrowing Costs
The standard has been revised to require capitalization of borrowing costs when such costs relate
to a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of
time to get ready for its intended use or sale. In accordance with the transitional requirements in
the standard, the Group will adopt this as a prospective change. Accordingly, borrowing costs will
be capitalized on qualifying assets with a commencement date after January 1, 2009. No changes
will be made for borrowing costs incurred to this date that have been expensed.
Amendments to PAS 27, Consolidated and Separate Financial Statements - Cost of an
Investment in a Subsidiary, Jointly Controlled Entity or Associate
These amendments prescribe changes in respect of the holding companies’ separate financial
statements including (a) the deletion of ‘cost method’, making the distinction between pre- and
post-acquisition profits no longer required; and (b) in cases of reorganizations where a new parent
is inserted above an existing parent of the group (subject to meeting specific requirements), the
cost of the subsidiary is the previous carrying amount of its share of equity items in the subsidiary
rather than its fair value. All dividends will be recognized in the statement of income. However,
the payment of such dividends requires the entity to consider whether there is an indicator of
impairment.
Amendments to PAS 32, Financial Instruments: Presentation and PAS 1, Presentation of
Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation
These amendments specify, among others, that puttable financial instruments will be classified as
equity if they have all of the following specified features: (a) the instrument entitles the holder to
require the entity to repurchase or redeem the instrument (either on an ongoing basis or on
liquidation) for a pro rata share of the entity’s net assets; (b) the instrument is in the most
subordinate class of instruments, with no priority over other claims to the assets of the entity on
liquidation; (c) all instruments in the subordinate class have identical features; (d) the instrument
does not include any contractual obligation to pay cash or financial assets other than the holder’s
right to a pro rata share of the entity’s net assets; and (e) the total expected cash flows attributable
to the instrument over its life are based substantially on the profit or loss, a change in recognized
net assets, or a change in the fair value of the recognized and unrecognized net assets of the entity
over the life of the instrument.
Philippine Interpretation IFRIC 16, Hedges of a Net Investment in a Foreign Operation
This interpretation provides guidance on identifying foreign currency risks that qualify for hedge
accounting in the hedge of net investment; where within the group the hedging instrument can be
held in the hedge of a net investment; and how an entity should determine the amount of foreign
currency gains or losses, relating to both the net investment and the hedging instrument, to be
recycled on disposal of the net investment.
Improvements to PFRS
In May 2008, the International Accounting Standards Board issued its first omnibus of
amendments to certain standards, primarily with a view to removing inconsistencies and clarifying
wording. There are separate transitional provisions for each standard.
-5•
PFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations
When a subsidiary is held for sale, all of its assets and liabilities will be classified
as held for sale under PFRS 5, even when the entity retains a non-controlling
interest in the subsidiary after the sale.
•
PFRS 7, Financial Instruments: Disclosures
Removal of the reference to ‘total interest income’ as a component of finance
costs.
•
PAS 1, Presentation of Financial Statements
Assets and liabilities classified as held for trading are not automatically classified
as current in the balance sheet.
•
PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors

Clarification that only implementation guidance that is an integral part of a PFRS
is mandatory when selecting accounting policies.
•
PAS 10, Events After the Balance Sheet Date
Clarification that dividends declared after the end of the reporting period are not
obligations.
•
PAS 16, Property, Plant and Equipment
The amendment replaces the term ‘net selling price’ with ‘fair value less costs to
sell’, to be consistent with PFRS 5 and PAS 36, Impairment of Assets.
Items of property, plant and equipment held for rental that are routinely sold in the
ordinary course of business after rental, are transferred to inventory when rental
ceases and they are held for sale. Proceeds of such sales are subsequently shown
as revenue. Cash payments on initial recognition of such items, the cash receipts
from rents and subsequent sales are all shown as cash flows from operating
activities.
•
PAS 18, Revenue
Replacement of the term ‘direct cost’ with ‘transaction costs’ as defined in
PAS 39.
•
PAS 19, Employee Benefits
Revises the definition of ‘past service costs’ to include reductions in benefits
related to past services (‘negative past service costs’) and to exclude reductions in
benefits related to future services that arise from plan amendments. Amendments
to plans that result in a reduction in benefits related to future services are
accounted for as a curtailment.
Revises the definition of ‘return on plan assets’ to exclude plan administration
costs if they have already been included in the actuarial assumptions used to
measure the defined benefit obligation.
Revises the definition of ‘short-term’ and ‘other long-term’ employee benefits to
focus on the point in time at which the liability is due to be settled.
-6
Deletes the reference to the recognition of contingent liabilities to ensure
consistency with PAS 37, Provisions, Contingent Liabilities and Contingent
Assets.
