Megawide Prospectus Follow On Offering 2014

MEGAWIDE CONSTRUCTION CORPORATION
2/F Spring Building, Arnaiz Avenue corner P. Burgos Street,
Pasay City, Metro Manila
Telephone No. +63 2 655 1111
Preliminary Prospectus relating to the Primary Offer in the Philippines of
40,000,000 Non-Voting Perpetual Preferred Shares
with an Oversubscription Option for up to an additional 30,000,000
Non-Voting Perpetual Preferred Shares
at an Offer Price of P100 per Share
To be listed and traded on the
Main Board of The Philippine Stock Exchange, Inc.
Joint Issue Managers and Joint Bookrunners
Joint Lead Underwriters
Participating Underwriters
November 13, 2014
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
THESE SECURITIES OR DETERMINED IF THIS PRELIMINARY PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE AND SHOULD BE REPORTED IMMEDIATELY TO THE
SECURITIES AND EXCHANGE COMMISSION.
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MEGAWIDE CONSTRUCTION CORPORATION
2/F SPRING BUILDING
ARNAIZ AVENUE CORNER P. BURGOS STREET,
PASAY CITY, METRO MANILA
Telephone No. +63 2 655 1111
http://www.megawide.com.ph/
This Preliminary Prospectus relates to the offer and sale (the ―Offer‖) of 40,000,000 cumulative, nonvoting Perpetual Preferred Shares (the ―Preferred Shares‖ or ―Shares‖) of Megawide Construction
Corporation (―Megawide‖ or ―MWIDE‖ or the ―Company‖ or the ―Issuer‖), a corporation organized
under Philippine law. In the event of an oversubscription, the Joint Issue Managers and Joint
Bookrunners, with the consent of the Company, reserve the right to increase the size of the Offer by
up to 30,000,000 Perpetual Preferred Shares (the ―Oversubscription Option‖), for an aggregate issue
size of up to 70,000,000 Perpetual Preferred Shares. The Preferred Shares will be issued by the
Company from its 70,000,000 unissued Non-Voting Preferred Share capital. Each Preferred Share
has a par value of P1.00.
The Preferred Shares are being offered at a subscription price of P100.00 per share (the ―Offer Price‖
or the ―Issue Price‖). The trading symbol of the Company for the Preferred Shares shall be ―MWP‖.
The distribution and sale of the Preferred Shares shall be made solely in the Philippines and shall be
undertaken by the Joint Lead Underwriters (the ―Underwriters‖) who shall sell and distribute the
Preferred Shares to third party buyers/investors. The Joint Lead Underwriters are authorized to
organize a syndicate of sub-underwriters, soliciting dealers and/or agents for the purpose of the Offer.
Of the 40,000,000 Preferred Shares to be offered, 80% or 32,000,000 shares are being offered
through the Underwriters for subscription and sale to Qualified Institutional Buyers and the general
public. The Company plans to make available 20% or 8,000,000 shares for distribution to the
respective clients of the 133 Trading Participants of the PSE, acting as Selling Agents.
Following the Offer, and assuming the Oversubscription Option is exercised in full, the Company will
have 2,399,426,127 of 4,930,000,000 authorized common shares and 70,000,000 of 70,000,000
authorized Non-Voting Preferred Shares issued and outstanding. The holders of the Preferred Shares
do not have identical rights and privileges with holders of the existing common shares of the
Company. (See ―Description of Shares‖ on page 29)
The declaration and payment of Dividends on the Shares on each Dividend Payment Date will be
subject to the sole and absolute discretion of the Issuer‘s Board of Directors (the ―Board‖), the
covenants (financial or otherwise) in the loans and credit agreements to which Megawide is a party
and the requirements under applicable laws and regulations. The declaration and payment of
dividends (except stock dividends) do not require any further approval from the shareholders.
As and if declared by the Board, dividends on the Shares shall be at a fixed rate of 7.025% per
annum (also the ―Initial Dividend Rate‖). Subject to the limitations described in this Preliminary
Prospectus, dividends on the Shares will be payable on a quarterly basis in arrears on a Dividend
Payment Date (as defined herein). Unless the Preferred Shares have not been redeemed by the
Company on the Step Up Date, the dividend rate for all following Dividend Periods following the Step
Up Date shall be the higher of (a) the Initial Dividend Rate, or (b) the sum of (i) the 15-year PDST-R2
rate, or if the 15-year PDST-R2 rate is not available or cannot be determined, the interpolated 15-year
PDST-R2 rate, or if such interpolated 15-year PDST-R2 rate is not available or cannot be determined,
any such successor rate generally accepted by the market or a self-regulatory organization, and (ii)
4.875% . (See ―Summary of the Offer‖ on page 20).
Dividends on the Shares will be cumulative. If for any reason the Issuer‘s Board does not declare a
dividend on the Shares for a Dividend Period, the Issuer will not pay a dividend on the Dividend
Payment Date for that Dividend Period. However, on any future Dividend Payment Date on which
dividends are declared, holders of the Shares as of record date of such dividends must receive the
dividends due them on such Dividend Payment Date as well as all dividends due and payable or
dividends in arrears in respect of prior Dividend Periods (―Dividends in Arrears‖) (see ―Description of
the Shares‖ on page 29).
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As and if declared by the Board, the Issuer may redeem the Preferred Shares on the fifth anniversary
of the Listing Date or on any Dividend Payment Date occurring thereafter (each an ―Optional
Redemption Date‖) (as defined in this Preliminary Prospectus) in whole (not in part), at a redemption
price equal to the Issue Price of the Preferred Shares plus all dividends due on such Optional
Redemption Date as well as all Dividends in Arrears after deduction for any tax and customary
transfer costs to effect the redemption (the ―Redemption Price‖). The Redemption Price shall be made
to holders of the Shares as of the record date set by Megawide for such redemption.
Upon listing on the PSE, Megawide may purchase the Preferred Shares at any time in the open
market or by public tender or by private contract at any price through the PSE. The Preferred Shares
so purchased may either be redeemed (pursuant to their terms and conditions as set out in the
Prospectus) and cancelled, or kept as treasury shares.
All payments in respect of the Preferred Shares are to be made free and clear of any deductions or
withholding for or on account of any present or future taxes or duties imposed by or on behalf of the
Government of the Republic of the Philippines (the ―Government‖), including but not limited to, stamp,
issue, registration, documentary, value added or any similar tax or other taxes and duties, including
interest and penalties. If such taxes or duties are imposed, the Issuer will pay additional amounts so
that holders of Preferred Shares will receive the full amount of the relevant payment which otherwise
would have been due and payable, provided, however, that the Issuer shall not be liable for (a) the
final withholding tax applicable on dividends earned on the Preferred Shares, (b) as applicable, any
income tax (whether or not subject to withholding), percentage tax (such as stock transaction tax),
and documentary stamp tax on the redemption or buy back of the Preferred Shares or on the
liquidating distributions as may be received by a holder of Preferred Shares, (c) expanded value
added tax which may be payable by any holder of the Preferred Shares on any amount to be received
from the Issuer under the Offer, (d) any withholding tax on any amount payable to any holder of
Shares or any entity which is a non-resident foreign corporation and (e) applicable taxes to any
subsequent sale or transfer of the Preferred Shares by any holder of the Preferred Shares which shall
be for the account of the said holder (or the buyer in case such buyer shall have agreed to be
responsible for the payment of such taxes). If payments become subject to additional withholding or
any new tax as a result of certain changes in law, rule or regulation, or in the interpretation thereof,
and such tax cannot be avoided by use of reasonable measures available to the Issuer, the Issuer
may redeem the Shares in whole, but not in part, on any Dividend Payment Date (having given not
more than thirty (30) nor less than sixty (60) days‘ notice) at the Redemption Price (see ―Summary of
the Offer‖ on page 20; the taxes applicable on the Preferred Shares are discussed in the section on
―Taxation‖ on page 141).
Documentary stamp tax for the primary issue of the Preferred Shares and the documentation, if any,
shall be for the Issuer‘s account.
The Shares will constitute direct and unsecured subordinated obligations of the Issuer ranking at least
pari passu in all respects and ratably without preference or priority among themselves and with all
other preferred shares issued or to be issued by the Issuer.
The Shares will be issued in scripless form. Title to the Shares shall pass by endorsement and
delivery to the transferee and registration in the registry of shareholders to be maintained by the
Registrar and Depository Agent (as defined herein). Settlement of the Shares in respect of such
transfer or change of title to the Shares, shall be similar to the transfer of title and settlement
procedures for listed securities in the PSE (see ―Summary of the Offer‖ on page 20).
Through the Offer and based on the Offer Price set forth above, the Company expects to raise gross
proceeds of approximately P4,000,000,000.00, or if the Oversubscription Option is exercised in full,
P7,000,000,000.00. The net proceeds from the Offer, estimated to be at P 3,936,695,850.00, or if the
Oversubscription Option is exercised in full, P6,896,045,850.00, determined by deducting from the
gross proceeds the SEC Registration fees, underwriting and selling fees, documentary stamp taxes
and other related fees and out-of-pocket expenses, will be used by the Company to partially finance
its capital expenditure requirements for various Private Public Partnership projects (See ―Use of
Proceeds‖ on page 47). BPI Capital Corporation (―BPI Capital‖) and Standard Chartered Bank (―SCB‖)
acting as Joint Issue Managers and Joint Bookrunners, and BDO Capital & Investment Corporation
(―BDO Capital‖), BPI Capital, First Metro Investment Corporation (―First Metro‖) and SCB as Joint
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Lead Underwriters, shall receive underwriting fees of 0.75% of the gross proceeds of the Offer,
inclusive of amounts to be paid to the Joint Lead Underwriters, Co-Lead Underwriters, Participating
Underwriters and Selling Agents.
Some of the Company‘s existing loan agreements contain covenants that restrict the declaration or
payments of dividends under certain circumstances, such as the occurrence of an event of default
under such loan agreements or if such payment would cause an event of default to occur (see
―Description of the Shares‖ on page 29).
No dealer, salesman, or any other person has been authorized to give any information or to make any
representation not contained in this Preliminary Prospectus. If given or made, any such information or
representation must not be relied upon as having been authorized by the Company, the Joint Issue
Managers or any of the Underwriters. The distribution of this Preliminary Prospectus and the offer and
sale of the Preferred Shares may, in certain jurisdictions, be restricted by law. The Company and the
Joint Issue Managers require persons into whose possession this Preliminary Prospectus comes, to
inform themselves of and observe all such restrictions. This Preliminary Prospectus does not
constitute an offer of any securities, or any offer to sell, or a solicitation of any offer to buy any
securities of the Company in any jurisdiction, to or from any person to whom it is unlawful to make
such offer in such jurisdiction.
Unless otherwise stated, the information contained in this Preliminary Prospectus has been supplied
by the Company. To the best of its knowledge and belief, the Company (which has taken all
reasonable care to ensure that such is the case) confirms that the information contained in this
Preliminary Prospectus is correct, and that there is no material statement or omission of fact which
would make any statement in this Preliminary Prospectus misleading in any material respect. The
Company hereby accepts full and sole responsibility for the accuracy of the information contained in
this Preliminary Prospectus. The Company and the Underwriters have exercised due diligence in
ascertaining that all material representations contained in the Preliminary Prospectus, its
amendments and supplements, are true and correct, and that no material information was omitted
which was necessary in order to make the statements contained in the aforementioned documents
not misleading. The Joint Issue Managers and the Underwriters confirm that they have exerted
reasonable efforts to verify the information contained herein but do not make any representation,
express or implied, as to the accuracy or completeness of the materials contained herein. The Joint
Issue Managers and the Underwriters, having made all reasonable enquiries, confirm that this
document contains all information with respect to the Issuer, the Underwriters, and the Preferred
Shares which is material in the context of the issue and offering of the Preferred Shares, that the
information contained herein is true and accurate in all material respects and is not misleading, that
the opinions and intentions expressed herein are honestly held and have been reached after
considering all relevant circumstances and are based on reasonable assumptions, that there are no
other facts, the omission of which would, in the context of the issue and offering of the Preferred
Shares, make this document as a whole or any of such information or the expression of any such
opinions or intentions misleading in any material respect and that all reasonable enquiries have been
made by the Issuer to verify the accuracy of such information. The Issuer accepts responsibility
accordingly.
Unless otherwise indicated, all information in this Preliminary Prospectus is as of November 14, 2014.
Neither the delivery of this Preliminary Prospectus nor any sale made pursuant to this Preliminary
Prospectus shall, under any circumstances, create any implication that the information contained
herein is correct as of any date subsequent to the date hereof or that there has been no change in the
affairs of the Company and its subsidiaries since such date. Market data and certain industry
forecasts used throughout this Preliminary Prospectus were obtained from internal surveys, market
research, publicly available information and industry publications. Industry publications generally state
that the information contained therein has been obtained from sources believed to be reliable, but that
the accuracy and completeness of such information is not guaranteed. Similarly, internal surveys,
industry forecasts and market research, while believed to be reliable, have not been independently
verified, and none of the Company, the Joint Issue Managers and the Underwriters make any
representation as to the accuracy of such information. Each person contemplating an investment in
the Preferred Shares should make his own independent investigation and analysis of the
creditworthiness of Megawide and his own determination of the suitability of any such investment. The
risk disclosure herein does not purport to disclose all the risks and other significant aspects of
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investing in the Shares. A person contemplating an investment in the Preferred Shares should seek
professional advice if he or she is uncertain of, or has not understood any aspect of the securities to
invest in or the nature of risks involved in trading of securities, especially those high-risk securities.
Investing in the Preferred Shares involves a higher degree of risk compared to debt instruments. For
a discussion of certain factors to be considered in respect of an investment in the Preferred Shares,
see the section entitled ―Risk Factors‖ beginning on page 37.
An application to list the Preferred Shares has been filed with the PSE but has not yet been approved.
The PSE assumes no responsibility for the correctness of any statements made or opinions
expressed in this Preliminary Prospectus. The PSE makes no representation as to its completeness
and expressly disclaims any liability whatsoever for any loss arising from reliance on the entire or any
part of this Preliminary Prospectus. The issuance of the Preferred Shares is subject to the approval of
the Board of Directors of the PSE. Such approval for issuance is permissive only and does not
constitute a recommendation or endorsement of the Preferred Shares by the PSE.
Under the SRC and its amended implementing rules, securities, such as the Preferred Shares, are
not permitted to be sold or offered for sale or distribution within the Philippines unless such securities
are approved for registration by the SEC or are otherwise exempt securities under Section 9 of the
SRC or sold pursuant to an exempt transaction under Section 10 of the SRC. For this purpose,
Megawide is in the process of securing the registration of the Preferred Shares with the SEC.
ALL REGISTRATION REQUIREMENTS HAVE BEEN MET AND ALL INFORMATION CONTAINED THEREIN IS TRUE
AND CURRENT.
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TABLE OF CONTENTS
DEFINITION OF TERMS .............................................................................................................................. 8
FORWARD LOOKING STATEMENTS ....................................................................................................... 12
EXECUTIVE SUMMARY ............................................................................................................................ 13
SUMMARY FINANCIAL INFORMATION.................................................................................................... 16
SUMMARY OF THE OFFER ...................................................................................................................... 20
DESCRIPTION OF SHARES ...................................................................................................................... 29
RISK FACTORS .......................................................................................................................................... 37
USE OF PROCEEDS.................................................................................................................................. 47
PLAN OF DISTRIBUTION .......................................................................................................................... 53
CAPITALIZATION ....................................................................................................................................... 57
DILUTION.................................................................................................................................................... 58
DETERMINATION OF THE OFFER PRICE ............................................................................................... 59
DIVIDEND POLICY ..................................................................................................................................... 60
DESCRIPTION OF BUSINESS .................................................................................................................. 61
MANAGEMENT‘S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ..................................... 89
THE PHILIPPINE CONSTRUCTION INDUSTRY..................................................................................... 102
MARKET INFORMATION ......................................................................................................................... 108
MANAGEMENT AND CERTAIN SHAREHOLDERS ................................................................................ 109
SECURITY OWNERSHIP OF CERTAIN RECORD AND BENEFICIAL SHAREHOLDERS ................... 116
REGULATORY & ENVIRONMENTAL MATTERS ................................................................................... 120
MATERIAL CONTRACTS ......................................................................................................................... 128
INTEREST OF EXPERTS AND COUNSEL ............................................................................................. 133
PHILIPPINE STOCK MARKET ................................................................................................................. 134
PHILIPPINE FOREIGN INVESTMENT, FOREIGN OWNERSHIP AND EXCHANGE CONTROLS ........ 140
PHILIPPINE TAXATION ........................................................................................................................... 141
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DEFINITION OF TERMS
Affordable Housing
Housing units with a price range of P400,000.00 to P2,000,000.00 per
unit
Altria
Altria East Land, Inc.
Applicant
A person, whether natural or juridical, who seeks to subscribe to the
Offer Shares by submitting an Application under the terms and
conditions prescribed in this Preliminary Prospectus
Application
An application to subscribe for Offer Shares pursuant to the Offer
Banking Day
A day (except Saturdays, Sundays and holidays) on which banks in
the Philippines are open for business in Metro Manila, Philippines
BIR
Bureau of Internal Revenue
Board or Board of Directors
The Board of Directors of the Company
BDO Capital
BDO Capital & Investment Corporation
BPI Capital
BPI Capital Corporation
BSP
Bangko Sentral ng Pilipinas, the central bank of the Philippines
Citicore
Citicore Holdings Investment, Inc.
CMCI
Citicore-Megawide Consortium Inc.
Company
Megawide Construction Corporation
Construction Order Book
The value of construction contracts awarded to the Company during a
specified period
Corporation Code
Batas Pambansa Blg. 68, otherwise known as ―The Corporation Code
of the Philippines‖
DENR
Department of Environment and Natural Resources
DepEd
Department of Education
Depository Agent
Philippine Depository and Trust Group
DOH
Department of Health
DOTC
Department of Transportation and Communication
DPWH
Department of Public Works and Highways
Eligible Investors
Applicants who are qualified to subscribe to the Offer Shares
FIA
Foreign Investments Act of 1991, as amended
First Metro
First Metro Investment Corporation
Formwork Systems
Temporary or permanent molds into which concrete or similar
materials are poured
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Government
The Government of the Republic of the Philippines
GMCAC
GMR-Megawide Cebu Airport Corporation, a joint venture between
Megawide (60%) and GMR (40%)
GMR
GMR Infrastructure Limited
High Technology
Systems
Building
Pre-Cast Concrete and Formwork Systems currently employed by the
Company in construction
Joint Issue Managers and
Joint Bookrunners
BPI Capital Corporation and Standard Chartered Bank
Joint Lead Underwriters
BDO Capital, BPI Capital, First Metro and SCB
Listing Date
The date on which the listing and trading of the Offer Shares on the
PSE begin, expected to be on December 3, 2014
MWCCI
Megawide World Citi Consortium, Inc., a joint venture between
Megawide and World Citi, Inc.
MCIA Project
Mactan Cebu International Airport Project
MPOC
Modernization of the Philippine Orthopedic Center
Megawide
Megawide Construction Corporation
MySpace
MySpace Properties Inc.
Offer
The offer for subscription of 40,000,000 Preferred Shares plus an
additional oversubscription option of up to 30,000,000 Preferred
Shares, if exercised, to eligible investors subject to the terms and
conditions in this Preliminary Prospectus and in the Application
Offer Period
The period commencing 9:00 a.m. on November 17, 2014 and ending
at 5:00 p.m. on November 24, 2014 within which the Eligible Investors
may subscribe to the Offer Shares
Offer Price
P 100.00
Offer Shares
40,000,000 new Preferred Shares each with a par value of P 1.00
Order Backlog
The value of the uncompleted portion of a construction contract
Oversubscription Option
Shares
Up to 30,000,000 new Preferred Shares each with a par value of
P 1.00
P or P
Philippine Pesos, the lawful currency of the Republic of the
Philippines
PCAB
Philippine Contractors Accreditation Board
P.D. No. 1746
Presidential Decree No. 1746, entitled ―Creating the Construction
Industry Authority of the Philippines‖, amending R.A. No. 4566
P/E
Price-to-Earnings, the ratio obtained by dividing a company‘s share
price by its earnings per share
PDTC
The Philippine Depository and Trust Corporation, the central
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securities depositary of, among others, securities listed and traded on
the PSE
Philippine Nationals
Pursuant to the FIA, any of the following:
(a) a citizen of the Philippines; or
(b) a domestic partnership or association wholly owned by citizens of
the Philippines; or
(c) a corporation organized under the laws of the Philippines of which
at least 60% of the capital stock outstanding and entitled to vote is
owned and held by citizens of the Philippines; or
(d) a corporation organized abroad and registered as doing business
in the Philippines under the Corporation Code of which 100% of
the capital stock outstanding and entitled to vote is wholly owned
by Filipinos; or
(e) a trustee of funds for pension or other employee retirement or
separation benefits, where the trustee is a Philippine national and
at least 60% of the fund will accrue to the benefit of the Philippine
nationals. Where a corporation and its non-Filipino stockholders
own stocks in an SEC-registered enterprise, at least 60% of the
capital stock outstanding and entitled to vote of both corporations
must be owned and held by citizens of the Philippines and at least
60% of the members of the Board of Directors of both
corporations must be citizens of the Philippines, in order that the
corporations shall be considered a Philippine national
Pursuant to SEC Memorandum Circular No. 8, Series of 2013, which
generally applies to all corporations engaged in identified areas of
activities or enterprises specifically reserved, wholly or partly, to
Philippine nationals by the Philippine Constitution, the FIA and other
existing laws, amendments thereto, and implementing rules and
regulations of said laws, for purposes of determining compliance with
the constitutional or statutory ownership requirement, the required
percentage of Filipino ownership shall be applied to both:
(i) the total number of outstanding shares of stock entitled to vote in
the election of directors; and
(ii) the total number of outstanding shares of stock, whether or not
entitled to vote in the election of directors.
PPP
Public-Private Partnership
Pre-Cast Concrete System
A construction product resulting from casting concrete in a reusable
mold which is then cured in a controlled environment, transported to
the construction site and lifted into place.
Preferred Shares
The Company‘s Preferred Shares which are subject of the Offer, each
with a par value of P 1.00
Preliminary Prospectus
This Preliminary Prospectus together with all its annexes, appendices
and amendments
Project
Any one of the following projects, as the context may require:
(a)
(b)
(c)
(d)
(e)
PSIP Phase I;
PSIP Phase II;
MPOC;
MCIA Project; and
Project for Renewable Energies.
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PSE
The Philippine Stock Exchange, Inc.
PSIP
Philippine School for Infrastructure Project of the Department of
Education
Qualified Institutional Buyer
Any of the following: mutual funds, pension or retirement funds,
commercial or universal banks, trust companies, investment houses,
insurance companies, investment companies, finance companies,
venture capital firms, government financial institutions, trust
departments of commercial or universal banks, non-bank quasi
banking institutions, Trading Participants of the PSE for their dealer
accounts, non-stock savings and loan associations, educational
assistance funds, and any other juridical persons that possesses the
following qualifications, and registered as such with SEC-accredited
registrars with the SEC under Memorandum Circular No. 6, Series of
2007:
(a) Has a minimum annual gross income of at least One Hundred
Million Pesos (P100,000,000.00) for at least two (2) years prior to
registration;
(b) Has a total portfolio investment in securities registered with the
SEC of at least Sixty Million Pesos (P60,000,000.00); and
(c) A net worth of not less than One Hundred Million
(P100,000,000.00)
R.A. No. 4566
Republic Act No. 4566 or the ―Contractor‘s License Law‖
Registrar
BDO Unibank, Inc. - Trust & Investments Group
Receiving and Paying Agent
BDO Unibank, Inc. - Trust & Investments Group
SCB
Standard Chartered Bank
SCCP
Securities Clearing Corporation of the Philippines
SEC
The Philippine Securities and Exchange Commission
Shares
Up to 70,000,000 Preferred Shares of the Company being applied for
listing with the PSE
SRC
Republic Act No. 8799, otherwise known as ―The Securities
Regulation Code‖
Trading Day
Any day on which trading is allowed in the PSE
Underwriters
BDO Capital, BPI Capital, FMIC, SCB, China Bank, RCBC Capital
and SB Capital
Underwriting Agreement
The agreement entered into by and between the Company and the
Underwriters, indicating the terms and conditions of the Offer and
providing that the Offer shall be fully underwritten by the Underwriters
VAT
Value Added Tax
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FORWARD LOOKING STATEMENTS
This Preliminary Prospectus contains forward-looking statements that are, by their nature, subject to
significant risks and uncertainties and should not in any way be confused or considered as statements
of historical fact. Some of these statements can be identified by ―forward looking terms,‖ such as
―anticipate,‖ ―believe,‖ ―can,‖ ―could,‖ ―estimate,‖ ―expect,‖ ―intend,‖ ―may,‖ ―plan,‖ ―should,‖ ―will,‖ and
―would‖ or other similar words. These words, however, are not the exclusive means of identifying
forward-looking statements. These forward-looking statements include, without limitation, statements
relating to:
(a) Known and unknown risks;
(b) Uncertainties and other factors which may cause Megawide‘s actual results, performance or
achievements to deviate significantly from any future results;
(c) Performance or achievements expressed or implied by forward-looking statements;
(d) Megawide‘s overall future business, financial condition and results of operations, including,
but not limited to, its financial position or cash flow;
(e) Megawide‘s goals for or estimated of its future operational performance of results;
(f) Megawide‘s dividend policy; and
(g) Changes in Megawide‘s regulatory environment including but not limited to, policies,
decisions and determinations of governmental or regulatory authorities.
Such forward-looking statements are based on numerous assumptions regarding Megawide‘s present
and future business strategies and the environment in which Megawide will operate in the future.
Important factors that could cause some or all of the assumptions not to occur or cause actual results,
performance or achievements to differ materially from those in the forward-looking statements
include, but are not limited to, those disclosed under ―Risk Factors‖ and ―Additional Risk Factors.‖
These forward-looking statements speak only as of the date of this Preliminary Prospectus.
Megawide, the Joint Issue Managers and Joint Bookrunners and the Joint Lead Underwriters,
expressly disclaim any obligation or undertaking to release, publicly or otherwise, any updates or
revisions to any forward-looking statement contained herein to reflect any change in Megawide‘s
expectations with regard thereto or any change in events, conditions, assumptions or circumstances
on which any statement is based. In the light of all the risks, uncertainties and assumptions
associated with forward-looking statements, investors should be aware that the forward-looking
events and circumstances discussed in this Preliminary Prospectus might not occur in the way
Megawide expects or even at all. Investors should not place undue reliance on any forward-looking
information.
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EXECUTIVE SUMMARY
The following summary is qualified in its entirety by the more detailed information, including the
Company’s financial statements and the notes relating thereto, appearing elsewhere in this
Preliminary Prospectus. Prospective purchasers of the Preferred Shares must read the entire
Preliminary Prospectus carefully, including the section on “Risk Factors” on page 37. Capitalized
terms not defined in this summary are defined in the section “Definition of Terms” on page 8.
COMPANY OVERVIEW
Megawide Construction Corporation (―Megawide‖) was registered with the Securities and Exchange
Commission (SEC) on July 28, 2004. Its primary purpose is to engage in the general construction
business. It includes constructing, enlarging, repairing, or engaging in any work upon buildings,
houses and condominium, roads, plants, bridges, piers, waterworks, railroads and other structures,
and to own, use, improve, develop real estate of all kinds. Its registered office is located at 2/F Spring
Bldg., Arnaiz Ave. cor. P. Burgos St., Pasay City. The Company also maintains an office in its own
building at No. 20 N. Domingo Street, Brgy. Valencia, Quezon City.
The Company‘s common shares were listed at the Philippine Stock Exchange on February 18, 2011
under its trading symbol ―MWIDE‖.
As of the date of this Prospectus, the authorized capital stock of the Company is P5,000,000,000.00
divided into 4,930,000,000 common shares with a par value of P1.00 per share and 70,000,000
preferred shares with a par value of P1.00 per share. As of date, 2,399,426,127 common shares are
issued and outstanding, of which 1,494,736,804 are listed.
The Company‘s management team is headed by Chairman and Chief Executive Officer, Michael C.
Cosiquien and Chief Operating Officer and President, Edgar B. Saavedra, each of whom is a licensed
civil engineer who have been practicing for more than 15 years. The Company is governed by a board
of seven (7) directors composed of Michael C. Cosiquien and Edgar B. Saavedra, Yerik C. Cosiquien,
Elizabeth Anne Uychaco, Florentino Tuazon Jr., Leonilo Coronel, and Leonor Briones, the latter two
being the independent directors.
As of June 30, 2014, the Company‘s major shareholders are Citicore, holding 56.8% of the total
issued and outstanding capital stock, PCD Nominee Corporation (Filipino) at 20.79% and Sybase
Equity Investments Corporation with 15.37%. Citicore is the holding company of Michael C. Cosiquien
and Edgar B. Saavedra while Sybase is a holding company owned by the Sy family.
The Company is one of the major players in the Philippine construction industry. It has completed
numerous low-rise to high-rise condominiums, office buildings, hotels, and casinos. The Company‘s
major clients include a variety of top and small property developers such as SM Development
Corporation, Filinvest Land, Inc., Belle Corporation, Shangri-La Properties, Rockwell Land, Suyen
Corporation, Daiichi Properties, Megaworld Corporation and Antel Land Holdings, Inc.. In the recent
years, the Company has been actively participating in the bidding for the Government‘s PPP projects.
It has been awarded 4 out of the 5 PPP projects that it participated in, namely, PSIP I, PSIP II,
MPOC, and MCIA projects.
The Company‘s other major on-going and upcoming projects include the construction of the Rockwell
Proscenium, SMDC‘s Jazz Residences, Belle Corporation‘s City of Dreams, and the Araneta Group‘s
business process outsourcing building to be located in Araneta Center, Cubao, among others. For
details of these projects, see ―Description of Business‖ on page 61 of this Preliminary Prospectus.
To support its contracts and to gear up for more projects in the upcoming years, the Company has a
12-hectare state-of-the-art Precast Concrete Manufacturing Complex in Taytay, Rizal. The facility is
fully automated and is considered to be the largest and most advanced precast plant in the country as
well as in Southeast Asia. Through this technology, Megawide will be able to realize the full potential
and inherent benefits of pre-cast concrete building solutions such as shorter construction period, cost
efficiency, increased productivity and enhanced operational capability.
13
COMPETITIVE STRENGTHS
The Company believes that its principal strengths are its: (1) value engineering through the use of
modern and advanced building technology; (2) business synergies from vertical integrations; (3)
strong brand name and proven track record; (4) organizational capability and flexibility; (5) financial
strength and ability to raise financing at competitive costs; (6) AAA and Large B contractor‘s license;
and (7) new, modern and branded fleet of building equipment. For a discussion of these strengths,
see ―Description of Business‖ on page 61 of this Preliminary Prospectus.
BUSINESS STRATEGY
The Company sees various opportunities for continued domestic construction orders not just in the
private sector such as the condominium, office, and hospitality sectors but also the public sector such
as infrastructure projects. The Company is also actively pursuing the National Government‘s initiative
in addressing and improving the infrastructure development in the country through its PrivatePartnership Projects. This includes various projects in socialized housing, construction of school
buildings, road infrastructure, hospitals, utilities such as water and power supply, and mass transport
projects. With these, the Company is keen on the following business strategies: (1) continue to
improve productivity and enhance operational efficiency in its on-going projects; (2) timely completion
and roll-out of infrastructure projects in its pipeline and actively pursue suitable PPP Projects; (3)
expand its business into infrastructure developments; (4) leverage organizational competence and
flexibility; and (5) pursue prudent and strategic investments, alliances, joint ventures and acquisitions.
For details of these strategies, see ―Description of Business‖ on page 61 of this Preliminary
Prospectus.
RISK FACTORS
Before making an investment decision, investors should carefully consider the risks associated with
an investment in the Preferred Shares. These risks include:
1. Risks relating to the Company and its business
 The Company is exposed to risks associated with the Philippine property market,
including potential construction contract cancellations.
 Significant competition in the construction industry could adversely affect the Company‘s
business.
 The Company is exposed to credit risk on its receivables from construction contracts.
 The volatility in the price of construction materials could affect the Company‘s profitability.
 The Company‘s reputation will be adversely affected if its projects are not completed on
time, or if projects do not meet customer requirements.
 The Company may be exposed to liquidity risk from delayed payments of progress
billings.
 The availability of construction materials may affect the Company‘s projects.
 The Company is reliant on its High Technology Building Systems to maintain its
competitive advantage over other contractors.
 The Company is exposed to the risk of industrial or labor disputes.
 The Company is exposed to the risk of separation of key employees.
 Injuries or damages to third parties could arise from construction accidents.
 The Company is required to obtain various licenses for its construction business.
 The MPOC and the MCIA Projects are the subject of pending petitions for certiorari with
the Supreme Court seeking to enjoin the implementation of these projects.
2. Risks relating to the Company’s Preferred Shares
 Payment of Dividends on the Preferred Shares
 Subordination to the Issuer‘s Other Indebtedness
 Insufficient Distributions upon Liquidation
 Ability to Make Payments under the Shares is Limited by Terms of Megawide‘s Other
Indebtedness
 No Stated Maturity Date and Megawide has the Sole Right to Redemption.
 Lack of Public Market for the Shares
14





Limited Liquidity
Non-payment of Dividends May Affect the Trading Price of the Preferred Shares
Inability to Reinvest at a Similar Return on Investment
No Voting Rights
Restrictions on Foreign Ownership of Megawide‘s Shares by Non-Philippine Nationals.
3. General Risks
 A slowdown in the Philippine economy could adversely affect the Company.
 Political or social instability could adversely affect the financial results of the
Company.
 Foreign Exchange Controls.
 Occurrence of Natural Catastrophes or Blackout.
CORPORATE INFORMATION
The Company‘s has its principal place of business is at 2/F Spring Building, Arnaiz Avenue corner P.
Burgos Street, Pasay City, Metro Manila but it also maintains its corporate office at No. 20 N.
Domingo St., Brgy. Valencia, Quezon City. The Company‘s finance department, headed by its Chief
Finance Officer, Mr. Oliver Tan, and Investor Relations Officer, Mr. Joseph Jalandoni, can be reached
at +632 655 1111 loc. 803. Information on the Company may be obtained at www.megawide.com.ph.
15
SUMMARY FINANCIAL INFORMATION
The selected financial information set forth in the following table has been derived from the Group’s
unaudited interim financial statements for the period ended June 30, 2014 and June 30, 2013, and the
Company’s audited financial statements for the years ended December 31, 2013 and 2012, and
should be read in conjunction with the financial statements and notes thereto contained in this
Preliminary Prospectus and the section entitled “Management’s Discussion & Analysis of Financial
Condition” on page 89 and other financial information included herein.
The financial statements of the Company for the years ended December 31, 2013 and 2012 were
audited by Punongbayan & Araullo. The summary of financial information set forth below does not
purport to project the results of operations or financial conditions of the Group for any future period or
date.
Reviewed
June 30, 2014
(Amounts in P
thousands)
ASSETS
CURRENT ASSETS
Cash and cash
equivalents
Financial assets at
fair value through
profit or loss
Trade and other
receivables - net
Construction
materials
Cost in excess of
billings on
uncompleted
contracts
Other current assets
Total Current
Assets
NON-CURRENT
ASSETS
Investment in an
associate
Property, plant and
equipment - net
Concession Rights
Deferred tax assets
Other non-current
assets
Total Non-current
Assets
TOTAL ASSETS
2014
Audited
December 31
2012
(Restated)
2013
780,116
2,276,034
209,299
4,663,839
5,824,274
2,004,223
3,745,121
4,102,937
3,433,592
413,542
339,633
67,722
2,922,884
2,244,617
1,060,186
3,562,576
1,954,825
1,125,528
16, 088,078
16,742,320
7,900,550
776,656
196,269
145,495
4,483,041
4,330,697
3,775,259
14,759,093
46,570
41,367
64,123
234,848
192,344
151,050
20,300,208
4,760,677
4,135,927
36.388,286
21,502,997
12,036,477
LIABILITIES AND
EQUITY
CURRENT
16
Reviewed
June 30, 2014
(Amounts in P
thousands)
LIABILITIES
Interest-bearing
loans and
borrowings
Trade and other
payables
Income tax payable
Advances from
customers
Billings in excess of
costs on
uncompleted
contracts
Other current
liabilities
Total Current
Liabilities
NON-CURRENT
LIABILITIES
Interest-bearing
loans and
borrowings
Post-employment
defined
benefit obligation
Other non-current
liability
Total Non-current
Liabilities
Total Liabilities
EQUITY
Equity attributable to
owners of parent co
Non-controlling
interest
Total Equity
TOTAL LIABILITIES
AND EQUITY
Audited
December 31
2014
2012
(Restated)
2013
14,958,103
2,432,444
2,075,625
3,141,566
2,024,477
1,947,558
-
-
3,701
1,039,251
987,842
693,478
0
0
1,052,986
2,317,862
1,223,314
46,215
52,613
51,438
20,238,121
7,815,238
5,995,114
5,015,839
5,032,932
1,194,444
119,951
110,367
50,856
3,450
24,683
5,135,790
5,146,749
1,269,983
25,373,911
12,961,987
7,265,097
9,080,146
8,541,010
4,771,380
1,934,229
-
-
11,014,375
8,541,010
4,771,380
36,388,286
21,502,997
12,036,477
Reviewed
June 30
(Amounts in P thousands)
2014
2013
Audited
December 31
2012
2013
(Restated)
CONTRACT REVENUES
5,055,312
4,168,372
10,880,437
8,204,810
CONTRACT COSTS
4,172,866
3,424,277
9,099,308
6,811,344
17
Reviewed
June 30
(Amounts in P thousands)
2014
2013
Audited
December 31
2012
2013
(Restated)
1,781,129
1,393,466
GROSS PROFIT
882,446
744,095
OTHER OPERATING
EXPENSES
179,374
160,479
338,338
276,177
OPERATING PROFIT
703,072
583,616
1,442,791
1,117,289
(204,476)
49,203
30,511
(124,762)
(161,595)
339,505
24,950
202,860
(421,151)
459,041
46,897
84,787
(235,064)
236,834
37,978
39,748
578,310
786,476
1,527,578
1,157,038
34,292
131,944
144,471
537,390
752,184
1,395,634
1,012,566
-
(13,119)
-
-
537,390
739,065
1,395,634
1,012,566
OTHER INCOME
(CHARGES)
Finance costs
Finance income
Others - net
PROFIT BEFORE TAX
40,920
TAX EXPENSE
NET PROFIT
OTHER COMPREHENSIVE
INCOME
NET PROFIT
The following table summarizes Megawide‘s Key Performance Indicators (KPIs) and Ratios as of and
for the six months ended June 30, 2014 and the years ended December 31, 2013 and 2012:
Reviewed
June 30
1
Current Ratio
2
Debt to Equity Ratio
3
Book Value Per Share
4
Earnings per Share
Return on Assets
Return on Equity
Gross Profit Margin
Operating Profit Margin
Audited
December 31
2014
2013
2013
0.79
0.64
5.51
0.33
1.48%
4.88%
17.46%
13.91%
2.45
0.47
4.80
0.50
3.96%
9.51%
17.85%
14.00%
2.14
0.47
5.18
1.13
6.49%
16.34%
16.37%
13.26%
2012
1.32
0.41
4.28
0.91
8.41%
21.22%
16.98%
13.62%
Notes:
(1) Current Assets / Current Liabilities
(2) Interest bearing loans and borrowings / (Stockholder’s Equity+Interest bearing loans and borrowings)
(3) Total Equity Attributable to Shareholders of the Parent Company / Issued and Outstanding Shares
(4) Net Income / Issued and Outstanding Shares
The KPIs were chosen to provide management with a measure of Megawide‘s financial strength
(Current Ratio and Debt to Equity Ratio), and profitability (Earnings per Share, Return on Assets,
Return on Equity, Gross Profit and Operating Profit Margin).
18
Top five (5) KPIs for GMCAC are Aircraft Movement, Passenger Movement, Debt to Equity Ratio,
Gross Profit Margin and Operating Profit Margin while the top five (5) KPIs for MWCCI are Annual
Admissions, Annual Outpatient Visits Movement, Debt to Equity Ratio, Gross Profit Margin and
Operating Profit Margin. The KPIs were chosen to provide Megawide‘s management with a measure
of GMCAC‘s and MWCCI‘s market strength, financial strength, and profitability.
19
SUMMARY OF THE OFFER
The following do not purport to be a complete listing of all the rights, obligations and privileges of the Preferred
Shares. Some rights, obligations or privileges may be further limited or restricted by other documents and subject
to final documentation. Prospective shareholders are enjoined to perform their own independent investigation
and analysis of the Issuer and the Preferred Shares. Each prospective shareholder must rely on its own appraisal
of the Issuer and the proposed financing and its own independent verification of the information contained herein
and any other investigation it may deem appropriate for the purpose of determining whether to participate in the
proposed financing and must not rely solely on any statement or the significance, adequacy or accuracy of any
information contained herein. The information and data contained herein are not a substitute for the prospective
shareholder’s independent evaluation and analysis.
The following overview should be read as an introduction to, and is qualified in its entirety by reference to, the
more detailed information in this Prospectus. This overview may not contain all of the information that prospective
investors should consider before deciding to invest in the Preferred Shares. Accordingly, any decision by a
prospective investor to invest in the Preferred Shares should be based on a consideration of this Prospectus as a
whole. Should there be any inconsistency between the summary below and the final documentation, the final
documentation shall prevail.
Issuer
Megawide Construction Corporation (―Megawide‖)
Offer Size
P4 billion with an oversubscription option of up to P3 billion
Instrument
Cumulative,
non-voting,
non-participating,
non-convertible,
PHPdenominated preferred shares consisting of 40,000,000 preferred shares,
and in case the oversubscription option is exercised, up to an additional
30,000,000 preferred shares (collectively, the ―Preferred Shares‖)
Joint Issue Managers
and Joint
Bookrunners
BPI Capital Corporation (―BPI Capital‖) and Standard Chartered Bank
(―SCB‖)
Joint Lead
Underwriters
BDO Capital & Investment Corporation, BPI Capital, First Metro Investment
Corporation and SCB
Syndicate of
Underwriters
A group of financial institutions to be invited by the Joint Lead Underwriters
as necessary, in consultation with the Issuer (each of the Joint Lead
Underwriters and such financial institutions, an ―Underwriter‖)
Registration and
Listing
To be registered with the Securities and Exchange Commission (―SEC‖) and
listed on The Philippine Stock Exchange, Inc. (―PSE‖) on Listing Date (as
such term is defined below), subject to compliance with SEC regulations and
PSE listing rules
Use of Proceeds
Various Public-Private Partnership (PPP) projects, development of renewable
energy projects, and bid preparation and preliminary works for PPP projects
that Megawide will bid for
Par Value
The Preferred Shares have a par value of P1.00 per share.
Issue Price
The Preferred Shares shall be offered at a price of P100.00 per share.
Dividend Rate
The Preferred Shares shall, subject to the Conditions for the
Payment of Dividends, bear cumulative non-participating
based on the Issue Price, payable quarterly in arrears
Payment Date, at the Dividend Rate per annum from Listing
will be calculated on a 30/360-day basis.
Declaration and
cash dividends
every Dividend
Date. Dividends
The term ―Dividend Rate‖ means (a) from the Listing Date up to the Step Up
Date, the Initial Dividend Rate, and (b) from the Step Up Date, the higher of
the Initial Dividend Rate and the Step Up Rate. (Please see below relevant
20
definitions.)
Initial Dividend Rate
The initial dividend rate shall be at the fixed rate of 7.025 % per annum
(―Initial Dividend Rate‖).
Dividend Rate Step
Up
If the Preferred Shares shall not have been redeemed by the Company on
the seventh anniversary of the Listing Date (―Step Up Date‖), the Initial
Dividend Rate shall be adjusted on the Step Up Date to the 15-year PDSTR2 rate, or if the 15-year PDST-R2 rate is not available or cannot be
determined, the interpolated 15-year PDST-R2 rate, or if such interpolated
15-year PDST-R2 rate is not available or cannot be determined, any such
successor rate generally accepted by the market or a self-regulatory
organization, in each case, plus 4.875% per annum (―Step Up Rate‖).
However, if the Initial Dividend Rate is higher than the Step Up Rate, there
shall be no adjustment on the Dividend Rate, and the Initial Dividend Rate
shall continue to be the Dividend Rate.
Dividend Payment
Dates
Cash dividends will be payable on March 3, June 3, September 3, and
December 3 of each year (each a ―Dividend Payment Date‖), being the last
day of each 3-month period (a ―Dividend Period‖), as and if declared by
Megawide in accordance with the terms and conditions of the Preferred
Shares. If the Dividend Payment Date is not a Banking Day, dividends will be
paid on the next succeeding Banking Day, without adjustment as to the
amount of dividends to be paid.
A ―Banking Day‖ means a day, except Saturday or Sunday or legal holidays,
in which facilities of the Philippine banking system are open and available for
clearing and the banks are open for business in Metro Manila, Philippines.
Conditions on
Declaration and
Payment of Cash
Dividends
The declaration and payment of cash dividends on each Dividend Payment
Date will be subject to the discretion of the Board of Directors, the covenants
(financial or otherwise) in the loans and credit agreements to which
Megawide is a party and the requirements under applicable laws and
regulations.
If the profits available for distribution as cash dividends are, in the opinion of
the Board of Directors, not sufficient to enable Megawide to pay in full cash
dividends on the Preferred Shares and cash dividends that are scheduled to
be paid on or before the same date on shares that have an equal right to
dividends as the Preferred Shares (―Comparable Shares‖), Megawide is
required to pay cash dividends on the Preferred Shares and any Comparable
Shares pro rata to the amount of the cash dividends scheduled to be paid to
the Preferred Shares and the Comparable Shares, respectively. For
purposes of this paragraph, the amount scheduled to be paid shall include all
dividends due on such Dividend Payment Date as well as all accumulated
dividends due and payable or dividends in arrears in respect of prior
Dividend Periods (―Dividends in Arrears‖).
The profits available for distribution are, in general and with some
adjustments pursuant to applicable laws and regulations, equal to the
accumulated, realized profits of Megawide less accumulated, realized loss.
Optional Redemption
and Purchase
As and if declared by the Board of Directors of Megawide and subject to the
requirements of applicable laws and regulations, Megawide may, at its sole
option, redeem the Preferred Shares on the fifth anniversary of the Listing
Date or on any Dividend Payment Date occurring thereafter (each an
―Optional Redemption Date‖), in whole (not in part), at a redemption price
equal to the Issue Price of the Preferred Shares plus all dividends due on
such Optional Redemption Date as well as all Dividends in Arrears
21
(―Redemption Price‖). Megawide shall give not less than thirty (30) nor more
than sixty (60) days prior written notice of its intention to redeem the
Preferred Shares, which notice shall be irrevocable and binding upon
Megawide to effect such early redemption of the Preferred Shares at the
Optional Redemption Date stated in such notice
Megawide may also redeem the Preferred Shares, in whole but not in part, at
any time if an Accounting Event or a Tax Event (each as defined below) has
occurred and is continuing, having given not less than thirty (30) nor more
than sixty (60) days‘ written notice prior to the intended date of redemption,
which notice shall be irrevocable and binding upon Megawide to effect such
redemption of the Preferred Shares at the redemption date stated in such
notice. The redemption due to an Accounting Event or a Tax Event shall be
made by Megawide at the Redemption Price, which shall be paid within five
Banking Days of the exercise of the right to redeem the Preferred Shares on
the date of redemption set out in the notice.
Upon listing on the PSE, Megawide may purchase the Preferred Shares at
any time in the open market or by public tender or by private contract at any
price through the PSE. The Preferred Shares so purchased may either be
redeemed (pursuant to their terms and conditions as set out in the
Prospectus) and cancelled, or kept as treasury shares.
No Sinking Fund
Megawide is not legally required to establish, has not established, and
currently has no plans to establish, a sinking fund for the redemption of the
Preferred Shares.
Accounting Event
An accounting event (―Accounting Event‖) shall occur if an opinion of any
reputable firm authorized to perform auditing services in the Republic of the
Philippines has stated that there is more than an insubstantial risk that the
funds raised through the issuance of the Preferred Shares may no longer be
recorded as ―equity‖ pursuant to the Philippine Financial Recording
Standards (―PFRS‖), or such other accounting standards which succeed
PFRS, as adopted by the Republic of the Philippines and applied by
Megawide for drawing up its consolidated financial statements for the
relevant financial year.
Tax Event
A tax event (―Tax Event‖) shall occur if dividend payments on the Preferred
Shares become subject to higher withholding tax or any new tax (including a
higher rate of an existing tax) as a result of certain changes in law, rule or
regulation, or in the interpretation thereof, and such tax cannot be avoided by
use of reasonable measures available to Megawide.
Taxation
All payments in respect of the Preferred Shares are to be made free and
clear of any deductions or withholding for or on account of any future taxes or
duties imposed by or on behalf of Republic of the Philippines, including but
not limited to, stamp, issue, registration, documentary, value added or any
similar tax or other taxes and duties, including interest and penalties. If such
taxes or duties are imposed, Megawide will pay additional amounts so that
holders of the Preferred Shares will receive the full amount of the relevant
payment which otherwise would have been due and payable. Provided,
however, that Megawide shall not be liable for, and the foregoing payment
undertaking of Megawide shall not apply to:
(a) the final withholding tax applicable on dividends earned on the Preferred
Shares,
(b) as applicable, any income tax (whether or not subject to withholding),
percentage tax (such as stock transaction tax) and documentary stamp
tax on the redemption of the Preferred Shares or on the liquidating
22
distributions as may be received by a holder of Preferred Shares,
(c)
any expanded value added tax which may be payable by any holder of
the Preferred Shares on any amount to be received from Megawide
under the terms and conditions of the Preferred Shares,
(d) any withholding tax on any amount payable to any holder of Preferred
Shares or any entity which is a non-resident foreign corporation, and
(e)
applicable taxes to any subsequent sale or transfer of the Preferred
Shares by any holder of the Preferred Shares which shall be for the
account of the said holder (or the buyer in case such buyer shall have
agreed to be responsible for the payment of such taxes).
Documentary stamp tax for the primary issue of the Preferred Shares and the
documentation, if any, shall be for the account of Megawide.
Form, Title and
Registration of the
Preferred Shares
The Preferred Shares will be issued in scripless form through the electronic
book-entry system of BDO Unibank, Inc. – Trust and Investment Group as
Registrar for the Offer, and lodged with Philippine Depository and Trust
Corporation as Depository Agent on Listing Date through PSE Trading
Participants respectively nominated by the applicants. For this purpose,
applicants shall indicate in the proper space provided for in the Application
Form the name of a PSE Trading Participant under whose name their shares
will be registered.
After Listing Date, shareholders may request the Registrar, through their
respective nominated PSE Trading Participants, to (a) open a scripless
registry account and have their holdings of the Preferred Shares registered
under their name, or (b) issue stock certificates evidencing their investment in
the Preferred Shares. Any expense that will be incurred in relation to such
registration or issuance shall be for the account of the requesting
shareholder.
Legal title to the Preferred Shares will be shown in an electronic register of
shareholders (―Registry of Shareholders‖) which shall be maintained by the
Registrar. The Registrar shall send a transaction confirmation advice
confirming every receipt or transfer of the Preferred Shares that is effected in
the Registry of Shareholders (at the cost of the requesting shareholder). The
Registrar shall send (at the cost of Megawide) at least once every year a
statement of account to all shareholders named in the Registry of
Shareholders, except certificated shareholders and depository participants,
confirming the number of shares held by each shareholder on record in the
Registry of Shareholders. Such statement of account shall serve as
evidence of ownership of the relevant shareholder as of the given date
thereof. Any request by shareholders for certifications, reports or other
documents from the Registrar, except as provided herein, shall be for the
account of the requesting shareholder.
Selling and Transfer
Restrictions
Initial placement and subsequent transfers of interests in the Preferred
Shares shall be subject to normal selling restrictions for listed securities as
may prevail in the Philippines from time to time.
Governing Law
The Preferred Shares will be issued pursuant to the laws of the Republic of
the Philippines.
Features of the Preferred Shares
23
Status
The Preferred Shares rank or shall rank at least pari passu in all respects
and ratably without preference of priority among themselves and with all
other preferred shares issued or to be issued by Megawide.
The obligations of Megawide in respect of the Preferred Shares are
subordinated to all indebtedness of Megawide.
The obligations of Megawide under the Preferred Shares are unsecured and
will, in the event of the winding-up of Megawide, rank junior in right of
payment to all indebtedness of Megawide and claims against Megawide
which rank or are expressed to rank senior to the Preferred Shares.
Accordingly, the obligations of Megawide under the Preferred Shares will not
be satisfied unless Megawide can satisfy in full all of its other obligations
ranking senior to the Preferred Shares.
Cumulative Dividends
There is no agreement or instrument that limits the ability of the Megawide to
issue preferred shares or other securities that rank pari passu with the
Preferred Shares.
Dividends on the Preferred Shares will be cumulative. If for any reason the
Board of Directors of Megawide does not declare a dividend on the Preferred
Shares for a Dividend Period, Megawide will not pay a dividend on the
Dividend Payment Date for that Dividend Period. However, on any future
Dividend Payment Date on which dividends are declared, holders of the
Preferred Shares shall receive the dividends due them on such Dividend
Payment Date as well as all Dividends in Arrears. Holders of the Preferred
Shares shall not be entitled to participate in any other or further dividends,
cash, property or stock, beyond the dividends specifically payable on the
Preferred Shares.
Megawide will covenant that, in the event (for any reason):
(a)
any cash dividends due with respect to any Preferred Shares then
outstanding for any period are not declared and paid in full when due,
(b)
where there remains Dividends in Arrears on the Preferred Shares, or
(c)
any other amounts payable in respect of the Preferred Shares pursuant
to the terms and conditions of the Preferred Shares, are not paid in full
when due,
then Megawide will not:
(i)
declare or pay any dividends or other distributions in respect of shares
ranking pari passu with or junior to the Preferred Shares (unless such
payment in respect of shares ranking pari passu with the Preferred
Shares shall be in accordance with ―Conditions on Declaration and
Payment of Cash Dividends‖), or
(ii)
repurchase or redeem, securities ranking pari passu with, or junior to,
the Preferred Shares (or contribute any moneys to a sinking fund for
the redemption of any securities ranking pari passu with, or junior to,
the Preferred Shares),
until any and all the amounts described in (a), (b) and (c) have been paid in
full to the holders of the Preferred Shares.
No Voting Rights
Holders of the Preferred Shares will not be entitled to vote at Megawide‘s
stockholders‘ meetings, except as otherwise provided by law.
24
Non-Participating
Holders of the Preferred Shares shall not be entitled to participate in any
other or future dividends beyond the cash dividends specifically payable on
the Preferred Shares.
Non-Convertible
Holders of the Preferred Shares shall have no right to convert the Preferred
Shares into any other preferred shares or common shares of Megawide.
No Pre-emptive
Rights
Holders of the Preferred Shares will have no pre-emptive rights to subscribe
to any shares (including, without limitation, treasury shares) that will be
issued by Megawide.
Liquidation Rights
In the event of a return of capital in respect of the liquidation, dissolution or
winding up of the affairs of Megawide but not on a redemption or purchase
by Megawide of any of its share capital, the holders of the Preferred Shares
at the time outstanding will be entitled to receive, in Philippine Pesos out of
the assets of Megawide available for distribution to shareholders, together
with the holders of any other shares of Megawide ranking, as regards
repayment of capital, pari passu with the Preferred Shares and before any
distribution of assets is made to holders of any class of shares of Megawide
ranking after the Preferred Shares as regards repayment of capital,
liquidating distributions in an amount equal to the Redemption Price as of
(and including) the date of commencement of the winding up of Megawide or
the date of any such other return of capital, as the case may be. If, upon any
return of capital in the winding up of Megawide, the amount payable with
respect to the Preferred Shares and any other shares of Megawide ranking
as to any such distribution pari passu with the Preferred Shares are not paid
in full, the holders of the Preferred Shares and of such other shares will
share proportionately in any such distribution of the assets of Megawide in
proportion to the full respective preferential amounts to which they are
entitled. After payment of the full amount of the liquidating distribution to
which they are entitled, the holders of the Preferred Shares will have no right
or claim to any of the remaining assets of Megawide and will not be entitled
to any further participation or return of capital in a winding up.
Other Terms of the Offer
Offer Period
The Offer Period shall commence at 9:00 a.m. on November 17, 2014 and
end at 5:00 p.m. on November 24, 2014. Megawide and the Joint Lead
Underwriters reserve the right to extend or terminate the Offer Period with the
approval of the SEC and the PSE.
Minimum
Subscription to the
Preferred Shares
Each Application shall be for a minimum of 500 Preferred Shares, and
thereafter, in multiples of 100Preferred Shares. No Application for multiples
of any other number of Preferred Shares will be considered.
Eligible Investors
The Preferred Shares may be owned or subscribed to by any person,
partnership, association or corporation regardless of nationality (except U.S.
Persons as defined below), provided that the Company may reject an
Application or reduce the number of Preferred Shares applied for
subscription or purchase for purposes of complying with any applicable
constitutional or statutory nationality requirement. In determining compliance
with such nationality requirement, the required percentage of Filipino
ownership shall be applied to both (a) the total number of outstanding shares
of stock entitled to vote in the election of directors, and (b) the total number
of outstanding shares of stock, whether or not entitled to vote in the election
of directors, as set out in applicable regulations.
The Offer Shares shall not be sold to persons classified as U.S. Persons
under the Foreign Account Tax Compliance Act of the United States, as this
may be amended from time to time. ―U.S. Persons‖ means any of the
25
following: (i) a U.S. citizen (including dual citizen); (ii) a U.S. resident alien
for U.S. tax purposes; (iii) a US partnership; (iv) a U.S. corporation; (v) any
U.S. estate; (v) any U.S. trust if: (y) a court within the United States is able to
exercise primary supervision over the administration of the trust; or (z) one of
more U.S. persons have the authority to control all substantial decisions of
the trust; and (vi) any other person that is not a non-US person.
Law may restrict subscription to the Preferred Shares in certain jurisdictions.
Foreign investors interested in subscribing for or purchasing the Preferred
Shares should inform themselves of the applicable legal requirements under
the laws and regulations of the countries of their nationality, residence or
domicile, and as to any relevant tax or foreign exchange control laws and
regulations affecting them personally. Foreign investors, both corporate and
individual, shall warrant that their purchase of the Preferred Shares will not
violate the laws of their jurisdiction and that they are allowed to acquire,
purchase and hold the Preferred Shares.
Procedure for
Application
Application Forms for the subscription of Preferred Shares may be obtained
from any of the Underwriters and Selling Agents. All applications shall be
evidenced by the Application Form, duly executed in each case by an
authorized signatory of the applicant and accompanied by two (2) completed
signature cards, the corresponding payment for the Preferred Shares
covered by the Application and all other required documents including
documents required for registry with the registrar and depository agent
(―Application‖). The duly executed Application Form and required documents
should be submitted to the Underwriters or Selling Agents on or prior to the
deadline for submission of Applications for Underwriters and Selling Agents,
respectively.
If the applicant is a corporation, partnership, or trust account, the Application
must be accompanied by the following documents:
a. a certified true copy of the applicant‘s latest articles of incorporation
and by-laws and other constitutive documents, each as amended to
date, duly certified by the corporate secretary (or equivalent officer);
b. a certified true copy of the applicant‘s SEC certificate of registration,
duly certified by the corporate secretary (or equivalent officer);
c.
a duly notarized corporate secretary‘s certificate setting forth the
resolution of the applicant‘s board of directors or equivalent body
authorizing (i) the purchase of the Preferred Shares indicated in the
Application, and (ii) the designated signatories for the purpose,
including their respective specimen signatures; and
d. two (2) specimen signature cards fully completed and signed by the
applicant, [and certified by the corporate secretary (or equivalent
officer),]
If the applicant is an individual, two (2) specimen signature cards duly
authenticated by the Underwriter or the Selling Agent which forwarded the
Application.
Payment for the
Preferred Shares
The Preferred Shares shall be paid for in full upon submission of the
Application. The purchase price must be paid in full in Pesos upon the
submission of the duly completed and signed Application Form and signature
26
cards together with the requisite attachments.
Payment for the Preferred Shares being subscribed for shall be made either
by: (i) personal or corporate check drawn against an account with a Bangko
Sentral ng Pilipinas (―BSP‖) authorized bank at any of its branches located in
Metro Manila, or (ii) manager‘s or cashier‘s check drawn against any of such
authorized bank at any of its branches located in Metro Manila. The check
shall be made to the order of ―Megawide Preferred Shares‖. The check must
be dated on or about (but not later than) the date of the filing of the
application and crossed ―For Payee‘s Account Only‖. Applications and the
related payments shall be received by the Receiving Agent at its offices or
other designated places during the Offer Period.
Applicants directly submitting their Application to a Joint Issue Manager,
Joint Lead Underwriter or Joint Bookrunner may also remit payment for their
Preferred Shares through the RTGS facility of the BSP to the Joint Issue
Manager, Joint Lead Underwriter or Joint Bookrunner to whom such
Application was submitted or via direct debit to their deposit account
maintained with such Joint Issue Manager, Joint Lead Underwriter or Joint
Bookrunner. Applications and the related payments shall be received at any
of the offices of the Joint Issue Managers, Joint Lead Underwriters and Joint
Bookrunners.
Cash payments shall not be accepted.
Acceptance/Rejection
of Applications
The actual number of Preferred Shares that an applicant will be allowed to
subscribe for is subject to the confirmation of the Underwriters. Megawide
through the Joint Lead Underwriters shall have sole discretion to accept or
reject, in whole or in part, or to reduce any application due to any grounds
specified in the underwriting agreement to be entered into by Megawide and
the Joint Lead Underwriters. Applications which were unpaid or where
payments were insufficient and those that do not comply with the terms of the
Offer shall be rejected. Moreover, any payment received pursuant to the
Application does not constitute as approval or acceptance by Megawide of
the Application.
An Application, when accepted, shall constitute an agreement between the
applicant and Megawide for the subscription to the Preferred Shares at the
time, in the manner and subject to terms and conditions set forth in the
Application Form and those described in the Prospectus. Notwithstanding the
acceptance of any Application by Megawide, the actual subscription by the
applicant for the Preferred Shares will become effective only upon listing of
the Preferred Shares on the PSE and upon the obligations of the
Underwriters under the issue management and underwriting agreement/s
becoming unconditional and not being suspended, terminated or cancelled,
on or before the Listing Date, in accordance with the provision of the said
agreement/s. If such conditions have not been fulfilled on or before the
periods provided above, all Application payments will be returned to the
applicants without interest.
Refunds for Rejected
Applications
In the event that the number of Preferred Shares to be allotted to an
applicant, as confirmed by an Underwriter or Selling Agent, is less than the
number covered by its Application, or if an Application is wholly or partially
rejected by Megawide, then Megawide shall refund, without interest, within
five (5) Banking Days from the end of the Offer Period, all or a portion of the
payment corresponding to the number of Preferred Shares wholly or partially
rejected. All refunds shall be made through the Underwriter or Selling Agent
with whom the applicant has filed the Application at the applicant‘s risk.
Listing Date
December 3, 2014
27
Depository Agent
Philippine Depository and Trust Corporation
Registrar
Banco de Oro Unibank, Inc. - Trust and Investments Group
Receiving and Paying
Agent
Banco de Oro Unibank, Inc. - Trust and Investments Group
Selling Agents
PSE Trading Participants
Counsel to the Issuer
Martinez Vergara Gonzalez & Serrano Law
Counsel to the Joint
Lead Underwriters
SyCip Salazar Hernandez & Gatmaitan
28
DESCRIPTION OF SHARES
Set forth below is the information relating the Preferred Shares. The description is qualified by
reference to Philippine law and the Company’s Articles of Incorporation (“Articles”) and By-Laws (“ByLaws”), both as amended, copies of which are available at the SEC, and the Application to Purchase.
THE COMPANY’S SHARE CAPITAL
A Philippine corporation may issue common or preferred shares, or such other classes of shares with
such rights, privileges or restrictions as may be provided for in its articles of incorporation and the bylaws.
The current authorized capital stock of the Company is P5,000,000,000.00 divided into 4,930,000,000
common shares with a par value of P1.00 per share and 70,000,000 preferred shares with a par value
of P1.00 per share. As of date, 2,399,426,127 common shares are issued and outstanding, of which
1,494,736,804 is listed.
Following the Offer, and assuming the Oversubscription Option is exercised in full, the Company will
have (a) 2,399,426,127 of 4,930,000,000 authorized common shares and (b) 70,000,000 of
70,000,000 authorized Non-Voting Preferred Shares, issued and outstanding. Following the Offer,
and assuming the Oversubscription Option is not exercised, the Company will have (a) 2,399,426,127
of 4,930,000,000 authorized common shares and (b) 40,000,000 of 70,000,000 authorized NonVoting Preferred Shares, issued and outstanding.
The holders of the Preferred Shares do not have identical rights and privileges with holders of the
existing common shares of the Company.
THE PREFERRED SHARES
Under the Amended Articles, the Preferred Shares have the following features, rights and privileges:









The Preferred Shares have a par value of P1.00 per share.
The issue value of the Preferred Shares shall be determined by the Board at the time of the
issuance of the shares.
The Board shall declare a dividend rate equivalent to the 7-year benchmark rate determined
by the Board as of issue date, payable on a date to be set by the Board in accordance with
Philippine laws, rules and regulations.
The Preferred Shares shall be non-convertible into common shares.
The holders of Preferred Shares shall have preference over holders of common stock in the
distribution of corporate assets in the event of dissolution and liquidation of the Company and
in the payment of the dividend at the rate specified at the time of issuance.
Preferred Shares shall be cumulative.
Preferred Shares shall be non-participating in any other or further dividends beyond that
specifically payable on the shares.
The Preferred Shares shall have no pre-emptive rights to any issue of shares, common or
preferred; and
The Preferred Shares may be redeemed by the Company at the sole option of the Board of at
the price to be determined by the Board.
Pursuant to the board resolution approved on November 13, 2014 and the authority granted to certain
signatories pursuant to the such board resolutions, and as applicable, pursuant to law, the Preferred
Shares shall have the following specific features, rights and privileges:
Issue Price
The Preferred Shares shall be offered at a price of P100.00 per share (the ―Issue Price‖).
29
Dividend Policy In Respect of the Preferred Shares
The Preferred Shares shall, subject to the conditions for the declaration and payment of dividends as
set out herein, bear cumulative non-participating cash dividends based on the Issue Price, payable
quarterly in arrears on March 3, June 3, September 3 and December 3 of each year (each a ―Dividend
Payment Date‖), being the last day of each 3-month period (a ―Dividend Period‖), at the Dividend Rate
per annum commencing from the Listing Date. Dividends will be calculated on a 30/360-day basis. If
the Dividend Payment Date is not a Banking Day, dividends will be paid on the next succeeding
Banking Day, without adjustment as to the amount of dividends to be paid.
The term ―Dividend Rate‖ means (a) from the Listing Date up to the Step Up Date, the Initial Dividend
Rate, and (b) from the Step Up Date, the higher of the Initial Dividend Rate and the Step Up Rate.
(Please see below relevant definitions.)
The initial dividend rate shall be at the fixed rate of 7.025% (―Initial Dividend Rate‖).
If the Preferred Shares shall not have been redeemed by the Company on the seventh anniversary of
the Listing Date (the ―Step Up Date‖), Initial Dividend Rate shall be adjusted on the Step Up Date to
the 15-year PDST-R2 rate, or if the 15-year PDST-R2 rate is not available or cannot be determined,
the interpolated 15-year PDST-R2 rate, or if such interpolated 15-year PDST-R2 rate is not available
or cannot be determined, any such successor rate generally accepted by the market or a selfregulatory organization, in each case, plus 4.875% per annum (the ―Step Up Rate‖).
However, if the Initial Dividend Rate is higher than the Step Up Rate, there shall be no adjustment on
the Dividend Rate, and the Initial Dividend Rate shall continue to be the Dividend Rate.
The declaration and payment of cash dividends on each Dividend Payment Rate will be subject to the
discretion of the Board of Directors, the covenants (financial or otherwise) in the loans and credit
agreements to which Issuer is a party and the requirements under applicable laws and regulations.
The Board of Directors will not declare and pay dividends on any Dividend Payment Date where
payment of the dividend would cause the Company to breach any of its financial covenants.
If the profits available for distribution as cash dividends are, in the opinion of the Board of Directors,
not sufficient to enable Issuer to pay in full cash dividends on the Preferred Shares and cash
dividends that are scheduled to be paid on or before the same date on shares that have an equal right
to dividends as the Preferred Shares (―Comparable Shares‖), the Issuer is required to pay cash
dividends on the Preferred Shares and any Comparable Shares pro rata to the amount of the cash
dividends scheduled to be paid to the Preferred Shares and the Comparable Shares, respectively. For
purposes of this paragraph, the amount scheduled to be paid shall include all dividends due on such
Dividend Payment Date as well as all accumulated dividends due and payable or dividends in arrears
in respect of prior Dividend Periods (―Dividends in Arrears‖).
The profits available for distribution are, in general and with some adjustments, equal to the Issuer‘s
accumulated, realized profits less accumulated, realized loss. In general, under Philippine law, a
corporation can only declare dividends to the extent that it has unrestricted retained earnings.
Unrestricted retained earnings represent the undistributed earnings of the corporation which have not
been allocated for any managerial, contractual or legal purposes and which are free for distribution to
the shareholders as dividends.
Dividends on the Preferred Shares will be cumulative. If for any reason the Issuer‘s Board does not
declare a dividend on the Shares for a Dividend Period, the Issuer will not pay a dividend on the
Dividend Payment Date for that Dividend Period. However, on any future Dividend Payment Date on
which dividends are declared, holders of the Shares must receive the dividends due them on such
Dividend Payment Date as well as all accumulated dividends due and payable or dividends in arrears
in respect of prior Dividend Periods (―Dividends in Arrears‖).
Holders of Preferred Shares shall not be entitled to participate in any other or further dividends
beyond the dividends specifically payable on the Preferred Shares.
30
Redemption of the Preferred Shares
As and if declared by the Board and subject to the requirements of applicable laws and regulations,
the Issuer may redeem the Preferred Shares on the fifth anniversary of the Listing Date or on any
Dividend Payment Date occurring thereafter (each, an ―Optional Redemption Date‖), in whole (not in
part) at a redemption price equal to the Issue Price plus all dividends due on such Optional
Redemption Date as well as all Dividends in Arrears (the ―Redemption Price‖). The payment of the
Redemption Price, less any tax and customary transfer costs to effect the redemption, shall be made
to holders of the Shares as of the record date set by Megawide for such redemption. Upon such
redemption, the Preferred Shares shall be considered retired and no longer issuable.
The Issuer is not legally required to establish, has not established, and currently has no plans to
establish, a sinking fund for the redemption of the Preferred Shares.
The Issuer may purchase the Preferred Shares at any time in the open market or by public tender or
by private contract at any price through the PSE. The Preferred Shares so purchased may either be
redeemed (pursuant to their terms and conditions as set out in this Preliminary Prospectus) and
cancelled or kept as treasury shares.
The Issuer shall give not less than thirty (30) nor more than sixty (60) days prior written notice of its
intention to redeem the Preferred Shares, which notice shall be irrevocable and binding upon the
Megawide to effect such redemption of the Preferred Shares at the redemption date stated in such
notice.
Early Redemption Due to Taxation
If a Tax Event occurs, the Issuer may redeem the Preferred Shares in whole, but not in part, at any
time after giving not less than thirty (30) nor more than sixty (60) days‘ written notice prior to the
intended date of redemption. The redemption shall be made by Megawide at the Redemption Price
which shall be paid within five (5) Banking Days of the exercise of the right to redeem the Preferred
Shares on the date of redemption set out in the notice, which notice shall be irrevocable and binding
upon Megawide to effect such redemption of the Preferred Shares at the redemption date stated in
such notice.
Early Redemption Due to Changes in Accounting Treatment of the Shares
If an Accounting Event occurs the Issuer may redeem the Preferred Shares in whole, but not in part,
at any time after giving not less than thirty (30) nor more than sixty (60) days‘ written notice prior to
the intended date of redemption. The redemption shall be made by Megawide at the Redemption
Price which shall be paid within five (5) Banking Days of the exercise of the right to redeem the
Preferred Shares on the date of redemption set out in the notice, which notice shall be irrevocable
and binding upon Megawide to effect such redemption of the Preferred Shares at the redemption date
stated in such notice.
An Accounting Event shall occur if an opinion of any reputable firm authorized to perform auditing
services in the Republic of the Philippines has stated that there is more than an insubstantial risk that
the funds raised through the issuance of the Preferred Shares may no longer be recorded as ―equity‖
pursuant to the Philippine Financial Recording Standards (―PFRS‖), or such other accounting
standards which succeed PFRS, as adopted by the Republic of the Philippines and applied by
Megawide for drawing up its consolidated financial statements for the relevant financial year.
In General: No Voting Rights
Holders of the Preferred Shares shall have no voting rights except as specifically provided by law.
Thus, holders of the Preferred Shares shall not be eligible, for example, to vote for or elect the
Company‘s Directors or to vote for or against the issuance of a stock dividend.
31
Holders of Preferred Shares, however, may vote on matters which the Corporation Code considers
significant corporate acts that may be implemented only with the approval of shareholders, including
those holding shares denominated as non-voting in the articles of incorporation. These matters, which
require the approval of shareholders representing at least two-thirds of the issued and outstanding
capital stock of the Company in a meeting duly called for the purpose, are as follows:

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




Amendment of the Articles (including any increase or decrease in capital stock);
Amendment of the Company‘s By-laws;
Sale, lease, exchange, mortgage, pledge or other disposition of all or a substantial part of the
Company‘s assets;
Incurring, creating or increasing bonded indebtedness;
Increase or decrease of capital stock;
Merger or consolidation of the Company with another corporation or other corporations;
Investment of corporate funds in any other corporation or business or for any purpose other
than the primary purpose for which the Company was organized; and
Dissolution of the Company.
Status
The Preferred Shares will constitute direct and unsecured subordinated obligations of the Issuer
ranking at least pari passu in all respects and ratably without preference or priority among themselves
with all other preferred shares issued or to be issued by the Issuer. The Preferred Shares rank junior
in right of payment to all indebtedness of the Issuer and claims against the Issuer which rank or are
expressed to rank senior to the Preferred Shares. Accordingly, the obligations of the Issuer under the
Preferred Shares will not be satisfied unless the Issuer can satisfy in full all of its other obligations
ranking senior to the Preferred Shares.
There is no agreement or instrument that limits or prohibits the ability of the Megawide to issue
preferred shares or other securities that rank pari passu with the Preferred Shares.
Liquidation Rights In Respect of the Preferred Shares
In the event of a return of capital in respect of the liquidation, dissolution or winding up of the affairs of
the Issuer but not on a redemption or purchase by the Issuer of any of its share capital, the holders of
the Preferred Shares at the time outstanding will be entitled to receive, in Philippine Pesos out of the
assets of the Issuer available for distribution to shareholders, together with the holders of any other
shares of the Issuer ranking, as regards repayment of capital, pari passu with the Preferred Shares
and before any distribution of assets is made to holders of any class of shares of the Issuer ranking
after the Preferred Shares as regards repayment of capital, liquidating distributions in an amount
equal to the Redemption Price as of (and including) the date of commencement of the winding up of
the Issuer or the date of any such other return of capital, as the case may be. If, upon any return of
capital in the winding up of the Issuer, the amount payable with respect to the Preferred Shares and
any other shares of the Issuer ranking as to any such distribution pari passu with the Preferred
Shares are not paid in full, the holders of the Preferred Shares and of such other shares will share
proportionately in any such distribution of the assets of the Issuer in proportion to the full respective
preferential amounts to which they are entitled. After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of the Preferred Shares will have no right or claim to
any of the remaining assets of the Issuer and will not be entitled to any further participation or return
of capital in a winding up.
Tax Payments in respect of the Preferred Shares
All payments in respect of the Preferred Shares are to be made free and clear of any deductions or
withholding for or on account of any present or future taxes or duties imposed by or on behalf of
Republic of the Philippines, including but not limited to, stamp, issue, registration, documentary, value
added or any similar tax or other taxes and duties, including interest and penalties. If such taxes or
duties are imposed, the Issuer will pay additional amounts so that holders of the Preferred Shares will
receive the full amount of the relevant payment which otherwise would have been due and payable.
Provided, however, that the Issuer shall not be liable for: (a) the final withholding tax applicable on
dividends earned on the Preferred Shares, (b) as applicable, any income tax (whether or not subject
32
to withholding), percentage tax (such as stock transaction tax) and documentary stamp tax on the
redemption or buy back of the Preferred Shares or on the liquidating distributions as may be received
by a holder of Preferred Shares, (c) expanded value added tax which may be payable by any holder
of the Preferred Shares on any amount to be received from the Issuer under the terms and conditions
of the Preferred Shares,(d) any withholding tax on any amount payable to any holder of the Share or
any entity which is a non-resident foreign corporation, and (e) applicable taxes to any subsequent
sale or transfer of the Preferred Shares by any holder of the Preferred Shares which shall be for the
account of the said holder (or the buyer in case such buyer shall have agreed to be responsible for
the payment of such taxes).
No Pre-emptive Rights
The Amended Articles currently deny pre-emptive rights to holders of Preferred Shares over all
issuances of the Company‘s shares. However, shareholders representing at least two-thirds of the
Company‘s issued and outstanding capital stock voting at a shareholders‘ meeting duly called for the
purpose may amend the Articles to grant pre-emptive rights to subscribe to a particular issue or other
disposition of shares from Megawide‘s capital. Pre-emptive rights may not extend to shares to be
issued in compliance with laws requiring stock offerings or minimum stock ownership by the public; or
to shares to be issued in good faith with the approval of the shareholders representing two-thirds of
the outstanding capital stock in exchange for property needed for corporate purposes or in payment of
a previously contracted debt.
Transfer of Shares and Share Register
The Preferred Shares will be issued in scripless form.
Legal title to the Preferred Shares will be shown in the Registry of Shareholders which shall be
maintained by the Registrar. The Registrar shall send (at the cost of the Issuer) at least once every
year a Statement of Account to all Shareholders named in the Registry of Shareholders confirming
the number of Shares held by each Shareholder on record in the Registry of Shareholders. Such
Statement of Account shall serve as evidence of ownership of the relevant Shareholder as of a given
date thereof. Any request by Shareholders for certifications, reports or other documents from the
Registrar, except as provided herein, shall be for the account of the requesting Shareholder.
Initial placement of the Preferred Shares and subsequent transfers of interests in the Preferred
Shares shall be subject to normal Philippine selling restrictions for listed securities as may prevail
from time to time.
After the Listing Date, Shareholders of the Shares may request the Registrar and Depository Agent to
issue stock certificates evidencing their investment in the Preferred Shares. Any expense that will be
incurred in relation to such issuance shall be for the account of the requesting shareholder.
Philippine law does not require transfers of the Preferred Shares to be effected on the PSE, but any
off-exchange transfers will subject the transferor to a capital gains tax that may be significantly greater
than the stock transfer tax applicable to transfers effected on an exchange. See ―Taxation‖. All
transfers of shares on the PSE must be effected through a licensed stock broker in the Philippines.
Not Convertible into Common Shares
The Preferred Shares shall not be convertible into Megawide‘s common shares.
Other Rights and Incidents Relating to the Preferred Shares
Following are other rights and incidents relating to the Preferred Shares, which may also apply to
other classes of Megawide‘s stock.
Restrictions on Ownership of Megawide’s Shares by Non-Philippine Nationals
Under the Philippine Constitution, no franchise, certificate, or any other form of authorization for the
operation of public utility shall be granted except to citizen of the Philippines or to corporations or
33
associations organized under the laws of the Philippines at least 60% of whose capital is owned by
such citizens. Accordingly, the Preferred Shares and Megawide‘s other shares may be owned or
subscribed by or transferred to any person, partnership, association or corporation regardless of
nationality, provided that it complies with the nationality requirement under the Philippine constitution
and other applicable laws. Pursuant to SEC Memorandum Circular No. 8, Series of 2013, which
generally applies to all corporations engaged in identified areas of activities or enterprises specifically
reserved, wholly or partly, to Philippine nationals by the Philippine Constitution, the FIA and other
existing laws, amendments thereto, and implementing rules and regulations of said laws, for purposes
of determining compliance with the constitutional or statutory ownership requirement, the required
percentage of Filipino ownership shall be applied to both:
(a)
(b)
the total number of outstanding shares of stock entitled to vote in the election of directors; and
the total number of outstanding shares of stock, whether or not entitled to vote in the election
of directors.
Directors
Unless otherwise provided by law or the Company‘s By-Laws, the corporate powers of the Company
are exercised, its business is conducted, and its property is controlled by the Board. Megawide has
seven (7) directors who are elected by holders of shares entitled to voting rights under the Articles
during each annual meeting of the shareholders for a term of one year. As mentioned, holders of
Preferred Shares are not entitled to vote for and elect the Company‘s directors.
Megawide‘s By-laws currently disqualify or deem ineligible for nomination or election to the Board any
person who represents an interest adverse to or in conflict with those of the Company or said person
is an officer of stockholder of a corporation engaged in the same business as that of the Company.
The Company conforms to the requirement to have at least two (2) independent directors or such
number of independent directors as may be required by law. As of the date of this Preliminary
Prospectus, the Company‘s independent directors are Leonilo G. Coronel and Leonor M. Briones.
Directors may only act collectively; individual directors have no power as such. A majority of the
directors constitutes a quorum for the transaction of corporate business and every decision of a
majority of the quorum duly assembled as a board is valid as a corporate act. Any vacancy created by
the death or resignation of a director prior to expiration of his term may be filled by the remaining
members of the Board, if still constituting a quorum. Any director elected in this manner by the Board
shall serve only for the unexpired term of the director whom he replaces. Any such vacancy may also
be filled by the shareholders entitled to vote, by ballot, at any meeting or adjourned meeting held
during such vacancy, provided that the notice of the meeting mentions such vacancy or expected
vacancy.
Appraisal Rights
Philippine law recognizes the right of a shareholder to institute, under certain circumstances,
proceedings on behalf of a corporation in a derivative action in circumstances where the corporation
itself is unable or unwilling to institute the necessary proceedings to redress wrongs committed
against the corporation or to vindicate corporate rights, as for example, where the directors
themselves are the malefactors.
In addition, the Corporation Code grants a shareholder a right of appraisal in certain circumstances
where he has dissented and voted against a proposed corporate action, including:




an amendment of the articles of incorporation which has the effect of adversely affecting the
rights attached to his shares or of authorizing preferences in any respect superior to those of
outstanding shares of any class or of extending or shortening the term of corporate existence;
the sale, lease, exchange, transfer, mortgage, pledge or other disposal of all or substantially
all the assets of the corporation;
the investment of corporate funds in another corporation or business or for any purpose other
than the primary purpose for which the corporation was organized; and
a merger or consolidation.
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In these circumstances, the dissenting shareholder may require the corporation to purchase his
shares at a fair value which, in default of agreement, is determined by three disinterested persons,
one of whom shall be named by the stockholder, one by the corporation, and the third by the two thus
chosen. The SEC will, in the event of a dispute, determine any question about whether a dissenting
shareholder is entitled to this right of appraisal. The dissenting stockholder will be paid if the corporate
action in question is implemented and the corporation has unrestricted retained earnings sufficient to
support the purchase of the shares of the dissenting shareholders.
Shareholders’ Meeting
At the annual meeting or at any special meeting of the Company‘s shareholders, the latter may be
asked to approve actions requiring shareholder approval under Philippine law.
Quorum
The Corporation Code provides that, except in instances where the assent of shareholders
representing two-thirds of the outstanding capital stock is required to approve a corporate act (usually
involving the significant corporate acts where even non-voting shares may vote, as identified above)
or where the by-laws provide otherwise, a quorum for a meeting of shareholders will exist if
shareholders representing a majority of the capital stock are present in person or by proxy.
Voting
At every meeting of the stockholders of the Company, every stockholder entitled to vote shall be
entitled to one vote for each share of stock standing in his name on the books of the Company;
provided, however, that in the case of the election of directors, every stockholder entitled to vote shall
be entitled to cumulative voting in accordance with the provision of Corporation Code. Every
stockholder entitled to vote at any meeting of the stockholders may so vote by proxy, provided that
the proxy shall have been appointed in writing by the stockholder himself, or by his duly authorized
attorney; in accordance with the existing laws, and rules and regulations of the SEC and the
Company‘s amended by-laws.
In case of election of directors, each stockholder may vote such number of shares for as many
persons as there are directors to be elected or he may cumulate said shares and give one nominee
as many votes as the number of directors to be elected multiplied by the number of his shares shall
equal, or he may distribute them on the same principle among as many nominees as he shall see fit,
provided that the whole number of votes cast by him shall not exceed the number of shares owned by
him multiplied by the whole number of directors to be elected.
Fixing Record Dates
The Board has the authority to fix in advance the record date for shareholders entitled: (a) to notice of,
to vote at, or to have their votes voted at, any shareholders‘ meeting; (b) to receive payment of
dividends or other distributions or allotment of any rights; or (c) for any lawful action or for making any
other proper determination of shareholders‘ rights. The Board may provide that the stock and transfer
book be closed for ten (10) working days immediately preceding such shareholders‘ meeting.
Issues of Shares
Subject to applicable limitations, the Company may issue additional shares to any person for
consideration deemed fair by the Board, provided that such consideration shall not be less than the
par value of the issued shares.
Change in Control
There is no provision in the Company‘s Articles of Incorporation and By-Laws, as amended, which
may delay, deter, or prevent a change in control in the Company. However, there may be provisions
in contracts to which the Company is or shall be party which may delay, deter or prevent a change in
control in the Company.
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Mandatory Tender Offers
Under the Securities Regulation Code and its implementing rules, subject to certain exceptions:

Any person or group of persons acting in concert, who intends to acquire thirty five percent
(35%) or more of equity shares in a public company shall disclose such intention and
contemporaneously make a tender offer for the percent sought to all holders of such class. In
the event that the tender offer is oversubscribed, the aggregate amount of securities to be
acquired at the close of such tender offer shall be proportionately distributed across both
selling shareholder with whom the acquirer may have been in private negotiations and
minority shareholders.

Any person or group of persons acting in concert, who intends to acquire thirty five percent
(35%) or more of equity shares in a public company in one or more transactions within a
period of twelve (12) months, shall be required to make a tender offer to all holders of such
class for the number of shares so acquired within the said period.

If any acquisition of even less than thirty five percent (35%) would result in ownership of over
fifty one percent (51%) of the total outstanding equity securities of a public company, the
acquirer shall be required to make a tender offer for all the outstanding equity securities to all
remaining stockholders of the said company at a price supported by a fairness opinion
provided by an independent financial advisor or equivalent third party. The acquirer in such a
tender offer shall be required to accept any and all securities thus tendered.
Accounting and Auditing Requirements / Rights of Inspection
Philippine stock corporations are required to file copies of their annual financial statements with the
SEC. Corporations whose shares are listed on the PSE are also required to file quarterly and annual
reports with the SEC and the PSE. Shareholders are entitled to request copies of the most recent
financial statements of the corporation which include a balance sheet as of the end of the most recent
tax year and a profit and loss statement for that year. Shareholders are also entitled to inspect and
examine the books and records that the corporation is required by law to maintain.
The Board is required to present to shareholders at every annual meeting a financial report of the
operations of the corporation for the preceding year. This report is required to include audited financial
statements.
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RISK FACTORS
An investment in the Preferred Shares, as described in this Preliminary Prospectus, involves a certain
number of risks. The price of securities can and does fluctuate, and any individual security may
experience upward or downward movements and may even become valueless. There is an inherent
risk that losses may be incurred rather than profit made, as a result of buying and selling securities.
Past performance is not a guide to future performance and there may be a large difference between
the buying price and the selling price of these securities. An investor deals in a range of investments,
each of which may carry a different level of risk.
Prior to making any investment decision, prospective investors should carefully consider all of the
information in this Preliminary Prospectus, including the risk factors described below before deciding
to invest in the Preferred Shares.
This section entitled “Risk Factors” does not purport to disclose all of the risks and other significant
aspects of investing in these securities. The occurrence of any of the events discussed below and any
additional risks and uncertainties not presently known to the Company or that are currently
considered immaterial could have a material adverse effect on the Company’s business, results of
operations, financial condition and prospects and on the Preferred Shares and the investors may lose
all or part of their investment. Prospective investors may request publicly available information on the
Preferred Shares and the Company from the SEC. Prospective investors should undertake
independent research and study the trading of these securities before commencing any trading
activity. Prospective investors should seek professional advice if he or she is uncertain of, or has not
understood any aspect of the Offer or the nature of risks involved in purchasing, holding and trading
the Preferred Shares. Each potential investor should consult its own counsel, accountant and other
advisors as to legal, tax, business, financial and related aspects of an investment in the Preferred
Shares.
The risk factors discussed in this section are separated into categories for ease of reference, and
within each category, are discussed in order of importance.
RISKS RELATING TO THE COMPANY AND ITS BUSINESS
The Company is exposed to risks associated with the Philippine property market, including
potential construction contract cancellations.
The Company currently derives a majority of its sales and operating profits from its contracting
services with Philippine property developers. Megawide‘s business is highly dependent on the ability
of these developers to market, sell and dispose of condominium units and office units to potential
customers. In the event of a weak property market, developers may hold and/or cancel construction
contracts and orders. These events would have a material adverse effect on the Company‘s business,
financial condition and results of operations.
While these risks are uncontrollable, the Company seeks to minimize the possible effects of a weak
property market by gradually diversifying into other types of projects such as infrastructure and public
utility projects that are non-cyclical in nature. The current administration‘s commitment in accelerating
the country‘s infrastructure development through its Public-Private Partnership projects posts a great
opportunity for the Company. Megawide, with its track record and technical expertise, is actively
participating in these projects, both as a contractor and as a proponent. This will enable Megawide to
diversify its customer client base and decrease revenue concentration risk.
Significant competition in the construction industry could adversely affect the Company’s
business.
The Company competes with both local and foreign firms to provide construction services in the
domestic property market. The Philippine construction industry is highly competitive, with large
companies competing aggressively in the same target market. These large companies have existing
or on-going residential condominium or commercial development projects in the Metro Manila area.
There is also a possibility of decline in market share due to the entry of new contractors. A discussion
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on the Company‘s competitors is found on the ―Description of Business‖ on page 61 of this
Preliminary Prospectus.
The Company believes, however, that it has a competitive advantage over other construction
companies due to its use of High Technology Building Systems, high quality construction equipment,
value-added engineering services, technical competence, and innovative ability. Furthermore,
Megawide‘s use of High Technology Building Systems has allowed it to price its projects
competitively. A discussion on the Company‘s use of the High Technology Building Systems is found
on page 61 of this Preliminary Prospectus.
The Company is exposed to credit risk on its receivables from construction contracts.
For on-going projects, Megawide is exposed to credit risk if project owners are unable to fully settle
the unpaid balance of receivables under construction contracts, and other claims owed to the
Company.
Credit risk is managed in accordance with the Company‘s credit risk policy, which requires the
evaluation of the creditworthiness of each project owner. The Company can also resort to enforce its
contractor‘s lien over the project with varying degrees of effectiveness. Under Article 2242 (3) of the
Civil Code of the Philippines, a contractor‘s lien is the preference accorded to the claim of a contractor
engaged in the construction, reconstruction or repair of buildings, canals or other works, with respect
to the said buildings, canals or other works when the same is the subject of claims of several creditors
and the value of such is insufficient to pay in full all the creditors. As of the date of this Preliminary
Prospectus, the Company has not had to enforce its contractor‘s lien over any of the projects.
While frequently invited to participate in biddings, the Company carefully selects which projects to
consider in line with its credit risk policies and based on the following criteria:


Credit worthiness of the project owner determined through background checks with banks
and financial community, business and trade associations, Housing and Land Use Regulatory
Board standing and major suppliers credit records; and
Liquidity of the owners determined by financial ratios and financial performances for the past
three (3) years.
In addition, the Company also evaluates each potential project based on the following:





Size of the over-all development blueprint of a project and its implementation timetable on
phases;
Complexities and limitations of the structural design of the high-rise building project;
Project location accessibility of heavy construction equipment and proximity to clusters of ongoing project sites;
Logistics difficulties and limitations; and
Profitability.
The volatility in the price of construction materials could affect the Company’s profitability.
A significant increase in construction material prices could adversely affect the Company‘s cost of
sales and other expenses. The Company may not be able to pass on any increase in construction
material costs to its customers.
While these risks are uncontrollable, the Company employs a hedging program and facilities with a
number of its suppliers to help mitigate the risk of price volatility. Steel and cement, for example,
which are historically the most price volatile materials, constitute around 70% of the Company‘s
construction cost. In order to mitigate the risk, the Company enters into fixed purchase contracts with
its suppliers, immediately upon award of contracts, which fix the unit cost of the materials. These
contracts typically range from six (6) months to one (1) year. No price escalation is charged until the
estimated quantities have been delivered within the agreed period.
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The Company’s reputation will be adversely affected if its projects are not completed on time,
or if projects do not meet customer requirements.
The Company‘s reputation will be adversely affected if any of its projects experience construction
failures, design flaws, significant project delays and quality control issues. These will make it more
difficult for the Company to obtain more projects in the future.
The Company has a proven track record with years of experience in the construction industry.
Megawide has a group of well-trained and experienced technical managers that implement measures
to maintain project progress, schedules and quality. In addition, contracts with the Company‘s
suppliers and subcontractors contain warranties for quality and requirements for timely completion.
These warranties are typically covered by a guarantee bond, surety bond or performance bond. For
details, see ―Description of Business‖ on page 61 of this Preliminary Prospectus.
The Company may be exposed to liquidity risk from delayed payments of progress billings.
The Company may encounter difficulty with cash inflows due to delayed payments of progress billings
by project owners. This, in turn, may cause project delays. The Company believes that it has a solid
financial background and has established credit lines with several financial institutions from which it is
able to easily obtain loans to finance its working capital requirements.
The availability of construction materials may affect the Company’s projects.
The lack of construction materials could affect the Company‘s ability to complete projects within the
timeframe given in its construction contracts.
The principal raw materials utilized by the Company in its projects are cement and steel, which are
both readily available in the market from a number of sources, including Dee Concrete and Steel Asia
Manufacturing Corporation. The Company also diversifies its sources of these raw materials so that it
is not dependent on one or a limited number of suppliers.
The Company is reliant on its High Technology Building Systems to maintain its competitive
advantage over other contractors.
The Company believes that it has a competitive advantage over other construction companies partly
due to its High Technology Building Systems. The use of High Technology Building Systems has
allowed it to price its projects competitively. The Company currently does not have an exclusivity
contract with any of its technology and equipment suppliers. As such, competitors may opt to and will
be able to purchase the same technology and equipment from the Company‘s suppliers.
However, although its competitors may purchase similar technology, the Company has an advantage
as it already has at least eight (8) years of experience in utilizing said High Technology Building
Systems. The Company believes, based on its experience, that new users of the High Technology
Building Systems will need time to learn and adapt to the change in construction processes.
Employees will need to be re-trained for these new methods and technologies. New users should also
have significant project volumes in order to realize a return on its investment and to bring down
construction cost.
Nonetheless, to ensure that Megawide maintains its technological advantage, the Company has
established a Research and Development Team to continuously adapt and respond to new inventions
and standards in construction and continues to implement training programs to keeps its work force
up to date with the latest innovations.
The Company is exposed to the risk of industrial or labor disputes.
The Company is exposed to the risk of industrial or labor disputes. The occurrence of such events
could have a material adverse effect on the Company‘s business, financial condition, or results of
operation.
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The Company has maintained a harmonious relationship between management and staff. Megawide
provides employee benefits and complies with labor standards. It is not unionized and there has not
been any incidence of work stoppages or labor disputes. The Company is also highly mechanized,
and is therefore not dependent on manual labor for its production and structural works.
The Company is exposed to the risk of separation of key employees.
Megawide relies on the continued employment of, and its ability to attract, qualified engineers, project
managers and technical personnel to ensure its continued success. The competition for such skilled
workforce in the construction industry is strong, as seen in aggressive head hunting of employees.
To mitigate this risk, the Company gives attractive compensation packages that consist of: (1) basic
wages; (2) allowance for project employees, depending on the position of the project employee; (3)
project completion bonus for project employees; and (4) performance bonus for project employees
occupying key positions such as project managers and assistant project managers, depending on the
position of the project employee.
The Company has also entered into employment agreements with its key employees containing a
―non-compete‖ clause, which prevents these key personnel from moving to Megawide‘s competitors.
Injuries or damages to third parties could arise from construction accidents.
Risk related to injuries or damages to third parties arising from construction accidents is inherent in
the nature of the Company‘s business. In the event of accidents during construction, third parties may
claim for damages.
The Company actively promotes and advocates the highest construction safety standards. It adopts
the European Standard on Safety Scaffoldings. Under this standard, safety scaffoldings are built in
accordance with the British Standard (BS 5973), which sets out performance requirements for
working scaffolds and permissible stress design method. The working scaffold provides a safe
workplace with safe access suitable for the work being done. The Company utilizes German
Scaffoldings such as MEVA Automatic Climbing Scaffold, Shoring Tower and other Folding Scaffolds,
which were built in accordance with BS 5973.
The Company also strictly implements wearing of proper full body protection gear in accordance with
the Zero Accident Safety Program. The program is adopted in all job sites to prevent worker injury
under a ―Zero Injury‖ or ―Accident‖ program, which means that accidents or serious injuries to workers
can be successfully prevented. Moreover, as part of the project safety program, a Safety Engineer is
assigned to each construction site to ensure employee awareness.
Nonetheless, as a matter of policy, the Company ensures that all its projects are sufficiently covered
with Contractors All Risk Insurance to cover for damages to property and third party claims for injury
and death.
The Company is required to obtain various licenses for its construction business.
The Company is required to obtain and maintain various licenses in relation to its construction
activities, which include among others, its Contractor‘s License from PCAB, environmental permits,
and building permits and licenses. The revocation or non-renewal of these permits and licenses may
have a material adverse effect on the Company‘s operations.
To avoid work stoppage or disruption, the Company ensures that it is always compliant with the
necessary permits required by various licensing authorities. For details, please refer to the section on
―Regulatory and Environmental Matters‖ on page 120 of this Preliminary Prospectus.
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The MPOC and the MCIA Projects are the subject of pending petitions for certiorari with the
Supreme Court seeking to enjoin the implementation of these projects.
Two (2) of the Company‘s projects, namely the MCIA Project and the MPOC, are subject of petitions
for certiorari filed with the Supreme Court and which seek to enjoin the implementation and/or award
of the relevant projects through the immediate issuance of temporary restraining order.
MCIA Project
On April 3, 2014, Senator Sergio Osmeña III filed a Petition for Certiorari and Prohibition with
Application for Temporary Restraining Order and/or Writ of Preliminary Injunction with the Supreme
Court seeking to enjoin the DOTC, the MCIAA and the Prequalification, Bids and Awards Committee
of the MCIA Project from issuing a Notice of Award or executing a Concession Agreement for the
MCIA Project in favor of the consortium of Megawide and GMR. A Notice of Award of the MCIA
Project was issued in favor of the consortium of Megawide and GMR on April 4, 2014. Thus, Senator
Osmeña filed a Supplemental Petition with Prayer for Supplemental Provisional Relief essentially
seeking the nullification of the Notice of Award in favor of the consortium of Megawide and GMR.
Sen. Osmeña claims that: (a) the consortium of Megawide and GMR is an ―unqualified bidder‖ in view
of: (1) conflict of interest as defined in the Instruction to Prospective Bidders issued on December 27,
2012 and the Instruction to Bidders issued on May 10, 2013 for the MCIA Project and (2) the lack of
financial and technical capability of GMR. The Supreme Court has not issued any temporary
restraining order. Subsequently, the Company and GMR filed their Comments to the Petition alleging
that (a) there is no conflict of interest and (b) the consortium of Megawide and GMR is financially and
technically capable of undertaking the MCIA Project and developing, maintaining and operating the
renovated MCIA Project.
MPOC
On the other hand, petitioners in the MPOC case wants to annul and set aside the MPOC project for
being in violation of Article II, Section 15 of the Constitution which provides that ―the State shall
protect and promote the right to health of the people and instill health consciousness among them‖.
The Company filed its Comment maintaining that (i) the MPOC project does not violate the
constitution and our treaty obligations and private investments into public health services are not
prohibited by the constitution (ii) Section 15, Article 2 of the Constitution is not a self-executory
provision and (iii) the Build Operate and Transfer law can cover health facilities and hospitals.
For a detailed discussion of these cases, please refer to the section on ―Legal Proceedings‖ on page
86 of this Preliminary Prospectus.
While the Company is confident that both Supreme Court petitions will not prosper, the Company will
be compensated in the unlikely event of an adverse decision resulting in the cancellation of the
projects. In its agreement with the DOTC and MCIAA and the DOH, the DOTC and MCIAA or the
DOH, as the case may be, will be liable for termination payments computed in accordance with a
formula set forth in the respective agreement, taking into account the stage at which the project was
terminated.
RISKS RELATING TO THE COMPANY’S PREFERRED SHARES
Payment of Dividends on the Preferred Shares
Dividends on the Preferred Shares may not be paid in full, or at all. Under the terms and conditions
governing the Preferred Shares, the Company may pay no dividends or less than full dividends on a
Dividend Payment Date. Holders of the Preferred Shares will not receive dividends on a Dividend
Payment Date or for any period during which the Issuer does not have unrestricted retained earnings
out of which the dividends will be paid.
If the profits available for distribution as cash dividends are, in the opinion of the Board of Directors,
not sufficient to enable Megawide to pay in full cash dividends on the Preferred Shares and cash
dividends that are scheduled to be paid on or before the same date on Comparable Shares,
Megawide is required to pay cash dividends on the Preferred Shares and any Comparable Shares pro
41
rata to the amount of the cash dividends scheduled to be paid to the Preferred Shares and the
Comparable Shares, respectively. For purposes of this paragraph, the amount scheduled to be paid
shall include all dividends due on such Dividend Payment Date as well as all Dividends in Arrears.
Subordination to the Issuer’s Other Indebtedness
Megawide‘s obligations in respect of the Preferred Shares are subordinated to all of the Company‘s
indebtedness, and it will not make any payments under the Preferred Shares unless it can satisfy in
full all of its other obligations that rank senior to the Preferred Shares.
Megawide‘s obligations under the Preferred Shares are unsecured and will, in the event of the
winding-up of the Company, rank junior in right of payment to all indebtedness of the Company and
junior in right of payment to securities of, or claims against, the Company which rank or are expressed
to rank senior to the Preferred Shares. Accordingly, Megawide‘s obligations under the Preferred
Shares will not be satisfied unless Megawide can satisfy in full all of its other obligations ranking
senior to the Preferred Shares.
There are no terms in the Preferred Shares that limit Megawide‘s ability to incur additional
indebtedness, including indebtedness that ranks senior to or pari passu with the Preferred Shares.
Insufficient Distributions upon Liquidation
In the event of liquidation, the Non-Voting Preferred Shares shall rank ahead of the common shares.
Upon any voluntary or involuntary dissolution, liquidation or winding up of Megawide, holders of
Preferred Shares will be entitled only to the available assets of the Company remaining after the
Company‘s indebtedness is satisfied. If any such assets are insufficient to pay the full amount due to
the holders of the Preferred Shares, then holders of Preferred Shares shall share ratably in any such
distribution of assets in proportion to the full distributions to which they would otherwise be
respectively entitled.
Ability to Make Payments under the Shares is Limited by the requirements under Applicable
Laws and the Terms of Megawide’s Other Indebtedness
Under the Corporation Code, the board of directors of a stock corporation may declare dividends out
of the unrestricted retained earnings of such corporation. The SEC has issued regulations defining the
term unrestricted retained earnings. Under such regulations, unrestricted retained earnings means the
amount of accumulated profits and gains realized out of the normal and continuous operations of the
company after deducting therefrom distributions to stockholders and transfer to capital stock or other
accounts, and which is: (1) not appropriated by its Board of Directors for corporate expansion projects
or programs; (2) not covered by a restriction for dividend declaration under a loan agreement; and (3)
not required to be retained under special circumstances obtaining in the corporation such as when
there is a need for a special reserve for probable contingencies.
In relation to item (2) of the preceding paragraph, Megawide has and will continue to have a certain
amount of outstanding indebtedness. The current terms of Megawide‘s financing agreements contain
provisions that could limit the ability of the Company to make payments on the Preferred Shares. For
example, if Megawide is in default on its payment obligations to one or more of its lenders, or if it is
non-compliant with certain covenants and such non-compliance is uncured for a period of thirty (30)
days, the Company may be prohibited from making cash payments in respect of the Preferred
Shares. Also, Megawide may in the future, directly or indirectly through its subsidiaries, enter into
other financing agreements which may restrict or prohibit the ability of the Company to make
payments on the Preferred Shares. There can be no assurance that existing or future financing
arrangements will not adversely affect Megawide‘s ability to make payments on the Preferred Shares.
Perpetual or No Stated Maturity Date and Megawide has the Sole Right to Redemption
The Preferred Shares have no fixed maturity date, and the Preferred Shares are not repayable in
cash unless the Issuer, at its sole discretion, redeems them for cash. Furthermore, holders of the
Preferred Shares have no right to require the Issuer to redeem the Preferred Shares. The Preferred
42
Shares are only redeemable at the option of the Issuer on the Optional Redemption Date, or at any
time, if an Accounting Event or Tax Event has occurred and is continuing. Accordingly, if a Preferred
Share holder wishes to obtain the cash value of the investment, the holder will have to sell the
Preferred Shares in the secondary market.
Lack of Public Market for the Shares
The Philippine securities markets are substantially less liquid and more volatile than major securities
markets in other jurisdictions, and are not as highly regulated or supervised as some of these other
markets. The Company cannot guarantee that the market for the Preferred Shares will always be
active or liquid upon commencement of their trading on the PSE. The nationality restriction on
ownership of the Preferred Shares may also restrict the trading and liquidity of the Shares.
Limited Liquidity
The Underwriters are not obligated to create a trading market for the Preferred Shares and any such
market making will be subject to the limits imposed by applicable law, and may be interrupted or
discontinued at any time without notice. Accordingly, the Company cannot predict whether an active
or liquid trading market for the Preferred Shares will develop or if such a market develops, if it can be
sustained. Consequently, a holder may be required to hold his Preferred Shares for an indefinite
period of time or sell them for an amount less than the Offer Price.
Non-payment of Dividends May Affect the Trading Price of the Preferred Shares
If dividends on the Preferred Shares are not paid in full, or at all, the Preferred Shares may trade at a
lower price than they might otherwise have traded if dividends had been paid. The sale of Preferred
Shares during such a period by a holder of Preferred Shares may result in such holder receiving lower
returns on the investment than a holder who continues to hold the Preferred Shares until dividend
payments resume. In addition, because of the dividend limitations, the market price for the Preferred
Shares may be more volatile than that of other securities that do not have these limitations.
Inability to Reinvest at a Similar Return on Investment
On the Step Up Date, or any Dividend Payment Date thereafter, or at any time redemption due to a
Tax Event occurs, Megawide may redeem the Preferred Shares for cash at the redemption price, as
described in ‗‗Description of the Shares‘‘. At the time of redemption, interest rates may be lower than
at the time of the issuance of the Preferred Shares and, consequently, the holders of the Preferred
Shares may not be able to reinvest the proceeds at a comparable rate of return or purchase securities
otherwise comparable to the Preferred Shares.
No Voting Rights
Holders of Preferred Shares will not be entitled to elect the Directors of the Company. Except as
provided by Philippine law, holders of Preferred Shares will have no voting rights (see ‗‗Description of
the Shares‘‘).
Restrictions on Ownership of Megawide’s Shares by Non-Philippine Nationals
Under Philippine law, no franchise, certificate, or any other form of authorization for the operation of
public utility shall be granted except to citizen of the Philippines or to corporations or associations
organized under the laws of the Philippines at least 60% of whose capital is owned by such citizens.
Accordingly, the Preferred Shares may be owned or subscribed by or transferred to any person,
partnership, association or corporation regardless of nationality, provided that at any time at least
60% of the Company‘s outstanding capital stock shall be owned by citizens of the Philippines or by
partnerships, associations or corporations, 60% of the voting stock or voting power, and 60% of the
total number of outstanding shares of stock, of which is owned and controlled by citizens of the
Philippines as set out in applicable regulations.
43
GENERAL RISKS
A slowdown in the Philippine economy could adversely affect the Company.
Results of operations of the Company have generally been influenced, and will continue to be
influenced by, the performance of the Philippine economy. Consequently, the Company‘s income and
results of operations depend, to a significant extent, on the performance of the Philippine economy.
The Philippine economy was adversely affected by the 1997 Asian financial crisis which caused a
significant depreciation of the Philippine peso, rise in interest rates and downgrading of the Philippine
local currency rating and the ratings outlook for the Philippine banking sector. While the Philippine
economy has recovered from this crisis and has registered respectable positive economic growth
starting 1999, it continues to be at risk from its significant budget deficit, volatile peso exchange rate
and relatively weak banking sector.
Any deterioration in economic conditions in the Philippines as a result of these or other risk factors,
may materially adversely affect the Company‘s financial condition and results of operations. There
can also be no assurance that the current or future Government will adopt economic policies
conducive to sustaining economic growth. This risk is beyond the control of the Company.
Political or social instability could adversely affect the financial results of the Company.
The Philippines has from time to time experienced political and social instability. In 2001, President
Joseph Estrada was subjected to allegations of corruption, and this led to protracted televised
impeachment proceedings against him. These proceedings were followed by widespread street
demonstrations and a public withdrawal of support for Estrada by the military that eventually forced
Estrada to resign. Following Estrada‘s removal from office, the then Vice President, Gloria
Macapagal-Arroyo, was sworn in as President on January 20, 2001.
Challenges to the legitimacy of Arroyo‘s presidency were struck down by the Supreme Court in a
unanimous decision promulgated on March 2, 2001. Nevertheless, political uncertainty plagued the
Arroyo Administration.
On July 27, 2003, over 270 military officers and soldiers conducted an unsuccessful coup d‘état
against President Arroyo due to allegations of corruption.
After the May 2004 elections, President Arroyo was re-elected and persistent accusations of
corruption and electoral fraud were made against Arroyo during her second term. On February 24,
2006, another attempted coup d‘état led President Arroyo to issue Proclamation No. 1017, which was
criticized as a virtual declaration of martial law and portions of it were later declared unconstitutional
by the Philippine Supreme Court. On November 29, 2007, Senator Antonio Trillanes IV, a leader of
the 2003 coup d‘état who was elected to the Senate while in jail, led an armed occupation by military
officers and soldiers of a luxury hotel in the Makati financial district and publicly called for President
Arroyo‘s ouster. Senator Trillanes and his troops later surrendered.
On November 23, 2009, in the southern island of Mindanao‘s Maguindanao province, approximately
100 armed men allegedly affiliated with the Ampatuan political family murdered 58 persons, including
members of the Mangudadatu family (the Ampatuans‘ political rivals in the province), lawyers,
journalists and aides accompanying them, and motorists whose vehicles were behind the
Mangudadatus‘ vehicles. This was the bloodiest incident of political violence and of violence directed
at journalists in the Philippines‘ recent history and President Arroyo sent hundreds of troops to and
declared martial law over Maguindanao after the incident.
In June 2010, Senator Benigno S. Aquino III took office as the 15th President of the Philippines, after
garnering votes of over 15 million in the country‘s first computerized elections. Jejomar S. Binay,
former Makati City Mayor, won the vice-presidential race over President Aquino‘s running mate
Senator Manuel Roxas II.
In December 2011, the House of Representatives voted to impeach then Chief Justice Renato
Corona of the Philippine Supreme Court, making him the first head of the Philippine judiciary to be
44
impeached and put on trial. The impeachment complaint accused Chief Justice Corona of improperly
issuing decisions that favored former President Arroyo, as well as failure to disclose certain
properties, in violation of rules applicable to all public employees and officials. The trial of Chief
Justice Corona was conducted from January until May 2012. On May 29, 2012, a verdict was given
by the Senate of the Philippines acting as an impeachment court, finding the former Chief Justice
guilty of impeachable acts. On August 24, 2012, President Aquino appointed the Philippines‘ first
female Chief Justice in the person of Associate Justice Maria Lourdes Sereno.
In October 2012, the Government and the Moro Islamic Liberation Front (―MILF‖), signed a
preliminary peace agreement, the Framework Agreement on the Bangsamoro, in Malacanang Palace
in Manila, designed to implement structural reform while upholding national sovereignty through the
creation of an autonomous political entity, Bangsamoro. Under the agreement, a Transition
Commission and a Bangsamoro Transition Authority will be created to draft the Bangsamoro Basic
Law and to recommend amendments to the Philippine Constitution, if necessary, and to bridge the
period between the plebiscite and the elections planned for the new Bangsamoro region in 2016,
respectively. The Bangsamoro Transition Authority is tasked to prepare for the transformation of the
region into the Bangsamoro. With a ministerial form of government, the MILF and other political forces
will be able to participate in elections through political parties. Voters shall elect political parties, and
the winning parties shall, in turn, elect the head of the Bangsamoro region. On July 14, 2013, the
Government and the MILF signed a wealth-sharing agreement that provides guidance for drafting
relevant provisions of a law expanding Muslim autonomy in the new Bangsamoro region.
In February 2013, some 235 militants arrived by boat in Lahad Datu, Sabah from Simunul Island,
Tawi-Tawi, Philippines. The militants were reportedly sent by Jamalul Kiram III, one of the claimants
to the throne of the Sultanate of Sulu, an archipelago in the southern region of the Philippines, in
order to settle and assert the unresolved territorial claim of the Philippines to eastern Sabah. In
response, Malaysian security forces surrounded the village where the group are gathered, declared
the group a terrorist group and commenced military operations. According to reports from the National
Disaster Risk Reduction Management Council, some 5,000 Filipinos have fled Sabah since the start
of this conflict. Kiram forces in Lahad Datu, reportedly 1,600 strong, killed eight members of the
Malaysian forces in an ambush on August 11. At least 36 Filipinos are on trial or have been
sentenced to life imprisonment for acts related to the conflict. Notwithstanding this, the Office of the
President of the Philippines has issued statements to the media that the relationship between the
Philippines and Malaysia remains unchanged and should remain unaffected by the conflict.
National and local elections as well as elections for the regional officials of the Autonomous Region of
Muslim Mindanao were held on May 13, 2013. While the Government acknowledged 90 violent
incidents related to the elections, including deaths, it also claimed that election-related violence had
declined compared to previous years.
On April 28, 2014, the officials of the Government and the United States of America signed the
Enhanced Defense Cooperation Agreement, shortly before the visit to the Philippines of US President
Barack Obama. The said agreement shall foster the implementation of the Philippines and US Mutual
Defense Treaty and shall allow greater US military presence in the Philippines. Activists blasted the
move and have staged various protest actions, with even some lawmakers arguing the lack of
transparency and rush in having the said agreement signed.
These political events, among others, negatively affect the economic condition in the Philippines.
There is no assurance that there will not be any future political events such as these that could
destabilize the Philippines.
Therefore, the Company‘s business, financial position, and results of operations could be materially
and adversely affected.
Foreign Exchange Controls
Currently, the Philippines has liberal foreign exchange controls. The BSP has statutory authority with
the approval of the President of the Philippines, during a foreign exchange crisis or in times of
national emergency, to:
45



suspend temporarily or restrict sales of foreign exchange;
require licensing of foreign exchange transactions; or
require the delivery of foreign exchange to the BSP or its designee banks for the issuance
and guarantee of foreign currency-denominated borrowings.
The Company acquires machinery and equipment from abroad and may need foreign currency to
make these purchases. Prospective investors cannot be assured that foreign exchange controls will
not be imposed by the Government in the future. If imposed, these restrictions could materially and
adversely affect the Company‘s ability to obtain machinery and equipment from abroad, which could
affect Megawide‘s financial condition and results of operations.
Occurrence of Natural Catastrophes or Blackouts
The Philippines has experienced a number of major natural catastrophes in recent years including
typhoons, floods, volcanic eruptions, earthquakes, mudslides, and droughts. Natural catastrophes
may disrupt the Company‘s ability to deliver its services and impair the economic conditions in the
affected areas, as well as the overall Philippine economy. The Philippines has also experienced
power outages from power generation shortages and transmission problems, and from disruptions
such as typhoons and floods. These types of events may materially disrupt and adversely affect the
Company‘s business and operations. Prospective investors cannot be assured that the insurance
coverage maintained by the Company will adequately compensate it for all damages and economic
losses resulting from natural catastrophes or blackouts, including possible business interruptions.
46
USE OF PROCEEDS
Megawide expects to raise gross proceeds amounting to approximately P4,000,000,000.00 from the
Offer. In the event that the Oversubscription Option is exercised in full, the Company expects to raise
gross proceeds from the Offer of P 7,000,000,000.00.
The following are the estimated expenses to be incurred in relation to the Offer:
Without
Oversubscription
(in P)
2,338,150
With
Oversubscription
(in P)
2,338,150
4,056,000
7,056,000
Underwriting and Selling Fees
200,000
30,000,000
350,000
52,500,000
Professional Expenses
25,710,000
40,710,000
1,000,000
1,000,000
63,304,150
103,954,150
SEC Registration Fees
PSE Processing and Listing Fees
Documentary Stamp Tax
Other related expenses*
Total Estimated Expenses
Note: Other related expenses are composed of marketing related expenses (e.g., publication fees,
investors presentations, etc.)
Megawide expects to use the net proceeds from the Offer, estimated to be P3,936,695,850.00, or P
6,896,045,850.00 assuming the Oversubscription Option is fully exercised, after deducting the above
expenses.
Net Proceeds from the Offering will be used by Megawide to partially finance its capital expenditure
(―CAPEX‖) requirements of the following projects.
Project Name
PPP Projects Awarded
Mactan-Cebu International Airport
Amount Without
Oversubscription
(in P)
Amount With
Oversubscription
(in P)
Timing of
Disbursements
984,173,962.50
985,149,407.14
Q4 2015
442,878,283.13
443,317,233.21
Q1 2015
442,878,283.13
443,317,233.21
Q1 2015
Allocated for additional equity call from
Airport Subsidiary GMCAC to cover any
shortfall in the estimated internal
accruals/retained earnings to be plowed
back as equity into the construction of
the new passenger terminal building,
Terminal 2.
Public School Infrastructure Project
Phase 2
Construction of 2,440 classrooms
spread over Region I, II, III and CAR
Modernization of Philippine
Orthopedic Center
Construction of 700-beds specialty
hospital in East Avenue, Quezon City
47
Project Name
Project Development
Development of various Renewable
Energies composed of Wind, Solar,
Hydro and Biomass totaling to
100MW
Amount Without
Oversubscription
(in P)
Amount With
Oversubscription
(in P)
Timing of
Disbursements
98,417,396.25
98,514,940.71
Q1 2015
Other Possible PPP Projects (Bid Preparation & Preliminary Works)
Bulacan Bulk Water Supply Project*
984,173,962.50
1,970,298,814.29
Construction of Water Treatment
Plants, Treated Water Reservoirs,
Pumping Station, Raw Water
Conveyance System, Interconnection
pipelines and Ancillary Facilities
Integrated Transport System
(Southwest and South Terminal)*
Q3 2016
492,086,981.25
492,574,703.57
Q3 2015
492,086,981.25
985,149,407.14
Q4 2016
N/A
985,149,407.14
Q4 2016
N/A
492,574,703.57
Q4 2016
3,936,695,850.00
6,896,045,850.00
Construction of Intermodal Transport
Terminal catering to various transport
systems such as Provincial and City
Buses, Jeepneys, Taxi and AUVs
6-Airports to be Bid Out*
In preparation for the expected tender
of 6-Airports by DOTC namely Davao,
Palawan, Iloilo, Bacolod, Bohol and
Laguindingan
Laguna Lakeshore Expressway Dike
Project*
Construction of a high standard
highway with a dike, interchanges,
floodgates, pumps and the reclamation
of 700 hectares of land.
Regional Prison Facilities*
Construction of a modern prison facility,
staff housing, administrative buildings,
areas for rehabilitation, and high
security systems that can accommodate
26,880 inmates and associated staff.
TOTAL
*These projects are part of the PPP currently to be awarded by the Government. Megawide intends to
participate in the tender for these projects and hence must already allocate funds for the same in the event of
being awarded the same.
48
A. Capital Expenditure for PPP Projects Awarded
MCIA Project
The MCIA Project was awarded to the Consortium of Megawide and GMR on April 4, 2014. It involves
the construction of new passenger terminal 2 and renovation of the old passenger terminal 1,
operation and maintenance of both terminals, construction and operation of aprons, ground handling,
daily slot management and bay allocation. The turnover of terminal 1 by MCIAA to the GMCAC was
successfully completed on November 1, 2014.
The new passenger terminal 2 will have 3-levels with a double sided pier spread over 43,398 square
meters with 6 contact gates to service 90% of international flights through boarding bridges on T2
Apron, 3-level in-line baggage screening system, 4 Baggage Carousels, 14 escalators and canopy
coverage for Airport Village, Ramps and Taxi Parking.
The Project is expected to generate revenues through a passenger service charge, aero-related
services and commercial services. The passenger service charge is the fee charged to embarking
passengers at the passenger terminals. Aero-related services provide revenues generated from the
airlines‘ usage of various services at the apron and inside the terminal. These services include
boarding bridge usage, check-in counter charges, aircraft parking fee, ground handling services, and
in-flight catering. Commercial services that generate revenues include duty free related revenues,
food and beverage operations, advertising, retail, lounges, car parking and taxi operations.
In order to finance the construction expansion, GMCAC, is in the midst of arranging its debt financing
in order to achieve financial close by mid-January 2015. In particular, GMCAC is currently negotiating
with domestic and foreign banks that constitute a large share of the banking industry as well as
multilateral financing institutions. These prospective lenders are in the final stages of their due
diligence process. The Company remains optimistic that GMCAC will succeed in achieving financial
close by mid-January 2015 due to data showing strong market fundamentals over the life of the
concession that supports the financial and operational viability of the MCIA Project.
Total equity infusion is estimated at P11.0 Billion to be funded through equity calls to the Company
and GMR as shareholders of GMCAC. The Company will use a portion of the net proceeds from the
Offer to partially fund its share of the equity.
PSIP Phase 2
The PSIP Phase 2 Project was awarded to the Company on September 16, 2013. It involves the
construction of new public school building of various types for a total of 2,440 classrooms equipped
with school furniture and toilets in accordance with the minimum specifications provided in its BuildTransfer Contract with the Department of Education. These schools are spread over Regions I, II, III
and CAR.
After completion of the construction of all the classrooms, the Company will receive remuneration
equivalent to the entire Build-Transfer contract value. The Company has mobilized its operations to
begin the construction of the classrooms.
Total Project Cost is estimated at P2.2 billion to be funded through mixed short term revolving line
facility with banks, equity and internally generated cash. The Company has already achieved financial
close by securing the required short term revolving line facilities. The Company will use a portion of
the net proceeds from the Offer to partially fund the equity requirement for this project.
MPOC
The MPOC Project was awarded to the Consortium of Megawide and World Citi last December 6,
2013 and the Company expects to commence construction by end of the year. It involves the
construction of new 700-beds super specialty tertiary hospital fully equipped with modern facilities and
equipment. The Project Site comprises an actual area of 6,714.78 square meters situated at the
National Kidney Transplant Institute Complex in Quezon City. The Build-Operate-Transfer
49
Concession is for 25 years. The Consortium of Megawide and World Citi has since incorporated
MWCCI to undertake the Project.
The Project is expected to generate revenues through in-patient orthopedic services, medical
services, hospital laboratory usage, pharmacy and supplies, training services, and commercial
concessions.
Total Project Cost is estimated at P5.6 billion to be funded through mixed debt and equity. The
Company will use a portion of the net proceeds from the Offer to partially fund its share of equity. On
October 2, 2014, MWCCI entered into an Omnibus Loan and Security Agreement with Land Bank of
the Philippines, Land Bank of the Philippines – Trust Banking Group and Development Bank of the
Philippines.
B. Project Development of Renewable Energies
The Company is currently working on the project development of four (4) potential renewable
energies (two (2) solar and two (2) biomass) with combined capacity of 80 megawatts at various
project development stages.
Project development of these potential renewable energies involves the registration / Service Contract
with Department of Energy, Project Feasibility Studies, Technical Data Gathering, detailed
engineering designs, financial modeling, procurement of government clearances, consents and
permits, procurement of power purchase agreement and Energy Regulatory Commission (―ERC‖)
approvals.
The Company estimates that post-project development cost for construction after the development
phase would require approximately P 5.8 billion to fund the capital expenditures which involve the civil
works, mechanical and electrical works for these power plant projects.
The Company will use a portion of the net proceeds from the Offer to fund the project development
costs estimated at P 100 million.
C. Bid Preparation and Preliminary Works
Bulacan Bulk Water Supply Project
The proposed project involves the design, financing, construction, operation and maintenance of a
new water treatment plants, treated water reservoirs, pumping stations, raw water conveyance
system, interconnection pipelines and ancillary facilities. This project is envisioned to supply clean
water to various water districts located in the Province of Bulacan.
The Company will use a portion of the net proceeds from the Offer to fund the bid preparation, project
feasibility studies, value engineering services, technical and planning, engineering analysis and
designs as well as fund a portion of the projected initial capital requirement of the project with total
estimated cost of P 24 billion.
Intermodal Transport System
The proposed project involves the design, financing, construction, operation and maintenance of a
new Intermodal Transport Terminals in Coastal Road, Manila and FTI Taguig. The project aims to
ease commuters coming from different provinces to the city.
The Company will use a portion of the net proceeds from the Offer to fund bid preparation, project
feasibility studies, value engineering services, technical and planning, engineering analysis and
designs as well as fund a portion of the projected initial capital outlay requirement of the project.
Privatization of 6-Airports
The proposed project involves the design, financing, construction, operation and maintenance of 6
Airports located in Davao, Palawan, Iloilo, Bacolod, Bohol and Laguindingan.
50
The Company will use a portion of the net proceeds from the Offer to fund bid preparation, project
feasibility studies, value engineering services, technical and planning, engineering analysis and
designs as well as fund a portion of the projected initial capital outlay requirement of the project.
Laguna Lakeshore Expressway Dike Project
The proposed project involves the design, financing, construction, operation and maintenance of a
high standard highway with a dike, interchanges, floodgates, pumps and the reclamation of 700
hectares of land.
The Company will use a portion of the net proceeds from the Offer to fund bid preparation, project
feasibility studies, value engineering services, technical and planning, engineering analysis and
designs as well as fund a portion of the projected initial capital outlay requirement of the project.
Regional Prison Facilities
The proposed project involves the design, financing, construction and maintenance of a modern
prison facilities, staff housing, administrative buildings, areas for rehabilitation and high security
systems that can accommodate 26,880 inmates and associated staff.
The Company will use a portion of the net proceeds from the Offer to fund bid preparation, project
feasibility studies, value engineering services, technical and planning, engineering analysis and
designs as well as fund a portion of the projected initial capital outlay requirement of the project.
In the event that the allocated proceeds from the Offer for various identified PPP projects that the
Company intends to tender are not awarded to the Company, the Company plans to re-channel
portion of these allocated proceeds to the capital expenditures requirement for the project
construction phase of the four (4) power plant projects discussed above. The capital expenditure for
these renewable energy projects, which the Company initially plan to source from internally generated
funds, would be equivalent to the bid preparation and preliminary works for the PPP projects to be
bidded out. Should the proceeds of the Offer exceed the capital expenditure requirements of the
renewable energy projects especially in the event the Over Subscription Option is exercised, the
Company may use said excess proceeds to meet subsequent GMCAC equity calls for the MCIA
Project.
While awaiting disbursements, the Company may deposit the funds in time deposits or special deposit
accounts and/or invest the same in Philippine government Peso-denominated securities. The
Company will not use any portion of the proceeds to discharge any debt nor to reimburse any of its
officers, directors, employees or shareholders for services rendered, asset previously transferred, or
money loaned or advanced. Other than the fees relating to the underwriting and issue management of
the Company, the Company will not use the proceeds to pay any financial obligations with the
Underwriter and its affiliates.
The foregoing discussion represents a best estimate of the use of proceeds of the Offer based on the
Company‘s current plans and anticipated expenditures. In the event that there is any change in the
Company‘s development plan, including force majeure and circumstances, such as (1) failure to
obtain requisite approvals, and (2) changes in government policies that would render any of the above
plans not commercially viable, the Company will carefully evaluate the situation and may reallocate
the proceeds for future investments and/or hold such funds on short term deposit whichever is better
for the Company‘s and its shareholders‘ interest taken as a whole. In such event, the Company will
issue a public disclosure if there is any change in the above proposed use of proceeds and shall
accordingly inform the SEC, the PSE and its shareholders at least thirty (30) days prior to its
implementation.
In the event that the actual expenses are more than the estimates, or the actual net proceeds are less
than the projected net proceeds, the Company will utilize said net proceeds based on their order of
priority and will use internally generated funds and bank loans to finance the shortfall, or delay or
abandon one or more of the components of its plans. In such an event, the Company shall inform the
SEC, the PSE and its shareholders at least thirty (30) days prior to its implementation.
51
In the event of any significant deviation, material adjustment or reallocation in the planned use of
proceeds, the Company will secure the approval of its Board of Directors for such deviation,
adjustment or reallocation and promptly make the appropriate disclosures to the SEC and the PSE.
The Company shall regularly disclose to the PSE, through the PSE Electronic Disclosure Generation
Technology (―PSE EDGE‖), any disbursements from the proceeds generated from the Offer. In
addition, the Company shall likewise submit via the PSE EDGE the following disclosure to ensure
transparency in the use of proceeds:
a. Any disbursements made in connection with the planned use of proceeds from the Offer;
b. Quarterly Progress Report on the application of the proceeds from the Offer on or before the
first fifteen (15) days of the following quarter;
c. Annual Summary of the application of proceeds on or before January 31 of the year following
the initial public offering;
d. Approval by the Company‘s Board of Directors of any reallocation on the planned use of
proceeds, or of any change in the work program. The actual disbursement or implementation
of such reallocation will be disclosed by the Company at least thirty (30) days prior to the said
actual disbursement or implementation;
e. Certification by the Company‘s Chief Financial Officer or Treasurer and of an external auditor
on the accuracy of the information reported by the Company to the PSE in the quarterly and
annual reports; and
f. A comprehensive report on the progress of its business plan on or before the first fifteen (15)
days of the following quarter.
52
PLAN OF DISTRIBUTION
THE OFFER
The offer by the Company of the Preferred Shares is purely domestic and will not include an
international offering. BDO Capital, BPI Capital, First Metro and SCB have been appointed by the
Company to act as Joint Lead Underwriters for the Offer. The Company plans to issue the Preferred
Shares through the Joint Lead Underwriters, namely, BDO Capital, BPI Capital, First Metro and SCB.
The Trading Participants, who are member-brokers of the PSE, shall act as Selling Agents for the
Offer, pursuant to the PSE‘s rules and regulations.
However, there can be no assurance in respect of: (i) whether Megawide would issue such equity
securities at all; (ii) the size or timing of any individual issuance or the total issuance of such equity
securities; or (iii) the specific terms and conditions of such issuance. Any decision by Megawide to
offer such equity securities will depend on a number of factors at the relevant time, many of which are
not within Megawide‘s control, including but not limited to: prevailing interest rates, the financing
requirements of Megawide‘s business and prospects, market liquidity and the state of the domestic
capital market, and the Philippine, regional and global economies in general.
OBLIGATIONS OF THE UNDERWRITERS AND SELLING AGENTS
In accordance with the Underwriting Agreement to be entered into with Megawide, BDO Capital, BPI
Capital, First Metro and SCB (the ―Joint Lead Underwriters‖) have agreed to underwrite 40,000,000 of
Preferred Shares at the Offer Price on a firm basis, and to distribute and sell the Preferred Shares in
the Offer, subject to the satisfaction of certain conditions, in consideration for certain fees and
expenses.
Each of the Joint Lead Underwriters has committed to underwrite the Offer up to the amount indicated
below (in P, actual amounts):
BDO Capital
BPI Capital
SCB
First Metro
Total
1,000,000,000.00
1,000,000,000.00
1,000,000,000.00
1,000,000,000.00
4,000,000,000.00
BDO Capital is a wholly-owned investment-banking subsidiary of BDO Unibank Inc. BDO Capital is a
full-service investment house primarily involved in securities underwriting, loan syndication, financial
advisory, private placement of debt and equity, project finance, and direct equity investment.
Incorporated in December 2008, BDO Capital commenced operations in March 1999.
BPI Capital is a wholly-owned subsidiary of Bank of Philippine Islands. BPI Capital is an investment
house focused on corporate finance and securities distribution business. It began operations in
December 1994. BPI Capital has an investment house license.
Founded in 1972, First Metro Investment Corporation is a leading investment bank in the country with
over 40 years of service in the development of the Philippine capital markets. It is the investment
banking arm of the Metrobank Group, one of the largest financial conglomerates in the country. It
provides high-quality investment banking and financial services through its strategic business units –
Investment Banking, Financial Markets, Investment Advisory and Trust. With assets of around P83
billion as of December 31, 2013, it is the largest investment bank in the country today. First Metro
has been ranked among the Top 11 Philippine Companies and among the Best ASEAN 100
Companies based on Relative Wealth Added Index by New York-based management consulting firm,
Stern Stewart & Co. In 2009, 2011 and 2013, First Metro was awarded the Best Bond House in the
Philippines by Finance Asia. In the last five years, First Metro was also awarded the Best Bond House
by The Asset Magazine of Hong Kong. In 2012, it was recognized by Finance Asia as the Best Equity
House in the Philippines. In 2013, it was awarded as one of the Top 10 Best Managed Companies
and Top 10 Best Investor Relations by Finance Asia.
53
Standard Chartered Bank is a banking corporation duly organized and incorporated in England with
limited liability by Royal Charter in 1853, and licensed to act as a banking institution under and by
virtue of the laws of the Republic of the Philippines through its branch office, with principal offices in
Makati City. It has operated for over 150 years in some of the world's most dynamic markets and
earns more than 90 percent of its profits in Asia, Africa and the Middle East. Operating in the
Philippines since 1872, Standard Chartered is a universal bank and is the longest established foreign
bank in the country. The principal banking products include deposits, lending and related services,
treasury and capital market operations, trade services, payments and cash management, credit
cards, and custodial services. The bank also provides capital raising solutions such as local currency
and G3 currency fixed income and loan syndications.
Participating Underwriters
China Bank is one of the largest commercial banks in the Philippines in terms of assets and capital.
Commencing operations on August 16, 1920, it is the first privately owned local commercial bank in
the Philippines. It provides a wide range of banking services including investment banking, lending,
treasury and foreign exchange trading, trust and investment management, wealth management,
insurance and remittance.
RCBC Capital is a licensed investment house providing a complete range of capital raising and
financial advisory services. Established in 1974, RCBC Capital has over 40 years of experience in the
underwriting of equity, quasi-equity and debt securities, as well as in managing and arranging the
syndication of loans, and in financial advisory. RCBC Capital is a wholly-owned subsidiary of the Rizal
Commercial Banking Corporation and a part of the Yuchengco Group of Companies, one of the
country‘s largest fully integrated financial services conglomerates.
SB Capital is a Philippine corporation organized in October 1995 as a wholly-owned subsidiary of
Security Bank Corporation. It obtained its license to operate as an investment house in 1996 and is
licensed by the SEC to engage in underwriting and distribution of securities to the public. SB Capital
provides a wide range of investment banking services including financial advisory, underwriting of
equity and debt securities, project finance, privatizations, mergers and acquisitions, loan syndications
and corporate advisory services.
Prior approval from the SEC is required to effect a termination of the Underwriting Agreement.
The Underwriters may enter into other sub-underwriting agreements with other underwriters who may
want to participate in the issuance. There is no agreement for any of the Underwriters to put back to
Megawide any unsold Preferred Shares.
The Company further grants the Joint Lead Underwriters an option, exercisable within the Offer
Period, to subscribe, on a firm basis, up to an additional 30,000,000 Preferred Shares, on the same
terms and conditions set forth in this Preliminary Prospectus, solely to cover oversubscriptions, if any.
In the event the Oversubscription Option is not exercised, it is deemed cancelled and the filing fee for
that over-subscription is forfeited.
The Underwriters are duly licensed by the SEC to engage in the underwriting or distribution of the
Preferred Shares. The Underwriters may, from time to time, engage in transactions with and perform
services in the ordinary course of its business for the Company or other members of the Megawide
Group.
The Underwriters have no direct relations with Megawide in terms of ownership by either of their
respective major stockholder/s.
The Underwriters do not have a contract or other arrangement with the Company under which any of
the Underwriters may put back to the Company any unsold securities of the Offer. The Underwriters
do not have any direct or indirect interest in the Company or in any securities thereof including
options, warrants or rights thereto. The Underwriters do not have any right to designate or nominate
any member of the Company‘s Board.
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SALE AND DISTRIBUTION
The distribution and sale of the Preferred Shares shall be undertaken by the Underwriters who shall
sell and distribute the Preferred Shares to third party buyers/investors. The Underwriters are
authorized to organize a syndicate of sub-underwriters, soliciting dealers and/or agents for the
purpose of the Offer. Of the 40,000,000 Preferred Shares to be offered, 80% or 32,000,000 shares
are being offered through the Underwriters for subscription and sale to Qualified Institutional Buyers
and the general public. The Company plans to make available 20% or 8,000,000 shares for
distribution to the respective clients of the 133 Trading Participants of the PSE, acting as Selling
Agents. Each Trading Participant shall be allocated 60,100 shares (computed by dividing the
Preferred Shares allocated to the Trading Participants by 133), subject to reallocation as may be
determined by the Receiving Agent. The balance of 8,000,000 shares shall be allocated by the PSE
among the Trading Participants. Trading Participants may undertake to purchase more than their
allocation of 60,100 shares. Any requests for shares in excess of 8,000,000 shares may be satisfied
via the reallocation of any Preferred Shares not taken up by other Trading Participants.
The Company will not allocate any Preferred Shares for the Local Small Investors. As defined in the
PSE Revised Listing Rules, a Local Small Investor is a share subscriber whose subscription does not
exceed P25,000.00. The Offer will have a minimum subscription amount of P50,000.00, which is
beyond the prescribed maximum subscription amount for Local Small Investors.
Prior to the close of the Offer Period, any Preferred Shares not taken up by the Trading Participants
shall be distributed by the Underwriters directly to their clients and the general public.
All Preferred Shares not taken up by the Trading Participants, general public and the Underwriters‘
clients shall be purchased by the Underwriters pursuant to the terms and conditions of the
Underwriting Agreement. Nothing herein or in the Underwriting Agreement shall limit the rights of the
Underwriters from purchasing the Preferred Shares for their own respective accounts.
The obligations of each of the Underwriters will be several, and not joint and solidary, and nothing in
the Underwriting Agreement shall be deemed to create a partnership or joint venture between and
among any of the Underwriters. Unless otherwise expressly provided in the Underwriting Agreement,
the failure by any Underwriter to carry out its obligations thereunder shall not relieve any other
Underwriter of its obligations thereunder, nor shall any Underwriter be responsible for the obligations
of any other Underwriter thereunder.
TERM OF APPOINTMENT
The engagement of the Underwriters shall subsist so long as the SEC‘s permit to sell the Preferred
Shares remains valid, unless otherwise terminated by the Company and the Underwriters.
The underwriting and selling fees to be paid by the Company to the Joint Lead Underwriters in
relation to the Offer shall be equivalent to 0.75% of the gross proceeds of the Offer. This shall be
inclusive of underwriting fees to be paid to the Joint Lead Underwriters, Co-Lead Underwriters and
Participating Underwriters, if any, and selling commissions to be paid to the Trading Participants,
which selling commissions shall be equivalent to 0.20% of the total proceeds from the sale of the
Preferred Shares by such Trading Participant.
The Underwriting Agreement may be terminated by the Underwriters prior to payment being made to
the Company of the net proceeds of the Preferred Shares under certain circumstances such as (a) a
cancellation order from a Government authority, (b) a change or an impending change of law that
would materially and adversely affect Megawide‘s profitability or (c) financial, political or economic
conditions in the Philippines which would materially and adversely affect the Offer.
MANNER OF DISTRIBUTION
The Underwriters shall, at their discretion, determine the manner by which proposals for subscriptions
to, and issuances of, Preferred Shares shall be solicited, with the primary sale of the Preferred Shares
to be effected only through the Underwriters and Selling Agents.
55
OFFER PERIOD
The Offer Period shall commence at 9:00 a.m. on November 17, 2014 and end at 5:00 p.m. on
November 24, 2014. The Company and the Underwriters reserve the right to extend or terminate the
Offer Period with the approval of the SEC and the PSE.
56
CAPITALIZATION
The following table sets out the unaudited consolidated long-term debt and capitalization of the Group
as of June 30, 2014 and as adjusted to give effect to the issuance of the Preferred Shares. This table
should be read in conjunction with Group‘s unaudited interim condensed consolidated financial
statements and the related notes thereto as of and for the period ended June 30, 2014 attached to
this Preliminary Prospectus.
(Amounts in P thousands)
LIABILITIES AND EQUITY
Liabilities - net of issuance
costs
Interest-bearing loans and
borrowings - current portion
Interest-bearing loans and
borrowings - long term debt
Total Interest-bearing loans
and borrowings
Actual
As of June 30, 2014
Assuming P4
Assuming P7 billion
billion Offer
Offer
14,958,103
14,958,103
14,958,103
5,015,839
5,015,839
5,015,839
19,973,942
19,973,942
19,973,942
Common stock
1,649,426
1,649,426
1,649,426
Preferred shares
Additional paid-in capital
Revaluation reserve
4,207,276
(36,065)
40,000
8,167,276
(36,065)
70,000
11,137,276
(36,065)
3,259,509
3,259,509
3,259,509
Total Equity
1,934,229
11,014,375
1,934,229
15,014,375
1,934,229
18,014,375
Total Capitalization
30,988,317
34,988,317
37,988,317
EQUITY
Retained earnings
Non Controlling Interest
57
DILUTION
The Company is offering to the public 40,000,000 Preferred Shares, with an Oversubscription Option
of up to an additional 30,000,000 Preferred Shares with a par value of P1.00 per share to be issued
from unissued Non-Voting Preferred Share Capital. The issuance of the Preferred Shares will not
have any dilutive effect on the earnings per common share (EPS) of the Company, since the
Preferred Shares are not convertible to common shares. Therefore, the outstanding number of
common shares that will be used in computing the EPS will not change.
On September 22, 2014, the SEC approved the amendment to the Seventh Article of the Company‘s
Amended Articles of Incorporation to increase Megawide‘s authorized capital stock from
P2,000,000,000 and the creation of 70,000,000 Preferred Shares. Megawide‘s current authorized
capital structure is P 5,000,000,000.00 divided into 4,930,000,000 common shares with a par value of
P 1.00 per share and 70,000,000 preferred shares with a par value of P1.00 per share. The issuance
and offering of the Preferred Shares will enable the Company to comply with the capital requirements
for construction projects and will fund the Company‘s capital expenditures.
The terms, conditions and dividends for preferred shares are declared upon the sole discretion of the
Megawide‘s Board.
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DETERMINATION OF THE OFFER PRICE
The Offer Price of P 100.00 is at a premium to the Preferred Shares‘ par value per share of P 1.00.
The Offer Price was arrived at by dividing the desired gross proceeds of approximately P 4 billion (or
up to P 7 billion in the event that the Oversubscription Option is exercised in full) by the target amount
of Preferred Shares allocated for the Offer. Factors considered in the determination of the offer
included offer prices of other comparable transactions, marketability to investors and the number of
preferred shares that the Company can issue out of its authorized capital stock, among others.
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DIVIDEND POLICY
On June 26, 2013, the Board of Directors adopted a dividend policy of declaring annual cash
dividends equivalent to 20% of the prior year income, subject to contractual obligations. The
Company has entered into loan agreements restricting its ability to declare dividends unless certain
conditions such as all debt obligations are current and updated, availability of retained earnings while
maintaining debt to equity ratios and debt service cover ratios after dividend payment, are met. As of
date, the Company‘s subsidiaries, many of which are new established and not yet income generating,
do not as of yet have any dividend policy formulated or approved. The Company intends to cause
these subsidiaries to adopt the appropriate dividend policies that subject to capital requirements and
other existing covenants/restriction with its creditors, it is intended each subsidiary shall regularly
declare dividends in favor of the Company.
Under the Corporation Code, Megawide‘s Board of Directors is authorized to declare cash, property,
stock dividends or a combination thereof. Cash and property dividend declarations require the
approval of the Board and no shareholder approval is necessary. A stock dividend declaration
requires the approval of the Board and shareholders representing at least 2/3 of Megawide‘s
outstanding capital stock. Such approval may be given at a general or special meeting duly called for
such purpose. Holders of outstanding shares on a dividend record date for such shares will be entitled
to the full dividend declared without regard to any subsequent transfer of shares. Under the
Corporation Code, Megawide may not make any distribution of dividends other than out of its
unrestricted retained earnings.
Megawide declared dividends as follows during the past three (3) years:
Date Approved
June 3, 2011
June 30, 2011
June 26, 2012
April 8, 2013
June 26, 2013
May 14, 2014
June 30, 2014
Record Date
October 14, 2011
Type
Stock
Amount
P257,100,001.00
Date of Payment
November 10, 2011
July 20, 2012
July 19, 2013
Cash
Stock
P150,024,528.20
P380,636,801.00
August 15, 2012
August 14, 2013
October 22, 2014
Stock
P750,000,000.00
November 17, 2014
RECENT SALES OF UNREGISTERED OR EXEMPT SECURITIES
Megawide made the following issuances of shares of stock:





On November 10, 2011, the Company issued stock dividends amounting to P257,100,001.00
to the shareholders.
On May 15, 2013, Megawide issued shares of stock amounting to P35,959,523.00 from its
authorized capital stock to Citicore, Geoffred Deetan, Ellie Chan and Dennis Bryan Ty.
On May 24, 2013, Megawide issued shares amounting to P118,729,800.00 to Citicore
pursuant to a Placing Agreement with Citicore, CLSA Limited and First Metro relative to the
Company‘s Placing and Subscription transaction/offering.
On August 14, 2013, Megawide issued stock dividends amounting to P380,636,801.00 to
shareholders.
On November 17, 2014, Megawide issued stock dividends amounting to P750,000,000.00 to
shareholders.
The foregoing issuances are exempt transactions under Section 10.1 (d), (e) and (i) respectively of
the SRC, for which no notice or request for exemption is required. The Company, however, filed a
Notice of Exempt Transaction with the SEC on October 21, 2011 in relation to the stock dividends
paid on November 10, 2011. The shares were not publicly offered and no underwriter was engaged
for purposes of the issuance of the shares. There were also no underwriting discounts or
commissions since there were no underwriters engaged.
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DESCRIPTION OF BUSINESS
OVERVIEW OF THE COMPANY
Megawide Construction Corporation (Megawide) was registered with the Securities and Exchange
Commission (SEC) on July 28, 2004. Its primary purpose is to engage in the general construction
business. The Company‘s common shares were listed at the Philippine Stock Exchange on February
18, 2011 under its trading symbol ―MWIDE‖.
The current authorized capital stock of the Company is P5,000,000,000.00 divided into 4,930,000,000
common shares with a par value of P1.00 per share and 70,000,000 preferred shares with a par value
of P1.00 per share. As of date, 2,399,426,127 common shares are issued and outstanding, of which
1,494,736,804 is listed.
The Company is governed by a board of seven (7) directors composed of Michael C. Cosiquien,
Edgar B. Saavedra, Yerik C. Cosiquien, Elizabeth Anne Uychaco, Florentino Tuazon Jr., Leonilo
Coronel, and Leonor Briones.
The Company‘s management team is headed by Chairman and Chief Executive Officer, Michael C.
Cosiquien and Chief Operating Officer and President, Edgar B. Saavedra, each of whom is a licensed
civil engineer who have been practicing for more than 15 years. They are ably supported by Vice
President for Operations, Ronald Paolo, Chief Technology Officer, Tarcyzjusz W. Froelich, and Vice
President for Precast, Masashi Watanabe. Other members of the management committee who are
not engineers are Chief Financial Officer, Oliver Y. Tan, Chief Marketing Officer, Manuel Louie B.
Ferrer, Vice President for Comptroller, Renato Uy and Vice President for Human Resource, Claudia
Soriano.
Megawide is one of the leaders in the Philippines construction industry. Megawide has been essential
in defining the current skyline of Metro Manila and various parts of the Philippines by being the
developer of choice for high-rise residential buildings, office buildings, commercials, hotels and
casinos, schools, hospitals and mass affordable housing. Known for its value engineering expertise,
design capabilities, project management and advanced construction technologies, Megawide has
transformed into an Engineering, Procurement and Construction (EPC) company offering complete
solutions and services from civil and structural works, mechanical and electrical works, architectural
and fit-out works to commissioning and facility management at par with global trends and practices.
Megawide‘s unique business model puts it in a league of its own, clearly differentiating it from its
peers. It is the only construction company that has a manufacturing component through its state-ofthe-art precast production facility and wide downstream integration such as modern concrete batching
plant, advanced formworks systems and its own fleet of vertical, earth-moving and construction
equipment. Moreover, to ensure sustainable business growth and mitigate economic down cycles,
Megawide has expanded and diversified into infrastructure development, an upstream integration that
certainly adds and creates greater value to Megawide in the short, medium and long term horizon.
Not only will these infrastructure development projects provide construction revenues to its
downstream business units, it will likewise become the source of future stable recurring income upon
completion. The synergies in these vertical integrations will result to seamless operating efficiencies,
optimal use of resources and financial strength.
Megawide further organized its infrastructure development into three (3) categories namely: Social
Infrastructure, Public Infrastructure and Utility Infrastructure. Its on-going public school building
projects and Modernization of Philippine Orthopedic Center projects are clustered under the Social
Infrastructure Segment while the Mactan-Cebu International Airport project and other airport projects
that it shall tender a bid for, including the Intermodal Transport System project, are clustered under
the Public Infrastructure category. Lastly, the Company‘s future power generating assets and water
concessions shall be grouped together under Utility Infrastructure.
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Under its Construction Portfolio, the Company‘s on-going and upcoming projects include SM
Development Corporation‘s Jazz Residences and Fern Residences condominium projects; Filinvest‘s
The Linear, Zen Studio, and IHUB projects, the Araneta Group‘s BPO, Shang Properties‘ Shang
Salcedo Place, and Rockwell Land‘s Proscenium. For details of these projects, see ―Description of
Business‖ on page 61 of this Preliminary Prospectus. At the moment, there are no foreign revenues in
the Company‘s construction portfolio.
Megawide is also registered with the Board of Investments as new producer of modular housing
components/systems on a non-pioneer status.
HISTORY
The Company traces its roots to an engineering firm founded in 1997 by two young civil engineers,
Engr. Edgar B. Saavedra and Engr. Michael Cosiquien, with a start-up capital of P500,000.00. The
engineering firm rendered construction services to private residential houses, commercial and
industrial buildings. On July 28, 2004, the firm was formally incorporated under the name ―Megawide
Construction Corporation‖, with the primary purpose of engaging in general construction business.
2005 to 2010
In 2005, the Company entered the high-rise condominium market and constructed the 25-storey
Residencia de Regina project located at Loyola Heights, Quezon City. It also inaugurated its
Binangonan pre-cast fabrication plant, and introduced high-strength pre-cast concrete façade walls in
the Residencia de Regina project.
In 2007, Megawide qualified and secured its AAA Contractor‘s License, the highest classification and
category, from the Philippine Contractors Accreditation Board. The Company also successfully
negotiated and booked contracts with SMDC for Grass Residences and Berkeley Residences.
In 2008, the Company upgraded its fleet of tower cranes and earthmoving equipment, in anticipation
of increase in demand for its contracting services and to support its expansion plans and programs.
The Company also introduced key value engineering building systems into its construction process,
the wall, slab and climbing Formwork System, purchased from the German company, Meva. These
new systems enhanced the Company‘s competitiveness by reducing construction time and allowing
earlier project turnover.
As a result of increasing demand for pre-cast concrete products, the Company in 2010, launched its
satellite pre-cast concrete plant in the Mall of Asia Complex, Pasay City, fitted with European pre-cast
machineries. In addition, two (2) experienced foreign engineers who are experts in precast concrete,
and international building systems and standards joined Megawide‘s pool of senior managers.
In January 2010, the Company broke ground for its 10-storey corporate office tower in Quezon City.
The Megawide Corporate Tower obtained a gold certification from the Leadership in Energy and
Environmental Design (―LEED‖) of the United States Green Building Council. LEED is a third party
certification program for the design, construction and operation of high performance green buildings.
LEED is the predominant green building rating system in the U.S. and is used around the world. The
Corporate Tower marks an important landmark for Megawide, as it strives to be at the forefront of
green building technology in the country. The Company was also a recipient of the Construction
Safety Award from the Occupational Safety and Health Administration (―OSHA‖) in May 2009 and
September 2010. The OSHA is a Philippine government agency that establishes protective and safety
standards and enforces these standards in construction jobsites all over the country.
2011
On 2011, Megawide conducted its initial public offering and on February 18, 2011, Megawide was
listed on the Main Board of the PSE.
In May 2011, Megawide broke ground for its 12-hectares State-of-the-Art Precast Concrete
Manufacturing Complex in Taytay, Rizal. The facility is fully automated and considered to be the
largest precast plant in the country. The Company intends to use the facility to mass-produce modular
62
housing components to address the housing backlog of the nation; moreover, the same can also be
used for school buildings, hospitals, and other infrastructure projects.
2012
In October 2012, Megawide entered into a joint venture agreement with its parent company, Citicore,
and registered Citicore-Megawide Consortium Inc. (―CMCI‖) with the SEC. Ten percent (10%) of the
issued and outstanding stock of CMCI is owned by Megawide while 90% is owned by Citicore. The
first project booked by CMCI was the Department of Education‘s PPP for school buildings. The
Department of Education awarded to CMCI in 2012 the school buildings in Regions 3 and 4. CMCI
commissioned Megawide to construct all the school buildings in both regions.
In December 2012, Megawide acquired 100% of the issued and outstanding stock of Altria, the owner
of the property in Taytay, Rizal where the precast plant of Megawide is located.
The Company was awarded by Asia-Money as one of the Best Managed Companies in the
Philippines.
2013
On May 15, 2013, Megawide issued 35,959,523 new common shares of stock for a total issue price of
P305,655,945.50 to Citicore and three individual stockholders of Altria. Said issuance of shares was
part of the series of transactions for the acquisition of Altria.
On October 17, 2013, CMCI signed the Build-Lease-Transfer Agreements for School Infrastructure
Projects Phase II for Regions I, II, III and Cordillera Administrative Region, with the Department of
Education.
On November 28, 2013, the Megawide-World Citi Consortium, Inc. (―MWCCI‖) was awarded the
Modernization of the Philippine Orthopedic Center project by the Department of Health.
On December 12, 2013, the PBAC of the DOTC opened all proposals for the Mactan-Cebu
International Airport project to reveal that the Megawide-GMR Consortium submitted the highest bid.
The DOTC-MCIAA later issued the Notice of Award on April 4, 2014.
The International Organization for Standardization (―ISO‖) awarded Megawide with the ISO
9001:2008 and ISO 140001:2004 certifications for quality and environmental management
respectively.
Finance Asia awarded Megawide as one of ―Asia‘s Best Managed Companies‖ for its outstanding
performance.
On top of the Company‘s AAA Contractor License it also secured Large B Contractor‘s License
classification for government registration.
2014
In 2014, Megawide started to penetrate the upper market housing segments by winning the coveted
Proscenium Project from Rockwell and Shang Salcedo Place from Shangri-La Properties thus firmly
establishing its ability to cater to wide market segments from upper to middle to Affordable Housing.
The Company is also on track to complete and turnover PSIP I by the end of the year.
On April 22, 2014, the Company, along with its joint venture partner, GMR Infrastructure Limited, was
officially awarded the MCIA project under a BOT agreement. Megawide and GMR incorporated GMRMegawide Cebu Airport Corporation (―GMCAC‖) to undertake said project which is one of the biggest
PPP projects of the DOTC, involving, among others, the construction of a world-class airport
passenger terminal (along with associated infrastructure and facilities), the renovation and expansion
of the existing airport terminal and the operation and maintenance of both airport passenger terminals
for a period of 25 years under a build-operate-transfer arrangement. GMCAC expects to take over the
63
th
operations of the MCIA by the 4 quarter of 2014 and construction of the new passenger terminal to
start early next year.
On September 4, 2014, Megawide incorporated a subsidiary named Megawatt Clean Energy
Incorporated (―MCEI‖) to pursue project development of Renewable Energies with particular focus on
Wind, Solar, Hydro and Bio-mass power.
On November 1, 2014, terminal 1 of the Mactan International Airport was successfully turned over to
GMCAC.
Additionally, the Occupational Health & Safety Advisory Services (OHSAS) awarded Megawide with
the OHSAS 18001:2007 certification as recognition of the Company‘s efforts to implement practices
that create a healthy and safe working environment.
ORGANIZATIONAL STRUCTURE
SUBSIDIARIES & AFFILIATES
As of date, the Company holds 100% interest in Altria, 60% in GMCAC, 70% in MCEI, and 51% in
MWCCI. All four (4) subsidiaries were incorporated to assist the Company in the implementation of its
projects and realize its objectives.
64
Altria Land East, Inc.
Altria was incorporated on April 16, 2010 with SEC Registration Number CS201005977. It is
authorized to deal and engage in land or real estate business, such as to hold, develop, manage,
administer, sell, convey, encumber, purchase, acquire, rent or otherwise deal in and dispose of all
kinds of housing projects, commercial, industrial, urban or other kinds of property. Its principal place
of business is in Taytay, Rizal.
Altria has an authorized capital stock of P1,600,000.00 divided into 1,600,000 common shares with a
par value of P 1.00 per share. At least 25% of the authorized capital stock has been subscribed and
at least 25% of the total subscription has been paid. The Company owns 100% of Altria. As of the
date of acquisition, Altria has no operations and its main asset is the land leased by the Company for
its operations. From a general accounting perspective, the transaction is accounted for by the
Company as an asset acquisition since the transaction does not constitute an acquisition of a
business. As of June 30, 2014, Altria has not contributed to the Company‘s revenues.
GMR Megawide Cebu Airport Corporation
GMCAC was incorporated on January 13, 2014 with SEC Registration Number CS201400629. It is
authorized to engage in the business of building, rehabilitating, renovating, constructing, developing,
operating and maintain the Mactan Cebu International Airport, including the commercial assets
thereof and all allied businesses for the operation and maintenance of said airport facility pursuant to
the concession granted to GMCAC and in accordance with R.A. 7718 and other applicable laws, rules
and regulation. Its principal place of business is in Quezon City, Metro Manila.
GMCAC has an authorized capital stock of P100,000,000.00 divided into 100,000,000 with a par
value of P 1.00 per share. At least 25% of the authorized capital stock has been subscribed and at
least 25% of the total subscription has been paid. The Company owns 60% of GMCAC.
Megawatt Clean Energy, Inc.
MCEI was incorporated on September 4, 2014 with SEC Registration Number CS201417147. It is
authorized to engaged in the development of clean or renewable energy sources for power
generation, including the design, construction and installation, purchase, importation, commissioning,
owning, management and operation of relevant machinery, facilities and infrastructure therefor, the
processing and commercialization of by-products in its operations and generally the carrying out of
contracts and transactions off every kind and character that may be necessary or conducive to the
accomplishment of the purposes of MCEI. Its principal place of business is in Quezon City, Metro
Manila.
MCEI has an authorized capital stock of P10,000,000.00 divided into 10,000,000 with a par value of P
1.00 per share. At least 25% of the authorized capital stock has been subscribed and at least 25% of
the total subscription has been paid. The Company owns 70% of MCEI.
Megawide World Citi Consortium, Inc.
MWCCI was incorporated on January 16, 2014 with SEC Registration Number CS201400872. It is
authorized to plan, construct, equip, operate, own, manage and maintain hospitals, medical facilities,
clinical laboratories and such other allied enterprises which may have similar or analogous
undertakings or dedicated to services in connection with providing curative and rehabilitative care to
sick, diseased or disabled persons; provided that purely professional medical and surgical services
shall be performed by duly licensed physicians or surgeons who may or may not be connected with
MWCCI and whose services shall be freely and individually contracted by the patients. Its principal
place of business is in Quezon City, Metro Manila. MWCCI shall act as the hospital operator in the
modernization of the Philippine Orthopedic Hospital.
MWCCI has an authorized capital stock of P2,000,000,000.00 divided into 2,000,000,000 with a par
value of P 1.00 per share. At least 25% of the authorized capital stock has been subscribed and at
least 25% of the total subscription has been paid. Out of the authorized capital stock, 51% has been
subscribed by the Company while World Citi subscribed to 49%. On September 26, 2014, World Citi
65
sold 39% of its shares in MWCCI to Citicore. Accordingly, the Company now owns 51% of MWCCI,
Citicore owns 39% and World Citi, 10%, giving Citicore ultimate control of MWCCI through its
ownership interest in the Company.
Apart from Altria, all of the Company‘s other subsidiaries, i.e., GMCAC, MCEI and MWCCI, were all
incorporated this year and are still in post-incorporation or pre-operating stage. As such, these
subsidiaries have yet to contribute to the Company‘s balance sheet and income statement.
Parent Company and Other Affiliates
Citicore Holdings Investment, Inc.
Citicore Holdings Investment, Inc. (―Citicore‖) was incorporated on December 13, 2011 and operates
primarily as a holding company with ownership interests in Megawide (at 56.8%), MWCCI (at 39%),
My Space Properties, Inc. (at 100%), CMCI (at 90%).
My Space Properties, Inc.
MySpace Properties, Inc. (MySpace) was incorporated on February 6, 2010, and is presently
engaged in real estate development. MySpace is wholly-owned subsidiary of Citicore
Holdings Investment. Inc. MySpace was the corporate vehicle used to form a joint venture
with another real estate development company for the Antel Serenity Tower.
Citicore-Megawide Consortium, Inc.
CMCI was incorporated on October 15, 2012 with SEC Registration Number CS201219238. It
is authorized to engage in the general construction business, including the construction,
improvement and repair of, or any other work upon, buildings, roads, bridges, plants,
waterworks, railroads and other. Its principal place of business is in Quezon City, Metro
Manila.
CMCI has an authorized capital stock of P2,000,000,000.00 divided into 2,000,000,000
common shares with a par value of P 1.00 per share, fully subscribed and fully paid up. The
Company owns 10% of CMCI.
As of June 30, 2014, CMCI contributes P4,462,925 or 0.83% of the Company‘s net income.
Future State Myspace, Inc.
Future State Myspace, Inc. (―FSMI‖) was incorporated on January 27, 2012 to primary engage in
purchasing, acquiring, leasing and selling properties. FSMI is 36% owned by Michael Cosiquien and
Edgar Saavedra. It owns 100% of IRMO, Inc.
IRMO Inc.
IRMO Inc., was incorporated on August 13, 2008 to principally engage in the realty
development business, including home building and development. Megawide is constructing
The Curve for IRMO, Inc.
Megapolitan Realty and Development Corporation
Megapolitan Realty and Development Corporation (―Megapolitan‖) was incorporated on June 20,
1997 to engage in real estate development. Michael C. Cosiquien and Irving Cosiquien each own 5%
of Megapolitan‘s outstanding capital stock and both serve as its directors. Megapolitan‟s controlling
shareholders are the parents of Michael and Irving Cosiquien. Megawide is leasing the lot where its
corporate office is located from Megapolitan.
66
Philwide Development and Construction Corporation
Philwide Development and Construction Corporation (―Philwide‖) was incorporated in 1981 to engage
in real estate development and is majority-owned by the father of Michael, Yerik and Irving Cosiquien.
The Company is leasing its current principal office from Philwide.
Below is a map showing the relationship between the Company and its related entities.
(i) Megawide’s acquisition of Altria is treated as an acquisition of asset and not a business acquisition. Hence, Altria is not
considered a subsidiary of Megawide for accounting purposes.
(ii) Megawide owns 51% of MWCCI, but accounted for the investment as an associate since it does not have control over
MWCCI's relevant activities. Citicore subsequently acquired 68% effective ownership interest over MWCCI, hence, obtained
it the control over MWCCI.
COMPETITIVE STRENGTHS
The Company believes that its principal strengths are the following:
1) Value Engineering through the Use of Modern and Advanced Building Technology

Megawide was the first to extensively utilize advanced, modern and comprehensive
European building systems that reduce construction time and allow for quicker project turnover.

Megawide employs Formwork Systems, purchased from German company, MEVA
Schalungs-Systeme Gmbh, in its on-going projects. Formwork Systems are the temporary or
permanent moulds, into which concrete or similar materials are poured into, to form the
structural elements of a building. The traditional construction process utilizes timber or
plywood formworks. For its projects, Megawide‘s Formwork Systems are 100% wood-free, all
plastic facing. These are nailable like plywood, but maintain structural rigidity. These are also
re-usable, putting an end to plywood wastage, and do not swell or shrink like plywood.
Megawide utilizes the following Formwork Systems in its existing projects:
o
o
o
o
o
Slab Formworks
Wall Formworks
Column Formworks
Circular Formworks
Climbing Formworks
67

Megawide‘s 12-hectare fully-automated pre-cast concrete manufacturing complex is the
largest and most advanced in the country and is among the top in Southeast Asia in terms of
size and technology employed. The use of pre-cast concrete is environment-friendly and
allows Megawide to reduce construction costs, shorten the construction period, and improve
the overall quality of the work and increase project volume.
2) Business Synergies from Vertical Integrations
Megawide‘s unique business model puts it in a league of its own, clearly differentiating it from
among its peers. It is the only construction company that has a manufacturing component through
the use of state-of-the-art precast production facility and wide downstream integration such as
modern concrete batching plant, advanced formworks systems and its own fleet of vertical, earthmoving and construction equipment. Moreover, to ensure sustainable business growth and
mitigate economic down cycles, Megawide has expanded and diversified into infrastructure
development, an upstream integration that surely adds and creates greater value to Megawide in
the short, medium to long term horizon. Not only will these infrastructure development projects
provide construction revenues to its downstream business units, it will likewise become the
source of future stable recurring income upon completion. The synergies in these vertical
integrations will result to seamless operating efficiencies, optimal use of resources and financial
strength.
3) Strong Brand Name and Proven Track Record
Megawide has a well-established reputation in the construction industry for its excellent project
execution and customer service. It has a proven track record of efficient operations, having
successfully completed numerous low-rise to high-rise condominiums and industrial buildings.
4) Organizational Capability and Flexibility
Megawide has a lean organizational structure that is flexible, responsive and adapts to market
changes. It has a diverse work force of young, dynamic, committed and highly effective personnel
and experienced and well-trained professionals. It also has a disciplined and responsible
management team that has effectively surpassed challenging business situations.
5) Financial Strength and Ability to Raise Financing at Competitive Costs
The Company believes it has a strong balance sheet. As a result, it has the ability to secure clean
loans at competitive costs.
6) AAA and Large B Contractor’s License
Megawide has an AAA Contractor‘s License from PCAB. This is the highest classification and
category for a construction company, which allows Megawide to bid for private projects with no
limits on contract value. Likewise, the Company obtained Large B classification for government
registration which qualifies Megawide to participate in large infrastructure projects such as
highways, roads and bridges, piers and airports, railroads, waterworks and power plants.
7) Young, Modern and Branded Fleet of Building Equipment
Megawide owns and maintains a young, modern and branded fleet of tower cranes and
earthmoving equipment to ensure maximum efficiency and minimum down time during
construction.
BUSINESS STRATEGY
Having organized the Company‘s businesses into two (2) main units namely: (i) Engineering,
Procurement and Construction (EPC) and (ii) Infrastructure Development which is composed of Social
Infrastructure, Public Infrastructure and Utility Infrastructure, the Company will pursue the following
business strategies:
68
Maintain Current Productivity and Operational Efficiency in its On-going Projects.
The Company‘s goal is to maintain current productivity and operational efficiency in its on-going and
future projects thru the use of existing building technologies it employs and the utilization of precast
concrete facility. The timely completion of the workable balance of contracted domestic projects will
encourage repeat orders, sustain construction revenue growth and retain market share.
Timely Completion and Roll-out of Infrastructure Projects in its Pipeline and Actively Pursue
Suitable PPP Projects
Megawide has been awarded as project proponent to a total of four (4) of five (5) PPP Projects which
it has participated in and bidded for. A summary of these awarded PPP Projects are as follows:
I.
Social Infrastructure
a. School Segment
Accelerate Completion of PSIP I and timely roll-out of PSIP II will free up resources to
enable the Company to participate in the upcoming phase 3 and 4 scheduled to be set for
bidding early next year.
b. Hospital Segment
Efficient roll-out of the construction of 700-beds specialty hospital with gross leasable
area of 60,000 square meters. Upon completion, this asset is expected to provide stable
recurring lease income to the Company, through its subsidiary, for the next 25 years.
II.
Public Infrastructure
a. Airport Segment
GMCAC will be a pioneer in the privately operated airport space in the Philippines upon
take-over of the MCIA. GMCAC intends to undertake an efficient roll-out of the
construction of new passenger terminal in Q1 2015. Upon completion, this asset will
provide diversified recurring income streams to the Company, through GMCAC, for the
next twenty five (25) years.
Initial preparation has started to enable the Company to aggressively pursue the other six
(6) airports to be tendered for bidding by the DOTC early next year. The Company
believes these airports will create synergies with its MCIA project.
b. Transport Segment
The Company is currently preparing for its tender for the Intermodal Transport System in
Southwest and South Terminal Station. The project is an integrated bus terminal that
provides seamless transfer of passengers from provincial buses to city mode of
transportation.
III.
Utility Infrastructure
a. Power
The Company is currently working on a total of 100MW renewable energies at various
development stages. It aims to put-up a portfolio of 200MW power generation assets in
the next three (3) years that will supply electricity to On-Grid and Off-Grid.
69
b. Water
The Company is likewise keen on participating in the Bulacan Bulk Water Supply Project
of MWSS. The project is divided into three (3) stages which will require, among others,
the construction and operation and maintenance of raw water conveyance system and
interconnection pipelines; water treatment plants and ancillary facilities; treated water
reservoirs and pumping stations.
Leverage organizational competence and flexibility.
The Company believes it has talented, resilient and dedicated employees who contribute to its
success. The Company will continue to have concerted and structured initiatives for knowledge
sharing through team-based programs. It will continue with its aggressive recruitment of young
graduates with engineering, finance and business management backgrounds to sustain the quality of
its management pool.
Pursue prudent and strategic investments, alliances, joint ventures and acquisitions.
In line with the Company‘s strategy to expand its business into infrastructure developments,
Megawide plans to continue to actively seek strategic investments, alliances, joint ventures and/or
acquisitions that will be consistent with the Company‘s overall business strategy. The Company
believes that such undertakings will provide business opportunities and allow entry into new markets.
PLANS AND PROGRAMS
Megawide intends to focus its activities on its core competencies of providing value-added
engineering services with its modern and advanced formworks and precast concrete systems not only
for high-rise construction, but also for infrastructure projects.
Having been constantly invited and participating in bids in local markets gives Megawide an
impression of what the short and medium term prospects are. Thus, Megawide will continue with its
recruitment and training activities, to ensure that it will have the necessary workers with the proper
skills to deploy in the projects Megawide might undertake. Moreover, Megawide will continue to
leverage on its strong research and development focus, thus constantly adapt and respond to new
inventions, methodologies and standards in construction to maintain Megawide‘s edge over its
competitors.
Megawide intends to use its track record and reputation for modern building technology, in
establishing its presence in infrastructure projects such as flyovers and skyways, utility and mass
transport infrastructures. It aims to actively participate in the bidding of several infrastructure-related
PPP projects of the Government.
Megawide also aims to expand into broader housing market segments by offering low-rise to mediumrise full precast high strength concrete building technologies patterned after European low-cost
housing models. It targets to deliver 100,000 Vertical Affordable Housing units in the next [3 to 5
years].
Likewise, with Megawide‘s world-class precast concrete manufacturing complex in a sprawling 12hectare property in EPZA Taytay, Rizal it will be able to:
•
•
•
•
Handle larger projects and order volumes at shorter construction time;
Offer variety of precast concrete products from precast walls to columns, beams and hollowcore slabs for condominium buildings, girders for roads, bridges and flyovers and railway
sleepers;
Offer socialized and comfortable European-style Affordable Housing at greatly reduced
construction cost and time; and
Expand and diversify into infrastructure projects
70
PROJECTS
Business Development
The Company’s current order book as of July 31, 2014 is at P23.0 billion. It consists of a balanced in
terms of project mix composed of 27% residential projects, 24% airport, 16% office and commercial
projects, 14% public school building and 11% hospital.
Order Book as of July 2014
Residential
24%
27%
Office/Commercial
National Housing
11%
16%
14%
Hotel
School
Hospital
5%
3%
Airport
Recently Completed Projects
Since 2011, the Company has completed several notable projects including:
1) Citysquare Residences – Citysquare Residences is a 28-storey residential condominium
with floor area of 19,600 square meters located at the heart of the Chinatown Business
district.
2) Antel Spa Residences - Antel Spa Residences is a 34-storey mixed-use high-rise
condominium located at the financial capital of Metro Manila with a gross floor area of 33,360
square meters. It is complete with building amenities such as power gym and fitness center,
sky garden, coffee shop, resort spa pool, garden ballroom and wide selection of commercial
spaces that include organic restaurants and markets, beauty and medical establishments.
3) B-Hotel - Parcvue B-Hotel is a 10-storey Three Star Hotel with Penthouse located in Madrigal
Business Center, Alabang, Muntinlupa City with a gross floor area of 11,200 square meters.
4) Hampton Garden Tower K and L - Hampton Garden Tower K and L is a low-rise residential
condominium located at C. Raymundo Avenue, Maybunga, Pasig City, with total floor area of
7,500 square meters offering 191 residential units.
5) SM Grass Residences Tower 1 – 41-storey high-rise residential building located at the back
of SM City North Edsa with 1,956 residential units. Its total floor area is 77,151.20 square
meters.
6) SM Sea Residences - The project is located near the SM Mall of Asia, and is composed of 6storey residential condominiums (Phases 1, 2 and 3). The Sea Residences has a total of
2,703 residential units on a gross floor area of 139,850 square meters. Amenities offered
include a swimming pool, playgrounds and a clubhouse.
7) Belle Grande Casino - The project is a casino consisting of two L-shaped hotel towers and
four high-end condominiums on top of a 2-level casino podium located at Macapagal Avenue,
71
Pasay City. Total floor area is 250,000 square meters and lot area of 3.5 hectares. Once
completed, it will be the largest casino in the Philippines.
8) University Tower II - University Tower II is a 31-multi-storey office and residential
condominium located across University of Santo Tomas with a floor area of 25,000 square
meters. The Project offers 736 units with 65 parking slots located at the Second, Third and
Fourth Floors.
9) University Tower Malate - University Tower III is a 40-multi-storey commercial and
residential condominium with a floor area of 29,000 square meters. The project is located
near the university belt area at Pedro Gil, Malate and consists of 6 commercial units at the
ground floor and 689 residential units with 86 parking slots.
10) Berkeley – Berkeley Residences is a 35-storey residential building located at Katipunan
Avenue corner Escalera St., Loyola Heights, Quezon City, with floor area of 55,310 square
meters.
11) Hampton Gardens Condominiums Tower I and J – Hampton Gardens is a multi-storey
residential building consisting of 16 cluster buildings located at C. Raymundo Avenue,
Maybunga, Pasig City. Tower I and J consists of 10,000 square meters floor area offering 320
residential units.
12) Asya Office Building – Asya Office Building is a medium-rise office and commercial building
located at Macapagal Boulevard, MOA Complex with total floor area of 17,000 square meters.
13) Antel Serenity Tower Hotel & Residences – Antel Serenity Tower is a 36-storey hotel and
residential condominium located in Makati Avenue, Makati City that features 144 exclusive
hotel units and 184 private residences. The Serenity Tower will have a hotel standard
ballroom, high-ceiling grand lobby, function rooms and business center. This has a total floor
area of 33,360 square meters.
14) Bench Corporate Office Building – Bench Tower is a 23-storey office building located in
Global City, Fort Bonifacio, Taguig City with a gross floor area of 35,000 square meters.
15) Malate Bayview Mansion – Malate Bayview Mansion is a commercial condominium located
in the center of Malate, Manila. The project consists of a 44-storey mixed-use condominium
building with floor area of 59,060 square meters.
16) SM Grass Tower 3 Residences - Tower 3 has 1,988 residential units and total floor area of
220,018 square meters.
17) My Place South Triangle Phase I – My Place Phase 1 (Residential Tower A & B) is a 27storey residential condominium located at South Triangle, Quezon City. Its total floor area is
96,513 square meters.
18) Dimensione – 4-storey commercial building with area of 650 square meters.
On-Going Projects
The following are the Company‘s on-going projects as of June 30, 2014:
1) SM Grass Residences Tower 2 – Tower 2 has 1,988 residential units and total floor area of
220,018 square meters.
2) SM Jazz Residences – SM Jazz Residences is composed of four 40-storey towers, on top of
a 5-level shopping mall and parking basement. It is located along Jupiter Street, Bel-Air
Makati. The project has a total floor area of 300,000 square meters in a lot area of 2-hectares.
72
3) Blue Residences – Blue Residences is a 40-storey residential condominium located at
Katipunan Avenue, Quezon City with total floor area of 72,700 square meters.
4) The Linear – The Linear is an office and commercial building located at San Antonio, Makati
City. Its total floor area is 7,400 square meters.
5) Studio City – Studio City is an 18-storey residential condominium located in FCC, Alabang,
Muntinlupa City with total floor area of 12,334.74 square meters.
6) Studio Zen – Studio Zen is a 22-storey residential condominium located in Taft Avenue,
Pasay City with total floor area of 18,992.67 square meters.
7) IHUB 9 Building – Ihub 9 is a BPO building located in Northgate Cyberzone, FCC, Alabang,
Muntinlupa City. Its total floor a 28,898.04 square meters.
8) IHUB 10 Building – Ihub 10 is also a BPO building building located in Northgate Cyberzone,
FCC, Alabang, Muntinlupa City. Its total floor a 28,898.04 square meters.
9) BPO Complex Cebu – BPO Complex Cebu is located in Phase 1 Lahug, Cebu City, 14storey commercial building for BPO with lot area of 45,428.07 square meters.
10) My Place South Triangle Phase II – My Place Phase II (Residential Tower C & D) is a 27storey residential condominium located at South Triangle, Quezon City. Its total floor area is
96,513 square meters.
11) Belle Grande Casino Phase II – Expansion of the Belle Grande Entertainment Complex
located in Macapagal Ave., Paranaque City with estimated 116,206.72 square meters.
12) One World Place – A 31-storey commercial building with floor area of 46,130.39 located in
Fort Bonifacio, Taguig City.
13) Dexterton – A 15-storey commercial building with floor area of 12,769.43 square meters
located in Fort Bonifacio, Taguig City.
14) World Hotel & Residences – A 38-storey hotel and condominium with total floor area of
44,011 square meters located in Makati City.
15) Camarin Project – This is a10 five-storey medium rise buildings with land development
located in Camarin, Caloocan City. This is a low-cost housing project of National Housing
Authority. Its total lot area is 3,823.98 square meters.
16) University Tower 4 – Located in P. Noval, Sampaloc, Manila, a 46-storey condominium with
roof deck with estimated area of 43,320.21 square meters. This is another project of Prince
Jun Development Corp.
17) BPO- Araneta – A 29-storey BPO building with three (3) basement parkings located in
Araneta Center, Cubao, Quezon City and owned by the Araneta Group. It has a total lot area
of 4,072.65 square meters.
18) Shangrila Salcedo –With a total floor area of 3,880 square meters, Shang Salcedo Place, a
68-storey residential building is located in Salcedo Village, Makati City, and has 715
residential units.
19) Rockwell Business Center – A 15-storey office building owned by Rockwell-Meralco BPO
Venture, a joint venture between Rockwell Land Corp. and Manila Electric Company
(MERALCO). The project is located in Meralco Compound, Ortigas Extension. This has a
total leasable floor area of 30,287.91 square meters.
73
Recently Awarded Projects
Recently, the Company has been awarded the following projects:
1) World Plaza – A 27-storey office building owned by Real Property Innovative Solutions, Inc.
th
located at 5 Ave., Bonifacio Global City, Taguig. This will have a total leasable floor area of
64,745.61 square meters.
2) Mareic Building – This project is located at 121 Tordecillas Streets, Salcedo Village, Makati
City owned by Greenway Properties Realty Corporation. A 40-storey residential building with
and additional two (2) basement areas.
3) Proscenium – A commercial type of building owned and developed by Rockwell Land
Corporation. It has two (2) phases, 6-storey each with two (2) basements areas per phase
and located in Estrella Cor. J.P. Rizal St., Guadalupe Viejo, Makati City.
4) 8990 Deca Tower EDSA – Owned by Foghorn, Inc. located in Sierra Madre & EDSA, Brgy.
Highway Hills, Mandaluyong. A residential project which has a floor area of 25,555.88 square
meters.
5) New Frontier Theater – Located in Araneta Center, Quezon City, New Frontier is a twostorey commercial building.
6) Tower One Plaza Magellan – Developed by Megaworld Construction Corporation, Tower
One Plaza is located in Mactan, Cebu City.
7) The Rise – Located in San Antonio Village, Makati City and developed by The Rise
Development Company, Inc.
PPP Projects
PSIP I
With an estimated project value of P16.28 Billion, the project will involve the design, financing and
construction of about 9,300 one-storey and two-storey classrooms, including furniture and fixtures, in
various sites in Region I, III and IV-A. The project aims to supplement the current program of the
Department of Education in reducing classroom backlog
PSIP II
With an estimated project value of P3.86 Billion, the project involves the design, financing, and
construction of 2,440 classrooms, including furniture, fixtures, and toilets, in 4 regions (Regions I, II, III
and CAR).
MPOC Project
With a project value of P5.69 Billion, the MPOC Project involves the construction of the largest public
specialty tertiary orthopedic hospital in the Philippines with a 700-bed capacity orthopedic hospital to
be located in Quezon City, Philippines. MWCCI will design, build, finance, operate and maintain the
hospital for the designated 25-year concession period, and then turnover the hospital to the DOH at
the end of such period. MWCCI will act as the hospital operator under the MPOC Project.
MCIA Project
With a contract value of P35.5 Billion, the MCIA Project, which is one of the biggest PPP projects of
the DOTC, involves, among others, the construction of a world-class airport passenger terminal
(along with associated infrastructure and facilities), the renovation and expansion of the existing
airport terminal and the operation and maintenance of both airport passenger terminals for a period of
74
25 years under a build-operate-transfer arrangement. The MCIA is an international airport located on
Mactan Island in Cebu Province of the Central Visayas area in the Philippines. Apart from being the
second largest airport in the Philippines in terms of domestic traffic, MCIA is also a gateway airport for
various tourist destinations in the Visayas Islands. The airport has witnessed significant growth in
traffic and handled more than 4.74 million domestic passengers and more than 1.47 million
international passengers in 2011.
The following table lists the Company‘s existing projects, with respective percentage completion as of
July 31, 2014:
Project
Customer
MPlace P1
MPlace Tower C
MPlace Tower D
Grass T2
Jazz P1
Jazz P2
Jazz SD
Linear P1
Linear P2
Studio City
Studio Zen
One World
Dexterton
FCC Cebu
Ihub 9
Ihub 10
NHA
World Hotel
RBC
UT4 Structural
UT4 Arch
UT4 MEPF
Shang Salcedo
Hampton J
B Hotel
Gateway T2
Hampton M
Hampton N
PSIP 1 R3
PSIP 1 R4
Curve
MPOC
PSIP 2
Fern
27 Annapolis
Urban Deca
World Plaza
Proscenium
Mareic
Tower 1 Magellan
MCIA
SMDC
SMDC
SMDC
SMDC
SMDC
SMDC
SMDC
Filinvest
Filinvest
Filinvest
Filinvest
Daichi
Dexterton
Filinvest
Filinvest
Filinvest
NHA
H20
Rockwell
Prince Jun
Prince Jun
Prince Jun
Shangrila
Dynamic
Bellevue
Araneta
Dynamic
Dynamic
CMCI
CMCI
IRMO
MWCCI
DepED
SMDC
Bayswater Realty
8990
Daichi
Rockwell
Landmark
Megaworld
GMCAC
%
Completion
99.30%
94.50%
85.75%
99.88%
98.48%
88.77%
95.54%
98.04%
93.98%
99.78%
92.57%
77.03%
85.65%
93.80%
84.09%
80.91%
86.20%
33%
77.05%
28.75%
0%
0%
16.47%
93.48%
28.91%
14.12%
41.03%
0%
83.09%
81.78%
0%
0%
0%
17.36%
13.81%
0%
0%
0%
0%
0%
0%
75
MAJOR CUSTOMERS
Megawide is currently servicing the majority of high-rise condominium projects in Metro Manila for
several major local developers, primarily for its use of High Technology Building Systems, and quality
workmanship. While Megawide is constantly invited to bid for major domestic high-rise building
projects, it opts to focus on a selected clientele that provides synergy in business operations and
better risk management.
The following graphs illustrate the percentage contributed by the Company’s major customers to its
Construction Order Book as of June 30, 2014:
Residential
18%
50%
1%
15%
SM Group
Filinvest
Rockwell
Shangrila
12%
Megaworld
Other
4%
Office
42%
48%
Araneta
Filinvest
10%
Others
SM Development Corporation
SMDC is a publicly listed company and is a leading developer of vertical villages integrated with
commercial retail environment. Their 21 properties are strategically situated in key areas across
Metro Manila specifically the cities of Makati, Mandaluyong, Manila, Paranaque, Pasay, Pasig,
Quezon City, and Taguig, as well as Tagaytay City. Some of these properties include the Jazz
Residences, Sea Residences and Grass Residences.
Filinvest Land Incorporated
Filinvest Land, Inc. (“FLI”) is one of the leading real estate developers in the Philippines with various
residential and commercial developments in the country. FLI spun-off from Filinvest Development
Corporation, the listed holding company for real estate business of the Gotianum family, which has
more than 40 years of experience in real estate development.
76
Belle Corporation
Belle Corporation is a publicly-listed company, and is a leading developer of high-end residential and
leisure properties. The Belle group owns approximately 1,280 hectares of land.
In 2013, Belle Corporation partnered with Macau-based Melco Crown Entertainment Ltd. to bring its
City of Dreams brand to the Philippines renaming the former‘s Belle Grande and expanding that
project from 242 gaming tables and 1,450 electronic gaming machines to 365 gaming tables, 1,680
slot machines and 1,680 electronic table games.
Rockwell Land
Rockwell Land Corporation is one of the premier real estate development companies in the
Philippines. It was formed in 1995, after the shutdown of the thermal power plant, by the Lopez
Group. Its primary task was to transform the old thermal plant property into a high-end commercial
business district, truly a benchmark for innovation in the real estate industry.
Megaworld Corporation
Megaworld is one of the country's leading real estate developer and top business process and
outsourcing (BPO) office developer and landlord in the Philippines. Led by real estate magnate and
visionary, Dr. Andrew L. Tan, Megaworld pioneered the LIVE-WORK-PLAY-LEARN township concept
in the country. The company introduced the successful large-scale, master-planned mixed-use
developments such as Eastwood City in Libis, Quezon City; Newport City in Pasay; McKinley Hill,
Forbes Town Center, McKinley West, and Uptown Bonifacio, all in Fort Bonifacio; Woodside City in
Pasig; Iloilo Business Park in Mandurriao, Iloilo City; The Mactan Newtown in Lapu-Lapu City, Cebu;
and the Davao Park District in Davao City.
Shangri-La Properties
Shang Properties, Inc is a luxury real estate developer in the Phlippines. They are the Philippines
property development arm of the prestigious Kuok Group and with core businesses in upscale office
and retail leasing and residential development. The company has a landbank of over 500 hectares
located in Batangas, Tagaytay, Cavite, and Mactan earmarked for future development. Backed by the
added value and advantages provided by its affiliates worldwide– Kerry Properties, the Kuok Group,
and Shangri-La International Hotels and Resorts, and their ever growing network of property, logistics
and infrastructure assets, Shang Properties, Inc. continues to set the pace for premium real estate
projects in the Philippines.
CUSTOMER AND PROJECT SELECTION
The Company is invited to bid for major domestic low to high-rise building projects. The scope of work
on these contracts generally include, among others, site development, earthworks, structural and civil
works, masonry works, architectural finishes, electrical works, plumbing and sanitary works, fire
protection works and mechanical works.
While frequently invited to project biddings, the Company carefully selects which projects to
participate in, based on the following criteria, in line with its credit risk policies:


Creditworthiness of the project owner determined through background checks with banks and
financial community, business and trade associations, HLURB standing and major suppliers
credit records; and
Liquidity of the project owner determined through financial ratios and financial performances
for the past three years.
In addition, the Company also evaluates each potential project based on the following:


Size of the over-all development blueprint of a project and its implementation timetable on
phases;
Complexities and limitations of the structural design of the high-rise building project;
77



Project location accessibility of heavy construction equipment and proximity to clusters of ongoing project sites;
Logistics difficulties and limitations; and
Profitability.
Terms Granted to Customers
Bids for construction projects are typically accompanied with particular material specifications and the
kind of finishes to be used for the project. Deviations from agreed material specifications are subject
to variation orders. Consistent with industry practice, Megawide normally requires the following key
terms of payment in its construction contracts:

A down payment of 15% to 20% of the contract price prior to commencement of construction
activities. Customers usually require that Megawide obtain a performance bond to guarantee
that it will execute the work in accordance with the contract;

Monthly progress billing (or interim billings). Progress billings are subject to pro-rata
recoupment of down payments, and retention monies equivalent to 10% of the billed amount,
to be reduced to 5% upon 50% completion of the project; and

The release of the 5% retention monies within one-year from full completion of the project.
Customers usually require that Megawide obtain a guarantee bond to guarantee the quality of
the materials provided, the equipment installed and its workmanship.
The exposure of Megawide to credit risk on its receivables relates primarily to the inability of the
customer to fully settle the unpaid balance of contract receivables and other claims owed to
Megawide. Credit risk is managed in accordance with Megawide‘s credit risk policy, which requires
the evaluation of the creditworthiness of the customer.
HIGH TECHNOLOGY BUILDING SYSTEMS
The Company considers the use of High Technology Building Systems as a significant contributor in
gaining advantage over its competitors. It employs Pre-Cast Concrete and Formwork Systems,
purchased from various European companies, in its on-going projects.
Formwork Systems
Formworks are the temporary or permanent moulds, into which concrete or similar materials are
poured into, to form the structural elements of a building. The traditional construction process utilizes
timber or plywood formworks.
For its projects, the Company‘s Formwork Systems are 100% wood-free, all plastic facing. These are
nailable like plywood, but maintain structural rigidity. These are also re-usable, putting an end to
plywood wastage, and do not swell or shrink like plywood. The Company utilizes the following
Formwork Systems in its existing projects:





Slab Formworks
Wall Formworks
Column Formworks
Circular Formworks
Climbing Formworks
The Formwork Systems were purchased from MEVA Schalungs-Systeme Gmbh, a German company
founded in 1970 that designs, manufactures and supplies formwork systems, as well as provides
consultancy services to its clients. MEVA serves contractors from all over the world, from 40
locations.
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Pre-Cast Concrete Systems
Pre-Cast concrete is rapidly becoming one of the dominant ways to build in the modern world. Its core
strength lies in its ability to keep up with the changing expectations of global construction, from market
challenges to new performance and safety requirements.
The European Pre-Cast Concrete Systems which the Company employs in its current projects, has
the inherent advantages of:
Reducing cost
Due to improved economies of scale, the technology enables mass production and fabrication
of building frames and elements resulting in a decline of the average cost per unit. By
manufacturing pre-cast panels in a controlled factory setting, less material is required
because precise mixture proportions and tighter tolerances are achievable. The factory
setting also allows waste materials to be readily recycled. Any spare component and
materials can be recycled and re-used in another structure.
Shortening the construction period
1. The Pre-cast technology saves up to 40% to 50% in labor hours due to its fast-cycle,
compared to conventional construction processes.
2. The manufacturing of pre-cast building members and site preparation can proceed
simultaneously.
3. Pre-cast concrete products arrive at the job site ready to install, which can save weeks
over cast-in-place construction.
4. Pre-cast reduces the need for skilled labor on site.
5. It is not necessary to order raw materials such as reinforcing steel and concrete, and no
time is wasted setting up forms, placing reinforcements, pouring concrete and waiting for
the concrete to cure.
Improving quality
Consistency is achieved because of the use of high precision machines. Pre-cast concrete
products are produced in a controlled environment, and therefore are of high quality and
uniformity. Among the variables typically affecting the quality of construction on a job site are
temperature, humidity, and craftsmanship. These are closely controlled and monitored in a
plant environment.
In addition, pre-cast concrete has excellent load-bearing capacities and structural efficiencies.
Other materials can deteriorate, experience creep and stress relaxation, lose strength and
deflect over time. The load carrying capacity of pre-cast concrete is derived from its own
structural qualities and does not rely on the strength or quality of surrounding backfill
materials.
Increasing project volume
Due to the shorter construction period, the Company can increase the number of projects it
can deliver.
Environment friendly
Pre-cast concrete solutions leave a substantially smaller environmental footprint than other
building construction methods due to the increased recycled content and proven production
processes. Waste is minimized as less concrete waste is created due to careful control of
quantities of constituent materials.
In addition, the pre-cast technology produces less dust and waste at the construction site,
because only needed concrete elements are delivered. Moreover, fewer trucks and less time
are required for pre-cast concrete construction. This is particularly beneficial in urban areas
where minimal traffic disruption is critical.
The Pre-Cast Concrete Systems were purchased from Elematic, a Finnish company founded in 1959,
and one of the world‘s leading suppliers of pre-cast concrete machinery and equipment, production
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lines and complete production plans. Elematic is currently at work in more than 90 countries
worldwide.
Machineries and equipment for the Pre-Cast Concrete Systems were purchased from Elematic
through direct purchases and were paid in cash. Elematic, as part of its after sales support, provided
technical assistance by deploying engineers tasked to brief the Company and its personnel how to
operate the system.
World Class Pre-Cast Manufacturing Complex
The Company has also recently completed the construction of its world-class precast concrete
manufacturing complex in a sprawling 15-hectare property in EPZA Taytay, Rizal. This facility is the
country‘s largest precast facility, and is the second largest in Southeast Asia. The facility enables the
Company to expand the production of its pre-cast products to include high strength concrete frames
and elements, columns, beams, floor slabs and walls. The pre-cast facility can be used for both
building construction, and infrastructure construction for beams, girders, cross beams, columns,
culverts and railroad cross ties.
The following table is a summary of the advantages of Megawide‘s High Technology Building
Systems over traditional construction methods:
Formworks
Pre-Cast
Concrete
Traditional Construction
Plywood
Megawide
Plastic face formworks
Coco lumber
Aluminum & Steel
Scaffoldings
Concrete Hollow Blocks
Pre-cast walls
Traditional Concrete
Beams, Columns, Slabs
Pre-cast beams, columns,
slabs
Advantages
 No swelling and
shrinking
 Stable flexural rigidity
 Free from rippling and
warping
 Quality in concrete
pouring
 Fast cycle, simple
assembly, early
 stripping, less manual
labor employed
 Even surfaces
 Zero discoloration
 Fast on-site cleaning
 Zero waste
 Reusable
 More stable and robust
 Longer lifespan
 Easy assembly lock
and formwork clamp
 Precise, smooth and
even curing, high
 Quality, energy saving
and ecological
 Savings in steel and
partition wall materials,
extra long spans for
design flexibility,
accurate dimensions
and strand locations
for less work-on site
Green Construction
The Megawide Corporate Tower in Quezon City obtained a gold certification from the Leadership in
Energy and Environmental Design (―LEED‖) of the United States Green Building Council. LEED is a
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third party certification program for the design, construction and operation of high performance green
buildings. It is the predominant green building rating system in the U.S. and is used around the world.
Additionally, completed construction projects that are LEED pre-certified include the Bench HQ for
Suyen and One Coral Way for Asya. One World Place, World Plaza and the Curve for IRMO are also
going through the LEED certification process and are currently in the compliance phase.
LEED Certification
The LEED green building rating system, developed and administered by the U.S. Green Building
Council, a Washington D.C.-based, nonprofit coalition of building industry leaders -- is designed to
promote design and construction practices that increase profitability while reducing the negative
environmental impacts of buildings and improving occupant health and well-being.
LEED is the predominant green building rating system in the United States, and is also used around
the world.
The LEED rating system offers four certification levels for new construction — Certified, Silver, Gold
and Platinum — that correspond to the number of credits accrued in five green design categories:
sustainable sites, water efficiency, energy and atmosphere, materials and resources and indoor
environmental quality.
Fleet of Construction Equipment
The Company invests heavily on new tower cranes and earthmoving equipment to ensure maximum
efficiency and minimum down time during construction. These include:
Type
Ground Equipment
Vertical equipment
Trucks
Services Vehicles
Quantity (as of June 30, 2014)
90
221
91
126
SUPPLIERS
The Company sources its raw materials, primarily steel, cement and aggregates from external
suppliers who are reliable and known in the construction industry. In selecting its suppliers, Megawide
considers quality, pricing, and efficient delivery of raw materials. It also does not depend on one or a
limited number of suppliers for raw materials and none of its major suppliers are its affiliates.
Suppliers usually give Megawide a 60 to 90 day payment period. Below is a list of the Company‘s
major third party independent suppliers:
Name of Supplier
Phases Electrical Contractor
Steel Asia Manufacturing Corp.
Megapipe Builders Inc
Tonaeki Industrial Corp.
Seapac Philippines, Inc.
Premier Ready Mix Incorporated
Eagle Cement Corporation
Lafarge Cement
Deeconcrete Inc.
Comanchesteel Corporation
United Colourtech Contractors
Liebherr Export AG
Marubeni
Meva
Raw Material Supplied
Subcontractor of MEPF
Steel
Subcontractor of MEPF
Construction equipment
Subcontractor of aluminium
works
Concrete, cement
Cement
Cement
Concrete, cement
Steel
Subcontractor of painting works
Batching plant equipment
Deformed rebar
Formworks
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In order to mitigate the risk of price volatility in raw materials for its projects, the Company, upon
contract award, immediately purchases major materials such as steel and concrete for the entire
project. All purchases are done centrally for all project site requirements.
Quality Control
The Company‘s General Specifications of work quality are in accordance with the American Society
for Testing and Materials (―ASTM‖), the American National Standards Institute (―ANSI‖), or the
Construction Specifications Institute (―CSI‖). The general specifications can be modified based on
local conditions, policies, available materials, local regulations and other special circumstances.
In addition to on-site inspections, as a standard procedure, concrete samples are tested by
specialized laboratories to ensure compliance with ASTM, ANSI and CSI specifications.
PROJECT IMPLEMENTATION
Upon receipt of an invitation to bid, the Company evaluates the proposed project in accordance with
its credit risk policies and based on the following criteria:

Creditworthiness of the project owner determined through background checks with banks and
financial community, business and trade associations, HLURB standing and major suppliers
credit records; and

Liquidity of the project owners determined by financial ratios and financial performances for
the past three years.
In addition, the Company also evaluates each potential project based on the following:





Size of the over-all development blueprint of a project and its implementation timetable on
phases;
Complexities and limitations of the structural design of the high-rise building project;
Project location accessibility of heavy construction equipment and proximity to clusters of ongoing project sites;
Logistics difficulties and limitations; and
Profitability.
The Company negotiates the final construction price with the project owner. Upon receipt of the
Notice to Proceed or the Notice of Award for a project, the Company depending on the agreement
with the project owner, procures the necessary building permits and other regulatory permits, and
immediately prepares for mobilization of construction equipment, manpower and materials needed for
the project. The Company secures Performance Bonds and Surety Bonds required in order to obtain
down payment from the project owner, and contractor‘s all-risk insurance. The Company also
negotiates and finalizes the terms of its construction contract with the project owner. The
responsibilities and warranties of Megawide under its construction contracts typically include among
others, on-time project turn-over and completion as per an agreed timetable, adherence to the agreed
material specifications and construction methods, and warranty on workmanship and material defects.
In the normal course of business, on a per project basis, the Company sub-contracts to specialty or
trade contractors such tasks as mechanical and electric works for its projects.
During construction, quality control procedures are strictly followed. The Planning and Technical
Manager is responsible for quality assurance and quality control during production and construction.
Under him are highly-trained inspectors and personnel. His team conducts on-site inspections to
assure compliance. As standard procedure, concrete samples are tested by specialized laboratories
to ensure compliance with ASTM, ANSI and CSI specifications.
To ensure that projects are on schedule, on-site project managers monitor and control the progress of
projects, mindful of the completion date pursuant to the construction contract. Project managers are
responsible for accomplishing project objectives, developing the project plan, managing the project
team and budget. Disagreements on quantities and specifications are handled by Quantity Surveyors
and Quality Control Engineers.
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Upon project completion, the following activities are conducted as a condition to project turnover to
the owner:





Megawide submits a Notice of Turn-Over and Completion to the project owner;
Megawide and the project owner conducts a joint inspection and punch listing;
Should there be no pending items for completion, the project owner issues a Certificate of
Completion;
The project owner releases retention monies upon submission by the Company of a
guarantee bond. The guarantee bond is typically valid for up to one (1) year from the project‘s
turnover date, and is required by project owners to guarantee the quality of the materials
provided, the equipment installed and its workmanship.
LEASED PROPERTIES
Megawide is leasing the 1,493 sq.m property at N. Domingo St., Barangay Valencia, Quezon City
where its corporate office is located from Megapolitan. The lease agreement is valid until February 5,
2015 and Megawide pays a monthly rental of P196,619.40. Megawide leases an office space from
Philwide with a monthly rental of P1,000.00.
In addition to the foregoing office spaces, Megawide also leases the following properties for its
operations:
Lessor
Mail Link Coordinates
EverForbes Development Corp
Will Decena & Associates, Inc,
Maria Elma Javier Loresca
Myrna Tomas
LVN Pictures Inc.
New Zealand Creamery, Inc.
New Zealand Creamery, Inc.
Eldan Land Use Management and
Development Corp
Natividad N. Makabuhay
Dizon Farms Produce, Inc.
Aguacate Marketing Corp.
Altria Land East, Inc.
Monthly Rental
P420,000.00 inclusive of 12% VAT
P67,578.94 inclusive of VAT and Withholding Tax
P80,000.00 net of VAT and Withholding Tax
P30,000 inclusive of Withholding Tax
P107,000.00 inclusive of VAT and other taxes
P271,404.67 inclusive of 12% VAT
P200.00/ sqm inclusive of 5% withholding tax and
12% VA, or a total of P270,000.00
P200.00/ sqm inclusive of 5% withholding tax and
12% VA, or a total of P 235,200.00
P80,000.00 inclusive of all taxes and fees
Validity
January 13, 2015
December 20, 2014
January 2015
February 28, 2015
March 31, 2016
April 11, 2016
May 31, 2015
P487,200.00 exclusive of applicable taxes.
P75.00/ sqm. VAT inclusive or a total amount of P
46,125.00
P150.00/sqm inclusive of VAT and all applicable
taxes or a total of ₱ 217,500.00
P 2,439,696.00 inclusive of VAT and other taxes
June 30, 2015
March 1, 2018
May 31, 2015
March 31, 2015
October 31, 2018
January 1, 2015
All of the above leases are subject to renewal upon mutual agreement of the parties.
DEPENDENCE ON CUSTOMERS
For the past three years, SMDC has been the Company‘s top customer, representing approximately
46% on average of the Company‘s Construction Revenues. However, starting in 2012, the Company
has been able to acquire new customers and expand its portfolio to include other developers as well.
As of 2013, SMDC accounts for 26% of Megawide‘s revenues The Company will continue to look out
for new prospective customers while maintaining a good relationship and repeat order business with
its existing customers.
COMPETITORS IN THE INDUSTRY
EEI Corporation (―EEI‖), and DMCI Construction (―DMCI‖) are among Megawide‘s major competitors.
Both have on-going residential condominium projects in Metro Manila. DMCI dominates domestic
infrastructure, while EEI, a publicly listed company, concentrates on heavy industries projects.
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The principal areas of competition are pricing, service and quality of construction. Megawide believes,
however, that it has an advantage over its competitors in the high-rise residential condominium
market because of its use of High Technology Building Systems, value-added engineering services,
technical competence and innovative ability. Furthermore, unit prices of Megawide‘s projects are
competitive with those of EEI‘s and DMCI‘s.
PROPERTIES
Megawide owns a 1.0294-hectare property located at Taytay, Rizal which is being used as an
equipment stockyard for such items as tower cranes, backhoes and other earthmoving equipment.
The same was acquired by Megawide for P21 million. Megawide owns this property and all its
construction equipment such as tower cranes and other earthmoving equipment, free of any
mortgage, lien or encumbrance. There are no limitations on Megawide‘s ownership or usage over
this property.
In 2011, Megawide acquired land in Ortigas Extension, Barangay San Isidro, Taytay Rizal with lot
area of 21,082square meters for P104 million. Megawide owns this property free of any mortgage,
lien or encumbrance. There are no limitations on Megawide‘s ownership or usage over this property.
In 2012, another lot was purchased in Taytay, adjacent to Megawide‘s precast plant with lot area of
8,505 square meters for P50 million. A 4,022 square meters lot adjacent to the stockyard of
2
Megawide in Taytay was purchased for P9 million. On the same year, Megawide bought a 178m
property located in the same municipality for a total amount of ₱1.157 million. Megawide owns these
properties free of any mortgage, lien or encumbrance. There are no limitations on Megawide‘s
ownership or usage over this property.
In 2013, Megawide has a total additional land acquisition amounting to P67 million in Taytay Rizal in
relation to the Precast Plant expansion. The property is free of any attachments and limitations on
ownership and usage.
Megawide invests on new tower cranes and earthmoving equipment to ensure maximum efficiency
and minimum down time during construction. As of June 30, 2014, these include tower cranes, heavy
equipment, trucks and service vehicles.
INSURANCE
The construction contracts entered into by Megawide require it to secure some or all of the following:
a surety bond, a performance bond, a contractor‘s all risk insurance and a guarantee bond. In most of
the contracts, proof of compliance is required prior to the issuance of the Notice to Proceed.
In general, a surety bond is secured to guarantee the repayment of the down payment, while a
performance bond is required to guarantee that Megawide will perform the work as specified by the
contract. The coverage of these bonds is normally reduced as the project progresses and obligations
are met. On the other hand, subject to the customary deductibles and exclusions, the Company‘s
contractors all risk insurance policy includes coverage for, among other things, third party liability to
the public and construction works and a guarantee bond is posted to guarantee any defects, except
those from ordinary wear and tear or not attributable to the Company, that may occur within one (1)
year from acceptance. A guarantee bond is obtained after complete turnover of the project.
Aside from the foregoing, the Company has sufficient insurance coverage that is required by
Philippine regulations for real and personal property. It is, however, not covered by any business
interruption insurance.
EMPLOYEES
As of June 30, 2014, the Company‘s manpower complement is as follows:
84
Division
Regular
Operations
Head Office
Total
3
169
1186
Project
Based
1081
105
172
Total
1084
274
1358
Megawide will continue to hire qualified and competent employees for the next twelve months for its
on-going projects.
Megawide‘s manpower complement is not unionized. The relationship and cooperation between the
management and staff has been good and is expected to remain so in the future. There has not been
any incidence of work stoppages or labor disputes in the past. There is no existing collective
bargaining agreement between Megawide and its employees. Megawide complies with the minimum
wage and employment benefits standards pursuant to Philippine law. It adopts an incentive system
that rewards and recognizes the employees who excel in their respective fields to foster the
harmonious relationship between management and the employees.
Megawide has a retirement plan which provides a retirement benefit equal to 22.5 days pay for every
year of credited service in accordance with Republic Act No. 7641 or the Retirement Pay Law. On
July 19, 2010, its Board of Directors resolved to establish a non-contributory retirement fund for its
officers and employees and appointed the fund‘s board of trustees. . Subsequently, on December 11,
2012, the Board approved the establishment of the Megawide Construction Corp. Ret. Plan for the
benefit of the Company‘s qualified employees. The Board appointed BDO Unibank – Trust and
Investments Group as trustee of the Retirement Fund. Megawide is currently in the midst of partially
funding the retirement fund.
No single person is expected to make a significant contribution to the business since Megawide
considers the collective efforts of all its employees as instrumental to the overall success its
performance.
Edgar Saavedra, the President and COO, and Michael Cosiquien, the Chairman and CEO are central
figures in the operations of Megawide and are currently the key decision makers. However, Megawide
is continuously hiring experts to further strengthen and professionalize its organizational and
management structure. Megawide continues to bolster its management positions in order to spread
out responsibilities. It also provides various training programs for its employees to maintain
competitiveness and efficiency.
INTELLECTUAL PROPERTY
The Company does not believe that its operations are dependent on any patent, trademark, copyright,
license, franchise, concession or royalty agreement.
RESEARCH AND DEVELOPMENT
Megawide has formed a Research & Development Team composed of the Chief Operating Officer,
the Vice President for Operation, the Precast Manager and the Planning and Technical Manager, to
continuously adapt and respond to new inventions, standards and quality assurance in construction. It
is also constantly working with international consultants for value engineering to achieve more cost
efficient building structures and maximum space utilization. Although it engages in research and
development activities, the expenses incurred by Megawide in connection with these activities are not
material.
GOVERNMENT APPROVAL AND PERMITS
All government approvals and permits issued by the appropriate government agencies or bodies
which are material and necessary to conduct the business and operations of the Company, were
obtained by the Company and are in full force and effect.
The Company and its business operations are subject to various laws and regulatory agencies,
including the Contractor‘s License Law, nationality restrictions, and environmental laws. Any changes
85
in the current environmental laws and regulations applicable to the Company may increase the
Company‘s operating expenses. The Company complies with environmental laws and will keep
abreast of any changes in such laws which may have an impact on its business. See Regulatory and
Environmental Matters on page 120.
Megawide believes that it is in compliance with local and national tax laws and regulations and it shall
continue to be so by paying all taxes, including income tax, withholding tax, real property tax and such
other taxes that are assessed against it and which Megawide believes to be due.
LEGAL PROCEEDINGS
The Company and MWCCI, are involved in two (2) Supreme Court cases relative to their respective
PPP Projects:
Osmeña v. DOTC Secretary, et.al. G.R.-S.P. No. 211737
On December 21, 2012, the DOTC and the MCIAA invited prospective bidders to apply for the prequalification and bidding for the MCIA Project. The DOTC and the MCIAA created a Prequalification,
Bids and Awards Committee (―PBAC‖) to administer the pre-qualification process and bidding for the
MCIA Project. The bidding was conducted following a dual-stage public bidding process prescribed by
Republic Act No. 6957, as amended by Republic Act No. 7718, or the Build-Operate-Transfer Law
(―BOT Law‖) and its Implementing Rules and Regulations. To be qualified to bid for the MCIA Project,
an entity/consortium must fulfill Legal Qualification Requirements, Technical Qualification
Requirements and Financial Qualification Requirements.
The Company and GMR formed a consortium (the ―Consortium‖) for the purpose of submitting a prequalification bid with the PBAC. On December 27, 2012, the DOTC and the MCIAA issued the
Instructions to Potential Bidders (―ITPB‖). On April 22, 2013, the Consortium submitted its prequalification bid in accordance with ITPB.
On May 15, 2013, the Consortium was pre-qualified along with the following consortia: (i) AyalaAboitiz Consortium, (ii) Filinvest Consortium, (iii) First Philippine Holding Consortium, (iv) Metro
Pacific Consortium, (v) SM Investments Consortium and (vi) San Miguel Corporation Consortium.
On May 29, 2013, the DOTC and the MCIAA issued the Instructions to Bidders (―ITB‖) stating that
only prequalified bidders shall be allowed to submit their bid proposals.
On November 28, 2013, the Consortium submitted its bid proposal in accordance the ITB and on the
same date, the PBAC opened the technical proposals of the pre-qualified consortia. Upon opening of
the Technical Proposal of the First Philippine Holding Consortium, it was revealed that its technical
partner, Wellington International Airport Limited, was replaced by Malaysia Airports Holdings Berhad.
On December 12, 2013, the financial proposals were opened and the Consortium emerged as the
highest bidder.
In the middle of the process of the post-qualification evaluation of the Consortium, a Petition for
Certiorari and Prohibition with Application for Temporary Restraining Order and/or Writ of Preliminary
Injunction dated April 3, 2014 (―Petition‖) was filed with the Supreme Court by petitioner Senator
Sergio Osmeña III. On April 6, 2014, Senator Osmeña filed a Supplemental Petition which essentially
sought the nullification of the Notice of Award in favor the Consortium.
In the Petition, petitioner prayed (i) to declare the Consortium as ―unqualified bidder‖ in view of: (1)
Conflict of Interest as defined in the ITPB and ITB and (2) lack of financial and technical capability and
(ii) to enjoin the DOTC and MCIAA from issuing a Notice of Award or executing a Concession
Agreement.
On July 28, 2014, the Company filed its Comment on the Petition (the ―Comment‖). In its Comment,
the Company argued that the Petition should be dismissed outright as it suffer from several fatal
procedural infirmities, to wit: (i) the Petition raises several factual questions, which the Supreme Court
86
cannot be required to entertain particularly in a petition for certiorari and prohibition; (ii) the petition for
certiorari and prohibition under Rule 65 of the Rules of Court is improper and cannot be pursued
against the Company which does not exercise judicial, quasi-judicial or ministerial functions; and (iii)
the petitioner has no locus standi to file the petition.
On the substantive grounds against the Petition, the Company maintained that (i) the Petition assails
matters which require to be left to the sole determination of the Executive Department, particularly the
PBAC and the DOTC, and thus beyond judicial cognizance; (ii) petitioner‘s prayer to enjoin the DOTC
and the MCIAA from issuing a Notice of Award or executing a Concession Agreement is already moot
as both already occurred; (iii) the petitioner failed to establish a violation of law; (iv) there is no conflict
of interest; and (v) the Consortium is financially and technically capable of undertaking the Airport
Project and developing, maintaining and operating the renovated MCIA Project.
On its Opposition to Application for a Temporary Restraining Order/Preliminary Injunction, the
Company argued that: (i) the petitioner failed to show a clear, unmistakable legal right that demands
protection nor for a prima facie entitlement to the relief demanded in the Petition, (ii) petitioner failed
to show that the public and the State will suffer grave and irreparable injury from the continuation of
the award and the execution of the Concession Agreement and/or the MCIA Project; (iii) grave and
irreparable injury will result should the bidding process be enjoined and, consequently, the MCIA
Project be delayed; and (iv) the petitioner failed to show that an exception from the general prohibition
against the injunction of BOT projects, such as the MCIA Project, is warranted.
On August 4, 2014, GMR filed its Comment to the Petition and Supplement Petition. Its allegations
support that of Megawide‘s Comment.
The Company has yet to receive the Comment of the DOTC, MCIAA or PBAC and the Supreme
Court has yet to issue Orders on the matter. The Concession Agreement was signed on April 12,
2014 and GMCAC and MCIAA are in the process of taking over the operations of the airport in
accordance with said Concession Agreement.
Daisy Joy Rojallo Cervantes, et.al., vs. H.E. Benigno Simeon Aquino III, Hon. Enrique T. Ona, Hon.
Teodoro J. Herbosa, Cosette C. Canilao, Jan Irish P. Villegas, Arsenio M. Balisacan, Cesar V.
Purisima, Consortium of Megawide Construction Corporation and World Citi Medical Center
Supreme Court, Case No. 210805 (Certiorari and Prohibition with Application for the Issuance of a
Writ of Preliminary Injunction and/or Temporary Restraining Order)
On September 18, 2012, the National Economic and Development Authority approved the MPOC
Project, a Build-Operate-Transfer scheme pursuant to the PPP program of the Government. The
MPOC Project involves the construction of a new hospital facility within the National Kidney and
Transplant Institute Compound along East Avenue, Quezon City. It is intended to be a super-specialty
tertiary orthopedic hospital, comprising of a minimum of 700-bed capacity hospital with all the required
infrastructure and installation of modern diagnostics and therapeutic equipment.
On January31, 2014, the petitioners, composed of civil society groups, health workers, and patients of
the Philippine Orthopedic Center (―POC‖) who are opposed to the MPOC Project filed a Petition for
Certiorari and Prohibition before the Supreme Court.
The petitioners prayed that the Supreme Court annul and set aside the MPOC Project for being in
violation of Article II, Section 15 of the Philippine Constitution and the treaty commitments recognizing
the people‘s right to health. Petitioners argue that the Government relinquished the duty and
responsibility to provide and ensure a basic social service such as health to a private entity through
privatization or commercialization of the POC. The Petitioners further prayed that the Supreme Court
issue a writ of preliminary injunction or temporary restraining order to stop the implementation of the
MPOC Project.
On April 24, 2014, the consortium composed of Megawide and World Citi, Inc. filed its
Comment/Opposition to the Petition. The consortium‘s arguments are as follows:
87
Procedurally, the Petition must be dismissed because a) Petitioners do not have standing to file the
case, b) Petitioners have not yet exhausted all available administrative remedies, and c) policy
decisions of the executive department are not proper subjects of judicial review;
Substantially, a) the MPOC project does not violate the constitution and our treaty obligations. It is not
a privatization but merely a modernization of the POC. In any case, private investments into public
health services are not prohibited by the constitution. b) Section 15, Article 2 of the Constitution is not
a self-executory provision, c) the Build Operate and Transfer law can cover health facilities and
hospitals.
The other respondents (officers of the Executive Department) represented by the Office of the
Solicitor General, requested for additional time to file their Comment/Opposition.
All the private respondents have submitted their respective pleadings and corresponding supporting
documents. The Company is currently awaiting the order from the Supreme Court confirming that the
case has been submitted for resolution.
While the Company believes that both Supreme Court cases will not prosper, the Company will be
compensated in the event of an adverse decision resulting in the cancellation of the projects. In its
agreement with the DOTC and the DOH, the DOTC or the DOH, as the case may be, will be liable for
termination payments computed in accordance with a formula set forth in the relevant agreement,
taking into account the stage at which the project was terminated.
On November 3, 2014, the Company became aware of news reports that a petition was filed by
Business for Progress Movement seeking to halt the rehabilitation and expansion of MCIA by
GMCAC. As of date, the Company has yet to receive a copy of said Petition; however, based on the
issues mentioned in the news item, it appears that said petition is a mere rehash of Osmeña v. DOTC
Secretary et. al, G.R.-S.P. No. 211737. The Company is of the position that the petition is already
moot and academic given that GMCAC has effectively taken over the operations of MCIA on
November 1, 2014.
Aside from the foregoing, there are no pending legal cases against the Company and its management
that will have immediate material effect on the financial position and operating results.
CORPORATE GOVERNANCE
Megawide has substantially complied with the provisions of its Manual on Corporate Governance.
Megawide commits to the principles and best practices of governance to attain its goals and
objectives. To ensure good governance, a system has been established that monitors and evaluates
the performance of Megawide and its Management. Megawide‘s Manual on Corporate Governance
contains the specific principles which institutionalize good corporate governance in the organization.
Megawide has not deviated from its Manual since its adoption of the Manual until present.
On March 27, 2014, the Board of Directors reorganized the committees. The Audit and Risk
Management Committee became the ―Audit and Compliance Committee.‖ A separate Risk Committee
was created to be headed by Professor Leonor Briones. The Nomination and Compensation
Committees were merged into the ―Compensation and Nomination Committee‖ to be headed by Ms.
Elizabeth Anne Uychaco.
Continuous monitoring is being done by the Compliance Officer, Audit and Compliance Committee
and Risk Committee, President and Chief Financial Officer to assure compliance.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The following management's discussion and analysis of the Company's financial condition and results
of operations should be read in conjunction with the Company's audited and unaudited financial
statements, including the related notes, contained in this Preliminary Prospectus. This Preliminary
Prospectus contains forward-looking statements that involve risks and uncertainties. The Company
cautions investors that its business and financial performance is subject to substantive risks and
uncertainties. The Company's actual results may differ materially from those discussed in the forwardlooking statements as a result of various factors, including, without limitation, those set out in "Risk
Factors" on page 37 of the Prospectus. In evaluating the Company's business, investors should
carefully consider all of the information contained in "Risk Factors" on page 37 of the Prospectus.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE SIX (6) MONTHS ENDED JUNE 30, 2014 COMPARED TO SIX (6)
MONTHS ENDED JUNE 30, 2013
Results of Operations
Revenues and Cost of Construction
The Company has reported growth of 21% or P887 million in construction revenues for the first six
months of 2014 due to mobilization of new projects such as Shangri-la Salcedo, BPO Araneta and
Fern Residences of SMDC. As these projects gain momentum and the Company ramped up
construction, the double digits revenue growth posted can be sustain throughout the year.
Cost of construction is P4.17 billion and P3.42 billion in 2014 and 2013, respectively. There is an
increase of 22% or P749 million. Increase is directly related to the increase in revenue.
Operating expenses increased by 12% or P19 million mainly due to increase in salaries and wages.
Head office has increased its manpower to provide better support to the continuously growing
operation of the Company.
Meanwhile, operating profit increased to P703 million in the first half from P584 million during the
same period a year ago. Operating margin was unchanged at 14% in spite of the slight increase in
operating expenses.
Net profit dropped by 29%, P537 million compared to P752 million in the same period a year ago due
mainly to decrease in non-core earnings in finance income as the company deployed allocated cash
to its airport subsidiary. Construction of the new passenger terminal in Mactan-Cebu International
Airport is set to begin early next year.
Going forward, the Company remains upbeat on the construction industry in general as private
developers continue to roll out new office and commercial buildings and more large ticket PPP
projects are set to be bidded out.
Review of financial condition as of June 30, 2014 as compared with financial condition as of
December 31, 2013
Financial Condition
Current assets decreased by 4% or P654 million due to the following:
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Cash and cash equivalents decreased by 66% or P1.50 billion due to investment made by the
Company to GMCAC incorporated on January 13, 2014. GMCAC will build the new airport in Mactan
Cebu and will operate it for 25 years. Megawide has accounted the joint venture as Investment in
Subsidiary and prepared a consolidated financial statements for financial reporting purposes as
required by PFRS 10.
Financial assets at fair value through profit or loss decreased by 20% or P1.16 billion. The Company
terminated some of its placements and invested the proceeds in GMCAC.
Trade and other receivables decreased by 9% or P358 million. The Company made a good effort to
collect its receivables as of the end of second quarter. The Company has implemented measures to
ensure that its receivables are being monitored and collected when due.
Construction materials increased by 22% or P74 million. The Company was able to book several
projects in 2013 and 2014. With this, the Company has increased its purchases of construction
materials for these new projects.
Cost in excess of billings increased by 30% or P678 million due to cost incurrence of all on- going
projects and the major contributors of the increase are the projects that were just started like Grass
Tower 4 of SMDC, BPO Araneta of Araneta Group, Shangrila Salcedo and Annapolis of Bayswater
Realty.
Other current asset increased by 82% or P1.61 billion as a result of consolidating the financial
statements of the Company and GMCAC. Other current asset includes the input VAT on bid premium
paid by GMCAC.
Non-current assets increased by 326% or P15.54 billion due to the following:
Consessionaire rights increased by 100% or P14.76 billion as a result of consolidating the financial
statements of the Company and GMCAC. The P14.76 billion represents the initial investment of
GMCAC which includes the bid premium of P16 billion. GMCAC will build the new Mactan Cebu
Airport and will operate it for 25 years.
Property and equipment increased by 4% or P152 million due to the additional equipment purchased
by the Company to support its growing operation.
Investment in associate increased by 296% or P580 million mainly due to the Company‘s subscription
to its ownership interest in MWCCI and the share of the Company on the net income of CiticoreMegawide Consortium, Inc (―CMCI‖).
Deferred tax increased by 13% or P5.20 million due to deferred tax on provision for retirement
benefits and amortization of deferred gain on sale and leaseback.
Other non-current asset increased by 22% or P42.5 million due to deferred input VAT on purchases of
capital asset and acquisition of computer software licenses.
Current liabilities increased by 159% or P12.42 billion due to the following:
Interest-bearing loans and borrowings-current increased by 515% or P12.53 billion. The Company
availed short-term loans to finance the operation and capital expenditures of the Company while
GMCAC availed a bridge loan with BDO amounting to P11.29 billion to finance the required bid
premium of the Mactan Cebu Airport. Since the Company has a controlling interest in GMCAC, the
Company is required to prepare the consolidated financial statements for reporting purposes. As a
result of the consolidation, the interest bearing loans and borrowings suddenly increased by P12.53
billion.
Trade and other payables increased by 55% or P1.12 billion due to increase in retention payable to
subcontractors and consolidating the payables of GMCAC in the financial statements of the
Company. The Company prepared the consolidated financial statements as required by PFRS 10
because the Company has a controlling interest in GMCAC.
90
Advances from customers increased by 5% or P51 million due to down payments received from new
clients but net of downpayment recoupment on progress billings to customers.
Billings in excess of costs on uncompleted contracts – net decreased by 55% or P 1.26 billion. The
decrease is due to several projects of SMDC that already at their tail end of construction such as Jazz
Residences Phase 1 and Phase, MPlace Phase 1 and Phase 2, Blue Residences, Grass Tower 2 and
Filinvest projects like Linear, Studio City and Studio Zen. Since these projects are on their way to
completion stage, their billings also decreased.
Other current liabilities decreased by 12% or P6 million due to amortization of unearned income on
sale and leaseback.
Non-current liabilities decreased by P11 million due to the following:
Interest-bearing loans and borrowings-noncurrent decreased by P17 million due to amortization of
deferred charges related to the issuance of the Corporate Notes issued in 2013.
Retirement benefit obligation increased by 9% or P10 million due to accrual of retirement obligation.
Other non-current liability decreased by 100% or P3 million due to reclassification of non-current
portion of unearned interest income on sale and leaseback to current. Other non-current liability was
reclassified to current because this will mature in 2015.
Retained Earnings increased by 20% or P539 million due to net income earned as of June 30, 2014.
Non-controlling interest increased by 100% or P1.9 billion as a result of consolidating the financial
statements of the Company and GMCAC. Non-controlling interest pertains to the ownership of GMR
Infrastructure Limited in GMCAC which is 40%.
Review of Pro-Forma Adjustments on Financial Condition as at December 31, 2013 and June
30, 2014.
Balance Sheet
December 31, 2013 Pro-forma Adjustments
Cash and cash equivalents decreased by P24 million. The Company terminated its short-term
placements amounting to P3 billion and invested P2.9 billion of the proceeds to GMCAC. In addition,
the Company also advanced P200 million to GMCAC. The cash balance of GMCAC is P64 million
and the amount is consolidated in the pro-forma balance sheet as of the period ended December 31,
2013.
Financial assets at fair value through profit or loss decreased by P3 billion due to the termination of
UITF. The proceeds of the terminated UITF is P3.02 billion
Trade and other receivables increased by P51 million. The increase represents the advances made
by GMCAC to the Construction Joint Venture. The Construction Joint Venture will take charge of the
construction of the new terminal.
Other current asset increased by P1.72 billion due to the input vat of the bid premium paid by GMCAC
to Mactan Cebu International Airport (MCIA).
The payment of the bid premium by GMCAC to MCIA and other related project expenses had caused
concessionaire rights to increase by P14.76 million.
Property and equipment increased by P2 million due to the assets of GMCAC that were included in
the consolidated pro-forma balance sheet.
91
Interest-bearing loans and borrowings-current increased by P11.29 billion. GMCAC availed a loan
with a local bank and the proceeds were used to pay the bid premium to MCIA.
Trade and other payables increased by P277 million. The amount represents the liabilities of GMCAC
which were consolidated in the pro-forma balance sheet. GMCAC has a payable to GMR Limited
(minority interest) amounting to P181 million and interest payable amounting to P86 million. The
interest payable is the accrued interest on the bridge loan.
Retained Earnings increased by P8.21 million which is the net effect of the gain on the termination of
UITF amounting to P10.8 million and net loss of GMCAC attributable to Megawide amounting to P2.6
million.
Balance Sheet
June 30, 2014 Pro-forma Adjustments
Cash and cash equivalents increased by P185 million. The increase is the net cash generated from
the operation of GMCAC.
Trade and other receivables decreased by P0.26 million. This adjustment is the result of the
liquidation of advances to employees by GMCAC.
Other current asset decreased by P23 million due to the offsetting of input and output vat of GMCAC.
The output is for the 2 months revenue of GMCAC.
Concessionaire rights increased by P212 million due to the capitalization of interest on bridge loan
which was used to finance the bid premium of the Mactan Cebu International Airport Project.
Property and equipment decreased by P0.21 million due to the depreciation of fixed assets of
GMCAC.
Trade and other payables increased by P202 million. The increase is the net of accrual of interest
expenses amounting to P212 million and payments of accounts payable by GMCAC amounting to
P10.2 million.
Retained earnings increased by P103 million due to net income of the Company and net income of
GMCAC attributable to Megawide.
Review of Pro-Forma Adjustments on Results of Operations for the year ended December 31,
2013 and the six (6) months ended June 30, 2014.
Income Statement
December 31, 2013 Pro-forma Adjustments
Other operating expenses increased by P3.22 million. This represents the operating expenses of
GMCAC which were included in the pro-forma income statement.
Other Income (Charges)
Finance Costs increased by P1.52 million as a result of consolidating the forex loss on GMCAC.
Other Income increased by P15.86 million due to the gain on sale of UITF.
Tax expenses increased by P4.64 million due to the adjustment of the gain on sale of UITF reflected
in the pro-forma balance.
Income Statement
December 31, 2013 Pro-forma Adjustments
Revenue increased by P263 million due to the revenue of GMCAC.
92
Direct costs increased by P77 million represents the direct cost incurred in the operation of GMCAC.
Other Operating Expenses increased by P10.4 million represents the operating expenses of GMCAC.
Other Income (Charges) decreased by P 15 million due to the adjustment already reflected in the
2013 pro-forma balance in line with the gain on sale of UITF.
Finance Costs decreased by P1.4 million due to the bank charges for GMCAC.
Tax Expense decreased by P4.6 million in line with the decrease in other income already adjusted in
2013 pro-forma balance
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE FULL YEAR ENDED DECEMBER 31, 2013 COMPARED TO FULL YEAR
ENDED DECEMBER 31, 2012
Results of Operations
Revenues and Cost of Construction
Megawide recorded gross revenues of P10.88 billion in 2013. There is an increase of 33% or P2.68
billion compared to revenue booked in 2012 amounting to P8.20 billion. The bulk of the increase is
due to the accomplishment of the Company‘s PPP school infrastructure project of Department of
Education in 2013.
Cost of construction is P9.10 billion and P6.81 billion in 2013 and 2012, respectively. There is an
increase of 34% or P2.29 billion in 2013.
Operating expenses increased by 23% or P62 million due to the growing operation of the Company.
Operating expenses is P338 million and P276 million in 2013 and 2012, respectively.
Review of financial condition as of December 31, 2013 as compared with financial condition as
of December 31, 2012
As of the end of 2013, total assets stood at ₱21.50 billion, 79% higher than its value of ₱12.04
billion as of the end of 2012.
Current assets grew by 112% or ₱8.84 billion due to the following:
Cash and cash equivalents increased by 987% or P2.07 billion because of the short-term placements
amounting to P700 million with a 14 to 19 day-term that the Company procured before the year
ended.
Financial assets at fair value through profit or loss increased by 191% or P3.82 billion because
proceeds of the corporate notes issued in February 2013 and new shares issued in May 2013 were
invested in short-term placements.
Construction materials increased by 402% or P272 million due to voluminous purchases of
construction materials required by projects especially for PPP school infrastructure project of the
Department of Education.
Cost in excess of billings increased by 112% or P1.18 billion because of cost of construction already
incurred but not yet billed towards the end of the year.
Other current assets also increased by 74% or P829 million due to the increased in advances to
suppliers for new projects including the PPP school infrastructure of Department of Education.
93
Trade and other receivables increased by 19% or P669 million due to the billings in December that
were subsequently collected in early 2014 and increase in retention receivable which is 10% of
progress billings that were withheld by customers.
Non-current assets grew by 15% due mainly to:
Increase in property and equipment by 15% or P555 million because of the expansion of batching
plant in Taguig, acquisition of mobile mixers and construction equipment.
Increase in investment in associate by 35% or P51 million due to the additional investment in CMCI in
2013.
Increase in other non-current asset by 27% or P41 million due to deferred input vat on purchases of
capital asset and increase in intangible asset. Intangible asset represents the cost of the computer
license software of the Company.
Deferred tax assets decreased by 35% or P28 million because of the tax effect of the reversal of
allowance for doubtful accounts.
As of the end of 2013, total liabilities registered an increase of 78%, from ₱7.27 billion as of
2012 to ₱12.96 billion at the end of 2013.
Current liabilities increased by 30% or ₱1.82 billion due to:
Interest-bearing loans and borrowings – current increased by 17% or P357 million due to additional
short-term loans availed by the Company for working capital. Bank loans interest rate ranges from
2.75% to 3.00%. Portion of the non-current finance lease is reclassified to current potion that also
contributed to the increase of this account.
Advances from customers increased by 42% or P294 million due to the downpayments received from
Shangrila, Rockwell and BPO Araneta projects.
Billings in excess of costs on uncompleted contracts – net increased by 89% or P 1.09 billion because
of higher net revenue derived from new projects because of lesser costs that are incurred during the
structural phase of the project compared with the finishing phase of the project.
Increase in trade and other payables increased by 4% or P77 million due to increase in retention
payable. Retention payable is paid to subcontractors upon completion of work commissioned to them.
As of the end of 2013, total equity registered an increase of 79%, from P4.77 billion as of 2012 to
P8.54 billion at the end of 2013.
Capital stock increased by 48% or P535 million due to additional issuance of shares and declaration
of stock dividend in 2013
Addition paid-in-capital increased by 114% or P2.25 billion because of the issuance of additional
shares in 2013 at a price higher than par value.
Financial Condition
Material Changes in Megawide’s Audited Income Statement for the year ended December 31,
2013 compared to the Audited Income Statement for the year ended December 31, 2012
(increase/decrease of 5% or more)
33% increase in contract revenue or ₱2.68 billion
Increase in contract revenue arising from accomplishment of PPP school infrastructure project of the
Department of Education.
34% increase in Contract Costs or ₱2.29 billion
Increase in contract cost is directly related to the increase in contract revenue
94
23% increase in Operating Expenses or ₱62 million
Increase in salaries and wages by P12 million because of the increase in manpower to support the
growing operation of the Company.
Taxes and licenses increased by P13 million due to DST on short-term loans, DST on issuance of
new shares of the Company and DST on stock dividend.
Professional fees increased by P10 million due to availment of professional services in arranging the
requirements of the PPP school infrastructure project of the Department of Education and other public
and private biddings that the Company has participated.
94% increase in Finance Income or ₱222 million
Increase is due to gain on sale of RTB and interest income on short-term investments.
79% increase in Finance Costs or ₱186 million
Increase is due to interest on corporate note and issuance cost of corporate note.
23% increase in Other Income or ₱9 million
Increase is due to gain on sale of fixes assets and amortization of deferred gain on sale and
leaseback.
9% decrease in Income Tax or ₱13 million
Decrease is due to the tax effect of the write-off of allowance for doubtful accounts which is a
deductible expense per income tax computation. The company also availed its income tax holiday
based on its registered activities.
38% increase in Net Income or ₱383 million
Increase in contract revenues, operating efficiency and other income
Material Changes in Megawide’s Audited Balance Sheet as of December 31, 2013 compared to
the Audited Balance Sheet as of December 31, 2012 (increase/decrease of 5% or more)
Cash and cash equivalents increased by 987% or P2.07 billion because of the 14 to 90 days shortterm placements amounting to P700 million that the Company procured before the year ends.
Financial assets at fair value through profit or loss increased by 191% or P3.82 billion because
proceeds of the corporate notes issued in February 2013 and new shares issued in May 2013 were
invested in short-term placements
Construction materials increased by 402% or P272 million due to voluminous purchases of
construction materials required by projects especially for PPP school infrastructure project of the
Department of Education.
Cost in excess of billings increased by 112% or P1.18 billion because of cost of construction already
incurred but not yet billed towards the end of the year
Other current assets also increased by 74% or P829 million due to the increased in advances to
suppliers for new projects including the PPP school infrastructure of Department of Education.
Trade and other receivables increased by 19% or P669 million due to the billings in December that
were subsequently collected in early 2014 and increase in retention receivable which is 10% of
progress billings that were withheld by customers.
Increase in property and equipment by 15% or P555 million because of the expansion of batching
plant in Taguig, acquisition of mobile mixers and construction equipment.
Increase in investment in associate by 35% or P51 million due to the additional investment in CMCI in
2013
95
Increase in other non-current asset by 27% or P41 million due to deferred input VAT on purchases of
capital asset and increase in intangible asset. Intangible asset represents the cost of the computer
license software of the Company.
Deferred tax assets decreased by 35% or P23 because of the tax effect of the reversal of allowance
for doubtful accounts.
Interest-bearing loans and borrowings – current increased by 17% or P357 million due to net
availments of short-term loans by the Company for working capital. Bank loans interest rate ranges
from 2.75% to 3.00%.
Advances from customers increased by 42% or P294 million due to the down payments received from
Shangrila, Rockwell and BPO Araneta projects.
Billings in excess of costs on uncompleted contracts – net increased by 89% or P1.09 billion because
of higher net revenue derived from new projects because of lesser costs are incurred during the
structural phase of the project compared with the MEPF and finishing phase of the project
Interest-bearing loans and borrowings – noncurrent increased by 321% or P3.84 billion due to the
issuance of corporate notes of the Company. Interest rate ranges from 5.47% to 5.68%.
Post-employment benefits increased by 117% or P60 million as a result of the amendments in PAS
19 mandating the outright recognition of unrecognized actuarial loss instead of deducting it from
present value of the obligation.
Other non-current liability decreased by 86% or P21 million as a result of the reclassification of noncurrent finance lease to current that are due in 2014.
Capital stock increased by 48% or P535 million due to additional issuance of shares and declaration
of stock dividend in 2013
Addition paid-in-capital increased by 114% or P2.25 billion because of the issuance of additional
shares in 2013 at a price higher than par value. Par value of shares is P1.00.
Retained earnings increased by 60% or P1.015 million due to the net income earned in 2013.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE FULL YEAR ENDED DECEMBER 31, 2012 COMPARED TO FULL YEAR
ENDED DECEMBER 31, 2011
Results of Operations
Revenues and Cost of Construction
Megawide recorded gross revenues of P8.20 billion in 2012. There is an increase of 6% compared to
revenues booked for the same period in 2011 amounting to P7.74 billion. The increase in contract
revenues and its corresponding costs is mainly due to the following new projects: Studio City and
Studio Zen of Filinvest Land, Inc., Jazz Phase 2 of SMDC, BPO Buildings of Cyberzone Properties
Inc. and Department of Education School Buildings. Total revenue generated from these projects
amounted to P2.42 billion at the end of 2012. Operating efficiency improved significantly in 2012 due
to better control on construction expenses. As a result, net income increased to P1 billion from P750
million it earned during the same period in 2011.
Review of financial condition as of December 31, 2012 as compared with financial condition as
of December 31, 2012
Financial Condition
96
As of the end of 2012, total assets stood at P 12 billion, 45% higher than P 8.29 billion as of the
end of 2011 due to the following:
Current assets grew by 32% due to:
Increase in short-term investments by 158% because Megawide invested its cash in short-term
money market products that significantly contributed to the decrease in cash and cash equivalents.
Increase in trade and other receivables by 41% or P995 million because of the increase in accounts
receivables by P1 billion.
Cost in excess of billing also increased by P614 million because of unbilled cost not yet billed as of
December 31, 2012 for some projects.
Other current assets increased by 58% due to increase in advances to suppliers by P318 million in
2012. Advance payments represent down payment to supplier and subcontractors. Input VAT
increased by P95 million due to voluminous purchases of construction materials (local and imported)
in 2012.
Non-current assets grew by 80% due to:
Increase in property and equipment 73% or P1.59 billion as a result of the additions of newly acquired
precast plant and machineries and construction equipment to support the existing and new projects of
Megawide.
Other non-current assets increased by 66% or P60 million due deferred input tax on purchases of
capital asset.
Megawide formed CMCI with its parent company CHI and contributed P147 million which is
equivalent to 10% ownership of the joint venture. The investment represents that total investment in
subsidiary and associate.
Total liabilities registered an increase of 66% or P2.88 billion due to the following:
Increase in interest-bearing loans by 99% or as a result of additional short-term bank loans for
working capital use.
Increase in accounts payable by P426 million which is correlated to the increase on purchases of
construction materials and services in 2012.
Increase in retention payable by P338 million also caused the increase in payables.
Increase in billing in excess of cost by 23% or P230 million due to higher billings than actual work
done for some projects.
Advances from customers decreased by 14% or P112 million due to recoupment of advances in each
billing made to customers.
Material Changes in Megawide’s Audited Income Statement for the year ended December 31,
2012 compared to the Audited Income Statement for the year ended December 31, 2011
(increase/decrease of 5% or more)
Revenue increased by 6% or ₱463 Million
Increase in construction revenue is due to the projects that started in 2012 namely; Ihub 9 & 10, FCC
Cebu, Studio City, Studio Zen, One World, Jazz Phase 2, My Place 2, and Department of Education
schools. Total revenue generated from these projects amounted to P2.42 billion in 2012.
Cost of construction increased by 3% or ₱169 Million
97
Increase of cost of construction is directly caused by increase in revenue. Cost of construction ratio is
83% and 86% in 2012 and 2011, respectively. There is an operation improvement that caused a 3%
savings in cost of construction or P169 million.
Other operating expenses increased by 5% or ₱13 Million
Salaries and Wages posted an increase of P27 million due to increase in number of employees from
1,196 to 1,844 from December 31, 2011 to December 31, 2012, or an increase by 648 employees
including supervisory and managerial level.
Depreciation expense increased by P19.7 million due to a full year depreciation of Megawide‘s
buildings, furniture, fixtures and office equipment. There is also an increase in depreciation of
transportation equipment due to new acquisition of company cars.
Utilities increased by P5.89 million due to increase in number of employees in the head office.
Insurance expense increased by P2 million because of bonds purchased for project biddings,
insurance of service vehicles and insurance of office building.
Rental expense increased by P1 million because of rental of additional office equipment and staff
house.
However, the total increase of the abovementioned accounts was negated by the decline in taxes and
licenses of P23 million and P19 million for repairs and maintenance.
Finance Costs increased by 223% or ₱162 million
Increase in bank borrowings by P1.61 billion caused the increase in finance cost
Finance Income increased by 114% or ₱126 million
Increase in short-term placements by P1.20 billion caused the increase in finance income
Other Income increased by 97% or ₱19 million
Due to increase in scrap sales and amortization of deferred income in sale and leaseback transaction.
Material Changes in Megawide’s Audited Balance Sheet as of December 31, 2012 compared to
the Audited Balance Sheet as of December 31, 2011 (increase/decrease of 5% or more)
Cash and Cash Equivalents decreased by 85% or ₱1.23 billion
In 2011, cash & cash equivalents amounted to P1.40 billion mainly due to the unused proceeds
received from IPO listing of Megawide in February 2011. As of the year-end quarter of 2012, cash &
cash equivalents amounted to only P.21 billion. There is a 86% or P1.23 billion decreased compared
with that of 2011. The decreased is due to investment of cash in retail treasury bills or RTB which is
earning a 6.25% interest per annum and short-term placements with a local bank earning 4.10% to
4.20% per annum.
Short-term Investments increased by 158% or ₱1.23 billion
Investments in RTB and short-term placement caused the short-term investments to pile up to P2
billion as of year-end of 2012. Total interest income on these investments amounted to P 235 million
as year-end. Interest rate of RTB is 6.25% per annum and 4.10% to 4.20% for short-term placements
Trade and Other Receivables increased by 41% or ₱995 million
Increase in this account is due to the increase in construction receivable by 42% or P994 million.
Increase in revenue caused the increase in construction receivable. This increase in receivable
represents the billing of Megawide to CMCI for its Department of Education project that started only in
the 4th quarter of 2012.
Construction Materials decreased by 60% or ₱103 million
Increase is due to higher consumption of construction materials in 2012 compared to prior year.
Inventories as of year-end are those still in the premise of the warehouse. Inventories already
delivered in the projects are considered consumed.
98
Cost in Excess of Billing increased by 138% or ₱614 million
Increase is due to unbilled project cost for some projects as of December 31, 2012.
Other Current Asset increased by 58% or ₱415 million
Advances to Suppliers increased by P318 million in 2012. Advance payments represent down
payment to supplier and subcontractors. In 2012, Megawide paid P116 million as down payment for
its rebar supply, P14 million was paid to the Bureau of Customs for advance duties and the rest to
suppliers and subcontractors.
Input VAT increased by P95 million due to voluminous purchases of construction materials (local and
imported) in 2012. This is correlated also with the increase in payable as of year-end. Prepaid
insurance increased by P14 million because of the procurement of insurances for new projects.
Security deposit increased by P13 million because of the warehouses, staging areas for new projects
rented by Megawide for its operation.
Investment in Subsidiary increased by 100% or ₱145 million
Megawide formed CMCI with its parent company CHI and contributed P145 million which is
equivalent to 10% ownership of the joint venture.
Property, Plant & Equipment increased by 73% or P1.59 billion
The increase in property and equipment is due to additions of construction equipment, precast plant,
precast and batching machineries in 2012. Total cost of precast plant is P387 million, while total cost
for precast and batching machineries is P592 million.
The Company also purchased the shares of Altria for P305 million but accounted the purchase as
purchase of asset only. Altria owns land valued at a book value at P303 million. This land too was
recognized in the books of Megawide.
Deferred Tax Asset increased by 142% or P38 million
Increase is due to set-up of deferred asset for allowance of doubtful account in 2012 amounting to
P89 million.
Interest-Bearing Loans and Borrowings increased by 97% or ₱1.61 billion
Increase in borrowings is caused by availments of loans for working capital requirements. Megawide
opted to invest its cash and avail loans to support its operation because Megawide‘s investments
yield higher return compared with interest cost of borrowed capital. The latest short-term loan interest
rate provided to Megawide ranges from 3.70% to 3.80%.
Trade and Other Payables increased by 130% or ₱1.10 billion
Accounts Payable increased by P421 million which is correlated to the increase on purchases of
construction materials and services in 2012.
Increase in retention payable by P338 million also caused the increase in accounts payable.
Other Payables increased by P302 million because of the purchase of shares of Altria.
Advances from customers decreased by 14% or ₱112 million
Decrease in this account is due to recoupment of down payment in 2012. A percentage of the down
payment is deducted from the total billing every progress billing.
Billing in Excess of Cost increased by 23% or ₱230 million
Increase is due to higher billing than the actual work done for some projects as of December 31,
2012.
Other Liabilities and Other Non-Current Liabilities increased by 157% or ₱47 million
Other liabilities include unearned income from sale and leaseback and government payables such as
withholding taxes and mandatory contributions.
99
Unearned income from sale and leaseback arises when Megawide sells its depreciated equipment
and leases it back. The difference between the book value of the asset and selling price shall be
recognized as unearned income and shall be amortized based on the lease term. There is of P30
million increase in unearned interest income in 2012 because of the leaseback transaction entered
into by Megawide with BDO Leasing.
Retirement Benefit Obligation increased 13% or ₱6 million
The increase in obligation is due to accrual of retirement benefits in 2012.
Retained Earnings increased by 102% or ₱863 million
Increase is due to the net income in 2012
There were no seasonal aspects that had a material effect on the financial condition or results of
operations of Megawide.
There are no explanatory comments on the seasonality of interim operations. There are no material
events subsequent to the end of the interim period that have not been reflected in the financial
statements of the interim period.
There are no material amounts affecting assets, liabilities, equity, net income or cash flows that are
unusual in nature; neither are there changes in estimates of amounts reported in prior interim period
of the current financial year.
100
LIQUIDITY AND CAPITAL RESOURCES
As regards internal and external sources of liquidity by the Company, funding will be sourced from
internally generated cash flows, and also from borrowings or available credit facilities from other local
and international commercial banks.
There is no material commitment for capital expenditures other than those performed in the ordinary
course of trade or business.
There is no significant element of income not arising from continuing operations.
There have not been any seasonal aspects that had a material effect on the financial condition or
results of operations of Megawide.
101
THE PHILIPPINE CONSTRUCTION INDUSTRY
The information in this section has been derived from various government and private publications,
and unless otherwise indicated, has not been prepared or independently verified by the Company or
the Joint Issue Managers or the Underwriter or any of their respective affiliates or advisors. Please
refer to the section “Regulatory and Environmental Matters” on page 120 of this Preliminary
Prospectus.
Regulated Industry
R.A. No. 4566 as amended by PD No. 1746 requires a construction company seeking to operate in
the Philippines to obtain either a regular or a special license with the PCAB. In order to enforce the
licensing requirements, all architects and engineers preparing plans and specifications and all public
or private agencies or entities conducting biddings and/or letting out contracts for construction work to
be contracted and undertaken in the Philippines, shall include in their invitation to bidders and other
bidding documents necessary stipulations to convey to every bidder, whether he is a resident of the
Philippines or not, the information that it will be necessary for him to have a license before his bid is
considered.
Classification and Categorization
Constructors are classified into three main contracting classifications, based on capability and
specialization:
Classification
General Engineering Construction
Areas of Specialization
a.) Road, highway, pavement and bridge
b.) Irrigation and flood control
c.) Dam, reservoir and tunneling
d.) Port, harbor and offshore engineering
General Building Construction
a.) Building and industrial plant
b.) Sewerage and sewage treatment/disposal plant and
system
c.) Water treatment plant and system
d.) Park, playground and recreational work
Specialty Construction
a.) Foundation work
b.) Structural steel work
c.) Concrete pre-casting and pre-stressing
d.) Plumbing and sanitary work
e.) Electrical work
f.) Mechanical work
g.) Mechanical work (ventilation-refrigeration)
h.) Mechanical work (elevator-conveyor)
i.) Fire protection work
j.) Waterproofing work
k.) Painting work
Source: Rules and Regulations Governing Licensing and Accreditation of Constructors in the
Philippines
In addition, each constructor is evaluated, graded and assigned a category based on the following
criteria and quantified by equivalent credit points:
1) financial capacity measured in terms of net worth;
2) equipment capacity in terms of the book value;
3) experience of the company in terms of aggregate number of years in which the firm has
actively engaged in construction contracting and operation and average annual value of work
completed during the past three (3) years; and
4) experience of the technical personnel.
102
Overall
CPR (2)
Minimum Qualification Requirements
Class
General
Engineering
General
Building
Specialty
Category
Financial Capacity
Construction Experience
Requirement
Minimum
Individual Aggregate
CPR
10
60
300.00
AAA
Equity’
(in million P)
90.00
CPR
(1)
900.00
AA
A
B
C
D
AAA
45.00
9.00
4.50
3.00
0.90
90.00
450.00
90.00
45.00
30.00
9.00
900.00
10
7
5
3
3
10
50
21
10
3
3
60
250.00
105.00
50.00
15.00
15.00
300.00
AA
A
B
C
D
AAA
AA
A
B
C
D
45.00
9.00
4.50
3.00
0.90
90.00
45.00
9.00
4.50
3.00
0.90
450.00
90.00
45.00
30.00
9.00
900.00
450.00
90.00
45.00
30.00
9.00
10
7
5
3
3
10
10
7
5
3
3
50
21
10
3
3
60
50
21
10
3
3
250.00
105.00
50.00
15.00
15.00
300.00
250.00
105.00
50.00
15.00
15.00
Specialty –
E
0.05
0.40
none
none
none
Trade
Source: CIAP
Notes:
1
CPR – Credit Points Required
2
Overall credit points inclusive of Equipment Capacity (1point/₱100,000); Experience of Firm (10
points/year of active existence and 1point/₱100,000 of 3 year average annual volume of work
accomplished)
1,950.0
0
915.15
265.00
122.50
75.50
24.00
1,910.0
0
895.00
261.00
120.50
66.50
24.00
1510.00
695.00
211.00
110.50
60.50
24.00
0.45
Construction Licenses Issued
Under the law, only contractors accredited by the Philippine Contractors Accreditation board (―PCAB‖)
are allowed to enter into a construction contract with clients. For 2010 to 2011, PCAB has issued a
total of 3,325 contractors‘ licenses. The following table shows the breakdown of contractors per type:
In terms of Size
Large Contractors (AAA & AA)
Medium-sized Contractors (A & B)
Small Contractors
In terms of Principal Classification
General Engineering (GE) Contractors
General Building (GB) Contractors
Trade Contractors
Specialty Contractors
Share to total
6.4%
36.6%
57.0%
Share to total
59.9%
31.4%
3.8%
4.9%
Source: Philippine Contractors Accreditation Board
Also, the PCAB has issued special licenses to 21 foreign contractors, 95.2% or 20 of which are large
contractors and 4.8% or only one (1) is a medium-sized contractor. In terms of nationality, majority of
these contractors were Japanese (10), followed by Chinese (4), and Korean (3) firms, while the
remaining were Thai (1), Australian (1), Austrian (1) and Malaysian (1).
103
CONSTRUCTION INDUSTRY PERFORMANCE
SELECTED MACROECONOMIC INDICATORS
In 2000 Prices, Billion Pesos
(2009 - 2013)
2009
2010
2011
2012
2013
5,297.2
5,701.5
5,910.2
6,312.2
6,765.5
417.7
490.7
450.3
528.6
583.6
Public
138.6
144.2
88.3
103.6
119.0
Private
279.1
346.4
362.1
425.0
464.6
Gross Value Added (GVA) in Construction
285.0
325.8
294.6
348.3
381.7
% share of Construction to GDP
7.9%
8.6%
7.6%
8.4%
8.6%
% share of GVA in Construction to GDP
5.4%
5.4%
5.7%
5.6%
5.0%
5.5%
5.5%
5.9%
5.6%
6.0%
Gross Domestic Product (GDP)
Gross Value (GV) in Construction*
% Share of Construction to Total Employment
Source: Construction Industry Authority of the Philippines, National Statistical Coordination Board, National Statistics Office and
Department of Labor and Employment
Note: The Philippine Government classifies all construction owned by the government and government operations as public
construction. All other construction activities are classified as private construction.
Construction has two broad aspects, namely, as an industry and as investment or capital formation.
The construction industry‘s output is measured by Gross Value Added (GVA) in Construction. Since
2009, construction GVA has contributed an average of 5.4% to the country‘s GDP. On the other hand,
investments in the sector are measured by Gross Value in Construction (GVC). Since 2009, GVC has
contributed a significant portion, an average of 8.2% of the country‘s Gross Capital Formation. In
2013, GVC reached P [55.0 billion in real terms, a 10.5% growth from 2012. The construction industry
has likewise contributed to total domestic employment in the country at an average of 5.7% from 2009
to 2013.
In terms of construction per sector, private construction activities have formed a larger part of
construction expenditure in the country, composing an average of 76% of all construction expenditure
from 2009 to 2013 for the past five (5) years. This shows the private sector‘s active role in the growth
of the industry. However, the public sector‘s contribution has steadily declined from 2010 to 2011 from
P 138.6 billion to P 88.3 billion but has improved to P 119 billion in 2013. This is expected to improve
as the Philippine Government is expected to roll-out its various infrastructure programs and PPP
projects in the next few years.
Private Building Construction Demand
The Philippine Government gathers statistics on the demand for private construction from approved
building permits that relate to data on new construction, additions, alterations and repairs of existing
residential and non-residential buildings and other structures undertaken in all cities/municipalities in
the country.
From 2009 to 2013, residential building permits accounted for 72% to 75% of total approved building
permit applications. Building permits are defined as written authorizations granted by the Local
Building Official (―LBO‖) to an applicant allowing them to proceed with the construction of a specific
project after plans, specifications and other pertinent documents have been found to be in conformity
with the National Building Code (PD 1096).
Approved Building Permits For All Types of Construction
in number of applicants
Segment
Non-Residential Building
Residential Building
Additions, alterations, repairs
2009
13,280
84,626
14,196
2010
13,327
86,185
13,808
2011
14,881
81,537
18,483
2012
16,477
79,516
16,111
2013
12,864
78,094
16,783
104
Total
112,102
113,230
112,881
112,104
107,741
Source: National Statistics Office
In terms of value, residential building construction, composed of single type, duplex, apartment and
residential condominiums, accounted for a larger portion of the total value of private building
construction, at an average of 51% from 2009 to 2013. This is followed by non-residential building
construction, which includes commercial, industrial, agricultural and institutional buildings, which
contributed an average of 40%. Permits for additions, alterations and repairs contributed an average
of 9%.
Total Value of Construction
In P Billions
Segment
Non-Residential Building
Residential Building
Additions, alterations, repairs
Total
2009
51.3
80.1
12.1
143.5
2010
82.7
102.9
14.6
200.3
2011
90.0
100.2
22.8
213.0
2012
99.9
120.4
21.1
241.4
2013
104.0
125.4
20.4
249.8
Source: National Statistics Office
In terms of area, the bulk of the value of construction originated from Luzon, with the National Capital
Region, CALABARZON and Central Luzon regions accounting for more than half of the value of
private building construction.
Prospects
Outlook for the construction industry remains positive as the Philippine government continues to
implement its policy of accelerating the infrastructure development of the country.
Philippine Government’s Infrastructure Programs
The Philippines, in comparison to its ASEAN neighbors, has been ranking low in terms of
infrastructure quality. According to a 2008 study by the World Economic Forum, the Philippine road
quality has a score of 2.8 (1 – underdeveloped, 7 – extensive and efficient by international standards)
below the ASEAN average of 4.2.
The Philippine Government‘s continued policy of pursuing infrastructure programs will help fuel
construction, as infrastructure projects necessitate the heavy involvement of construction. The
Comprehensive and Integrated Infrastructure Program (CIIP) contains a list of infrastructure projects
to meet the goals and objectives set forth in the Government‘s Medium Term Philippine Development
Program. CIIP has segregated its funds for various infrastructure projects in transportation, power and
electrification, water resources, communications and digital infrastructure, and social infrastructure,
among others.
The National Economic Development Authority (―NEDA‖) has recently stressed the importance of
Public-Private Partnerships (PPP) as a mechanism that can address the financial needs of
infrastructure and services of national and local governments. Philippine President Benigno S. Aquino
III identified PPPs as a strategy to finance government projects like infrastructure and basic services
through the assistance of the private sector.
Megawide considers this as a big opportunity as it also expands its business from being the emerging
leader in high-rise construction into venturing into infrastructure projects such as affordable housing,
classroom building, elevated expressways, construction of roads and bridges, and heavy industries
related to energy and power plants
1) Housing
105
The Housing and Urban Development Coordinating Council (―HUDCC‖) estimates that total
housing backlog is expected to grow from is 3.76 million houses in 2011 to 5.80 million in
2016.
The demand has been driven and is expected to continue to be driven by the following
external factors:
a) Improving affordability levels in large part to the availability of housing loans from Home
Development Mutual Fund (―HDMF‖) and local banking institutions;
b) Improved accessibility for low middle-income to low income earners as real estate
developers are coming up with several dedicated brands to fulfill the demand of the
under-served low income market
c) Growing Overseas Filipino Workers (―OFW‖) remittances. Most analysts say that almost a
third of the remittances are invested in real estate properties and house improvements.
OFW remittances in 2011 reached high levels of US$20.11 billion. Forecasts state a 5%
to 7% growth in 2012.
d) Growing number of Business Process Outsourcing (―BPO‖) professionals. BPO
professionals present the new breed of highly paid individuals, an important marking for
housing units. The BPO Association of the Philippines expects employment in the
industry could reach up to 1.3 million employees in 2016 given ample support from the
government.
2) Public-private partnership programs
To address growing infrastructure requirements, the Philippine Government has tapped the
PPP program to entice the private sector to be an active partner in the continuous
development of infrastructure requirements. As of the moment, there are at least eleven (11)
that already passed the National Economic Development Authority Board approval and are
either awarded or in live bidding stage. Selected PPP projects that are in either live bidding
stage or awarded are as follows:
Project
Daang-hari SLEX link road
Implementing
Agency
DPWH
PPP for School
Infrastructure phase 1
PPP for School
Infrastructure Phase 2
NAIA Expressway Project
Dep Ed
Modernization of the
Philippine Orthopedic
Center
Automatic Fare Collection
Center
Mactan-Cebu International
Airport Passenger
Terminal Building
Light Rail Transit Line 1
Cavite Extension Project
Cavite Laguna
Expressway
Total
Dep Ed
DPWH
Contractual agreement
Build-Transfer-andOperate (BTO)
Build-Lease-andTransfer (BLT)
BTO
Cost
(Billions P)
2.01
16.28
3.86
15.52
DOTC
Build-Operate-andTransfer (BOT)
BOT
DOTC
No data available
1.72
DOTC
BTO
17.52
DOTC
BTO
65.00
DPWH
BTO
35.40
5.69
145.48
Source: Public-Private Partnership Center of the Philippines
106
The listed projects below under the PPP framework are currently subject under due diligence
by various parties for bidding:
Project
Integrated Transport System
(ITS)-Southwest Terminal
Project
Bulacan Bulk Water Supply
Project
Integrated Transport System
(ITS)-South Terminal Project
Laguna Lakeshore
Expressway Dike Project
Implementing Agency
Contractual
agreement
BTO
Cost
(Billions P)
2.50
Metropolitan
Waterworks and
Sewerage System
(MWSS)
DOTC
BOT
24.40
BTO
4.50
DPWH
BTO –
Expressway
Dike
Build-Transfer Reclamation
122.80
DOTC
Total
154.20
Source: Public-Private Partnership Center of the Philippines
3) Other Infrastructure requirements
The Philippine government intends to address this by improving the roads, highways, ports,
power plants, among others, to complement the continuation of strong economic growth that
the Philippines has experienced for the past few years. Improved infrastructure is also
expected to boost tourism in the country as more local sites are accessible to local and
foreign tourists.
107
MARKET INFORMATION
The shares of the Company are traded on the PSE under the symbol ―MWIDE‖. The shares were
listed on the PSE on February 18, 2011. The following table sets out, for the periods indicated, the
high and low closing prices for the Company‘s shares as reported on the PSE:
2012
High
High (adjusted)
Low
Low (adjusted)
First Quarter
14.96
n/a
8.60
n/a
Second Quarter
18.10
n/a
13.90
n/a
Third Quarter
17.48
n/a
15.80
n/a
Fourth Quarter
18.52
n/a
13.54
n/a
First Quarter
13.91
13.58
13.87
n/a
Second Quarter
24.20
16.50
17.20
13.23
Third Quarter
21.10
16.50
12.40
12.40
Fourth Quarter
14.70
14.70
10.10
10.10
First Quarter
14.00
14.00
11.46
11.46
Second Quarter
13.80
13.98
11.76
11.76
Third Quarter
13.26
13.26
12.50
12.50
2013
2014
On September 30, 2014, the closing price of the Company‘s common shares on the PSE was P 12.68
per share.
108
MANAGEMENT AND CERTAIN SHAREHOLDERS
DIRECTORS AND SENIOR MANAGEMENT
The Company‘s management team is headed by Chairman and Chief Executive Officer, Michael C.
Cosiquien and Chief Operating Officer and President, Edgar B. Saavedra, each of whom is a licensed
civil engineer who has been practicing for more than 15 years. The Company is governed by a board
of seven (7) directors composed of Michael C. Cosiquien and Edgar B. Saavedra, Yerik C. Cosiquien,
Elizabeth Anne Uychaco, Florentino Tuazon Jr., Leonilo Coronel, and Leonor Briones, the latter two
being the independent directors.
Directors shall hold office for one (1) year or until their successors are elected and qualified. The first
directors are also the incorporators. The annual meeting of the stockholders shall be held every June
30 of each year.
The Board of Directors is responsible for the direction and control of the business affairs and
management of Megawide, and the preservation of its assets and properties. No person can be
elected as director of Megawide unless he or she is a registered owner of at least one voting share of
Megawide.
Section 38 of the SRC requires that at least two (2) members of the Board of Directors be
independent directors. The Amended Articles and Incorporation and By-Laws of Megawide provide
that the seven (7) directors shall include such number of independent directors as may be required by
law.
The table below sets forth each member of Megawide‘s Board as of July 31, 2014.
Name
Michael C. Cosiquien
Age
40
Citizenship
Filipino
Position
Director and Chairman of the Board since July 28,
2004
Chief Executive Officer
Since July 19, 2010
Director and President since July 28, 2004
Chief Operating Officer since July 19, 2010
Edgar B. Saavedra
39
Filipino
Yerik C. Cosiquien
Elizabeth
Anne
C.
Uychaco
Florentino A. Tuason, Jr.
35
58
Filipino
Filipino
Director since July 28, 2004
Director since March 16, 2011
64
Filipino
Leonilo G. Coronel
Leonor M. Briones
67
73
Filipino
Filipino
Director since April 8, 2011
Corporate Secretary since June 3, 2011
Independent Director since July 19, 2010
Independent Director since July 19, 2010
The business experience of each of the Company‘s directors and officers covering the past five years
are described below.
Board of Directors
The following is a brief description of the business experience of each of the Directors:
Michael C. Cosiquien, 40, Filipino, is the Chairman and Chief Executive Officer of Megawide. He is
also a director of Altria East Land Inc. (Altria), MySpace Properties, Inc., Citicore, Megapolitan Realty
and Development Corporation (Megapolitan) and Megapolitan Marketing Inc. He is a licensed civil
engineer, having passed the Government Licensure Board Examination for Civil Engineering in 1995.
He graduated at the De La Salle University with a degree in Bachelor of Science major in Civil
Engineering in 1995. His professional engineering experience spans fifteen (15) years. He has been a
member and Chairman of the Megawide Board since July 28, 2004 and the Chief Executive Officer
since July 19, 2010.
109
Edgar B. Saavedra, 39, Filipino, is the President and Chief Operating Officer of Megawide. He is also
a director of Altria, MySpace Properties, Inc. and Citicore. He is a licensed engineer, having passed
the Government Licensure Board Examination for Civil Engineering in 1996. He obtained his Bachelor
of Science degree in Civil Engineering from the De La Salle University in 1996.He attended special
studies on foundation works sponsored by Philippine Institute for Civil Engineers. He also obtained
training in German formwork system and basic occupational safety and health. Engr. Saavedra
specializes in European building technologies and advanced formwork systems. He has been a
member and President of the Megawide Board since July 28, 2004 and the Chief Operating Officer
since July 19, 2010.
Yerik C. Cosiquien, 35, Filipino, is a director of Megawide. Mr. Cosiquien is also the General
Manager of Cosmo Fortune Corporation. He was the Corporate Secretary from July 28, 2004 to May
20, 2011 and Key Accounts Manager of Kraft Food Philippines, Incorporated. He obtained his
Bachelor of Science degree in Psychology Economics from the University of British Columbia. He has
been a member of the Megawide Board since July 28,2004.
Elizabeth Anne C. Uychaco, 58, Filipino, is a director of Megawide. She is the Chairman of the
Compensation and Nomination Committee. Ms. Uychaco is the Senior Vice President, Corporate
Services of SM Investments Corporation and Vice Chairperson of Belle Corporation. She graduated
from St. Scholastica's College with a degree in Bachelor of Arts. She obtained a Master's Degree in
Business Economics from the University of Asia and Pacific and a Master's Degree in Business
Administration from the Ateneo Business School. She has been a member of the Megawide Board
since March 16, 2011.
Florentino A. Tuason, Jr., 64, Filipino, is a director and the Corporate Secretary of Megawide. He is
a senior partner of the law firm Quasha Ancheta Peña &Nolasco. He is a retired Commissioner in the
Commission on Elections, a former Executive Judge in the Regional Trial Court of Makati City and
former First Senior Vice President (FSVP) of the Development Bank of the Philippines (DBP). He was
a director of DBP Management Corporation, Capitol Development Bank, Telecommunications
Industries and Services, Inc. and Phoenix Iron Steel Corporation. He graduated at the University of
the Philippines with a degree in Bachelor of Arts major in Political Science. He obtained his Bachelor
of Laws from the University of the Philippines. He has been a member of the Megawide Board since
April 8, 2011 and the Corporate Secretary since June 3, 2011.
Leonilo G. Coronel, 67, Filipino, is an independent director of Megawide. He heads the Audit and
Compliance Committee of Megawide. He is also the Managing Director of BAP Credit Bureau Inc.,
director of Software Ventures Int‘l., Executive Director of RBB Micro Finance Foundation and
independent director of DBP-Aiwa Securities SMBC Phils. Inc. He was a director at the Philippine
Dealing System, Philippine Depository & Trust Corporation and Philippine Clearing House
Corporation, Trustee/Treasurer and member of the Capital Market Development Council Institute,
Project Director of Small & Medium Ents. Credit Program of the Philippine Business for Social
Progress and Consultant of Land Bank of the Philippines. He obtained his Bachelor of Arts degree in
Economics from the Ateneo de Manila University. He has been an independent director of Megawide
since July 19, 2010.
Leonor M. Briones, 73, Filipino, is an independent director of Megawide. She is the Chairman of the
Risk Committee of Megawide. Mrs. Briones is also the President of Social Watch Philippines, Inc. She
was the Treasurer of the Philippines, Vice President for Finance and Administration of the University
of the Philippines System and Secretary to the Commission of the Commission on Audit. She
obtained her Bachelor in Business Administration, major in Accounting from Siliman University. She
obtained a Masters in Public Administration, major in Local Government and Fiscal Administration
from the University of the Philippines Diliman, Post Graduate Diploma in Development Administration,
major in Public Enterprises and Certificate in Policy for Public Enterprise from the Harvard Institute for
International Development, Harvard University, Massachussetts, USA. She has been an independent
director of Megawide since July 19, 2010.
Key Officers
Michael C. Cosiquien, please refer to the section above.
110
Edgar B. Saavedra, please refer to the section above.
Oliver Y. Tan, 37, Filipino, is the Chief Investment and Strategy Officer, Chief Finance Officer and a
Corporate Information Officer of Megawide. Mr. Tan holds various CFO position across the business
groups, affiliates and subsidiaries: CFO for Citicore, Citicore-Megawide Consortium Incorporated
(CMCI), Megawide-World Citi Consortium, Inc. (MWCCI), GMR-Megawide Cebu Airport Corporation
(GMCAC) and Megawatt Clean Energy Incorporated (MCEI). He is also a member of Megawide‘s
Executive Committee. Likewise, Mr. Tan is Director/Treasurer of CHII, CMCI, MWCCI, GMCAC and
MCEI; Director/Corporate Secretary of Future State, Myspace Incorporated and IRMO Incorporated
(affiliate companies of Megawide). He is a member of the Financial Executives Institute of the
Philippines (FINEX). Prior to joining Megawide, Mr. Tan worked as financial analyst for Golden Astra
Capital Incorporated, a private investment fund located in Makati with portfolios in equities,
commodities, options, currencies and other derivative financial instruments. He finished his Bachelor
of Science in Business Administration major in Financial Management at Philippine School of
Business Administration (PSBA) after transferring from University of Santo Tomas (UST) where he
took up his Bachelor of Science in Electrical Engineering.
Louie Ferrer, 38, Filipino, is the VP for Marketing and a Corporate Information Officer of Megawide.
Mr. Ferrer served as the Associate Marketing Manager at JCB International Co., Ltd, Country
Marketing Manager at TNT Intl, and Accounts Director at Creative Juice Manila. Mr. Ferrer has also
been the Managing Director of MagicWorx Licensing Inc. since 2004. He obtained his degree in
Industrial Design from the De La Salle University in 1996. He has been the VP for Marketing for
Megawide since November 22,2010 and Corporate Information Officer since February 16, 2011.
Irving Cosiquien, 42, Filipino, is the Treasurer of Megawide, He sits as a Director for Citicore
Holdings Investment, Inc., and MySpace Properties, Inc. He is also the General Manager of
Megapolitan Marketing Incorporated and the former Operations Manager for Jimmian Hardware. He
graduated in 1994 from De La Salle University with a Bachelor of Science in Industrial Engineering
and Management. He has been the Treasurer for Megawide since July 19, 2010.
Grace Q. Bay, 44, Filipino, is the Assistant Corporate Secretary, Compliance Officer and a Corporate
Information Officer of Megawide. She is a partner of the law firm Quasha Ancheta Peña & Nolasco.
She is the Corporate Secretary of various corporations, which include, St. Luke‘s Medical Center
(Global City), Inc., SLMC Bonifacio Global City MAB Corp., Pilipinas TotalGas, Inc., PTGI Laguna
Gas, Inc., Colombo Merchants Philippines, Inc., Brillante Realty, Inc. and Chatham House
Condominium Corporation. She is the Assistant Corporate Secretary of QBE Insurance (Phils.), Inc.
She graduated at the University of the Philippines with a degree in Bachelor of Arts major in Political
Science. She obtained her Bachelor of Laws from the University of the Philippines. She has been a
Corporate Information Officer of Megawide since February 16, 2011, Assistant Corporate Secretary
since June3, 2011 and Compliance Officer since June 30, 2011.
Joyce M. Briones, 33, Filipino, is a Corporate Information Officer of Megawide. She is the Corporate
Secretary of American Association of the Philippines, Inc. and the Assistant Corporate Secretary of
St. Luke‘s College of Medicine William H. Quasha Memorial, Inc. She graduated at the University of
the Philippines with a degree in Bachelor of Arts major in Political Science. She obtained her law
degree from the Ateneo de Manila University. She has been a Corporate Information Officer of
Megawide since February 16, 2011.
Senior Management
Engr. Masashi Watanabe, C.E., 65, Japanese, Assistant Vice President for Precast of Megawide.
His vast knowledge and experience in pre-cast concrete production spans more than three decades.
His prior positions include, among others, being a Clerk in the Pre-cast Concrete Production Factory
Division of Shimizu Corporation, Ltd. in Japan from 1971 to 1976; Site Clerk for the Mass Housing
Production Division in the Shin-Matsudo Sun Light Pastoral Condominium Project from 1976 to 1980;
Site Manager for Jakarta Hilton International Hotel and the Barren Gulf of Bank project from 1983
to1986; Section Chief of Kurosawa Construction; Project Manager for the Taichung City West
Treatment Center, Mitsubishi Electronic Taichung Building and Japan Community Society Building in
Taiwan; Project Director for the Ajinomoto Kunol Foods Building, Mitsubishi Motors Tsudayama
Studio, Yokohama Fureai Hospital, Kobayashi‘s Transportation Cot. Quake Absorbing Structure
111
Warehouse, Memorial of Yokohama Port Renewal work and Yokohama Stadium Renewal; Section
Manager for the Twin Towers Condominium Project in Hiroshima; and Project Section Manager for
the Japan Embassy Project in Moscow. Engr. Watanabe is a licensed First Class Construction
Management Engineer in Tokyo, Japan. He is also Second Class Architect and is qualified in Weld
Engineering, Dangerous Article Handler and a First Class Small Craft. Moreover, He finished Special
Engineering at Kogakuin University. He has been the Precast Manager of Megawide since June 30,
2010.
Tarc Forehlich, 37, German, is the Chief Technical Officer for Megawide. He previously worked for
Alfred Kunz GmbH, Construction Company in Munich as an Engineer. He also worked as a Project
Engineer for both JV EEI Concrete Construction Walter Bau and Walter Bau Dywidag. He then
became the Regional Director for Meva Formworks System before becoming the CTO of Megawide.
He holds a Geodesy and Environmental Engineering Degree from AGH Tech University in Cracow.
He obtained his Masters of Project Management from FH Augsburg Germany.
Claudia J. Soriano, 46, Filipino, is the Vice-President – Human Resources of Megawide. Prior to
joining Megawide, she was Director for Employment at Cebu Air, Inc. She was also previously
Assistant Resource Manager at Robinsons Land Corporation and Assistant Personnel Manager at
Manila Galleria Suites. She graduated Cum Laude from Far Eastern University with a Bachelor of
Science degree in Industrial Psychology, and attained her Master‘s in Industrial Relations from the
University of the Philippines in 2000.
Renato H. Uy, Filipino, is the Vice-President – Comptroller of Megawide. Prior to joining Megawide,
he was the Executive Vice-President of Goldland Group of Companies, a real estate development
company. He was also a Senior Auditor at SGV & Company from 1986-1990. He graduated with a
Bachelor of Science Degree in Accounting from the University of Sto. Tomas in 1985.
Ronald D. Paulo, 49, Filipino, is Vice-President – Operations for Megawide. He previously worked
with Robinsons Land China, a subsidiary of Robinsons Land Corporation, as Corporate Project
Director. He began his career as a full-time site engineer, joining Cityland Development Corporation in
1990 as a Property and Facilities Supervisor. He holds a Bachelor‘s Degree in Civil Engineering and a
Masters Degree in Business Administration.
SIGNIFICANT EMPLOYEE
No single person is expected to make a significant contribution to the business since Megawide
considers the collective efforts of all its employees as instrumental to the overall success of its
performance.
FAMILY RELATIONSHIPS
Chairman Michael C. Cosiquein, director Yerik C. Cosiquein and treasurer, Irving C. Cosiquien, are
siblings.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
The Company is not aware of the occurrence during the past five (5) years of any of the following
events that are material to an evaluation of the ability or integrity of any director or executive officer:
1) Any bankruptcy petition filed by or against any director, or any business of a director,
nominee for election as director, or executive officer who was a director, general partner or
executive officer of said business either at the time of the bankruptcy or within two years prior
to that time;
2) Any director, nominee for election as director, or executive officer being convicted by final
judgment in a criminal proceeding, domestic or foreign, or being subject to a pending criminal
proceeding, domestic or foreign, excluding traffic violations and other minor offenses;
112
3) Any director, nominee for election as director, or executive officer being subject to any order,
judgment, or decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of business, securities,
commodities or banking activities; and
4) Any director, nominee for election as director, or executive officer being found by a domestic
or foreign court of competent jurisdiction (in a civil action), the SEC or comparable foreign
body, or a domestic or foreign exchange or other organized trading market or self-regulatory
organization, to have violated a securities or commodities law or regulation, and the judgment
has not been reversed, suspended, or vacated.
113
COMPENSATION OF DIRECTORS AND OFFICERS
The compensation of directors and senior officers is included in the compensation table below (in P
millions).
Name and Position
Fiscal Year
Annual Salary
Bonus
Other
Compensation
Michael C.
Cosiquien
Chairman and CEO
Edgar B. Saavedra
President and COO
Ronald Paulo
VP-Operations
Tarc Froehlich
Chief Technical
Officer
Masashi Watanabe
Precast Manager
CEO & Most
Highly
Compensated
Executive Officers
Estimated 2014
Actual 2013
Actual 2012
62.1
61.3
30.6
4.6
4.5
2.3
-
Aggregate
compensation paid
to all other officers
and directors as a
group unnamed
Estimated 2014
42.78
3.5
-
Actual 2013
19.21
2.0
-
Actual 2012
20.0
2.0
-
Compensation of Directors
Under the By-Laws of Megawide, by resolution of the Board, each director, shall receive a reasonable
per diem allowance for his attendance at each Board meeting. As compensation, the Board shall
receive and allocate an amount of not more than 10% of the net income before income tax of the
corporation during the preceding year. Such compensation shall be determined and apportioned
among directors in such manner as the Board may deem proper, subject to the approval of
stockholders representing at least a majority of the outstanding capital stock at a regular or special
meeting of the stockholders.
On November 4, 2011, the Board of Directors, upon recommendation of the Compensation
Committee, approved the giving of P 20,000.00 director‘s per diem per Board meeting and a
P30,000.00 monthly allowance in the form of reimburseable expenses for each regular director. Each
independent director will be given P 25,000.00 director‘s per diem per Board meeting and a
P30,000.00 monthly allowance in the form of reimburseable expenses. The Corporate Secretary
(who is also a regular director) will be given a P 20,000.00 director‘s per diem per Board meeting and
a P30,000.00 monthly allowance in the form of reimburseable expenses. Reimburseable expenses
cover receipts for food, beverage, gasoline and travel expenses. The total amount of per diem given
to the directors in 2013 is P47,058.80.
114
Standard Arrangements and Other Arrangements
There are no other arrangements for compensation either by way of payments for committee
participation or special assignments other than reasonable per diem. There are also no outstanding
warrants or options held by Megawide‘s Chief Executive Officer, other officers and/or directors.
Employment Contracts, Termination of Employment, Change-in-Control Arrangements
There are no existing employment contracts with executive officers. Furthermore, there are no special
retirement plans for executives. There is also no existing arrangement for compensation to be
received by any executive officer from Megawide in the event of change in control of Megawide.
However, aside from its employees, Megawide also entered into employment contracts with its foreign
experts for a term of three (3) years for its Assistant Vice-President for Operation and one (1) year for
its Assistant Vice President for Precast. Basic terms of these contracts include benefits accorded to
the employee (e.g., housing, insurance, vacation leaves, company vehicle, work permits), Megawide‘s
ownership of any invention developed during their employment, liquidated damages in the event of
contract pre-termination, and a non-compete clause prohibiting the employee, for a period of two (2)
years after the termination of the contract, from engaging, directly or indirectly, for himself or on behalf
of or in conjunction with any person, corporation, partnership or other business entity that is
connected with the business of Megawide.
The Assistant Vice President for Operations is tasked with directing and coordinating all activities of
Megawide and ensuring the most feasible methods for achieving the most economical approach in
quality services. His contract was valid from July 30, 2010 to July 30, 2013. The Assistant Vice
President for Precast, on the other hand, shall oversee all plant activities and manufacturing
operations, including the procurement of raw materials, mobilization of the facilities and personnel, as
well as the repair and maintenance of the equipment and machineries. His contract was valid from
June 30, 2010 to June 30, 2011 and was renewed for another three (3) years from July 1, 2011 to
July 1, 2014.
Warrants and Options
There are no outstanding warrants and options held by any of Megawide‘s directors and executive
officers.
115
SECURITY OWNERSHIP OF CERTAIN RECORD AND BENEFICIAL SHAREHOLDERS
Top 20 Shareholders
There are approximately 24 holders of common equity as of September 12, 2014. The following are
the top 20 stockholders of the Company:
1
Title of
Class
Common
2
3
Common
Common
4
5
6
7
8
9
10
Common
Common
Common
Common
Common
Common
Common
11
12
Common
Common
13
Common
14
15
16
Common
Common
Common
17
18
19
Common
Common
Common
20
Common
Name
Citizenship
Citicore Holdings Investment,
Inc.
PCD Nominee Corporation
Sybase Equity Investments
Corporation
PCD Nominee Corporation
Suyen Corporation
Ellie Chan
Geoffred Deetan
Dennis Bryan Ty
John I. Bautista Jr.
Regina Capital Dev. Corp.
000351
Grace Q. Bay
Pacifico Silla &/or Catherin M.
Silla &/or Alexander M. Silla
Pacifico Silla &/or Marie Paz
Silla
Joyce M. Briones
Bernardo P. Torres
Frederick E. Ferraris &/or
Ester E. Ferraris
Gaudencio C. Cabingan
Agnes H. Cabingan
Julius Victor Emmanuel D.
Sanvictores
Guillermo F. Gili, Jr.
Filipino
Number of
Shares
936,933,735
Percentage
to total
56.804%
Filipino
Filipino
342,916,211
253,500,000
20.790%
15.369%
81,239,493
29,770,000
2,431,765
1,215,883
1,215,883
109,850
50,700
4.925%
1.805%
0.147%
0.074%
0.074%
0.007%
0.003%
Filipino
Filipino
10,478
6,500
Nil
Nil
Filipino
6,500
Nil
Filipino
Filipino
Filipino
5,408
5,200
3,900
Nil
Nil
Nil
Filipino
Filipino
Filipino
3,250
500
260
Nil
Nil
Nil
Filipino
169
Nil
Non-Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
As of June 30, 2014, 4.93% of the Company‘s outstanding capital stock is owned by foreign nationals.
Security Ownership of Directors and Management
As of June 30, 2014, the following table sets forth security ownership of the Company‘s Directors and
Officers:
Title of
Class
Common
Common
Common
Common
Common
Common
Name of Beneficial Owner
Edgar B. Saavedra
Director, President and COO
Michael C. Cosiquien
Director, Chairman and CEO
Yerik C. Cosiquien
Director
Elizabeth Anne C. Uychaco
Director
Florentino A. Tuason, Jr.
Director and Corporate Secretary
Leonilo G. Coronel
Number of
shares
0
2
0
2
0
6,184,167
40,560
169
Nature of
ownership
(D)
(I)
(D)
(I)
(D)
(I)
(D)
(I)
(D)
(I)
(D)
Citizenship
%
Filipino
Nil
Filipino
Nil
Filipino
Filipino
0.37%
Nil
Filipino
Nil
Filipino
Nil
116
Title of
Class
Common
Common
Common
Common
Common
Common
Common
Name of Beneficial Owner
Independent Director
Leonor M. Briones
Independent Director
Louie Ferrer
VP for Marketing
Corporate Information Officer
Oliver Y. Tan
Chief Financial Officer
Chief Investment and Strategy
Officer
Corporate Information Officer
Irving C. Cosiquien
Treasurer
Masashi Watanabe
Asst. Vice President for Precast
Grace Q. Bay
Assistant Corporate Secretary,
Compliance Officer and Corporate
Information Officer
Joyce M. Briones
Corporate Information Officer
TOTAL
Number of
shares
3
3
Nature of
ownership
(I)
(D)
(I)
(D)
Citizenship
%
Filipino
Nil
Filipino
Nil
Filipino
Nil
(I)
(D)
16,900
6,184,165
5,070
10,478
(I)
(D)
(I)
(D)
(I)
(D)
Filipino
Japanese
0.37%
Nil
Filipino
Nil
Filipino
Nil
(I)
5,408
1,170
12,448,097
(D)
(I)
0.75%
There is no director or key officer of Megawide owns at least 10% of Megawide‘s issued and
outstanding shares of common stock.
Security Ownership of Record and Beneficial Owners:
Title of
Class
Name, Address of
Record Owner &
Relationship with the
Company
Name of
Beneficial
Owner &
Relationship
with Record
Owner
Citizenship
Number of
Shares
Percentage
to total
1
Common
Citicore Holdings
Investment, Inc.
20 N. Domingo St.,
Brgy. Valencia,
Quezon City
Direct owner
Filipino
936,933,735
56.804%
2
Common
Various
investors
Filipino
342,916,211
20.790%
3
Common
PCD Nominee
Corporation
37F Tower 1,
The Enterprise Center,
6766 Ayala Ave. cor.
Paseo de Roxas,
Makati City
Sybase Equity
Investments Corporation
17/F L.V. Locsin Bldg.,
Ayala Ave. cor. Makati
Ave., Makati City
Direct owner
Filipino
253,500,000
15.369%
117
Voting Trust Holders of 5% or More
There is no voting trust arrangement executed among the holders of 5% or more of the issued and
outstanding shares of common stock of Megawide.
Change in Control
There are no arrangements entered into by Megawide or any of its stockholders which may result in a
change of control of Megawide. For information on Changes in Control, see the section ―Description
of Shares‖ on page 29 of this Preliminary Prospectus.
118
RELATED PARTY TRANSACTIONS
Related Party
Category
June 30,
2014
Amount of
Transaction
Ultimate Parent
Company:
Advances
June 30,
2013
Amount of
Transaction
Outstanding
Balance
(P 600,240,626)
(P 614,469,172)
Shareholders:
Revenue from services
1,095,279,025
1,277,292,282
1,899,141,822
74,184,326
Associate:
Revenue from services
1,102,142,857
696,023,369
1,342,527,992
1,341,014,869
Advances to an
associate
57,468,655
57,468,655
Advances from an
associate
(5,241,500)
Related Parties Under
Common Ownership:
Cash deposits
Notes Payable
Obligation under finance
lease
Bank loans
Revenue from services
Interest expense
(753,895,845)
-
-
281,693,281
(900,000,000)
P
-
December 31,
2013
Outstanding
Balance
(P
-
-
937,555,758
-
14,228,547)
-
(5,241,500)
1,035,589,127
(900,000,00)
(101,300,752)
(146,423,879)
(29,939,000)
(247,724,631)
(11,295,682,882)
(12,405,682,882)
(550,000,000)
(1,112,500,000)
44,642,857
44,107,143
139,216,443
(104,655,345)
33,722,723
(17,612,612)
(1,154,832)
Advances to a joint
venture
51,000,000
51,000,000
-
5,040,446
(3,386,245)
-
(184,079,384)
(184,079,384)
-
-
1,714,995
10,146,637
-
8,195,642
Advances from minority
shareholder
Advances to Officers
and Employees
Key Management
Personnel:
Compensation
35,152,636
-
(1,174,043)
-
Rent expense
Advances from related
party
-
-
28,066,772
-
(8,471,254)
-
119
REGULATORY & ENVIRONMENTAL MATTERS
Contractor’s License Law
R.A. No. 4566, as amended by PD No. 1746, requires a construction company seeking to operate in
the Philippines to obtain either a regular or a special license from the PCAB. A regular license is
issued to a domestic construction firm (a Filipinos sole-proprietorship or a partnership/corporation with
at least 60% Filipino equity) and is renewed annually, on or before June 30 of each year. On the other
hand, a special license is issued to a joint venture, a consortium, a foreign constructor, or a project
owner who authorizes the licensee to engage only in the construction of a single, specific
project/undertaking and is cancelled by PCAB upon completion of the single specific
undertaking/project authorized by the license.
In order to enforce the licensing requirements, all architects and engineers preparing plans and
specifications and all public or private agencies or entities conducting biddings and/or letting out
contracts for construction work to be contracted and undertaken in the Philippines, shall include in
their invitation to bidders and other bidding documents necessary stipulations to convey to every
bidder, whether he is a resident of the Philippines or not, the information that it will be necessary for
him to have a license before his bid is considered.
Moreover, PCAB is authorized to institute the proper action in court and secure a writ of injunction
without bond, restraining any person or firm not licensed, or whose license is under suspension or has
expired or been revoked, from engaging or attempting to engage in the business of construction
contracting and it shall be the duty of all duly constituted law enforcement officers of the national,
provincial, city and municipal government or any political subdivision thereof, to enforce the provisions
of the said law and to report to PCAB any violation of the same.
Classification and Categorization
For the purpose of a more accurate evaluation of a constructor's capability, regular licensees are
further classified as those engaged in (a) general engineering construction, (b) general building
construction and (c) specialty construction and the classification of a constructor shall be determined
by the training and experience of the constructor or of his Sustaining Technical Employee. A
constructor may apply for and be issued more than one classification; provided that one of which shall
be designated by the applicant as his principal classification. The rest shall be considered as other
classification(s). A licensed constructor shall operate within the classification(s) that he is authorized,
by his license, to engage in. A regular license constructor shall, however, be allowed to undertake an
extra classification work, if it is incidental and/or supplementary to a project under his contract and to
be undertaken in conjunction with the implementation of the said project.
In addition to classification, every constructor shall be graded and assigned a category as an adjunct
to his licensing. Evaluation of category shall be based on the following criteria quantified by equivalent
credit points in scales as determined by the Board:
a) financial capacity measured in terms of net worth;
b) equipment capacity in terms of the book value;
c) experience of the company in terms of aggregate number of years in which the firm has
actively engaged in construction contracting and operation and average annual value of work
completed during the past three (3) years; and
d) experience of the technical personnel.
General Engineering and General Building constructors shall be categorized in a scale of six, namely:
AAA, AA, A, B, C, and D.
Megawide is principally classified as General Building (―GB‖) 1 for building and industrial plant
construction with general engineering construction as its ―other classification‖ and is categorized as
AAA.
120
Referral to Arbitration
Executive Order No. 1008 vests the Construction Industry Arbitration Commission (―CIAC‖) with
original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into
by parties involved in construction in the Philippines, whether the dispute arises before or after the
completion of the contract, or after the abandonment or breach thereof. These disputes may involve
government or private contracts. The jurisdiction of the CIAC may include, but is not limited, to
violation of specifications for materials and workmanship; violation of the terms of agreement;
interpretation and/or application of contractual time and delays; maintenance and defects; payment,
default of employer or contractor and changes in contract cost.
The CIAC may acquire jurisdiction in two ways, either by providing an arbitration clause in the
contract between the parties, or by agreement of the parties to submit the dispute to CIAC. Thus, the
fact that the parties incorporated an arbitration clause in their contract is sufficient to vest the CIAC
with jurisdiction over any construction controversy, notwithstanding any reference made to another
arbitral body. CIAC‘s jurisdiction over construction disputes is conferred by law; as such, it may not be
waived by mere agreement of the parties.
Liability of Engineers, Architects and Contractors
Under the Civil Code, the engineer or architect who drew up the plans and specifications for a building
is liable for damages if within 15 years from the completion of the structure, the same should collapse
by reason of a defect in those plans and specifications, or due to the defects in the ground. The
contractor is likewise responsible for the damages if the edifice falls, within the same period, on
account of defects in the construction or the use of materials of inferior quality furnished by him, or
due to any violation of the terms of the contract. If the engineer or architect supervises the
construction, he shall be solidarily liable with the contractor. The acceptance of the building, after
completion, does not imply waiver of any of the causes of action by reason of any of the foregoing
defects. The action arising therefrom must be brought within 10 years following the collapse of the
building.
ENVIRONMENTAL LAWS
Development projects that are classified by law as environmentally critical or projects within statutorily
defined environmentally critical areas are required to obtain an Environmental Compliance Certificate
(―ECC‘‘) prior to commencement. The DENR through its regional offices or through the Environmental
Management Bureau (―EMB‘‘), determines whether a project is environmentally critical or located in
an environmentally critical area. As a requisite for the issuance of an ECC, an environmentally critical
project is required to submit an Environmental Impact Statement (―EIS‘‘) to the EMB while a project in
an environmentally critical area are generally required to submit an Initial Environmental Examination
(―IEE‘‘) to the proper DENR regional office. In case of an environmentally critical project within an
environmentally critical area, an EIS is required. The construction of major roads and bridges are
considered environmentally critical projects for which EISs and ECCs are mandated.
The EIS refers to both the document and the study of a project‘s environmental impact, including a
discussion of the direct and indirect consequences to human welfare and ecological as well as
environmental integrity. The IEE refers to the document and the study describing the environmental
impact, including mitigation and enhancement measures, for projects in environmentally critical areas.
While the EIS or an IEE may vary from project to project, as a minimum, it contains all relevant
information regarding the projects‘ environmental effects. The entire process of organization,
administration and assessment of the effects of any project on the quality of the physical, biological
and socio-economic environment as well as the design of appropriate preventive, mitigating and
enhancement measures is known as the EIS System. The EIS System successfully culminates in the
issuance of an ECC. The issuance of an ECC is a Government certification, that the proposed project
or undertaking will not cause a significant negative environmental impact; that the proponent has
complied with all the requirements of the EIS System and that the proponent is committed to
implement its approved Environmental Management Plan in the EIS or, if an IEE was required, that it
shall comply with the mitigation measures provided therein.
121
Project proponents that prepare an EIS are required to establish an Environmental Guarantee Fund
(―EGF‘‘) when the ECC is issued to projects determined by the DENR to pose a significant public risk
to life, health, property and the environment. The EGF is intended to answer for damages caused by
such a project as well as any rehabilitation and restoration measures.
Project proponents that prepare an EIS are mandated to include a commitment to establish an
Environmental Monitoring Fund (―EMF‘‘) when an ECC is eventually issued. The EMF shall be used to
support the activities of a multi-partite monitoring team which will be organized to monitor compliance
with the ECC and applicable laws, rules and regulations.
All development projects, installations and activities that discharge liquid waste into and pose a threat
to the environment of the Laguna de Bay Region are also required to obtain a discharge permit from
the Laguna Lake Development Authority.
Although the obligation to obtain the ECC is normally with the project owner, there are instances
when the project owner requests the Company assist in securing the ECC. The Company incurs
expenses for the purposes of complying with environmental laws that consist primarily of payments
for Government regulatory fees. Such fees are standard in the industry and are minimal.
Other Environmental Laws
Other regulatory environmental laws and regulations applicable to Megawide‘s business includes the
following:
(a) The Toxic Substances and Hazardous and Nuclear Waste Control Act of 1990, which regulates,
restricts or prohibits the (i) importation, manufacture, processing, handling, storage,
transportation, sale, distribution, use and disposal of chemical substance and mixtures that
present unreasonable risk or injury to health or the environment, and (ii) entry into the Philippines
or the keeping in storage of hazardous wastes which include by products, process residue,
contaminated plant or equipment or other substances from manufacturing operations. The said
law is implemented by the DENR.
(b) The Ecological Solid Waste Management Act of 2000, which provides for the proper management
of solid waste which includes discarded commercial waste and non-hazardous institutional and
industrial waste. The said law prohibits, among others, the transporting and dumping of collected
solid wastes in areas other than prescribed centers and facilities. The National Solid Waste
Management Commission, together with other government agencies and the different local
government units, are responsible for the implementation and enforcement of the said law.
NATIONALITY RESTRICTION
The Company owns land, hence, Philippine laws limit foreign shareholdings in the Company to a
maximum of 40% of its issued and outstanding capital stock. Any subsequent transfer of the
Company‘s Shares by Filipinos to non-Filipinos will also be subject to the limitation that any such
transfers will not cause foreign shareholdings in the Company to exceed 40% of the Company‘s
issued and outstanding capital stock. In the event that foreign ownership of the Company‘s issued
and outstanding capital stock will exceed 40%, the Company has the right to reject a transfer request
by persons to persons other than Philippine Nationals.
Further, in order to maintain its PCAB license, the Company, pursuant to the Implementing Rules and
Regulations of P.D. No. 1746, must maintain its Filipino shareholding to at least 60% of the issued
and outstanding capital stock. However, should the Company decide to engage in the construction of
locally funded government projects, foreign equity should be limited to 25% in accordance with
Executive Order No. 98 promulgating the Ninth Regular Foreign Investment Negative List.
Partnerships with the Government
The Build-Operate-Transfer Law (―BOT Law‖) governs the conduct of bidding in infrastructure
projects. The BOT Law allows private sector participation in large infrastructure projects, such as
122
power plants, highways, ports, airports, canals, dams, hydropower projects, water supply, irrigation,
telecommunications, railroads and railways, transport systems, land reclamation, housing,
government buildings, tourism projects, markets, slaughter houses, warehouses, solid waste
management, information technology networks and database infrastructure, education and health
facilities, sewerage, drainage, dredging and other projects as may be authorized by the appropriate
government agency. It recognizes various kinds of contractual arrangements, including build-operateand-transfer, build-and-transfer, build-own-and-operate, build-lease-and-transfer, build-transfer-andoperate, contract-add-and-operate, develop-operate-and-transfer, rehabilitate-operate-and-transfer
and rehabilitate-own-and-operate.
The BOT Law provides that these projects must be awarded through the conduct of a public bidding.
Such public bidding must be done by publishing a notice inviting prospective project investors once a
week for three consecutive weeks in at least two newspapers of general circulation and one local
newspaper in the place where the project is to be constructed. The public bidding must be conducted
under a two-envelope/two-stage system: the first envelope to contain the technical proposal and the
second envelope to contain the financial proposal.
Depending on the type of arrangement, as in the case of a build-operate-and-transfer arrangement,
for instance, the contract shall be awarded to the bidder who has satisfied the minimum financial,
technical, organizational and legal standards required, and has submitted the lowest bid and most
favorable terms for the project, and shall be granted the franchise to operate and maintain the facility.
In the case of a build-and-transfer, or a build-lease-and-transfer, the law provides that a Filipino
contractor who submits an equally advantageous bid with exactly the same price and technical
specifications as those of a foreign contractor shall be given preference.
Before the submission of actual bids, the bidder must first submit proof that it is legally, technically
and financially qualified to undertake the project. The legal requirements include proof showing
compliance with the nationality requirements, if the project will involve a public utility. If the bidder is
an unincorporated consortium, the identity of each of the members must be disclosed and must also
undergo the pre-qualification process. Moreover, the members shall submit an undertaking binding
themselves to be solidarily liable for the obligations under the contract. If the consortium is a duly
registered corporation with the SEC, the corporation must be the one to execute such undertaking.
Lastly, the prospective bidder must indicate the contractor it seeks to engage once the contract is
awarded to it. The contractor must be duly licensed and accredited by the PCAB, if a Filipino, or its
equivalent in a foreign country, if a foreigner.
Aside from the legal requirements, the prospective bidder must also show that it has the technical
expertise and has ample experience in similar or related infrastructure projects. For this purpose, the
consortium must submit a business plan, which shall include the identity of its members, the equity
interest/contribution of each member of the consortium, their prospective contractor(s), capacity of the
consortium to undertake the project, and the description and respective roles of each member and the
contractor.
Lastly, it must also demonstrate that it has the financial capability to undertake the project. In this
regard, it must show proof that it has the minimum amount of equity to the project measured in terms
of the net worth of the company or the net worth of the lead member (in case of a consortium). It must
also show that it can set aside a deposit equivalent to the minimum equity required. Moreover, a letter
testimonial from a domestic universal/commercial bank or an international bank with a
subsidiary/branch in the Philippines or any international bank recognized by the Bangko Sentral ng
Pilipinas (―BSP‖) certifying that the bidder is an account holder, is in good financial standing and is
able to obtain credit accommodations from such banks to finance the project.
Law on Public Utilities
The operation of an airport terminal is within the definition of a public utility as the use thereof is held
out generally to the public. Thus, it is subject to the requirements of the Philippine Constitution which
provides that franchises, privileges and other authority to operate a public utility shall be given to
corporations, associations or firms at least 60 percent of capital of which is owned by Filipino citizens.
123
Operation of an Airport
The operation of the Mactan-Cebu International Airport is under the supervision of the Mactan-Cebu
International Airport Authority (―MCIAA‖). MCIAA was created pursuant to Republic Act No. 6958 in
order to control, manage and supervise the Mactan International Airport and the Lahug Airport.
MCIAA has the following functions, powers and duties, among others: (i) to control, supervise,
construct, maintain, operate and provide such facilities or services as shall be necessary for the
efficient functioning of the airports; (ii) promulgate rules and regulations governing the planning,
development, maintenance, operation and improvement of the airports, and to control and supervise
the construction of any structure or the rendition of any service within the airports; (iii) levy and collect
dues, charges, fees or assessments for the use of airport premises, works, appliances, facilities or
concessions, or for any service provided by the MCIAA; and (iv) provide services, whether on its own
or otherwise, within the airports and the approaches thereof as may be necessary or in connection
with the maintenance and operation of the airports and their facilities.
Aside from MCIAA, the Civil Aviation Authority of the Philippines (―CAAP‖) is also responsible for the
planning, development, construction, operation, maintenance or the expansion of airports in the
Philippines. Among others, the CAAP Board has the power to determine and fix landing fees, parking
space fees, royalties on sales or deliveries, direct or indirect, to any aircraft for its use of aviation
gasoline, oil and lubricants, spare parts, accessories and supplies, tools, other royalties, fees or
rentals for the use of any of the property under its management and control.
The rules and regulations of these agencies will have an impact on the operations of the MactanCebu International Airport.
Operation of a Hospital
Philippine law defines a ―hospital‖ as a place devoted primarily to the maintenance and operation of
facilities for the diagnosis, treatment and care of individuals suffering from illness, disease, injury or
deformity, or in need of obstetrical or other medical and nursing care. It is also an institution, building
or place where there are installed beds or cribs or bassinets for twenty-four hour use or longer by
patients in the treatment of diseases, injuries, deformities or abnormal physical and mental states,
maternity cases, and sanitorial or sanitarial care, infirmities, nurseries, dispensaries, and such other
means by which they may be designated.
The primary government agency that regulates hospitals is the Department of Health (―DOH‖) through
the Bureau of Health Facilities and Services (―BHFS‖) and Center for Health Development (―CHD‖).
Under present regulations of the DOH, hospitals are classified according to (a) ownership
(government or private), (b) scope of services (General or Specialty) and (c) functional capacity into
(i) General (Levels 1, 2, and 3) (ii) Specialty Hospitals and (iii) Trauma Capable Hospitals (Trauma
Capable or Trauma Receiving). Each of the specific type of hospital classification entails variations in
licensing requirements, as well as inspection and assessment criteria, from the DOH.
While there are no specific nationality restrictions on the ownership and operations of hospitals in the
Philippines, nationality thresholds may be triggered in relation to hospitals: (a) owning lands and (b)
engaging in retail trade (pharmacies independent of hospital operations). Under Philippine law, only a
maximum of 40% foreign equity is allowed for corporations that own land. For corporations engaging
in retail trade, a minimum paid-up capital of the equivalent of US Dollars 2,500,000.00 is required
before foreign participation may be allowed.
In addition to the requirement to obtain permits and licenses which are applicable to all business
operations in the Philippines (i.e., local business permits, Securities and Exchange Commission
registration and reportorial requirements (for corporations and partnerships), Department of Trade
and Industry registration and reportorial (for sole proprietorship), Bureau of Internal Revenue
registration, Social Security System, Home Development Mutual Fund and Philippine Health
Insurance Corporation (―PhilHealth‖) registrations and reportorial requirements as an employer),
specific permits, licenses and regulations are applicable to hospital ownership and operations.
124
(a)
Certificate of Need (“CON”) – a certificate issued by the CHD for a proposed construction of a
new general hospital, which ensures that the facility will be needed at the time of its
completion. A CON is required prior to the issuance of a DOH-Permit to Construct (―DOHPTC‖) for construction of a general hospital.
(b)
DOH-PTC – a permit issued by the DOH through the BHFS to an applicant that will establish
and operate a hospital or other health facility prior to actual construction of the facility. A
DOH-PTC is also required for hospitals and other health facilities with substantial alteration,
expansion, renovation, or increase in number of beds. It is a prerequisite for the issuance of a
License to Operate (―LTO‖).
(c)
LTO – a formal authority issued by the DOH to an individual, agency, partnership or
corporation to operate a hospital or other health facility. A single LTO is issued to cover the
operation of the hospital, as well as its ancillary and other facilities including, but not limited
to, the clinical laboratory, HIV testing, drinking water analysis and drug testing, blood bank,
blood collection unit and blood station; dialysis clinic; ambulatory surgical clinic; pharmacy;
and medical x-ray facility. Special permits or authorities are required for hospital-based
medical facilities intended to cater to overseas workers and seafarers, hospital-based drug
abuse treatment and rehabilitation centers, facilities using radioactive materials that are
currently regulated by the Philippine Nuclear Research Institute (―PNRI‖) and medical facilities
that perform kidney transplants. An LTO is valid for one year, and must be renewed on an
annual basis.
Under R.A. No. 4226, a licensee is a person or persons granted a license to operate and
maintain a hospital according to an approved minimum standard. Under DOH Administrative
Order No. 2012-0012, an LTO is defined as a formal authority issued by the DOH to an
individual, agency, partnership or corporation to operate a hospital or other health facility.
(d)
Accreditation as a Hospital Engaged in Kidney Transplantation – a separate authorization
issued by the DOH for hospitals that are engaged in kidney transplantation. It is valid for three
years after issuance, and may be renewed thereafter. A self-assessment report is required to
be submitted to the Philippine Network for Organ Donation and Transplantation on the
succeeding year from the date of the issuance of the certificate.
(e)
Certificate of Accreditation – a separate Certificate of Accreditation is issued by the DOH for
medical facilities that cater to overseas Filipino workers and seafarers.
(f)
PhilHealth Accreditation - all DOH-licensed hospitals are deemed automatically accredited by
PhilHealth as Centers of Safety. Hospitals are required to submit a Mandatory Monthly
Hospital Report to the PhilHealth, indicating, among others information with regard to patients
admitted to the hospital.
(g)
PNRI Licenses – the PNRI is the primary government agency tasked to issue license in
relation to radioactive materials in the Philippines. Among the licenses issued by the PNRI for
hospitals or hospital related activities are (i) the license for medical use of
radiopharmaceuticals in medical institutions and (ii) the license for medical use of sealed
sources.
(h)
Philippine Drug Enforcement Agency (―PDEA‖) Licenses – hospitals are required to secure
license to handle dangerous drugs, dangerous drug preparations and precursors, essential
chemicals or controlled chemicals or mixtures.
In certain instances, hospitals are held solidarily liable for medical malpractice. In these instances, the
Philippine Supreme Court has used three approaches to justify a finding that hospitals are solidarily
liable with its physicians: (a) the ―control test‖ in labor law, (b) the doctrine of apparent authority, and
(c) the doctrine of corporate negligence or responsibility.
(c)
The ―Control Test‖
125
In a string of Philippine Supreme Court rulings, the nature of the ―control test‖ vis-à-vis the liability of
hospitals in medical malpractice was explained. The ―control test‖ essentially determines whether an
employment relationship exists between a physician and a hospital based on the exercise of control
over the physician as to details. Specifically, the employer (or the hospital) must have the right to
control both the means and the details of the process by which the employee (or the physician) is to
accomplish his task for it to become liable for the acts of consulting or visiting doctors under Article
2180 of the Civil Code. Under this provision, a person may be held directly and primarily accountable
for the negligence of his employee who acts within the scope of his assigned tasks. Once negligence
on the part of the employee is proved, liability on the part of the employer attaches by operation of
law, unless the latter can prove that he observed the due diligence of a good father of the family in the
selection and supervision of his employee.
(d)
The Doctrine of Apparent Authority
In general, a hospital is not liable for the negligence of an independent contractor-physician. There is,
however, an exception to this principle. The hospital may be liable if the physician is the ―ostensible‖
agent of the hospital. This exception is also known as the ―doctrine of apparent authority,‖ which
consists of two factors: (i) the hospital‘s manifestations, representations and actions (whether general
or implied) which would lead a reasonable person to conclude that the individual who was alleged to
be negligent was an employee or agent of the hospital and (ii) patient‘s reliance on the hospital‘s
conduct, sometimes characterized as an inquiry on whether the plaintiff acted in reliance upon the
conduct of the hospital or its agent, consistent with ordinary care and prudence.
(e)
Corporate Negligence or Responsibility
The third means by which hospitals could be made liable for medical malpractice is the doctrine of
corporate negligence or corporate responsibility. In Professional Services, Inc. v. Agana (G.R.
126297, 31 January 2007), the Supreme Court, in holding Professional Services, Inc. liable, noted the
emerging view that providing quality medical service is ―no longer the sole responsibility of the
physician‖ since the hospitals themselves promise quality health services to the public. Thus, they
have the obligation to exercise reasonable care to protect from harm and negligence all patients
admitted to their facilities. When a hospital breaches its duty to exercise reasonable care in providing
medical services, it incurs liability.
LABOR AND EMPLOYMENT
The Department of Labor and Employment (―DOLE‖) is the Philippine government agency mandated
to formulate policies, implement programs and services, and serve as the policy-coordinating arm of
the Executive Branch in the field of labor and employment. The DOLE has exclusive authority in the
administration and enforcement of labor and employment laws such as the Labor Code of the
Philippines and the Occupational Safety and Health Standards (―OSHS‖), as amended, and such
other laws as specifically assigned to it or to the Secretary of the DOLE.
Social Security System, PhilHealth and the Pag-IBIG Fund
An employer, or any person who uses the services of another person in business, trade, industry or
any undertaking is required under the Social Security Act of 1997 to ensure coverage of employees
following procedures set out by the law and the Social Security System (―SSS‖). Under the said law,
an employer must deduct from its employees their monthly contributions based on a given schedule,
pay its share of contribution and remit these to the SSS within a period set by law and/or SSS
regulations.
Employers are likewise required to ensure enrollment of its employees in a National Health Program
administered by the Philippine Health Insurance Corporation (―PhilHealth‖), a government corporation
attached to the DOH tasked with ensuring sustainable, affordable and progressive social health
insurance pursuant to the provisions of the National Health Insurance Act of 1995. Under the Home
Development Mutual Fund Law of 2009, all employees who are covered by the Social Security Act of
1997 must also be registered with and covered by the Home Development Mutual Fund, more
commonly referred to as the Pag-IBIG Fund.
126
Workers’ health and safety
The Rules for OSHS issued by the Bureau of Working Conditions of the DOLE establishes the
threshold limit values (―TLV‖) for toxic and carcinogenic substances which may be present in the
atmosphere of the work environment. The TLV refer to airborne concentration of substances and
represent the conditions under which it is believed that nearly all workers may be repeatedly exposed
daily without adverse effect. The TLV refers to the time weighted concentrations for an eight-hour
workday and a total of 48-work hours per week.
The employees‘ exposure to the substances identified in the OSHS must be limited to the ceiling
value given for the relevant substance in the OSHS or must not exceed the 8-hour time weighted
average limit given for that substance in the OSHS, as the case may be.
To protect the employees, an employer is required to furnish its workers with protective equipment for
the eyes, face, hands, and feet as well as protective shields and barriers, whenever necessary, by
reason of the hazardous nature of the process or environment, chemical or radiological or other
mechanical irritants or hazards capable of causing injury or impairment in the function of any part of
the body through absorption, inhalation or physical contact. The employer is responsible for ensuring
the adequacy and proper maintenance of personal protective equipment used in its workplace.
To ensure compliance with the OSHS, every establishment or place of employment will be inspected
at least once a year. Special inspection visits may be authorized by the Regional Labor Office to
investigate accidents, occupational illnesses or dangerous occurrences, especially those resulting in
permanent total disability or death, to conduct surveys of working conditions for the purpose of
evaluating and assessing environmental contaminants and physical conditions, or to conduct
investigations, inspections or follow-up inspections upon request of an employer, worker or a labor
union of the establishment.
Any violation of the provisions of the OSHS will be subject to the applicable penalties provided in the
Labor Code. The Labor Code imposes a fine of not less than P1,000.00 nor more than P10,000.00 or
imprisonment of not less than three months nor more than three years, or both such fine and
imprisonment, at the discretion of the court. If the offense is committed by a corporation, the penalty
will be imposed upon the guilty officers of such corporation.
Depending on the size of the workforce and the nature of the work place as either hazardous or nonhazardous, an employer is obliged to provide certain free medical and dental attendance and
facilities. For large-scale industries where the number of workers is from 200 to 600, the employer is
required to provide the services of a part-time occupational health physician and a part-time dentist,
each of whom is required to stay in the premises of the workplace at least four hours a day, six times
a week, and each working in alternate periods with the other. It is also required to provide the
services of a full-time occupational health nurse and a full-time first aider. The employer must further
maintain an emergency clinic, unless there is a hospital or dental clinic which can be reached in 25
minutes of travel, and it has facilities readily available for transporting its workers to the hospital or
clinic in case of emergency
Under the OSHS, every place of employment is required to have a health and safety committee.
Further, the employer has the duty to write administrative policies on safety in conformity with OSHS.
It must report to the DOLE copies of the policies adopted and the health and safety organization
established to carry out the program on safety and health within one month after the organization or
reorganization of the health and safety committee.
Moreover, Republic Act No. 7877 makes it the duty of every employer to create a committee on
decorum and investigation of sexual harassment cases. Such committee must be composed of at
least one representative each from management, the union, the employees from the supervisory rank,
and the rank-and-file employees. In addition, it is likewise the duty of the employer to promulgate
rules and regulations prescribing the procedure for the investigation of sexual harassment cases and
the administrative sanctions therefor, which rules must be formulated in consultation with and later
jointly approved by the employees.
127
MATERIAL CONTRACTS
The Company‘s principal contracts generally consist of construction contracts for its projects,
operating and finance lease commitment, contract for the lease of its office space, motor pool and
equipment yard; surety arrangement and guarantees and joint venture agreement. The Company also
has existing loan agreements. Other than these, the Company is not a party to any contract of any
material importance and outside the usual course of business, and the Directors do not know of any
such contract involving the Company.
CONSTRUCTION CONTRACTS
Majority of the Company‘s contracts are general construction works and may be classified into several
scopes namely: site development, earthworks, structural and civil works, masonry works, architectural
finishes, electrical works, plumbing and sanitary works, fire protection works and mechanical works.
These construction contracts generally contain a warranty from the Company that it shall be
responsible for, and shall indemnify and hold the customer free and harmless from and against all
losses, expenses, judgments, court costs, attorney‘s fees, demands, payments, suits, action,
recoveries, decrees, execution and claims of every nature and description brought and/or recovered
against the Company or the customer, for whatever reason, in connection with the work covered by
the said contracts. Payment of liquidated damages, computed at 1/10 of 1% of the total contract price,
up to a maximum of 10% of the total contract amount, per calendar day of delay, is stipulated in said
contracts.
As for the manner of payment, the customer generally pays the downpayment upon submission of
certain documents (e.g. bonds) while the balance is paid through monthly progress payments upon
submission of Megawide‘s monthly progress billing. These monthly payments are subject to ten
percent (10%) retention to be released upon lapse of a certain amount of time after the completion
and/or turn-over of the project.
Upon complete turn-over of the projects, the Company, under the foregoing construction contracts, is
required to post bonds to guarantee any defects, except those from ordinary wear and tear or not
attributable to the Company, that may occur within one (1) year from acceptance.
PPP CONTRACTS
The Company on its own and through its subsidiaries, executed the following agreements relative to
its PPP Projects:
(i) Agreements executed by the Department of Education and CMCI for the PSIP I Projects
(a) Build Lease Transfer Agreement (for Package B) dated October 8, 2012 with a contract price
of 5,229,899,136 for the construction of school buildings in Region III;
(b) Build Lease Transfer Agreement (for Package C) dated October 8, 2012 with a contract price
of 7,229,899,136 for the construction of school buildings in Region IV-A; and
The PSIP involves the construction, maintenance, and lease of school buildings under a Build-Lease
Transfer (―BLT‖) framework. Under the BLT, Citicore-Megawide Consortium will build over 7000
classrooms then lease the same to the DepED for ten (10) years before transferring the school
buildings to the DepEd.
(ii) Agreement executed by the Department of Education and Megawide for the PSIP II Projects
October 17, 2013, the Company executed a Build Transfer Agreement with the DepEd for the
construction of school buildings in Regions I, II, III, and CAR with contract price of P2,255,923,096.49
128
(iii) Build Operate Transfer Agreement executed by MWCCI and the DOH
On March 6, 2014, the Company‘s 51%-owned subsidiary, MWCCI, executed a Build Operate
Transfer Agreement with the DOH relative to the MPOC Project for a total contract price of
approximately P5.69 Billion. The BOT Agreement covers the design, construction, operation and
maintenance of the hospital for the designated 25-year concession period, and then turnover the
hospital to the DOH at the end of such period.
(iii) Concession Agreement executed by GMCAC and the DOTC and the MCIAA
On April 22, 2014, GMCAC executed the concession agreement for the renovation of the Mactan
Cebu International Airport and the construction of a new and world-class airport passenger terminal
(along with associated infrastructure and facilities), the renovation and expansion of the existing
airport terminal and the operation and maintenance of both airport passenger terminals for a period of
25 years under a build-operate-transfer arrangement.
The Concession Period is for 25 years.
OPERATING AND FINANCE LEASE
In the conduct of its ordinary course of business, Megawide enters into finance lease agreements with
financing companies for its vehicles and equipment for terms of 36 – 60 months. As of date hereof,
the Company‘s leased property under such arrangement has a total cost of P713,260,181.34, total
rental is P 632,435,906.80 and total monthly rental of P17,523,569.83.
LEASED PROPERTIES
Megawide is leasing the 1,493 sqm property at N. Domingo St., Barangay Valencia, Quezon City
where its corproate office is located from Megapolitan Realty and Development Corporation
(Megapolitan). The lease agreement is valid until February 5, 2015 and Megawide pays a monthly
rental of P196,619.40. Megawide leases an office space from Philwide with a monthly rental of
P1,000.00. It also leases an office space from Philwide. Megawide pays a rental of P1,000.
In addition to the foregoing office spaces, Megawide also leases properties needed for its operations
such as the lease agreement with:
Date
January
13,
2014
Lessor
Mail
Coordinates
December 21,
2013
EverForbes
Development Corp
June 23, 2014
Will
Decena
Associates, Inc,
&
January 2015
March 1, 2014
Maria Elma Jaview
Loresca
February 28,
2015
April 1, 2014
Myrna Tomas
April 11, 2014
LVN Pictures Inc.
April 11, 2016
June 1, 2014
New
May 31, 2015
Link
Duration
January 13,
2015
December 20,
2014
Zealand
March 31,
2016
Location
Mexico
Industrial
Complex,
Brgy.
Panipuan,
Mexico
Pampanga
#25 Sct. Borromeo
St.
Corner
Sct.
Tuazon St. South
Triangle Quezon City
11 Scout Rallos,
Barangay
Laging
Handa, Quezon City
#115
Dr.
Sixto
Antonio Ave. Brgy
Maybunga
Pasig
City,
87
Mindanao
Avenue, Barangay
Pagasa/B.Bantay,
Quezon City
Barangay Kaunlaran,
Cubao Quezon City
Area
4,800 sqm
Monthly Rental
P420,000.00
inclusive of 12%
VAT
488.10
sqm
P67,578.94
inclusive of VAT
and Withholding
Tax
P80,000.00 net
of VAT and
Withholding Tax
P30,000
Yakal
1,350 sqm
Street
cor
690 sqm
1,225.61
square
feet
809 sqm
P107,000.00
inclusive of VAT
and other taxes
2,019.38
sqm
P271,404.67
Inclusive of 12%
VAT
P200.00/ sqm
129
Creamery, Inc.
Talisay
Makati City
June 1, 2014
New
Zealand
Creamery, Inc.
May 31, 2015
April 1, 2014
Eldan Land Use
Management
&
Development Corp
July 1, 2014
Natividad
Makabuhay
Street,
Yakal Street cor
Talisay
Street,
Makati City
1,176 sqm
March 31,
2015
Mariano
A.Luna
Makati
399 sqm
N.
June 30,
2015
Barangay San Juan,
Taytay Rizal
6,090 sqm
March 1, 2014
Dizon
Farms
Produce, Inc.
March 1,
2018
Ligid Tipas Taguig
City
615 sqm
March 1, 2014
Aguacare Marketing
Corp.
October 31,
2018
Tipas St. Taguig City
1,450 sqm
January 1,
2014
Altria East Land, Inc.
January 1,
2015
Coastal
Road,
Bangiad, Brgy. San
Juan, Taytay Rizal
121,984.8
sqm
St. Cor.
City
of
inclusive of 5%
withholding tax
and 12% VA, or
a total of
P270,000.00
P200.00/ sqm
inclusive of 5%
withholding tax
and 12% VA, or
a total of
P235,200.00
P80,000.00
inclusive of all
taxes and fees.
P487,200.00
exclusive of
applicable taxes
P75.00/
sqm.
VAT inclusive or
a total amount
of P46,125.00
P150.00/sqm
inclusive of VAT
and all
applicable taxes
or a total of
P217,500.00
P2,439,696.00
inclusive of VAT
and other taxes
LOAN AGREEMENTS
The Company has existing credit lines granted per bank (amounts in P millions) as of date:
Bank
Credit Line
Outstanding Loan
Available Credit Line
BDO Unibank, Inc
1,500.00
1,210.00
290.00
Bank of Philippine Islands
1,000.00
600
400.00
Metrobank
1,500.00
910
590.00
Philippine National Bank
2,000.00
500
1,500.00
Security Bank
DBP
HSBC(USD millions)
500.00
2,000.00
500.00
300
15.00
1,700.00
15.00
Additionally, the Company has the following loan agreements:
P3 Billion – BDO Private Bank
On July 11, 2011, the Company entered into a P3 Billion Notes Facility Agreement with BDO Private
Bank,Inc. – Wealth Advisory and Trust Group to fund the Company‘s capital expenditure
requirements. The note earns interest at the rate per annum which is equal to the interest rate based
on the relevant Philippine Dealing System Treasury Fixing (―PDST-F‖) benchmark rate referenced to
the bid yield for treasury securities of maturity similar to the one month notes plus a margin from 125
to 150 basis points.
As of date, the outstanding amount on the Notes Facility is P1,000,000,000.
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The final maturity dates of the notes issued pursuant to this Agreement are in 2016.
P 6.5 Billion Notes Facility Agreement
On December 7, 2012, the Company, as Sponsor, entered into a P6.5 B Notes Facility Agreement
with Citicore-Megawide Consortium, Inc. as Issuer, Citicore Holdings Investment, Inc. as Sponsor,
and several banking institutions. The P6.5 Billion Notes Facility Agreement is for the purpose of
financing the debt portion of the total project cost of PSIP Contract Package B for Region III and
Contract Package C for Region IV-A.
In consideration of the commitments made by the noteholders to CMCI in accordance with such
agreement, and to ensure the payment by CMCI of all its obligations under such agreement and other
loan documents, and for other good and valuable consideration, CMCI assigned to the security
trustee appointed under the agreement for the benefit of the noteholders all CMCI‘s rights, title and
interests into its project accounts, project receivables and project documents (subject to governmental
approval, including the Build Lease Transfer Agreements with the government), among others.
As of date, the outstanding amount on the Notes Facility is P6,012,500,000.
The final maturity date of the notes issued under this Agreement is in 2023.
P 4.0 Billion Notes Facility Agreement
On February 19, 2013, the Company, as Issuer, entered into a P4 Billion Notes Facility Agreement
with several banking institutions. The P4 Billion Notes Facility Agreement is for the purpose of funding
the Company‘s working capital requirements and for general corporate purposes.
As of date, the outstanding amount on the notes facility is P4,000,000,000.
The final maturity dates of notes issued under this Agreement are in 2018, 2020 and 2023,
respectively.
P 11.3 Billion Omnibus Loan and Security Agreement
On April 8, 2014, the Company, as Sponsor, Assignor and Pledgor, entered into a P11.3 Billion
Omnibus Loan and Security Agreement with GMR Megawide Cebu Airport Corporation as Borrower,
GMR Infrastructure Limited as Sponsor, Assignor and Pledgor, GMR Infrastructure (Singapore) Pte.
Limited as Assignor and Pledgor and BDO Unibank, Inc. as Lender. The P11.3 Billion Omnibus Loan
and Security Agreement is for the purpose of partially financing the payment of the bid premium of the
MCIA Project.
In consideration of the commitments made by the lender to GMCAC in accordance with such
agreement, and to ensure the payment by GMCAC of all its obligations under such agreement and
other loan documents, and for other good and valuable consideration, GMCAC assigned to the
security trustee appointed under the agreement for the benefit of the lender all its rights, title and
interests into its project accounts, project receivables and project documents, among others.
As of date, the outstanding loan amount is P11,293,182,882.34.
The final maturity date of the notes issued under this Agreement is in 2015.
P 2.9 Billion Omnibus Loan and Security Agreement
On October 2, 2014, the Company, as Guarantor, entered into a P2.9 Billion Omnibus Loan and
Security Agreement with Megawide World Citi Consortium, Inc. as Borrower, Land Bank of the
Philippines and Development Bank of the Philippines as Lenders. The P2.9 Billion Omnibus Loan and
Security Agreement is to finance the construction cost of the new Philippine Orthopedic Center.
131
In consideration of the commitments made by the noteholders to MWCCI in accordance with such
agreement, and to ensure the payment by MWCCI of all its obligations under such agreement and
other loan documents, and for other good and valuable consideration, MWCCI assigned to the
security trustee appointed under the agreement for the benefit of the noteholders all its rights, title and
interests into certain of its project debt accounts, project receivables, project documents, among
others.
As of date, there is no outstanding loan amount.
SHAREHOLDERS AGREEMENTS
Agreement with PhilCarbon Inc. in relation to Megawatt Clean Energy, Inc.
On June 27, 2014, the Company entered into a Shareholders' Agreement with PhilCarbon Inc.
("PhilCarbon"), a renewable energy developer, to establish a company that will engage in the
development of energy projects for Megawide. Pursuant to said Shareholders' Agreement, Megawatt
Clean Energy, Inc. ("MCEI") was incorporated on September 4, 2014.
Under the Shareholders' Agreement, the Company shall own 70% of MCEI and provide 100% of the
funds needed to capitalize and operate MCEI. PhilCarbon shall own 30% of MCEI. MCEI's Board
shall be comprised of five (5) directors designated by the Company and two (2) directors designated
by PhilCarbon. MCEI will initially develop energy projects to be selected by the MCEI Board from the
current portfolio of stage zero projects of PhilCarbon.
Agreement with GMR in relation to GMCAC
On April 8, 2014, the Company entered into a Shareholders‘ Agreement with GMR setting forth the
terms and conditions governing their participation in the share capital of GMCAC, and their rights and
obligations as shareholders in relation to GMCAC. Under said Shareholders‘ Agreement the parties
defined the business of GMCAC, the required manpower support from each shareholder, the
composition of the board, formation of committees and the management team for the orderly
management of the MCIA Project, conduct of board and shareholder meetings as well as restrictions
on the transfer rights of the stockholders and issuance of additional shares.
Agreement with World Citi in relation to MWCCI
On September 22, 2014, the Company entered into a Shareholders‘ Agreement with World Citi setting
forth the terms and conditions governing their participation in the share capital of MWCCI, and their
rights and obligations as shareholders in relation to MWCCI. Under said Shareholders‘ Agreement the
parties defined the shareholding structure, right of first refusal, composition of the board, residency
training program for MPOC, and hospital operations and management.
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INTEREST OF EXPERTS AND COUNSEL
LEGAL MATERS
The validity of the Offer Shares and other matters concerning the Offer and the tax matters were
passed upon for the Company by Cayetano Sebastian Ata Dado and Cruz, the independent legal and
tax counsel of the Company. The independent counsel has no shareholdings or any interest, direct or
indirect, in the Company, or any right, whether legally enforceable or not to nominate persons or to
subscribe to the securities of the Company in accordance with the standards on independence
required in the Code of Professional Responsibility and as prescribed by the Supreme Court of the
Philippines.
INDEPENDENT AUDITORS
The financial statements of Megawide Construction Corporation as of December 31, 2013 and 2012,
and for the years ended December 31, 2013, 2012 and 2011 appearing in this Preliminary Prospectus
have been audited by Punongbayan & Araullo, independent auditors, as set forth in their report
thereon appearing elsewhere herein.
The aggregate fees billed by Punongbayan & Araullo for each of the years ended December 31,
2011, 2012 and 2013 for professional services rendered by Punongbayan & Araullo to the Company,
excluding fees directly related to the Offer (amounts in P):
Nature
Audit of Financial Statements
December 31, 2013
For the years ended
December 31, 2012
1,050,000
1,050,000
December 31,
2011
995,000
The fees presented above include out-of-pocket expenses incidental to the Independent Auditors
services.
Except for the abovementioned services, the independent auditor provided no other type of services.
The Company has no disagreements with its independent auditors on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or procedure.
The Company‘s Corporate Governance Manual provides that the audit committee shall consist of
three (3) members of the Board of Directors, who shall preferably have accounting and finance
backgrounds, one of whom is an independent director, including the chairman of the committee, and
another with audit experience. The audit committee, with respect to an external audit:




Perform oversight function over the corporation‘s external auditor. It shall ensure that the
external auditor acts independently from the internal auditor, and that the external auditor is
given unrestricted access to all records, properties and personnel to enable them to perform
their respective audit functions.
Prior to the commencement of the audit, discuss with the external auditor the nature, scope
and expenses of the audit, and ensure proper coordination if more than one audit form is
involved in the activity to secure proper coverage and minimize duplication of efforts.
Review the report submitted by the external auditor.
Evaluate and determine the non-audit work, if any, of the external auditor, and review
periodically the non-audit fees paid to the external auditor in relation to their significance to
the total annual income of the external auditor and to the corporation‘s overall consultancy
expenses. The committee shall disallow any non-audit work that will conflict with his duties as
an external auditor or may pose a threat to his independence. The non-audit work, if allowed,
should be disclosed in the corporation‘s annual report.
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PHILIPPINE STOCK MARKET
The information presented in this section has been extracted from publicly available documents which
have not been prepared or independently verified by the Company or the Joint Issue Managers or any
of their respective affiliates or advisors in connection with sale of the Offer Shares.
BRIEF HISTORY
The Philippines initially had two stock exchanges, the Manila Stock Exchange, which was organized
in 1927, and the Makati Stock Exchange, which began operations in 1963. Each exchange was selfregulating, governed by its respective Board of Governors elected annually by its members.
Several steps initiated by the Government have resulted in the unification of the two bourses into the
PSE. The PSE was incorporated in 1992 by officers of both the Makati and the Manila Stock
Exchanges. In March 1994, the licenses of the two exchanges were revoked. While the PSE
maintains two trading floors, one in Makati City and the other in Pasig City, these floors are linked by
an automated trading system, which integrates all bids, and ask quotations from the bourses.
In June 1998, the Philippine SEC granted the ―Self-Regulatory Organization‖ status to the PSE,
allowing it to impose rules as well as implement penalties on erring trading participants and listed
companies. On August 8, 2001, the PSE completed its demutualization, converting from a non-stock
member- governed institution into a stock corporation in compliance with the requirements of the
Philippine Securities Regulation Code. The PSE has an authorized capital stock of 97.8 million
shares, of which, of which 30.7 million shares are subscribed and fully paid up. Each of the 184
member-brokers was granted 50,000 common shares of the new PSE at a par value of P1.00 per
share. In addition, a trading right evidenced by a ―Trading Participant Certificate‖ was immediately
conferred on each member broker allowing the use of the PSE‘s trading facilities. As a result of the
demutualization, the composition of the PSE Board of Governors was changed, requiring the inclusion
of seven brokers and eight non-brokers, one of whom is the President.
On December 15, 2003, the PSE listed its shares by way of introduction at its own bourse as part of a
series of reforms aimed at strengthening the Philippine securities industry.
Classified into financial, industrial, holding firms, property, services, and mining and oil sectors,
companies are listed either on the PSE‗s Main Board or the Small, Medium and Emerging Board.
Previously, the PSE allowed listing on the First Board, Second Board or the Small, Medium and
Enterprises Board. As a result of the issuance by the PSE of Memorandum No. CN-No. 2013-0023
dated June 6, 2013, revisions to the PSE Listing Rules were made. Among such changes are the
removal of the Second Board listing and the requirement that lock-up rules be embodied in the
articles of the incorporation of the issuer. Each index represents the numerical average of the prices
of component shares. The PSE has an index, referred to as the PHISIX, which as at the date thereof
reflects the price movements of selected shares listed on the PSE, based on traded prices of shares
from the various sectors. The PSE shifted from full market capitalization to free float market
capitalization effective April 3, 2006, simultaneous with the migration to the free float index and the
renaming of the PHISIX to PSEi. The PSEi is composed of shares of 30 selected companies listed on
the PSE.
With the increasing calls for good corporate governance, the PSE has adopted an online daily
disclosure system to improve the transparency of listed companies and to protect the investing public.
The table below sets out movements in the composite index as of the last business day of each
calendar year from 1995 to 2013, and the most recent month end in 2014, and shows the number of
listed companies, market capitalization, and value of shares traded for the same period:
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SELECTED STOCK EXCHANGE DATA
The table below sets forth movements in the composite index from 1995 to 2013 and as of May 31,
2014, and shows the number of listed companies, market capitalization, and value of shares traded
for the same period:
Year
Composite
Index at
Closing
2,594.2
3,170.6
1,869.2
1,968.8
2,142.9
1,494.5
1,168.1
1,018.4
1,442.4
1,822.8
2,096.0
2,982.5
3,621.6
1,872.9
3,052.7
4,201.1
4,372.0
5,812.7
5,889.8
6,864.8
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
As of July 31, 2014
Notes: in ₱ Billions
Source: Philippine Stock Exchange, Inc.
Number of
Listed
Companies
205
216
221
222
225
229
231
234
236
235
237
239
244
246
248
253
253
268
257
297
Aggregate
Market
Capitalization
(inPbillions)
1,545.7
2,121.1
1,251.3
1,373.7
1,936.5
2,576.5
2,141.4
2,083.2
2,973.8
4,766.3
5,948.4
7,173.2,
7,977.6
4,069.2
6,029.1
8,866.1
8,697.0
10,850.0
11,931.3
TRADING
The PSE is a double auction market. Buyers and sellers are each represented by stockbrokers. To
trade, bid or ask prices are posted on the PSE‘s electronic trading system. A buy (or sell) order that
matches the lowest asked (or highest bid) price is automatically executed. Buy and sell orders
received by one broker at the same price are crossed at the PSE at the indicated price. Transactions
are generally invoiced through a confirmation slip sent to customers on the trade date (or the following
trading day). Payment of purchases of listed securities must be made by the buyer on or before the
third trading day (the settlement date) after the trade.
Wholesale trading on the PSE starts at 9:30 a.m. and ends at 3:30 p.m., with trading recess from
12:00 nn to 1:30 p.m. There is also a provision for ten-minute extensions during which transactions
may be conducted, provided that they are executed at the last traded price and are only for the
purpose of completing unfinished orders. The PSE may effect changes to the hours and schedule of a
trading day, as the circumstance warrants. Trading days are Monday to Friday, except legal and
special holidays, days when the BSP is closed for various reasons, and such other days as may
otherwise be declared by the SEC or the PSE, through its President or other duly authorized
representative, to be a non-trading day.
Minimum trading lots range from five (5) to 1,000,000 shares depending on the price range and
nature of the security traded. Odd-sized lots are traded by brokers on a board specifically designed
for odd lot trading.
To maintain stability in the stock market, daily price swings are monitored and regulated. Under
current PSE regulations, when the price of a listed security moves up by 50.00% or down by 50.00%
in one day (based on the previous closing price or last posted bid price, whichever is higher), the price
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of that security is automatically frozen by the PSE, unless there is an official statement from the
company or a government agency justifying such price fluctuation, in which case the affected security
can still be traded but only at the frozen price. If the issuer fails to submit such explanation, a trading
halt is imposed by the PSE on the listed security the following day. Resumption of trading shall be
allowed only when the disclosure of the company is disseminated, subject again to the trading ban.
NON-RESIDENT TRANSACTIONS
When the purchase/sale of Philippine shares of stock involves a non-resident, whether the transaction
is effected in the domestic or foreign market, it shall be the responsibility of the securities
dealer/broker to register the transaction with the BSP. The local securities dealer/broker shall file with
the BSP, within three business days from the transaction date, an application in the prescribed
registration form. After compliance with other required undertakings, the BSP shall issue a Certificate
of Registration. Under BSP rules, all registered foreign investments in Philippine securities including
profits and dividends, net of taxes and charges, may be repatriated.
SCRIPLESS TRADING
In 1995, the PDTC (formerly the Philippine Central Depository, Inc.), was organized to establish a
central depository in the Philippines and introduce scripless or book-entry trading in the Philippines.
On December 16, 1996, the PDTC was granted a provisional license by the Philippine SEC to act as
a central securities depository.
All listed securities at the PSE have been converted into book-entry settlement in the PDTC. The
depository service of the PDTC provides the infrastructure for lodgment (deposit) and upliftment
(withdrawal) of securities, pledge of securities, securities lending and borrowing and corporate
actions including shareholders‘ meetings, dividend declarations and rights offerings. The PDTC also
provides depository and settlement services for non-PSE trades of listed equity securities. For
transactions on the PSE, the security element of the trade will be settled through the book-entry
system, while the cash element will be settled through the current settlement banks.
In order to benefit from the book-entry system, securities must be immobilized into the PDTC system
through a process called lodgment. Lodgment is the process by which shareholders transfer legal title
(but not beneficial title) over their shares of stock in favor of the PCD Nominee Corporation (―PCD
Nominee‖), a corporation wholly-owned by the PDTC, whose sole purpose is to act as nominee and
legal title holder of all shares of stock lodged in the PDTC. ―Immobilization‖ is the process by which
the warrant or share certificates of lodging holders are canceled by the transfer agent and the
corresponding transfer of beneficial ownership of the immobilized shares in the account of the PCD
Nominee through the PDTC participant will be recorded in the issuing corporation‘s registry. This trust
arrangement between the participants and PDTC through the PCD Nominee is established by and
explained in the PDTC Rules and Operating Procedures approved by the Philippine SEC. No
consideration is paid for the transfer of legal title to the PCD Nominee. Once lodged, transfers of
beneficial title of the securities are accomplished via book-entry settlement.
Under the current PDTC system, only participants (e.g. brokers and custodians) will be recognized by
the PDTC as the beneficial owners of the lodged equity securities. Thus, each beneficial owner of
shares, through his participant, will be the beneficial owner to the extent of the number of shares held
by such participant in the records of the PCD Nominee. All lodgments, trades and uplifts on these
shares will have to be coursed through a participant. Ownership and transfers of beneficial interests in
the shares will be reflected, with respect to the participant‘s aggregate holdings, in the PDTC system,
and with respect to each beneficial owner‘s holdings, in the records of the participants. Beneficial
owners are thus advised that in order to exercise their rights as beneficial owners of the lodged
shares, they must rely on their participant-brokers and/or participant custodians.
Any beneficial owner of shares who wishes to trade his interests in the shares must course the trade
through a participant. The participant can execute PSE trades and non-PSE trades of lodged equity
securities through the PDTC system. All matched transactions in the PSE trading system will be fed
through the SCCP, and into the PDTC system. Once it is determined on the settlement date (T+3)
that there are adequate securities in the securities settlement account of the participant-seller and
adequate cleared funds in the settlement bank account of the participant-buyer, the PSE trades are
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automatically settled in the SCCP Central Clearing and Central Settlement system, in accordance
with the SCCP and PDTC Rules and Operating Procedures. Once settled, the beneficial ownership of
the securities is transferred from the participant-seller to the participant-buyer without the physical
transfer of stock certificates covering the traded securities.
If a shareholder wishes to withdraw his stockholdings from the PDTC system, the PDTC has a
procedure of upliftment under which PCD Nominee will transfer back to the shareholder the legal title
to the shares lodged.
The uplifting shareholder shall follow the Rules and Operating Procedures of the PDTC for the
upliftment of the shares lodged under the name of the PCD Nominee. The transfer agent shall
prepare and send a Registry Confirmation Advice to the PDTC covering the new number of shares
lodged under the PCD Nominee. The expenses for upliftment are for the account of the uplifting
shareholder.
The difference between the depository and the registry would be on the recording of ownership of the
shares in the issuing corporations‘ books. In the depository set-up, shares are simply immobilized,
wherein customers‘ certificates are canceled and a confirmation advice is issued in the name of PCD
Nominee to confirm new balances of the shares lodged with the PDTC. Transfers among/between
broker and/or custodian accounts, as the case may be, will only be made within the book-entry
system of the PDTC. However, as far as the issuing corporation is concerned, the underlying
certificates are in the PCD Nominee‘s name. In the registry set-up, settlement and recording of
ownership of traded securities will already be directly made in the corresponding issuing company‘s
transfer agents‘ books or system. Likewise, recording will already be at the beneficiary level (whether
it be a client or a registered custodian holding securities for its clients), thereby removing from the
broker its current ―de facto‖ custodianship role.
The option if whether a listed security should be ―housed‖ in the depository or registry is at the
issuer‗s discretion. The migration from the depository to the registry model aims to eliminate the legal
and operational risk brought about by a depository infrastructure. Likewise, the migration is expected
to strengthen measures to protect public investors/shareholders and decrease transaction costs
resulting from additional layers in the settlement process. At present, the depository model is the
most widely used and recognized system, being utilized by nearly all jurisdictions around the world.
In light of the CCCS, custodians holding Philippine listed equity securities now have the following
options:
a) Stay with the depositary for all its securities, whereby the PDTC acts as their implied
―Custodian‖. For shares under the PDTC, custodians are direct PDTC account holders with
the shares still recorded in the PCD Nominee‗s name as far as the corporation/transfer agent
is concerned. For shares under the registry, the custodian appears to be a ―client‖ under
―PCD‖, such that shares are recognized or recorded with PCD as the master/controlling
account; or
b) Be a system participant of the SCCP wherein the CCCS would offer to the custodians the
interface to both the depositary and registry systems. In this option, for shares under the
PDTC, custodians will still have the option to maintain their own accounts in the PDTC or
have an omnibus account together with the broker accounts in the PDTC as shares are
accounted for or segregated per accountholder in the CCCS. This simplifies the custodian‗s
interface into a single connectivity for both the depositary and the registry systems. For
shares under the registry system, the custodian will have its own master account, having
control over its own account. In the registry scenario, the custodian is already recognized as
the beneficial holder of the securities on behalf of its clients. The custodian effectively is given
a direct relationship with the issuing company wherein it receives the annual reports,
dividends, the other communications and information directly. Prospectively, when the
custodian is accredited as an indirect clearing member of the SCCP, straight-through
processing of trades or settlement can already be done directly with the custodian or with its
client.
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AMENDED RULE ON LODGEMENT
On June 24, 2009, the PSE apprised all listed companies and market participants through
Memorandum No. 2009-0320 that, beginning July 1, 2009, as a condition for the listing and trading of
the securities of an applicant company, the applicant company shall electronically lodge its registered
securities with the PDTC or any other entity duly authorized by the SEC, without any jumbo or mother
certificate in compliance with the requirements of Section 43 of the Securities Regulation Code. In
compliance with the foregoing requirement, actual listing and trading of securities on the scheduled
listing date shall take effect only after submission by the applicant company of the documentary
requirements stated in Article III Part A of the Revised Listing Rules.
Further, the PSE apprised all listed companies and market participants on May 21, 2010, through
Memorandum No. 2010-0246, that the Amended Rule on Lodgment of Securities under Section 16 of
Article III, Part A of the Revised Listing Rules of the Exchange shall apply to all securities that are
lodged with the PDTC or any other entity duly authorized by the SEC.
For listing applications, the amended rule on lodgment of securities is applicable to:
a) The offer shares/securities of the applicant company in the case of an initial public offering;
b) The shares/securities that are lodged with the PDTC, or any other entity duly authorized by
the Commission in the case of a listing by way of introduction;
c) New securities to be offered and applied for listing by an existing listed company; and
d) Additional listing of securities of an existing listed company.
e) Pursuant to the said amendment, the PDTC issued an implementing procedure in support
thereof to wit:
For new companies to be listed at the PSE as of July 1, 2009 the usual procedure will be observed
but the Transfer Agent on the companies shall no longer issue a certificate to PCD Nominee Corp but
shall issue a Registry Confirmation Advice, which shall be the basis for the PDTC to credit the
holdings of the Depository Participants on listing date.
On the other hand, for existing listed companies, the PDTC shall wait for the advice of the Transfer
Agents that it is ready to accept surrender of PCNC jumbo certificates and upon such advice the
PDTC shall surrender all PCNC jumbo certificates to the Transfer Agents for cancellation. The
Transfer Agents shall issue a Registry Confirmation Advice to PCNC evidencing the total number of
shares registered in the name of PCNC in the Issuer‗s registry as of confirmation date.
SETTLEMENT
The Securities Clearing Corporation of the Philippines (―SCCP‖) is a wholly owned subsidiary of the
PSE, and was organized primarily as a clearance and settlement agency for SCCP-eligible trades
executed through the facilities of the PSE. SCCP received its permanent license to operate on
January 17, 2002. It is responsible for:



Synchronizing the settlement of funds and the transfer of securities through Delivery versus
Payment clearing and settlement of transactions of Clearing Members, who are also Trading
Participants of the PSE;
Guaranteeing the settlement of trades in the event of a Trading Participant‘s default through
the implementation of its Fails Management System and administration of the Clearing and
trade Guaranty Fund; and
Performance of Risk Management and Monitoring to ensure final and irrevocable settlement.
SCCP settles PSE trades on a 3-day rolling settlement environment, which means that settlement of
trades takes place three (3) Business Days after transaction date (T+3). The deadline for settlement
of trades is 12:00 noon of T+3. Securities sold should be in scripless form and lodged under the
PDTCs book entry system. Each Trading Participant maintains a Cash Settlement Account with one
138
of the four existing Settlement Banks of SCCP which are BDO Unibank, Inc., Rizal Commercial
Banking Corporation, Metropolitan Bank & Trust Company and Deutsche Bank AG (Manila Branch).
Payment for securities bought should be in good, cleared funds and should be final and irrevocable.
Settlement is presently on a broker level.
SCCP implemented the CCCS last May 29, 2006. CCCS employs multilateral netting whereby the
system automatically offsets ―buy‖ and ―sell‖ transactions on a per issue and a per flag basis to arrive
at a net receipt or a net delivery security position for each Clearing Member. All cash debits and
credits are also netted into a single net cash position for each Clearing Member. Notation of the
original PSE trade contracts occurs, and SCCP stands between the original trading parties and
becomes the Central Counterparty to each PSE-Eligible trade cleared through it.
ISSUANCE OF CERTIFICATED SHARES
On or after the listing or re-issuance of the shares on the PSE, any beneficial owner of the shares
may apply to the PDTC through his broker or custodian-participant for a withdrawal from the bookentry system and return to the conventional paper-based settlement. If a stockholder wishes to
withdraw his stockholdings from the PDTC System, the PDTC has a procedure of upliftment under
which PCD Nominee will transfer back to the stockholder the legal title to the shares lodged. The
uplifting shareholder shall follow the Rules and Operating Procedures of the PDTC for the upliftment
of shares lodged under the name of PCD Nominee. The transfer agent shall prepare and send a
Registry Confirmation Advice to the PDTC covering the new number of shares lodged under PCD
Nominee. The expenses for upliftment are for the account of the uplifting shareholder.
Upon the issuance of certificated shares in the name of the person applying for upliftment, such
shares shall be deemed to be withdrawn from the PDTC book-entry settlement system. Such shares
cannot be traded on the PSE without lodging them once again in the depository, in accordance with
existing PSE and PDTC rules that were approved by the SEC. Pending completion of the upliftment
process, the beneficial interest in the shares covered by the application for upliftment is frozen and no
trading and book-entry settlement will be permitted until certificated shares shall have been issued by
the relevant company‗s transfer agent.
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PHILIPPINE FOREIGN INVESTMENT, FOREIGN OWNERSHIPAND EXCHANGE CONTROLS
REGISTRATION OF FOREIGN INVESTMENTS AND EXCHANGE CONTROLS
Under current BSP regulations, a foreign investment in listed Philippine securities (such as common
shares) must be registered with the BSP if the foreign exchange needed to service the repatriation of
capital and the remittance of dividends, profits and earnings which accrue thereon will be sourced
from the banking system. If the foreign exchange required for servicing such capital repatriation or
dividends, profits, and earnings remittance will be sourced outside the banking system, registration
with the BSP is not required. The application for registration must be filed by a stockbroker/dealer or
an underwriter directly with the BSP or with a custodian bank designated by the investor. A custodian
bank may be any commercial bank or offshore banking unit in the Philippines appointed by the
investor to register the investment, hold shares for the investor, and represent the investor in all
necessary actions in connection with his investments in the Philippines. Applications for registration
must be accompanied by: (i) a purchase invoice, or subscription agreement and/or proof of listing in
the PSE; and (ii) a credit advice or bank certification showing the amount of foreign currency inwardly
remitted and converted to Pesos through a commercial bank; and (iii) in certain instances, transfer
instructions from the stockholder and/or dealer, as the case may be. Upon submission of the required
documents, a Bangko Sentral Registration Document (―BSRD‖) will be issued by the BSP or the
investor‘s custodian bank.
Proceeds of divestments, or dividends of registered investments are repatriable or remittable
immediately in full through the Philippine commercial banking system, net of applicable tax, without
need of BSP approval. Remittance is allowed upon presentation of the BSRD, at the exchange rate
applicable on the date of actual remittance. Pending repatriation or reinvestment, divestment
proceeds, as well as dividends of registered investments, may be lodged temporarily in interestbearing deposit accounts. Interest earned thereon, net of taxes, is also remittable in full. Remittance
of divestment proceeds of dividends of registered investments may bereinvested in the Philippines if
the investments are registered with the BSP or the investor‘s custodian bank.
The foregoing is subject to the power of the BSP, with the approval of the President of the Philippines,
to restrict the availability of foreign exchange during an exchange crisis, when an exchange crisis is
imminent or in times of national emergency.
The registration with the BSP of all foreign investments in the Offer Shares shall be the responsibility
of the foreign investor.
RESTRICTION ON FOREIGN OWNERSHIP
The Philippine Constitution and related statutes set forth restrictions on foreign ownership of
companies engaged in certain activities, among them ownership of private land. The Constitution, in
relation to Commonwealth Act No. 141, states that no private land shall be transferred or conveyed
except to citizens of the Philippines or to corporations or associations organized under the laws of the
Philippines at least 60% of whose capital is owned by such citizens.
Since the Company owns land, the Company must comply with the foregoing restrictions on foreign
ownership.
Further, in order to maintain its PCAB license, the Company, pursuant to the Implementing Rules and
Regulations of P.D. No. 1746, must maintain a minimum Filipino shareholding of at least 60%.
However, should the Company decide to engage in the construction of government projects, foreign
equity should be limited to 25% in accordance with Executive Order No. 858promulgating the Eighth
Regular Foreign Investment Negative List.
140
PHILIPPINE TAXATION
The following is a general description of certain Philippine tax aspects of the investment in the
Company. This discussion is based upon laws, regulations, rulings, income tax conventions (treaties),
administrative practices and judicial decisions in effect at the date of this Preliminary Prospectus.
Subsequent legislative, judicial or administrative changes or interpretations may be retroactive and
could affect the tax consequences to the prospective investor.
The tax treatment of a prospective investor may vary depending on such investor‘s particular situation
and certain investors may be subject to special rules not discussed below. This summary does not
purport to address all tax aspects that may be important to an investor. This general description does
not purport to be a comprehensive description of the Philippine tax aspects of the investments in
shares and no information is provided regarding the tax aspects of acquiring, owning, holding or
disposing the shares under applicable tax laws of other applicable jurisdictions and the specific tax
consequence in light of particular situations of acquiring, owning, holding and disposing the shares in
such other jurisdictions. This summary does not purport to address all tax aspects that may be
important to a holder of the Preferred Shares.
EACH PROSPECTIVE HOLDER SHOULD CONSULT WITH HIS OWN TAX ADVISER AS TO THE
PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF PURCHASING, OWNING AND
DISPOSING OF THE OFFER SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY
LOCAL AND NATIONAL TAX LAWS.
CORPORATE INCOME TAX
A domestic corporation is subject to a tax of 30% of its taxable income from all sources within and
outside the Philippines except, among others, (i) gross interest income from currency bank deposits
and yield from deposit substitutes, trust funds and similar arrangements as well as royalties from
sources within the Philippines which are generally taxed at the lower final withholding tax rate of 20%
of the gross amount of such income; and (ii) interest income from a depository bank under the
expanded foreign currency deposit system which is subject to a final tax rate of 7.5% of such income.
A minimum corporate income tax of 2% of the gross income as of the end of the taxable year is
imposed on a domestic corporation beginning on the fourth taxable year immediately following the
year in which such corporation commenced its business operations, when the minimum corporate
income tax is greater than the ordinary income tax for the taxable year.
Nevertheless, any excess of the minimum corporate income tax over the ordinary corporate income
tax shall be carried forward and credited against the latter for the three immediately succeeding
taxable years. Further, subject to certain conditions, the minimum corporate income tax may be
suspended with respect to a corporation which suffers losses on account of a prolonged labor dispute,
force majeure or legitimate business reverses.
TAX ON DIVIDENDS
Cash and property dividends received from a domestic corporation by individual shareholders who
are either citizens or residents of the Philippines are subject to income tax at the rate of 10%. Cash
and property dividends received by domestic corporations or resident foreign corporations from a
domestic corporation are not subject to tax.
Cash and property dividends received from a domestic corporation by non-resident alien individuals
engaged in trade or business in the Philippines are subject to a 20% tax on the gross amount thereof,
while cash and property dividends received by non-resident alien individuals not engaged in trade or
business in the Philippines are subject to tax at 25% of the gross amount, subject, however, to the
applicable preferential tax rates under tax treaties executed between the Philippines and the country
of residence or domicile of such non-resident foreign individuals. A non-resident alien who comes to
the Philippines and stays in the country for an aggregate period of more than 180 days during any
calendar year will be deemed a non-resident alien engaged in trade or business in the Philippines.
141
Cash and property dividends received from a domestic corporation by a non-resident foreign
corporation not engaged in trade or business in the Philippines are generally subject to tax at the rate
of 30%. Subject to applicable preferential tax rates under treaties in force between the Philippines and
the country of domicile of such non-resident foreign corporation, cash and property dividends received
are subject to final withholding tax at the rate of 15.0%; provided that the country in which the nonresident foreign corporation is domiciled (i) imposes no taxes on foreign–sourced dividends or (ii)
allows a credit against the tax due from the non-resident foreign corporation taxes deemed to have
been paid in the Philippines equivalent to the difference between the regular income tax of 30% on
corporations and the 15.0% tax on dividends.
The following table lists some of the countries with which the Philippines has tax treaties and the tax
rates currently applicable to non-resident holders who are residents of those countries:
Dividends
(%)
Canada
France
Germany
Japan
Singapore
United Kingdom
United States
(1)
25
(2)
25
(3)
15
(4)
25
(5)
25
(6)
25
(7)
25
Stock
transaction tax
on sale or
disposition
effected through
the PSE (%)
(8)
Exempt
(8)
Exempt
0.5
(8)
Exempt
(8)
Exempt
(10)
Exempt
(8)
Exempt
Capital Gains
tax due on
disposition of
Shares
outside the
PSE (%)
(8)
Exempt
(8)
Exempt
(9)
5/10
(8)
Exempt
(8)
Exempt
(10)
Exempt
(8)
Exempt
Notes:
(1) 15% if recipient company controls at least 10% of the voting power of the company paying the
dividends.
(2) 15% if the recipient company holds directly at least 15% of the voting shares of the company
paying the dividends.
(3) 10% if the recipient company owns directly at least 25% of the capital of the company paying the
dividends.
(4) 10% if the recipient company holds directly at least 25% of either the voting shares of the
company paying the dividends or of the total shares issued by that company during the period of
6 months immediately preceding the date of payment of the dividends.
(5) 15% if during the part of the paying company’s taxable year which precedes the date of payment
of dividends and during the whole of its prior taxable year at least 15% of the outstanding shares
of the voting stock of the paying company was owned by the recipient company.
(6) 15% if the recipient company is a company which controls directly or indirectly at least 10% of the
voting power of the company paying the dividends.
(7) 20% if during the part of the paying corporation’s taxable year which precedes the date of
payment of dividends and during the whole of its prior taxable year at least 10% of the
outstanding shares of the voting stock of the paying corporation was owned by the recipient
corporation.
(8) Capital gains are taxable only in the country where the seller is a resident, provided the shares
are not those of a corporation, the assets of which consist principally of real property situated in
the Philippines, In which case the sale is subject to Philippine taxes.
142
(9) Under the RP-Germany Tax Treaty, capital gains from the alienation of shares of a Philippine
corporation may be taxed in the Philippines irrespective of the nature of the assets of the
Philippine corporation. Tax rates are 5% on the net capital gains realized during the taxable year
not in excess of P =100,000 and 10% on the net capital gains realized during the taxable year in
excess of ₱100,000.
(10) Under the RP-UK Tax Treaty, capital gains on the sale of the stock of Philippine corporations are
subject to tax only in the country where the seller is a resident, irrespective of the nature of the
assets of the Philippine corporation.
Stock dividends distributed pro-rata to any holder of shares of stock are not subject to Philippine
income tax. A stock dividend constitutes income if it gives the shareholder an interest different from
that which his former stock holdings represented. A stock dividend does not constitute income if the
new shares confer no different rights or interest than did the old.
Philippine tax authorities have prescribed certain procedures for availment of tax treaty relief. Subject
to the approval by the BIR of the Company‘s application for tax treaty relief, the Company shall
withhold taxes at a reduced rate on dividends to be paid to a non-resident holder, if such non-resident
holder provides the Company with proof of residence and if applicable, individual or corporate status.
Proof of residence for an individual consists of certification from his embassy, consulate, or other
equivalent certifications issued by the proper government authority, or any other official document
proving residence. If the regular tax rate is withheld by the Company instead of the reduced rates
applicable under a tax treaty, the nonresident holder of the shares may file a claim for refund from the
BIR. However, because the refund process in the Philippines requires the filing of an administrative
claim and the submission of supporting information, and may also involve the filing of a judicial
appeal, it may be impractical to pursue such a refund.
SALE, EXCHANGE OR DISPOSITION OF SHARES
Capital Gains Tax, if sale was made outside the PSE
Net capital gains realized by a resident or non-resident other than a dealer in securities during each
taxable year from the sale, exchange or disposition of shares of stock outside the facilities of the PSE,
are subject to tax as follows: 5% on gains not exceeding ₱100,000.00 and 10% on gains over
₱100,000.00. If an applicable tax treaty exempts such gains from tax or provides preferential rates, an
application for tax treaty relief must be filed with (and approved) by the Philippine tax authorities in
order to obtain an exemption or to apply a preferential rate under a tax treaty.
The capital gains tax described above shall apply (unless an applicable treaty exempts such gains
from tax or provides for preferential rates) to the secondary sale of the common shares by the holder
thereof to another party made outside the facilities of the PSE.
Stock Transaction Tax
A sale or other disposition of shares of stock through the facilities of the PSE by a resident or a nonresident holder, other than a dealer in securities, is subject to a stock transaction tax at therate of
0.5% of the gross selling price or gross value in money of the shares of stock sold or otherwise
disposed, unless an applicable treaty exempts such sale from said tax. This tax is required to be
collected by and paid to the Philippine Government by the selling stockbroker on behalf of his client.
The stock transaction tax is classified as a percentage tax in lieu of a capital gains tax. Under certain
tax treaties, the exemptions from capital gains tax discussed herein may not be applicable to the
stock transaction tax.
Value Added Tax
Value Added Tax of 12% may generally be imposed on the gross income earned by dealers in
securities on the sale of shares and on the commission earned by the PSE-registered broker, which is
generally passed on to the client.
143
DOCUMENTARY STAMP TAX
The original issue of shares of stock is subject to documentary stamp tax of ₱1.00 for each ₱200.00
par value, or a fraction thereof, of the par value of the shares of stock issued. The secondary transfer
of shares of stock is subject to a documentary stamp tax of P0.75 on each ₱200.00 par value, or a
fractional part thereof, of the par value of share of stock transferred.
The sale, barter, or exchange of shares of stock listed and traded through the local stock exchange is
exempt from the DST.
In addition, the borrowing and lending of securities executed under the Securities Borrowing and
Lending Program of a registered exchange, or in accordance with regulations prescribed by the
appropriate regulatory authority, are likewise exempt from documentary stamp tax. However, the
securities borrowing and lending agreement should be duly covered by a master securities borrowing
and lending agreement acceptable to the appropriate regulatory authority, and should be duly
registered and approved by the BIR.
ESTATE AND GIFT TAXES
Shares issued by a corporation organized under Philippine laws are deemed to have a Philippine
situs, and any transfer thereof by way of donation or succession, even if made by a non-resident
decedent or donor outside the Philippines, is subject to Philippine estate or donor‘s tax.
The transfer of shares of stock upon the death of an individual holder to his heirs by way of
succession, whether such holder was a citizen of the Philippines or an alien, regardless of residence,
is subject to Philippine taxes at progressive rates ranging from 5% to 20%, if the net estate is over
₱200,000.00. On the other hand, individual and corporate holders, whether or not citizens or residents
of the Philippines, who transfer shares of stock by way of gift or donation are liable to pay Philippine
donors‘ tax on such transfer of shares ranging from 2% to 15% of the net gifts during the calendar
year exceeding ₱100,000.00. The rate of tax with respect to net gifts made to a stranger (i.e., one who
is not a brother, sister, spouse, ancestor, lineal descendant or relative by consanguinity within the
fourth degree of relationship) is a flat rate of 30%.
Estate and donor‘s taxes, however, shall not be collected in respect of intangible personal property,
such as shares of stock: (a) if the decedent at the time of his death or the donor at the time of the
donation was a citizen and resident of a foreign country which at the time of his death or donation did
not impose a transfer tax of any character, in respect of intangible personal property of citizens of the
Philippines not residing in that foreign country, or (b) if the laws of the foreign country of which the
decedent or donor was a citizen and resident at the time of his death or donation allows a similar
exemption from transfer or death taxes of every character or description in respect of intangible
personal property owned by citizens of the Philippines not residing in that foreign country.
TAXATION OUTSIDE THE PHILIPPINES
Shares of stock in a domestic corporation are considered under Philippine law as situated in the
Philippines and the gain derived from their sale is entirely from Philippine sources; hence such gain is
subject to Philippine income tax and the transfer of such shares by gift (donation) or succession is
subject to the donor‘s or estate taxes stated above. The tax treatment of a non-resident holder of
shares of stock in jurisdictions outside the Philippines may vary depending on the tax laws applicable
to such holder by reason of domicile or business activities and such holder‘s particular situation. This
Preliminary Prospectus does not discuss the tax considerations on non-resident holders of shares of
stock under laws other than those of the Philippines.
144
Transaction Parties
The Issuer
Name
Megawide Construction Corporation
Address
20 N. Domingo St., 1112 Valencia, Quezon City
The Joint Issue Managers and Joint Bookrunners
Name
BPI Capital Corporation
Standard Chartered Bank
Address
8th Floor, BPI Building, 6768 Ayala Avenue, Makati City,
1226Metro Manila, Philippines
8th Floor, 6788 Ayala Avenue Makati City 1226 Metro
Manila, Philippines
The Underwriters
Name
BDO Capital & Investment
Corporation
BPI Capital Corporation
First Metro Investment Corporation
Standard Chartered Bank
Address
20th Floor South Tower, BDO Corporate Center, Makati
Avenue, Makati City
8th Floor, BPI Building, 6768 Ayala Avenue, Makati City,
1226Metro Manila, Philippines
45th Floor GT Tower International, 6813 Ayala Avenue
corner H.V. dela Costa St., Makati City
8th Floor, 6788 Ayala Avenue Makati City 1226 Metro
Manila, Philippines
Legal Counsels to the Issuer
Name
Martinez Vergara Gonzalez &
Serrano
Address
Suite 2401, The Orient SquareF. Ortigas, Jr. Road, Ortigas
Center1600 Pasig CityMetro Manila, Philippines
Legal Counsel to the Underwriters
Name
SyCip Salazar Hernandez &
Gatmaitan
Address
SyCipLaw Center105 Paseo de RoxasMakati City
1226Metro Manila, Philippines
Registrar
Name
BDO Unibank, Inc. - Trust &
Investments Group
Address
15th Floor South Tower, BDO Corporate Center
7899 Makati Avenue, Makati City
Receiving and Paying Agent
Name
BDO Unibank, Inc. - Trust &
Investments Group
Address
15th Floor South Tower, BDO Corporate Center
7899 Makati Avenue, Makati City
145
MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
(A Subsidiary of Citicore Holdings Investment, Inc.)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
JUNE 30, 2014
(UNAUDITED)
(With Comparative Audited Figures for December 31, 2013)
(Amounts in Philippine Pesos)
June 30,
2014
(Consolidated see Note 2)
Notes
December 31,
2013
(Parent Company see Note 2)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value
through profit or loss
Construction materials
Costs in excess of billings on
uncompleted contracts
Other current assets
5
P
6
7
8
9
11
Total Current Assets
NON-CURRENT ASSETS
Investments in associates
Concession rights
Property, plant and equipment - net
Deferred tax assets
Other non-current assets
10
12
13
23
11
Total Non-current Assets
TOTAL ASSETS
P
780,116,428
3,745,120,823
P
2,276,033,774
4,102,937,463
4,663,838,893
413,542,420
5,824,274,558
339,632,753
2,922,883,586
3,562,575,843
2,244,616,767
1,954,824,815
16,088,077,993
16,742,320,130
776,656,324
14,759,092,910
4,483,041,080
46,570,064
234,847,764
196,268,564
4,330,697,120
41,366,847
192,344,521
20,300,208,142
4,760,677,052
36,388,286,135
P
21,502,997,182
-2-
June 30,
2014
(Consolidated see Note 2)
Notes
December 31,
2013
(Parent Company see Note 2)
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Interest-bearing loans and borrowings
Trade and other payables
Advances from customers
Billings in excess of costs on
uncompleted contracts
Other current liabilities
P
15
14
16
14,958,103,410
3,141,566,251
1,039,250,501
2,317,861,428
52,613,351
20,238,120,967
7,815,237,646
15
5,015,838,921
5,032,932,033
21
119,951,352
-
110,366,827
3,450,440
5,135,790,273
5,146,749,300
25,373,911,240
12,961,986,946
Total Current Liabilities
17
Total Non-current Liabilities
Total Liabilities
EQUITY
Equity attributable to shareholders
of the parent company:
Capital stock
Additional paid-in capital
Revaluation reserves
Retained earnings
24
1,649,426,127
4,207,276,193
36,064,872 )
3,259,508,413
(
Total equity attributable to
shareholders of the Parent Company
1,649,426,127
4,207,276,193
36,064,872 )
2,720,372,788
(
9,080,145,861
8,541,010,236
1,934,229,034
Non-controlling interest
-
11,014,374,895
Total Equity
TOTAL LIABILITIES AND EQUITY
2,432,443,752
2,024,476,795
987,842,320
1,052,986,380
46,214,425
9
17
NON-CURRENT LIABILITIES
Interest-bearing loans and borrowings
Post-employment defined
benefit obligation
Other non-current liability
P
P
36,388,286,135
See Notes to Financial Statements.
8,541,010,236
P
21,502,997,182
MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
(A Subsidiary of Citicore Holdings Investment, Inc.)
STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(UNAUDITED)
(Amounts in Philippine Pesos)
2014
(Consolidated see Note 2)
Notes
CONTRACT REVENUES
18
CONTRACT COSTS
19
P
GROSS PROFIT
OTHER OPERATING EXPENSES
20
OPERATING PROFIT
OTHER INCOME (CHARGES)
Finance costs
Finance income
Others - net
TOTAL COMPREHENSIVE INCOME
P
4,168,372,412
4,172,866,058
3,424,276,743
882,445,443
744,095,669
179,374,015
160,478,631
703,071,428
583,617,038
(
204,475,859 )
49,203,289
30,511,468
(
124,761,102 )
202,859,860
578,310,326
786,476,898
40,919,876
34,291,851
537,390,450
752,185,047
23
NET PROFIT
OTHER COMPREHENSIVE INCOME
Remeasurements of post-employment
defined benefit plan
Tax income
5,055,311,501
22
PROFIT BEFORE TAX
TAX EXPENSE
2013
(Parent Company see Note 2)
-
21
23
P
537,390,450
(
161,595,060 )
339,505,160
24,949,760
(
18,741,905 )
5,622,572
13,119,333 )
(
P
739,065,714
-2-
2014
(Consolidated see Note 2)
Notes
Net Profit Attributable To:
Shareholders of the parent company
Non-controlling interest
1
P
539,135,625
1,745,174 )
P
752,185,047
-
P
537,390,450
P
752,185,047
P
539,135,625
1,745,174 )
P
739,065,714
-
P
537,390,450
P
739,065,714
P
0.33
P
0.50
(
Total Comprehensive Income Attributable To:
Shareholders of the parent company
Non-controlling interest
Earnings per Share
Basic and diluted
2013
(Parent Company see Note 2)
(
27
See Notes to Financial Statements.
MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
(A Subsidiary of Citicore Holdings Investment, Inc.)
STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(UNAUDITED)
(Amounts in Philippine Pesos)
Attributable to Shareholders of the Parent Company
Capital
Stock
Notes
Balance at January 1, 2014
Issuance during the period
Total comprehensive income for the period
P
Balance at January 1, 2013
Issuances during the period
Stock dividends
Total comprehensive income for the period
Balance at June 30, 2013
1,649,426,127
-
P
P
P
1,649,426,127
P
2, 24
Balance at June 30, 2014
Additional
Paid-in Capital
24
24
P
Revaluation
Reserves
4,207,276,193
-
( P
P
P
4,207,276,193
1,114,100,003
154,689,323
380,636,801
-
P
1,961,729,696
2,245,546,497
-
1,649,426,127
P
4,207,276,193
Retained
Earnings
36,064,872 )
-
P
( P
36,064,872 )
P
( P
2,720,372,788
539,135,625
P
3,259,508,413
P
(
9,826,206 )
P
(
13,119,333 )
1,705,376,164
380,636,801 )
752,185,047
( P
22,945,539 )
2,076,924,410
See Notes to Financial Statements.
P
Non-controlling
Interest
Total
8,541,010,236
539,135,625
Total
P
1,935,974,208
1,745,174 )
P
8,541,010,236
1,935,974,208
537,390,450
9,080,145,861
P
1,934,229,034
P
11,014,374,895
P
4,771,379,657
2,400,235,820
739,065,714
P
-
P
4,771,379,657
2,400,235,820
739,065,714
P
7,910,681,191
-
P
7,910,681,191
(
P
MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
(A Subsidiary of Citicore Holdings Investment, Inc.)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(UNAUDITED)
(Amounts in Philippine Pesos)
2014
(Consolidated see Note 2)
Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments for:
Depreciation and amortization
Finance costs
Finance income
Gain on disposals of property, plant and equipment
Equity in net losses of associates
Operating profit before working capital changes
Decrease in trade and other receivables
Increase in construction materials
Increase in costs in excess of billings
on uncompleted contracts
Increase in other current assets
Increase in other non-current assets
Increase (decrease) in trade and other payables
Increase in advances from customers
Increase (decrease) in billings in excess of
costs on uncompleted contracts
Increase in post-employment defined benefit obligation
Decrease in other liabilities
Cash generated from (used in) operations
Cash paid for income taxes
P
20
22
22
13, 22
22
(
Net Cash Used in Investing Activities
Balance carried forward
578,310,326
245,732,983
204,475,859
49,203,289 )
20,414,354 )
502,236
959,403,761
365,924,725
73,909,667 )
(
(
(
678,266,819 )
1,649,678,156 )
42,503,243 )
1,178,789,553
51,408,181
(
1,264,875,048 )
9,584,525
9,849,366 )
21
(
P
(
(
(
(
(
(
(
(
786,476,898
218,658,803
161,595,060
339,505,160 )
10,890,359 )
547,797
816,883,039
406,538,778
495,435,210 )
186,014,634 )
19,841,544 )
23,980,750 )
627,366,960 )
444,757,605
40,271,812
16,636,146
13,943,063 )
(
1,153,971,554 )
5,543,839
358,505,219
67,901,031
(
1,148,427,715 )
426,406,250
10
(
(
(
19,764,101,943
18,595,003,406 )
14,759,092,910 )
580,889,996 )
13
(
438,174,223 )
32,432,334
56,315,669
(
497,867,216 )
252,426,645
10,890,359
(
14,520,310,589 )
(
5,799,659,470 )
(
15,668,738,304 )
(
5,373,253,220 )
Net Cash From (Used in) Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of financial assets at fair value
through profit or loss (FVTPL)
Acquisition of FVTPL
Payment for concession rights
Additional investments in associates
Acquisitions of property, plant and equipment
and intangible assets
Interest received
Proceeds from sale of property, plant and equipment
(
(
2013
(Parent Company see Note 2)
7
7
12
13
(
(
2,431,969,497
7,943,578,755 )
53,500,000 )
-2-
2014
(Consolidated see Note 2)
Notes
( P
Balance brought forward
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from interest-bearing loans and borrowings
Repayment of interest-bearing loans and borrowings
Proceeds from investment of non-controlling interest
Interest paid
Repayments of amounts due to related parties
Proceeds from issuance of shares of stock
15,668,738,304 )
15,001,357,735
2,492,791,189 )
1,935,974,208
254,798,741 )
16,921,054 )
-
15
(
24
(
(
24
2013
(Parent Company see Note 2)
( P
6,740,456,419
2,911,031,913 )
115,470,063 )
7,668,444 )
2,400,235,820
(
(
(
14,172,820,959
Net Cash From Financing Activities
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
(
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS
AT END OF PERIOD
P
6,106,521,819
1,495,917,346 )
733,268,599
2,276,033,774
209,299,011
780,116,428
P
Supplemental Information on Noncash Financing Activities
In 2013, the Parent Company declared and distributed stock dividends amounting to P380.6 million (see Note 24).
See Notes to Financial Statements.
5,373,253,220 )
942,567,610
MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
(A Subsidiary of Citicore Holdings Investment, Inc.)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
(UNAUDITED)
(With Comparative Audited Figures for December 31, 2013)
(Amounts in Philippine Pesos)
1.
CORPORATE INFORMATION
1.1
Incorporation and Operations
Megawide Construction Corporation (the Parent Company) was incorporated in the
Philippines on July 28, 2004 and is engaged in the general construction business, including
constructing, enlarging, repairing, or engaging in any work upon buildings, houses and
condominium, roads, plants, bridges, piers, waterworks, railroads and other structures. It
performs general construction works which involve site development, earthworks,
structural and civil works, masonry works, and architectural finishes, electrical works,
plumbing and sanitary works, fire protection works and mechanical works.
Currently, the Parent Company is engaged in the business of construction, its sole business
activity where it utilizes the services of subcontractors. In 2011, the production of the
Parent Company’s modular housing components has been registered with the Board of
Investments (BOI).
On January 28, 2011, the Philippine Stock Exchange (PSE) and the Philippine Securities
and Exchange Commission (SEC) approved the Parent Company’s application for the
listing of its common stock. The approval covered the initial public offering (IPO) of
292.0 million unissued common shares of the Parent Company at P7.8 offer price per
share and the listing of those shares on PSE’s main board on February 18, 2012.
The Parent Company is a subsidiary of Citicore Holdings Investment, Inc. (Citicore or the
ultimate parent company) which owns and control 56.8% of the issued and outstanding
capital stock of the Parent Company. Citicore is a company incorporated in the
Philippines and is engaged in the business of a holding company through buying and
holding shares of other companies.
The Parent Company holds ownership interest in Citicore-Megawide Consortium, Inc.
(CMCI) and in Megawide-World Citi Consortium, Inc. (MWCCI), both accounted for as
investments in associates (see Note 10.1).
-2In 2013, the Parent Company, together with GMR Infrastructure Limited (GMR), a
company incorporated under the laws of India, formed a consortium to bid to one of the
public-private partnership projects of the government which is to construct and operate
the Mactan-Cebu International Airport Project (the Project). The parties incorporated a
Special Purpose Company (SPC) in order to execute, undertake, and implement the
Project in accordance with the concession agreements. The SPC was incorporated as
GMR-Megawide Cebu Airport Corporation (GMCAC) on January 13, 2014. GMCAC’s
registered address, which is also its principal place of business, is located at Mactan Cebu
Airport Road, Lapu-Lapu City. The Parent Company acquired 15.0 million shares of stock
of GMCAC which represent 60% of GMCAC’s issued and outstanding capital stock,
giving the Parent Company control over the financial and operations of GMCAC
(see Note 24.4). Accordingly, the Parent Company’s equity ownership interest is
accounted for as an investment in a subsidiary; and, starting in 2014, the financial
statements of GMCAC (herein referred to as subsidiary) are consolidated with that of the
Parent Company (see Note 2).
The registered address of Citicore, which is also its principal place of business, is at
20 N. Domingo Street, Brgy. Valencia, Quezon City while the registered office of the
Parent Company is located at 2nd Floor Spring Building, Arnaiz Avenue Corner P. Burgos
St., Pasay City. The Parent Company also maintains an office in its own building at
20 N. Domingo Street, Brgy. Valencia, Quezon City.
1.2
Approval of Interim Financial Statements
The interim consolidated financial statements (unaudited) of Megawide Construction
Corporation and its subsidiary (collectively referred herein as the Group) as of and for the
six months ended June 30, 2014 (including the comparatives for the six months ended
June 30, 2013 and for the audited statement of financial position as of December 31, 2013)
were approved and authorized for issue by the Board of Directors (BOD) of the Parent
Company on October 14, 2014.
2.
BASIS OF PREPARATION OF INTERIM FINANCIAL STATEMENTS
The interim consolidated financial statements of the Group as of and for the six months
ended June 30, 2014 and the separate statement of comprehensive income, statement of
changes in equity and statement of cash flows of the Parent Company for the six months
ended June 30, 2013 have been prepared in accordance with Philippine Accounting
Standard (PAS) 34, Interim Financial Reporting. These do not include all of the information
required in an annual financial statements in accordance with PAS 1, Presentation of Financial
Statements, and should be read in conjunction with the financial statements of the Parent
Company as of and for the year ended December 31, 2013.
-3As discussed in Note 1.1, starting 2014, GMCAC became a subsidiary of the Parent
Company. Accordingly, the interim financial statements as of and for the six months
ended June 30, 2014 represent the consolidated financial statements of the Parent
Company and GMCAC. Prior to 2014, the Parent Company has no subsidiary. Hence,
the interim statement of comprehensive income, statement of changes in equity and
statement of cash flows for the six months ended June 30, 2013 represent that of the
Parent Company only.
The financial statements have been prepared using the measurement bases specified by
Philippine Financial Reporting Standards (PFRS) for each type of asset, liability, income
and expense.
These financial statements are presented in Philippine pesos, the Group’s functional and
presentation currency, and all values represent absolute amounts except when otherwise
indicated.
Items included in the financial statements of the Group are measured using its functional
currency. Functional currency is the currency of the primary economic environment in
which the Group operates.
3.
SIGNIFICANT ACCOUNTING POLICIES
The interim consolidated financial statements have been prepared in accordance with the
accounting policies adopted in the Parent Company’s most recent annual financial
statements for the year ended December 31, 2013.
New PFRS and amendments to PFRS effective for the reporting period ending
December 31, 2014 are not expected to have a material impact on the Group’s interim
consolidated financial statements.
Taxes on income in the interim period are accrued using the tax rate that would be
applicable to expected total annual profit of the Group.
The Group’s interim consolidated financial statements as of and for the six months ended
June 30, 2014 comprise the accounts of the Parent Company and a subsidiary after the
elimination of material intercompany transactions. All intercompany assets and liabilities,
equity, income, expenses and cash flows relating to transactions between entities under the
Group, are eliminated in full during the consolidation. Unrealized profits and losses from
intercompany transactions that are recognized in assets are also eliminated in full.
Intercompany losses that indicate impairment are recognized in the interim consolidated
financial statements.
The Group does not have other operations with different nature of service and market
that would qualify as a separate strategic business unit. Consequently, no segment has
been reported.
-44.
SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES
The preparation of the Group’s financial statements in accordance with PFRS require
management to make judgments and estimates that affect the amounts reported in the
financial statements and related notes. Judgments and estimates 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. Actual results may
ultimately differ from these estimates.
In preparing these interim consolidated financial statements, the significant judgments
made by management in applying the Group’s accounting policies and the key sources of
estimation uncertainty were the same as those applied in the Parent Company’s last annual
financial statements for the year ended December 31, 2013.
5.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are as follows:
Cash on hand
Cash in banks
Short-term placements
June 30,
2014
December 31,
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
P
5,710,035
573,344,429
201,061,964
P 780,116,428
P
4,576,812
1,571,456,962
700,000,000
P 2,276,033,774
Cash in banks generally earn interest based on daily bank deposit rates.
Short-term placements are made for varying periods from 14 to 90 days and earn annual
effective interest of ranging from 1.0% to 1.5%. Interest income earned from these
financial assets is presented as Interest income from short-term placements under Finance
Income in the statements of comprehensive income (see Note 22.2).
6.
TRADE AND OTHER RECEIVABLES
This account consists of the following:
Notes
June 30,
2014
December 31,
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
Contract receivables:
Related parties
Third parties
25.1
P 604,239,296
953,165,399
P1,747,051,309
856,101,408
Balance carried forward
18
1,557,404,695
2,603,152,717
-5June 30,
2014
December 31,
2013
Notes
(Consolidated see Note 2)
(Parent Company see Note 2)
Balance brought forward
18
P 1,557,404,695
P 2,603,152,717
Retention receivables:
Related parties
Third parties
25.1
1,413,183,498
643,096,197
2,056,279,695
1,173,695,234
295,986,273
1,469,681,507
108,468,655
10,146,637
12,826,141
131,436,433
8,195,642
21,907,597
30,103,239
P3,745,120,823
P 4,102,937,463
18
Advances to related parties
25.6,
25.8
Advances to officers and employees 25.3
Other receivables
Major portion of contract and retention receivables is from transactions with related parties.
Retention receivables pertain to progress billings which are withheld by the project owner
equivalent to 5% or 10% as provided in the respective construction contract of each project.
This will only be collected after a certain period of time upon acceptance by project owners
of the certificate of completion.
Trade and other receivables do not bear any interest. All receivables are subject to credit
risk exposure.
All of the Group’s trade and other receivables have been reviewed for indicators of
impairment.
7.
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
As of June 30, 2014 and December 31, 2013, the Group’s financial assets classified as fair
value through profit or loss (FVTPL) are composed of Philippine government retail
treasury bonds and unit investment trust funds. These financial assets are carried at fair
value based on quoted market prices amounting to P4,663.8 million as of June 30, 2014
and P5,824.3 million as of December 31, 2013. The increases in the fair values of the
FVTPL financial assets amounting to P8.7 million and P24.0 million for the six months
ended June 30, 2014 and 2013, respectively, are presented as Unrealized fair value gain on
financial assets under Finance Income account in the statements of comprehensive
income (see Note 22.2).
-68.
CONSTRUCTION MATERIALS
This account consists of the following:
Rebars
Precast
Mechanical electrical plumbing
and fireproof materials
Hardware
Others
June 30,
2014
December 31,
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
P
P 101,184,030
100,060,067
48,967,576
109,981,556
41,108,599
43,486,347
96,088,675
82,071,255
77,118,385
53,108,683
P
P 413,542,420
339,632,753
Others pertain to construction materials which include painting materials, consumables,
nails and adhesive items.
9.
COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS
An analysis of these accounts is shown below.
Total costs incurred on uncompleted
contracts (work in progress)
Total billings on uncompleted
contracts (progress billings)
June 30,
2014
December 31,
2013
Note
(Consolidated see Note 2)
(Parent Company see Note 2)
18
P29,338,959,620
P 22,536,185,597
( 27,469,062,414 ) (
P 1,869,897,206
(P
22,609,430,258 )
73,244,661 )
-7The net amounts are included in the statements of financial position under the following
captions:
Costs in excess of billings on
uncompleted contracts
(shown under current assets)
Billings in excess of costs on
uncompleted contracts
(shown under current liabilities)
June 30,
2014
December 31,
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
P2,922,883,586
P 2,244,616,767
( 1,052,986,380 ) (
P 1,869,897,206
10.
2,317,861,428 )
(P
73,244,661 )
INVESTMENTS IN ASSOCIATES AND ACQUISITION OF ASSETS
10.1 Investments in Associates
The components of the carrying values of this account are as follows:
Note
Acquisition cost:
MWCCI
CMCI
Equity share in net losses:
Balance at beginning of period
Equity in net losses for
the period
Balance at end of period
June 30,
2014
December 31,
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
P 580,889,996
200,000,000
780,889,996
22.3
P
200,000,000
200,000,000
(
3,731,436 ) (
1,004,876 )
(
(
502,236 ) (
4,233,672 ) (
2,726,560 )
3,731,436 )
P 776,656,324
P
196,268,564
MWCCI was incorporated in the Philippines on January 16, 2014 and is primarily engaged
to plan, construct, equip, operate own, manage and maintain hospitals, medical facilities,
clinical laboratories and such other allied enterprises. Specifically, MWCCI shall execute,
undertake, and implement the construction of a 700-bed capacity super-specialty tertiary
orthopedic hospital (New Hospital Facility), under the Modernization of the Philippine
Orthopedic Center (MPOC) Project.
-8The Parent Company owns 51% ownership interest in MWCCI. However, the voting
rights associated with the Parent Company’s ownership does not result to control over
MWCCI’s relevant activities since World Citi, Inc. (World Citi), which owns 49%
ownership interest in MWCCI, subsequently sold 80% of its 49% ownership interest, or
39% ownership interest in MWCCI to Citicore [see Note 28(b)]. As a result of the sale,
Citicore acquired ultimate control over MWCCI owning effectively 68%, representing the
39% ownership interest it acquired from World Citi and 29% indirect holding through the
Parent Company. Consequently, the Parent Company’s equity ownership interest as of
June 30, 2014 is accounted for as part of investments in associates.
The Parent Company’s subscription to the 51% ownership interest in MWCCI amounting
to P580.9 million was paid by Citicore. The related liability to Citicore as of June 30, 2014
amounting to P580.9 million is presented as part of Due to stockholders and related
parties under Trade and Other Payables account (see Note 14) in the 2014 consolidated
statement of financial position.
In a special meeting by the BOD on October 3, 2012, the Parent Company, together with
Citicore, formed a joint venture corporation named Citicore-Megawide Consortium, Inc.
(CMCI) whereby the Parent Company will own 10% of the issued and outstanding shares
of stock of CMCI. CMCI was incorporated in the Philippines on October 15, 2012 and is
primarily engaged in general construction business. CMCI’s registered address, which is
also its principal place of business, is located at 20 N. Domingo Street, Brgy. Valencia,
Quezon City.
As of June 30, 2014 and December 31, 2013, the Parent Company owns 10% interest in
CMCI as a joint venture partner. The rights and powers of the Parent Company over the
management and control of the CMCI are exercised through a seat in the BOD of CMCI.
Taking this into consideration, the Parent Company concluded that it has significant
influence over the investee; accordingly, the Parent Company’s equity ownership interest is
accounted for as an investment in an associate.
Of the agreed subscription amount of the Parent Company in CMCI’s 10% interest,
P52.8 million was paid by Citicore on behalf of the Parent Company. The related liability
to Citicore as of December 31, 2013 amounting to P11.0 million is presented as part of
Due to stockholders and related parties under Trade and Other Payables account
(see Note 14) in the 2013 statement of financial position. The Parent Company already
settled the advances as of June 30, 2014.
MWCCI’s and CMCI’s shares of stock are not listed in the stock exchange, hence, the fair
value of its shares cannot be determined reliably.
-9The movements in the carrying amount of investments in associates accounted for under
equity method as of June 30, 2014 and December 31, 2013 are as follows:
Note
Balance at beginning of period
Addition
Equity share in net losses
22.3
Balance at end of period
June 30,
2014
December 31,
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
P 196,268,564 P
580,889,996
(
502,236 ) (
P 776,656,324
P
145,495,124
53,500,000
2,726,560 )
196,268,564
The following table presents the unaudited financial information as of and for the six
months ended June 30, 2014, and audited financial information as of and for twelve
months ended December 31, 2013 (in thousands) of the associates.
Total Assets
2014:
MWCCI
CMCI
2013:
CMCI
P
1,222,619
11,518,724
Total Liabilities
Total Revenues
P
P
10,069,886
93,355
9,508,769
-
Net Profit
(Loss)
(P
9,736 )
44,629
(
27,266 )
72,040
8,104,561
44,057
10.2 Acquisition of Assets of Altria
On December 26, 2012, pursuant to a memorandum of agreement dated
December 17, 2012, the Parent Company acquired 100% ownership interest in Altria East
Land, Inc. (Altria). Altria is a company incorporated in the Philippines and holds an
investment property in the form of land. The registered office of Altria, which is also its
principal place of business, is located at Coastal Road Bangiad, San Juan, Taytay, Rizal.
As of the date of acquisition, Altria has no operations and its assets mainly pertain to the
land where the Parent Company’s precast and batching facilities are constructed. In
accordance with Group’s policy, the transaction is accounted for by the Parent Company
as an asset acquisition since the transaction does not constitute an acquisition of a
business. Since the land is to be used for operations, the Parent Company classified it as
part of property, plant and equipment.
The purchase price was allocated among the following accounts based on their relative fair
values:
Notes
Cash in bank
Bond deposits
Land
Accrued expenses
5
11
13
P
486,426
1,500,958
303,468,569
(
100,000)
P 305,355,953
- 10 11.
OTHER ASSETS
This account is composed of the following:
Current:
Input value-added tax (VAT)
Advances to suppliers
Prepaid taxes
Refundable security and
bond deposits
June 30,
2014
December 31,
2013
Notes
(Consolidated see Note 2)
(Parent Companysee Note 2)
11.1
11.2
11.5
P 2,062,663,195
1,250,792,445
138,503,553
10.2,
26.1
Prepaid rent
Prepaid insurance
Others
Non-current:
Deferred input VAT
Intangible assets – net
Deposits for condominium units
Investment in club shares
11.3
11.6
11.4
P
83,161,052
1,664,758,903
104,129,190
59,116,758
26,210,446
25,090,534
198,912
53,713,405
19,736,576
29,325,689
-
3,562,575,843
1,954,824,815
150,220,471
46,372,331
37,210,491
1,044,471
130,973,713
25,044,630
36,326,178
-
234,847,764
192,344,521
P 3,797,423,607
P 2,147,169,336
11.1 Input VAT
In 2014, GMCAC paid input VAT amounting to P1,728.5 million pertaining to the bid
premium (see Note 12).
11.2 Advances to Suppliers
Advances to suppliers pertain to down payments made by the Group to the suppliers based
on a certain percentage of the contract price. The initial payment will eventually be
recouped or deducted from the amount payable of the Group either in a pro-rated basis or
in full once billed by the supplier.
11.3 Deferred Input VAT
Deferred input VAT pertains to the unamortized input VAT on purchases of capital goods
exceeding P1.0 million. Deferred input VAT is to be amortized and credited against output
tax evenly over five years or the life of the asset, whichever is shorter.
11.4 Deposits for Condominium Units
Deposits for condominium units represent payments made for the purchase of
condominium units from the clients of the Group.
- 11 11.5 Prepaid Taxes
Prepaid taxes pertain to the excess of quarterly income tax payments over the current tax
due during the year.
11.6 Intangible Assets
Intangible assets represent the cost of computer license software. Acquired computer
software licenses are capitalized on the basis of the costs incurred to acquire and install the
specific software. Capitalized costs are amortized on a straight-line basis over the
estimated useful lives of five years as the lives of these intangible assets are considered
finite.
12.
CONCESSION RIGHTS
In April 2014, GMCAC executed a build-operate-transfer (BOT) agreement with the
Philippine government, through the Department of Transportation and Communications
and Mactan-Cebu International Airport Authority (the Grantor) under the Project. The
agreement authorizes GMCAC to perform the following:
(a)
(b)
(c)
(d)
(e)
Construction of new passenger terminal, along with all associated infrastructure and
facilities as per Philippines/International guidelines and International Civil Aviation
Organization standards to handle operations;
Rehabilitation and expansion of the existing terminal;
Installation of all the required equipment and other associated facilities;
Installation of the required information technology and other equipment; and,
Operation and maintenance of new and existing terminals during the entire 25-year
concession period.
Upon receiving the concession rights to the Project, GMCAC paid the bid premium
amounting to P14,404.6 million, net of applicable taxes, to the Grantor. This amount was
capitalized as part of Concession Rights in the 2014 interim consolidated statement of
financial position.
As of June 30, 2014, GMCAC also capitalized certain debt issue costs and other direct
expenses totaling P268.5 million. Moreover, GMCAC capitalized the interest expense
incurred amounting to P86.0 million (see Note 15.2) in relation to the availment of loan to
be used for the Project. The interest, which will be paid upon maturity of the loan, is
reported as part of Interest payable under Trade and Other Payables account in the 2014
interim consolidated statement of financial position (see Note 14).
- 12 13.
PROPERTY, PLANT AND EQUIPMENT
The gross carrying amounts and accumulated depreciation at the beginning and end of
June 30, 2014 and December 31, 2013 are shown below.
June 30, 2014
Cost
Accumulated
depreciation and
amortization
Net carrying amount
December 31, 2013
Cost
Accumulated
depreciation and
amortization
Net carrying amount
January 1, 2013
Cost
Accumulated
depreciation and
amortization
Net carrying amount
Land
Building
Precast
Factory
Office
Furniture,
Fixture and
Equipment
P 762,246,325
P 230,651,814
P 624,929,185
P 118,580,468
-
52,261,363 ) ( 1,197,746,701)
-
P5,906,025,891
-
( 1,422,984,811 )
P 28,663,555
P
59,937,404 P2,859,672,631
P
-
P4,483,041,080
P 620,705,584
P 229,838,657
P 414,492,169
P 105,988,248
P
197,240,361 P3,939,632,830
P
-
P5,507,897,849
-
( 1,177,200,729 )
-
P4,330,697,120
20,520,166 ) (
89,916,913) (
P
P 565,906,808
19,403,745 ) (
59,022,377 ) (
112,198,767 P4,057,419,332
Total
P 206,614,357
(
24,037,457 ) (
P
Construction
in
Progress
P 762,246,325
-
(
Precast and
Construction
Equipment
Transportation
Equipment
77,776,465) (
82,281,135 ) (
977,219,218 )
P 620,705,584
P 210,434,912
P 393,972,003
P 28,211,783
P
114,959,226
P2,962,413,612
P
P 515,441,390
P 219,793,378
P 387,345,935
P 94,985,287
P 151,211,382
P3,061,082,887
P
P 515,441,390
(
10,430,876 ) (
P 209,362,502
3,800,916 ) ( 46,397,262 ) (
P 383,545,019
53,220,551 ) (
P 48,588,025
P
97,990,831
550,023,650 )
P2,511,059,237
9,272,224
-
P
P4,439,132,483
(
9,272,224
663,873,255 )
P3,775,259,228
A reconciliation of the carrying amounts of property, plant and equipment at the
beginning and end of 2014 and 2013 is shown below.
Balance at January 1, 2014,
net of accumulated
depreciation and
amortization
Additions
Reclassification
Disposal
Depreciation and
amortization charges
for the period
Balance at June 30,
2014, net of accumulated
depreciation and
amortization
Balance at January 1, 2013,
net of accumulated
depreciation and
amortization
Additions
Reclassification
Disposal
Depreciation and
amortization charges
for the period
Balance at December 31,
2013, net of accumulated
depreciation and
amortization
Land
Building
Precast
Factory
P 620,705,584
141,540,741
-
P 210,434,912
813,156
-
P 393,972,003
34,249,802
176,187,214
-
-
(
P 762,246,325
4,633,711 ) (
38,502,211 ) (
Office
Furniture,
Fixture and
Equipment
P 28,211,783
12,592,220
-
Transportation
Equipment
P
(
(
12,140,448) (
Precast and
Construction
Equipment
Construction
in
Progress
114,959,226 P 2,962,413,612 P
11,380,143
237,598,161
56,154,932 ) ( 124,228,247)
240,000 ) (
35,661,315)
10,007,033 ) (
180,449,580)
P 206,614,357
P 565,906,808
P 28,663,555
P
59,937,404 P 2,859,672,631 P
P 515,441,390 P 209,362,502
105,264,194
10,045,279
-
P 383,545,019
12,335,895
14,810,339
-
P 48,588,025
11,002,961
-
P
97,990,831 P 2,511,059,237 P
59,667,966
884,018,008
(
11,001,355 ) (
1,809,066)
-
P 620,705,584
(
8,972,869 ) (
P 210,434,912
16,719,250 ) (
P 393,972,003
(
31,379,203) (
P 28,211,783
31,698,216 ) (
P
430,854,567)
114,959,226 P 2,962,413,612
-
(
(
P 4,330,697,120
438,174,223
4,195,965 )
35,901,315)
-
(
245,732,983)
-
P 4,483,041,080
9,272,224 P 3,775,259,228
5,538,115
1,087,872,418
14,810,339 )
(
12,810,421)
-
P
Total
-
(
519,624,105)
P4,330,697,120
As a result of the acquisition of Altria in 2012, the Parent Company recorded additional
land amounting to P303.5 million (see Note 10.2).
In 2012 and 2011, the Group entered into several sale and leaseback transactions for
certain construction equipment and transportation equipment that resulted in a finance
lease. There were no similar transactions in 2013 and 2014. The Group recognized gain
on these transactions amounting to P46.6 million and P17.2 million in 2012 and 2011,
respectively. The gain is deferred and will be amortized over the term of the lease. The
related amortization for the six months ended June 30, 2014 and 2013 of the deferred gain
amounted to P10.6 million for each period (see Note 22.3) while the unamortized deferred
gain amounting to P14.1 million and P24.7 million as of June 30, 2014 and December 31,
2013, respectively, is presented as Unearned income under Other Liabilities in the
statements of financial position (see Note 17).
- 13 As of June 30, 2014 and December 31, 2013, certain property and equipment were sold
for P56.3 million and P32.2 million, respectively. As a result, the Parent Company
recognized gain amounting to P20.4 million and P10.9 million for the six months ended
June 30, 2014 and 2013, respectively, which is presented as Gain on disposals of property
and equipment under Other Income in the statements of comprehensive income
(see Note 22.3).
The Parent Company acquired several transportation equipment and construction
equipment under finance leases. Outstanding liabilities for the finance leases as of
June 30, 2014 and December 31, 2013 amounted to P194.3 million and P247.7 million,
respectively, and are presented as Obligations under finance lease under Interest-bearing
Loans and Borrowings in the statements of financial position (see Notes 15.3).
14.
TRADE AND OTHER PAYABLES
This account consists of the following:
Notes
Trade payables
Retention payable
Due to stockholders and
related parties
Accrued expenses
Interest payable
Accrued salaries
Dividends payable
10.1, 25.6,
25.7
12, 15.1
15.2
25
June 30,
2014
December 31,
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
P 1,029,570,320
874,269,455
P 988,827,766
739,871,269
801,934,801
277,214,616
27,941,301
211,958,118
136,366,180
20,227,652
1,983,227
37,971,741
15,923,373
1,983,227
P 3,141,566,251
P 2,024,476,795
Retention payable pertains to amounts withheld from payments made to subcontractors to
ensure compliance and completion of contracted projects ranging from 5% to 10% of
every billing made by the contractor. Upon completion of the subcontracted projects, the
amounts are returned to the subcontractors.
Accrued expenses include unreleased checks, unpaid utilities and unclaimed salaries and
wages of resigned employees.
- 14 15.
INTEREST-BEARING LOANS AND BORROWINGS
The details of short-term and long-term interest-bearing loans and borrowings are as
follows:
Current:
Bank loans
Obligations under
finance lease
Non-current:
Notes payable
Obligations under
finance lease
June 30,
2014
December 31,
2013
Note
(Consolidated see Note 2)
(Parent Company see Note 2)
15.2
P 14,815,970,004
P 2,256,199,800
15.3
142,133,406
176,243,952
14,958,103,410
2,432,443,752
15.1
4,963,627,033
4,961,451,354
15.3
52,211,888
71,480,679
5,015,838,921
5,032,932,033
P 19,973,942,331
P 7,465,375,785
15.1 Notes Payable
On February 19, 2013, the Parent Company executed a notes facility agreement with a
local bank. In this agreement, the Parent Company desired to offer and issue fixed-rate
corporate notes in the aggregate principal amount of P4,000.0 million. The net proceeds
of the notes after deducting direct issue costs, such as underwriting fees and commissions,
documentary stamp tax and other expenses associated with the issuance, amounted to
P3,957.3 million.
The notes constitute direct, unconditional, unsubordinated, general and unsecured
obligation ranking at least pari passu with all other present and future direct,
unconditional, unsubordinated and unsecured obligations of the Parent Company.
The notes are issued in three tranches with the following details:
Principal
Tranche A
Tranche B
Tranche C
P
650,000,000
3,250,000,000
100,000,000
Term in years
5
7
10
Interest Rate
5.48%
5.68%
5.67%
P 4,000,000,000
The nominal rates refer to the Philippine Dealing System Treasury Fixing (PDST-F) rates
with respect to the term of each tranche plus an interest spread of 1.75% for Tranche A
and B and 1.50% for Tranche C.
- 15 The notes, among other things, restrict the Group’s ability to:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
incur any indebtedness to be secured by or to benefit from any lien, in favor of any
creditor on, or in respect of any present or future assets or revenues or the right to
receive income;
make any material change in the nature of its business from that being carried on as
of the signing date;
enter into any merger or consolidation except if the issuer retains control of the
surviving corporation, such merger or consolidation is required by law, and such
merger does not result in material adverse effect;
amend its articles of incorporation and/or by-laws except as required by law;
declare or pay any cash dividend to its stockholders or retain, retire, purchase or
otherwise acquire any class of its capital stock;
sell, assign, lease, transfer, and/or dispose all or substantially all of its properties;
assign, transfer or otherwise convey any right to receive any of its income or
revenues;
voluntarily suspend its business operations in a manner that will result in a material
adverse effect;
extend any loan, advance or subsidy to any person.;
permit its financial debt to equity ratio to exceed 2:1; and,
voluntarily prepay any indebtedness.
The Group has complied with all the debt covenants set forth in the notes facility
agreement. As of June 30, 2014 and December 31, 2013, the carrying amount of the notes
is P3,963.6 million and P3,961.4 million, respectively.
In 2011, the Parent Company was granted another unsecured Notes payable facility up to
P3,000.0 million by a local bank, to which P1,000.0 million was availed. The loan bears an
annual interest of 6.52% payable in 5 years. The carrying value of the loan is
P1,000.0 million as of June 30, 2014 and December 31, 2013. Total interest on these
notes payable is presented as Interest expense from notes payable under Finance Costs
account (see Note 22.1). Unpaid interest as of June 30, 2014 and December 31, 2013
amounting to P42.2 million and P35.6 million, respectively, is presented as part of Interest
payable under Trade and Other Payable in the statements of financial position
(see Note 14).
15.2 Bank Loans
In 2014, GMCAC executed a promissory note with a local bank amounting to
P11,293.2 million, with an interest of 3.75% payable one year from the initial drawdown.
The loan is for the sole purpose of financing the bid premium paid for the concession
rights. Accordingly, the related interest expense amounting to P86.0 million is capitalized
as part of the Concession Rights account (see Note 12).
As security for the loan, GMCAC executed an outright assignment of all of the following:
(a)
(b)
(c)
receivables under loans or advances,
rights to collect termination payments due to GMCAC under the concession
agreement (see Note 12), and;
proceeds, products and fruits of all the foregoing.
- 16 In addition, GMCAC also pledged all its issued and outstanding shares, and any new or
additional shares of stock, subscriptions, warrants and other rights to purchase or acquire
such shares of stock to the local bank.
Other bank loans represent short-term unsecured loans from local banks availed by the
Parent Company. The loans bear fixed annual interest rates ranging from 2.25% to 3.00%
in 2014. Certain bank loans were obtained from a local bank, which is a related party
under common ownership. Total interest on these bank loans is presented as Interest
expense from bank loans under Finance Costs account in the interim statements of
comprehensive income (see Note 22.1).
Unpaid interest as of June 30, 2014 and December 31, 2013 amounting to P94.2 million
and P2.4 million, respectively, is presented as part of Interest payable under Trade and
Other Payable in the consolidated statement of financial position (see Note 14) .
15.3 Finance Lease Obligations
The obligations under finance lease have an effective interest rate of 5.40% and interest
ranging from 6.50% to 8.36%. Lease payments are made on a monthly basis. Interest
expense is presented under Finance Costs (see Note 22.1).
16.
ADVANCES FROM CUSTOMERS
Advances from customers relates to the following projects:
Contracts in progress:
Third parties
Related parties
Deposit received prior to
commencement of a project
June 30,
2014
December 31,
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
P 1,008,279,171
30,971,330
1,039,250,501
P 911,288,131
911,288,131
P 1,039,250,501
76,554,189
P 987,842,320
Advances from customers will be applied against the contract receivables based on
work accomplishment on the project.
- 17 17.
OTHER LIABILITIES
The details of this account are as follows:
Note
Current:
Withholding taxes
Unearned income
Others
Non-current–
Unearned income
June 30,
2014
December 31,
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
P
13
13
26,425,171
14,083,491
5,705,763
46,214,425
P
3,450,440
P
46,214,425
27,066,256
21,232,403
4,314,692
52,613,351
P
56,063,791
Others include social security and home development mutual fund liabilities for remittance
to the related government agencies.
18.
CONTRACT REVENUES
The details of this account for the six months ended June 30, 2014 and 2013 are
composed of the revenues from:
Contracts in progress
Completed contracts
2014
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
P4,878,634,225
176,677,276
P 4,168,372,412
-
P 5,055,311,501
P 4,168,372,412
About 15% and 30% of the contract revenues for 2014 and 2013, respectively, were
earned from contracts with SM Development Corporation (SMDC), a related party under
common ownership.
Contracts in progress and the balances of the related accounts are as follows:
Total cost incurred on uncompleted
contracts (work in progress)
Contract receivables
Retention receivables
June 30,
2014
December 31,
2013
Notes
(Consolidated see Note 2)
(Parent Company see Note 2)
9
6
6
P29,338,959,620
1,557,404,695
2,056,279,695
P 22,536,185,597
2,603,152,717
1,469,681,507
- 18 19.
CONTRACT COSTS
The following is the breakdown of contract costs for the six months ended June 30, 2014
and 2013:
Outside services
Materials
Project overhead
Salaries and employee benefits
Depreciation
2014
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
P1,837,568,482
1,482,329,531
358,742,208
267,660,110
226,565,727
P 1,259,119,942
1,480,944,496
243,285,945
239,924,564
201,001,796
P4,172,866,058
P 3,424,276,743
Project overhead includes insurance, repairs and maintenance, gas and oil, travel and
transportation, professional fees and various rental expenses of staging areas.
20.
OPERATING EXPENSES BY NATURE
The details of operating expenses by nature for the six months ended June 30, 2014 and
2013 are shown below.
Note
Outside services
Materials, supplies and facilities
Project overhead
Salaries and employee benefits
Depreciation and amortization
Transportation
Utilities
Representation and travel
Taxes and licenses
Repairs and maintenance
Rentals
Advertising
Security services
Insurance
Gas and oil
Miscellaneous
13
2014
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
P 1,850,552,030
1,485,683,877
358,742,208
349,903,630
245,732,983
13,523,726
6,842,662
6,272,438
4,946,385
4,598,262
3,062,291
