1. business and industrial

COVER SHEET
0 0 0 0 0 4 8 9 0 9
S.E.C. Registration Number
L O R E N Z O
S H
C O R P O R A T
I
P P
I N G
I O N
(Company's Full Name)
2 0 T H
F L O O R
U N
I
T E D
,
T
I M E S
N A T
E R M I
T A
P L A Z A
B L D G .
I O N S
A V E N U E
,
I
M A N
,
,
L A
(Business Address: No. Street City / Town / Province)
ROBERTO A. UMALI
567-2180
Contact Person
Company Telephone Number
1 2 3 1 2 0 1 3
Month
Day
1 7
Year
A
0 6 2 6 2 0 1 4
FORM TYPE
Month
Fiscal Year
Day
Year
Annual Meeting
Secondary License Type, If Applicable
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
Php 943.6 million
$ 3.68 million
Domestic
Foreign
Total no. of Stockholders
To be accomplished by SEC Personnel concerned
File Number
LCU
Document I.D.
Cashier
STAMPS
Remarks = please use black ink for scanning purposes
ANNUAL REPORT PURSUANT TO SECTION 17
OF THE SECURITIES REGULATION CODE AND SECTION 141
OF THE CORPORATION CODE OF THE PHILIPPINES
1..For the year ended
December 31, 2013
2..SEC Identification Number
48909
3. BIR Tax Identification No. 000-628-958-000
4. Exact name of issuer as specified in its charter LORENZO SHIPPING CORPORATION
6. (SEC
5..Metro Manila, Philippines
Province, Country or other jurisdiction of
Incorporation or organization
7..20th Floor, Times Plaza Bldg.
United Nations Avenue
Ermita, Manila
Address of principal office
1000
Postal Code
8. (632) 567 21 71 to 80
Issuer’s telephone number, including area code
9. Pier 6/10, North Harbor, Tondo, Manila 1012
Former name, former address and former fiscal year, if
changed since last report.
10. Securities registered pursuant to Sections * and 12 of the SRC, or Sec. 4 and 8 of the RSA
Title of Each Class
Number of Shares Of Common Stock
Outstanding and Amount of Debt Outstanding
Common Stock – Class U
Total Liabilities
554,642,251
Php 1,703 Million
11. Are any or all of these securities listed on a Stock Exchange.
Yes (x) No ( )
If yes, state the name of such stock exchange and the classes of securities listed therein:
Philippine Stock Exchange
Common Stock – Class U
12. Check whether the issuer:
(a) has filed all reports required to be filed by section 17 of the SRC and SRC Rule 17
hereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of
The Corporation Code of the Philippines during the preceding twelve (12) months (or for such
shorter period that the registrant was required to file such reports);
Yes (x)
No ( )
(b) has been subject to such filing requirements for the past ninety (90) days
Yes (x)
No ( )
1
13. The aggregate market value of the voting stock held by non-affiliates of the registrant is Php45.884M as
of December 31, 2009.
APPLICABLE ONLY TO ISSUERS INVOLVED IN INSOLVENCY/SUSPENSION OF PAYMENTS
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
14. Check whether the issuer has filed all documents and reports required to be filed by Section 17 of the
Code subsequent to the distribution of securities under a plan confirmed by a court or the Commission.
Yes ( )
No ( )
N/A
DOCUMENTS INCORPORATED BY REFERENCE
15. If any of the following documents are incorporated by reference, briefly describe them and identify the
part of SEC Form 17-A into which the document is incorporated.
N/A
2
PART 1- BUSINESS AND GENERAL INFORMATION
Item 1. Business
(a)
Description of Business
(1)
Business Development
(A) Form and year of organization
Lorenzo Shipping Corporation (LSC) was incorporated on 17 October 1972 by the Go
Family headed by Jose D. Go, Sr., primarily to engage in domestic inter-island cargo
handling business. The Company has been an active participant in containerized cargo
business and has played a significant role in the domestic shipping industry.
(B) The Company has no record of any bankruptcy, receivership or similar proceedings during
the past three years.
(C) Material reclassification, merger or purchase or sale of significant amount of assets.
The Company has not undergone any material reclassification, merger, consolidation or
purchase or sale of a significant amount of its assets that are not in the ordinary course of
business.
(2)
Business of Issuer
(A) Description of Registrant
(i)
Lorenzo Shipping Corporation was founded and incorporated in 1972. The Company
owns and operates vessels with which it provides domestic inter-island cargo liner
services to the general public. The Company’s business focus has evolved from that
of being a break-bulk cargo carrier to a fully containerized cargo shipping company.
Lorenzo Shipping Corporation owns and operates a fleet of seven (7) vessels deployed
to the key ports in Manila, Visayas and Mindanao. The Company’s vessels have a
capacity ranging from 200 TEUs to 426 TEUs with speed of 11 knots to 15 knots. LSC
owns various equipment and facilities to efficiently handle customer’s cargoes
including a) land-based equipment such as forklifts, toplifts and trucks and b)
container yards and warehouses in its branches and agencies.
(ii)
The Company is engaged solely in domestic inter-island cargo liner services, thus, the
foreign sales requirement is inapplicable.
(iii)
Lorenzo Shipping Corporation markets its services through a network of branches and
agencies nationwide. The network is comprised of six branches: Cebu, Davao, General
Santos, Cotabato, Iloilo, Cagayan and three agencies: Zamboanga, Dumaguete and
Bacolod. Manila operations, under the Corporate Office, handles all inbound and
outbound volume in Manila.
LSC provides 20-foot and 40-foot dry containers to its customers in which they can
load their cargoes to various ports. LSC also carries rolling cargoes such as heavy
equipment, trucks and vehicles as well as uncontainerized cargoes such as steel
products and bridging materials. Livestock cargoes are also carried by LSC using
special vans.
(iv)
Competitive business conditions and the registrant’s competitive position in the
industry and methods of competition:
3
Lorenzo Shipping Corporation is one of the key players in the domestic containerized
cargo shipping industry. It operates in the major ports in the country and maintains a
fleet of seven vessels.
LSC considers other containerized cargo shipping companies as its competitors such
as Aboitiz Transport Systems Corp. (ATSC), Negros Navigation Corp., Sulpicio
Lines Inc., Solid Shipping Inc., NMC Container Lines, Inc. (NMCCLI) and Oceanic
Container Lines, Inc. ATSC, Negros Navigation and Sulpicio Lines, Inc. cater to
both passenger and cargo market while Solid Shipping , Oceanic and NMCCLI are
purely cargo carriers.
Competition among domestic lines is strong in the diversity and quality of service
provided to its customers. The industry is also governed by the rules and regulations
of the Maritime Industry Authority (MARINA).
LSC is also a member of the Philippine Liner Shipping Association (PLSA) where its
competitors are also members. The PLSA is a venue for all the member shipping lines
to discuss issues and solutions to these issues which affect the domestic shipping
industry.
(v)
Sources and availability of raw materials and the names of principal suppliers:
Major suppliers of fuel, spare parts, container vans and others.
Name of Supplier
Items Supplied
Petron Corporation
Manila North Harbor Port Inc.
Chevron Philippines I
Magsaysay Shipmanagement
Tao Commodity
NMC Container Lines Inc.
Magsaysay Marine Services, Inc.
Mindanao International Container Terminal
Keppel Subic Shipyard Inc.
Asiaport Equipment and Logistics Corp.
Pilipinas Shell Petroleum
Seven Star Logistics Solutions
ACRO Distribution Network
TOMS Extreme Wheels Services
Pioneer Insurance and Surety
Filipinas Port Services
Central Inter-Transport Logistics
Antonio Victoriano Trucking Corporation
ZC Integrated Port Services
Chesteel Marine Industrial
(vi)
Fuel
Stevedoring and hauling Services
Fuel
Management Fee & Reimbursables
Fuel
Co-loading, rental & reimbursables
Fabrication of container van/repair
Arrastre, Stevedoring and storage
Vessel repairs
Hauling Services
Fuel
Hauling Services
Hauling Services
Hauling Services
Insurance
Arrastre, Stevedoring and Storage
Arrastre, Stevedoring
Hauling Services
Arrastre, Stevedoring
Vessel Repair
Major customers/clients of LSC
2013 Top 20 Accounts
Coca-Cola Bottlers Philippines, Inc.
Pepsi-Cola Products Phils.
NMC Containers Lines Inc.
URC / Robinsons Group
DJ Cargo
Lamsan Inc.
SMC Group
Asia Brewery Inc.
All Asian Countertrade Inc.
Tanduay Distillers
Icebox Logistics Services Inc.
Greenfield Trucking
Gaisano Grand Group of Companies
Philipppines Foremost Milling Corp.
Yan An Cargo Forwarders
IFP Manufacturing Corp.
Prifood Corporation
Icon Reefer Corporation
Century Canning Corp.
ACS Manufacturing Corp.
4
The business is not dependent upon a single customer or a few customers, the loss
of any or more of which will not have material adverse effect on the company
(vii) The business of the company is not in any way dependent on related parties’
transactions.
(viii) Licenses, Concessions, Labor contracts, including duration;
a)
With Maritime Industry Authority (Marina) registration
LSC vessels are duly registered with MARINA and subjected to regular
MARINA survey and ISM audits to ascertain its adherence to vessel and
manning safety standards. The Company has been granted a company
Certificate of Public Convenience (CPC) for the seven vessels under RA 9295
valid for 25 years from June 7, 2005 to June 7, 2030 by the MARINA to
service domestic ports of call.
b) Labor contracts
For the sea-based employees, the Collective Bargaining Agreement shall be
in full force and effect until 31 August 2015 for licensed crewmembers, and
until 15 September 2015 for unlicensed crewmembers.
For the land-based employees, the Collective Bargaining Agreement shall be
in full force and effect until 15 February 2012.
c)
Licenses and Franchises
For licenses and franchises of vessels, while principal terms are anchored
solely on seaworthiness of vessel (of which registrant is already ISMCertified by regulatory authority) only the following expiration dates are
disclosed:
M/V LORCON VISAYAS
CERTIFICATES
AND LICENSES
Certificate of Ownership (CO)
Certificate of Vessel Registry (CVR)
Certificate of Public Convenience (CPC)
Cargo Ship Safety Certificate
Coastwise License (CWL)
Radio Station License (RSL)
Coastwise Loadline Certificate (CLLC)
DATE
ISSUED
11/08/10
11/08/10
06/07/05
03/20/14
09/17/13
10/31/13
03/21/13
DATE
EXPIRY
STATUS
Permanent
Permanent
06/07/30
02/24/15
09/25/14
08/21/14
03/08/18
M/V LORCON CEBU
CERTIFICATES
AND LICENSES
Certificate of Ownership (CO)
Certificate of Vessel Registry (CVR)
Certificate of Public Convenience (CPC)
Cargo Ship Safety Certificate
Coastwise License (CWL)
Radio Station License (RSL)
Coastwise Loadline Certificate (CLLC)
DATE
ISSUED
11/08/10
11/08/10
06/07/05
02/1/14
09/17/13
02/27/14
02/15/13
DATE EXPIRY
STATUS
Permanent
Permanent
06/07/30
02/13/15
09/25/14
03/17/15
06/17/18
5
M/V LORCON MANILA
CERTIFICATES
AND LICENSES
Certificate of Ownership (CO)
Certificate of Vessel Registry (CVR)
Certificate of Public Convenience (CPC)
Cargo Ship Safety Certificate
Coastwise License (CWL)
Radio Station License (RSL)
Coastwise Loadline Certificate (CLLC)
DATE
ISSUED
11/08/10
11/08/10
06/07/05
01/27/14
09/17/13
01/27/14
09/06/11
DATE EXPIRY
DATE
ISSUED
10/01/13
08/13/12
06/07/05
07/04/13
08/07/13
08/16/13
09/20/13
DATE
EXPIRY
DATE
ISSUED
11/17/10
11/17/10
06/07/05
09/16/13
02/28/14
02/10/14
04/23/13
DATE EXPIRY
DATE
ISSUED
05/14/10
05/14/10
06/07/05
10/09/13
04/23/13
04/30/14
05/18/10
DATE
EXPIRY
STATUS
Permanent
Permanent
06/07/30
07/29/14
10/24/14
10/25/14
07/24/16
M/V LORCON GENERAL SANTOS
CERTIFICATES
AND LICENSES
Certificate of Ownership (CO)
Certificate of Vessel Registry (CVR)
Certificate of Public Convenience (CPC)
Cargo Ship Safety Certificate
Coastwise License (CWL)
Radio Station License (RSL)
Coastwise Loadline Certificate (CLLC)
STATUS
Permanent
Permanent
06/07/30
07/12/14
08/15/14
08/16/14
02/04/14
M/V LORCON CAGAYAN DE ORO
CERTIFICATES
AND LICENSES
Certificate of Ownership (CO)
Certificate of Vessel Registry (CVR)
Certificate of Public Convenience (CPC)
Cargo Ship Safety Certificate
Coastwise License (CWL)
Radio Station License (RSL)
Coastwise Loadline Certificate (CLLC)
STATUS
Permanent
Permanent
06/07/30
04/29/14
03/28/15
02/17/15
04/04/18
M/V LORCON DUMAGUETE
CERTIFICATES
AND LICENSES
Certificate of Ownership (CO)
Certificate of Vessel Registry (CVR)
Certificate of Public Convenience (CPC)
Cargo Ship Safety Certificate
Coastwise License (CWL)
Radio Station License (RSL)
Coastwise Loadline Certificate (CLLC)
STATUS
Permanent
Permanent
06/07/30
04/25/14
05/13/14
05/06/14
11/25/14
(ix)
The Company has no pending request for approval from any government
body.
(x)
There is no record of cost incurred for research and development.
6
(xi)
Costs and effects of compliance with environmental laws
The Company complies with the Anti-Pollution Act, which requires the
control of smoke emission coming from the vessels and disallows spilling or
dumping of oil into the sea. The Company complies with such regulations
through the effective utilization of equipment such as bridge sludge tank.
However, the cost of such equipment is not separately accounted for in the
company’s books. The cost of compliance is not significant in amount.
(xii)
Total number of employees and number of full time employees
As of 31 December 2013, the total sea-based manpower is 145 and the total
land-based manpower is 166. The registrant does not anticipate increasing
its manpower for the ensuing year.
The political and social provisions of CBA for sea-based employees shall
be in full force and effect until 31 August 2015 for licensed crew members
and until 15 September 2015 for unlicensed crew members.
The description, ownership and limitation on ownership, of the principal properties of the company are
shown below.
Vessel in Operations:
VESSEL/YEAR BUILT
OWNERSHIP
STATUS
GRT & DWT IN
METRIC TON
CAPACITY IN
TEUs/LIEN
SERVICE ROUTE
426
LORCON MNL
1996
COMPANY OWNED
4,328
5,998.30
LORCON CDO
1986
COMPANY OWNED
5,954
7,203
LORCON GEN
SANTOS
2000
COMPANY OWNED
4,962
7,209
LORCON CBU
1986
COMPANY OWNED
4,996
6,087
LORCON VIS
1986
COMPANY OWNED
5,954
7,233
LORCON ZAM
1984
COMPANY OWNED
5,589
6,630
LORCON DUM
1999
COMPANY OWNED
7,970
9,822.
(MORTGAGED)
MLA//CGY/ILO/BAC/MNL
300
(NOT MORTGAGED)
MLA/CBU/CGYMLA
408
(MORTGAGED)
278
(MORTGAGED)
300
(MORTGAGED)
MLA/CBU/DUM/ZAM/MLA
MLA/ILO/ZAM/COT/GSC/CBU/
MLA
MLA/ILO/ZAM/COT/GSC/CBU/
MLA
205
1.
(MORTGAGED)
486
(MORTGAGED)
MLA /BAC/ILO/MLA
MLA/DVO/CBU//MLA
The limitations are those which are usual to ordinary mortgage of chattel and real properties.
The Company has no intention to acquire properties not in the ordinary course of business in the next
twelve months.
2. The Company leases the following properties in its operations:
The Company leases from various entities the following properties for its operations, to wit:
1.
A container yard covering an area of 2,000 square meters located at Polloc Port, Parang, Maguindanao,
Cotabato City at the rate of Php21,300.00 per month. As stipulated, the contract is valid for a period of
one (1) year commencing January 1, 2013 until December 31, 2013.
2.
A warehouse/office in Salimbao, Sultan Kudarat, Maguindanao, consisting of an area of 850 square
7
meters for a monthly rental of Php21,000.00. This lease commenced on 09 December 2013 and is valid
as such until 08 December 2016. (Antonio Uy)
3.
An office located at Door No. 5, Julia Pacana St., Barangay 21, Cagayan De Oro City with a monthly
rental fee of Php10,000.00. The period covering this lease commenced on 01 April 2012 until 30 March
2014.
4.
A container yard with office covering an area of 10,000 square meters located at Phividec Estate of
Misamis Oriental (PIE-MO), Municipalities of Tagaloan and Villanueva, Province of Misamis Oriental.
Contract is valid for a period of ten (10) years commencing September 1, 2008.
5.
A parcel of land with a building consisting of approximately 17,607 square meters, more or less, located
at Barangay Labangal, General Santos City, for a monthly rental of Php55,000.00. Contract is valid for
a period of five (5) years commencing 01 August 2011 until 31 July 2016.
6.
In Iloilo City, a warehouse covering an area of 820 located at Barangay Loboc, Lapaz, Iloilo City, for a
monthly rental of Php46,881.45. Contract is valid for a period of one (1) year commencing 01 January
2011 until December 31, 2012. Contract was no longer renewed after 2012.
7.
In Iloilo City, one door commercial building with an area of approximately 150 square meters for a
monthly rental of Php 19,420.50 commencing 01 April 2012 and Php21,362.55 commencing 01 April
2013 until 31 March 2014, exclusive of EVAT plus Php750.00.00 for security services and common
electric cost at Php275.00.
8.
Another container yard with an area of 3,613.00 square meters located at Barangay Obrero, Iloilo City
for a monthly rental of Php111,063.62. Contract is valid for a period of one (1) year commencing January
1, 2013 until December 31, 2013.
9.
A Container yard covering an area of 10,000 square meters, more or less, located at Km. 10, Sasa, Davao
City. Contract is valid for five (5) years commencing 01 February 2007 until 31 December 2013 for an
aggregate area of 10,000 square meters. Effective, February 1, 2007 to December 31, 2013, Php53.50
per square meter per month for the concreted portion and Php28.50 for the non-concreted portion of the
property.
10. An office space covering an area of 702 09 square meters located at Times Plaza Building, U.N. Ave.
Cor. Taft Ave., Ermita, Manila with a monthly rental of 147,800.00. Contract commenced January 2011
until June 31, 2015.
11. In Zamboanga, a container yard covering an area of 4,800 square meters located at Governor Ramos,
San Roque, Zamboanga City with a monthly rental of Php147,840.00.Contract is valid for a period of
three (3) years commencing 01 January 2014 until December 2014.
An additional area in Governor Ramos, San Roque, Zambonga City, covering an area of 2,000 square
meters was also utilized as container yard, with a monthly rental of Php50,000.00. Contract is valid foa
a period of three (3) years commencing 01 January 2014 until 31 December 2014.
12. In Bacolod, a container yard covering an area of 6,282 square meters located at BREDCO II, reclamation
Area, Bacolod City with a monthly rental of Php375,439.47 VAT inclusive. Contract commenced on
January 1, 2004 and deemed automatically renewed every year.
13. A container yard located at Bacong, Negros Oriental with a monthly rental of Php45,000.00. Contract
was renewed for five (5) years commencing 01 January 2013 until 31 December 2018. Lease contract
is renewed on a month to month basis, but final contract is still undergoing negotiations.
14. A container yard located at Manila Harbor Center, Tondo, Manila, with an area of 5,000 sqm and a
monthly rental of Php330,000.00, with annual escalation rate of 5%. Contract is for a period of five (5)
years commencing on 01 May 2011 until 30 April 2016. (J.O.S. Holdings, Inc.)
8
15. A warehouse on a parcel of land with an area of 444.8 sqm. located at No. 658 Calindagan, Dumaguete
City, Negros Oriental, and with a monthly rent of Php31,136.00, exclusive of VAT. Contract is from 16
December 2011 until 15 December 2013. (JOS Holdings, Inc.)
16. The ground floor of a building with an area of 150 sqm. located at No. 323 Moriones Street, Tondo, City
of Manila, and a monthly rental of Php50,000.00 (Vat-inclusive). Contract is for 5 years commencing
on 01 February 2014 until 31 January 2019. (Sps.Limpio)
17. A container yard and a container office, with an area of 6,000 square meters located at #15 Old Airport
Road, Km. 9, Sasa, Davao City. Contract is for five (5) years from 01 April 2014 until 31 March 2019.
(Kudos);
18. A container yard with an area of 6,500 square meters located at 571-572 Honorio Lopez Boulevard,
Tondo, City of Manila, with a monthly rental of Php226,875.00, for two (2) years, commencing on 15
February 2014 until 29 February 2016.
19. An area located at MNH CFS 1bay, with an area of 556.45 square meters, with a monthly rental of
Php67,665.04, commencing on 16 September 2013 to 14 January 2018;
Item 3. Legal Proceedings
The Company is the defendant in several pending legal cases involving claims for damages arising
from the ordinary course of business and trade and those arising from its relationship with its employees as the
latter’s employer. The management opines, however, that the ultimate liability which may result from these
lawsuits and claims, if any, would not impinge on the financial position and operating results of the company.