•
PAS 20, Accounting for Government Grants and Disclosure of Government Assistance
Loans granted with no or low interest rates will not be exempt from the
requirement to impute interest. The difference between the amount received and
the discounted amount is accounted for as a government grant.
•
PAS 23, Borrowing Costs
Revises the definition of borrowing costs to consolidate the types of items that are
considered components of ‘borrowing costs’, i.e., components of the interest
expense calculated using the effective interest rate method.
•
PAS 27, Consolidated and Separate Financial Statements

When a parent entity accounts for a subsidiary at fair value in accordance with
PAS 39 in its separate financial statements, this treatment continues when the
subsidiary is subsequently classified as held for sale.
•
PAS 28, Investments in Associates
If an associate is accounted for at fair value, in accordance with PAS 39, only the
requirement of PAS 28 to disclose the nature and extent of any significant
restrictions on the ability of the associate to transfer funds to the entity in the form
of cash or repayment of loans will apply.
An investment in an associate is a single asset for the purpose of conducting the
impairment test. Therefore, any impairment test is not separately allocated to the
goodwill included in the investment balance.
•
PAS 29, Financial Reporting in Hyperinflationary Economies
Revises the reference to the exception that assets and liabilities should be
measured at historical cost, such that it notes property, plant and equipment as
being an example, rather than implying that it is a definitive list.
•
PAS 31, Interests in Joint Ventures
If a joint venture is accounted for at fair value, in accordance with PAS 39, only
the requirements of PAS 31 to disclose the commitments of the venturer and the
joint venture, as well as summary financial information about the assets,
liabilities, income and expense will apply.
•
PAS 34, Interim Financial Reporting
Earnings per share is disclosed in interim financial reports if an entity is within the
scope of PAS 33, Earnings per Share.
•
PAS 36, Impairment of Assets
When discounted cash flows are used to estimate ‘fair value less cost to sell’,
additional disclosure is required about the discount rate, consistent with
-7-
disclosures required when the discounted cash flows are used to estimate ‘value in
use’.
•
PAS 38, Intangible Assets
Expenditure on advertising and promotional activities is recognized as an expense
when the Company either has the right to access the goods or has received the
services. Advertising and promotional activities now specifically include mail
order catalogues.
Deletes references to there being rarely, if ever, persuasive evidence to support an
amortization method for finite life intangible assets that results in a lower amount
of accumulated amortization than under the straight-line method, thereby
effectively allowing the use of the unit of production method.
•
PAS 39, Financial Instruments: Recognition and Measurement

Changes in circumstances relating to derivatives - specifically derivatives
designated or de-designated as hedging instruments after initial recognition - are
not reclassifications.
When financial assets are reclassified as a result of an insurance company
changing its accounting policy in accordance with paragraph 45 of PFRS 4,
Insurance Contracts, this is a change in circumstance, not a reclassification.
Removes the reference to a ‘segment’ when determining whether an instrument
qualifies as a hedge.
Requires use of the revised effective interest rate (rather than the original effective
interest rate) when re-measuring a debt instrument on the cessation of fair value
hedge accounting.
•
PAS 40, Investment Property
Revises the scope (and the scope of PAS 16) to include property that is being
constructed or developed for future use as an investment property. Where an
entity is unable to determine the fair value of an investment property under
construction, but expects to be able to determine its fair value on completion, the
investment under construction will be measured at cost until such time as fair
value can be determined or construction is complete.
•
PAS 41, Agriculture
Removes the reference to the use of a pre-tax discount rate to determine fair
value, thereby allowing use of either a pre-tax or post-tax discount rate depending
on the valuation methodology used.
Removes the prohibition to take into account cash flows resulting from any
additional transformations when estimating fair value. Instead, cash flows that are
expected to be generated in the ‘most relevant market’ are taken into account.
-8-
3. Significant Accounting Judgments and Estimates
The preparation of the accompanying unaudited condensed consolidated financial statements in
conformity with PFRS requires management to make judgments, estimates and assumptions that
affect the amounts reported in the unaudited condensed consolidated financial statements and
accompanying notes. The estimates and assumptions used in the accompanying unaudited
condensed consolidated financial statements are based upon management’s evaluation of relevant
facts and circumstances as of the date of the unaudited condensed consolidated financial
statements. Actual results could differ from such estimates.
Estimates and judgments are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances.
Judgments
In the process of applying the Company’s accounting policies, management has made the
following judgments, apart from those involving estimations, which have the most significant
effect on the amounts recognized in the financial statements:
Determining functional currency
Based on the economic substance of underlying circumstances relevant to the Company, the
functional currency of the Company has been determined to be the Philippine peso. The Philippine
peso is the currency of the primary economic environment in which the Company operates and it
is the currency that mainly influences the underlying transactions, events and conditions relevant
to the Company.