2,787,840
2,371,548
1,294,204
552,776
15,373,213
P 1,271,952,801
1,486,211,318
243,285,945
316,907,813
218,658,803
4,926,098
5,369,259
5,111,788
10,350,663
5,664,708
2,950,095
1,641,385
1,841,179
1,326,576
919,660
7,637,283
P 4,352,240,073
P 3,584,755,374
- 19 These expenses are classified in the statements of comprehensive income as follows:
Contract costs
Other operating
expenses
21.
2014
2013
Note
(Consolidated see Note 2)
(Parent Company see Note 2)
19
P 4,172,866,058
P 3,424,276,743
179,374,015
160,478,631
P 4,352,240,073
P 3,584,755,374
POST-EMPLOYMENT DEFINED BENEFIT OBLIGATION
The Group maintains a partially funded and noncontributory post-employment defined
benefit plan covering all regular full-time employees. The Group conforms to the
minimum regulatory benefit under the Retirement Pay Law which is of the defined benefit
type and provides a retirement benefit in lump sum equal to 22.5-day pay for every year of
credited service. The regulatory benefit is paid in a lump sum upon retirement. The
normal retirement age is 60 with a minimum of 5 years of credited service.
For the six months ended June 30, 2014, the Group accrued for the current service cost of
the employees entitled in the plan, however, actuarial gains or losses, if any, during the
period were not determined but management believes that its effect, if any, is not
significant to the June 30, 2014 interim consolidated financial statements.
22.
OTHER INCOME (CHARGES)
22.1 Finance Costs
The breakdown of this account for the six months ended June 30, 2014 and 2013 is as
follows:
Note
Interest expense from:
Notes payable
Bank loans
Finance lease
2014
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
15
P
169,664,949
24,591,134
7,047,596
201,303,679
1,610,483
1,561,697
P
112,736,892
33,475,707
14,813,410
161,026,009
215,629
353,422
P
204,475,859
P
161,595,060
Foreign currency losses – net
Bank charges
- 20 22.2 Finance Income
The details of finance income for the six months ended June 30, 2014 and 2013 are the
following:
Notes
Interest income from:
Short-term placements
Cash in banks
Gain on sale of financial
assets at FVTPL
Unrealized fair value
gain on financial assets
2014
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
5
P
7
P
P
27,283,888
817,843
28,101,731
21,523,066
427,239
21,950,305
12,438,687
293,583,000
8,662,871
23,971,855
P
49,203,289
339,505,160
22.3 Others
This consists of the following for the six months ended June 30, 2014 and 2013:
Notes
Gain on disposals of
property and equipment
Amortization of
deferred gain on sale
and leaseback
Equity in net losses of
associates
Others
13
2014
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
P
P
13
10
20,414,353
10,599,351
10,599,351
502,236) (
-
(
P
30,511,468
10,890,359
547,797)
4,007,847
P
24,949,760
- 21 23.
TAXES
23.1 Registration with BOI
On April 19, 2011, the BOI approved the Parent Company’s application for registration as
a new producer of modular housing components/system on a nonpioneer status. Under
the terms of the registration, the applicable rights and privileges provided in the Omnibus
Investment Code of 1987, the Parent Company is entitled to the following tax and nontax
incentives, among others:
(a)
Income Tax Holiday (ITH) for a period of four years from June 1, 2011;
(b)
Importation of consigned equipment for a period of 10 years from June 1, 2011
subject to posting of re-export bond;
(c)
Employment of foreign nationals which will hold supervisory, technical or advisory
positions for five years from June 1, 2011; and,
(d)
Exemption from warfage dues and any export tax, duty, impost and fee on exports of
its registered export products for a period of 10 years from June 1, 2011.
23.2 Current and Deferred Taxes
The components of tax expense as reported in profit or loss for the six months ended
June 30 are as follows:
Reported in other profit or loss
Current tax expense:
Regular corporate income
tax (RCIT) at 30%
Final tax at 20% and 7.5%
Deferred tax income
relating to origination and
reversal of temporary
differences
2014
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
P
5,203,217) (
(
P
Reported in other comprehensive income –
Deferred tax expense
relating to origination and
reversal of temporary
differences
28,693,799
5,717,264
34,411,063
40,579,255
5,543,838
46,123,093
P
119,212 )
40,919,876 P
34,291,851
P
5,622,572
-
- 22 A reconciliation of tax on pretax profit computed at the applicable statutory rates to tax
expense for the six months ended June 30 is as follows:
Tax on pretax profit at 30%
Adjustment for income
subjected to lower tax rates
Tax effects of:
Non-taxable net profit
under ITH
Unrecognized net operating loss
carry over (NOLCO)
Non-deductible
interest expense
Non-taxable income
2014
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
P
235,943,069
173,493,098
(
2,771,919)(
2,858,632)
(
132,946,035)(
108,385,588 )
-
1,308,881
(
P
4,284,042
2,448,191) (
2,994,384
93,401,382 )
40,919,876 P
34,291,851
The Group did not recognize the deferred tax asset arising from NOLCO attributable to
GMCAC since it is probable that due to the Project, GMCAC will not have sufficient
taxable profits to be able to utilize the NOLCO in the immediately succeeding three years.
The deferred tax assets recognized in the interim statement of financial position relate to
the following:
Retirement benefit obligation
Deferred gain on sale and leaseback
Unrealized foreign currency losses – net
June 30,
2014
December 31,
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
P
35,985,406
10,584,658
-
P
33,110,048
7,404,853
851,946
P
46,570,064
P
41,366,847
- 23 24.
EQUITY
24.1 Capital Stock
Capital stock consists of:
Shares
Amount
June 30,
December 31,
June 30,
December 31,
2014
2013
2014
2013
(Consolidated- (Parent Company- (Consolidated- (Parent Companysee Note 2)
see Note 2)
see Note 2)
see Note 2)
Common shares – P1 par value
Authorized
2,000,000,000
2,000,000,000
P2,000,000,000 P2,000,000,000
Issued and outstanding:
Balance at beginning of period
Issuance during the period
Stock dividends distributed
1,649,426,127
-
1,114,100,003
154,689,326
380,636,798
1,649,426,127
-
1,649,426,127
1,649,426,127
P1,649,426,127 P 1,649,426,127
Balance at end of period
1,114,100,003
154,689,326
380,636,798
In the meeting of the Parent Company’s BOD held on May 14, 2014 and of the
stockholders held on June 30, 2014, the BOD and the stockholders approved the
amendment of the articles of incorporation to increase the Parent Company’s authorized
capital stock from P2,000.0 million divided into 2,000.0 million common shares to
P5,000.0 million divided into 4,930.0 million common shares and 70.0 million preferred
shares, both with a par value of P1.0 each. Also, on the same respective dates, the BOD
and the stockholders approved the creation of preferred shares with the features, terms
and conditions subject to the approval by the SEC. The minimum subscription and
paid-up requirement shall be issued from the stock dividends to be declared upon
approval by the SEC of the Parent Company’s application for the increase in authorized
capital stock [see Notes 24.2, 24.3 and 28(a)].
On May 20, 2013, the Parent Company issued 118.7 million shares at P17.65 per share, net
of transaction costs, to Citicore under private placements exempt from registration
pursuant to Section 10.1 of the Securities Regulation Code. Also, on May 2013, the Parent
Company issued 36.0 million shares to Citicore and various shareholders at P8.50 per
share, net of transaction costs. Total increase in additional paid-in capital as a result of the
new share issuance amounted to P2,245.5 million.
24.2 Dividends
On May 14, 2014 and June 30, 2014, the Parent Company’s BOD and stockholders,
respectively, approved the declaration of the stock dividends in relation to the increase in
capital stock (see Note 24.1). The stock dividends equivalent to 750.0 million common
shares of stock with par value of P1.0 each shall be taken from the unrestricted retained
earnings of the Parent Company as of December 31, 2013. The record date of the
stockholders entitled to the stock dividends shall not be less than 10 days nor more than
30 days after all clearances and approvals by the SEC have been secured [see Note 28(a)].
The record date is yet to be determined by the Parent Company’s BOD.
On April 8, 2013, the BOD of the Parent Company approved the proposal to declare
stock dividends equivalent to 30% of the total issued and outstanding shares of stock
equivalent to P380.6 million (P1.0 par value). This was approved by the stockholders in a
regular meeting held on June 26, 2013. The stock dividends were distributed within 2013.
- 24 24.3 Retained Earnings
As of June 30, 2014 and December 31, 2013, the Parent Company’s retained earnings
exceeded its capital stock. Relative to this, on April 8, 2013, the BOD of the Parent
Company approved the declaration of dividends and gave management the authority to
decide the type (cash, stock or mixed) and amount of any dividends to be declared
subsequently. Further, in 2014, the Parent Company’s BOD and stockholders approved
the declaration of stock dividends (see Note 24.2) relative to its application for increase in
authorized capital stock, which was subsequently approved by the SEC on
September 22, 2014 (see Notes 24.1 and 28).
24.4 Non-Controlling Interest
In 2014, the Parent Company acquired 15.0 million shares of GMCAC. The purchase of
the shares is part of the shareholders’ agreement to execute, undertake, and implement the
Project in accordance with the concession agreement (see Note 12). The shares acquired
represent 60% of the total issued and outstanding shares of GMCAC (see Note 1.1).
The non-controlling interest representing GMR’s 40% ownership in GMCAC is presented
as part of Non-controlling Interest account in the June 30, 2014 consolidated statement of
financial position.
25.
RELATED PARTY TRANSACTIONS
The Group’s related parties include its parent company, subsidiary, associate, parties
related to the Parent Company by common ownership and key management personnel.
The summary of the Group’s transactions with related parties as of and for the six months
ended June 30, 2014 and 2013 is as follows:
Related Party
Category
June 30, 2014
Amount of
Outstanding
Transaction
Balance
Note
June 30,
2013
Amount of
Transaction
December 31,
2013
Outstanding
Balance
Ultimate Parent Company:
Advances
25.6
Shareholders:
Revenue from services
25.1
1,095,279,025
1,277,292,282
1,899,141,822
74,184,326
Associate:
Revenue from services
25.1
1,102,142,857
696,023,369
1,342,527,992
1,341,014,869
Advances to an associate
25.6
57,468,655
57,468,655
Advances from an associate
25.6
(P
(
600,240,626 ) (P
5,241,500 )
614,469,172 ) P
-
-
(P
-
14,228,547 )
(
5,241,500 )
- 25 -
Related Party
Category
Related Parties Under
Common Ownership:
Cash deposits
Note
25.4
(
Notes payable
25.5 (a)
Obligation under finance lease
25.5 (b)
(
Bank loans
25.5 (d)
(
Revenue from services
Interest expense
-
139,216,443
Advances to a joint venture
25.8
Advances from related party
25.6
Advances from minority
shareholder
25.7
25.3
Key Management Personnel:
Compensation
(
1,154,832 )
51,000,000
(
900,000,000 )
-
146,423,879 ) (
51,000,000
(
900,000,000 )
29,939,000 ) (
247,724,631 )
-
104,655,345 )
-
1,035,589,127
550,000,000 ) ( 1,112,500,000 )
44,107,143
(
December 31,
2013
Outstanding
Balance
937,555,758
11,295,682,882 ) ( 12,405,682,882 ) (
25.5 (c)
(
281,693,281
101,300,752 ) (
44,642,857
25.2
Advances to Officers
and Employees
753,895,845 )
25.1
Rent expense
June 30,
2013
Amount of
Transaction
June 30, 2014
Amount of
Outstanding
Transaction
Balance
33,722,723
(
1,505,547,348
(
17,612,612 )
1,174,043 )
-
-
-
5,040,446 (
3,386,245 )
-
184,079,384 ) (
184,079,384 )
-
-
1,714,995
10,146,637
-
8,195,642
35,152,636
-
(
28,066,772
8,471,254 )
-
25.1 Rendering of Services
The Group provides construction services to SMDC and Belle Corporation (related
parties under common ownership), CMCI (associate), and to a certain shareholder. The
related revenue from these transactions is recorded as part of Contract Revenues in the
interim consolidated statements of comprehensive income (see Note 18). Services
rendered to the above related parties are based on normal terms similar to terms that
would be available to non-related parties.
The related outstanding contract receivables from construction revenues, which are
generally unsecured and settled through cash within three to six months, and
retention receivables, which can only be collected after a certain period of time upon
acceptance by project owners of the certificate of completion, are presented as part of
Contract and Retention receivables under Trade and Other Receivables in the
consolidated statements of financial position (see Note 6).
There were no impairment losses recognized in 2014 and 2013 for these related party
receivables.
25.2 Rental of Land and Building
The Parent Company is a lessee of certain parcels of land and building owned by related
parties under common ownership.
For the six months ended June 30, 2014 and 2013, the Parent Company recognized rent
expense amounting to P1.2 million each from the lease agreement with Megapolitan
Realty and Development Corporation (Megapolitan) for the land where the Parent
Company’s building is located (see Note 13). The Parent Company has no outstanding
payables from the rental transaction with Megapolitan as of June 30, 2014 and
December 31, 2013.
- 26 In 2014 and 2013, the Parent Company also leases an office space from Philwide
Construction and Development Corporation (Philwide), a related party under common
ownership, where its registered address is located.
Megapolitan and Philwide are entities owned by the Parent Company’s stockholders and
their close family members.
25.3 Advances to Officers and Employees
Advances to officers and employees represent unsecured, noninterest-bearing cash
advances for business-related expenditures that are to be liquidated 60 days from the date
the cash advances were received. The outstanding receivables from this transaction are
presented as part of Trade and Other Receivables (see Note 6).
No impairment losses were recognized in 2014 and 2013 for these advances.
25.4 Cash in Banks
The Group has certain bank accounts and short-term placements maintained with
related parties under common ownership, which earns interest based on prevailing
market interest rates. The balance of cash in banks with related parties as of
June 30, 2014 and December 31, 2013 are presented as part of Cash and Cash
Equivalents in the statements of financial position (see Note 5).
25.5 Interest-bearing Loans and Borrowings
The Group has the following transaction with a local commercial bank which is a
related party under common ownership:
(a) Notes payable facility up to P3,000.0 million of which the total amount drawn
amounted to P1,000.0 million as of June 30, 2014 (see Note 15);
(b) Finance lease on certain transportation and construction equipment is presented as
part of Obligation under finance lease under Interest-bearing Loans and Borrowings
account in the statements of financial position (see Note 15);
(c)
The related interest expense incurred on these loans and borrowings is presented as
part of Finance Costs (see Note 22.1); and,
(d) Total credit line granted to the Group amounted to P12,900.0 million and
P1,500.0 million as of June 30, 2014 and December 31, 2013, respectively. GMCAC
executed a promissory note as additional financing for the payment of the bid
premium. Other bank loans of the Parent Company are used for its working capital
requirements (see Note 15.2).
25.6 Advances to and from Related Parties
The Parent Company obtained unsecured, noninterest-bearing cash advances from
Citicore to finance portion of its working capital requirement payable upon demand. The
outstanding balance from these transactions is shown under Trade and Other Payables
account in the statements of financial position (see Note 14).
- 27 Citicore paid for the Parent Company’s subscriptions of ownership interest in MWCCI in
2014 and CMCI in 2012 (see Note 10.1). The balance of these advances, which are
unsecured, noninterest-bearing and payable on demand, are presented under Trade and
Other Payables account in the statements of financial position (see Note 14).
The Parent Company also gave unsecured, noninterest-bearing cash advances to its
associate and certain related parties under common ownership for their working capital
requirements. The outstanding balance from this transaction is shown under Trade and
Other Receivables account in the statements of financial position (see Note 6).
Further, no impairment losses were recognized in 2014 and 2013 for these advances.
The Parent Company’s outstanding receivables from and payables to the same related
parties as presented can be potentially offset to the extent of their corresponding
outstanding balances.
25.7 Advances from Minority Shareholder
In 2014, the minority shareholder granted unsecured noninterest-bearing cash advances to
GMCAC to support its Project bid-related expenses. No impairment losses were recognized for
these advances.
25.8 Advances to Joint Venture
In relation to the operation of the Project, the Parent Company and GMR will form an
unincorporated joint venture company (JV) for the construction of the airport, which shall
enter into Works Construction Contract with GMCAC to take up the construction work.
The Parent Company and GMR shall share equally in the net assets of the JV. During the
period, GMCAC has made unsecured noninterest-bearing cash advances to the JV for
working capital requirements.
25.9 Others
(a) The trust department of a local universal bank which is a related party under common
ownership, serves as the investment manager of the Group’s retirement fund. Other
than the amounts of contributions to the retirement plan and benefit payments, the
retirement plan has no other transactions and outstanding balances with the Group.
(b) The BOD declared 30% stock dividends in 2013. The undistributed dividends
amounting to P2.0 million as of June 30, 2014 and December 31, 2013 are presented
as Dividends payable under Trade and Other Payable account (see Note 14).
(c)
The Group is also severally liable for the loan facility obtained by CMCI in case of
non-payment (see Note 26.3).
(d) The Parent Company is a guarantor in an omnibus loan and security agreement
entered into by MWCCI with various banks (see Note 26.4).
- 28 26.
COMMITMENTS AND CONTINGENCIES
The following are the significant commitments and contingencies involving the Group:
26.1 Operating Lease Commitments – Group as Lessee
The Group is a lessee under operating leases covering its office space, and
its stockyards and certain construction equipment with terms ranging from one year to
two years. The related refundable security deposits are presented as part of Other
Current Assets in the consolidated statement of financial position (see Note 11).
26.2 Finance Lease Commitments – Group as Lessee
The Group has finance leases covering certain transportation and construction equipment
with terms ranging from two to five years. The liabilities relating to the finance leases are
shown as part of Interest-bearing Loans and Borrowings.
26.3 Public-private Partnership with Department of Education
On October 8, 2012, the Parent Company, together with Citicore (collectively referred to
as proponent), executed a build-lease-transfer agreement with the Philippine government,
through its Department of Education under the PPP for school infrastructure project,
which provides initiatives on the construction of classroom nationwide to address the
current classroom backlog and future requirements for classrooms.
The agreement requires the construction, maintenance and lease of school buildings under
a build-lease-and transfer contractual arrangement, whereby, the project proponent is
authorized to finance and construct the school facility within 16 months from the
execution date and upon its completion turns it over to the government agency or local
government unit concerned on a lease agreement for a period of 10 years from the
issuance of certificate of completion. After which, ownership of the facility is
automatically transferred to the government agency or local government unit concerned.
Total lease payments for the 10-year term amounted to P12,834.8 million which will
be collected on a monthly basis in accordance with the schedule provided by both parties.
All overdue lease payments shall be subjected to interest at the rate of 6-month PDST-F.
During the lease period, the proponent shall be responsible for the maintenance works,
which shall be performed twice, the first time at any point between the fourth and fifth
year, and the second time at any point between the 8th and 9th years.
At the end of the 10-year term, the proponent shall bear all costs incurred in connection
with the transfer of rights to the Philippine government.
Pursuant to the above agreements, the Parent Company and Citicore established CMCI to
handle the PPP school infrastructure project and executed an Accession Agreement to
transfer all rights and obligation of the proponent to CMCI under the agreement with the
government (see Note 1.1). On October 18, 2012, the Company and CMCI executed a
construction agreement whereby the Parent Company has agreed to undertake the
construction of the PPP school infrastructure project for a contract price of
P8,000.0 million.
- 29 In 2012, CMCI obtained a loan facility with a local bank for P6,500.0 million which was
received by the latter in 2012. The Company and Citicore are severally liable for the
obligation in case of non-payment of CMCI (see Note 25.9).
26.4 Build-Operate-Transfer Agreements
Mactan-Cebu International Airport Project
In 2014, GMCAC entered into a BOT agreement with the Grantor. GMCAC was
established to undertake the Project involving, among others, the construction of a worldclass airport passenger terminal (along with associated infrastructure and facilities), the
renovation and expansion of the existing airport terminal and the operation and
maintenance of both airport passenger terminals for a period of 25 years. GMCAC
expects to take over the operations of the Project by the fourth quarter of 2014 and
construction of the new passenger terminal to start by the first quarter of 2015.
On April 8, 2014, the Parent Company entered into Shareholders’ Agreement with GMR
setting forth the terms and conditions governing their participation in the share capital of
GMCAC, their rights and obligations as shareholders in relation to GMCAC. Under the
said Shareholders’ Agreement, the parties defined the business of GMCAC, the required
manpower support from each shareholder, the composition of the board, formation of
committees and the management team for the orderly management of the Project,
conduct of board and shareholder meetings as well as restrictions on the transfer rights of
the stockholders and issuance of additional shares.
GMCAC will be a pioneer in the privately operated airport space in the Philippines when it
takes over the Mactan Cebu International Airport on the scheduled take over date of
November 1, 2014. GMCAC intends to undertake an orderly and timely take-over of the
existing Mactan-Cebu International Airport as scheduled and efficient roll-out of the
construction of new passenger terminal by the first quarter of 2015.
MPOC Project
On March 6, 2014, MWCCI, an associate (see Note 10.1), entered into a BOT agreement
with DOH to undertake the MPOC Project. The scope of work on the New Hospital
Facility involves the following:
(a) Planning, design and construction and commissioning;
(b) Procurement, installation, and commissioning of the assets in the New Hospital
Facility;
(c) Operation and maintenance, including the New Hospital Facility’s diagnostic center,
out-patient departments, inpatient departments, and all other activities related to the
operations of the hospital;
(d) Undertaking and providing the MPOC services, as well as administrative and ancillary
services (such as clinical laboratory, imaging and radiology, sterile supplies, and
pharmacy);
(e) Provision of appropriately qualified staff (medical, paramedical, nursing and support);
and,
(f) Provision of teaching and training facilities and training programs.
The BOT agreement shall expire after 25 years from the date of issuance of Certificate of
Possession by the DOH. As required in the Notice of Award on the MPOC Project,
MWCCI entered into an omnibus loan and security agreement with various banks, wherein
the Parent Company is a guarantor (see Note 25.9).
- 30 -
26.5 Credit Lines
The Group has existing credit lines with local banks totalling P20,755.0 million and
P6,660.0 million in 2014 and 2013, respectively.
The Group availed of bank loans totalling P14,816.0 million and P2,256.2 million from the
credit lines in 2014 and 2013, respectively (see Note 15). Only the loan obtained by
GMCAC was secured, as disclosed in Note 15.2. Unused credit lines as of
June 30, 2014 and December 31, 2013 amounted to P5,939.0 million and P4,403.8 million,
respectively. Certain credit lines are with a local bank which is a related party under
common ownership (see Note 25.5).
26.6 Legal Claims
In 2014, certain legal claim was filed against the Parent Company. There is no related
provision recognized in the 2014 and 2013 financial statements as management believe
that the Parent Company has strong legal position related to such case.
26.7 Others
There are other commitments and contingent liabilities that arise in the normal course of
the Group’s operations which are not reflected in the financial statements. Management is
of the opinion that losses, if any, from these commitments and contingencies will not have
material effects on the Group’s financial statements, taken as a whole.
27.
EARNINGS PER SHARE
Basic earnings per share for the six months ended June 30 were computed as follows:
Net profit attributable to
Parent Company’s shareholders
Divided by weighted average
number of outstanding
common shares
Basic and diluted earnings per share
2014
2013
(Consolidated see Note 2)
(Parent Company see Note 2)
P
539,135,625 P
1,649,426,127
P
0.33 P
752,185,047
1,499,721,235
0.50
- 31 28.
EVENTS AFTER THE END OF THE REPORTING PERIOD
Subsequent to June 30, 2014, the Group entered in the following significant transactions:
(a) On September 22, 2014, the SEC approved the Parent Company’s amendment of
articles of incorporation involving the increase in authorized capital stock and creation
of preferred shares (see Notes 24.1 and 24.2).
(b) On September 4, 2014, the Parent Company acquired 70% of the issued and
outstanding capital stock of Megawatt Clean Energy, Inc. (MCEI). MCEI was
incorporated to engage in the development of clean or renewable energy sources for
power generation, including the design, construction and installation, purchase,
importation, commissioning, owning, management and operation of relevant
machinery, facilities and infrastructure therefor, and the processing and
commercialization of by-products in its operations. MCEI has an authorized capital
stock of P10.0 million divided into 10.0 million common stock with a par value of
P1.00 per share. Its registered address, which is also its principal place of business, is
located at 20 N. Domingo St. Brgy. Valencia, Quezon City. MCEI has not yet started
commercial operations to date.
(c) On September 26, 2014, World Citi sold its 39% equity ownership in MWCCI to
Citicore. Consequently after the sale, the effective ownership of Citicore in MWCCI
became 68%, after considering the 29% indirect holdings through the Parent
Company, which owns 51% ownership interest MWCCI (see Note 10.1).
MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
List of Supplementary Information
June 30, 2014
Schedule
Content
Page No.
Schedules Required under Annex 68-E of the Securities Regulation Code Rule 68
A
Financial Assets
Financial Assets at Fair Value Through Profit or Loss
Available-for-sale Financial Assets
1
B
Amounts Receivable from Directors, Officers, Employees, Related Parties, and Principal
Stockholders (Other than Related Parties)
C
Amounts Receivable from Related Parties which are Eliminated during the Consolidation of
Financial Statements
7
D
Intangible Assets - Other Assets
8
E
Long-term Debt
9
F
Indebtedness to Related Parties
10
G
Guarantees of Securities of Other Issuers
H
Capital Stock
2-6
N/A
11
Others Required Information
Reconciliation of Retained Earnings Available for Dividend Declaration
Schedule of Philippine Financial Reporting Standards and Interpretations Adopted by
the Securities and Exchange Commission and the Financial Reporting Standards
Council as of June 30, 2014
12
13 - 15
Map Showing the Relationship Between the Company and its Related Entities
16
Financial Ratios
17
-1MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
Schedule A
Financial Assets - Fair Value Through Profit or Loss and Available for Sale
June 30, 2014
Name of Issuing Entity and
Association of Each Issue
Amount Shown in
Valued Based on
Number of Shares or
the Statement
Market Quotation at
Principal Amount of Financial Positon as
End of Reporting
Bonds or Notes
of Reporting Period
Period
(i)
Income Received
and Accrued (ii)
Fair Value through Profit of Loss
3,119,808,386
1,535,367,636
BDO Leasing
Unit Investment Trust Fund
TOTAL
P
4,655,176,022
3,123,702,659
1,540,136,234
P
4,663,838,893
3,123,702,659
1,540,136,234
P
4,663,838,893
31,178,162
4,768,598
P
35,946,759
Available for Sale
Investment in Club shares - The City
Club, Alphaland Makati Place
1,044,471
1,044,471
1,044,471
Supplementary information on Financial assets at FVTPL
(i) The investments are carried at fair value based on quoted market prices from Philippine Dealings Exchange and net assets value
quoted by financial institutions.
(ii) This represents the increase in fair value of the asset which is not yet realized, interest received and accrued interest income
as of June 30, 2014.
-
- 2MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
Schedule B
Amounts Receivable from Directors, Officers, Employees,
Related Parties and Principal Stockholders (Other than Related Parties)
June 30, 2014
Name
ABELARDO LABRAGUE
ABENDAN, VICTORIO
ABONDIO B. MAGCUHA JR.
AFTAB A. MASIH
AGOSTO F. BALADJAY
AKING MENDOZA
ALBERTO AROCHA JR.
ALBERTO DACUMA
ALBERTO NECOSIA
ALEX GAJITON,ARNEL ALI
ALEXANDER E. LEONOR
ALFRED DELA PEÑAFOR
ALFREDO C. CASASIS
ALFREDO Q. CABIGAO, JR.
ALFREDO RONILO JR.
ALLAN LACERNA
ALMIN DACAYMAT
ALVIN ESGUERRA
ALVIN NICANOR
ALVIN SULONG
ALVIN TORRES
AMADO G. ASONG JR
AMIEL BILLONES
AMIEL O. BELIONES
AMOR JESSA AÑONUEVO
ANALIZA C. DIOLOLA
ANDREW DIAZ
ANDY R. LEGASPI
ANGELICA CHUA
ANGELICA UMALI
ANGELO HERMOGINO
ANITO B.BARCALA
ANNA DOMINIQUE SAJOR
ANNA KARENINA M. SALGADO
ANNE DOMINIQUE SAJOR
ANTHONY T. MANA-AY
ANTONIO ALLAN MENDOZA
ANTONIO G. PAREDES
ANTONIO MONJE JR.
ANTONIO PAUSAL
ANTONIO TABLATE
ARCHIBALD GARCIA
ARIEL L. MABINI
ARLAN G. SISON
ARNALDO V. REBOLLO
ARNEL BELLONES
ARNEL CAMACHO
ARNEL CERRO
ARNEL SEDENO
ARNOLD A. ARGONZA
ARNOLD AGCAMARAN
ARNOLD G. ABANICO
ARNOLD I. VILLAFUERTE
ARNOLD P.DAVILA
ARVIR MENDOZA
ATHENA AVA M. ALSOL
AURELIO RODRIGO ROCA
BENA KRISTIE S. UDQUIN
BENJAMIN R. DELA CRUZ
BENJAMIN VICENTE JR.
BENJIE FABROA
BERNIE JAYMA
BEVERLY BUBAN
CAMELO BASCO
CARLITO A. RAMOS JR
CARLITO BAFLOR
CARLOS LEITAO
CATALINA CHOI
CATHERINE A. SANDIEGO
CELIO E. EVANGELIO
CENDRIX DESEMBRANA
CEZAR V. MAYHAY
CHITO BILOG
CHRISTOPHER CERBO
CHRISTOPHER D. LECITA
CHRISTOPHER L. RUADO
CLAUDIA SORIANO
CONRADO F. PARCON
CRESANTO M. CASTRO
CUSTODIO M. TIU
CZARINO A. LORENZO
DANTE RODRIGUEZ
DARWIN R. TALATTAD
Balance forwarded
Balance at Beginning
of Period
P
10,000
Deductions
Additions
P
Amounts Collected
-
( P
566
17,092
247,092
(
10,000 ) P
17,092 )
307,608
7,200
8,000
7,000
2,000
20,000
(
(
(
8,000 )
7,000 )
20,000 )
2,054
13,500
2,130
12,500
8,183
10,000
(
(
8,183 )
10,000 )
(
20,000 )
450
20,000
6,000
2,054
10,000
5,973
7,500
(
10,000 )
4,250
(
7,500 )
2,929
3,685
4,448
31,850
4,107
5,625
6,900
(
5,625 )
11,667
2,500
5,400
16,800
382,000
(
(
5,400 )
16,800 )
(
500 )
(
(
(
(
58,559 )
7,775 )
5,000 )
10,000 )
226,000
16,800
500
25,000
58,559
7,775
5,000
10,000
2,000
139,700
1,800
39,000
3,750
(
3,750 )
2,850
7,864
20,000
20,000
2,344
25,000
400
(
(
20,000 )
20,000 )
3,719
5,200
19,760
(
(
5,200 )
19,760 )
(
(
20,000 )
132,041 )
(
10,000 )
30,000
20,000
144,273
50,000
6,208
50,000
10,000
35,000
2,000
4,375
27,293
173,871
19,525
(
(
(
4,375 )
27,293 )
20,000 )
(
(
458 )
7,550 )
30,000
458
7,550
2,700
10,000
2,563
500
9,000
275,562
(
232,140 )
(
13,825 )
(
2,775 )
750
4,830
15,175
683
2,775
743
1,787,157
1,000,760
(
766,601 )
Ending Balance
Written Off
-
Current
P
Balance at End of
Period
Non-current
-
743
-
2,021,316
-
P
566
554,700
7,200
2,000
2,054
13,500
2,130
12,500
450
6,000
2,054
10,223
2,929
3,685
4,448
31,850
4,107
6,900
11,667
2,500
608,000
16,800
25,000
141,700
1,800
39,000
2,850
7,864
2,344
25,000
400
3,719
30,000
12,232
50,000
6,208
50,000
35,000
2,000
153,871
19,525
30,000
2,700
10,000
2,563
500
9,000
43,422
750
4,830
1,350
683
-
P
566
554,700
7,200
2,000
2,054
13,500
2,130
12,500
450
6,000
2,054
10,223
2,929
3,685
4,448
31,850
4,107
6,900
11,667
2,500
608,000
16,800
25,000
141,700
1,800
39,000
2,850
7,864
2,344
25,000
400
3,719
30,000
12,232
50,000
6,208
50,000
35,000
2,000
153,871
19,525
30,000
2,700
10,000
2,563
500
9,000
43,422
750
4,830
1,350
683
743
2,021,316
- 3MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
Schedule B
Amounts Receivable from Directors, Officers, Employees,
Related Parties and Principal Stockholders (Other than Related Parties)
June 30, 2014
Name
Balance at Beginning
of Period
Balance carried forward
DENNIS ALVIN JOSON
DENNIS V. SILVANO
DIANA JOY VICTORIA
EARL NIÑO CLARET
EDBERT J. CALANG
EDGAR AVESTRUZ
EDGAR L. NUGUIT
EDGAR SAAVEDRA
EDGAR VALERA
EDGARDO D. MALIT
EDGARDO L. RECTO
EDGARDO P. BERNARDO
EDIELITO M. BINDOLO
EDILFE M. LIWAGON
EDMAR T. SEDOL
EDMUNDO B. JUAREZ
EDUARDO RAMIREZ
EDWARD M. REYES
EDWARD S. PASCUA
EDWIN CHIQUILLO
EDWIN DULAY
EDWIN FAJARDO
ELAINE LUMAGBAS
ELEUTERIO L. MAGAYONES
ELINO LUTCHAVEZ
ELMER D. GACER SR.
EMILIO MONTES JR.
EMILY LIM
ENRICO D. GAW
ENRIQUE RAMOS
ERIC N. GABRIEL
EVELYN A. BEROU
FAHREN JAY T. MENDOZA
FEBELYN JOY LOGON
FEDERICO GABOT JR.
FELOMINO L. PALER
FERDINAND B. RODRIGUEZ
FERDINAND P. MEMPIN
FILIPINO ILOGAN
FLORENTINO D. DUNGOG
FRANCIS LUIS DE GUZMAN
GARY CATINGGAN
GARY R. PITOGO
GENITO B. NIERVES SR.
GEORGE M. BUTAC
GERALD LLENADO
GERRY B. NIERVES
GIL AZARCON
GLENDA L. RATUM
GLENN CORTEZ
GLENN J. OJAS
GLIZETTE DYAN BERNARDO
GOMER A. PARMA
GREFIEL MANJERON
GREFIEL Y. MANJERON
HARRY DELAMIDE
HAYDEE CHUA
HAYDEE MAYOR
HENRY D. CAÑAS
ILDEFONSO BLEZA III
INGMAR WILHELM
IRINEO A. AGUIHAP
ISAGANI I. LATHROP
ISIDRO D. ORTEA
ISRAEL K. BONAVENTE
JACKSON G. NAIG
JAIME B. HERNANDEZ
JAN B. DENAGA
JANETTE SORILLA
JANINE REGENCIA
JASPER NOEL CABRERA
JAY ANTHONY V. HUTALLA
JAY M. GALICHA
JAYSON B. BARCALA
JEFEY M. MANGABON
JEFORE U. FRESNIDO
JENEROS P. DELOS REYES
JENNIFER U. MADELO
JENNY D. GUITA
JERALBINE R. NUGUID
JERICK D. DISCAYA
JEROME GUEVARRA
JEROME J. ZURBITO
JESSIE CORONEL
JESUS ABRAJANO
JETON COMENDADOR
JHULIAN LOREN GUTIERREZ
1,787,157
Balance forwarded
Deductions
Additions
Amounts Collected
1,000,760
6,950
18,000
(
766,601 )
(
18,000 )
28,530
7,200
1,520
8,000
8,000
321,698
103,840
180,000
18,000
(
(
(
8,000 )
8,000 )
321,698 )
(
18,000 )
(
8,183 )
43,000
3,914
8,183
1,200
30,450
8,000
10,800
6,250
(
8,000 )
(
6,250 )
(
(
4,696 )
20,000 )
(
(
(
(
(
20,000 )
17,100 )
17,550 )
6,000 )
10,000 )
(
20,000 )
(
5,610 )
(
2,500 )
735
4,696
20,000
1,943
20,000
17,100
17,550
6,000
10,000
638,000
81,273
15,000
18,200
4,704
5,610
2,500
30,000
1,000
7,000
20,000
37,524
(
7,000 )
(
33,159 )
(
8,000 )
6,500
8,000
10,500
2,746
3,000
4,375
5,000
10,000
8,000
5,129
78,200
8,000
25,084
21,000
(
(
(
(
(
(
(
(
(
3,000 )
4,375 )
5,000 )
10,000 )
8,000 )
5,129 )
78,200 )
8,000 )
25,084 )
3,000
500
8,500
(
8,500 )
6,406
30,000
24,167
6,750
15,000
50,000
397,937
18,000
8,000
8,125
18,000
111,169
(
(
6,750 )
15,000 )
168,630
(
(
18,000 )
8,000 )
3,200
(
(
18,000 )
110,568 )
(
(
4,800 )
15,000 )
3,431
4,800
15,000
11,200
1,575
7,500
18,000
1,667
10,000
20,000
57,000
27,699
416
30,000
5,321
21,000
7,608
(
(
7,500 )
18,000 )
(
(
(
10,000 )
20,000 )
57,000 )
7,333
47,500
1,584
(
30,000 )
(
21,000 )
8,000
16,000
(
(
8,000 )
16,000 )
3,838,720
2,158,758 (
1,873,254 )
3,150
38,488
Ending Balance
Written Off
-
Current
Non-current
2,021,316
6,950
38,488
-
4,124,223
-
28,530
7,200
1,520
103,840
223,000
3,914
1,200
30,450
10,800
735
1,943
638,000
61,273
19,704
12,591
5,610
30,000
1,000
20,000
4,365
6,500
10,500
2,746
21,000
3,000
500
6,406
30,000
24,167
50,000
566,567
11,325
601
3,431
18,808
1,575
9,000
75,199
2,000
5,321
3,150
-
Balance at End of
Period
2,021,316
6,950
28,530
7,200
1,520
103,840
223,000
3,914
1,200
30,450
10,800
735
1,943
638,000
61,273
19,704
12,591
5,610
30,000
1,000
20,000
4,365
6,500
10,500
2,746
21,000
3,000
500
6,406
30,000
24,167
50,000
566,567
11,325
601
3,431
18,808
1,575
9,000
75,199
2,000
5,321
3,150
38,488
4,124,223
-4MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
Schedule B
Amounts Receivable from Directors, Officers, Employees,
Related Parties and Principal Stockholders (Other than Related Parties)
June 30, 2014
Name
Balance at Beginning
of Period
Balance carried forward
JO-ANN S. BUENAAGUA
JOEL MARTINEZ
JOEL ROCA
JOEL VILLANUEVA
JOEY ALBERT CEREZO
JOHN DICK T. QUITOS
JOHN HAROLD B. MANUEL
JOHN KELVIN CARREON
JOHN MAR O. MALIRONG
JOHN RYAN SONZA
JOHNNY NAPILE
JONATHAN A. MONTOYA
JONATHAN AGASCON
JONATHAN M IRAS
JORGE D. LOBIGAS JR.
JOSE RAMIREZ
JOSE TALINGE
JOSELITO O. INAMARGA
JOSEPH ANDALIZA
JOSEPH HAYES F. HONORIO
JOVERSON D. SANGCAP
JOWELL SAN JOSE
JOWIE T. REAL
JUANITO S. MINA
JULIEN STEINER
JUNITO B. PESCADERO
KAREN B. POSADAS
KATRINA TENGKI
KENNETH DALIDA
KHAREN D. CARPIO
KHOSAN ARIEL LUCES
KRISTIE VALQUIN
LALAINE ROSALES
LEO B. MEDALLA
LEO D. GACUTINA
LEONARDO O. GUEVARRA
LEONCIO R. SAPEDA
LEONIDES POTENCIANO
LEXLIE L. MANUEL
LIBERATO M. PALAÑA
LITO INAMARGA
LITO MARIE G. AMOSCO
LOVE JOY TOMAS
LOWELL CORTEZ
LOWELL CRUZ
LUCENA O. BONGOLAN
LUCILA FAMILAR
LYNARD BARREDO
MA. CRISTINA E. CALIBUSO
MA. CRISTINE LEMIT
MA. DIAN JOIE M. SAN ANTONIO
MA. LOURDES D. VALERA
MA. ROXANNE A. PAGUIO
MA. TERESA D. PACIENTE
MA. THERESA FRANCIA
MADEL C. CUNANAN
MADGE GRETA CABATIC
MALOU SUNGA
MANNY BONGULTO
MANUEL LOUIE FERRER
MANUEL M. SARMIENTO
MARCELINO LAQUINDANUM JR
MARCELINO MANGAYA-AY JR.
MARCIN ARGARIN
MARGARITO A. TOMOGDON
MARIBETH J. MONTERO
MARIE KRISTINE GUERRA
MARILOU L. SUNGA
MARJUN OROBILLO
MARJUNE CASAMAYOR
MARK ANTHONY VALDEZ
MARK M. LERIOS
MARK MAÑOZO
MARLON M. ESTELLA
MARRY ANN O. DEGORIO
MARTY GEE ANOCHE
MARVIN D. FERIA
MARVIN GUTLAY
MARY CHRISTINE Y. AYUNTING
MARY LOURDES T. ROBLEZA
MARYCON SALAZAR
3,838,720
3,250
Balance forwarded
6,253,962
20,000
57
298,262
8,000
2,429
48,000
5,000
429
Deductions
Additions
Amounts Collected
2,158,758 (
(
909,135
(
12,575
(
3,150
(
100,000
(
(
1,873,254 )
2,750 )
20,000 )
0)
272,430 )
8,000 )
5,000 )
4,152
74
8,000
(
8,000 )
(
(
20,000 )
222,675 )
349,196
20,000
222,675
6,265
1,762
7,000
(
7,000 )
(
(
8,000 )
3,750 )
(
(
(
(
6,250 )
10,000 )
7,170 )
7,775 )
226,019
8,000
3,750
12,850
6,250
10,000
7,170
7,775
900
25,000
8,718
24,375
833
8,000
8,000
15,640
(
(
(
8,000 )
8,000 )
15,640 )
(
20,000 )
(
(
3,950 )
5,000 )
(
45,000 )
1,464
20,000
20,000
5,500
3,950
5,000
1,441
45,000
51,250
1,694
3,258
8,750
(
3,258 )
38,567
5,499
57,538
26,667
27,278
22,394
174,117
1,820
1,502,383
28,333
75,000
12,321
835,022
(
835,022 )
14,050
4,375
4,375
17,775
182,700
8,000
(
(
(
(
(
4,375 )
3,775 )
17,775 )
182,700 )
8,000 )
(
(
(
(
10,270 )
57,321 )
10,000 )
18,000 )
(
23,800 )
(
10,000 )
(
(
8,000 )
15,000 )
30,000
10,270
57,321
10,000
18,000
10,000
23,800
2,125
10,000
30,000
8,000
15,000
19,650
2,746
30,000
15,802
18,500
5,662,942 (
3,794,941 )
Ending Balance
Written Off
-
Current
Non-current
4,124,223
500
909,135
2,746
30,000
35,452
18,500
-
8,121,963
-
12,575
57
3,150
25,833
100,000
2,429
48,000
4,580
74
349,196
6,265
1,762
226,019
12,850
900
25,000
8,718
24,375
833
1,464
20,000
5,500
1,441
60,000
1,694
38,567
5,499
57,538
26,667
27,278
24,214
1,676,500
28,333
75,000
12,321
14,050
600
30,000
10,000
2,125
30,000
-
Balance at End of
Period
4,124,223
500
909,135
12,575
57
3,150
25,833
100,000
2,429
48,000
4,580
74
349,196
6,265
1,762
226,019
12,850
900
25,000
8,718
24,375
833
1,464
20,000
5,500
1,441
60,000
1,694
38,567
5,499
57,538
26,667
27,278
24,214
1,676,500
28,333
75,000
12,321
14,050
600
30,000
10,000
2,125
30,000
2,746
30,000
35,452
18,500
8,121,963
-5MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
Schedule B
Amounts Receivable from Directors, Officers, Employees,
Related Parties and Principal Stockholders (Other than Related Parties)
June 30, 2014
Name
Balance at Beginning
of Period
Balance carried forward
MATHEW GARCIA D. MAUAD
MELISSA L. SALILICAN
MELIZZA K. DE TORRES
MELONA E. DABLO
MELQUIADES S. TAPIA
MELVIN CAÑERO
MENCHIE O. DIASEN
MERLINDO TAYRUS JR.
MICHAEL B. COLINAYO
MICHAEL BERMUDO
MICHAEL COSIQUIEN
MICHAEL M. SETINTA
MICHELLE ANN P. PEDRAJA
MICHELLE BARRUZO
MODESTO V. TORRES
NAZARENO ABALOS
NELSON M.TUIZA JR
NELSON S.DARAMAN
NELSON SEMINIANO JR.
NELSON TUISA
NESTOR L. SIERVO JR
NICANOR CALISORA
NICK G. LARAZABAL
NICOLAS O. LANGAY-LANGAY
NIKKO F. DEL ROSARIO
NIÑO B. DAIRO
NOE G. GERAPUSO
NOEL GARBO
NOEL R. TABERNILLA
NONY L. BUAL
NORBERTO BAJAN
NORMAN VINCENT DELA CRUZ
OSCAR S. OCAMPO JR
PEDRITO MAÑOSA JR.
PEDRO B. EDICA JR.
PRECIOUS PEARL A. ABAYA
RAMIE BALBUTIN
RAMIL ALIMBUYUGIN
RANDY DELA CRUZ
RAYMUNDO R. LAYSON
REALYN G. FLORES
RECILE S. POSECION
REGIE M. MENDOZA
RENALDO B. CATAMPONGAN
RENEL RUBIO
REY K. BANAL
REYNALDO CANDO
REYNALDO GARADO
REYNALDO RODRIN
RHODA M. GUCILATAR
RHODERICK A. DURBAN
RICARDO B. GILTENDEZ
RICARDO MOSTERA
RICHARD TIODIANCO
RIO B. GOTIZA
ROCYL A. VINGNO
RODOLFO PESARILLO
RODRIGO S. PAMAHOY
ROEL BATACAN
ROGELIO D. EMELIO
ROGIE ENTERIA
ROLAND DAYGO
ROLAND LOZA
ROLAND N. RIÑA
ROLANDO S. DAYGO
ROLNALD MESINA
ROMEL J. LUCAPA
ROMEO A. OLIPAS JR.
ROMIL F. MANA-AY
ROMMEL G. REYES
ROMMEL NIÑO M. PULPULAAN
ROMMEL Y. ONDONG
ROMNICK LLENADO
RONALD ALLAN M. NICOLAS
RONALD PAOLO
RONARD B. JUMALON
RONILO C. MENDOZA
RONILO G. TAGOLGOL
RONNIE O. BERNARDO
ROSE ANN A. PIQUERO
ROWEL LUNZAGA
ROY JOHN LOPEZ
ROY M. VELASCO
RUBELIZA BALTAZAR
RUBEN A. YENOGACIO
RUBEN C. DAGOOC
RUBIELIZA ALBAY
RUBIELIZA BALTAZAR
RUEL L. LAFUENTE
RUEL SALVADOR
RUSKY L. FERRER
RYAN VIRAY
6,253,962
429
9,500
Balance forwarded
7,515,993
Deductions
Additions
Amounts Collected
5,662,942 (
2,482
3,794,941 )
3,000
1,668
4,608
24,250
(
24,250 )
65,441
7,500
8,000
245,630
100,000
5,000
(
(
(
(
(
7,500 )
8,000 )
115,630 )
100,000 )
4,778 )
(
5,003 )
3,000
10,000
40,000
100,000
5,003
1,350
4,129
6,500
30,910
500
17,000
117,996
(
(
4,129 )
6,500 )
(
17,000 )
56,585
3,760
12,706
8,400
45,000
(
45,000 )
2,000
9,000
11,250
4,392
6,563
10,000
10,000
4,880
(
(
4,392 )
6,563 )
(
8,000 )
(
10,800 )
3,600
15,120
30,000
10,800
6,000
4,129
130,620
(
(
4,129 )
85,720 )
(
(
(
5,000 )
10,000 )
10,000 )
(
18,000 )
45,000
28,667
17,415
1,000
2,143
1,000
5,000
10,000
67,310
2,870
1,163
18,000
7,025
195,070
6,500
5,625
3,000
20,000
2,775
2,442
5,179
6,250
(
(
(
(
5,625 )
3,000 )
20,000 )
2,775 )
(
(
5,179 )
6,250 )
19,510
5,400
5,000
64,688
500
5,000
(
5,000 )
215,540
8,000
(
8,000 )
22,800
913
1,032
5,000
40,000
16,904
15,687
45,890
2,023
6,904
8,000
29,418
(
(
40,000 )
16,904 )
(
45,890 )
(
(
(
6,904 )
8,000 )
4,058 )
(
6,775 )
23,500
3,150
13,500
6,775
21,108
8,000
20,000
20,000
1,108
(
(
(
8,000 )
20,000 )
20,000 )
13,350
330
8,000
(
8,000 )
2,000
6,712,073 (
4,535,692 )
Ending Balance
Written Off
-
Current
Non-current
8,121,963
2,911
9,500
3,000
1,668
4,608
2,000
-
9,692,373
-
65,441
130,000
223
3,000
10,000
40,000
217,996
1,350
87,495
500
3,760
12,706
8,400
2,000
9,000
11,250
13,600
2,000
20,000
30,000
6,000
44,900
45,000
28,667
17,415
1,000
2,143
8,025
57,310
197,940
1,163
6,500
21,952
5,400
5,000
64,688
500
215,540
22,800
913
1,032
5,000
15,687
2,023
25,361
23,500
3,150
13,500
21,108
1,108
13,350
330
-
Balance at End of
Period
8,121,963
2,911
9,500
3,000
1,668
4,608
65,441
130,000
223
3,000
10,000
40,000
217,996
1,350
87,495
500
3,760
12,706
8,400
2,000
9,000
11,250
13,600
2,000
20,000
30,000
6,000
44,900
45,000
28,667
17,415
1,000
2,143
8,025
57,310
197,940
1,163
6,500
21,952
5,400
5,000
64,688
500
215,540
22,800
913
1,032
5,000
15,687
2,023
25,361
23,500
3,150
13,500
21,108
1,108
13,350
330
2,000
9,692,373
-6MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
Schedule B
Amounts Receivable from Directors, Officers, Employees,
Related Parties and Principal Stockholders (Other than Related Parties)
June 30, 2014
Name
Balance at Beginning
of Period
7,515,993
1,000
8,000
Balance carried forward
SANTIAGO CANDOLE
SANTIAGO R. GARIN
SEVERINO L. CERVO
SHEENA BERDIN
SHEILA G. ANGELES
SHERWIN GATBONTON
SHERWIN S. YUMOL
SHIELA MAPACPAC
SONNY BOY G. ENRIQUEZ
SULPICIO A. GARCIA
TARCYZJUSZ FROEHLICH
TEODORO CAPATE
THEODY P. SILVA
TIMOTHY GALEON
TOMAS D. BUSLON
TOMMY CABANTAC SR.
TRIUMFANDO TAN
VALENTINO S. SOLIVEN
VENER V. PAGAYANAN
VICENTE A. ARANAS JR
VICTOR L. VALDEZ
VIRGILIO UMALI JR.
VIVENCIO A. ROSALES JR.
VOLTAIRE CLELO
WENDELYN P. GRUTA
WENNIE S. PALACIO
WILBERT INCHOCO
WILFREDO AUGUIS
WILFREDO MEJIA
WILLIE G. RUFINO
WILMOR A. CABANDO
WILTON DY
WINSTON V. JIMENEZ
XAVIER G. BIEN
ZALDY OSTREA
ZANDY U. BAUIT
TOTAL
Deductions
Additions
Amounts Collected
6,712,073 (
4,535,692 )
(
8,000 )
(
(
280 )
50,000 )
34,917
(
154,990 )
87,328
5,000
1,875
5,000
8,125
(
5,000 )
(
8,125 )
(
21,952 )
2,573
21,952
500
10,000
87,500
(
(
10,000 )
2,500 )
(
6,900 )
3,600
500
1,050
31,200
6,900
13,601
87,532
2,400
(
(
87,532 )
2,400 )
50,000
18,600
2,552
62,500
20,795
(
(
62,500 )
14,595 )
9
1,830
400
P
8,195,642
P
6,921,462
( P
4,970,466 )
Current
-
2
6,429
330
50,000
2,367
44,250
154,990
53,432
Ending Balance
Written Off
P
-
Non-current
9,692,373
1,000
-
2
6,429
50
2,367
79,167
53,432
87,328
1,875
5,000
2,573
500
85,000
3,600
500
1,050
31,200
13,601
50,000
18,600
2,552
6,200
9
1,830
400
P
10,146,637
Balance at End of
Period
P
-
9,692,373
1,000
2
6,429
50
2,367
79,167
53,432
87,328
1,875
5,000
2,573
500
85,000
3,600
500
1,050
31,200
13,601
50,000
18,600
2,552
6,200
9
1,830
400
P
10,146,637
-7MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
Schedule C
Amounts Receivable from Related Parties which are Eliminated during the Consolidation of Financial Statements
June 30, 2014
Name and Designation of
Debtor
GMR Megawide Cebu Airport
Corporation (GMCAC),
Subsidiary
Deductions
Balance at
Beginning of
Period
P
-
Additions
P
200,353,855
Amounts Collected
P
-
Ending Balance
Written Off
P
-
Current
P
200,353,855
Supplementary information:
In 2014, the Parent Company granted unsecured noninterest-bearing cash advances to GMCAC to support its Project bid-related expenses payable on demand.
Non-current
P
-
Balance at End of
Period
P
200,353,855
-8-
Give reasons for write off.
MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
Schedule D
Intangible Assets - Other Assets
June 30, 2014
Deduction
Beginning
Balance
Description (i)
Computer license software
Concession rights
P
Total
P
Charged to Cost Charged to Other
and Expenses (iii)
Accounts
Other Changes
Additions
(Deductions)
22,164,755
14,759,092,910
( P
P
14,781,257,665
( P
Additions at Cost (ii)
25,044,630
-
P
25,044,630
P
-
837,054 ) P
-
837,054 )
-
-
P
46,372,331
14,759,092,910
-
P
14,805,465,241
Supplementary information on Intangible Assets
(i) Intangible assets, which pertain to computer license software and system, are presented as part of other non-current assets in the statement of financial position.
Concession rights pertain to GMR Megawide Cebu Airport Corp.'s payment for bid premium and other related expenses pertaining to
the Cebu-Mactan Internation Airport Project.
(ii) Additions during the period represents software customization fees, new human resource system and various installation fees.
(iii) Intangible assets are amortized on a straight-line basis over the estimated useful lives of five years.
Ending Balance
-9MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
Schedule E
Long-Term Debt
June 30, 2014
Title of Issue and Type of
Obligation
Notes payable
Obligations under finance lease
Amount Authorized
by Indenture
P
Amount Shown Under
Caption"Current
Portion of Long-term
Debt" in Related
Statement of Financial
Position
4,963,627,033 P
194,345,294
Amount Shown Under
Caption"Long-Term
Debt" in Related
Statement of Financial
Position
P
142,133,406
4,963,627,033
52,211,888
Supplementary information on Long-term Debt
(i) Total notes payable represents unsecured availments from two notes facility agreement with a local bank for private placement
amounting to P4.0 billion in 2013 and P1.0 billion in 2011. Both notes payable have maturity of five years from date of issue.
(ii) The obligations under finance lease have an effective annual interest rate of 5.4% with maturity of five years from
date of transaction.
- 10 MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
Schedule F
Indebtedness to Related Parties
June 30, 2014
Name of Related Party
Balance at Beginning of
Period
Advances from Citicore Holdings Investment, Inc.1
Advances from Citicore-Megawide Consortium , Inc.
Advances from minority shareholder 2
Advances from MySpace Properties, Inc.
Due to employees
P
Total
P
14,228,547
5,241,500
Balance at End of
Period
P
614,469,172
184,079,384
2,409,554
976,691
P
801,934,801
7,450,000
1,021,254
27,941,301
Supplementary information on Indebtedness to Related Parties
1
The Parent Company obtains unsecured, noninterest-bearing cash advances from its ultimate parent company to finance
its working capital requirements, which are payable on demand.
Citicore paid for the Parent Company’s agreed subscription of MWCCI in 2014 and CMCI in 2012. These advances
are noninterest-bearing and payable on demand.
2
The minority shareholders of GMR-Megawide Cebu Airport Corp. granted unsecured noninterest-bearing cash advances
to GMCAC to support its Cebu-Mactan Internation Airport Project bid-related expenses.
- 11 MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
Schedule H
Capital Stock
June 30, 2014
Number of Shares Held By
Title of Issue
Common
Number of Shares
Authorized
2,000,000,000
Number of Shares Issued and
Number of Shares
Outstanding as Shown Under the Reserved for Options,
Related Statement of Financial
Warrants, Coversion
Postion Caption
and Other Rights
1,649,426,127
-
Related Parties
1,220,203,735
Directors, Officers
and Employees
169
Others
429,222,223
- 12 MEGAWIDE CONSTRUCTION CORPORATION
2nd Floor Spring Building, Arnaiz Avenue Cor. P. Burgos St., Pasay City
Reconciliation of Retained Earnings Available for Dividend Declaration
For Six Months Ended June 30, 2014
Unappropriated Retained Earnings of the Parent Company at Beginning of Period
Prior Periods' Outstanding Reconciling Item, net of tax
Deferred tax income
P
(
2,720,372,788
40,514,901 )
Unappropriated Retained Earnings Available for
2,679,857,887
Dividend Declaration at Beginning of Period, as Adjusted
Net Profit of the Parent Company Realized during the Period
Net profit per reviewed financial statements
Non-actual/unrealized income, net of tax
Unrealized fair value gains on financial assets
Deferred tax income
541,753,386
(
(
8,662,871 )
6,055,163 )
527,035,352
Unappropriated Retained Earnings Available for
Dividend Declaration at End of Period
P
3,206,893,239
- 13 MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
Schedule of Philippine Financial Reporting Standards and Interpretations
Adopted by the Securities and Exchange Commission and the
Financial Reporting Standards Council as of June 30, 2014
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS
Adopted
Framework for the Preparation and Presentation of Financial Statements
a
Conceptual Framework Phase A: Objectives and Qualitative Characteristics
a
Practice Statement Management Commentary
Not
Adopted
Not
Applicable
a
Philippine Financial Reporting Standards (PFRS)
PFRS 1
(Revised)
First-time Adoption of Philippine Financial Reporting Standards
a
Amendments to PFRS 1: Additional Exemptions for First-time Adopters **
a
Amendment to PFRS 1: Limited Exemption from Comparative PFRS 7 Disclosures for First-time
Adopters **
a
Amendments to PFRS 1: Severe Hyperinflation and Removal of Fixed Date for
First-time Adopters **
a
Amendment to PFRS 1: Government Loans **
Share-based Payment
PFRS 2
PFRS 3
(Revised)
a
a
Amendments to PFRS 2: Vesting Conditions and Cancellations
a
Amendments to PFRS 2: Group Cash-settled Share-based Payment Transactions
a
Business Combinations
a
Insurance Contracts
a
Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts
a
PFRS 5
Non-current Assets Held for Sale and Discontinued Operations
a
PFRS 6
Exploration for and Evaluation of Mineral Resources
a
PFRS 4
PFRS 7
PFRS 8
Financial Instruments: Disclosures
a
Amendments to PFRS 7: Transition
a
Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets
a
Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets - Effective Date and
Transition
a
Amendments to PFRS 7: Improving Disclosures about Financial Instruments
a
Amendments to PFRS 7: Disclosures - Transfers of Financial Assets
a
Amendments to PFRS 7: Disclosures – Offsetting Financial Assets and Financial Liabilities
Amendment to PFRS 7: Mandatory Effective Date of PFRS 9 and Transition Disclosures (deferred
application) *
a
a
Operating Segments
a
Financial Instruments (deferred application) *
a
PFRS 9
Amendments to PFRS 9: Mandatory Effective Date of PFRS 9 and Transition Disclosures (deferred
application) *
a
PFRS 10
Consolidated Financial Statements
a
Amendment to PFRS 10: Transition Guidance
a
Amendment to PFRS 10: Investment Entities
a
Joint Arrangements
a
Amendment to PFRS 11: Transition Guidance
a
Disclosure of Interests in Other Entities
a
Amendment to PFRS 12: Transition Guidance
a
Amendment to PFRS 12: Investment Entities
a
Fair Value Measurement
a
PFRS 11
PFRS 12
PFRS 13
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS
Adopted
Not
Adopted
Not
Applicable
-14Philippine Accounting Standards (PAS)
PAS 1
(Revised)
Presentation of Financial Statements
a
Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on
Liquidation**
a
Amendment to PAS 1: Presentation of Items of Other Comprehensive Income
a
PAS 2
Inventories
a
PAS 7
Statement of Cash Flows
a
PAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
a
PAS 10
Events after the Reporting Period
Construction Contracts
a
Income Taxes
a
PAS 11
PAS 12
a
Amendment to PAS 12 - Deferred Tax: Recovery of Underlying Assets
a
PAS 16
Property, Plant and Equipment
a
PAS 17
Leases
a
PAS 18
Revenue
a
Employee Benefits
a
Amendment: Employee Benefits – Defined Benefit Plans – Employee Contributions
a
PAS 19
(Revised)
PAS 20
PAS 21
Accounting for Government Grants and Disclosure of Government Assistance
a
The Effects of Changes in Foreign Exchange Rates
a
Amendment: Net Investment in a Foreign Operation**
a
PAS 23
(Revised)
Borrowing Costs
a
PAS 24
(Revised)
Related Party Disclosures
a
PAS 26
Accounting and Reporting by Retirement Benefit Plans
PAS 27
(Revised)
Separate Financial Statements
a
a
Amendment to PAS 27: Investment Entities
a
PAS 28
(Revised)
Investments in Associates and Joint Ventures
a
PAS 29
Financial Reporting in Hyperinflationary Economies
a
Financial Instruments: Presentation
a
Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on
Liquidation**
a
Amendment to PAS 32: Classification of Rights Issues
a
Amendments to PAS 32: Offsetting Financial Assets and Financial Liabilities
a
PAS 33
Earnings per Share
a
PAS 34
Interim Financial Reporting
a
PAS 36
Impairment of Assets
a
Amendment to PAS 36: Recoverable Amount Disclosures for Non-financial Assets
a
PAS 37
Provisions, Contingent Liabilities and Contingent Assets
a
PAS 38
Intangible Assets
a
Financial Instruments: Recognition and Measurement
a
Amendments to PAS 39: Transition and Initial Recognition of Financial Assets and Financial
Liabilities
a
Amendments to PAS 39: Cash Flow Hedge Accounting of Forecast Intragroup Transactions**
a
Amendments to PAS 39: The Fair Value Option **
a
PAS 32
PAS 39
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS
Adopted
Not
Adopted
Not
Applicable
- 15 Philippine Accounting Standards (PAS)
PAS 39
Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts **
a
Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets
a
Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets – Effective Date and
Transition
a
Amendments to Philippine Interpretation IFRIC 9 and PAS 39: Embedded Derivatives **
a
Amendment to PAS 39: Eligible Hedged Items **
a
Amendment to PAS 39: Novation of Derivatives and Continuation of Hedge Accounting **
a
PAS 40
Investment Property
PAS 41
Agriculture
`
IFRIC 1
Changes in Existing Decommissioning, Restoration and Similar Liabilities
a
IFRIC 2
Members' Share in Co-operative Entities and Similar Instruments
a
IFRIC 4
Determining Whether an Arrangement Contains a Lease
IFRIC 5
Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation
Funds
a
IFRIC 6
Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic
Equipment
a
IFRIC 7
Applying the Restatement Approach under PAS 29, Financial Reporting in Hyperinflationary
Economies
a
a
a
Reassessment of Embedded Derivatives**
a
Amendments to Philippine Interpretation IFRIC–9 and PAS 39: Embedded Derivatives**
a
IFRIC 10
Interim Financial Reporting and Impairment
a
IFRIC 12
Service Concession Arrangements
a
IFRIC 13
Customer Loyalty Programmes
IFRIC 9
IFRIC 14
a
PAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their
Interaction
a
Amendments to Philippine Interpretations IFRIC - 14, Prepayments of a Minimum Funding
Requirement and their Interaction
a
IFRIC 16
Hedges of a Net Investment in a Foreign Operation
IFRIC 17
Distributions of Non-cash Assets to Owners**
a
IFRIC 18
Transfers of Assets from Customers**
a
IFRIC 19
Extinguishing Financial Liabilities with Equity Instruments**
a
IFRIC 20
Stripping Costs in the Production Phase of a Surface Mine
a
IFRIC 21
Levies
a
a
Philippine Interpretations - Standing Interpretations Committee (SIC)
SIC-7
Introduction of the Euro
a
SIC-10
Government Assistance - No Specific Relation to Operating Activities
a
SIC-13
Jointly Controlled Entities - Non-Monetary Contributions by Venturers
a
SIC-15
Operating Leases - Incentives
a
SIC-25
Income Taxes - Changes in the Tax Status of an Entity or its Shareholders**
a
SIC-27
Evaluating the Substance of Transactions Involving the Legal Form of a Lease
a
SIC-29
Service Concession Arrangements: Disclosures
a
SIC-31
Revenue - Barter Transactions Involving Advertising Services
a
SIC-32
Intangible Assets - Web Site Costs
a
* These standards will be effective for periods subsequent to 2014 and are not early adopted by the Group.
** These standards have been adopted in the preparation of financial statements but the Group has no significant transactions covered
in both years presented.
- 16 -
G
MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
MAP SHOWING THE RELATIONSHIP BETWEEN THE COMPANY AND ITS RELATED ENTITIES
June 30, 2014
Citicore Holdings Investment,
Inc. (Citicore)
56.81%
Megawide-World Citi
Consortium, Inc. (MWCCI)
51%
90%
Megawide Construction
Corporation (Megawide)
60%
GMR-Megawide Cebu Airport
Corporation (GMCAC) (iii)
10%
Citicore-Megawide
Consortium, Inc. (CMCI) (ii)
100%
Altria East Land, Inc. (Altria)
(i)
Supplementary information:
(i) Megawides acquisition of Altria is treated as an acquisition of asset and not a business acquisition. Hence, Altria is not considered
a subsidiary of the Megawide for accounting purposes.
(ii) The rights and powers of Megawide over the management and control of the CMCI are exercised through a seat in the board. Taking this
into consideration, the Megawide concluded that it has significant influence over the investee; accordingly the investment is accounted for as
an investment in associate.
(iii) Megawide acquired 15.0 million shares of stock of GMCAC which represent 60% of GMCAC’s issued and outstanding capital stock,
giving Megawide control over the financial and operations of GMCAC.
(iv)
Megawide acquired 51% ownership interest in MWCCI, but accounted for the investment as an associate since it does not have
control over MWCCI's relevant activities. Citicore subsequently acquired 68% effective ownership interest over MWCCI, hence,
obtained the control over MWCCI.
100%
MySpace Properties, Inc.
-17 MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
Schedule of Relevant Financial Ratios as Required
Under SRC Rule 68, as amended
For the Six Months Ended June 30, 2014 and the Year Ended December 31, 2013
(Amounts in Philippine Pesos)
I.
June 30,
2014
December 31,
2013
June 30,
2014
December 31,
2013
(Consolidated)
(Six Months)
(Parent Company)
(One Year)
(Consolidated)
(Six Months)
(Parent Company)
(One Year)
0.79
2.14
0.45
1.56
0.03
0.11
2.30
1.52
3.30
2.52
1.43
1.66
3.59
3.43
0.17
0.16
0.11
0.13
0.05
0.21
0.02
0.08
5.51
5.18
0.33
1.13
Current/liquidity ratios
a.
Current Ratio
Total Current Assets
Total Current Liabilities
P
16,088,077,993
P
16,742,320,130
20,238,120,967
7,815,237,646
b. Quick Ratio
(Cash and Cash Equivalents + Financial
Assets at Fair Value through Profit or Loss
+ Trade and Other Receivables)
II.
9,189,076,144
12,203,245,795
Total Current Liabilities
20,238,120,967
7,815,237,646
(Earnings Before Interest and Taxes)
Total Liabilities
733,582,896
1,489,687,842
25,373,911,240
12,961,986,946
Total Liabilities
25,373,911,240
12,961,986,946
Total Equity
11,014,374,895
8,541,010,236
Solvency ratios
a.
Solvency Ratio
b. Debt-to-Equity Ratio
III.
IV.
V.
Asset-to-equity ratio
Total Assets
36,388,286,135
21,502,997,182
Total Equity
11,014,374,895
8,541,010,236
Total Assets
36,388,286,135
21,502,997,182
Total Liabilities
25,373,911,240
12,961,986,946
733,582,896
1,442,791,313
204,475,859
421,151,138
Asset-to-liability ratio
Interest Coverage Ratio
(Earnings Before Interest and Taxes)
Interest Expense
VI.
Profitability Ratios
a.
Gross Profit Margin
Gross Profit
Revenues
882,445,443
1,781,129,312
5,055,311,501
10,880,437,252
b. Net Profit Margin
c.
Net Profit
537,390,450
1,395,633,425
Revenues
5,055,311,501
10,880,437,252
537,390,450
1,395,633,425
9,777,692,566
6,656,194,947
Return on Equity
Net profit
Average Equity
d. Return on Assets
Net profit
537,390,450
1,395,633,425
28,945,641,659
16,769,736,953
Total Equity
9,080,145,861
8,541,010,236
Outstanding Shares
1,649,426,127
1,649,426,127
539,135,625
1,395,633,425
1,649,426,127
1,237,598,470
Average Assets
VII. Market Ratios
a.
Book Value per Share Attributable to
Owners of Parent Company
b. Earnings per Share Attributable to
Owners of Parent Company
Net Profit
Average Outstanding Shares
MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
(A Subsidiary of Citicore Holdings Investment, Inc.)
PRO-FORMA CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
JUNE 30, 2014 AND DECEMBER 31, 2013
(UNAUDITED)
(Amounts in Philippine Pesos)
June 30, 2014
Historical Balances
Notes
December 31, 2013
Pro-forma
Adjustments
Pro-forma Balances
Pro-forma
Adjustments
Historical Balances
Pro-forma Balances
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value
through profit or loss
Costs in excess of billings on
uncompleted contracts
Other current assets
4
P
4,663,838,893
-
2,922,883,586
3,976,118,263 (
-
6
7
6
P
P
23,224,007 )
965,311,985
3,744,859,823
P
2,276,033,774 ( P
4,102,937,463
24,498,704 )
51,261,000
P
2,251,535,070
4,154,198,463
4,663,838,893
5,824,274,558 (
3,000,000,000 )
2,824,274,558
2,922,883,586
3,952,894,256
2,244,616,768
2,294,457,567
1,724,780,536
2,244,616,768
4,019,238,103
1,248,457,168 )
15,493,862,962
16,088,077,993
161,710,550
16,249,788,543
14,759,092,910
4,483,041,080 (
1,058,074,152
211,747,179
205,724 )
14,970,840,089
4,482,835,356
1,058,074,152
4,330,697,120
429,979,932
14,759,092,910
2,057,240
-
14,759,092,910
4,332,754,360
429,979,932
211,541,455
20,511,749,597
4,760,677,052
14,761,150,150
19,521,827,202
-
20,300,208,142
Total Non-current Assets
TOTAL ASSETS
185,195,557
261,000 )
5
Total Current Assets
NON-CURRENT ASSETS
Concession rights
Property, plant and equipment - net
Other non-current assets
780,116,428
P
3,745,120,823 (
36,388,286,135
P
373,252,005
P
36,761,538,140
16,742,320,130 (
P
21,502,997,182
P
13,512,692,982
P
35,015,690,164
-2-
June 30, 2014
Historical Balances
Notes
December 31, 2013
Pro-forma
Adjustments
Pro-forma Balances
Pro-forma
Adjustments
Historical Balances
Pro-forma Balances
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Interest-bearing loans and borrowings
Trade and other payables
Other current liabilities
P
9
8
9
Total Non-current Liabilities
(
Non-controlling interest
Total Equity
P
201,595,251
P
14,958,103,410
3,343,161,502
2,138,451,307
201,595,251
20,439,716,219
7,815,237,646
-
P
2,432,443,752
2,024,476,795
3,358,317,099
P
11,293,182,882
277,066,320
-
P
11,570,249,202
13,725,626,634
2,301,543,115
3,358,317,099
19,385,486,848
5,015,838,921
119,951,352
-
5,015,838,921
119,951,352
5,032,932,033
113,817,267
-
5,032,932,033
113,817,267
5,135,790,273
-
5,135,790,273
5,146,749,300
-
5,146,749,300
25,575,506,492
12,961,986,946
201,595,251
1,649,426,127
4,207,276,193
36,064,872 )
3,259,508,412
Total equity attributable to
shareholders of the Parent Company
TOTAL LIABILITIES AND EQUITY
-
25,373,911,241
Total Liabilities
EQUITY
Equity attributable to shareholders
of the parent company:
Capital stock
Additional paid-in capital
Revaluation reserves
Retained earnings
P
20,238,120,968
Total Current Liabilities
NON-CURRENT LIABILITIES
Interest-bearing loans and borrowings
Other non-current liabilities
14,958,103,410
3,141,566,251
2,138,451,307
102,994,053
1,649,426,127
4,207,276,193
36,064,872 )
3,362,502,465
9,080,145,860
102,994,053
9,183,139,913
8,541,010,236
1,934,229,034
68,662,701
2,002,891,735
11,014,374,894
171,656,754
11,186,031,648
36,388,286,135
-
P
(
373,252,005
P
36,761,538,140
See Notes to Pro-forma Consolidated Financial Information.
11,570,249,202
1,649,426,127
4,207,276,193
36,064,872 )
2,720,372,788
(
P
8,214,746
1,649,426,127
4,207,276,193
36,064,872 )
2,728,587,534
8,214,746
8,549,224,982
-
1,934,229,034
1,934,229,034
8,541,010,236
1,942,443,780
10,483,454,016
21,502,997,182
-
24,532,236,148
P
(
13,512,692,982
P
35,015,690,164
MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
(A Subsidiary of Citicore Holdings Investment, Inc.)
PRO-FORMA CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND THE YEAR ENDED DECEMBER 31, 2013
(UNAUDITED)
(Amounts in Philippine Pesos)
June 30, 2014
Historical Balances
Notes
REVENUES
10
DIRECT COSTS
11
P
5,055,311,501
December 31, 2013
Pro-forma
Adjustments
P
262,705,935
Pro-forma Balances
P
Pro-forma
Adjustments
Historical Balances
5,318,017,436
P
10,880,437,252
P
Pro-forma Balances
-
P
10,880,437,252
4,172,866,058
77,279,450
4,250,145,508
9,099,307,940
-
9,099,307,940
GROSS PROFIT
882,445,443
185,426,485
1,067,871,928
1,781,129,312
-
1,781,129,312
OTHER OPERATING EXPENSES
179,374,015
10,380,117
189,754,132
338,337,999
3,221,904
OPERATING PROFIT
703,071,428
175,046,368
878,117,796
1,442,791,313 (
3,221,904 )
OTHER INCOME (CHARGES)
Finance costs
Others - net
(
204,475,859 )
79,714,757 (
1,355,860 (
15,857,549 )
203,119,999 )
63,857,208
(
124,761,102 ) (
14,501,689 ) (
139,262,791 )
12
PROFIT BEFORE TAX
578,310,326
40,919,876 (
TAX EXPENSE
NET PROFIT
4,642,503 )
537,390,450
165,187,182
-
OTHER COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME
160,544,679
P
-
537,390,450
P
P
421,151,138 ) (
505,937,566
1,439,569,409
1,523,568 ) (
15,857,547
422,674,706 )
521,795,113
84,786,428
14,333,979
99,120,407
738,855,005
1,527,577,741
11,112,075
1,538,689,816
36,277,373
131,944,316
4,642,503
136,586,819
702,577,632
1,395,633,425
6,469,572
1,402,102,997
-
165,187,182
(
341,559,903
(
702,577,632
26,238,666 )
P
1,369,394,759
-
P
(
6,469,572
26,238,666 )
P
1,375,864,331
-2-
June 30, 2014
Historical Balances
Note
Net Profit Attributable To:
Shareholders of the parent company
Non-controlling interest
Earnings per Share
Basic and diluted
Pro-forma
Adjustments
Historical Balances
Pro-forma Balances
539,135,624
1,745,174 )
P
94,779,307
70,407,875
P
633,914,931
68,662,701
P
1,395,633,425
P
(
8,214,746
P
1,745,174 ) (
1,403,848,171
1,745,174 )
P
537,390,450
P
165,187,182
P
702,577,632
P
1,395,633,425
6,469,572
1,402,102,997
P
539,135,624
1,745,174 )
P
94,779,307
70,407,875
P
633,914,931
68,662,701
P
1,369,394,759
P
(
8,214,746
P
1,745,174 ) (
1,377,609,505
1,745,174 )
P
537,390,450
P
165,187,182
P
702,577,632
P
1,369,394,759
P
6,469,572
P
1,375,864,331
P
0.33
P
0.05
P
0.38
P
1.13
P
0.02
P
1.15
(
13
Pro-forma Balances
P
(
Total Comprehensive Income Attributable To:
Shareholders of the parent company
Non-controlling interest
December 31, 2013
Pro-forma
Adjustments
See Notes to Pro-forma Consolidated Financial Information.
P
P
MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
(A Subsidiary of Citicore Holdings Investment, Inc.)
PRO-FORMA CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND YEAR ENDED DECEMBER 31, 2013
(UNAUDITED)
(Amounts in Philippine Pesos)
June 30, 2014
Pro-forma
Adjustments
Historical Balances
CAPITAL STOCK
Balance at beginning of period
Issuances during the period
Stock dividends distributed
P
Balance at end of period