Item 4. Submission of Matters to a Vote of Security Holders
None
9
PART II – OPERATIONAL AND FINANCIAL INFORMATION
Item 5. Market for Issuer’s Common Equity and Related Stockholder Matters
Item 5. Market for Issuer’s Common Equity and Related Stockholder Matters
(1)
Market Information
The Company’s common shares are traded at the Philippine Stock Exchange. The historical highlow share prices of the company’s stock are Php1.20 – 1.00 and Php2.67 – 0.90 as of quarters
ending March 2009 and March 2012 respectively. The quarterly high and low share prices of
LSC during the last three calendar years and interim periods are as follows:
QUARTER ENDING
Quarter ending March 2010
Quarter ending June 2010
Quarter ending Sept. 2010
Quarter ending Dec. 2010
Quarter ending March 2011
QUARTER ENDING
Quarter ending March 2011
Quarter ending June 2011
Quarter ending Sept. 2011
Quarter ending Dec. 2011
Quarter ending March 2012
QUARTER ENDING
Quarter ending March 2012
Quarter ending June 2012
Quarter ending Sept. 2012
Quarter ending Dec. 2012
Quarter ending March 2013
QUARTER ENDING
Quarter ending March 2013
Quarter ending June 2013
Quarter ending Sept. 2013
Quarter ending Dec. 2013
Quarter ending March 2014
(2)
IN PHIL. PESO
HIGH
LOW
1.20
1.00
1.10
1.00
1.15
0.75
1.05
1.00
1.05
0.90
IN PHIL. PESO
HIGH
LOW
1.05
0.90
1.06
0.92
1.20
0.99
2.35
1.03
2.67
1.03
IN PHIL. PESO
HIGH
LOW
2.65
1.03
1.97
1.30
1.83
1.20
1.70
1.26
1.65
1.25
IN PHIL. PESO
HIGH
LOW
1.65
1.25
1.61
1.25
1.35
1.18
2.20
1.10
1.60
1.23
VOLUME
667,000
372,000
393,000
218,000
169,000
VOLUME
169,000
1,735,000
107,000
14,067,000
5,106,000
VOLUME
5,106,000
799,000
392,000
11,668,000
783,000
VOLUME
787,000
495,823
11,880,300
11,691,760
42,891,761
Holders
As of March 31, 2014, the Company has 960 stockholders and the top twenty shareholders of
the company as of said date are the following:
Name of Stockholders
1
2
National Marine Corporation (Direct)
National Marine Corporation (Indirect
thru PCD Nominee Corporation)
Number of
Shares
Held
276,520,756
Total
Shares
% Over Total
Outstanding
379,149,561
68.36%
102,628,805
10
3
4
5
6
7
8
9
10
11
11
12
12
12
12
12
13
14
15
16
17
18
18
19
19
19
19
19
19
19
20
(3)
Pioneer Insurance & Surety Corporation
(Indirect)
Julio O. Sy Sr. (Indirect)
PCD Nominee Corporation (Filipino)
Jose Go Jr.
Oscar Y. Go
Julio D. Sy Jr.
Roberto A. Umali
Alvin Y Tan Unjo
Pcd Nominee Corporation (NonFilipino)
Jonathan D. Sy
Susano O. Sy
Emerging Market Capital Holdings
Johnny S. Lim
Lilian So Lim
Francisco Lim Lao
Jose Juan Pou
Willington Chua
Michael Escaler
Rcbc Securities, Inc.
Diana F. Malig
Century Sports Phils., Inc.
Pac Sally C. Ong
Aim Scientific Research Foundations,
Inc.
Luis M. Camus
Siewngan Philip Low
Reginaldo A. Oben
Walfrido R. Patawaran
Phiek Lian Go So
Tego Holdings, Inc.
Jacinto V. Rosales Jr.
75,193,750
75,193,750
13.56%
42,744,511
29,763,200
8,208,500
6,637,157
2,187,500
1,188,701
437,500
42,744,511
29,763,200
8,208,500
6,637,157
2,187,500
1,188,701
437,500
7.71%
5.37%
1.48%
1.20%
0.39%
0.21%
0.08%
382,750
382,750
0.07%
312,500
312,500
250,000
250,000
250,000
250,000
250,000
237,500
231,250
223,750
214,456
187,500
175,000
312,500
312,500
250,000
250,000
250,000
250,000
250,000
237,500
231,250
223,750
214,456
187,500
175,000
0.06%
0.06%
0.05%
0.05%
0.05%
0.05%
0.05%
0.04%
0.04%
0.04%
0.04%
0.03%
0.03%
125,000
125,000
0.02%
125,000
125,000
125,000
125,000
125,000
125,000
100,000
125,000
125,000
125,000
125,000
125,000
125,000
100,000
0.02%
0.02%
0.02%
0.02%
0.02%
0.02%
0.02%
Dividends
On June 27, 2013, the BOD has declared and issued in favor of common shareholders of record
as of July 12, 2013 cash dividends amounting to three centavos (P
=0.025) per share, or an
aggregate amount of P
=13,866,056.
(4)
Recent Sales of Unregistered Securities
Within the past 3 years, there has been no sale of the Company’s Securities which were not
registered under the Securities Regulations Code.
(5)
Description of Registrant’s Securities
Capital Stock
Since 2006, the Company’s authorized capital stock consists of common stock and maintains
no other class or type of share capital. The occurrence and amount of cash dividends issued to
its common stockholders is determined by the BOD.
Common shareholders have voting rights and appraisal rights, subject to and pursuant to the
11
provisions of the Corporation Code.
Under the law and the Company’s Articles of Incorporation, foreign ownership is restricted to
forty percent (40%). It provides that no transfer of shares or interest, which will render the
ownership of the Filipino citizens to less than the required percentage of the capital stock as
provided by existing law, shall be allowed or permitted to be recorded in the books of the
company.
Item 6. Management’s Discussion and Analysis or Plan of Operations.
Management’s discussion and analysis of financial condition and results of operations for the years
2013, 2012 and 2011 are presented below:
A. Financial Highlights
All Figures in Php ‘000
%
2013
2012
(As restated)
2011
(As restated)
Freight Revenue
1,869,304
2,000,421
Cost of Services
1,455,463
Terminal Expenses
228,467
Gross Profit
185,374
INCOME STATEMENT
%
2013-2012
2012-2011
1,869,412
-6.55%
7.01%
1,524,509
1,458,164
-4.53%
4.55%
223,515
243,621
2.22%
-8.25%
252,397
167,627
-26.55%
50.57%
29,293
(24,450)
33,013
-219.81%
-174.06%
Admin. & Gen. Expenses
158,703
141,556
157,547
12.11%
-10.15%
Finance Costs and Other
Charges-Net
44,047
26,730
36,856
64.78%
-27.47%
Net Income Before Tax
11,917
59,661
6,237
1,593
-3,320
-4,937
-147.98%
-32.75%
10,324
62,981
11,174
-83.61%
463.64%
Basic
0.02
0.11
0.02
-81.82%
450.00%
Diluted
0.02
0.11
0.02
-81.82%
450.00%
Other Income (Charges) -Net
Provision for Income Tax
Net Income After Tax
-80.03%
856.57%
Earnings per share
12
All Figures in Php ‘000
BALANCE SHEET
2012
(As restated)
2013
2011
(As restated)
%
%
2013-2012
2012-2011
Current Assets
1,208,129
971,853
884,422
24.31%
9.89%
Property and Equipment
1,652,972
1,681,456
1,659,959
-1.69%
1.30%
Other Assets
64,332
59,562
42,149
8.01%
41.31%
Total Assets
2,925,433
2,712,871
2,586,530
7.84%
4.88%
Current Liabilities
1,162,727
636,429
630,624
82.70%
0.92%
540,106
828,334
752,338
-34.80%
10.10%
Stockholder's Equity
1,222,600
1,248,108
1,203,568
-2.04%
3.70%
Total Liabilities and
Stockholder's Equity
2,925,433
2,712,871
2,586,530
7.84%
4.88%
Long-Term Liabilities
Material changes (+/- 5% or more) in the financial statements
Income Statement


Freight Revenue decreased by 6.55% due to lower TEU volume, mainly due to volume decline of LCDM
which was off-hired for 24 days, and LCDO which was off-hired for 59 days.
Other Income (Charges) registered an increase of 220% substantially due to losses incurred on the sale of an
old vessel in 2012.
Admin and Gen Expenses increased by 12.11% substantially due to lower impairment losses on bad debt
from trade receivables recognized in the previous year.
Finance Costs and Other Charges increased by 64.79% due to foreign exchange losses incurred in 2013.

Provision for Income Tax increased by 148% due to higher taxable income in 2013.


Balance Sheet
 Current Assets increased by 24.31% substantially due to higher prepayments for Insurance and importations
as well as increase in withholding tax credits.
 Current liabilities increased by 82.7% due to increase in scheduled balloon payments on borrowings payable
in the coming year and increase in short term loans.
 Total non-current liabilities decreased by 34% due to reclassification of maturing term loans to current
portion.
13
Key Performance Indicators (KPI)
To evaluate the performance of LSC for a given period, the following performance indicators are used:
1
Current ratio
Measures liquidity and is the ratio between current
assets and current liabilities. The Company’s current
ratio in 2013 is 1.04:1.
2
Debt-to-equity ratio
3
Net Revenues
Ratio between the total liabilities and total
stockholder's equity. LSC’ debt-to-equity ratio in
2013 is 1.39:1.
LSC revenues are mainly composed of freight and
passage charges. Total Revenue in 2013 is P1.86
billion compared to P2 billion in 2012.
4
Income before income tax (IBT)
5
A/R Turn-over
Earnings of the company before income tax expense.
The Income before Income tax for 2013 is P11.9
million.
Determined by dividing Credit Revenue over
Average Receivables. For 2013 A/R Turn-over is
2.82.
B. Financial Ratios
RATIO ANALYSIS
A. CURRENT RATIO / WORKING CAPITAL RATIO / BANKER’S RATIO
(CURRENT ASSET / CURRENT LIABILITIES)
2013
2012
2011
CA
1,208,129,053
971,853,494
884,421,919
CL
1,162,727,539
636,429,171
630,623,652
CURRENT RATIO
1.04
1.53
1.40
A/R TURNOVER (TOTAL CREDIT SALES / AVE. RECEIVABLES)
2013
CREDIT SALES
AVE. A/R
A/R TURNOVER
2012
2011
1,869,304,043
2,000,421,463
1,869,412,499
663,064,925
531,457,903
541,582,325
2.82
3.76
3.45
A/P TURNOVER
(TOTAL COSTS less Depreciation and Personnel Expenses / AVE. PAYABLE)
2013
COST
AVE.A/P
A/P TURNOVER
2012
2011
1,311,215,272
1,350,147,491
1,296,300,381
277,584,582
298,478,018
352,696,196
4.72
4.52
3.68
14
B. ACID-TEST RATIO/QUICK ASSET RATIO
(CASH + RECEIVABLE / CURRENT LIABILITIES)
CASH/AR
CL
ACID TEST RATIO
2013
1,000,861,865
1,162,727,539
2012
797,297,337
636,429,171
2011
725,112,203
630,623,652
0.86
1.25
1.15
C. FUNDS FROM OPERATIONS
(NET INCOME + FOREX (GAIN)/LOSS + DEPRECIATION & AMORTIZATION)
`
NI
FOREX
D&A
FFO
2013
10,324,204
2012
62,980,946
10,134,912
319,764,670
340,223,786
(10,052,017)
333,871,307
386,800,236
2011
11,174,308
4,450,551
360,717,658
376,342,517
TEST OF SOLVENCY
A. EBIT (EARNINGS BEFORE INTEREST AND TAXES)
2013
55,963,834
EBIT
2012
86,390,209
2011
43,093,919
B. EBITDA (EARNINGS BEFORE INTEREST, TAXES, DEPN & AMORTIZATION)
EBIT
2013
55,963,834
2012
86,390,209
2011
43,093,919
D&A
319,764,670
333,871,307
360,717,658
EBITDA
375,728,504
420,261,516
403,811,577
C. INTEREST RATE COVERAGE RATIO (EBIT / INTEREST EXPENSE)
EBIT
INT
INTEREST RATE COVERAGE RATIO
2013
55,963,834
32,923,883
1.70
2012
86,390,209
36,401,968
2.37
2011
43,093,919
33,002,541
1.31
D. TIMES INTEREST EARNED (EBITDA/INTEREST EXPENSE)
2013
EBITDA
INT
TIE
2012
2011
375,728,504
420,261,516
403,811,577
32,923,883
36,401,968
33,002,541
11.41
11.57
12.24
15
E. DEBT TO EQUITY RATIO (TOTAL LIAB. /TOTAL EQUITY)
2013
1,702,833,547
1,222,600,220
1.39
TL
SHE
RATIO
2012
1,464,763,165
1,248,108,536
1.17
2011
1,382,961,297
1,203,568,452
1.15
F. DEBT RATIO (TOTAL LIABILITIES / TOTAL ASSETS)
TL
2013
1,702,833,547
2012
1,464,763,165
2011
1,382,961,297
TA
2,925,433,767
2,712,871,701
2,586,529,749
RATIO
0.58
0.54
0.53
G. EQUITY RATIO (TOTAL SHE / TOTAL ASSETS)
SHE
2013
1,222,600,220
2012
1,248,108,536
2011
1,203,568,452
TA
2,925,433,767
2,712,871,701
2,486,329,749
0.42
0.46
0.46
RATIO
H. ASSET TO EQUITY RATIO (TOTAL ASSETS / TOTAL SHE)
TA
SHE
ASSET TO EQUITY RATIO
2013
2,925,433,767
1,222,600,220
2.39
2012
2,712,871,701
1,248,108,536
2.17
2011
2,586,529,749
1,203,568,452
2.15
TEST OF PROFITABILITY
A. RETURN ON REVENUE OR NET PROFIT RATIO (NET INCOME / NET SALES)
MEASURES THE OVERALL PROFITABILITY OF OPNS
NI
2013
10,324,204
2012
62,980,946
2011
11,174,308
NET REV
1,869,304,043
2,000,421,463
1,869,412,499
%
0.55%
3.15%
0.60%
2012
86,390,209
2,000,421,463
4.37%
2011
43,093,919
1,608,325,931
2.68%
B. OPERATING PROFIT MARGIN (EBIT/NET SALES)
EBIT
NET REV
%
2013
55,963,834
1,869,304,043
2.99%
16
C. RETURN ON TOTAL ASSETS (ROA) – EBIT / TOTAL ASSETS
Measures of operating efficiency. It indicates how well management has used the asset under its control to
generate income.
EBIT
TA
%
2013
55,963,834
2,925,433,767
1.91%
2012
87,458,106
2,712,871,701
3.22%
2011
43,093,919
2,586,529,749
1.67%
D. RETURN ON ASSETS (NET INCOME / TOTAL ASSETS)
NI
2013
10,324,204
2012
62,980,946
2011
11,174,308
TA
2,925,433,767
2,712,871,701
2,586,529,749
RETURN
0.35%
2.32%
0.43%
E. RETURN ON OWNER’S EQUITY (NET INCOME / AVE. EQUITY)
Determines the ability of the company to generate income for its shareholders.
NI
SHE
RETURN
2013
10,324,204
1,222,600,220
0.84%
2012
62,980,946
1,248,108,536
5.05%
2011
11,174,308
1,203,568,452
0.93%
C. Discussions
CALENDAR YEAR 2013
The Company registered a net income after tax of Php 10.32 million or a decrease of 83.61% over the previous
year of Php 62.98 million.
During the year the Company acquired 600 container vans under finance lease agreement worth approximately
Php47.6M.
Cash dividends was declared and issued in favor of common shareholders amounting to three centavos (P
=0.03)
per share, or an aggregate amount of =
P13,891,307 paid last July 12, 2013.
OPERATING RESULTS 2013
Net Freight Revenue during the year was P1.86B, was significantly lower by 6.55% due to lower TEU volume
as compared to the previous year.
FINANCIAL CONDITION-2013
Total Assets expanded 7.84% from Php 2.71B to Php 2.93B due to higher prepayments for Insurance and
importations as well as increase in withholding tax credits.
During the year, bank borrowings increased by P41.5M net of P196.95M of payments.
Current ratio in 2013 is 1.04 compared to 1.53 in the previous year. Debt to equity is at 1.39.
17
(i)
There is no event that will trigger direct or contingent financial obligations that is material to the
company, including any default or acceleration of an obligation
(ii)
There is no material off-balance sheet transactions, arrangements, obligations (including contingent
obligations), and other relationships of the company with unconsolidated entities or other persons
created during the reporting period.
(iii)
There are no material commitments for capital expenditures.
(iv)
There are no known trends, events or uncertainties that have had or that are reasonably expected to
have, a material favorable or unfavorable impact on net sales or revenues or income from continuing
operations.
(v)
There are no significant elements of income or loss that did not arise from the registrant’s continuing
operations.
(vi)
There is/are no seasonal aspects that had a material effect on the financial condition or results of
operations.
CALENDAR YEAR 2012
The Company registered a net income after tax of Php 62.98 million or an increase of 464% over the previous
year of Php 11.1 million.
During the year the Company acquired a ten year old vessel with TEU capacity of 408 for Php232M and acquired
700 container vans worth approximately Php83.3M.
During the year, the Company sold one of its old vessel MV Lorcon Davao, with a net loss of Php36M.
Cash dividends was declared and issued in favor of common shareholders amounting to one and a half centavos
(P
=0.015) per share, or an aggregate amount of P
=8,319,633.76 paid last July 20, 2012.
OPERATING RESULTS 2012
Net Freight Revenue during the year was P2.00B, which was significantly higher by 6.5% due to higher TEU
volume as compared with the previous year.
Included in Other Income is P36M loss on the sale of Lorcon Davao.
FINANCIAL CONDITION-2012
Total Assets expanded by 4.7% from 2.59B to 2.71B mainly due to increase in cash generated from operations
and fixed assets.
During the year, bank borrowings increased by P119M net of P158M of payments. This included a P238M, 7year term loan obtained from Metropolitan Bank & Trust Company to finance the acquisition of a 10 year old
vessel during the year.
Current ratio improved from 1.4 to 1.53 while debt to equity remained at 1.16 largely due to increases in revenues.
CALENDAR YEAR 2011
The Company registered a net income after tax of Php 11.2 million or a decrease of 78.5% over the previous year
of Php 52 million.
During the year the Company spent Php100M on dry-docking of two (2) vessels.
18
Cash dividends was declared and issued in favor of common shareholders amounting to three centavos (P
=0.03)
per share, or an aggregate amount of =
P13,891,307 and was paid last July 13 2011.
OPERATING RESULTS 2011
Net Freight Revenue during the year was P1.87B, which was higher by 9.8% due to the implementation of 50%+
increase in bunker surcharge during the early part of the year.
Cost of Services for the year increased by 15.2% substantially due to the increase in fuel costs due to higher
prices and volume.
FINANCIAL CONDITION-2011
Total Assets expanded by 3% from 2.5B to 2.6B mainly due to increase in cash, fixed assets and withholding tax
credits..
Net Property and Equipment increased by 1.33% from P1.64B in 2010 to P1.66B substantially due to drydockings and improvements made to the current fleet
During the year, bank borrowings increased by P27M net of 168M of payments. This included a P130M, 3-year
term loan obtained from Metropolitan Bank & Trust Company to finance the various vessel dry-docking during
the year.
Current ratio improved from 1.22 to 1.40 and debt to equity from 1.08 to 1.16 largely due to increase revenues.
PLANS AND PROGRAMS FOR 2014 AND BEYOND
Plans For 2014
LSC will maintain its service to the 10 major ports in country, providing both pier-to-pier and door-door
services. At the same time, the company shall provide customized solutions to select customers. Operations
will continue to focus on vessel and service reliability as well as service excellence.
E-commerce, originally slated for 2013, will be launched within the year. This aims to provide more flexibility
to customers through on-line booking.
Trucking is a critical component of our service. More trucking support is being set up this year in order to meet
expected increase in volumes. This service component becomes more challenging given the current truck ban
policy in the city of Manila. Together with its truckers, customers and consignees, the company is addressing
these problems to minimize the negative effects of a limited window to move cargoes to and from the port of
Manila.
A newly-acquired vessel, re-named Lorcon Bacolod, is scheduled for deployment in mid-2014. This aims to
reduce maintenance costs and down-time.
LSC will continue to make use of port terminals that will provide increased productivity and reasonable cost to
help improve vessel turn-around.
Plans Beyond 2014
Additional ports of call are continually being reviewed, such as Batangas and Visayan ports. These additional
ports could be added internally or in collaboration with other service providers. Also, LSC shall increase
collaboration with its service partners in order to offer full logistics services to its customers.
Fleet renewal and then expansion will continue beyond 2014.
19
LSC's long-term plans include addressing 6 key areas, which we call the 6 Ps, namely, Profit, People, Portfolio,
Partner, Planet, and Productivity. The goal is to ensure that plans and programs of the business organization
are balanced and well-rounded. The 6 Ps also cover traditional areas such as corporate governance, risk
management, health, safety and environment programs and social responsibility programs.
The quest to offer more value and better service to customers is a never-ending journey. LSC shall move on
with this journey and to eventually become a full logistics service provider in the near future.
Item 7. Financial Statements
Please see exhibit A.
Item 8. Information on Independent Accountant and other Related Matters
SGV & Co was the Company’s independent auditor since 2006 until the present.
(1)
External Audit Fees and Services
Audit and Audit Related Fees – The aggregate fees billed for each of the last three calendar
years for professional services rendered by the external auditors amounted to Php 1.1M per
year from 2009 to 2013 plus Value Added Tax.
(2)
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There was no event in the past where SGV & Co and Co. had any disagreement with the
Company with regard to any matter relating to accounting principles or practices or financial
statement disclosure or auditing scope or procedure.
20
PART III – CONTROL AND COMPENSATION INFORMATION
Item 9. Directors and Executive Officers of the Issuer
(a) Directors, Executive Officers, Promoters and Control Persons
(1) Directors and Executive Officers
The term of office of the Company’s director is for a period of one (1) year until the election and
qualification of their successors. The incumbent directors of the Company with their corresponding business
experience and directorship held for at least the past five (5) years are the following:
Summary of Term of Office of Directors:
1)
2)
3)
4)
5)
6)
7)
Doris Magsaysay-Ho – director since June 2005 up to present
Antony Louis Marden – director since June 2005 up to present
Julio O. Sy – director since 1996 up to present
Roberto A. Umali – director since March 6, 2008
Deogracias N. Vistan – independent director from 2002 up to present
Michael L. Escaler – independent director from 2002 up to present
Mr. Edgardo A. Bautista – independent director from 2008 up to present
DORIS MAGSAYSAY HO, 62, Filipino, Chairperson of the Board and Executive Committee
Doris Magsaysay Ho is President and CEO of the Magsaysay Group of Companies, which is principally involved
in shipping, human resources and business process outsourcing services. Magsaysay Transport and Logistics
Group, operates in the Philippine trade with container liner, tanker and logistics services. Its affiliate, Fairmont
Shipping Limited, with operations in Hongkong, Vancouver and London, operates in the international dry bulk
trade. Magsaysay expanded from its roots in shipping to people resource providers. Magsaysay is present in the
Philippines, Indonesia, China, Eastern Europe and North America. The company prepares its people for a diverse
range of positions for the maritime, cruise, healthcare, hospitality, engineering and other industries. Guided by
its principles of caring for people and investing in training, Magsaysay has been awarded the Lloyd’s List Global
Training award for 2011 in London. Magsaysay is also the recipient of the Seatrade Asia Awards 2013 and 2011
for Corporate Social Responsibility and the Seatrade Asia Awards for Education and Training in 2010.
Magsaysay was also recently awarded the Asean Business Advisory Council Awards for Corporate Social
Responsibility and the Asian CSR Awards.
A. Magsaysay Inc. and Subsidiaries
President and CEO
Lorenzo Shipping Corporation
Chairman
Fairmont Shipping Limited
Director
AFFILIATIONS
Makati Business Club
APEC Business Advisory Council
Philippine Interisland Shipping Association
Steamship Mutual Underwriting Association
World Maritime University
The National Corn Competitiveness Group
Asia Society Philippine Foundation, Inc.