Operating lease commitments - Group as lessor
The Group has entered into commercial property leases on its investment property portfolio. The
Group has determined that it retains all the significant risks and rewards of ownership of these
properties which are leased out under operating lease arrangements.
Operating lease commitments - Group as lessee
The Group has entered into a lease agreement for the corporate office space and a subsidiary’s
mall operations. The Group has determined that it does not obtain all the significant risks and
rewards of ownership of the assets under operating lease arrangements.
Impairment of AFS investments
The Group follows the guidance of PAS 39 in determining when an investment is other-thantemporarily impaired. This determination requires significant judgment. In making this judgment,
the Group evaluates, among other factors, the duration and extent to which the fair value of an
investment is less than its cost; and the financial health of and near-term business outlook for the
investee, including factors such as industry and sector performance, changes in technology and
operational and financing cash flows.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the
balance sheet date that have a significant risk of causing a material adjustment to the carrying
-9-
amounts of assets and liabilities within the next financial year are discussed below.
Estimated allowance for impairment losses
The Group reviews its receivables and amounts owed by related parties at each reporting date to
assess whether an allowance for impairment should be recorded in the unaudited statement of
income. In particular, judgment by management is required in the estimation of the amount and
timing of future cash flows when determining the level of allowance required. Such estimates are
based on assumption about a number of factors and actual results may differ, resulting in future
changes to the allowance.
For the amounts owed by related parties, the Group uses judgment, based on the best available
facts and circumstances, including but not limited to, assessment of the related parties’ operating
activities (active or dormant), business viability and overall capacity to pay, in providing
allowance against the recorded receivable amounts. For the receivables, the Group evaluates
specific accounts where the Group has information that certain customers or third parties are
unable to meet their financial obligations. Facts, such as the Group’s length of relationship with
the customers or other parties and the customers’ or other parties’ current credit status, are
considered to ascertain the amount of allowance that will be provided. The allowances are
evaluated and adjusted as additional information is received.
Estimated useful lives of property, plant and equipment and investment properties
The estimated useful lives used as bases for depreciating the Group’s property, plant and
equipment and investment properties were determined on the basis of management’s assessment
of the period within which the benefits of these asset items are expected to be realized taking into
account actual historical information on the use of such assets as well as industry standards and
averages applicable to the Group’s assets.
The Group estimated the useful lives of its property, plant and equipment and investment
properties based on the period over which the assets are expected to be available for use. The
estimated useful lives of property, plant and equipment and investment properties are reviewed, at
least, annually and are updated if expectations differ from previous estimates due to physical wear
and tear and technical or commercial obsolescence on the use of these assets. It is possible that
future results of operations could be materially affected by changes in these estimates brought
about by changes in the factors mentioned above. A reduction in the estimated useful lives of
property, plant and equipment and investment properties would increase depreciation expense and
decrease property, plant and equipment and investment properties.
Determining fair values of financial instruments
Where the fair value of financial assets and financial liabilities recorded in the balance sheet
cannot be derived from active markets, they are determined using valuation techniques including
the discounted cash flows model. The inputs to these models are taken from observable markets
where possible, but where this is not feasible, a degree of judgment is required in establishing fair
values. The judgments include considerations of inputs such as liquidity risk, credit risk and
volatility. Changes in assumptions about these factors could affect the reported fair value of
financial instruments.
Estimating Realizability of deferred income tax assets
The Group reviews the carrying amounts of deferred income tax assets at each balance sheet date
- 10 -
and reduces deferred income tax assets to the extent that it is no longer probable that sufficient
taxable income will be available to allow all or part of the deferred income tax assets to be
utilized. However, there is no assurance that the Group will generate sufficient taxable income to
allow all or part of its deferred income tax assets to be utilized.
Asset impairment
Internal and external sources of information are reviewed at each balance sheet date to identify
indications that the assets may be impaired or an impairment loss previously recognized no longer
exists or may be decreased.
If any such indication exists, the recoverable amount of the asset is estimated. An impairment loss
is recognized whenever the carrying amount of an asset exceeds its estimated recoverable amount.
The Group assesses the impairment of assets whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The factors that the Group
considers important which could trigger an impairment review include the following:
•
•
•
significant underperformance relative to expected historical or projected future operating
results;
significant negative industry or economic trends; and
deterioration in the financial health of the investee for investments in stocks, industry and
sector performance, changes in technology, and operational and financing cash flows.
Pension and other retirement benefits
The determination of the Company’s obligation and retirement expense is dependent on the
selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions
include, among others, discount rates, expected returns on plan assets and salary increase rates. In
accordance with PFRS, actual results that differ from the Company’s assumptions, subject to the
10% corridor tests, are accumulated and amortized over future periods and therefore, generally
affect the recognized expense and recorded obligation in such future periods. While the Company
believes that the assumptions are reasonable and appropriate, significant differences between
actual experiences and assumptions may materially affect the Company’s accrued retirement
obligation and annual retirement expense.