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period
Issuances during the period
Balance at end of period
REVALUATION RESERVES
Balance at beginning of period
Remeasurement of post-employment
defined benefit plan, net of tax
Balance at end of period
RETAINED EARNINGS
Balance at beginning of period
Net profit for the period
Stock dividends declared
Balance at end of period
Total Equity Attributable to
Shareholders of the Parent Company
1,649,426,127
-
-
P
Historical Balances
1,649,426,127
-
P
1,114,100,003
154,689,323
380,636,801
P
Pro-forma Balances
-
P
1,114,100,003
154,689,323
380,636,801
1,649,426,127
-
1,649,426,127
1,649,426,127
-
1,649,426,127
4,207,276,193
-
-
4,207,276,193
-
1,961,729,696
2,245,546,497
-
1,961,729,696
2,245,546,497
4,207,276,193
-
4,207,276,193
4,207,276,193
-
4,207,276,193
(
36,064,872 )
-
(
P
Pro-forma Balances
December 31, 2013
Pro-forma
Adjustments
-
(
36,064,872 )
2,720,372,788
539,135,624
-
36,064,872 )
-
-
(
8,214,746
94,779,307
-
36,064,872 )
2,728,587,534
633,914,931
-
(
9,826,206 )
-
(
9,826,206 )
(
26,238,666 )
-
(
26,238,666 )
(
36,064,872 )
-
(
36,064,872 )
-
(
1,705,376,164
1,395,633,425
380,636,801 )
(
1,705,376,164
1,403,848,171
380,636,801 )
8,214,746
-
3,259,508,412
102,994,053
3,362,502,465
2,720,372,788
8,214,746
2,728,587,534
9,080,145,860
102,994,053
9,183,139,913
8,541,010,236
8,214,746
8,549,224,982
-2-
June 30, 2014
Historical Balances
NON-CONTROLLING INTEREST
Balance at beginning of period
Issuance during the period
Total comprehensive profit (loss)
for the period
1,935,974,208 (
(
TOTAL EQUITY
1,934,229,034
P
11,014,374,894
Pro-forma Balances
1,934,229,034
1,935,974,208 )
1,745,174 )
Balance at end of period
December 31, 2013
Pro-forma
Adjustments
P
1,934,229,034
-
-
70,407,875
68,662,701
-
68,662,701
2,002,891,735
-
171,656,754
P
11,186,031,648
See Notes to Pro-forma Consolidated Financial Information.
Pro-forma
Adjustments
Historical Balances
P
8,541,010,236
Pro-forma Balances
1,935,974,208
(
1,935,974,208
1,745,174 ) (
1,745,174 )
1,934,229,034
P
1,942,443,780
1,934,229,034
P
10,483,454,016
MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
(A Subsidiary of Citicore Holdings Investment, Inc.)
PRO-FORMA CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND YEAR ENDED DECEMBER 31, 2013
(UNAUDITED)
(Amounts in Philippine Pesos)
June 30, 2014
Historical Balances
Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments for:
Depreciation and amortization
Finance costs
Finance income
Gain on disposals of property, plant and equipment
Equity in net losses of associates
Operating profit before working capital changes
Decrease (increase) in trade and other receivables
Increase in costs in excess of billings
on uncompleted contracts
Decrease (increase) in other current assets
Increase in other non-current assets
Increase (decrease) in trade and other payables
Increasse (decrease) in other liabilities
Cash generated from (used in) operations
Cash paid for income taxes
P
6
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of financial assets at fair value
through profit or loss (FVTPL)
AcquisitionS of FVTPL
Payment for concession rights
Additional investments in associates
Acquisitions of property, plant and equipment
and intangible assets
Interest received
Proceeds from sale of property, plant and equipment
Net Cash Used in Investing Activities
Balance carried forward
P
(
1,754,910,008
(
64,383,392 )
(
678,266,819 )
31,322,185
42,503,243 )
1,114,406,162
1,213,731,708 )
1,153,971,555 )
5,543,839 (
1,914,530,740
11,087,678 ) (
760,559,185
5,543,839 )
(
1,148,427,716 )
1,903,443,062
755,015,346
(
(
(
19,764,101,943
18,595,003,406 ) (
14,759,092,910 )
580,889,996 )
3,000,000,000 )
14,547,345,731
10,256,978 )
-
(
-
245,732,983
204,475,859
49,203,289 )
20,414,354 )
502,236
959,403,761
365,924,723
438,174,223 )
32,432,334 (
56,315,669
(
14,520,310,589 )
( P
15,668,738,305 )
P
(
(
(
19,764,101,943
21,595,003,406 )
211,747,179 )
580,889,996 )
Pro-forma
Adjustments
Historical Balances
738,855,007
678,266,819 )
1,723,587,823 )
42,503,242 )
1,178,789,553 (
1,213,731,708 )
(
(
(
(
7
160,544,681
245,732,983
206,156,323
36,382,066 )
20,414,354 )
502,236
1,134,450,129
414,882,479
(
Net Cash From (Used in) Operating Activities
P
Pro-forma Balances
1,680,464
12,821,223 (
(
175,046,368
48,957,756
(
(
6
578,310,326
December 31, 2013
Pro-forma
Adjustments
P
(
(
(
(
(
(
(
(
(
(
1,527,577,741
P
Pro-forma Balance
11,112,075
520,620,448
421,151,138
459,041,037 )
19,412,623 )
2,726,560
1,993,622,227
623,328,896 ) (
-
P
1,538,689,816
Pro-forma Balances
P
1,538,689,816
11,112,075
51,260,999 ) (
520,620,448
421,151,138
459,041,037 ) (
19,412,623 ) (
2,726,560
2,004,734,302
674,589,895 ) (
520,620,448
421,151,138
459,041,037 )
19,412,623 )
2,726,560
2,004,734,302
674,589,896 )
1,184,430,591 )
1,219,278,243 ) (
42,290,772 )
22,523,442 )
1,424,882,848
(
1,731,480,279 ) (
(
277,066,320
-
1,184,430,591 ) (
2,950,758,522 ) (
42,290,772 ) (
254,542,878
1,424,882,848
1,184,430,591 )
2,950,758,522 )
42,290,772 )
254,542,878
1,424,882,848
326,653,131 (
26,709,672 )
1,494,562,883 ) (
(
1,167,909,752 ) (
26,709,672 ) (
1,167,909,753 )
26,709,672 )
299,943,459 (
1,494,562,883 ) (
1,194,619,424 ) (
1,194,619,425 )
1,718,263,759
5,538,315,799 )
(
53,500,000 )
3,000,000,000
(
14,759,092,910 ) (
(
4,718,263,759
5,538,315,799 ) (
14,759,092,910 ) (
53,500,000 ) (
4,718,263,759
5,538,315,799 )
14,759,092,910 )
53,500,000 )
(
1,027,690,838 ) (
436,032,593
32,223,044
1,027,690,838 )
436,032,593
32,223,044
(
(
(
438,174,223 )
22,175,356
56,315,669
(
1,027,690,838 )
436,032,593
32,223,044
11,537,088,753 (
2,983,221,836 )
(
4,432,987,241 ) (
11,759,092,910 ) (
16,192,080,151 ) (
16,192,080,151 )
13,440,531,815 ( P
2,228,206,490 )
( P
4,133,043,782 ) ( P
13,253,655,794 ) ( P
17,386,699,576 ) ( P
17,386,699,576 )
-
-2-
June 30, 2014
Historical Balances
Balance brought forward
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from interest-bearing loans and borrowings
Repayment of interest-bearing loans and borrowings
Proceeds from investment of non-controlling interest
Interest paid
Repayments of amounts due to related parties
Proceeds from issuance of shares of stock
( P
(
(
(
Net Cash From Financing Activities
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
(
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS
AT END OF PERIOD
P
December 31, 2013
Pro-forma
Adjustments
15,668,738,305 )
P
Pro-forma Balances
13,440,531,815 ( P
2,228,206,490 )
15,001,357,735 (
2,492,791,189 )
1,935,974,208 (
254,798,741 ) (
16,921,054 )
-
11,293,182,882 )
(
1,935,974,208 )
1,680,464 ) (
(
-
3,708,174,853
2,492,791,189 )
256,479,205 )
16,921,054 )
-
14,172,820,959 (
13,230,837,554 )
Historical Balances
( P
(
(
(
941,983,405
17,386,699,576 ) ( P
17,386,699,576 )
9,488,566,463
5,293,260,238 )
383,179,398 )
12,584,102 )
2,400,235,820
11,293,182,882
(
1,935,974,208
(
(
-
20,781,749,345
5,293,260,238 ) (
1,935,974,208
383,179,398 ) (
12,584,102 ) (
2,400,235,820
20,781,749,345
5,293,260,238 )
1,935,974,208
383,179,398 )
12,584,102 )
2,400,235,820
6,199,778,545
13,229,157,090
19,428,935,635
19,428,935,635
2,042,236,059
2,042,236,059
209,299,011
209,299,011
1,286,223,085 )
2,066,734,763 (
2,276,033,774 (
24,498,704 )
2,251,535,070
209,299,011
185,195,557
P
965,311,985
P
Supplemental Information on Noncash Financing Activity:
In 2013, the Parent Company declared and distributed stock dividends amounting to P380.6 million.
See Notes to Pro-forma Consolidated Financial Information.
Pro-forma Balances
13,253,655,794 ) ( P
209,694,261 (
P
Pro-forma Balance
4,133,043,782 ) ( P
1,495,917,346 )
780,116,428
Pro-forma
Adjustments
2,276,033,774 ( P
24,498,704 )
-
24,498,704 )
P
2,251,535,070
P
2,251,535,070
MEGAWIDE CONSTRUCTION CORPORATION AND A SUBSIDIARY
NOTES TO PRO-FORMA CONSOLIDATED FINANCIAL INFORMATION
JUNE 30, 2014 AND DECEMBER 31, 2013
(UNAUDITED)
(Amounts in Philippine Pesos)
1.
GENERAL DESCRIPTION OF THE PRO-FORMA FINANCIAL
INFORMATION
The accompanying pro-forma consolidated financial information for the periods
ended June 30, 2014 and December 31, 2013 is presented for Megawide Construction
Corporation (the Parent Company) and GMR-Megawide Cebu Airport Corporation
(GMCAC or Subsidiary), collectively referred herein as the Group. The pro-forma
consolidated financial information has been assembled by reflecting pro-forma
adjustments to give effect to the transactions described below (see Note 1.2) to the
historical financial statements. The historical financial statements are the reviewed
historical consolidated financial statements of the Group as of and for the period
ended June 30, 2014 and the audited historical financial statements of the Parent
Company as of and for the year ended December 31, 2013. The pro-forma
adjustments, which are based upon management’s assumptions described in Note 3,
are derived mainly from the historical figures presented in the reviewed financial
statements of GMCAC which was consolidated with the Parent Company as of
June 30, 2014, and the projected financial information of GMCAC from July 1, 2014
to December 31, 2014.
The pro-forma financial information of the Group as of and for the six months ended
June 30, 2014 and for the year ended December 31, 2013 were authorized for issue by
the Board of Directors (BOD) on October 28, 2014.
1.1 Objective of the Pro-Forma Consolidated Financial Information
The objective of this pro-forma consolidated financial information is to show the
acquisition of the Parent Company of 60% equity ownership interest to GMCAC as
discussed in Note 1.2. However, the pro-forma consolidated financial information is
not necessarily indicative of the results of operations or related effects on the financial
position that would have been attained had the above mentioned transactions actually
occurred earlier.
1.2 Transactions that Give Rise to Pro-Forma Adjustments
The pro-forma consolidated financial information reflects the pro-forma adjustments
that present the significant effects of the following transactions:
(a) Acquisition of GMCAC shares of stock;
(b) Execution of a Build-Operate-Transfer Agreement (BOT Agreement) with the
Philippine Government at Mactan-Cebu International Airport Authority and
Payment of Bid Premium;
(c) Availment of a bank loan from a local bank; and,
(d) Turnover of the operation of Mactan-Cebu International Airport.
-2-
In 2013, the Parent Company, together with GMR Infrastructure Limited (GMR), a
company incorporated under the laws of India, formed a consortium to bid to one of
the public-private partnership projects of the government which is to construct and
operate the Mactan-Cebu International Airport Project (the Project). The parties
incorporated a Special Purpose Company (SPC) in order to execute, undertake, and
implement the Project in accordance with the concession agreements. The SPC was
incorporated as GMR-Megawide Cebu Airport Corporation on January 13, 2014.
GMCAC’s registered address, which is also its principal place of business, is located at
Mactan Cebu Airport Road, Lapu-Lapu City.
In 2014, the Parent Company acquired 15.0 million shares of stock of GMCAC which
represent 60% of GMCAC’s issued and outstanding capital stock, giving the Parent
Company control over the financial and operating decisions on GMCAC.
Accordingly, the Parent Company’s equity ownership interest is accounted for as an
investment in a subsidiary.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies that have been used in the preparation of these
pro-forma consolidated financial information are summarized below. These policies
have been consistently applied to all the periods presented, unless otherwise stated.
2.1
Basis of Preparation of Pro-forma Consolidated Financial Information
The pro-forma consolidated financial information of the Megawide Construction
Corporation and a subsidiary (the Group) has been prepared in accordance with
Philippine Financial Reporting Standards (PFRS). PFRS are adopted by the
Financial Reporting Standards Council from the pronouncements issued by the
International Accounting Standards Board.
The consolidated pro-forma financial information has been prepared using the
measurement bases specified by PFRS for each type of asset, liability, income and
expense. The measurement bases are more fully described in the accounting policies
below and in the succeeding pages.
The pro-forma consolidated financial information is prepared based on management’s
assumptions as described in Note 3.
2.2
Financial Assets
Financial assets are recognized when the Group becomes a party to the contractual
terms of the financial instrument. Financial assets other than those designated and
effective as hedging instruments are classified into the following categories: financial
assets at fair value through profit or loss (FVTPL), loans and receivables, held-tomaturity investments and available-for-sale financial assets. Financial assets are
assigned to the different categories by management on initial recognition, depending
on the purpose for which the investments were acquired.
-3Regular purchases and sales of financial assets are recognized on their trade date. All
financial assets that are not classified as at FVTPL are initially recognized at fair
value plus any directly attributable transaction costs. Financial assets carried at
FVTPL are initially recorded at fair value and transaction costs related to it are
recognized in profit or loss.
The Group’s financial assets currently include FVTPL and loans and receivables as
described in more detail as follows:
(a)
Financial Assets at FVTPL
This category includes financial assets that are either classified as held for trading or
that meets certain conditions and are designated by the entity to be carried at fair
value through profit or loss upon initial recognition. All derivatives fall into this
category, except for those designated and effective as hedging instruments. Assets in
this category are classified as current if they are either held for trading or are
expected to be realized within 12 months from the end of the reporting period.
Financial assets at FVTPL are measured at fair value, and changes therein are recognized
in profit or loss. Financial assets (except derivatives and financial instruments originally
designated as financial assets at FVTPL) may be reclassified out of financial assets at
FVTPL category if they are no longer held for the purpose of being sold or repurchased
in the near term.
(b)
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They arise when the Group
provides money, goods or services directly to a debtor with no intention of trading
the receivables. They are included in current assets, except for maturities greater
than 12 months after the reporting period which are classified as non-current assets.
The Group’s financial assets categorized as loans and receivables are presented as
Cash and Cash Equivalents, Trade and Other Receivables and Refundable security
and bond deposits (presented under Other Current Assets) in the statement of
financial position. Cash and cash equivalents includes cash on hand, demand
deposits and short-term, highly liquid investments with original maturities of three
months or less, readily convertible to known amounts of cash and which are subject
to insignificant risk of changes in value.
Loans and receivables are subsequently measured at amortized cost using the
effective interest method, less impairment loss, if any. Impairment loss is provided
when there is objective evidence that the Group will not be able to collect all
amounts due to it in accordance with the original terms of the receivables. The
amount of the impairment loss is determined as the difference between the assets’
carrying amount and the present value of estimated future cash flows (excluding
future credit losses that have not been incurred), discounted at the financial asset’s
original effective interest rate or current effective interest rate determined under the
contract if the loan has a variable interest rate. All income and expenses, including
impairment losses, relating to financial assets that are recognized in profit or loss are
presented as part of Finance Income (presented as part of Other Income) or Finance
Costs in the pro-forma consolidated statement of comprehensive income.
-4For investments that are actively traded in organized financial markets, fair value is
determined by reference to exchange-quoted market bid prices at the close of
business on the reporting period. For investments where there is no quoted market
price, fair value is determined by reference to the current market value of another
instrument which is substantially the same or is calculated based on the expected
cash flows of the underlying net asset base of the investment.
Non-compounding interest and other cash flows resulting from holding financial
assets are recognized in profit or loss when earned, regardless of how the related
carrying amount of the financial assets is measured.
The financial assets are derecognized when the contractual rights to receive cash
flows from the financial instruments expire, or when the financial assets and all
substantial risks and rewards of ownership have been transferred to another party.
2.3
Construction Materials
Construction materials are valued at the lower of cost and net realizable value. Cost is
determined using the first-in, first-out method. The cost of construction materials
includes all costs directly attributable to acquisition such as the purchase price, import
duties and other taxes that are not subsequently recoverable from taxing authorities.
The net realizable value of construction materials is the current replacement cost.
2.4
Other Assets
Other assets pertain to other resources controlled by the Group as a result of past
events. They are recognized in the financial statements when it is probable that the
future economic benefits will flow to the entity and the asset has a cost or value that
can be measured reliably.
Other recognized assets of similar nature, where future economic benefits are
expected to flow to the Group beyond one year after the end of the reporting period,
are classified as non-current assets.
2.5
Investment in an Associate
Associate is an entity over which the Group is able to exert significant influence but
which is neither a subsidiary nor interest in a joint venture. Investment in an associate
is initially recognized at cost and subsequently accounted for using the equity method.
It is presented as part of Other Non-current Assets in the pro-forma consolidated
financial information.
Acquired investment in an associate is also subject to purchase accounting. However,
any goodwill or fair value adjustment attributable to the share in the associate is
included in the amount recognized as investment in associate. Goodwill is the excess
of the acquisition cost over the fair value of the Group’s share of the identifiable net
assets of the investee at the date of acquisition.
All subsequent changes to the ownership interest in the equity of the associate are
recognized in the Group’s carrying amount of the investments. Changes resulting
from the profit or loss generated by the associates are credited or charged against the
Equity in net earning (loss) of an associate account (presented as part of Other
Income) in profit or loss.
-5-
Changes resulting from other comprehensive income of the associate or items
recognized directly in the associate’s equity are recognized in other comprehensive
income or equity of the Group, as applicable. However, when the Group’s share of
losses in an associate equals or exceeds its interest in the associate, including any other
unsecured receivables, the Group does not recognize further losses, unless it has
incurred obligations or made payments on behalf of the associate. If the associate
subsequently reports profits, the investor resumes recognizing its share of those
profits only after its share of the profits exceeds the accumulated share of losses that
has previously not been recognized.
Distributions received from the associates are accounted for as a reduction of the
carrying value of the investment.
2.6
Acquisition of Asset
Acquisition of interest in an entity that holds investment property which does not
constitute a business is accounted for as an asset acquisition. A business is an
integrated set of activities and assets that is capable of being conducted and managed
for the purpose of providing a return in the form of dividends, lower costs or other
economic benefits directly to investors or other owners, members and participant.
Under the asset purchased accounting, the purchase costs is allocated to identifiable
assets and liabilities based on relative fair values of individual items, goodwill or gain
on bargain purchase is not recognized and transaction costs are capitalized.
2.7
Property, Plant and Equipment
Property, plant and equipment, except land and construction in progress, are carried at
acquisition cost or construction cost less subsequent depreciation and any impairment
losses. Land held for use in operations or administration is stated at cost less any
impairment losses.
The cost of an asset comprises its purchase price and directly attributable costs of
bringing the asset to working condition for its intended use. Expenditures for
additions, major improvements and renewals are capitalized; expenditures for repairs
and maintenance are charged to expense as incurred.
Depreciation is computed on straight-line basis over the estimated useful lives of the
assets as follows:
Building
Precast factory
Transportation equipment
Precast and construction equipment
Office furniture, fixtures and equipment
25 years
25 years
5 years
3-10 years
3 years
Fully depreciated assets are retained in the accounts until these are no longer in use
and no further charge in depreciation is made in respect of these assets.
Construction in progress represents properties under construction and is stated at cost.
This includes cost of construction of the Group’s building, batching plant and precast
factory. The account is not depreciated until such time that the assets are completed
and available for use.
-6Transportation equipment held under finance lease agreements (see Note 2.15) are
depreciated over their expected useful lives (determined by reference to comparable
owned assets) or over the term of lease, if shorter.
An asset’s carrying amount is written down immediately to its recoverable amount if
the asset’s carrying amount is greater than its estimated recoverable amount (see
Note 2.17).
The residual values and estimated useful lives of property, plant and equipment are
reviewed, and adjusted if appropriate, at the end of each reporting period.
An item of property, plant and equipment is derecognized upon disposal or when no
future economic benefits are expected to arise from the continued use of the asset.
Any gain or loss arising on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the item) is included in
profit or loss in the year the item is derecognized.
2.8
Intangible Assets
Intangible assets include acquired computer software licenses (shown as part of
Other Non-current Assets) and concessionaire rights, which are accounted for
under the cost model. The cost of the asset is the amount of cash or cash
equivalents paid or the fair value of the other considerations given up to acquire an
asset at the time of its acquisition or production. Capitalized costs are amortized
on a straight-line basis over the estimated useful lives of five years as the lives of
these intangible assets are considered finite. In addition, intangible assets are
subject to impairment testing as described in Note 2.17.
Acquired computer software licenses are capitalized on the basis of the costs
incurred to acquire and install the specific software.
Costs associated with maintaining computer software and those costs associated
with research activities are recognized as expense in profit or loss as incurred.
Costs that are directly attributable to the development phase of new customized
software for information technology are recognized as intangible assets if, and only
if, the Group can demonstrate all of the following recognition requirements:
(i)
technical feasibility of completing the prospective product for internal use
or sale;
(ii)
the intangible asset will generate probable economic benefits through
internal use or sale;
(iii)
intention and ability to complete, i.e., availability of sufficient technical,
financial and other resources necessary for completion, and use or sell the
asset; and,
(iv)
ability to measure reliably the expenditure attributable to the intangible
asset during development.
Concessionaire rights pertains to the bid premium and related expenses incurred to
obtain the right granted by the Philippine Government to the Group to rehabilitate
and operate the Airport, as expressly stated in the build-operate-transfer agreement
(see Notes 1.2 and 7).
-7-
An intangible asset is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. The gain or loss arising from
derecognition of an intangible asset is determined as the difference between the
net disposal proceeds and carrying value of the asset, and is charged to profit or
loss for the period.
2.9
Financial Liabilities
Financial liabilities, which include interest-bearing loans and borrowings and trade
and other payables [except output value-added tax (VAT) and other taxes payable]
are recognized when the Group becomes a party to the contractual terms of the
instrument. All interest-related charges incurred on a financial liability are
recognized as an expense in profit or loss as part of Finance Costs in the statement
of comprehensive income.
Interest-bearing loans and borrowings are raised for support of funding of operations.
Finance charges, including direct costs, are charged to profit or loss on an accrual basis
using the effective interest method and are added to the carrying amount of the
instrument to the extent that these are not settled in the period in which they arise.
Trade and other payables are initially recognized at their fair value and subsequently
measured at amortized cost, using effective interest method for maturities beyond one
year, less settlement payments.
Obligations under finance lease (included as part of Interest-bearing Loans and
Borrowings) are recognized at amounts equal to the fair value of the leased property
or, if lower, at the present value of minimum lease payments, at the inception of the
lease (see Note 2.14).
Dividend distributions to shareholders are recognized as financial liabilities upon
declaration by the BOD.
Financial liabilities are classified as current liabilities if payment is due to be settled
within one year or less after the end of the reporting period (or in the normal
operating cycle of the business, if longer), or the Group does not have an
unconditional right to defer settlement of the liability for at least twelve months after
end of the reporting period. Otherwise, these are presented as non-current liabilities.
Financial liabilities are derecognized from the statement of financial position only
when the obligations are extinguished either through discharge, cancellation or
expiration. The difference between the carrying amount of the financial liability
derecognized and the consideration paid or payable is recognized in profit or loss.
2.10
Offsetting Financial Instruments
Financial assets and liabilities are offset and the resulting net amount is reported in the
statement of financial position when there is a legally enforceable right to set off the
recognized amounts and there is an intention to settle on a net basis, or realize the
asset and settle the liability simultaneously.
-82.11
Provisions and Contingencies
Provisions are recognized when present obligations will probably lead to an outflow of
economic resources and they can be estimated reliably even if the timing or amount of
the outflow may still be uncertain. A present obligation arises from the presence of a
legal or constructive commitment that has resulted from past events.
Provisions are measured at the estimated expenditure required to settle the present
obligation, based on the most reliable evidence available at the end of reporting period,
including the risks and uncertainties associated with the present obligation. Where
there are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as a whole.
When the time value of money is material, long-term provisions are discounted to
their present values using pretax rate that reflects market assessments and the risks
specific to the obligation. The increase in the provision due to passage of time is
recognized as interest expense. Provisions are reviewed at the end of each reporting
period and adjusted to reflect the current best estimate.
In those cases where the possible outflow of economic resource as a result of present
obligations is considered improbable or remote, or the amount to be provided for
cannot be measured reliably, no liability is recognized in the financial statements.
Similarly, possible inflows of economic benefits to the Group that do not yet meet the
recognition criteria of an asset are considered contingent assets, hence, are not
recognized in the financial statements. On the other hand, any reimbursement that the
Group can be virtually certain to collect from a third party with respect to the
obligation is recognized as a separate asset not exceeding the amount of the related
provision.
2.12
Construction Revenues and Costs
The Group uses the percentage of completion method to determine the appropriate
amount to recognize as contract revenue and cost in a given period. The stage of
completion is measured through surveys done by the Group’s project engineers in
accordance with terms, conditions and technical specifications stipulated in the
contract. Contract cost is determined based on total estimated costs to complete the
project, as determined by project engineers, taking into consideration the stage of
completion of the projects.
When the outcome of a construction contract cannot be estimated reliably, contract
revenue is recognized only to the extent of contract costs incurred that are likely to be
recovered.
When the outcome of a construction contract can be estimated reliably and it is
probable that the contract will be profitable, contract revenue is recognized over the
period of the contract based on the percentage of completion. When it is probable
that total contract costs will exceed total contract revenues, the expected loss is
recognized as an expense immediately.
The Group presents as asset the gross amount due from customers for contract works
of all contracts in progress for which costs incurred plus recognized profits
(less recognized losses) exceed progress billings under current assets as Costs in
Excess of Billings on Uncompleted Contracts. Progress billings not yet paid by
customers and retention are included in Trade and Other Receivables account in the
pro-forma consolidated statement of financial position.
-9-
The Group presents as a liability the gross amount due to customers for contract work
for all contracts in progress for which progress billings exceed costs incurred plus
recognized profits (less recognized losses) under current liabilities as Billings in Excess
of Costs on Uncompleted Contracts.
Cash received from customers which will be applied to subsequent progress billings
are presented as Advances from Customers account under the current liabilities
section of the statement of financial position.
2.13
Revenue and Expense Recognition
Revenue comprises revenue from rendering of services measured by reference to the
fair value of consideration received or receivable by the Group for services rendered,
excluding VAT.
Revenue is recognized to the extent that the revenue can be reliably measured; it is
probable that the economic benefits will flow to the Group and the costs incurred or
to be incurred can be measured reliably. In addition, the following specific recognition
criteria must also be met before revenue is recognized:
(a) Contract revenues – Revenue from construction of buildings is recognized using the
percentage of completion method based on the physical completion of the project (see
Note 2.12).
(b) Aeronautical and non-aeronautical revenues – Revenue from operating the airport, such
as, passenger service charge, landing, take-off and parking fees of aircrafts, is
recognized upon rendering of the service which the period from landing up to
take-offs of aircrafts.
(c) Interest income – Income is recognized as the interest accrues taking into account the
effective yield on the asset.
Costs and expenses are recognized in profit or loss upon utilization of goods or
services or at the date they are incurred. All finance costs are reported in profit or loss
on an accrual basis, except for capitalized borrowing costs which are included as part
of the cost of the related qualifying asset (see Note 2.18).
2.14
Leases
The Group accounts for its leases as follows:
(a)
Group as Lessee
Leases, which transfer to the Group substantially all risks and benefits incidental to
ownership of the leased item, are classified as finance leases and are recognized as
assets and liabilities in the statement of financial position at the inception of the lease
at amounts equal to the fair value of the leased property or, if lower, at the present
value of minimum lease payments. Lease payments are apportioned between the
finance costs and reduction of the lease liability so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance costs are recognized in
profit or loss. Capitalized leased assets are depreciated over the shorter of the
estimated useful life of the asset or the lease term.
- 10 For sale and leaseback transactions resulting in a finance lease, any excess of sales
proceeds over the carrying amount of the asset is not immediately recognized as
income by the Group (as seller-lessee) but deferred and amortized over the lease term.
However, if the carrying amount of the asset exceeds the sales proceeds, the loss is
immediately charged to profit or loss in the statement of comprehensive income.
Leases, which do not transfer to the Group substantially all the risks and benefits of
ownership of the asset, are classified as operating leases. Operating lease payments
(net of any incentive received from lessor) are recognized as expense in the statement
of comprehensive income on a straight-line basis over the lease term. Associated
costs, such as maintenance and insurance, are expensed as incurred.
(b)
Group as Lessor
Leases which do not transfer to the lessee substantially all the risks and benefits of
ownership of the asset are classified as operating leases. Lease income from operating
leases is recognized in profit or loss on a straight-line basis over the lease term.
The Group determines whether an arrangement is, or contains, a lease based on the
substance of the arrangement. It makes an assessment of whether the fulfilment of
the arrangement is dependent on the use of a specific asset or assets and the
arrangement conveys a right to use the asset.
2.15
Foreign Currency Transactions and Translation
The accounting records of the Group are maintained in Philippine pesos. Foreign
currency transactions during the period are translated into the functional currency at
exchange rates which approximate those prevailing on transaction dates.
Foreign currency gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognized in the statement of comprehensive
income as part of profit or loss from operations.
2.16
Impairment of Non-financial Assets
The Group’s investment in an associate, property, plant and equipment, intangible
assets and other non-financial assets are subject to impairment testing. All
non-financial assets are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
For purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (cash-generating units). As a result,
assets are tested for impairment either individually or at the cash-generating unit
level.
- 11 Impairment loss is recognized for the amount by which the asset’s or cashgenerating unit’s carrying amount exceeds its recoverable amount which is the higher
of its fair value less costs to sell and its value in use. In determining value in use,
management estimates the expected future cash flows from each cash-generating
unit and determines the suitable interest rate in order to calculate the present value
of those cash flows. The data used for impairment testing procedures are directly
linked to the Group’s latest approved budget, adjusted as necessary to exclude the
effects of asset enhancements. Discount factors are determined individually for each
cash-generating unit and reflect management’s assessment of respective risk profiles,
such as market and asset-specific risk factors.
All assets are subsequently reassessed for indications that an impairment loss
previously recognized may no longer exist and the carrying amount of the asset is
adjusted to the recoverable amount resulting in the reversal of the impairment loss.
2.17
Employee Benefits
A defined benefit plan is a post-employment plan that defines an amount of
post-employment benefit that an employee will receive on retirement, usually
dependent on one or more factors such as age, years of service and salary. The legal
obligation for any benefits from this kind of post-employment plan remains with the
Group, even if plan assets for funding the defined benefit plan have been acquired.
Plan assets may include assets specifically designated to a long-term benefit fund, as
well as qualifying insurance policies. The Group’s post-employment defined benefit
plan covers all regular full-time employees. The pension plan is tax-qualified, noncontributory and administered by a trustee.
The liability recognized in the pro-forma consolidated statement of financial position
for a defined benefit plan is the present value of the defined benefit obligation (DBO)
at the end of the reporting period less the fair value of plan assets. The defined
benefit obligation is calculated annually by independent actuaries using the projected
unit credit method. The present value of the DBO is determined by discounting the
estimated future cash outflows using a discount rate derived from the interest rates of
a zero coupon government bonds as published by Philippine Dealing and Exchange
Corporation, that are denominated in the currency in which the benefits will be paid
and that have terms to maturity approximating to the terms of the related postemployment liability.
Remeasurements, comprising of actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions and the return on plan assets
(excluding amount included in net interest) are reflected immediately in the statement
of financial position with a charge or credit recognized in other comprehensive income
in the period in which they arise. Net interest is calculated by applying the discount
rate at the beginning of the period, taking account of any changes in the net defined
benefit liability or asset during the period as a result of contributions and benefit
payments. Net interest is reported as part of Finance Costs or Finance Income
account in the pro-forma consolidated statement of comprehensive income.
Past-service costs are recognized immediately in profit or loss in the period of a plan
amendment.
- 12 2.18
Borrowing Costs
Borrowing costs are recognized as expenses in the period in which they are incurred,
except to the extent that they are capitalized. Borrowing costs that are directly
attributable to the acquisition or construction of a qualifying asset (i.e., an asset that
takes a substantial period of time to get ready for its intended use or sale) are
capitalized as part of cost of such asset. The capitalization of borrowing costs
commences when expenditures for the asset and borrowing costs are being incurred
and activities that are necessary to prepare the asset for its intended use or sale are in
progress. Capitalization ceases when substantially all such activities are complete.
Investment income earned on the temporary investment of specific borrowings
pending their expenditure on qualifying assets is deducted from the borrowing costs
eligible for capitalization.
2.19
Income Taxes
Tax expense recognized in profit or loss comprises the sum of deferred tax and
current tax not recognized in other comprehensive income or directly in equity, if any.
Current tax assets or liabilities comprise those claims from, or obligations to, fiscal
authorities relating to the current or prior reporting period, that are uncollected or
unpaid at the end of the reporting period. They are calculated according to the tax
rates and tax laws applicable to the fiscal periods to which they relate, based on the
taxable profit for the year. All changes to current tax assets or liabilities are recognized
as a component of tax expense in profit or loss.
Deferred tax is accounted for using the liability method, on temporary differences at
the end of the reporting period between the tax base of assets and liabilities and their
carrying amounts for financial reporting purposes. Under the liability method, with
certain exceptions, deferred tax liabilities are recognized for all taxable temporary
differences and deferred tax assets are recognized for all deductible temporary
differences and the carry-forward of unused tax losses and unused tax credits to the
extent that it is probable that taxable profit will be available against which the
deductible temporary differences can be utilized. Unrecognized deferred tax assets are
reassessed at the end of each reporting period and are recognized to the extent that it
has become probable that future taxable profit will be available to allow such deferred
tax assets to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply in the period when the asset is realized or the liability is settled, provided such
tax rates have been enacted or substantially enacted at the end of each reporting
period.
The carrying amount of deferred tax assets is reviewed at the end of each reporting
period and reduced to the extent that it is probable that sufficient taxable profit will be
available to allow all or part of the deferred tax assets to be utilized.
- 13 The measurement of deferred tax liabilities and assets reflects the tax consequences
that would follow from the manner in which the Group expects, at the end of the
reporting period, to recover or settle the carrying amount of its assets and liabilities.
Most changes in deferred tax assets or liabilities are recognized as a component of tax
expense in profit or loss, except to the extent that it relates to items recognized in
other comprehensive income or directly in equity. In this case, the tax is also
recognized in other comprehensive income or directly in equity, respectively.
Deferred tax assets and deferred tax liabilities are offset if the Group has a legally
enforceable right to set off current tax assets against current tax liabilities and the
deferred taxes relates to the same entity and the same taxable authority.
2.20
Related Party Relationships and Transactions
Related party transactions are transfers of resources, services or obligations between
the Group and its related parties, regardless of whether a price is charged.
Parties are considered to be related if one party has the ability to control the other
party or exercise significant influence over the other party in making financial and
operating decisions. These parties include: (a) individuals owning, directly or indirectly
through one or more intermediaries, control or are controlled by, or under common
control with the Group; (b) associates; (c) individuals owning, directly or indirectly, an
interest in the voting power of the Group that gives them significant influence over
the Group and close members of the family of any such individual; and, (d) the
Group’s funded retirement plan.
In considering each possible related party relationship, attention is directed to the
substance of the relationship and not merely on the legal form.
2.21
Equity
Capital stock represents the nominal value of shares that have been issued.
Additional paid-in capital includes any premium received on the issuance of capital
stock. Any transaction costs associated with the issuance of shares are deducted from
additional paid-in capital, net of any related income tax benefits.
Revaluation reserves pertains to actuarial gains and losses due to remeasurements
of post-employment defined benefit plan.
Retained earnings represent all current and prior period results of operations
as reported in the profit or loss section of the pro-forma consolidated statement of
comprehensive income, reduced by the amounts of any dividends declared.
2.22
Earnings per Share
Basic earnings per share is determined by dividing net profit by the weighted average
number of common shares subscribed and issued during the year after giving
retroactive effect to any stock dividends, stock split or reverse stock split declared in
the current year, if any.
- 14 Diluted earnings per share is computed by adjusting the weighted average number of
ordinary shares outstanding to assume conversion of dilutive potential shares. The
Group does not have dilutive potential shares outstanding as at the end of the
reporting period.
2.23
Events After the End of the Reporting Period
Any post-year-end event that provides additional information about the Group’s
financial position at the end of the reporting period (adjusting event) is reflected in the
financial statements. Post-year-end events that are not adjusting events, if any, are
disclosed when material to the financial statements.
3.
MANAGEMENT ASSUMPTIONS
In preparing the pro-forma consolidated financial information, management assumes
that the actual transaction of GMCAC from January 1, 2014 to June 30, 2014 occurred
on July 1, 2013 and the transactions which are planned to occur subsequent to June 30,
2014 have instead occurred on or subsequent to January 1, 2014. The following
assumptions are the bases for the pro-forma adjustments:
(a) Acquisition of 60% Ownership Interest to GMCAC
•
The acquisition of 60% ownership interest in GMCAC on January 13, 2014
was reflected in the pro-forma consolidated financial information to have
occurred on July 13, 2013. Accordingly, the financial statements of GMCAC,
which primarily consists of cash, advances to and from relate parties, input
value-added tax (VAT), office equipment, incorporating expenses and other
expenses were consolidated in the December 2013 pro-forma consolidated
financial information of the Group.
•
To finance the acquisition or subscription of the 60% equity ownership in
GMCAC, the Parent Company sold in 2014 its P3.0 billion unit investment
trust funds classified as financial assets at FVTPL and recognized a gain on
disposal of P15.5 million. Management assumed that the disposal of the said
financial assets occurred in 2013 and reflected the transaction in the
December 2013 pro-forma consolidated financial information.
•
The investment of GMR on GMCAC amounting to P1,936.0 million was
reflected as non-controlling interest in the December 31, 2013 pro-forma
consolidated statement of financial position.
(b) Execution of BOT Agreement
•
In April 2014, GMCAC executed a BOT agreement with the Philippine
Government, through the Department of Transportation and
Communications (the Grantor) and Mactan-Cebu International Airport
Authority under the Project (see Note 7). Upon receiving the concession
rights to the Project in April 2014, GMCAC paid the bid premium amounting
to P14,404.6 million, net of applicable taxes, to the Grantor. This amount was
capitalized as part of Concession Rights which was reflected in the pro-forma
consolidated financial information to have occurred in 2013.
- 15 •
In relation to the operation of the Project, the Parent Company and GMR will
form an unincorporated joint venture company for the construction of the
airport, which shall enter into Works Construction Contracts with GMCAC to
take up the construction work. In 2014, GMCAC has made unsecured
non-interest bearing cash advances of P51.0 million to the joint venture
company for the working capital requirements. Management assumed that this
transaction occurred in 2013 and was recognized as part of Trade and Other
Receivables in the December 2013 pro-forma consolidated financial
information. It was assumed further that the advances remain outstanding in
the June 2014 pro-forma consolidated financial information.
(c) Availment of a Bank Loan
•
In 2014, an interest-bearing bridge loan totaling to P11,293.2 million was
obtained by GMCAC from a local bank to finance part of the bid premium
paid to the Philippine Government. The loan will mature in April 2015 and is
expected to be repaid from the proceeds of the project financing agreement
acquired through a loan syndication of local and foreign banks and multilateral
financing institutions.
•
Management assumed that the bank loan was obtained in 2013 and no
payment of principal and interest was made as of June 30, 2014 as the loan is
expected to mature in October 2014. Accordingly, the bank loan was reflected
in the June 2014 and December 2013 pro-forma consolidated financial
information. Interest on bank loan from the date of grant was accrued under
Trade and Other Payables and capitalized as part of Concession Rights in the
2014 and 2013 pro-forma consolidated statements of financial position.
(d) Turn-over of the Operation of Terminal 1
On November 1, 2014, GMCAC will take-over the existing operations of
Terminal 1. The turnover was reflected in the pro-forma consolidated financial
information to have occurred on May 1, 2014. The following are the relevant
assumptions made by management relative to revenues and expenses reflected in
the pro-forma financial information for June 2014:
•
All revenue streams and related costs and expenses are driven by the
passenger traffic forecasts (number of passengers). The pro-forma
revenues and operating costs are based on the traffic forecasts provided by
Simat, Helliesen & Eichner, Inc.( SH&E), one of the world’s largest air
transport consultancies. SH&E 2014 forecast is estimated at 110% of the
2013 actual traffic forecast. The revenues of P262.7 million and operating
costs are assumed for only two months from the date of the turn-over of
operation of Terminal 1 to GMCAC.
- 16 The following are the expected sources of revenues at the Mactan Cebu
Airport:
- Aero Revenues: These pertain to passenger service charges of departing
domestic and international passengers;
- Aero-related Revenues: These arise from the airlines’ usage of various
services at the airport and inside the terminal (e.g., boarding bridge
usage, check-in counter charges, aircraft parking fee, ground handling
service fees, etc.); and,
- Non-aero related Revenues: These pertain to commercial revenues which
include revenue from duty free, advertising, retail, lounges, car parking,
etc.
Aero and Aero-related rates are regulated by Department of
Transportation and Communication and are based on the traffic of the
airport. Aero and most of the aero-related charges were based on the
concession agreement or on the existing rates and revenue growth relative
to passenger traffic.
Non-aero revenue streams have been projected as a product of Sales Per
Passenger (SPP). SPP for different non-aero streams were based from the
existing performance and potential upside that can be achieved by
GMCAC upon turnover of the airport operation.
•
Manpower and utility costs are assumed to be the major operational costs
at the airport. The following are the assumptions made on the significant
costs and expenses included in the pro-forma adjustments:
- Employee salaries have been estimated based on the projected cost of
teams that the new management plans to bring in to the airport and on
the existing salaries at the airport employees that the new management
plans to retain.
- Utility costs have been derived by considering the current consumption
of the airport and extrapolating the usage in line with the assets which
possession rights will be turned over to the GMCAC.
- Repairs and maintenance costs were estimated based on the recurring
historical repairs and maintenance costs for the assets that were turned
over to GMCAC.
- Selling, general and admin expenses and operator fees were estimated
as a percentage of total revenues.
- Insurance expenses were estimated based on quotes given for property
and third party liability insurance entities.
- Common usage terminal equipment costs were estimated based on
comparable systems of GMR’s other airports and existing contracts.
- Janitorial and security expenses were based estimated on historical
expenses incurred by the previous airport operator.
•
The pro-forma adjustments on cash and cash equivalents are assumed to
have arisen in the normal course of GMCAC operations after the turnover
of airport operation. Revenues are assumed to be received in cash and all
operating expenses are paid in cash. Moreover, GMCAC has no
outstanding liabilities (except for loans and interest payable) in the
pro-forma consolidated statement of financial position as of June 30, 2014.
- 17 •
There are no pro-forma adjustments to property, plant and equipment
after the turnover since the title and ownership of land and assets of the
exiting airport remains with the government and only the possession of the
land and assets were transferred to GMCAC as concessionaire. No
additional capital expenditure was assumed since construction is expected
to start in January 2015.
(e) Tax Effects on Pro-forma Adjustments
•
Tax effects, if any, of the pro-forma adjustments are calculated at the
statutory rates effective during the periods for which the pro-forma income
statements are presented. However, for 2014, the pro-forma income tax
expense of GMCAC is nil since the Group plans to register the airport
operation with the Board of Investments (BOI) wherein the Group is
granted rights and privileges as provided under Omnibus Investment Code
of 1987.
•
GMCAC recognized an input value-added tax (VAT) of P1,729.4 million
on the bid premium paid as discussed under (b) above. The total input
VAT is reflected under Other Current Assets in the 2013 pro-forma
consolidated financial information available for carryover in 2014.
The related output and input VAT in 2014 are computed based on the
pro-forma revenues and expenses subject to VAT, based on the applicable
tax rates. The input VAT of P23.2 million was assumed to have been
applied to the output VAT due.
The details of the pro-forma balances presented in the pro-forma consolidated
financial information represents information that might have resulted had the
transactions occurred in July 1, 2013. However, these pro-forma balances are not
necessarily indicative of the actual balances that would have resulted had the
transactions actually occurred earlier.
4.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are as follows:
Cash on hand
Cash in banks
Short-term placements
P
June 30,
2014
December 31,
2013
5,710,035
758,539,986
201,061,964
P
P 965,311,985
4,576,812
1,546,958,258
700,000,000
P 2,251,535,070
Cash in banks generally earn interest based on daily bank deposit rates.
Short-term placements are made for varying periods from 14 to 90 days and earn annual
effective interest of ranging from 1.0% to 1.5%. Interest income earned from these
financial assets is presented as Interest income from short-term placements under
Finance Income in the pro-forma consolidated statements of comprehensive income.
- 18 5.
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
As of June 30, 2014 and December 31, 2013, the Group’s financial assets classified as
fair value through profit or loss (FVTPL) are composed of Philippine government retail
treasury bonds and unit investment trust funds. These financial assets are carried at fair
value based on quoted market prices amounting to P4,663.8 million as of June 30, 2014
and P2,824.3 million as of December 31, 2013. The increases in the fair values of the
FVTPL financial assets amounting to P8.7 million and P24.0 million for the six months
ended June 30, 2014 and year ended December 31, 2013, respectively, are presented as
Unrealized fair value gain on financial assets under Finance Income account in the
pro-forma consolidated statements of comprehensive income.
6.
OTHER ASSETS
This account is composed of the following:
Note
Current:
Input value-added tax (VAT)
Advances to suppliers
Construction materials
Prepaid taxes
Refundable security and
bond deposits
Prepaid rent
Prepaid insurance
Others
Non-current:
Investment in associates
Deferred input VAT
Deferred tax assets
Software licences
Deposits for condominium units
Investment in club shares
6.1
6.2
6.5
6.3
6.6
6.4
June 30,
2014
December 31,
2013
P 2,039,439,190
1,250,792,445
413,542,420
138,503,553
P 1,812,584,090
1,664,758,903
339,632,753
99,486,687
59,116,758
26,210,446
25,090,534
198,910
53,713,405
19,736,576
29,325,689
-
3,952,894,256
4,019,238,103
776,656,324
150,220,471
46,570,064
46,372,331
37,210,491
1,044,471
196,268,564
130,973,713
41,366,847
25,044,630
36,326,178
-
1,058,074,152
429,979,932
P 5,010,968,408
P 4,449,218,035
6.1 Input VAT
In 2013, GMCAC paid input VAT amounting to P1,728.5 million pertaining to the bid
premium (see Note 7).
- 19 6.2 Advances to Suppliers
Advances to suppliers pertain to down payments made by the Group to the suppliers
based on a certain percentage of the contract price. The initial payment will eventually be
recouped or deducted from the amount payable of the Group either in a pro-rated basis or
in full once billed by the supplier.
6.3 Deferred Input VAT
Deferred input VAT pertains to the unamortized input VAT on purchases of capital
goods exceeding P1.0 million. Deferred input VAT is to be amortized and credited
against output tax evenly over five years or the life of the asset, whichever is shorter.
6.4 Deposits for Condominium Units
Deposits for condominium units represent payments made for the purchase of
condominium units from the clients of the Group.
6.5 Prepaid Taxes
Prepaid taxes pertain to the excess of quarterly income tax payments over the current tax
due during the year.
6.6 Software Licences
Software licenses pertain to acquired computer software licenses capitalized on the basis
of the costs incurred to acquire and install the specific software. Capitalized costs are
amortized on a straight-line basis over the estimated useful lives of five years as the lives
of these intangible assets are considered finite.
7.
CONCESSION RIGHTS
In November 2013, GMCAC executed a BOT agreement with the Philippine
Government, through the Department of Transportation and Communications (the
Grantor) and Mactan-Cebu International Airport Authority under the Project. The
agreement authorizes GMCAC to perform the following:
(a)
(b)
(c)
(d)
(e)
Construction of new passenger terminal, along with all associated infrastructure
and facilities as per Philippines/International guidelines and International Civil
Aviation Organization standards to handle operations;
Rehabilitation and expansion of the existing terminal;
Installation of all the required equipment and other associated facilities;
Installation of the required information technology and other equipment; and,
Operation and maintenance of new and existing terminals during the entire 25-year
concession period.
Upon receiving the concession rights to the Project, GMCAC paid the bid premium
amounting to P14,404.6 million, net of applicable taxes, to the Grantor. This amount
was capitalized as part of Concession Rights in the 2013 pro-forma consolidated
statement of financial position.
- 20 As of December 31, 2013, GMCAC also capitalized certain debt issue costs and other
direct expenses totaling P268.5 million. Moreover, GMCAC capitalized the interest
expense incurred amounting to P211.7 million and P86.0 million as of June 30, 2014 and
December 31, 2013 in relation to the availment of bank loan to be used for the Project.
The interest, which will be paid upon maturity of the loan, is reported as part of Interest
payable under Trade and Other Payables account in the pro-forma consolidated
statements of financial position (see Note 8).
8.
TRADE AND OTHER PAYABLES
This account consists of the following:
Notes
Trade payables
Retention payable
Due to stockholders and
related parties
Accrued expenses
Interest payable
Accrued salaries
Dividends payable
7, 9
June 30,
2014
December 31,
2013
P 1,019,418,402
874,269,455
P 988,827,766
739,871,269
801,934,801
277,214,616
348,113,359
20,227,652
1,983,227
290,779,074
211,958,118
37,971,741
15,923,373
1,983,227
P 3,343,161,502
P 2,301,543,115
Retention payable pertains to amounts withheld from payments made to subcontractors
to ensure compliance and completion of contracted projects ranging from 5% to 10% of
every billing made by the contractor. Upon completion of the subcontracted projects,
the amounts are returned to the subcontractors.
Accrued expenses include unreleased checks, unpaid utilities and unclaimed salaries and
wages of resigned employees.
- 21 9. INTEREST-BEARING LOANS AND BORROWINGS
The details of short-term and long-term interest-bearing loans and borrowings are as
follows:
Current:
Bank loans
Obligations under
finance lease
Non-current:
Notes payable
Obligations under
finance lease
Note
June 30,
2014
December 31,
2013
9.2
P 14,815,970,004
P 13,549,382,682
9.3
142,133,406
176,243,952
14,958,103,410
13,725,626,634
9.1
4,963,627,033
4,961,451,354
9.3
52,211,888
71,480,679
5,015,838,921
5,032,932,033
P 19,973,942,331
P 18,758,558,667
9.1 Notes Payable
On February 19, 2013, the Parent Company executed a notes facility agreement with a
local bank. In this agreement, the Parent Company desired to offer and issue fixed-rate
corporate notes in the aggregate principal amount of P4,000.0 million. The net proceeds
of the notes after deducting direct issue costs, such as underwriting fees and
commissions, documentary stamp tax and other expenses associated with the issuance,
amounted to P3,957.3 million.
The notes constitute direct, unconditional, unsubordinated, general and unsecured
obligation ranking at least pari passu with all other present and future direct,
unconditional, unsubordinated and unsecured obligations of the Parent Company.
The notes are issued in three tranches with the following details:
Principal
Tranche A
Tranche B
Tranche C
P
650,000,000
3,250,000,000
100,000,000
Term in years
5
7
10
Interest Rate
5.48%
5.68%
5.67%
P 4,000,000,000
The nominal rates refer to the Philippine Dealing System Treasury Fixing (PDST-F)
rates with respect to the term of each tranche plus an interest spread of 1.75% for
Tranche A and B and 1.50% for Tranche C.
The notes, among other things, restrict the Group’s ability to:
(a)
incur any indebtedness to be secured by or to benefit from any lien, in favor of any
creditor on, or in respect of any present or future assets or revenues or the right to
receive income;
- 22 (b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
make any material change in the nature of its business from that being carried on
as of the signing date;
enter into any merger or consolidation except if the issuer retains control of the
surviving corporation, such merger or consolidation is required by law, and such
merger does not result in material adverse effect;
amend its articles of incorporation and/or by-laws except as required by law;
declare or pay any cash dividend to its stockholders or retain, retire, purchase or
otherwise acquire any class of its capital stock;
sell, assign, lease, transfer, and/or dispose all or substantially all of its properties;
assign, transfer or otherwise convey any right to receive any of its income or
revenues;
voluntarily suspend its business operations in a manner that will result in a material
adverse effect;
extend any loan, advance or subsidy to any person.;
permit its financial debt to equity ratio to exceed 2:1; and,
voluntarily prepay any indebtedness.
The Group has complied with all the debt covenants set forth in the notes facility
agreement. As of June 30, 2014 and December 31, 2013, the carrying amount of the
notes is P3,963.6 million and P3,961.4 million, respectively.
In 2011, the Parent Company was granted another unsecured Notes payable facility up
to P3,000.0 million by a local bank, to which P1,000.0 million was availed. The loan
bears an annual interest of 6.52% payable in 5 years. The carrying value of the loan is
P1,000.0 million as of June 30, 2014 and December 31, 2013. Total interest on these
notes payable is presented as Interest expense from notes payable under Finance Costs
account. Unpaid interest as of June 30, 2014 and December 31, 2013 amounting to
P42.2 million and P35.6 million, respectively, is presented as part of Interest payable
under Trade and Other Payable in the pro-forma consolidated statements of financial
position (see Note 8).
9.2 Bank Loans
In 2013, GMCAC executed a promissory note with a local bank amounting to
P11,293.2 million, with an interest of 3.75% payable one year from the initial drawdown.
The loan is for the sole purpose of financing the bid premium paid for the concession
rights. Accordingly, the related interest expense amounting to P211.7 million and
P86.0 million in 2014 and 2013 is capitalized as part of the Concession Rights account
(see Note 7).
As security for the loan, GMCAC executed an outright assignment of all of the
following:
(a)
(b)
(c)
receivables under loans or advances,
rights to collect termination payments due to GMCAC under the concession
agreement (see Note 7), and;
proceeds, products and fruits of all the foregoing.
In addition, GMCAC also pledged all its issued and outstanding shares, and any new or
additional shares of stock, subscriptions, warrants and other rights to purchase or
acquire such shares of stock to the local bank.
- 23 Other bank loans represent short-term unsecured loans from local banks availed by the
Parent Company. The loans bear fixed annual interest rates ranging from 2.25% to
3.00% in 2014. Certain bank loans were obtained from a local bank, which is a related
party under common ownership. Total interest on these bank loans is presented as
Interest expense from bank loans under Finance Costs account in the pro-forma
consolidated statements of comprehensive income.
Unpaid interest as of June 30, 2014 and December 31, 2013 is presented as part of
Interest payable under Trade and Other Payable in the pro-forma consolidated
statement of financial position.
9.3 Finance Lease Obligations
The obligations under finance lease have an effective interest rate of 5.40% and interest
ranging from 6.50% to 8.36%. Lease payments are made on a monthly basis. Interest
expense is presented under Finance Costs.
10.
REVENUES
The details of this account for the six months ended June 30, 2014 and year ended
December 31, 2013 are composed of the revenues from:
June 30,
2014
(Six months)
Revenue from contracts:
Contracts in progress
Completed contracts
December 31,
2013
(One year)
P
4,878,634,225
176,677,276
5,055,311,501
262,705,935
P 10,837,806,790
42,630,462
10,880,437,252
-
P
5,318,017,436
P 10,880,437,252
Revenue from airport operations
About 15% and 30% of the contract revenues for 2014 and 2013, respectively, were
earned from contracts with SM Development Corporation, a related party under
common ownership.
- 24 11. DIRECT COSTS
The following is the breakdown of contract costs for the six months ended
June 30, 2014 and year ended December 31, 2013:
Contract Costs:
Outside services
Materials
Project overhead
Salaries and employee benefits
Depreciation
June 30,
2014
(Six Months)
December 31,
2013
(One Year)
P1,837,568,482
1,482,329,531
358,742,208
267,660,110
226,565,727
4,172,866,058
P 3,306,303,720
3,888,789,406
985,365,045
439,447,561
479,291,208
9,099,307,940
Airport Operations Costs:
Salaries and employee benefits
Repairs and maintenance
Utilities
Security and janitorial
Terminal usage fee
Operator fee
Others
-
21,409,898
20,708,400
13,830,493
10,439,119
4,097,394
3,283,824
3,510,322
77,279,450
P4,250,145,508
P 9,099,307,940
Project overhead includes insurance, repairs and maintenance, gas and oil, travel and
transportation, professional fees and various rental expenses of staging areas.
12. OTHER INCOME (CHARGES)
This consists of the following for the six months ended June 30, 2014 and for the year
ended December 31, 2013:
Finance income
Gain on disposals of
property and equipment
Amortization of
deferred gain on sale
and leaseback
Income from scrap sales
Equity in net losses of
associates
June 30,
2014
(Six Months)
December 31,
2013
(One Year)
P
P
33,345,740
20,414,353
19,412,623
10,599,351
26,905,542
3,304,924
502,236) (
(
P
474,898,584
63,857,208
2,726,560 )
P
521,795,113
- 25 -
13.
EARNINGS PER SHARE
Basic earnings per share for the six months ended June 30, 2014 and year ended
December 31, 2013 were computed as follows:
June 30,
2014
(Six Months)
Net profit attributable to
Parent Company’s shareholders
Divided by weighted average
number of outstanding
common shares
Basic and diluted earnings per share
P
633,914,931 P 1,403,848,171
1,649,426,127
P
December 31,
2013
(One Year)
0.38 P
1,224,570,426
1.15