Asia Society (New York)
Metropolitan Museum Manila
The Hague Process on Refugees & Migration
First Philippine Conservation Inc.
World President’s Organization
Trustee
Philippine Member
Chairman Emeritus
Director
Director of Executive Board
Chairman
Chairman
Trustee
Trustee
Trustee
Treasurer and Trustee
Member
AWARDS
Seatrade Asia Awards for Corporate Social Responsibility
Asian CSR Awards
2013
2013
21
Asia Ceo Awards Global Filipino Executive of the Year
Lloyd’s List Asia Lifetime Achievement Award
The Outstanding Manilan Award
Ernst & Young Entrepreneur of the Year for Social Responsibility
Manhattanville College Leadership Award
2012
2011
2005
2004
2002
ANTONY LOUIS MARDEN, 64, British, Vice Chairman of the Board, Chairman of the Nomination
Committee, Member of the Executive and Audit Committees
Antony Louis Marden has been the Vice Chairman of the Board and Executive Committee. He is also Chairman
of the Nomination Committee since June 2006, and a member of the Audit Committee since June 2005. He is
the President of FIM Limited and a Director in the following corporations: G.E. Marden & Co., Ltd., Fenwick
Shipping Services, Ltd., National Marine Corporation, and the Clean Oil (HK) Limited.
JULIO O. SY, SR., 81, Filipino - Director
Mr. Sy was the Chairman of the Board from 1996 to 2006 and Director of the Company since 1996 to present.
He fulfills the same role in a number of other corporations, including: Dumaguete Coconut Oil Mill, Cebu
International Finance Corporation and Dumaguete City Development Bank. He also takes on further
responsibilities as President of BUSCO Sugar Milling Co., Inc., HIDECO Sugar Milling Co., Inc., Jurong
Engineering (Phils.) Inc., New Bian Yek Commercial Inc., July Development Corp., and July Lighterage Corp.,
as Director of Victorias Quality Packaging Corporation; and as EVP of Makati Agro Trading Inc., and Bayview
Park Hotel. Outside the professional realm, he has been actively involved in various civic organizations attesting
to a wide and diverse field of interest and expertise. Attending Siliman University from elementary to college,
he was awarded Outstanding Silimanian in Business. Other honors to his name include Outstanding National
Citizen Award of the Philippines, Philippine National Red Cross Award and National YMCA award.
ROBERTO A. UMALI, 58, Filipino - Director, President and Member of the Executive
Committee
Mr. Umali was formally elected and appointed as Director and President of the company on March 6,
2008. He had been the Officer-in-Charge of the company from May 2007, taking over the position of
the late Capt. Romeo L. Malig. Presently, Mr. Umali is also the Chief Operating Officer of the
Magsaysay Transport and Logistics Corporation and President of the NMC Group (National Marine
Corporation, NMC Container Lines, Inc., NMC Ship Agency and Brokerage, Inc., One Stop Logistics
Solutions, Inc., One Stop Distribution, Inc., Roadlink Solutions, Inc., Clean Oil Resources, Inc., Islas
Tankers Seatransport Corporation, Batangas Bay Carriers, Inc., Laguna Lake Carriers, Inc., Paros
Maritime, Inc., Marine Fuels Philippines, Inc., South East Asian Bunkers and Terminals, Inc., Shiplink
Terminal Resources, Inc., Icebox Logistics Services, Inc., Magsaysay-Seacor, Inc., Omni-Asia Tristar
Holdings, Inc.) and Magsaysay Lines, Inc. (Magsaysay Shipmanagement, Inc., Magsaysay Marine
Services, Inc., MagTech Solutions and Marine Consultancy Services, Inc., Sun Cruises, Inc., Sole
Cruises, Inc., and Filipinas Maritime Transport Corporation), Director and member of the Executive
Committee of various companies in the Magsaysay Group of Companies, and Chairman of Asiaport
Equipment and Logistics Corporation, Fast Cranes, Inc., Travel Services, Inc. and Travel People
Limited, Inc. He started his career with Luzon Stevedoring Corporation in 1978 and since then has
devoted his expertise in the areas of general management, shipping operations, chartering, port
operations, ship management, shipyard operations, shipbuilding, logistics management, planning,
project studies, and personnel administration.
As an active leader in the shipping industry, Mr. Umali currently holds the position as Trustee of the
Philippine Business for Social Progress and Chairman of its Livelihood and Enterprise Committee, and
directorships of leading shipping associations, namely; Philippine Inter-island Shipping Association
(PISA), Philippine Petroleum Sea Transport Association, Philippine Liner Shipping Association, and
22
Filipino Shipowners' Association. He also holds the position as member of various prestigious
business organizations such as the American Chamber of Commerce, Makati Business Club, Business
Economic Club and Philippine Chamber of Commerce and Industry.
Mr. Umali was the Most Outstanding Employee of National Marine Corporation in 1985. He was
awarded as Baby Rotarian of the Year in 2000 by the Rotary Club of Kamuning West, District 3780
and later became its President in 2004-2005. He is also a member of the U.P. Alumi Association and
U.P. Alumni Engineers Association. He placed fourth in the Assistant Electrical Engineering Board
exams after completing his undergraduate degree at the University of the Philippines in 1977. Mr.
Umali graduated with distinction at the Norwegian Shipping Academy in 1987 in the Professional
Shipping and Maritime Law and Insurance courses.
MICHAEL L. ESCALER, 63, Filipino - Independent Director & Member of the Audit Committee.
Mr. Michael L. Escaler is the President and Chief Executive Officer of All Asian Countertrade Incorporated,
known as the largest sugar trader in the Philippines, founded in 1994 in partnership with Louis Dreyfus
Commodities and Sojitz Corporation/Fuji Nikon. Mr. Escaler is also the Chairman and Chief Executive Officer
of Pampanga Sugar Development Company (PASUDECO), Sweet Crystals Integrated Sugar Mill Corporation,
Okeelanta Corporation, San Fernando Electric Company, Balibago Waterworks Corporation and Metro Clark
Waste Management Inc. He also serves as a Director for Herminio Teves Sugar Co., Trinity Life Insurance Co.
and Trinity Health Company. Mr. Escaler has served on the Board of Director for Lorenzo Shipping Corporation
since 2002.
Mr. Escaler is also an active member of the Rotary Club of Makati and prior to founding All Asian Countertrade,
Mr. Escaler was a sugar trader in New York and London from 1972-1993 where he worked for Nissho Iwai
Corporation as well as other companies like Philipp Brothers and ACLI a commodity trading companies. Mr.
Escaler is a Hall of Famer Sprinter for the Ateneo de Manila University where he graduated Cum Laude with a
Degree in AB Economics in 1972. Mr. Escaler finished his Masters in International Marketing at New York
University in 1978.
MR. DEOGRACIAS N. VISTAN, 70, Filipino - Independent Director, Chairman of the Audit Committee
and Member of the Nomination Committee
Mr. Vistan became a Director of the Company in 2002. He is a respected veteran banker whose last major stint
was as President and CEO of Equitable PCI Bank Corporation in 2001-2002. He distinguished himself in the
same position in Solidbank Corporation from 1992 to 2000 and as President and Vice-Chairman of the Land
Bank of the Philippines from 1986 to 1992. Before that, he occupied various senior management positions in
Citibank (Manila) where he also started his banking career.
Presently, he is Chairman of Creamline Dairy Corporation and an Independent Director of Philippine National
Bank and U-Bix Corporation. He is also Chairman of the Landbank Countryside Development Foundation, Inc.,
the PinoyME Foundation and a Trustee of the Ramon Magsaysay Award Foundation.
He graduated with a double degree in Business Administration and Humanities from the De La Salle University
and finished his Master in Business Administration at the Wharton Graduate School of the University of
Pennsylvania.
EDGARDO A. BAUTISTA, 79, Filipino, Independent Director
Mr. Bautista was nominated as an Independent Director of the Company on April 17, 2008. He is currently the
Vice Chairman and CEO of CEPALCO Group, Chairman, Acuatico Pte Ltd Singapore also sits as a Chairman
Acuatico Services Vietnam, He is also a member of the Management Board of Viwasupco Vietnam and Viwaco
Vietnam, also a Member of the Board of Trustees of the AIM Mirant Bridging Leadership Center.
He was a Consultant to the President of San Miguel Corporation from June 2008 to June 2009. He was a
Commissioner of the PT Bakrieland Development Tbk. since April 2007 until Feb. 2009. He was also the
23
Chairman of the EL Paso Philippines Energy Company, Inc and Director of EPEC Nederland Holding BV, and
East Asia Utilities Corporation, up until June 2008. From July 2006 to June 2008, Mr. Bautista served as the
Executive Director, Head of Asia Infrastructure Business of Avenue Asia Investments Management, LLC.
Mr. Bautista was also an independent director of the Philippine National Oil Company – EDC (PNOC-EDC)
until September 2007. From 2006 to 2007, he served as a Director of Visayan Electric Company, San Fernando
Electric and Light Company, Vivant Corporation and Global Business Power Corporation. From 2003 to 2005,
Mr. Bautista was a Director in Subic Enerzone Corporation and Philippine Electricity Market Corporation.
From January 1997 to December 2005, Mr. Bautista was the Chief Executive Officer of Mirant Philippines
Corporation and its subsidiaries, the President of Mirant Philippine Foundation and the President and Chief
Executive Officer of Mirant Global Corporation and its four subsidiaries. Prior to his stint with Mirant, he served
as the President and Chief Executive Officer of the Hopewell Group of Companies, a pioneer independent power
company which developed into Mirant Philippines Corporation.
Mr. Bautista graduated with honors (Cum Laude) from De La Salle College with a degree in Mechanical
Engineering. He also completed General Electric’s 2 year specialized management and technical program for
selected graduate engineers from different countries conducted at various facilities in the United States and an
Advance Management Program conducted by professors of the Harvard Business School. In 2006, Mr. Bautista
became a Certified Fellow of the Institute of Independent Directors.
ARSENIO C. CABRERA, JR., 53, Filipino - Corporate Secretary
Atty. Cabrera, a member of the Philippine Bar, holds a Bachelor of Laws (Second Honors) and a Bachelor of
Science in Legal Management from Ateneo de Manila University. Mr. Cabrera is a Managing Partner of Herrera
Teehankee & Cabrera Law Offices. He was elected as Corporate Secretary of the Company in 1996. He is
currently the General Counsel of STI Education Services Group, Inc. He also serves as Corporate Secretary of
Araval, Inc., BOIE Drug, Inc., BOIE, Incorporated, BOIE Prime, Inc., Bountiful Geomines, Inc., Calatagan Bay
Realty, Inc., Canlubang Golf and Country Club, Inc., Capital Managers and Advisors, Inc., Classic Finance
Corporation, Coinage, Inc., DLS-STI Colleges, Inc., DLS-STI Megaclinic, Inc., Foundation for Filipinos, Inc.,
GEOGEN Corporation, GEOGRACE Resources Philippines, Inc., Masbate13 Philippines, Inc., Mina Tierra
Gracia, Inc., NiHAO Mineral Resources International, Inc., Oregalore, Inc., Philippine American Drug
Company, Philippine First Condominium Corporation, Philippines First Insurance Co., Inc., Philippine Life
Assurance Financial Corporation, Philippine Women’s University, Philhealthcare, Inc., Philplans First, Inc.,
Renaissance Condominium Corporation, Rivara, Inc., Rosehills Memorial Management Philippines, Inc. Sonak
Holdings, Inc., STI Education Systems Holdings, Inc., STI Investments, Inc., Total Consolidated Asset
Management, Inc., Trend Developers, Inc., Unlad Resources Development Corporation, Villa Development
Corporation, West Negros University Corp. and WVC Development Corporation.
ANA CARMINA S. HERRERA, 39, Filipino - Assistant Corporate Secretary
A Senior Associate of Herrera Teehankee and Cabrera Law Offices, Atty. Herrera also performs the
role of Asst. Corporate Secretary in a number of other corporations: Banclife Insurance Co., Inc.,
Coastal Bay Chemicals, Inc., STI Education Systems Holdings, Inc., Palisades Condominium
Corporation, Philippine Life Assurance Financial Corporation, Philhealthcare, Inc., Philippines First
Insurance Co., Inc., Philippine First Condominium Corporation, STI College of Kalookan, Inc. and
STI College of Novaliches, Inc. She received her Bachelor of Laws degree from the University of the
Philippines in 2000.
OTHER EXECUTIVE OFFICERS:
24
EDNA F. MENDIOLA, 52, Filipino – Vice-President for Finance & Chief Finance Officer
Prior to her appointment as VP for Finance / Chief Finance Officer in April 17, 2009, Ms. Mendiola used to be
the Internal Audit Head when she joined Lorenzo Shipping Corporation in October 2007. Prior to LSC, she
handled the position of being the Country Audit Head of Consolidated Industrial Gases Inc. (CIGI), a multinational gas manufacturing company for 6 years where she was heavily involved in the Asia cluster focusing on
Business Assurance, Corporate Governance / Code of Conduct and the control framework for Sarbanes-Oxley
Act, a statutory requirement for publicly traded companies. While in the Audit position, she also occupied the
position of Local Implementation Project Manager for SAP when launched in CIGI in the year 2005.
Ms. Mendiola worked in CIGI for 23 years handling various managerial positions in Audit and Finance - Credit
& Treasury, Risk Management, Joint-Venture Accounting, Procurement and Quality Systems Audit. She is a
Certified Public Accountant and a graduate of University of the East - Manila with a degree of Bachelor of
Science in Business Administration.
FELICISIMO H. SALDAÑA, JR., 64, Filipino – Vice President for Operations
Mr. Saldaña joined the Company, during the latter part of the year 2000 with a wealth of experience both from
international and domestic shipping operations. He has handled all work activities involved in a shipping
company, i.e. finance and administration, operations and marketing work at Sealand Service, Inc. He was also
the General Manager of a major domestic container yard and warehouse operator and also General Manager of
Hyundai Shipping Agency in the Philippines. He is a CPA from Far Eastern University with a Masters in Business
Administration degree from De La Salle University. He was appointed as Vice President for Operations &
Logistics also in October 2002.
EDRALIN G. MANAPSAL, 55 Filipino - Vice President for Sales & Marketing
Mr. Manapsal graduated with a degree in Business Administration major in Management from the Philippine
School of Business Administration ( PSBA ).
He joined the Company in May 2001 as Senior Corporate Sales and Marketing Manager and after a year was
promoted to Assistant Vice President for Marketing and Sales in October 2002. He was appointed as Vice
President for Marketing and Sales in 2005.
His other work stints were with Anscor Transport & Terminals, Inc., Soriamont Steamship Agencies, Inc. as
Line Manager for U.S.A./EUROPE trade, P&O Nedlloyd, Inc. as Senior Marketing and Sales Manager and
HANJIN Shipping as Sales and Japanese Accounts Senior Manager.
DINO C. DIAZ, 50, Filipino – Compliance Officer
Mr. Diaz joined the Company in 2005 bringing with him 20 years of shipping experience. Prior to joining the
Company, he held various key positions in National Marine Corporation (NMC) and its Subsidiaries. Some of
these were as General Manager of NMC Container Lines and as Assistant Vice President for Corporate Planning
and Business Development of NMC.,
He graduated from the Ateneo de Manila University in 1984 with a BS degree in Management Engineering. He
started his career in shipping with Benguet Management Corporation and had a brief stint with SGV Consulting
prior to joining National Marine Corporation in 1991. He attended the Sea Transport Course at the Asian Institute
of Management and Maritime Transport Course at the World Maritime University in Malmo, Sweden.
(2)
Significant Employees
No person, who is not a director or an executive officer, is expected to make a significant contribution
to the business of the Company. Neither is the business highly dependent on the services of key
25
personnel.
(3)
Family Relationships
All the other above named directors and/or executive officers of the Company are not related, either by
consanguinity or affinity up to the fourth civil degree.
(4)
Involvement in Certain Legal Proceedings
To the knowledge and/or information of the Company, the above named directors and executive officers
of the Company are not, presently or during the last five (5) years, involved or have been involved in
any material legal proceeding affecting/involving themselves and/or their property before any court of
law or administrative body in the Philippines or elsewhere. To the knowledge and/or information of the
Company, the said persons have not been convicted by final judgment of any offense punishable by the
laws of the Republic of the Philippines or of the laws of any other nation/country.
Item 10. Executive Compensation
a.
Executive Compensation
The aggregate total compensation for directors, the President and the top four officers of the
Company is shown below.
Top five (5) officers
Compensation
1.
2.
3.
4.
5.
Compensation
(Bonuses)
2014
Php 14.3M
(estimate)
Php1.5M
(estimate)
YEAR
Compensation
(Bonuses)
2013
Php 13.0M
Php2.2M
YEAR
Compensation
(Bonuses)
2012
Php 11.81M
Php1.21M
Mr. Roberto A. Umali, President
Mr. Edna F. Mendiola, VP-Finance
Mr. Edralin Manapsal, VP- Sales and Marketing
Mr. Dino C. Diaz, Compliance Officer
Mr. Felicisimo H. Saldaña, VP- Operations
Top five (5) officers
Compensation
6.
7.
8.
9.
10.
YEAR
Mr. Roberto A. Umali, President
Mr. Edna F. Mendiola, VP-Finance
Mr. Edralin Manapsal, VP- Sales and Marketing
Mr. Dino C. Diaz, Compliance Officer
Mr. Felicisimo H. Saldaña, VP- Operations
Top five (5) officers
Compensation
26
11.
12.
13.
14.
15.
Mr. Roberto A. Umali, President
Mr. Edna F. Mendiola, VP-Finance
Mr. Edralin Manapsal, VP- Sales and Marketing
Mr. Dino C. Diaz, VP- Corporate Planning and Logistics and Compliance Officer
Mr. Felicisimo H. Saldaña, VP- Operations
Top five (5) officers
Compensation
1.
2.
3.
4.
5.
a
Compensation of Directors
Year 2014 (estimate)
Year 2013
Year 2012
Year 2011
c.
Compensation
(Bonuses)
2011
Php 10.89M
Php1.69M
Mr. Roberto A. Umali, President
Mr. Edna F. Mendiola, VP-Finance
Mr. Edralin Manapsal, VP- Sales and Marketing
Mr. Dino C. Diaz, VP- Corporate Planning and Logistics and Compliance Officer
Mr. Felicisimo H. Saldaña, VP- Operations
All officers and directors
as a group unnamed
b.
YEAR
Year
2014(estimate)
2013
2012
2011
Compensation
Phhp14.80M
Php 13.96M
Php 12.51M
Php 11.63M
Bonuses
Php 2.00M
Php 3.50M
Php 1.83M
Php 2.94M
Compensation
Php1.000M
Php 0.927M
Php 0.709M
Php 0.741M
Bonuses
Php0.80M
Php 1.30M
Php 0.85M
Php 1.25M
Employment Contracts and Termination of Employment and Change-in-Control Arrangements.
There are no employment contracts between the Company and a named executive officer, and any
compensatory plan or arrangement, including payments to be received from the Company, with respect
to a named executive officer, which plan or arrangement results or will result from the resignation,
retirement or any other termination of such executive officer's employment with the Company and its
subsidiaries or from a change-in-control of the Company or a change in the named executive officer's
responsibilities following a change-in-control and the amount involved, including all periodic payments
or installments, which exceeds Php2,500,000.
Item 11. Security of Certain Record/Beneficial Owners and Management
1.) Security Ownership of Certain Record/Beneficial Owners as of March 31, 2014
As of 31 March 2014, the following stockholders are the only owners of more than 5% of the
Company’s voting capital stock, whether directly or indirectly, as record owner or beneficial owner:
Title of
Class
Common
Name, Address of
Record Owner and
Relationship with
Issuer
National Marine
Corporation
Name of Beneficial
Owner and Relationship
with Record Owner
Citizenship
Doris Magsaysay-Ho, the
President of National
Marine Corporation, and
Filipino
No. of Shares
Held
Direct –
276,520,756
Percent
49.86%
27
7/F Times Plaza,
U.N. Ave. cor. Taft
Ave., Ermita,
Manila
Common
Pioneer Insurance
& Surety Corp.
(“Pioneer)
108 Paseo de
Roxas, Makati City
Common
Pioneer is the
Company’s insurer
for its seven (7)
vessels
Julio O. Sy, Sr.
Antony Louis Marden, a
director of National
Marine Corporation, are
authorized to vote for the
shares of National Marine
Corporation in the
Company
Pioneer is the beneficial
owner of the shares.
Filipino
Indirect
102,628,805
18.50%
75,193,750
13.56%
42,744,511
7.71%
Mr. David Coyukiat, the
President of Pioneer, is
duly authorized to vote
for the shares of Pioneer
in the Company.
Filipino
Security Ownership of Management as of 31 March 2014
The following table sets forth as of 31 March 2014, the beneficial ownership of each director and
executive officer of the Company:
Title of Class
Name of Beneficial Owner
Common
Julio O. Sy, Sr.
Common
Doris Magsaysay Ho
Common
Antony Louis Marden
Common
Michael L. Escaler
Common
Deogracias N. Vistan
Common
Roberto A. Umali
Common
Edgardo A. Bautista
Common
Atty. Arsenio C. Cabrera, Jr.
Common
Directors & Officers as a Group
(3)
Amount & Nature of
Beneficial Ownership
42,744,511 Record
Filipino
Percent of
Class
7.71%
1 Record
Filipino
0.00%
1 Record
British
0.00%
241,250 Record
Filipino
0.04%
3,750 Record
Filipino
0.00%
1,188,701 Record
Filipino
0.21%
1,000 Record
Filipino
0.00%
30,000 Record
Filipino
0.01%
44,209,214 Record
Citizenship
7.97%
Voting Trust Holders of 5% or More
NMC and Pioneer entered into a Voting Trust Agreement whereby Pioneer transferred and
delivered stock certificates covering 75,193,750 shares of the Company or approximately
13.53% of the Company’s outstanding capital stock to NMC as the Trustee. The
Agreement provided that NMC, as the Trustee, was entitled to exercise all the rights and
powers of an absolute owner of said shares of stock, including the right to vote for every
corporate purpose in accordance with its best judgment. Under the terms of the Voting
Trust Agreement, NMC is obliged to deliver proper certificates of the equivalent amount
of shares in the Company to Pioneer in July 2006 or in any period that may be subsequently
agreed upon by the parties.
28
(4)
Changes in Control
There is no existing arrangement which may result in a change of control in the
Company.
Item 12. Certain Relationships and Related Transactions.
Transactions between related parties are accounted for at arms’ length prices or on terms similar to those
offered to non-related entities in an economically comparable market.
The following are the list of transactions during the past two (2) years to which the Company is a party,
and in which certain persons or group have a direct or indirect material interest.