Contingencies
The Parent Company and certain subsidiaries are currently involved in various legal proceedings.
The estimate of the probable costs for the resolution of these claims has been developed in
consultation with outside legal counsel handling the defense in these matters and is based upon an
analysis of potential results. It is possible, however, that future results of operations could be
materially affected by changes in estimates or in the effectiveness of the strategies relating to these
proceedings.
- 11 -
4. Cash and Cash Equivalents
Cash on hand and in banks
Short-term investments
Surety bond deposit
June 30, 2009
March 31, 2010
(In Thousands)
=145,266
P
P
=64,442
261,670
90,932
62,500
–
=469,436
P
P
=155,374
Cash in banks earn interest at the respective bank deposit rates. Short-term investments are made
for varying periods of up to three months depending on the immediate cash requirements of the
Group and earn interest at the respective short-term investment rates.
5. Receivables
Trade debtors
Insurance receivables
Current portion of Manila Electric Company
(Meralco) refund - net
Others
Less allowance for impairment losses
June 30, 2009
March 31, 2010
(In Thousands)
=237,790
P
P
=258,423
201,635
407,942
1,119
340,344
1,007,828
276,426
P
=731,402
5,674
269,519
714,618
284,974
=429,644
P
6. Inventories
June 30, 2009
March 31, 2010
(In Thousands)
At NRV:
Finished goods
Work-in-process
Raw materials
Factory supplies and spare parts
Materials in-transit
P
=134,306
13,068
33,516
31,527
1,410
P
=213,827
=186,034
P
10,448
17,552
26,439
10,268
=250,741
P
7. Real Estate Held for Sale and Development
This account represents real estate held for sale and development located in Calamba, Laguna and
Sto. Tomas, Batangas, with a total carrying value of about =
P119.1 million and =
P233.2 million,
respectively.
- 12 -
8. Other Current Assets
June 30, 2009
March 31, 2010
(In Thousands)
Creditable withholding taxes - net of allowance
for probable losses amounting to =
P16,381 and
P
=16,415 in March 31, 2010 and June 30, 2009,
Respectively
Input value - added tax (VAT) – net of allowance
for probable losses amounting to P
=2,156 and =
P2,161
in March 31, 2010 and June 30, 2009, respectively
Prepayments
P
=140,309
=140,224
P
36,773
2,880
P
=179,962
31,901
241
=172,366
P
9. Available-for-Sale (AFS) Investments
Listed equity securities - at market
Nonlisted securities – at cost
June 30, 2009
March 31, 2010
(In Thousands)
=293,333
P
P
=489,079
156,281
127,441
=449,614
P
P
=616,520
10. Held-to-Maturity (HTM) Investments
This account pertains to investments in government debt securities with interest rates ranging from
6.875% to 11.50%. These investments have maturity dates starting from July 2010 to July 2013.
11. Investments
June 30, 2009
March 31, 2010
(In Thousands)
Investments in associates at equity:
Acquisition costs:
Balance at beginning of year
Balance at end of the period
Accumulated equity in net income (losses)
of associates:
Balance at beginning of year
Equity in net income of associates
Dividends received
Balance at end of the period
Allowance for probable losses on investments
P
=1,416,101
1,416,101
(160,357)
–
(200)
(160,557)
1,255,544
(725,023)
P
=530,521
=1,416,101
P
1,416,101
(160,609)
252
–
(160,357)
1,255,744
(725,023)
=530,721
P
- 13 -
12. Property, Plant and Equipment
As of March 31, 2010
Furniture,
Fixtures and
Equipment
Leasehold
Improvements
Machinery and
Equipment
(In Thousands)
Transportation
Equipment
=
P26,846
22
–
26,868
=
P2,054,988
2,216
–
2,057,204
=
P36,509
9,896
–
46,405
=
P104,371
5,190
(842)
108,719
=
P2,222,714
17,324
(842)
2,239,196
Accumulated depreciation and
amortization and allowance for
impairment:
At beginning of year
Disposals
At end of the period
20,842
610
–
21,452
2,044,527
2,169
–
2,046,696
30,948
1,874
–
32,822
85,356
6,090
(42)
91,404
2,181,673
10,743
(42)
2,192,374
Net book value, 3/31/2010
=
P5,416
=
P10,508
=
P13,583
At cost:
Additions
Reclassification/Disposals
At revalued amounts:
At beginning and end of year
amortization:
Net book value, 3/31/2010
=
P17,315
Total
=
P46,822
Land and
Improvements
Buildings and
Improvements
(In Thousands)
Total
=
P307,580
=536,560
P
=844,140
P
13,228
960
14,188
=
P293,392
200,853
16,437