1. NMC Container Lines, Inc. (NMCCLI) – related party
A wholly owned subsidiary of NMC, NMCCLI has a Co-Loading Agreement with the Company. To
alleviate temporary service disruptions, the parties extended to each other the privilege of co-loading their
respective cargos subject to the payment of the freight or tariff rates specified under the Co-Loading
Agreement.
2. Asiaport Equipment and Logistics Corporation – related party
On 01 September 2008, LSC signed a cargo-hanling contract with Asiaport Equipment and logistics
Corporation for the handling of its containers at LSC’s container yard at Pier 16 in Manila. Asiaport is 30
percent owned by National Marine Corporation.
20. One Stop Logistics Solutions (OSLI) – related party
One Stop Logistics Solutions provides logistical support to the Company by providing logistics services,
such as cargo consolidation, cargo handling, cargo trucking, and lube oil transport among other services.
4. Magsaysay Houlder Insurance Brokers, Inc. (MHIBI) – related party
MHIBI handles the marine cargo insurance requirements of the Company.
5. Magsaysay Shipmanagement Inc. (MSI) – related party
The Company entered into a Ship Management Agreement with MSI an associate company of NMC, on
30 November 2005. Pursuant to the terms of the Agreement, MSI is obliged to maintain the vessels of the
Company in seaworthy condition and in accordance with the standards set by the Company: MSI is also
obliged to manage the crew of said vessels for the duration of the Agreement or from 1 January 2006 to 31
December 2009. Currently the Shipmanagement Agreement with MSI is in the process of being renewed.
5. Julio O. Sy, Sr., Shareholder, Director
On 16 Dec 2007, the Company entered into a contract of lease with Mr. Julio O. Sy, Sr. for the rental of a
parcel of land containing an area of 5,000 square meters situated at Harbor Center, Tondo, Manila at the
rate of Php66.55 per square meter and payable monthly. The contract is for a period of three (3) months
from 16 Dec 2007 up to 15 Mar 2008.
6. DKL Shipping Agency – related party
The Company entered into an agency contract with DKL Shipping Agency, a sole proprietorship business
entity owned by Ms Jocelyn S. Limkaichong, daughter of Mr. Julio Sy, to service its marketing and other
shipping related requirements in 1998 for the port of Dumaguete City and in December 2000 for the port
of Bacolod City.
7. Tao Commodity Trader Inc. - related party
29
Tao Commodity, a corporation majority owned by Mr. Julio Sy Jr., son of Mr. Julio Sy Sr. is the major
supplier of the Company’s fuel requirements in 2005.
8. Dumaguete Coconut Mills – related party
Dumaguete Coconut Mills is a corporation substantially owned by Mr. Julio Sy Sr., shareholder, director
of the Company. The Company entered into a Contract of Lease with Dumaguete Coconut Mills for the
rental of a parcel of land located at Bacong, Negros Oriental at the rate of Php30, 000.00 per month. The
contract stipulated that the leased premises would be used for storage purposes only. The term of the
contract commenced on 1 October 2002 and will expire on 31 December 2007.
9. Pioneer Insurance & Surety Corp. (Pioneer), Shareholder
Pioneer is the Company’s provider of protection and indemnity and of hull & machinery insurances for its
seven (7) vessels.
10. Mr. Oscar Go, Shareholder
OYG Transport Inc.
Owned by Mr. Oscar Go, OYG Transport Inc. has entered into a non-exclusive hauler agreement with the
Company
11. The following customers are majority owned by directors or shareholders:
Customers
All Asian Countertrade
Oceanic Container Lines, Inc.
Discovery Haulers, Inc.
Evertop Transport
Roadlink Transport
Director/Shareholder
Majority owned by Mr. Michael Escaler, director
Majority owned by Mr. Jose Go Jr., shareholder
Majority owned by Mr. Jose Go Jr., shareholder
Majority owned by Mr. Jose Go III, son of Mr. Jose Go Jr.,
shareholder
Wholly owned by One Stop Logistics Solutions, Inc. (OLSI)
30
PART IV – EXHIBITS AND SCHEDULES
Item 13. Exhibits and Reports on SEC Form 17-C
(a) Exhibits
Exhibits
A
Description
Financial Statements
Statement of Management’s Responsibility for Financial Statements
Report of Independent Accountants
Balance Sheets as of December 31, 2012 and 2011
Statements of Income for each of the three years ended December 31, 2012,
2011 and 2010
Statements of Comprehensive Income for each of the three years ended
December 31, 2012, 2011 and 2010
Statements of Changes in Stockholders’ Equity for each of the three years
ended December 31, 2012, 2011 and 2010
Statements of Cash Flows for each of the three years ended December 31,
2012, 2011 and 2010
Notes to Financial Statements
Schedule A - Marketable Securities (Current Marketable Equity
Securities and Other Short-term Cash Investments
Schedule B – Amounts Receivables from Directors, Officers,
Employees, Related Parties and Principal Stockholders
Schedule C – Non Current Marketable Equity Securities, Other
Long-term Investments in stock and Other Investments
Schedule D – Advances to Unconsolidated Subsidiaries and Affiliates
Schedule E – Intangible Assets – Other Assets
Schedule F – Long-term Loans
Schedule G – Indebtedness to Affiliates and Related Parties
(Long-term loans from Related Companies)
Schedule H – Guarantees of Securities of Other Issuers
Schedule I – Capital Stock
(b) Reports on SEC Form 17-C
State whether any reports on SEC Form 17-C were filed during the last twelve month period covered by this
report, listing the items reported, any financial statements filed and the dates of such.
Report Date
26 April 2013
27 June 2013
4 October 2013
14 October 2013
Item

Venue of the Stockholders’ Meeting

Results of Annual Stockholder’s Meeting

Election of Officers

Declaration of Cash Dividends

Adoption of Dividend Policy

Filing of Petition with the Court of Tax Appeals against the Commissioner of
Internal Revenue.

Amendment of the Corporation’s By-Laws to create the position of Chief
Operating Officer.
31
27 June 2013
Annual Stockholders’ Meeting
The shareholders elected the following Directors of the Company to serve as such
for the ensuing year and until the election and qualification of their successors:
1.
2.
3.
4.
5.
Doris Magsaysay Ho
Antony Louis Marden
Roberto A. Umali
Julio O. Sy, Sr.
Michael L. Escaler
Independent Directors:
6.
Deogracias N. Vistan
7.
Edgardo A. Bautista
The stockholders also appointed Sycip Gorres Velayo & Company as the
Corporation’s external auditor for the year 2013.
In the Organizational Meeting of the Board of Directors immediately succeeding the
shareholders’ meeting, the following were elected Officers of the Company to serve
as such for the ensuing year and until the election and qualification of their successors:
Chairperson
Vice-Chairman
President and Chief Executive Officer
Chief Financial Officer/Treasurer
Compliance Officer
VP for Operations
VP for Marketing
Corporate Secretary & Corporate
Information Officer
Assistant Corporate Secretary
Executive Committee:
Chairman
Member
Member
Audit Committee:
Chairman
Member
Member
Member
Nomination Committee:
Chairman
Member
Member
Compensation Committee:
Chairman
Member
Member
-
Doris Magsaysay-Ho
Antony Louis Marden
Roberto A. Umali
Edna F. Mendiola
Dino C. Diaz
Felicisimo H. Saldaña
Edralin G. Manapsal
Atty. Arsenio C. Cabrera, Jr.
Atty. Anna Carmina S. Herrera
-
Doris Magsaysay-Ho
Antony Louis Marden
Roberto A. Umali
-
Deogracias N. Vistan
Michael L. Escaler
Antony Louis Marden
Edgardo A. Bautista
-
Antony Louis Marden
Deogracias N. Vistan
Michael L. Escaler
-
Doris Magsaysay Ho
Antony Louis Marden
Deogracias N. Vistan
32
COVER SHEET
4 8 9 0 9
SEC Registration Number
L O R E N Z O
S H I P P I N G
C O R P O R A T I O N
(Company’s Full Name)
2 0 t h
F l o o r
U n i t e d
T i m e s
N a t i o n s
P l a z a
A v e n u e ,
B u i l d i n g ,
E r m i t a ,
M a
Ln i l a
(Business Address: No. Street City/Town/Province)
Edna F. Mendiola
(02) 567-2180
(Contact Person)
(Company Telephone Number)
1 2
3 1
AAFS
Month
Day
(Form Type)
Month
(Calendar Year)
Day
(Annual Meeting)
Not Applicable
(Secondary License Type, If Applicable)
SEC
Not Applicable
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
979
P
=943.60 million
$3.68 million
Domestic
Foreign
Total No. of Stockholders
To be accomplished by SEC Personnel concerned
File Number
LCU
Document ID
Cashier
STAMPS
Remarks: Please use BLACK ink for scanning purposes.
*SGVFS004263*
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Tel: (632) 891 0307
Fax: (632) 819 0872
ey.com/ph
BOA/PRC Reg. No. 0001,
December 28, 2012, valid until December 31, 2015
SEC Accreditation No. 0012-FR-3 (Group A),
November 15, 2012, valid until November 16, 2015
INDEPENDENT AUDITORS’ REPORT
The Board of Directors and Shareholders
Lorenzo Shipping Corporation
20th Floor Times Plaza Building
United Nations Avenue
Ermita, Manila
Report on the Financial Statements
We have audited the accompanying financial statements of Lorenzo Shipping Corporation, which
comprise the balance sheets as at December 31, 2013 and 2012, and the statements of income,
statements of comprehensive income, statements of changes in equity and statements of cash flows for
each of the three years in the period ended December 31, 2013, and a summary of significant
accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Philippine Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with Philippine Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
*SGVFS004263*
A member firm of Ernst & Young Global Limited
-2Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
Lorenzo Shipping Corporation as at December 31, 2013 and 2012, and its financial performance and
cash flows for each of the three years in the period ended December 31, 2013, in accordance with
Philippine Financial Reporting Standards.
Report on Supplementary Information Required Under Revenue Regulations 15-2010
Our audits were conducted for the purpose of forming an opinion on the basic financial statements
taken as a whole. The supplementary information required under Revenue Regulations 15-2010 in
Note 30 to the financial statements is presented for purposes of filing with the Bureau of Internal
Revenue and is not a required part of the basic financial statements. Such information is the
responsibility of the management of Lorenzo Shipping Corporation. The information has been
subjected to the auditing procedures applied in our audit of the basic financial statements. In our
opinion, the information is fairly stated, in all material respects in relation to the basic financial
statements taken as a whole.
SYCIP GORRES VELAYO & CO.
Leovina Mae V. Chu
Partner
CPA Certificate No. 99910
SEC Accreditation No. 1199-A (Group A),
March 15, 2012, valid until March 14, 2015
Tax Identification No. 209-316-911
BIR Accreditation No. 08-001998-96-2012,
January 11, 2012, valid until January 10, 2015
PTR No. 4225232, January 2, 2014, Makati City
April 14, 2014
*SGVFS004263*
A member firm of Ernst & Young Global Limited
LORENZO SHIPPING CORPORATION
BALANCE SHEETS
December 31,
2013
December 31,
2012
(As restated;
Note 2)
January 1,
2012
(As restated;
Note 2)
ASSETS
Current Assets
Cash and cash equivalents (Note 5)
Trade and other receivables (Note 6)
Inventories (Note 7)
Prepayments and other current assets (Note 8)
Total Current Assets
P
=110,679,597
890,182,268
29,883,988
177,383,200
1,208,129,053
P
=191,193,593
606,103,744
30,460,277
144,095,880
971,853,494
P
=128,890,951
596,221,252
42,506,345
116,803,371
884,421,919
Noncurrent Assets
Property and equipment (Note 9)
Deferred income tax asset (Note 20)
Other noncurrent assets (Note 10)
Total Noncurrent Assets
1,652,972,769
53,247,313
11,084,632
1,717,304,714
1,681,456,399
42,625,111
16,936,697
1,741,018,207
1,659,958,872
32,963,427
9,185,531
1,702,107,830
=2,712,871,701
P
=2,925,433,767 P
P
=2,586,529,749
P
=486,400,240
232,458,822
P
=357,479,907
39,158,822
P
=454,072,961
65,000,000
411,871,048
31,997,429
1,162,727,539
213,979,430
25,811,012
636,429,171
91,500,000
20,050,691
630,623,652
299,269,321
648,316,609
624,944,462
130,159,204
110,677,483
540,106,008
105,948,729
74,068,656
828,333,994
62,106,408
65,286,775
752,337,645
555,652,251
555,652,251
555,652,251
459,791,492
(29,198,893)
239,481,220
(3,125,850)
1,222,600,220
459,791,492
(7,232,429)
243,023,072
(3,125,850)
1,248,108,536
459,791,492
2,888,799
188,361,760
(3,125,850)
1,203,568,452
TOTAL ASSETS
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and accrued expenses (Note 11)
Short-term borrowings (Note 12)
Current portion of:
Long-term borrowings (Note 12)
Obligations under finance lease (Note 24)
Total Current Liabilities
Noncurrent Liabilities
Long-term borrowings - net of current portion (Note 12)
Obligations under finance lease - net of current portion
(Note 24)
Retirement benefit obligation (Note 16)
Total Noncurrent Liabilities
EQUITY (Note 21)
Common stock - =
P1 par value
Authorized - 991,183,999 shares
Issued and outstanding - 554,642,251 shares
Additional paid-in capital
Actuarial gains (losses) on defined benefit plan (Note 16)
Retained earnings
Treasury shares at cost
Total Equity
TOTAL LIABILITIES AND EQUITY
=2,712,871,701
P
=2,925,433,767 P
P
=2,586,529,749
See accompanying Notes to Financial Statements.
*SGVFS004263*
LORENZO SHIPPING CORPORATION
STATEMENTS OF INCOME
Years Ended December 31
2012
2011
(As restated;
(As restated;
Note 2)
Note 2)
2013
FREIGHT REVENUE (Note 23)
P
=1,869,304,043
=2,000,421,463
P
=1,869,412,499
P
1,455,463,331
228,467,119
1,683,930,450
1,524,509,816
223,515,338
1,748,025,154
1,458,164,128
243,621,112
1,701,785,240
185,373,593
252,396,309
167,627,259
(158,703,319)
(141,555,641)
(157,546,735)
(44,046,710)
(26,729,793)
(36,856,117)
OTHER INCOME (CHARGES) - net
(Note 18)
29,293,560
(24,450,459)
33,013,395
INCOME BEFORE INCOME TAX
11,917,124
59,660,416
6,237,802
2,800,923
(1,208,003)
1,592,920
2,003,485
(5,324,015)
(3,320,530)
3,478,924
(8,415,430)
(4,936,506)
DIRECT COSTS
Cost of services (Note 13)
Terminal expenses (Note 14)
GROSS PROFIT
GENERAL AND ADMINISTRATIVE
EXPENSES (Note 15)
FINANCE COSTS AND OTHER
CHARGES - net (Note 19)
PROVISION FOR (BENEFIT FROM)
INCOME TAX (Note 20)
Current
Deferred
NET INCOME
EARNINGS PER SHARE (Note 22)
Basic/diluted
P
=10,324,204
P
=62,980,946
P
=11,174,308
P
=0.02
P
=0.11
P
=0.02
See accompanying Notes to Financial Statements.
*SGVFS004263*
LORENZO SHIPPING CORPORATION
STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31
2011
2012
(As restated;
(As restated;
Note 2)
Note 2)
2013
NET INCOME
OTHER COMPREHENSIVE INCOME
Items that will not be reclassified to
statements of income:
Actuarial gains (losses) on defined benefit
plan (Note 16)
Income tax effect
TOTAL COMPREHENSIVE INCOME
(LOSS)
P
=10,324,204
P
=62,980,946
(31,380,663)
9,414,199
21,966,464
(14,458,895)
4,337,667
10,121,228
(P
=11,642,260)
P
=52,859,718
P
=11,174,308
9,566,851
(2,870,055)
6,696,796
P
=17,871,104
See accompanying Notes to Financial Statements.
*SGVFS004263*
LORENZO SHIPPING CORPORATION
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
Additional
Paid-in Capital Treasury Shares
=
P459,791,492
=–
P
–
–
459,791,492
–
–
–
–
(3,125,850)
–
–
–
–
–
–
=
P459,791,492
(P
=3,125,850)
Actuarial Losses
on Defined
Benefit Plan
(Note 16)
=–
P
(3,807,997)
(3,807,997)
–
–
–
6,696,796
6,696,796
=
P2,888,799
Balances at January 1, 2011, as previously reported
Changes in accounting for employee benefits (Note 2)
Balances at January 1, 2011, as restated
Cash dividends - =
P0.03 per share (Note 21)
Acquisition of treasury shares (Note 21)
Net income for the year
Movement of actuarial gains on defined benefit plan
Total comprehensive income
Balances at December 31, 2011, as restated
Capital Stock
=
P555,652,251
–
555,652,251
–
–
–
–
–
=
P555,652,251
Balances at January 1, 2012, as restated
Cash dividends - =
P0.015 per share (Note 21)
Reversal of appropriation (Note 21)
Net income for the year, as previously reported
Changes in accounting for employee benefits (Note 2)
Net income for the year, as restated
Movement of actuarial losses on defined benefit plan
Total comprehensive income
Balances at December 31, 2012, as restated
=
P555,652,251
–
–
–
–
–
–
–
=
P555,652,251
=
P459,791,492
–
–
–
–
–
–
–
=
P459,791,492
(P
=3,125,850)
–
–
–
–
–
–
–
(P
=3,125,850)
=
P2,888,799
–
–
–
–
–
(10,121,228)
(10,121,228)
(P
=7,232,429)
Balances at January 1, 2013, as restated
Cash dividends - =
P0.025 per share (Note 21)
Net income for the year
Movement of actuarial losses on defined benefit plan
Total comprehensive income
Balances at December 31, 2013
=
P555,652,251
–
–
–
–
P
=555,652,251
=
P459,791,492
–
–
–
–
P
=459,791,492
(P
=3,125,850)
–
–
–
–
(P
=3,125,850)
(P
=7,232,429)
–
–
(21,966,464)
(21,966,464)
(P
=29,198,893)
Retained Earnings (Note 21)
Appropriated Unappropriated
=
P732,909
=
P190,345,850
–
–
732,909
190,345,850
–
(13,891,307)
–
–
–
11,174,308
–
–
–
11,174,308
=
P732,909
=
P187,628,851
=
P732,909
–
(732,909)
–
–
–
–
–
=–
P
=–
P
–
–
–
–
P
=–
Total
=
P1,206,522,502
(3,807,997)
1,202,714,505
(13,891,307)
(3,125,850)
11,174,308
6,696,796
17,871,104
=
P1,203,568,452
=
P187,628,851
(8,319,634)
732,909
62,389,661
591,285
62,980,946
–
62,980,946
=
P243,023,072
=
P1,203,568,452
(8,319,634)
–
62,389,661
591,285
62,980,946
(10,121,228)
52,859,718
=
P1,248,108,536
=
P243,023,072
(13,866,056)
10,324,204
–
10,324,204
P
=239,481,220
=
P1,248,108,536
(13,866,056)
10,324,204
(21,966,464)
(11,642,260)
P
=1,222,600,220
See accompanying Notes to Financial Statements.
*SGVFS004263*
LORENZO SHIPPING CORPORATION
STATEMENTS OF CASH FLOWS
Years Ended December 31
2012
(As restated;
Note 2)
2013
CASH FLOWS FROM OPERATING
ACTIVITIES
Income before income tax
Adjustments for:
Depreciation (Note 9)
Interest expense (Note 19)
Loss (gain) on disposal of property and
equipment - net (Note 18)
Net unrealized foreign exchange
loss (gain) (Note 19)
Impairment losses on:
Trade and other receivables
(Notes 6 and 15)
Deposits (Note 15)
Amortization of deferred financing cost
Equity in net loss of an associate
Interest income (Note 15)
Operating income before working capital
changes
Decrease (increase) in:
Trade and other receivables
Inventories
Prepayments and other current assets
Increase (decrease) in:
Accounts payable and accrued expenses
Pension obligation
Net cash generated from operations
Income taxes paid
Net cash flows from operating activities
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from disposal of property and
equipment
Decrease (increase) in other noncurrent assets
Interest received
Additions to property and equipment
(Notes 9 and 29)
Net cash flows used in investing activities
2011
P
=11,917,124
P
=59,660,416
P
=6,237,802
319,764,670
32,923,883
333,871,307
36,401,968
360,717,658
33,002,541
27,399,907
37,477,764
(14,325,068)
11,801,726
(7,648,101)
1,796,451
–
591,830
160,762
(619,433)
3,565,174
993,092
901,024
89,239
(1,305,882)
151,661
27,043,379
–
302,534
–
(1,053,292)
405,736,920
464,006,001
412,077,215
(284,962,646)
576,289
(33,287,320)
(13,102,885)
12,046,068
(27,292,511)
3,594,630
1,057,813
(55,745,068)
128,701,668
5,228,164
221,993,075
(2,800,923)
219,192,152
(96,044,700)
(5,677,014)
333,934,959
(2,003,485)
331,931,474
(1,535,539)
235,571
359,684,622
(3,478,924)
356,205,698
34,994,953
(7,840,405)
914,558
21,465,560
3,224,134
1,053,292
6,066,132
5,691,303
1,050,709
(277,091,569)
(264,283,425)
(344,604,463)
(316,535,357)
(316,817,661)
(291,074,675)
(Forward)
*SGVFS004263*
-2Years Ended December 31
2012
(As restated;
Note 2)
2013
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from:
Short-term borrowings
Long-term borrowings
Acquisition of treasury shares
Decrease in obligations under finance lease
(Note 29)
Payments of:
Dividends
Interest
Short-term borrowings
Long-term borrowings
Net cash flows from (used in) financing
activities
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS
EFFECT OF EXCHANGE RATE
CHANGES ON CASH AND
CASH EQUIVALENTS
2011
P
=39,158,822
238,000,000
–
P
=65,000,000
130,000,000
(3,125,850)
(29,771,517)
(27,558,251)
(13,817,092)
(13,866,056)
(33,333,553)
(45,200,000)
(151,747,500)
(8,319,634)
(36,240,692)
(65,000,000)
(93,049,447)
(13,891,307)
(31,533,661)
(70,000,000)
(98,276,442)
(35,418,626)
46,990,798
(35,644,352)
(80,509,899)
62,386,915
29,486,671
P
=238,500,000
–
–
(4,097)
(84,273)
1,989,420
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR
191,193,593
128,890,951
97,414,860
CASH AND CASH EQUIVALENTS
AT END OF YEAR
P
=110,679,597
=191,193,593
P
=128,890,951
P
See accompanying Notes to Financial Statements.
*SGVFS004263*
LORENZO SHIPPING CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. Corporate Information
Lorenzo Shipping Corporation (the Company) was incorporated in the Philippines and registered
with the Securities and Exchange Commission (SEC) on October 17, 1972 primarily to engage in
domestic inter-island cargo shipping activities.