217,290
=
P319,270
214,081
17,397
231,478
=
P612,662
As of June 30, 2009
At cost:
Additions
Disposals
amortization and allowance for
impairment:
Disposals
Net book value
Transportation
Equipment
Furniture,
Fixtures and
Equipment
Leasehold
Improvements
Machinery and
Equipment
(In Thousands)
=
P21,710
5,136
–
26,846
=
P2,051,235
3,753
–
2,054,988
=
P37,388
1,017
(1,896)
36,509
=
P98,943
6,137
(709)
104,371
=
P2,209,276
16,043
(2,605)
2,222,714
19,992
850
–
20,842
2,030,859
13,668
–
2,044,527
30,477
1,983
(1,512)
30,948
78,307
7,758
(709)
85,356
2,159,635
24,259
(2,221)
2,181,673
=6,004
P
=
P10,461
=
P5,561
=
P19,015
Total
=
P41,041
- 14 -
At revalued amounts:
At beginning and end of year
amortization:
Net book value
Land and
Improvements
Buildings and
Improvements
(In Thousands)
Total
=
P307,580
=
P536,560
=
P844,140
11,948
1,280
13,228
=
P294,352
178,935
21,918
200,853
=
P335,707
190,883
23,198
214,081
=
P630,059
Land and Land
Improvements
Machinery
and Equipment
13. Investment Properties
Building
Total
(In Thousands)
Cost:
Beginning balance
Reclassification
Disposals
Ending balance
2,120,552
–
–
2,120,552
36,387
–
(22,720)
13,667
17,378
–
–
17,378
2,174,317
–
(22,720)
2,151,597
Accumulated depreciation:
Beginning balance
Depreciation
Ending balance
Net book value
1,421,228
104,890
1,526,118
=594,434
P
–
–
–
=
P13,667
13,209
–
13,209
P
=4,169
1,434,437
104,890
1,539,327
=
P612,270
Building
Land and Land
Improvements
Machinery
and Equipment
Total
As of June 30, 2009
(In Thousands)
At cost:
Additions
Accumulated depreciation:
Depreciation
Net book value
=2,116,692
P
3,860
2,120,552
=
P36,387
–
36,387
P
=17,378
–
17,378
P
=2,170,457
3,860
2,174,317
1,282,125
139,103
1,421,228
=699,324
P
–
–
–
=
P36,387
13,209
–
13,209
P
=4,169
1,295,334
139,103
1,434,437
=
P739,880
- 15 -
14. Other Noncurrent Assets
Deferred reinsurance premiums
Meralco refund - net of current portion
Others
June 30, 2009
March 31, 2010
(In Thousands)
=28,708
P
P
=52,119
1,987
62,692
77,119
=93,387
P
P
=129,238
.
15. Loans Payable
This account consists of short-term loans from various local banks and financial institutions
which bear interest at prevailing market rates ranging from 9% to 18%. The LCI loans are
secured by the receivables and inventory of LCI under the CTI.
16. Long-term Debt
This account consists of term loans and syndicated loans from local banks for certain projects
of the Group:
June 30, 2009
March 31, 2010
(In Thousands)
Granito and Ceramic Tile Expansion Projects
of LCI
P
=P
=-
P140,000
=
=140,000
P
17. Convertible Note
On June 9, 2000, the Parent Company, together with OLI, Orion Property Development, Inc.
(OPDI) and LCI entered into a Memorandum of Agreement (MOA) with United Coconut
Planters Bank (UCPB) for the settlement of the Parent Company and LCI’s obligations to
UCPB.
On December 11, 2000, the Parent Company entered into a Loan Agreement with UCPB to
refinance the Group’s remaining short-term obligations after the implementation of the MOA.
On May 4, 2002, the Parent Company executed an Investment Agreement with UCPB to
reform/supersede the Loan Agreement. The terms of the Investment Agreement include,
among others, the following:
•
Prior to Maturity Date (December 11, 2005), UCPB has the option to require the
Parent Company to redeem the Convertible Note (the “Note”) through the issuance of
the Parent Company’s common shares;
- 16 •
•
•
•
At any time on or before Maturity Date, the Parent Company has the option to redeem
the Note in cash and at 5% premium;
The Note is subject to an annual simple interest rate of ten percent (10%) which
interest the Parent Company shall have the option to pay on any interest payment date,
either in cash or through the issuance of the Parent Company’s common shares;
UCPB shall be entitled to one seat in the Parent Company’s BOD and shall designate
its nominee within 10 days from the execution of the Investment Agreement; and
The Note is to be secured by a first lien over a subsidiary’s investment in shares of
stock of Tutuban Properties, Inc. (TPI) and shares of stocks of and/or subscription
rights to Cyber Bay and real properties of the Parent Company and a subsidiary, with
a total carrying value of =
P170.0 million as of June 30, 2009 and 2008.