Since 2006, the Company is majority-owned by National Marine Corporation (NMC), a domestic
shipping company (see Note 23).
The Company’s common shares of stock are traded in the Philippine Stock Exchange (PSE).
The Company is a holder of several Certificates of Convenience and special permits issued by the
Maritime Industry Authority to service certain domestic ports of call.
The Company’s registered and principal business address is 20th Floor Times Plaza Building,
United Nations Avenue, Ermita, Manila.
The financial statements of the Company as of December 31, 2013 and 2012 and for the three
years ended were approved and authorized for issue by the Audit Committee on April 14, 2014 as
delegated by the Board of Directors (BOD) last December 11, 2013.
2. Basis of Preparation, Statements of Compliance and Changes in Accounting Policies and
Disclosures
Basis of Presentation
The accompanying financial statements have been prepared under the historical cost and are
presented in Philippine peso, which is the Company’s functional and presentation currency.
The financial statements provide comparative information in respect of the previous period. In
addition, the Company presents an additional balance sheet at the beginning of the earliest period
presented when there is a retrospective application of an accounting policy, a retrospective
restatement or a reclassification of items in the financial statements. An additional balance sheet
as at January 1, 2012 is presented in these financial statements due to retrospective application of
certain accounting policies.
Statement of Compliance
The financial statements of the Company have been prepared in compliance with Philippine
Financial Reporting Standards (PFRS).
Changes in Accounting Policies and Disclosures
The accounting policies adopted are consistent with those of the previous financial year, except for
the following new and revised standards and IFRIC which were applied starting January 1, 2013.
Except for the adoption of Revised Philippine Accounting Standards (PAS) 19, Employee Benefit,
these new and revised standards and interpretations did not have any significant impact on the
Company’s financial statements.
*SGVFS004263*
-2The nature and the impact of each new standards and amendments are described below:
PFRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities
(Amendments)
These amendments require an entity to disclose information about rights of set-off and related
arrangements (such as collateral agreements). The new disclosures are required for all recognized
financial instruments that are set off in accordance with PAS 32, Financial Instruments:
Presentation. These disclosures also apply to recognized financial instruments that are subject to
an enforceable master netting arrangement or ‘similar agreement’, irrespective of whether they are
set-off in accordance with PAS 32. The amendments require entities to disclose, in a tabular
format unless another format is more appropriate, the following minimum quantitative
information. This is presented separately for financial assets and financial liabilities recognized at
the end of the reporting period:
a) The gross amounts of those recognized financial assets and recognized financial liabilities;
b) The amounts that are set off in accordance with the criteria in PAS 32 when determining the
net amounts presented in the statement of financial position;
c) The net amounts presented in the statement of financial position;
d) The amounts subject to an enforceable master netting arrangement or similar agreement that
are not otherwise included in (b) above, including:
i.
Amounts related to recognized financial instruments that do not meet some or all of the
offsetting criteria in PAS 32; and
ii.
Amounts related to financial collateral (including cash collateral); and
e) The net amount after deducting the amounts in (d) from the amounts in (c) above.
The adoption of the amended did not have a significant impact on the financial statements of the
Company.
PFRS 10, Consolidated Financial Statements
PFRS 10 replaces the portion of PAS 27, Consolidated and Separate Financial Statements, that
addresses the accounting for consolidated financial statements. It also includes the issues raised in
Standards Interpretation Committee (SIC) 12, Consolidation - Special Purpose Entities. PFRS 10
establishes a single control model that applies to all entities including special purpose entities. The
changes introduced by PFRS 10 will require management to exercise significant judgment to
determine which entities are controlled, and therefore, are required to be consolidated by a parent,
compared with the requirements that were in PAS 27. The amendment is not applicable to the
Company.
PFRS 11, Joint Arrangements
PFRS 11 replaces PAS 31, Interest in Joint Ventures and SIC 13, Jointly-controlled Entities - NonMonetary Contributions by Venturers. PFRS 11 removes the option to account for jointly
controlled entities using proportionate consolidation. Instead, jointly controlled entities that meet
the definition of a joint venture must be accounted for using the equity method. The amendment is
not applicable to the Company.
PFRS 12, Disclosure of Interests in Other Entities
PFRS 12 sets out the requirements for disclosures relating to an entity’s interests in subsidiaries,
joint arrangements, associates and structured entities. The requirements in PFRS 12 are more
comprehensive than the previously existing disclosure requirements for subsidiaries (for example,
where a subsidiary is controlled with less than a majority of voting rights). The amendment has no
significant impact to the Company.
*SGVFS004263*
-3PFRS 13, Fair Value Measurement
PFRS 13 establishes a single source of guidance under PFRS for all fair value measurements.
PFRS 13 does not change when an entity is required to use fair value, but rather provides guidance
on how to measure fair value under PFRS. PFRS 13 defines fair value as an exit price. PFRS 13
also requires additional disclosures.
As a result of the guidance in PFRS 13, the Company re-assessed its policies for measuring fair
values, in particular, its valuation inputs such as non-performance risk for fair value measurement
of liabilities. The Company has assessed that the application of PFRS 13 has not materially
impacted its fair value measurements. Additional disclosures, where required, are provided in the
individual notes relating to the assets and liabilities whose fair values were determined. Fair value
hierarchy is provided in Note 25.
Amendment to PAS 1, Financial Statement Presentation - Presentation of Items of Other
Comprehensive Income
The amendments to PAS 1 change the grouping of items presented in other comprehensive
income. Items that could be reclassified (or “recycled”) to profit or loss at a future point in time
(i.e., upon derecognition or settlement) would be presented separately from items that will never
be recycled. The amendment affects presentation only and has no impact on the Company’s
financial position or performance.
Revised PAS 19, Employee Benefits
On 1 January 2013, the Company adopted Revised PAS 19.
For defined benefit plans, the Revised PAS 19 requires all actuarial gains and losses to be
recognized in other comprehensive income and unvested past service costs previously recognized
over the average vesting period to be recognized immediately in profit or loss when incurred.
Prior to adoption of the Revised PAS 19, the Company recognized actuarial gains and losses
immediately to profit or loss while past service cost, if any, is recognized immediately to profit or
loss, unless the changes to the pension plan are conditional on the employees remaining in service
for a specified period of time (the vesting period). In this case, the past service cost is amortized
on a straight-line basis over the vesting period. Upon adoption of the Revised PAS 19, the
Company changed its accounting policy to recognize all actuarial gains and losses in other
comprehensive income and all past service costs in profit or loss in the period they occur.
Moving forward, the Company will retain the recognized actuarial gains and losses in other
comprehensive income and will not transfer this to other items of equity.
The Revised PAS 19 replaced the interest cost and expected return on plan assets with the concept
of net interest on defined benefit liability or asset which is calculated by multiplying the net
balance sheet defined benefit liability or asset by the discount rate used to measure the employee
benefit obligation, each as at the beginning of the annual period.
The Revised PAS 19 also amended the definition of short-term employee benefits and requires
employee benefits to be classified as short-term based on expected timing of settlement rather than
the employee’s entitlement to the benefits. In addition, the Revised PAS 19 modifies the timing
of recognition for termination benefits. The modification requires the termination benefits to be
recognized at the earlier of when the offer cannot be withdrawn or when the related restructuring
costs are recognized.
*SGVFS004263*
-4Changes to definition of short-term employee benefits and timing of recognition for termination
benefits do not have any impact on the Company’s financial position and financial performance.
The changes in accounting policies have been applied retrospectively. The effects of first time
adoption of the Revised PAS 19 on the financial statements are as follows:
As of
December 31,
2013
Increase (decrease) in:
Balance Sheets
Retirement benefit obligation
Deferred income tax asset
Other comprehensive income
Retained earnings
P
=40,931,206
(12,279,493)
(29,198,893)
546,737
As of
December 31,
2012
P
=9,486,903
(2,846,202)
(7,232,429)
591,285
2013
Increase (decrease) in:
Statements of Income
Net benefit costs
Provision for deferred tax
Net loss (profit) for the year
P
=63,640
(19,092)
P
=44,548
2013
Statements of Comprehensive Income
Actuarial losses on defined benefit plan
Income tax effects
Other comprehensive loss for the year, net of tax
Total comprehensive loss for the year
P
=31,380,663
(9,414,199)
21,966,464
P
=22,011,012
As of
January 1,
2012
(P
=4,126,855)
1,238,057
2,888,799
–
2012
(P
=844,693)
253,408
(P
=591,285)
2012
P
=14,458,895
(4,337,667)
10,121,228
P
=9,529,943
Other than the change in income before income tax, there is no material impact in the statements of
cash flows.
Revised PAS 27, Separate Financial Statements (as revised in 2011)
As a consequence of the new PFRS 10, Consolidated Financial Statements and PFRS 12,
Disclosure of Interests in Other Entities what remains of PAS 27 is limited to accounting for
subsidiaries, jointly controlled entities and associates in separate financial statements. The
adoption of the amended PAS 27 did not have a significant impact on the financial statements of
the Company.
Revised PAS 28, Investments in Associates and Joint Ventures
As a consequence of the new PFRS 11, Joint Arrangements and PFRS 12, Disclosure of Interests
in Other Entities, PAS 28 has been renamed PAS 28, Investments in Associates and Joint
Ventures, and describes the applications of the equity method to investments in joint ventures in
addition to associates. The amendment has no significant impact to the Company.
Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine
This interpretation applies to waste removal costs that are incurred in surface mining activity
during the production phase of the mine (“production stripping costs”) and provides guidance on
the recognition of production stripping costs as an asset and measurement of the stripping activity
asset. The amendment is not applicable to the Company.
*SGVFS004263*
-5PFRS 1, First-time Adoption of Philippine Financial Reporting Standards - Government Loans
(Amendments)
The amendments to PFRS 1 require first-time adopters to apply the requirements of PAS 20,
Accounting for Government Grants and Disclosure of Government Assistance, prospectively to
government loans existing at the date of transition to PFRS. However, entities may choose to
apply the requirements of PAS 39, Financial Instruments: Recognition and Measurement, and
PAS 20 to government loans retrospectively if the information needed to do so had been obtained
at the time of initially accounting for those loans. This amendment s are not applicable to the
Company.
Annual Improvements to PFRSs (2009-2011 cycle)
The Annual Improvements to PFRSs (2009-2011 cycle) contain non-urgent but necessary
amendments to PFRSs.
PFRS 1, First-time Adoption of PFRS - Borrowing Costs
The amendment clarifies that, upon adoption of PFRS, an entity that capitalized borrowing costs in
accordance with its previous generally accepted accounting principles, may carry forward, without
any adjustment, the amount previously capitalized in its opening statement of financial position at
the date of transition. Subsequent to the adoption of PFRS, borrowing costs are recognized in
accordance with PAS 23, Borrowing Costs. The amendment does not apply to the Company as it is
not a first-time adopter of PFRS.
PAS 1, Presentation of Financial Statements - Clarification of the Requirements for Comparative
Information
These amendments clarify the requirements for comparative information that are disclosed
voluntarily and those that are mandatory due to retrospective application of an accounting policy, or
retrospective restatement or reclassification of items in the financial statements. An entity must
include comparative information in the related notes to the financial statements when it voluntarily
provides comparative information beyond the minimum required comparative period. The
additional comparative period does not need to contain a complete set of financial statements. On
the other hand, supporting notes for the third balance sheet (mandatory when there is a
retrospective application of an accounting policy, or retrospective restatement or reclassification of
items in the financial statements) are not required. As a result, the Company has not included
comparative information in respect of the opening statement of financial position as at January 1,
2011. The amendments affect disclosures only and have no impact on the Company’s financial
position or performance.
PAS 16, Property, Plant and Equipment - Classification of Servicing Equipment
The amendment clarifies that spare parts, stand-by equipment and servicing equipment should be
recognized as property, plant and equipment when they meet the definition of property, plant and
equipment and should be recognized as inventory if otherwise.
PAS 32, Financial Instruments: Presentation - Tax Effect of Distribution to Holders of Equity
Instruments
The amendment clarifies that income taxes relating to distributions to equity holders and to
transaction costs of an equity transaction are accounted for in accordance with PAS 12, Income
Taxes. The amendment does not have any significant impact on the Company’s financial position
or performance.
*SGVFS004263*
-6PAS 34, Interim Financial Reporting - Interim Financial Reporting and Segment Information for
Total Assets and Liabilities
The amendment clarifies that the total assets and liabilities for a particular reportable segment need
to be disclosed only when the amounts are regularly provided to the chief operating decision maker
and there has been a material change from the amount disclosed in the entity’s previous annual
financial statements for that reportable segment. The amendment has no impact on the Company’s
financial position or performance.
New standards and interpretation issued and effective after December 31, 2013
The Company will adopt the standards and interpretations enumerated below when these become
effective. Except as otherwise indicated, the Company does not expect the adoption of these new
and amended PFRS and Philippine Interpretations to have significant impact on its financial
statements.
PAS 36, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets
(Amendments)
These amendments remove the unintended consequences of PFRS 13 on the disclosures required
under PAS 36.
In addition, these amendments require disclosure of the recoverable amounts for the assets or cashgenerating units (CGUs) for which impairment loss has been recognized or reversed during the
period. These amendments are effective retrospectively for annual periods beginning on or after
January 1, 2014 with earlier application permitted, provided PFRS 13 is also applied. The
amendments affect disclosures only and have no impact on the Company’s financial position or
performance.
Investment Entities (Amendments to PFRS 10, PFRS 12 and PAS 27)
These amendments are effective for annual periods beginning on or after January 1, 2014. They
provide an exception to the consolidation requirement for entities that meet the definition of an
investment entity under PFRS 10. The exception to consolidation requires investment entities to
account for subsidiaries at fair value through profit or loss.
Philippine Interpretation IFRIC 21, Levies (IFRIC 21)
IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggers
payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon
reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated
before the specified minimum threshold is reached. IFRIC 21 is effective for annual periods
beginning on or after January 1, 2014.
PAS 39, Financial Instruments: Recognition and Measurement - Novation of Derivatives and
Continuation of Hedge Accounting (Amendments)
These amendments provide relief from discontinuing hedge accounting when novation of a
derivative designated as a hedging instrument meets certain criteria. These amendments are
effective for annual periods beginning on or after January 1, 2014. The Company has no
derivatives during the period. However, these amendments would be considered for future
novations.
*SGVFS004263*
-7PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial
Liabilities (Amendments)
The amendments clarify the meaning of “currently has a legally enforceable right to set-off” and
also clarify the application of the PAS 32 offsetting criteria to settlement systems (such as central
clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The
amendments affect presentation only and have no impact on the Company’s financial position or
performance. The amendments to PAS 32 are to be retrospectively applied for annual periods
beginning on or after January 1, 2014.
PAS 19, Employee Benefits - Defined Benefit Plans: Employee Contributions (Amendments)
The amendments apply to contributions from employees or third parties to defined benefit plans.
Contributions that are set out in the formal terms of the plan shall be accounted for as reductions to
current service costs if they are linked to service or as part of the remeasurements of the net
defined benefit asset or liability if they are not linked to service. Contributions that are
discretionary shall be accounted for as reductions of current service cost upon payment of these
contributions to the plans. The amendments to PAS 19 are to be retrospectively applied for annual
periods beginning on or after July 1, 2014.
Annual Improvements to PFRSs (2010-2012 cycle)
The Annual Improvements to PFRSs (2010-2012 cycle) contain non-urgent but necessary
amendments to the following standards:
PFRS 2, Share-based Payment - Definition of Vesting Condition
The amendment revised the definitions of vesting condition and market condition and added the
definitions of performance condition and service condition to clarify various issues. This
amendment shall be prospectively applied to share-based payment transactions for which the grant
date is on or after July 1, 2014. This amendment does not apply to the Company as it has no
share-based payments.
PFRS 3, Business Combinations - Accounting for Contingent Consideration in a Business
Combination
The amendment clarifies that a contingent consideration that meets the definition of a financial
instrument should be classified as a financial liability or as equity in accordance with PAS 32.
Contingent consideration that is not classified as equity is subsequently measured at fair value
through profit or loss whether or not it falls within the scope of PFRS 9 (or PAS 39, if PFRS 9 is
not yet adopted). The amendment shall be prospectively applied to business combinations for
which the acquisition date is on or after July 1, 2014. The Company shall consider this
amendment for future business combinations.
PFRS 8, Operating Segments - Aggregation of Operating Segments and Reconciliation of the Total
of the Reportable Segments’ Assets to the Entity’s Assets
The amendments require entities to disclose the judgment made by management in aggregating
two or more operating segments. This disclosure should include a brief description of the
operating segments that have been aggregated in this way and the economic indicators that have
been assessed in determining that the aggregated operating segments share similar economic
characteristics. The amendments also clarify that an entity shall provide reconciliations of the total
of the reportable segments’ assets to the entity’s assets if such amounts are regularly provided to
the chief operating decision maker. These amendments are effective for annual periods beginning
on or after July 1, 2014 and are applied retrospectively. The amendments have no impact on the
Company.
*SGVFS004263*
-8PFRS 13, Fair Value Measurement - Short-term Receivables and Payables
The amendment clarifies that short-term receivables and payables with no stated interest rates can
be held at invoice amounts when the effect of discounting is immaterial.
PAS 16, Property, Plant and Equipment - Revaluation Method - Proportionate Restatement of
Accumulated Depreciation
The amendment clarifies that, upon revaluation of an item of property, plant and equipment, the
carrying amount of the asset shall be adjusted to the revalued amount, and the asset shall be treated
in one of the following ways:
a. The gross carrying amount is adjusted in a manner that is consistent with the revaluation of the
carrying amount of the asset. The accumulated depreciation at the date of revaluation is
adjusted to equal the difference between the gross carrying amount and the carrying amount of
the asset after taking into account any accumulated impairment losses.
b. The accumulated depreciation is eliminated against the gross carrying amount of the asset.
The amendment is effective for annual periods beginning on or after July 1, 2014. The
amendment shall apply to all revaluations recognized in annual periods beginning on or after the
date of initial application of this amendment and in the immediately preceding annual period. The
amendment has no impact on the Company’s financial position or performance.
PAS 24, Related Party Disclosures - Key Management Personnel
The amendments clarify that an entity is a related party of the reporting entity if the said entity, or
any member of a Company for which it is a part of, provides key management personnel services
to the reporting entity or to the parent company of the reporting entity. The amendments also
clarify that a reporting entity that obtains management personnel services from another entity (also
referred to as management entity) is not required to disclose the compensation paid or payable by
the management entity to its employees or directors. The reporting entity is required to disclose
the amounts incurred for the key management personnel services provided by a separate
management entity. The amendments are effective for annual periods beginning on or after July 1,
2014 and are applied retrospectively. The amendments affect disclosures only and have no impact
on the Company’s financial position or performance.
PAS 38, Intangible Assets - Revaluation Method - Proportionate Restatement of Accumulated
Amortization
The amendments clarify that, upon revaluation of an intangible asset, the carrying amount of the
asset shall be adjusted to the revalued amount, and the asset shall be treated in one of the following
ways:
a. The gross carrying amount is adjusted in a manner that is consistent with the revaluation of
the carrying amount of the asset. The accumulated amortization at the date of revaluation is
adjusted to equal the difference between the gross carrying amount and the carrying amount
of the asset after taking into account any accumulated impairment losses.
b. The accumulated amortization is eliminated against the gross carrying amount of the asset.
The amendments also clarify that the amount of the adjustment of the accumulated amortization
should form part of the increase or decrease in the carrying amount accounted for in accordance
with the standard.
The amendments are effective for annual periods beginning on or after July 1, 2014. The
amendments shall apply to all revaluations recognized in annual periods beginning on or after the
date of initial application of this amendment and in the immediately preceding annual period. The
amendments have no impact to the Company.
*SGVFS004263*
-9Annual Improvements to PFRSs (2011-2013 cycle)
The Annual Improvements to PFRSs (2011-2013 cycle) contain non-urgent but necessary
amendments to the following standards:
PFRS 1, First-time Adoption of PFRS - Meaning of ‘Effective PFRSs’
The amendment clarifies that an entity may choose to apply either a current standard or a new
standard that is not yet mandatory, but that permits early application, provided either standard is
applied consistently throughout the periods presented in the entity’s first PFRS financial
statements. This amendment is not applicable to the Company as it is not a first-time adopter of
PFRS.
PFRS 3, Business Combinations - Scope Exceptions for Joint Arrangements
The amendment clarifies that PFRS 3 does not apply to the accounting for the formation of a joint
arrangement in the financial statements of the joint arrangement itself. The amendment is
effective for annual periods beginning on or after July 1, 2014 and is applied prospectively. The
amendment have no impact on the Company’s financial position and performance.
PFRS 13, Fair Value Measurement - Portfolio Exception
The amendment clarifies that the portfolio exception in PFRS 13 can be applied to financial assets,
financial liabilities and other contracts. The amendment is effective for annual periods beginning
on or after July 1, 2014 and is applied prospectively. The amendment has no significant impact on
the Company’s financial position or performance.
PAS 40, Investment Property
The amendment clarifies the interrelationship between PFRS 3 and PAS 40 when classifying
property as investment property or owner-occupied property. The amendment stated that
judgment is needed when determining whether the acquisition of investment property is the
acquisition of an asset or a group of assets or a business combination within the scope of PFRS 3.
This judgment is based on the guidance of PFRS 3. This amendment is effective for annual
periods beginning on or after July 1, 2014 and is applied prospectively. The amendment is not
applicable to the Company.
PFRS 9, Financial Instruments
PFRS 9, as issued, reflects the first and third phases of the project to replace PAS 39 and applies to
the classification and measurement of financial assets and liabilities and hedge accounting,
respectively. Work on the second phase, which relate to impairment of financial instruments, and
the limited amendments to the classification and measurement model is still ongoing, with a view
to replace PAS 39 in its entirety. PFRS 9 requires all financial assets to be measured at fair value
at initial recognition. A debt financial asset may, if the fair value option (FVO) is not invoked, be
subsequently measured at amortized cost if it is held within a business model that has the objective
to hold the assets to collect the contractual cash flows and its contractual terms give rise, on
specified dates, to cash flows that are solely payments of principal and interest on the principal
outstanding. All other debt instruments are subsequently measured at fair value through profit or
loss. All equity financial assets are measured at fair value either through other comprehensive
income (OCI) or profit or loss. Equity financial assets held for trading must be measured at fair
value through profit or loss. For liabilities designated as at FVPL using the fair value option, the
amount of change in the fair value of a liability that is attributable to changes in credit risk must be
presented in OCI. The remainder of the change in fair value is presented in profit or loss, unless
presentation of the fair value change relating to the entity’s own credit risk in OCI would create or
*SGVFS004263*
- 10 enlarge an accounting mismatch in profit or loss. All other PAS 39 classification and
measurement requirements for financial liabilities have been carried forward to PFRS 9, including
the embedded derivative bifurcation rules and the criteria for using the FVO. The adoption of the
first phase of PFRS 9 will have an effect on the classification and measurement of the Company’s
financial assets, but will potentially have no impact on the classification and measurement of
financial liabilities.
On hedge accounting, PFRS 9 replaces the rules-based hedge accounting model of PAS 39 with a
more principles-based approach. Changes include replacing the rules-based hedge effectiveness
test with an objectives-based test that focuses on the economic relationship between the hedged
item and the hedging instrument, and the effect of credit risk on that economic relationship;
allowing risk components to be designated as the hedged item, not only for financial items, but
also for non-financial items, provided that the risk component is separately identifiable and
reliably measurable; and allowing the time value of an option, the forward element of a forward
contract and any foreign currency basis spread to be excluded from the designation of a financial
instrument as the hedging instrument and accounted for as costs of hedging. PFRS 9 also requires
more extensive disclosures for hedge accounting.
PFRS 9 currently has no mandatory effective date. PFRS 9 may be applied before the completion
of the limited amendments to the classification and measurement model and impairment
methodology. The Company will not adopt the standard before the completion of the limited
amendments and the second phase of the project.
Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate
This interpretation covers accounting for revenue and associated expenses by entities that
undertake the construction of real estate directly or through subcontractors. The interpretation
requires that revenue on construction of real estate be recognized only upon completion, except
when such contract qualifies as construction contract to be accounted for under PAS 11,
Construction Contracts, or involves rendering of services in which case revenue is recognized
based on stage of completion. Contracts involving provision of services with the construction
materials and where the risks and reward of ownership are transferred to the buyer on a continuous
basis will also be accounted for based on stage of completion. The SEC and the Financial
Reporting Standards Council (FRSC) have deferred the effectivity of this interpretation until the
final Revenue standard is issued by the International Accounting Standards Board (IASB) and an
evaluation of the requirements of the final Revenue standard against the practices of the Philippine
real estate industry is completed.
3. Summary of Significant Accounting Policies
Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either:
·
·
In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible to by the Company.
*SGVFS004263*
- 11 The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their
economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability
to generate economic benefits by using the asset in its highest and best use or by selling it to
another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable
inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements
are categorized within the fair value hierarchy, described as follows, based on the lowest level
input that is significant to the fair value measurement as a whole:
·
·
·
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair
value measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair
value measurement is unobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis, the
Company determines whether transfers have occurred between Levels in the hierarchy by
re-assessing categorization (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and
liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level
of the fair value hierarchy as explained above.
Cash and Cash Equivalents
Cash includes cash on hand and in banks, which are carried at face value. Cash equivalents are
short-term, highly liquid investments that are readily convertible to known amounts of cash with
original maturities of three months or less from the date of acquisition and that are subject to an
insignificant risk of change in value.
Financial Instruments
Date of recognition
The Company recognizes a financial asset or financial liability in the balance sheet when it
becomes a party to contractual provisions of the instrument.
All regular way purchases and sales of financial assets are recognized on the trade date, which is
the date the Company commits to purchase or sell the asset. Regular way purchases or sales are
purchases or sales of financial assets that require delivery of assets within the period generally
established by regulation or convention in the marketplace.
Initial recognition of financial instruments
All financial instruments, including investment securities and loans and receivables, are initially
measured at fair value. Except for financial assets at fair value through profit or loss (FVPL),
the initial measurement of financial assets includes transaction costs. The Company classifies its
*SGVFS004263*
- 12 financial instruments in the following categories: financial assets at FVPL, held-to-maturity
(HTM) investments, available-for-sale (AFS) investments, loans and receivables, financial
liabilities at FVPL, and other financial liabilities. The classification depends on the purpose for
which the financial instruments were acquired and whether they are quoted in an active market.
Management determines the classification of its financial instruments at initial recognition and,
where allowed and appropriate, re-evaluates such designation at every reporting period.
As of December 31, 2013 and 2012, the Company does not have outstanding financial asset at
FVPL, HTM investments, AFS investments, and financial liabilities at FVPL.
Embedded derivatives
An embedded derivative is separated from the host contract and accounted for as derivative if all
the following conditions are met:
·
·
·
the economic characteristics and risks of the embedded derivative are not closely related to the
economic characteristic of the host contract;
a separate instrument with the same terms as the embedded derivative would meet the
definition of the derivative; and
the hybrid or combined instrument is not recognized at FVPL.
Freestanding and separated embedded derivatives are classified as financial assets or financial
liabilities at FVPL unless they are designated as effective hedging instruments. Derivative
instruments are initially recognized at fair value on the date in which a derivative transaction is
entered into or bifurcated, and are subsequently re-measured at fair value. Derivatives are carried
as assets when the fair value is positive and as liabilities when the fair value is negative.
Gains and losses from changes in fair value of derivatives are recognized immediately in the
statement of income.
The Company assesses whether embedded derivatives are required to be separated from host
contracts when the Company first becomes party to the contract. Reassessment only occurs if
there is a change in the terms of the contract that significantly modifies the cash flows that would
otherwise be required.
As of December 31, 2013 and 2012, the Company has no bifurcated embedded derivatives.
Loans and receivables
Loans and receivables are nonderivative financial assets with fixed or determinable payments that
are not quoted in an active market. After initial measurement, such financial assets are carried at
amortized cost using the effective interest rate method less accumulated allowance for impairment,
if any. Amortized cost is calculated taking into account any discount or premium on acquisition
and includes fees that are an integral part of the effective interest rate and transaction costs. Gains
and losses are recognized in the statement of income when the loans and receivables are
derecognized or impaired, as well as through the amortization process. Loans and receivables are
classified as current assets when it is expected to be realized within twelve months after the
balance sheet date or within the normal operating cycle, whichever is longer.
The Company’s cash and cash equivalents, trade and other receivables, loan receivables, security
deposits included under other noncurrent assets are classified under this category (see Note 25).
*SGVFS004263*
- 13 Other financial liabilities
Issued financial liabilities or their components, which are not designated at FVPL are classified as
other financial liabilities, where the substance of the contractual arrangement results in the
Company having an obligation either to deliver cash or another financial asset to the holder, or to
satisfy the obligation other than by the exchange of a fixed amount of cash or another financial
asset for a fixed number of own equity shares. The components of issued financial liabilities that
contain both liability and equity elements are accounted for separately, with the equity component
being assigned the residual amount after deducting from the instrument as a whole the amount
separately determined as the fair value of the liability component on the date of issue. After initial
measurement, other financial liabilities are subsequently measured at amortized cost using the
effective interest rate method. Amortized cost is calculated by taking into account any discount or
premium on the issue and fees that are an integral part of the effective interest rate. Any effects of
restatement of foreign currency-denominated liabilities are recognized in the statement of income.
Other financial liabilities are classified as current liabilities when it is expected to be settled within
twelve months after the balance sheet date or the Company has an unconditional right to defer
settlement for at least 12 months from the balance sheet date.
The Company’s interest-bearing borrowings, accounts payable and accrued expenses, obligations
under finance lease and other obligations that meet the above definition (other than liabilities
covered by other accounting standards, such as income tax payable) are classified under this
category (see Note 25).
Derecognition of Financial Assets and Liabilities
Financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is derecognized where:
·
·
·
the rights to receive cash flows from the asset have expired;
the Company retains the right to receive cash flows from the asset, but has assumed an
obligation to pay them in full without material delay to a third party under a ‘pass-through’
arrangement; or
the Company has transferred its rights to receive cash flows from the asset and either has
transferred substantially all the risks and rewards of the asset, or has neither transferred nor
retained substantially all the risks and rewards of the asset, but has transferred control of the
asset.
Where the Company has transferred its rights to receive cash flows from an asset and has neither
transferred nor retained substantially all the risks and rewards of the asset nor transferred control
of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the
asset. Continuing involvement that takes the form of a guarantee over the transferred asset is
measured at the lower of the original carrying amount of the asset and the maximum amount of
consideration that the Company could be required to repay.
Financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or
cancelled or has expired.
Where an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and the recognition of a new
*SGVFS004263*
- 14 liability, and the difference in the respective carrying amounts is recognized in the statement of
income.
Impairment of Financial Assets
The Company assesses at each balance sheet date whether a financial asset or group of financial
assets is impaired.
Assets carried at amortized cost
If there is objective evidence that an impairment loss on loans and receivables carried at amortized
cost has been incurred, the amount of the loss is measured as the difference between the asset’s
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
(i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset
shall be reduced either directly or through the use of an allowance account. The amount of the
loss shall be recognized in the statement of income.
The Company first assesses whether objective evidence of impairment exists individually for
financial assets that are individually significant, and individually or collectively for financial
assets that are not individually significant. If it is determined that no objective evidence of
impairment exists for an individually assessed financial asset, whether significant or not, the asset
is included in a group of financial assets with similar credit risk characteristics and that group of
financial assets is collectively assessed for impairment. Assets that are individually assessed for
impairment and for which an impairment loss is or continues to be recognized are not included in
the collective assessment of impairment.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is
recognized in the statement of income, to the extent that the carrying value of the asset does not
exceed its amortized cost at the reversal date.
In relation to trade receivables, a provision for impairment loss is made when there is objective
evidence (such as the probability of insolvency or significant financial difficulties of the debtor)
that the Company will not able to collect all the amounts due under the original terms of the
invoice. The carrying amount of the receivables is reduced through the use of an allowance
account.
Assets carried at cost
If there is objective evidence that an impairment loss on an unquoted equity instrument that is not
carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that
is linked to and must be settled by delivery of such an unquoted equity instrument has been
incurred, the amount of the loss is measured as the difference between the asset’s carrying amount
and the present value of estimated future cash flows discounted at the current market rate of return
for a similar financial asset.
AFS investments
Significant or prolonged decline in fair value below cost, significant financial difficulties of the
issuer or obligor, and the disappearance of an active trading market are considerations to
determine whether there is objective evidence that investment securities classified as AFS
financial assets are impaired.
*SGVFS004263*
- 15 If an AFS financial asset is impaired, an amount comprising the difference between its cost (net of
any principal payment and amortization) and its current fair value, less any impairment loss
previously recognized in the statement of income, is transferred from other comprehensive income
to the statement of income. Reversals in respect of equity instruments classified as AFS are not
recognized in the statement of income.
Reversals of impairment losses on debt instruments are reversed through the statement of income,
if the increase in fair value of the instrument can be objectively related to an event occurring after
the impairment loss was recognized in the statement of income.
Day 1 Profit or Loss
Where the transaction price in a non-active market is different from the fair value from other
observable current market transactions in the same instrument or based on a valuation technique
whose variables include only data from observable market, the Company recognizes the difference
between the transaction price and fair value (a ‘Day 1’ profit or loss) in the statement of income
unless it qualifies for recognition as some other type of asset. In cases where use is made of data
which is not observable, the difference between the transaction price and model value is
recognized in the statement of income only when the inputs become observable or when the
instrument is derecognized. For each transaction, the Company determines the appropriate
method of recognizing the ‘Day 1’ profit or loss amount.
Offsetting Financial Instruments
Financial assets and financial liabilities are offset and the net amount reported in the balance sheet
if, and only if, there is a currently enforceable legal right to offset the recognized amounts and
there is an intention to settle on a net basis, or to realize the asset and settle the liability
simultaneously. This is not generally the case with master netting agreements, and the related
assets and liabilities are presented gross in the balance sheet.
Inventories
Inventories are valued at the lower of cost and net realizable value. Costs incurred in bringing
each product to its present location and condition are accounted for as follows:
Materials and spare parts
Fuel, diesel and lubricants
-
purchase cost using first-in, first-out method
purchase cost using first-in, first-out method
Net realizable value is the estimated replacement costs.
An allowance for losses and obsolescence is determined based on a regular review and
management evaluation of movement and condition of spare parts and supplies.
Property and Equipment
Property and equipment, except for land, are stated at cost, excluding the costs of day-to-day
servicing, less accumulated depreciation and any accumulated impairment in value. Such cost
includes the cost of replacing part of the property and equipment when that cost is incurred, if the
recognition criteria are met.
The initial cost of property and equipment consists of its purchase price, including import duties,
taxes and any directly attributable costs of bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by the Company. Expenditures
incurred after the property and equipment have been put into operation, such as repairs and
maintenance and overhaul costs, are normally charged in the statement of income in the period in
which the costs are incurred. Land is stated at cost less any accumulated impairment in value.
*SGVFS004263*
- 16 -
Each part of an item of property and equipment with a cost that is significant in relation to the total
cost of the item shall be depreciated separately.
Depreciation is computed on a straight-line basis less its residual value over the estimated useful
life (EUL) as follows:
Category
Land improvements
Vessels, excluding drydocking costs and vessel tools and equipment
Drydocking costs
Container vans and improvements
Buildings, warehouses, terminal premises and equipment
and leasehold improvements
Office furniture and equipment
Transportation equipment
Vessel tools and equipment
Number of Years
3
35*
3
5-10
3-10
5
5
5
*From the time the ship was built
The remaining EUL of the vessels range from 2 to 23 years.
The asset’s residual values, useful lives and depreciation method are reviewed and adjusted, if
appropriate, at each balance sheet date.
Major overhaul costs incurred during drydocking of vessels are capitalized and depreciated over a
3-year period or the next drydocking, whichever comes first. When significant drydocking costs
are incurred prior to the expiry of the 3-year depreciation period, the remaining costs of the
previous drydocking are written off in the period of the subsequent drydocking. Drydocking costs
are recorded as part of “Vessels” under property and equipment.
Fully depreciated assets are retained in the accounts until these are no longer in use. An item of
property and equipment is derecognized upon disposal or when no future economic benefits are
expected from the continued use of the item. Any gain or loss arising on derecognition of the
property and equipment (calculated as the difference between the net disposal proceeds and the
carrying amount of the item) is included in the statement of income in the year the asset is
derecognized.
The carrying amount of property and equipment are reviewed for impairment when events or
changes in circumstances indicate that the carrying amount may not be recoverable.
Investment in Associate
An associate is an entity in which the Company has significant influence and which is neither a
subsidiary nor a joint venture of the Company. An associate is accounted for under the equity
method of accounting.
Under the equity method, investment in an associate is carried in the balance sheet at cost plus
post-acquisition changes in the Company’s share in the net asset of the associate. The statement
of income reflects the share in the result of operations of the associate. Where there has been a
change recognized directly in the equity of the associate, the Company recognizes its share in any
changes and discloses this, when applicable, in the statement of income. Profit and losses
resulting from transactions between the Company and the associate are eliminated to the extent of
the interest in the associate. After application of the equity method, the Company determines
*SGVFS004263*
- 17 whether it is necessary to recognize any additional impairment loss with respect to the Company’s
net investment in the associate.
The Company discontinues the use of equity method from the date when it ceases to have
significant influence over an associate and accounts for the investment in accordance with PAS 39
from that date, provided the associate does not become a subsidiary or a joint venture as defined in
PAS 31. Upon loss of significant influence over the associate, the Company measures and
recognizes any retaining investment at its fair value. Any difference in the carrying amount of the
associate upon loss of significant influence and the fair value of the retaining investment and
proceeds from disposal is recognized in profit or loss. When the Company’s interest in an
investment in associate is reduced to zero, additional losses are provided only to the extent that the
Company has incurred obligations or made payments on behalf of the associate to satisfy
obligations of the investee that the Company has guaranteed or otherwise committed. If the
associate subsequently reports profits, the Company resumes recognizing its share of the profits if
it equals the share of net losses not recognized.
The financial statements of the associate are prepared for the same reporting period as the
Company. The accounting policies of the associate conform to those used by the Company for
like transactions and events in similar circumstances.
Impairment of Non-financial Assets
The Company assesses at each balance sheet date whether there is an indication that a
non-financial asset may be impaired. If any such indication exists, or when annual impairment
testing for a non-financial asset is required, the Company makes an estimate of the non-financial
asset’s recoverable amount. A non-financial asset’s recoverable amount is the higher of a nonfinancial asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is
determined for an individual non-financial asset, unless the non-financial asset does not generate
cash inflows that are largely independent of those from other non-financial assets or groups of
non-financial assets. Where the carrying amount of a non-financial asset exceeds its recoverable
amount, the non-financial asset is considered impaired and is written down to its recoverable
amount. In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the non-financial asset. In determining fair value less costs to sell,
an appropriate valuation model is used. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded subsidiaries or other available fair value
indicators. Impairment losses of continuing operations are recognized in the statement of income
in those expense categories consistent with the function of the impaired non-financial asset.
An assessment is made at each balance sheet date as to whether there is any indication that
previously recognized impairment losses may no longer exist or may have decreased. If such
indication exists, the recoverable amount is estimated. A previously recognized impairment loss is
reversed only if there has been a change in the estimates used to determine the non-financial
asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the
carrying amount of the non-financial asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have been determined, net of depreciation,
had no impairment loss been recognized for the non-financial asset in prior years. Such reversal is
recognized in the statement of income. After such a reversal, the depreciation charge is adjusted
in future periods to allocate the non-financial asset’s revised carrying amount, less any residual
value, on a systematic basis over its remaining useful life.
*SGVFS004263*
- 18 Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Company and the revenue can be reliably measured, regardless of when payment is being made.
Revenue is measured at the fair value of the consideration received or receivable, taking into
account contractually defined terms of payment and excluding taxes or duty. The Company
assesses its revenue arrangements against specific criteria in order to determine if it is acting as
principal or agent. The following specific recognition criteria must also be met before revenue is
recognized:
Freight revenues
Revenues derived from freight services are recognized on the basis of cargo loaded during the year
taking into account all direct costs related to the cargo as well as capacity costs incurred during the
year.
Interest income
Interest income from bank deposits and short-term investments (net of tax) is recognized as
interest accrues (using the effective interest rate method that is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial instrument to the net
carrying amount of the financial asset).
Rental income
Revenue is recognized on a straight-line basis over the lease term.
Income from insurance claims
Income from insurance claims is recognized when the amount can be measured and the flow of the
economic benefit to the Company is highly probable and measurable.
Cost and Expenses
Cost and expenses are decreases in economic benefits during the accounting period in the form of
outflows or decrease of assets or incurrence of liabilities that result in decreases in equity, other
than those relating to distributions to equity participants. Cost and expenses are recognized when
incurred.
Provisions
Provisions are recognized only when the Company has a present obligation (legal or constructive)
as a result of a past event, it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation and a reliable estimate can be made of the amount of the
obligation. Where the Company expects a provision to be reimbursed, for example under an
insurance contract, the reimbursement is recognized as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any provision is presented in the
statement of income, net of any reimbursements. If the effect of the time value of money is
material, provisions are determined by discounting the expected future cash flows at a pre-tax rate
that reflects current market assessments of the time value of money and, where appropriate, the
risks specific to the liability. Where discounting is used, the increase in the provision due to the
passage of time is recognized as interest expense.
Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are
capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in
the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in
connection with the borrowing of funds.
*SGVFS004263*
- 19 Deferred Financing Costs
Deferred financing costs represent costs incurred to obtain project financing. Deferred financing
costs are amortized, using the effective interest rate method, over the term of the related long-term
borrowing.
Taxes
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively enacted at the balance
sheet date.
Deferred income tax
Deferred income tax is provided using the balance sheet liability method on temporary differences
at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes.
Deferred income tax liabilities are recognized for all taxable temporary differences, except:
·
·
where the deferred income tax liability arises from the initial recognition of goodwill or of an
asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting income nor taxable income or loss; and
in respect of taxable temporary differences associated with investments in foreign subsidiaries
and interests in joint ventures, where the timing of the reversal of the temporary differences
can be controlled and it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred income tax assets are recognized for all deductible temporary differences, carryforward
benefits of unused tax credits and unused tax losses, to the extent that it is probable that taxable
income will be available against which the deductible temporary differences, and the carryforward
benefits of unused tax credits and unused tax losses can be utilized except:
·
·
where the deferred income tax asset relating to the deductible temporary difference arises from
the initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting income nor taxable income or
loss; and
in respect of deductible temporary differences associated with investments in foreign
subsidiaries and interests in joint ventures, deferred income tax assets are recognized only to
the extent that it is probable that the temporary differences will reverse in the foreseeable
future and taxable income will be available against which the temporary differences can be
utilized.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable income will be available
to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income
tax assets are reassessed at each balance sheet date and are recognized to the extent that it has
become probable that future taxable income will allow the deferred income tax asset to be
recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply
to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws)
*SGVFS004263*
- 20 that have been enacted or substantively enacted at the balance sheet date.
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable
right exists to offset current income tax assets against current income tax liabilities and the
deferred income taxes relate to the same taxable entity and the same taxation authority.
Deferred income tax relating to items recognized directly in equity is recognized in equity and not
in the statement of income.
Value-added taxes (VAT)
Revenues, expenses and assets are recognized net of the amount of VAT, except:
·
·
Where the VAT incurred on a purchase of assets or services is not recoverable from the
taxation authority, in which case the VAT is recognized as part of the cost of acquisition of the
asset or as part of the expense item as applicable.
Receivables and payables that are stated with the amount of VAT included.
The net amount of VAT recoverable from, or payable to, the taxation authority is included as part
of receivables or payables in the balance sheet.
Capital Stock
Capital stock is determined using the par value shares that have been issued. When the Company
issues more than one class of stock, a separate account is maintained for each class of stock and
number of shares issued.
When the shares are sold at a premium, the difference between the proceeds and the par value is
credited to the “Additional paid-in capital” account. When the shares are issued for a
consideration other than cash, the proceeds are measured by the fair value of the consideration
received. In case the shares are issued to extinguish or settle the liability of the Company, the
shares shall be measured either at fair value of the share issued or fair value of the liability settled,
whichever is more reliably determinable.
Treasury Stock
The Company’s own equity instruments which are reacquired are recognized at cost and deducted
from equity. No gain or loss is recognized in the statement of income on the purchase, sale, issue
or cancellation of the Company’s own equity instruments.
Retained Earnings
The amount included in retained earnings includes profit or loss attributable to the Company’s
equity holders and reduced by dividends on common stock. Retained earnings may also include
effect of changes in accounting policies as may be required by the standards’ transitional
provisions.
Pension Cost
The net defined benefit liability or asset is the aggregate of the present value of the defined benefit
obligation at the end of the reporting period reduced by the fair value of plan assets (if any),
adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceiling
is the present value of any economic benefits available in the form of refunds from the plan or
reductions in future contributions to the plan.
The cost of providing benefits under the defined benefit plans is actuarially determined using the
projected unit credit method.