On August 10, 2009, the Group entered into a Compromise Agreement with Asset Pool A (SPVAMC), Inc. for the settlement of the Group’s remaining loans for a total consideration of =
P680
million (see Notes 15 and 16). Under the compromise settlement, POPI and a subsidiary shall
settle the Compromise Amount within a period of 18 months.
On March 15, 2010, the Group paid the remaining balance of =
P49.5 million to APA after
deducting the down payments and the semi-annual installments covered by Standby Letter of
Credit (SBLC) issued by Banco de Oro Unibank, Inc. (BDO). As of March 31, 2010, the Group
was able to settle =
P249.5 million of the Compromise Amount through cash settlement and
assignment of receivable arising from the sale of a property in located in Mandaue, Cebu City
amounted to =
P430.5 million. Accordingly, the loan settlement reduced the outstanding loan
obligations from =
P1.5 billion to =
P nil.
18. Accounts Payable and Accrued Expenses
Trade payables
Accrued interest and penalties (see Notes 15 and 16)
Accrued provision for probable losses
Claims payable
Nontrade payables
Reserve for unearned premiums
Due to reinsurers and ceding companies
Others
June 30, 2009
March 31, 2010
(In Thousands)
P
=348,128
=326,339
P
681,853
250,268
312,817
130,884
95,072
134,257
118,851
78,620
65,755
57,772
295,596
376,356
P
=1,236,219
=2,036,349
P
- 17 -
19. Related Party Transactions
Parties are considered to be related if one party has the ability to control, directly or indirectly, the
other party or exercise significant influence over the other party in making financial and operating
decisions. Parties are also considered to be related if they are subject to common control or
common significant influence. Related parties may be individuals or corporate entities.
The Parent Company and its subsidiaries in their normal course of business have entered into
transactions with related parties principally consisting of noninterest-bearing advances with no
fixed repayment terms and are due and demandable.
Account balances with related parties, other than intra-group balances which are eliminated in
consolidation, are as follows:
June 30, 2009
March 31, 2010
(In Thousands)
Amounts owed by related parties:
Cyber Bay and Subsidiary
Hong Way Holdings, Inc.
Guoman Philippines, Inc.
Zeus Holdings, Inc.
Others
Less allowance for impairment losses
P
=85,939
1,841
1,627
1,191
1,009
91,607
86,485
P
=5,122
=84,298
P
1,840
1,575
1,184
1,145
90,042
84,846
=5,196
P
(In Thousands)
Amounts owed to related parties:
OYL Overseas, Ltd.
Others
P
=2,673
204
P
=2,877
P2,673
=
13,974
=16,647
P
- 18 -
20. Operating Expenses
Personnel expenses
Supplies and repairs
Taxes and licenses
Marketing expenses
Professional and legal fees
Provision for (reversal of) doubtful
accounts
Communication and transportation
Insurance
Representation
Others
Nine months ended March 31
2009
2010
(In Thousands)
=126,442
P
P
=125,320
132,675
139,369
9,495
7,500
31,186
23,500
19,543
17,613
10,152
23,670
(15,210)
7,935
2,827
1,629
15,016
=341,690
P
7,430
7,158
2,562
1,662
15,459
P
=371,243
21. Earnings (Loss) Per Share
The following table presents information necessary to calculate basic and diluted earnings (loss)
per share:
Nine months ended March 31
2010
Net income (loss) attributable to equity
holders of the Parent (in thousands)
b. Weighted average number of shares
Basic and diluted earnings (loss)
per share (a/b)
2009
a.
P
=2,194,425
2,367,149
P
=0.927
(P
=247,945)
2,367,149
(P
=0.105)
22. Segment Information
Business Segments
The Group’s operating businesses are organized and managed separately according to the nature
of services provided and the different markets served, with each segment representing a strategic
business unit.
The industry segments where the Company and its subsidiaries and associates operate are as
follows:
•
Financial services - insurance and related brokerage
•
Real estate - property development
- 19 •
Manufacturing and distribution - manufacture and distribution of beverage and ceramic tiles
Financial information about the operations of these business segments is summarized as follows:
Real Estate
Manufacturing
Holding
and Property
Financial
and
Company
Development
Services
Distribution
Total
=
P109,455
Quarter ended
March 31, 2010
Revenue
=
P–
=
P456,494
=
P520,523
P
=1,086,472
1,448,372
57,534
(16,661)
701,901
2,191,146
922
114,253
3,295
21,256
139,726
–
–
–
–
–
612,646
1,846,546
637,615
1,232,658
4,329,465
891
8,870
4,381
3,182
17,324
Investment in associates
528,470
–
2,051
–
530,521
Total liabilities
545,896
602,599
574,300
492,012
2,214,807
Holding
and Property
Financial
and
Company
Development
Services
Distribution
Total
Net income (loss)
Depreciation and
amortization
Equity in net income of
associates
Total assets
Capital expenditures
Real Estate
Manufacturing
(In Thousands)
Quarter ended
March 31, 2009
Revenue
=
P526,046
=
P956,925
(14,817)
4,340
(170,194)
(245,194)
484
113,679
3,174
32,276
149,613
–
–
-
–
–
As of June 30, 2009
Total assets
727,182
1,858,190
388,423
1,370,064
Capital expenditures
1,371
1,534
2,096
11,042
16,043
528,470
–
2,251
–
530,721
2,136,295
612,955
544,301
1,296,593
4,590,144
Net income (loss)
=
P–
(64,523)
=
P357,044
=
P73,835
Depreciation and
amortization
Equity in net income of
associates
Investment in associates
Total liabilities
Geographical Segments
The Group does not have geographical segments.
4,343,859
- 20 -
23. Financial Risk Management Objectives and Policies
The Group’s principal financial instruments comprise of amounts owed to related parties and loans
from various banks. The main purpose of these financial instruments is to finance the Group’s
operations. The Group has various other financial instruments such as cash and cash equivalents,
receivables, accounts payable and accrued expenses, amounts owed by related parties, AFS and
HTM investments and rental deposits and advances which arise directly from operations. The
main risks from the use of financial instruments are liquidity risk, interest rate risk, foreign
currency risk and credit risk.
Liquidity risk
In the management of liquidity, the Group monitors and maintains a level of cash deemed
adequate by the management to finance the Group’s operations and mitigate the effects of
fluctuations in cash flows.
The tables below summarize the maturity profile of the Group’s financial liabilities as of
March 31, 2010 based on contractual undiscounted payments.
Accounts payable and accrued
expenses
Amounts owed to related parties
On
demand
Less than
3 months
3 to 12
months
(In Thousands)
1 to 5
years
Total
=
P605,339
2,877
198,128
=806,344
P
=239,073
P
–
–
=
P239,073
=312,461
P
–
–
=
P312,461
=54,624
P
–
–
=
P54,624
P
=1,211,497
2,877
198,128
P
=1,412,502
Interest rate risk
The Group obtains additional financing through bank and related party borrowings. The Group’s
policy is to obtain the most favorable interest rates available without increasing its foreign
currency exposure.
The following table sets out the carrying amount, by maturity, of the Group’s financial
instruments that are exposed to interest rate risk for the period ended March 31, 2010:
March 31, 2010
Floating rate
Within 1 year
Cash and cash equivalents
=
P155,374
1-2 years
(In Thousands)
=
P–
Total
=155,374
P
- 21 -
June 30, 2009
Fixed rate
Within 1 year
Convertible notes
Long-term debt
=
P1,251,339
140,000
1-2 years
(In Thousands)
=
P–
–
Total
P
=1,251,339
140,000
Floating rate
Within 1 year
Loans payable
=
P469,436
156,441
1-2 years
(In Thousands)
=
P–
–
Total
=469,436
P
156,441
Interest on financial instruments classified as fixed rate is fixed until the maturity of the
instrument. Interest on financial instruments classified as floating rate is repriced at intervals of
less than one year.
Foreign currency risk
The Group’s foreign currency risk results primarily from movements of the Philippine Peso
against the US Dollar. The Group’s foreign currency risk arises primarily from its trade payables.
The Group monitors and assesses cash flows from anticipated transactions and financing
agreements denominated in US Dollar.
The table below summarizes the Group’s exposure to foreign currency risk as of March 31, 2010
and June 30, 2009. Included in the table are the Group’s assets and liabilities at carrying amounts:
June 30, 2009
March 31, 2010
Peso
Peso
US$ Equivalent
US$
Equivalent
(In Thousands)
Financial Asset:
Cash
Financial Liability:
Accounts payable
Net financial asset (liability)
93
1,034
(941)
4,212
76
3,648
46,748
(42,536)
870
(795)
41,887
(38,239)
- 22 -
The following table presents the impact on the Group’s income before income tax due to changes
in the fair value of its monetary assets and liabilities, brought about by a reasonably possible
change in the US$/P
= exchange rate (holding all other variables constant) as of March 31, 2010.
US dollar
Change in
Effect on
Currency
Income
Rate
Before tax
(In Thousands)
+6.15%
(P
=2,615)
-6.15%
2,615
There is no other impact on the Group’s equity other than those already affecting the profit and
loss account.
Credit risk
The Group establishes credit limits at the level of the individual borrower, corporate relationship
and industry sector. It also provides for credit terms with the consideration for possible application
of intercompany accounts between affiliated companies. Also, the Group transacts only with
affiliated companies and recognized third parties, hence, there is no requirement for collateral. In
addition, receivable balances are monitored on an ongoing basis with the result that the Group’s
exposure to bad debts is not significant.