*SGVFS004263*
- 21 Defined benefit costs comprise the following:
· Service cost
· Net interest on the net defined benefit liability or asset
· Remeasurements of net defined benefit liability or asset
Service costs which include current service costs, past service costs and gains or losses on nonroutine settlements are recognized as expense in profit or loss. Past service costs are recognized
when plan amendment or curtailment occurs. These amounts are calculated periodically by
independent qualified actuaries.
Net interest on the net defined benefit liability or asset is the change during the period in the net
defined benefit liability or asset that arises from the passage of time which is determined by
applying the discount rate based on government bonds to the net defined benefit liability or asset.
Net interest on the net defined benefit liability or asset is recognized as expense or income in profit
or loss.
Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the
effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized
immediately in other comprehensive income in the period in which they arise. Remeasurements
are not reclassified to profit or loss in subsequent periods.
Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance
policies. Plan assets are not available to the creditors of the Company, nor can they be paid
directly to the Company. Fair value of plan assets is based on market price information. When no
market price is available, the fair value of plan assets is estimated by discounting expected future
cash flows using a discount rate that reflects both the risk associated with the plan assets and the
maturity or expected disposal date of those assets (or, if they have no maturity, the expected period
until the settlement of the related obligations). If the fair value of the plan assets is higher than the
present value of the defined benefit obligation, the measurement of the resulting defined benefit
asset is limited to the present value of economic benefits available in the form of refunds from the
plan or reductions in future contributions to the plan.
Earnings Per Share (EPS)
Basic EPS is calculated by dividing net income for the year attributable to common shareholders
by the number of share issued and outstanding at the end of the year after giving retroactive effect
to regular stock dividends declared and stock rights exercised during the year, if any.
Diluted EPS is computed by dividing net income by the weighted average number of common
shares outstanding during the period, after giving retroactive effect for any stock dividends, stock
splits or reverse stock splits during the period, and adjusted for the effect of dilutive convertible
preferred shares. If the required dividends to be declared on convertible preferred shares divided
by the number of equivalent common shares, assuming such shares are converted would decrease
the basic EPS, then such convertible preferred shares would be deemed dilutive. Where the effect
of the assumed conversion of the preferred shares and the exercise of all outstanding options have
anti-dilutive effect, basic and diluted EPS are stated at the same amount.
Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of
the arrangement at inception date of whether the fulfillment of the arrangement is dependent on
the use of a specific asset or assets or the arrangement conveys a right to use the asset. A
reassessment is made after the inception of the lease only if one of the following applies:
*SGVFS004263*
- 22 a. there is a change in contractual terms, other than a renewal or extension of the arrangement;
b. a renewal option is exercised or extension granted, unless the term of the renewal or extension
was initially included in the lease term;
c. there is a change in the determination of whether fulfillment is dependent on a specified asset;
or
d. there is a substantial change to the asset.
Where a reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances gave rise to the reassessment for scenario a, c or d and at the date of
renewal or extension period for scenario b.
Operating lease - Company as lessee
Leases of office premises and container yards where the lessor retains substantially all the risks
and rewards of ownership are classified as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) are charged to the statement of income on a
straight-line basis over the period of lease.
Operating lease - Company as lessor
Lease of land where the Company retains substantially all the risks and rewards of ownership are
classified as operating leases. Receipts under operating leases (net of any incentives granted to the
lessee) are charged to the statement of income on a straight-line basis over the period of lease.
Finance lease - Company as lessee
Leases of container vans, where the Company has substantially obtained the risks and rewards of
ownership, are classified as finance leases. Finance leases are capitalized at the lease’s inception
at the lower of the fair value of the leased property and the present value of the minimum lease
payments. Each lease payment is allocated between the liability and finance charges so as to
achieve a constant rate on the finance balance outstanding. The corresponding rental obligations,
net of finance charges, are included in “Obligations under finance lease” account in the balance
sheet. The interest element of the finance cost is charged to the statement of income over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability
for each period. Property and equipment acquired under finance leases is depreciated over the
shorter of the asset’s useful life and the lease term.
Foreign Currency Transactions
The financial statements are presented in Philippine peso, which is the Company’s functional and
presentation currency. Transactions in foreign currencies are initially recorded in Philippine peso
based on the exchange rates prevailing at the dates of the transactions. At year-end, monetary
assets and liabilities denominated in foreign currencies are restated at closing rate and any
exchange differentials are credited to or charged against the statement of income.
Contingencies
Contingent liabilities are not recognized in the financial statements. These are disclosed unless the
possibility of an outflow of resources embodying economic benefits is remote. Contingent assets
are not recognized in the financial statements but are disclosed when an inflow of economic
benefits is probable.
Segment Reporting
The Company and its branches and agencies are operating as one reportable segment engaged in
domestic inter-island cargo shipping activities within the Philippines. Therefore, neither business
nor geographical segment information is presented.
*SGVFS004263*
- 23 Events After the Reporting Period
Post year-end events that provide additional information about the Company’s financial position at
the balance sheet date (adjusting events) are reflected in the financial statements. Post year-end
events that are not adjusting events are disclosed in the notes to financial statements when
material.
4. Significant Accounting Judgments and Estimates
The preparation of the accompanying financial statements requires management to make
judgments and estimates that affect the amounts reported in the financial statements and the
accompanying notes. The judgments and estimates used in the accompanying financial statements
are based upon management’s evaluation of relevant facts and circumstances as of date of the
financial statements. Actual results could differ from such estimates.
Judgments
In the process of applying the Company’s accounting policies, management has made judgments,
apart from those involving estimation, which have the most significant effect on the amounts
recognized in the financial statements.
Determining functional currency
Based on the economic substance of the underlying circumstances relevant to the Company, the
functional currency of the Company has been determined to be the Philippine peso. The
Philippine peso is the currency of the primary economic environment in which the Company
operates. It is the currency that mainly influences its revenues and operating expenses.
Operating lease commitments - Company as lessee
The Company has entered into leases of container yards, warehouses/offices and equipment. The
Company has determined that it does not retain all the significant risks and rewards of ownership
of these properties which are leased out on operating lease arrangements.
Operating Lease - The Company as Lessor
The Company has entered into commercial property leases. The Company has determined that it
retains all significant risks and rewards of ownership of these properties which are leased out as
operating leases.
Finance lease commitments - Company as lessee
The Company has entered into leases of dry van containers. The Company has determined that
these leases are finance leases since the significant risks and rewards of ownership related to these
properties are transferred to the Company from the date of the lease agreement.
Estimations
The key assumptions concerning the future and other key sources of estimation uncertainty at the
balance sheet date that have a significant risk causing material adjustments to the carrying
amounts of the assets and liabilities within the next financial years are discussed below:
Impairment losses on trade and other receivables
The Company assesses at each balance sheet date whether there is any objective evidence that
trade and other receivables are impaired. To determine whether there is objective evidence of
impairment, the Company considers factors such as the probability of insolvency or significant
financial difficulties of the debtor and default or significant delay in payments.
*SGVFS004263*
- 24 The main consideration for impairment assessment include whether any payments are overdue or
if there are any known difficulties in the cash flows of the counterparties. The Company assesses
impairment in two areas: individually assessed allowances and collectively assessed allowances.
The Company determines allowances for each significant receivable on an individual basis.
Among the items that the Company considers in assessing impairment is the inability to collect
from the counterparty based on the contractual terms of the receivable. Receivables included in
the specific assessment are the accounts that have been endorsed to the legal department and longoutstanding accounts receivable.
For collective assessment, allowances are assessed for receivables that are individually significant
and for individually significant receivables where there is no objective evidence of individual
impairment. Impairment losses are estimated by taking into consideration the age of the
receivables, past collection experience and other factors that may affect collectability.
Where there is objective evidence of impairment, the amount and timing of future cash flows are
estimated based on age and status of the trade and other receivables, as well as on historical loss
experience.
Trade and other receivables amounted to P
=890,182,268 and =
P606,103,744 as of
December 31, 2013 and 2012, respectively (see Note 6). These trade and other receivables have
allowance for impairment losses amounting to =
P34,063,633 and P
=32,267,182 as of
December 31, 2013 and 2012, respectively (see Note 6).
EUL of property and equipment
The EUL used as a basis for depreciating the Company’s vessels and other property and
equipment were determined on the basis of management’s assessment of the period within which
the benefits of these assets are expected to be realized taking into account actual historical
information on the use of such assets as well as industry standards and averages applicable to the
Company’s assets. The Company reviews annually the EUL of property and equipment.
A reduction in EUL of property and equipment would increase the recorded depreciation expense
and decrease noncurrent assets.
The net book value of property and equipment amounted to P
=1,652,972,769 and =
P1,681,456,399
as of December 31, 2013 and 2012, respectively (see Note 9).
Impairment of property and equipment and other non-financial assets
Internal and external sources of information are reviewed at each balance sheet date to identify
indications that the property and equipment may be impaired or an impairment loss previously
recognized no longer exists or may be decreased. If any such indication exists, the recoverable
amount of the asset is estimated. An impairment loss is recognized whenever the carrying amount
of an asset exceeds its recoverable amount. The Company assesses the impairment of assets
whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. The factors that the Company considers important which could trigger an
impairment review include the following:
·
·
·
significant underperformance relative to expected historical or projected future operating
results;
significant changes in the manner of use of the assets or the strategy for the overall business;
and
significant negative industry or economic trends.
*SGVFS004263*
- 25 -
The Company has not identified any events or changes in circumstances that would indicate
impairment of property and equipment and other non-financial assets.
The carrying value of property and equipment amounted to =
P1,652,972,769 and =
P1,681,456,399 as
of December 31, 2013 and 2012, respectively (see Note 9). The carrying value of other
non-financial assets amounted to =
P266,748,724 and =
P230,831,271 as of December 31, 2013 and
2012, respectively (see Notes 6, 7, 8 and 10).
Realizability of deferred income tax assets
The Company reviews the carrying amounts of deferred income tax assets at each balance sheet
date and reduces it to the extent that it is no longer probable that sufficient taxable income will be
available to allow all or part of the deferred income tax assets to be utilized. Management believes
that it can generate sufficient taxable income to allow all or part of its deferred income tax assets
to be utilized.
The Company recognized deferred income tax assets amounting to P
=53,443,587 and =
P45,293,364
as of December 31, 2013 and 2012, respectively (see Note 20). No deferred income tax assets
were recognized on deductible temporary difference amounting to P
=2,800,923 as of December 31,
2013.
Pension and other retirement benefits
The determination of the obligation and the cost of pension and other retirement benefits is
dependent on the selection of certain assumptions used by actuaries in calculating such amounts.
Those assumptions are described in Note 16, and include among others, discount rates and salary
increase rates. In accordance with PFRS, actual results that differ from the Company’s
assumptions are accumulated and amortized over future periods and therefore, generally affect the
recognized expense and recorded obligation in such future periods. While the Company believes
that the assumptions are reasonable and appropriate, significant differences in the actual
experience or significant changes in the assumptions may materially affect the pension and other
retirement obligation.
The carrying amount of the Company’s pension obligation was =
P110,677,483 and =
P74,068,656 as
of December 31, 2013 and 2012, respectively (see Note 16).
Fair value of financial instruments
Where the fair value of financial assets and financial liabilities recorded in the balance sheet
cannot be derived from active markets, they are determined using valuation techniques including
the discounted cash flows model. The inputs to these models are taken from observable markets
where possible, but where this is not feasible, a degree of judgment is required in establishing fair
values. The adjustments include considerations of inputs such as liquidity risk, credit risk and
volatility. Changes in assumptions about these factors could affect the reported fair values of
financial instruments.
The fair values of the Company’s financial assets amounted to =
P986,900,712 and =
P765,472,867 as
of December 31, 2013 and 2012, respectively, and financial liabilities amounted to
P
=1,717,013,495 and =
P1,313,187,086 as of December 31, 2013 and 2012, respectively (see Note
25).
Contingencies
In the ordinary course of business, the Company is a defendant in various litigations and claims.
The Company has an ongoing case with the Court of Tax Appeals. The estimate of the probable
*SGVFS004263*
- 26 costs for the resolution of these claims and cases has been developed in consultation with internal
and external legal counsels handling the Company’s defense in these matters and is based upon an
analysis of potential results. Although there can be no assurances, management and its legal
counsels believe that the ultimate resolution of these legal proceedings would not likely have a
material, adverse effect on the results of its operations, financial position or liquidity of the
Company. It is possible, however, that the future results of operations could be materially affected
by changes in estimates or in the effectiveness of the strategies relating to these litigations and
claims.
5. Cash and Cash Equivalents
Cash on hand and in banks
Short-term placements
2013
P
=110,679,597
–
P
=110,679,597
2012
P
=53,193,593
138,000,000
=191,193,593
P
Cash in banks earn interest at the respective bank deposit rates. Short term-placements are made
for varying periods of up to three months depending on the immediate cash requirements of the
Company and earn interest at the respective short-term placements rates.
Interest income from bank deposits and short-term placements, net of final tax, amounted to
=619,433, =
P
P1,305,882 and =
P1,053,292 in 2013, 2012 and 2011, respectively (see Note 19).
6. Trade and Other Receivables
Trade:
Third parties
Related parties (see Note 23)
Less allowance for impairment losses
Others:
Deposit to suppliers
Insurance claims
Advances
Officers and employees
Others
Less allowance for impairment losses
2013
2012
P
=562,834,858
250,732,433
813,567,291
24,824,100
788,743,191
=448,488,571
P
111,925,737
560,414,308
23,027,649
537,386,659
60,434,829
17,338,412
5,499,118
1,083,883
26,322,368
110,678,610
9,239,533
101,439,077
P
=890,182,268
57,276,635
6,267,193
5,997,597
1,181,066
7,234,127
77,956,618
9,239,533
68,717,085
=606,103,744
P
Trade receivables are noninterest-bearing and are generally on a 30-day term.
*SGVFS004263*
- 27 Rollforward of allowance for impairment losses follows:
Balances at beginning of year
Provisions (see Note 15)
Reversal
Write-off
2013
P
=32,267,182
1,796,451
–
–
P
=34,063,633
2012
P
=40,017,965
3,565,174
(3,017,139)
(8,298,818)
P
=32,267,182
2013
P
=26,283,283
3,600,705
P
=29,883,988
2012
P
=26,132,311
4,327,966
P
=30,460,277
7. Inventories - at cost
Fuel, diesel and lubricants
Materials and spare parts
Fuel and supplies inventories recorded under “Cost of services”, “Terminal expenses”, and
“General and administrative expenses” amounted to =
P519,104,920, P
=47,303,760, =
P2,352,123,
respectively, in 2013 and =
P614,254,542, P
=49,696,263, =
P2,621,261, respectively, in 2012
(see Notes 13, 14 and 15).
8. Prepayments and Other Current Assets
Creditable withholding tax (CWT)
Deferred input VAT
Prepaid insurance
Prepaid importation charges
Loan receivable - current portion
2013
P
=127,178,889
45,685,357
2,884,414
534,499
1,100,041
P
=177,383,200
2012
=107,217,467
P
31,794,784
2,258,048
1,824,058
1,001,523
=144,095,880
P
Deferred input tax pertains to VAT from purchases and/or importations of various parts, supplies,
equipment, machineries and or capital goods which will be claimed as credit against output tax
liabilities in a manner prescribed by pertinent revenue regulations. As of year-end, it consists of
the balance of the deferred input tax on capital goods exceeding =
P1 million as well as the
unapplied Input VAT pertaining to the last month’s transactions of the current taxable year. Input
tax on capital goods shall be claimed on a staggered basis over 60 months or the useful life of the
related assets, whichever is shorter.
CWTs represent the amount withheld by the Company’s customers in relation to its sale of
services. These are recognized upon collection of the related sales and are utilized as tax credits
against income tax due as allowed by the Philippine taxation laws and regulations.
*SGVFS004263*
- 28 -
9. Property and Equipment
Land
Land Improvements
2013
Buildings,
Warehouses,
Terminal
Premises and
Vessels and
Container
Equipment
Drydocking
Vans and and Leasehold
Costs Improvements Improvements
Office
Furniture and Transportation
Equipment
Equipment
Vessel
Tools and
Equipment
Total
Cost
Balances at beginning of
year
Additions
Disposals/write-off
Balances at end of year
P
=17,124,468
–
–
17,124,468
P
=15,272,566 P
=2,270,978,574
–
176,098,416
–
(167,377,895)
15,272,566 2,279,699,095
P
=693,109,967
69,294,449
(25,367,163)
737,037,253
P
=333,636,024
1,214,055
–
334,850,079
P
=58,201,132
11,632,440
–
69,833,572
P
=35,775,135
833,036
(621,818)
35,986,353
P
=210,704,672 P
=3,634,802,538
65,674,700
324,747,096
–
(193,366,876)
276,379,372 3,766,182,758
Accumulated depreciation
Balances at beginning of
year
Depreciation for the year
Disposals/write-off
Balances at end of year
Net book value
–
–
–
–
P
=17,124,468
15,162,145
997,841,510
110,421
196,208,605
–
(136,429,406)
15,272,566 1,057,620,709
P
=– P
=1,222,078,386
458,976,215
39,672,120
(22,880,323)
475,768,012
P
=261,269,241
300,002,909
5,365,113
–
305,368,022
P
=29,482,057
50,126,898
4,768,350
–
54,895,248
P
=14,938,324
22,693,668
3,741,037
(591,091)
25,843,614
P
=10,142,739
108,542,794 1,953,346,139
69,899,024
319,764,670
–
(159,900,820)
178,441,818 2,113,209,989
P
=97,937,554 P
=1,652,972,769
*SGVFS004263*
- 29 -
Land
Land
Improvements
Vessels and
Drydocking
Costs
Container
Vans and
Improvements
2012
Buildings,
Warehouses,
Terminal
Premises and
Equipment
and Leasehold
Improvements
Office
Furniture and
Equipment
Transportation
Equipment
Vessel
Tools and
Equipment
Total
Cost
Balances at beginning of
year
Additions
Disposals/write-off
Balances at end of year
=
P17,124,468
–
–
17,124,468
=
P15,272,566 =
P2,749,103,511
–
269,058,160
–
(747,183,097)
15,272,566 2,270,978,574
=
P652,696,816
83,687,462
(43,274,311)
693,109,967
=
P353,027,374
1,682,320
(21,073,670)
333,636,024
=
P56,318,696
1,882,436
–
58,201,132
=
P31,964,205
5,331,380
(1,520,450)
35,775,135
=
P157,368,025 =
P4,032,875,661
66,199,793
427,841,551
(12,863,146)
(825,914,674)
210,704,672 3,634,802,538
Accumulated depreciation
Balances at beginning of
year
Depreciation for the year
Disposals/write-off
Balances at end of year
Net book value
–
–
–
–
=
P17,124,468
13,001,313 1,458,781,835
2,160,832
229,041,075
–
(689,981,400)
15,162,145
997,841,510
=
P110,421 =
P1,273,137,064
463,623,925
34,445,269
(39,092,979)
458,976,215
=
P234,133,752
309,573,705
7,610,119
(17,180,915)
300,002,909
=
P33,633,115
46,933,353
3,193,545
–
50,126,898
=
P8,074,234
20,199,282
3,603,131
(1,108,745)
22,693,668
=
P13,081,467
60,803,376 2,372,916,789
53,817,336
333,871,307
(6,077,918)
(753,441,957)
108,542,794 1,953,346,139
=
P102,161,878 =
P1,681,456,399
*SGVFS004263*
- 30 In 2013, some parts of a vessel with a net book value of =
P30,948,489 were damaged and
subsequently derecognized which resulted to a loss on disposal (see Note 18).
On January 30, 2012, the Company entered into a Memorandum of Agreement with a third party
for the purchase of vessel.
On July 14, 2012, the Company entered into a Memorandum of Agreement with a third party for
the sale of one of the Company’s vessels, which has a net book value amounting to =
P65,122,585 at
the time of the sale. Loss recognized on the sale amounted to =
P41,960,885 (see Note 18).
In 2012, the Company sold various delivery vans which resulted to recognition of gain amounting
to =
P4,483,121 (see Note 18).
To ensure the maintenance of the vessels in accordance with international standards, the Company
has availed of the services of a related party to oversee the regular upgrading and maintenance of
the vessels (see Note 23).
The balance of property and equipment as of December 31, 2013 and 2012 includes fully
depreciated assets still in use amounting to P
=551,887,118 and =
P575,705,600, respectively.
Certain vessels with carrying values of P
=1,037,435,970 and P
=1,167,123,236 as of
December 31, 2013 and 2012, respectively, are used as chattel mortgage securities for long-term
borrowings (see Note 12).
Property and equipment include the following amounts where the Company is a lessee under a
finance lease (see Note 24):
Cost
Less accumulated depreciation
Net book value
2013
P
=233,856,582
62,385,850
P
=171,470,732
2012
=186,201,055
P
36,525,646
=149,675,409
P
2013
P
=6,644,834
3,740,463
–
699,335
P
=11,084,632
2012
P
=11,236,096
4,840,504
160,762
699,335
P
=16,936,697
10. Other Noncurrent Assets
Deposits - net (see Note 24)
Loan receivable - net of current portion
Investment in associate
Others
On November 2012, the Company entered into a Memorandum of Agreement with an agency
(the debtor) for a five year term loan amounting to P
=6,000,000. The loan receivable is due on
October 2017, subject to 9% per annum and shall be equally amortized for 60 months. The loan is
secured by a chattel mortgage on a land-based equipment.
On April 20, 2011, the Company and its related party NMC Container Lines Inc. (NMCCLI)
incorporated One Team Services Inc. (OTSI), in the Philippines owning 50% each, primarily to
engage in the business of operating and maintaining cargo handling services including the
operation, ownership, acquisition, and/or lease of the proper and necessary transport and cargo
*SGVFS004263*
- 31 handling equipment. As of December 31, 2013, OTSI has not started its commercial operations.
Selected financial information of the associate as of December 31, 2013 and 2012 and for the
years then ended follows:
Total assets
Total liabilities
Total equity (capital deficiency)
Proportion of the Company’s ownership
Carrying value
Income
Expenses
Net loss
2013
P
=514,131
3,230,556
(793,901)
50%
–
2012
P
=502,042
103,682
398,360
50%
160,762
2013
P
=1,056
(1,116,480)
P
=1,115,424
2012
P
=1,137
(77,974)
P
=76,837
Equity in net loss of OTSI amounted to =
P160,762 and =
P50,820 in 2013 and 2012, respectively.
OTSI has not declared dividends in 2013 and 2012.