With respect to credit risk from other financial assets of the Group, which mainly comprise of
cash, amounts owed by related parties, AFS investments and HTM investments, the exposure of
the Group to credit risk arises from default of the counterparty, with a maximum exposure equal to
the carrying amount of these instruments.
There are no significant concentrations of credit risk in the Group.
Credit quality per class of financial asset
The credit quality of financial assets is being managed by the Group by grouping its financial
assets into two: (a) High grade financial assets are those that are current and collectible;
(b) Standard grade financial assets need to be consistently followed up but are still collectible.
The table below shows the credit quality by class of financial asset based on the Group’s credit
rating system:
Receivables
Amounts owed by related parties
HTM investments
Past due or
Neither past due nor impaired
individually
High grade Standard grade
impaired
(In Thousands)
=155,374
P
=
P–
=
P–
478,172
125,886
403,770
–
5,122
86,485
26,000
–
–
P
=659,546
=
P131,008
=
P490,255
Total
=
P155,374
1,007,828
91,607
26,000
=
P1,280,809
- 23 -
The table below shows the aging analysis of past due but not impaired receivables per class that
the Group held as of March 31, 2010. A financial asset is past due when a counterparty has failed
to make payment when contractually due.
Past due but not impaired
Neither past due
nor impaired
=
P155,374
Receivables
604,057
5,122
HTM investments
26,000
=790,553
P
Less than 30 31 to 60 days
=
P–
=
P–
44,338
7,740
–
–
–
–
=
P44,338
=
P7,740
61 to 90 days
=
P–
12,168
–
–
=
P12,168
More than 91
days
=
P–
63,099
–
–
=
P63,099
Total
=
P155,374
731,402
5,122
26,000
=
P917,898
Capital Management
The primary objective of the Group’s capital management is to ensure the Group’s ability to
continue as a going concern and pay the Group’s currently maturing loans and obligations.
The Group manages its capital structure and makes adjustments to it, in light of changes in
economic conditions. To maintain or adjust the capital structure, the Group may adjust the
dividend payment to shareholders return capital to shareholders or issue new shares. No changes
were made in the objectives, policies or processes as of March 31, 2010 and June 30, 2009.
24. Fair Values and Categories of Financial Instruments
Fair Values of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of
financial instrument for which it is practicable to estimate such value:
March 31, 2010
June 30, 2009
Carrying
Carrying
Amounts
Amounts
Fair Values
Fair Values
(In Thousands)
Financial assets:
Receivables
AFS investments
HTM investments
Financial liabilities:
Loans payable
Convertible note
Long-term debt
=
P155,374
731,402
5,122
616,520
26,000
=
P155,374
731,402
5,122
616,520
28,723
=
P468,808
429,644
5,196
449,614
19,931
=
P468,808
429,644
5,196
449,614
20,735
=
P1,211,497
2,877
198,128
=
P1,211,497
2,877
198,128
=
P1,860,450
156,441
1,251,339
140,000
16,647
197,081
=
P1,860,450
156,441
1,251,339
140,000
16,647
197,081
The carrying amounts of cash and cash equivalents, receivables, accounts payable and accrued
expenses, amounts owed to and by related parties, convertible notes and loans payable
approximate their fair value due to the short-term maturity of these financial instruments.
- 24 -
AFS equity investments that are listed are based on quoted prices. Nonlisted AFS equity
investments are based on cost less impairment, if any.
HTM investments are based on quoted prices.
The carrying values of long-term debt approximate their fair values due to the quarterly repricing
of floating interest rates.
Categories of Financial Instruments
The carrying values of the Group’s financial asset and liabilities per category are as follows:
June 30, 2009
March 31, 2010
(In Thousands)
Loans and receivables:
Receivables - net
Amounts owed by related parties - net
AFS investments
HTM investments
Other financial liabilities:
Loans payable
Convertible note
Long-term debt
P
=155,374
731,402
5,122
891,898
616,520
26,000
P
=1,534,418
P
=1,211,497
2,877
198,128
P
=1,412,502
=468,808
P
429,644
5,196
903,648
449,614
19,931
=1,373,193
P
=1,860,450
P
156,441
1,251,339
140,000
16,647
197,081
=3,621,958
P
- 25 -
AGING OF ACCOUNTS RECEIVABLE
AS OF MARCH 31, 2010
Current
1 to 30 days
31 to 60 days
61 to 90 days
Over 90 days
=
P175,542
2,411
681
409
79,380
Total receivable-trade
258,423
Advances to officer and employees
Insurance receivable
Others
Total non-trade receivable
47,232
407,942
294,231
749,405
Total receivable
1,007,828
Allowance for impairment losses
(276,426)
P
=731,402