11. Accounts Payable and Accrued Expenses
Trade:
Third parties
Related parties (see Note 23)
Output VAT
Accrued expenses:
Repairs, maintenance and supplies for vessels
Outside services
Hustling, trucking and labor services
Others
Dividends payable (see Note 21)
Other taxes payable
Customer deposits
Customer claims
Others
2013
2012
P
=167,675,674
73,835,901
112,442,449
=143,974,176
P
52,565,296
75,459,162
32,687,564
26,586,922
19,476,616
7,852,528
24,169,757
5,444,165
3,216,630
613,783
10,398,251
P
=484,400,240
3,002,247
9,675,023
11,719,564
6,416,154
28,185,465
4,923,399
3,122,594
613,783
17,823,044
=357,479,907
P
*SGVFS004263*
- 32 -
12. Borrowings
Short-term borrowings from local banks bear annual interest at 4.00% to 4.25% and 4.25% to
5.25% in 2013 and 2012, respectively. Short-term borrowings are secured by trade receivables
with carrying amount of about P
=35.0 million.
Long-term borrowings consist of:
2013
2012
P
=227,500,000
P
=282,500,000
Balance of loan obtained from Metropolitan Bank & Trust Company
(MBTC) of P
=238.0 million, =
P50.0 million was availed last
April 20, 2012 and will mature on April 20, 2019, =
P138.0 million
was availed last May 15, 2012 and will mature on May 15, 2019.
The loan is payable in quarterly installments of =
P2.0 million for the
first drawdown and P
=7.5 million for the second drawdown with one
year grace period. Interest is paid and repriced quarterly.
Annual interest rate is equal to PDST-F plus minimum of 1.25%
spread inclusive of Gross Receipts Tax rate (GRT), or the BSP
Overnight lending rate plus GRT, whichever is higher at the time of
the repricing. Interest rates range from 3.00% to 3.50% in 2013 and
from 3.25% to 3.79% in 2012.
208,745,427
237,013,750
Balance of loan obtained from BDO of =
P225.0 million, maturing on
March 16, 2017 and payable quarterly in 16 equal quarterly
installments starting June 16, 2013. Annual interest rate is equal to
PDST-F plus applicable spread and tax. Interest rates range from
3.50% to 3.80% in 2013 and 4.00% to 4.50% in 2012.
182,394,942
224,282,289
92,500,000
711,140,369
411,871,048
P
=299,269,321
118,500,000
862,296,039
213,979,430
P
=648,316,609
Balance of loan obtained from Banco de Oro (BDO) of =
P450.0 million,
maturing on July 7, 2014 and payable in 7 equal semi-annual
installments of =
P12.5 million until October 2011, 5 equal semiannual installments of P
=27.5 million starting April 2012 until
April 2014. Annual interest rate is equal to the PDST-F plus 2.5%
or the simple average of PHIBOR and PDST-F rate when PHIBOR
rate is 2.0% higher than the corresponding PDST-F. Interest is
repriced and paid quarterly. Interest rates range from 3.50% to
3.75% in 2013 and 4.00% to 4.74% in 2012.
Balance of loan obtained from MBTC of =
P130.0 million. =
P60.0 million
was availed last June 2, 2011 and will mature on June 2, 2014,
P
=40.0 million was availed last July 29, 2011 and will mature on
July 29, 2014, while P
=30.0 million was availed last
October 26, 2011 and will mature on October 24, 2014. The loan is
payable in quarterly installments of =
P6.5 million with one year
grace period and with a balloon payment of principal on the third
year amounting to =
P84.5 million. Interest is paid monthly and
repriced quarterly. Annual interest rate is equal to PDST-F plus
minimum of 1.25% spread inclusive of GRT, or the BSP Overnight
lending rate plus GRT, whichever is higher at the time of the
repricing. Interest rates range from 3.00% to 3.44% in 2013 and
3.00% to 4.74% in 2012.
Less current portion - net of deferred financing cost
The long-term borrowings are secured by chattel mortgages on certain vessels with carrying
*SGVFS004263*
- 33 values of P
=1,037,435,970 and P
=1,167,123,236 as of December 31, 2013 and 2012, respectively
(see Note 9). Certain lenders require the Company to maintain financial ratios as stipulated in the
loan agreements. As of December 31, 2013 and 2012, the Company is compliant with the required
ratios.
Deferred financing costs were incurred in connection with the financing arrangement. These cost
are amortized, using the effective interest rate method, over the term of the related loans.
Rollforward analysis of deferred financing costs follows:
Cost:
Balances at beginning of period
Addition
Accumulated amortization:
Balances at beginning of period
Amortization for the period
Balances at end of period
Less current portion
2013
2012
P
=2,907,515
–
2,907,515
P
=1,717,515
1,190,000
2,907,515
1,203,558
591,830
1,795,388
1,112,127
458,952
P
=653,175
302,534
901,024
1,203,558
1,703,957
515,154
P
=1,188,803
13. Cost of Services
Materials, supplies and facilities (see Note 7)
Outside services
Depreciation (see Note 9)
Personnel (see Note 17)
Voyage
Vessel insurance (see Note 23)
Others
2012
2011
2013
P
=614,254,542
=
P598,753,108
P
=519,104,920
442,448,570
340,465,320
487,331,372
282,856,712
315,109,996
266,107,629
94,164,465
97,054,326
95,815,974
58,441,689
48,560,098
52,560,999
28,754,824
26,419,749
31,224,966
3,589,014
31,801,531
3,317,471
=1,524,509,816 =
P1,458,164,128
P
=1,455,463,331 P
14. Terminal Expenses
Rental (see Note 24)
Materials, supplies and facilities (see Note 7)
Depreciation (see Note 9)
Outside services
Personnel (see Note 17)
Others
2013
P
=55,885,072
47,303,760
44,932,893
42,954,719
29,690,040
7,700,635
P
=228,467,119
2012
P
=49,172,804
49,696,263
44,003,158
46,580,208
26,575,100
7,487,805
P
=223,515,338
2011
P
=50,350,341
54,177,618
39,158,052
63,233,745
27,391,081
9,310,275
=
P243,621,112
*SGVFS004263*
- 34 -
15. General and Administrative Expenses
Personnel (see Note 17)
Outside services
Rental (see Note 24)
Depreciation (see Note 9)
Communication, light and water
Transportation and travel
Taxes and licenses
Supplies (see Note 7)
Impairment losses:
Trade and other receivables (see Note 6)
Deposits
Repairs and maintenance
Entertainment, amusement and recreation
Employees’ training and staff meeting
Advertising
Membership fees
Others
2013
P
=86,147,813
30,187,421
9,248,030
8,724,148
8,039,764
3,438,836
2,851,147
2,352,123
1,796,451
–
1,270,356
1,104,987
677,142
185,915
76,100
2,603,086
P
=158,703,319
2012
(As restated;
Note 2)
P
=84,822,432
11,468,970
8,430,863
7,011,437
6,899,314
3,505,463
4,752,988
2,621,261
3,565,174
993,092
1,187,638
1,353,276
3,317,151
291,104
64,600
1,270,878
P
=141,555,641
2011
P
=77,868,529
13,742,413
8,690,119
6,449,610
7,176,743
3,728,104
3,562,886
2,520,616
27,043,379
–
1,518,090
1,253,193
1,479,616
574,226
184,738
1,754,473
=
P157,546,735
16. Pension Cost
The Company maintains a funded, tax qualified, non-contributory retirement plan covering all its
eligible employees. Under the provisions of the plan, the normal retirement age is 60 but
employees with at least 20 years of credited services for sea-staff and 15 years for shore-staff can
avail of an early retirement. The retirement plan is intended to provide lump-sum benefit
payments to employees equal to 150% of monthly salary per year for shore-based employees and
35 days pay per year of service for sea-based employees.
The Company’s retirement benefit fund (“Fund”) is in form of a trust being maintained and
managed by BPI Asset Management. In 2012, other than contributions to the Fund, there is no
transaction between the Company and the Fund.
Under the existing regulatory framework, Republic Act 7641 requires a provision for retirement
pay to qualified private sector employees in the absence of any retirement plan in the entity,
provided however that the employee’s retirement benefits under any collective bargaining and
other agreements shall not be less than those provided under the law. The law does not require
minimum funding of the plan.
*SGVFS004263*
- 35 The following tables summarize the components of net benefit expense recognized in the
statements of income and the funded status and amounts recognized in the balance sheets for the
Plan.
2012
(As restated;
see Note 2)
2013
Retirement expense to be recognized in the statements of
income:
Current service cost
Net interest cost
Effect of curtailment
Settlements
=6,713,927 P
=7,415,348
P
=8,113,400 P
3,067,590
6,467,808
3,471,972
(7,391,300)
–
–
9,607,484
–
–
=11,997,701 P
=13,883,156
P
=11,585,372 P
2013
Re-measurement effects to be recognized in other
comprehensive income:
Actuarial loss (gain) on defined benefit obligation
Return on assets excluding amount included in net
interest cost
2011
2012
2011
(As restated; (As restated;
see Note 2) see Note 2)
=14,774,607 (P
=10,517,400)
P
=31,097,465 P
(315,712)
950,549
283,198
=14,458,895 (P
=9,566,851)
P
=31,380,663 P
Movements in the pension liability are as follows:
Balances at beginning of year
Net benefit costs in statements of income:
Current service cost
Net interest cost
Effect of curtailment
Settlements
Net benefit costs in statements of comprehensive income:
Actuarial loss due to:
Experience adjustments
Changes in financial assumptions
Actual return excluding amount included in net
interest cost
Actual contributions
Benefits paid
2013
P
=74,068,656
2012
(As restated;
see Note 2)
P
=65,286,775
8,113,400
3,471,972
–
–
11,585,372
6,713,927
3,067,590
(7,391,300)
9,607,484
11,997,701
6,665,465
24,432,000
2,211,685
12,562,922
283,198
31,380,663
(1,000,000)
(5,357,208)
P
=110,677,483
(315,712)
14,458,895
(6,000,000)
(11,674,715)
P
=74,068,656
*SGVFS004263*
- 36 Pension liability - net
Fair value of plan assets
Present value of obligation
Pension liability
2013
P
=15,212,718
(125,890,201)
(P
=110,677,483)
2012
(As restated;
see Note 2)
P
=13,679,413
(87,748,069)
(P
=74,068,656)
Changes in the present value of the defined benefit obligation are as follows:
Balances at beginning of year
Net benefit costs in statements of income:
Current service costs
Interest cost
Effect of curtailment
Re-measurements in other comprehensive income
Actuarial loss due to:
Experience adjustments
Changes in financial assumptions
Benefits paid for voluntary separation
Balances at end of year
2013
P
=87,748,069
2012
(As restated;
see Note 2)
P
=72,089,247
8,113,400
4,288,475
–
12,401,875
6,713,927
3,628,819
(7,391,300)
2,951,446
6,665,465
24,432,000
31,097,465
(5,357,208)
P
=125,890,201
2,211,685
12,562,922
14,774,607
(2,067,231)
P
=87,748,069
2013
P
=13,679,413
816,503
2012
(As restated;
see Note 2)
P
=6,802,472
561,229
Changes in the fair value of plan assets are as follows:
Balances at beginning of year
Interest income included in net interest cost
Actual return excluding amount included in net interest
cost
Actual contributions
Balances at end of year
(283,198)
1,000,000
P
=15,212,718
315,712
6,000,000
P
=13,679,413
The fair value of plan assets by each class as at the end of the reporting period are as follows:
Cash and fixed-income investments
Less other liabilities
Fair value of plan assets
2013
P
=15,238,204
25,486
P
=15,212,718
2012
P
=13,701,167
21,754
P
=13,679,413
All equity instruments held have quoted prices in active market. The remaining plan assets do not
have quoted market prices in active market. The plan assets have diverse investments and do not
have any concentration risk.
*SGVFS004263*
- 37 The principal assumptions used as of December 31, 2013 and 2012 in determining pension benefit
obligations net pension asset for the Company’s Plan are shown below:
Discount rate
Salary increase rate:
Land-based
Sea-based
2013
4.94%
2012
5.61%
6.00%
3.00%
4.00%
4.00%
The sensitivity analysis below has been determined based on reasonably possible changes of each
significant assumption on the defined benefit obligation as of December 31, 2013, assuming all
other assumptions were held constant:
Discount rates
Future salary increases
Increase (decrease)
in basis points
100
(100)
Effect on defined
benefit obligation
(P
=12,357,200)
14,581,400
100
(100)
P13,763,100
=
(11,925,400)
The Company’s defined benefit pension plan is funded by the Company.
The Company expects to contribute =
P3,000,000 to the defined benefit plan in 2014.
The average duration of the defined benefit obligation as of December 31, 2013 is 17.33 years.
17. Personnel Expenses
Salaries and wages
Other employee benefits
Pension costs (see Note 16)
2013
P
=153,688,768
46,379,687
11,585,372
P
=211,653,827
2012
(As restated;
see Note 2)
P
=154,070,651
39,493,645
11,997,701
P
=205,561,997
2011
=
P140,413,601
48,017,179
13,883,156
=
P202,313,936
2013
P
=55,236,014
2012
P
=11,739,881
2011
P
=14,263,188
(27,399,907)
(37,477,764)
14,325,068
(160,762)
1,618,215
P
=29,293,560
(89,239)
1,376,663
(P
=24,450,459)
–
4,425,139
18. Other Income (Charges) - net
Income from insurance claims
Gain (loss) on disposal of property
and equipment - net (see Note 9)
Equity in net loss of an associate
(see Note 10)
Rental income and others
P
=33,013,395
*SGVFS004263*
- 38 19. Finance Costs and Other Charges - net
Interest expense:
Borrowings (see Note 12):
Long-term borrowings
Short-term borrowings
Obligations under finance lease
(see Note 24)
Foreign exchange losses (gains) - net
Banks and other financing charges
Interest income (see Note 5)
2013
2012
2011
P
=26,186,594
3,736,196
P
=32,482,034
2,413,169
P
=28,572,039
3,429,132
3,001,093
10,134,912
1,607,348
(619,433)
P
=44,046,710
1,506,765
(10,052,017)
1,685,724
(1,305,882)
P
=26,729,793
1,001,370
4,450,551
456,317
(1,053,292)
P
=36,856,117
20. Income Taxes
The Company’s current provision for income tax represents minimum corporate income tax
(MCIT) in 2013, 2012 and 2011.
The reconciliation of income tax computed at the statutory income tax rate to benefit from income
tax as shown in the statements of income is as follows:
2013
Income tax at statutory income tax rate
of 30%
Additions to (reductions in) income
tax resulting from:
Unrecognized deferred income tax asset
Nondeductible expenses
Equity in net loss of an associate
Interest expense limitation
Interest income subjected to final tax
Income subject to income tax holiday
(see Note 28)
P
=3,575,137
2012
(As restated;
see Note 2)
P
=17,898,126
2011
P
=1,871,341
2,800,923
828,067
48,228
18,499
(44,970)
–
456,155
161,221
15,240
(391,765)
–
213,114
130,245
–
(315,988)
(5,632,964)
P
=1,592,920
(21,459,507)
(P
=3,320,530)
(6,835,218)
(P
=4,936,506)
In 2013, the Company did not recognized deferred income tax asset on MCIT amounting to
P
=2,800,923.
*SGVFS004263*
- 39 The components of the net deferred income tax asset are as follows:
2012
(As restated;
see Note 2)
2013
Deferred income taxes recognized in the statement of
income:
Deferred tax assets:
Retirement benefit obligation
Allowance for impairment losses on receivables
Net operating loss carry over (NOLCO)
MCIT
Unrealized foreign exchange loss
Deferred tax liabilities:
Unrealized foreign exchange gain
Deferred financing cost
Deferred income tax asset related to retirement benefit
obligation recognized directly in equity
P
=18,833,712
10,766,144
2,306,993
5,482,409
3,540,518
40,929,776
P
=18,927,029
10,512,306
7,272,008
5,482,409
–
42,193,752
–
(196,274)
(196,274)
(2,294,430)
(373,823)
(2,668,253)
3,099,612
P
=42,625,111
12,513,811
P
=53,247,313
The Company has available NOLCO and MCIT which can be claimed as credit against regular
taxable income and regular tax liability, respectively, as follows:
Year Incurred
NOLCO
2012
2011
MCIT
2013
2012
2011
Availment Period
Amount
Applied/Expired
Balance
2013-2015
2012-2014
P
=20,332,455
3,907,570
P
=24,240,025
P
=12,642,478
3,907,570
P
=16,550,048
P
=7,689,977
–
P
=7,689,977
2014-2016
2013-2015
2012-2014
P
=2,654,175
2,003,485
3,478,924
P
=8,136,584
P
=–
–
–
P
=–
P
=2,654,175
2,003,485
3,478,924
P
=8,136,584
21. Equity
Capital Stock
On July 22, 1996, the Company listed with the PSE its common stock, wherein it offered
300,751,880 shares to the public at the issue price of =
P5.96 per share.
On September 4, 2006, the SEC approved the increase in the Company’s authorized capital stock
from =
P700.0 million divided into 400.0 million common shares, and 300.0 million preferred
shares, both with a par value of =
P1.0 per share, to =
P1.0 billion divided into 895,058,756 common
shares and 104,941,244 preferred shares, both with a par value of =
P1.0 per share. In separate
meetings, the BOD and the shareholders resolved that the increase of the authorized capital stock
shall be funded by the declaration of stock dividends equivalent to 75,187,967 common shares
with a par value of =
P1.0 per share. On October 3, 2006, the PSE approved the application of the
Company to list additional shares relating to the issuance of stock dividends.
*SGVFS004263*
- 40 On December 29, 2006, certain shareholders owning 96,125,243 preferred shares opted to convert
their shares into 1 common share per 1 preferred share, plus stock dividends equivalent to 86.96%
common share for every preferred share (equivalent to 83,587,161 shares). The Company filed
Form 10.1 with SEC for the exemption from registration requirements of the converted
96,125,243 preferred shares into 179,712,404 common shares.
On September 21, 2007, the SEC approved the amendment of Article VII of the Company’s
Articles of Incorporation through the retirement of 8,816,001 preferred shares and conversion of
96,125,243 preferred shares into common shares resulting in the reduction of the Company’s
authorized capital stock to 991,183,999 with par value of P
=1.0 per share.
On November 28, 2007, the PSE has approved the Company’s application to list additional
96,125,243 common shares to cover the underlying common shares for the conversion of a total of
96,125,243 preferred shares at a conversion rate of one (1) common share for every one (1)
convertible preferred share. In addition, the PSE has approved the application of the Company to
list additional 83,587,161 common shares, with a par value of P
=1.0 per share, to cover the 86.96%
stock dividend declaration to the stockholders who opted to convert their preferred shares to
common shares in 2007.
As of December 31, 2013, 2012 and 2011, the Company has 979, 996 and 1,015 shareholders,
respectively.
Retained Earnings
Appropriated retained earnings represent amounts for the payments of loan amortization. On
December 13, 2012, the BOD approved the reversal of the appropriated retained earnings.
On June 27, 2013, the BOD has declared and issued in favor of common shareholders of record as
of July 12, 2013 cash dividends amounting to three centavos (P
=0.025) per share, or an aggregate
amount of P
=13,866,056.
On June 21, 2012, the BOD has declared and issued in favor of common shareholders of record as
of July 6, 2012 cash dividends amounting to one and one half centavos (P
=0.015) per share, or an
aggregate amount of =
P8,319,634.
On May 20, 2011, the BOD has declared and issued in favor of common shareholders of record as
of June 17, 2011 cash dividends amounting to three centavos (P
=0.03) per share, or an aggregate
amount of P
=13,891,307.
Treasury Shares
On March 11, 2011, the BOD approved the acquisition of 1,010,000 shares of stock of the
Company. On June 23, 2011, the Company acquired 1,010,000 shares of its own outstanding
shares for a total consideration of P
=3,125,850.
*SGVFS004263*
- 41 -
22. Earnings Per Share
Following are the bases for the computation of EPS as of December 31:
2013
2012
2011
Basic/diluted earnings
Net income available to common
shareholders
P
=10,470,952
P
=62,980,946
P
=11,174,308
Weighted average number of
outstanding common shares
554,642,251
554,642,251
554,642,251
P
=0.02
P
=0.11
P
=0.02
Basic/diluted EPS
For the years ended December 31, 2013, 2012 and 2011, there were no shares of stock that have a
potentially dilutive effect on the basic EPS of the Company.
23. Related Party Transactions
Parties are considered to be related if one party has the ability to control, directly or indirectly, the
other party or exercise significant influence over the other party in making financial and operating
decisions. Parties are also considered to be related if they are subject to common control or
common significant influence. Related parties may be individuals or corporate entities.
*SGVFS004263*
- 42 The following are the more significant related party transactions and balances as of and for the years ended December 31, 2013, 2012 and 2011 not
separately shown elsewhere in the financial statements.
Related Parties
Year Freight Revenue
Purchases
Management
Fees
(Note 13)
Reimbursable
Expenses
Insurance,
Rental,
Guarantee
Fee, and
Other Services
Amounts
Owed by
Related Parties
(Note 6)
Amounts
Owed to
Related Parties
(Note 11)
Terms
Conditions
Parent:
NMC
2013
2012
2011
P
=3,619,173
13,877,692
–
P
=–
–
–
P
=–
–
–
P
=–
–
–
P
=4,182,881
9,797,638
3,435,771
P
=355,909
3,187,289
16,918,916
One Stop Logistics Solutions, 2013
Inc. (OSLI)
2012
2011
11,336,734
30,305,130
28,735,654
–
–
–
–
–
–
18,289
59,031
77,628
9,317,342
6,005,873
9,719,271
52,372,124
46,677,980
44,476,860
P
=2,125,931 Brokerage Fee - Payable within Unsecured;
955,985 the following month
No Impairment
4,895,824
Affiliates:
3,127,372 Trucking - Payable within the
3,098,556 month
3,976,258
Unsecured;
No Impairment
NMC Container Lines, Inc.
(NMCCLI)
2013
2012
2011
190,664,286
101,233,615
46,338,002
–
–
–
–
–
–
1,472,796
8,449,061
8,870,499
42,049,430
30,050,895
23,906,598
180,448,022
40,098,898
43,434,010
All Asian Countertrade
2013
2012
2011
38,132,121
40,021,435
19,945,165
–
–
–
–
–
–
–
–
–
–
–
–
8,120,629
12,715,150
7,456,641
– Freight - Collectible in 30 days Unsecured;
– after receipt of Bill
No Impairment
258,550
Magsaysay Shipmanagement, 2013
Inc. (MSI)
2012
2011
–
–
–
–
–
–
31,599,845
31,067,546
32,529,532
–
–
–
1,482,221
16,791,080
38,906,051
4,240,460
4,045,914
3,675,958
10,369,905 Revolving Fund Replenishment - Unsecured;
251,283 Payable 5 days after receipt
No Impairment
20,188,811
Magsaysay Marine Services,
Inc. (MMSI)
2013
2012
2011
–
–
–
–
–
–
–
–
–
–
–
–
27,016,512
28,398,777
42,905,683
843,215
748,815
845,390
Oceanic Container Lines, Inc. 2013
2012
2011
56,704
124,860
884,831
–
–
–
–
–
–
–
–
–
12,746,310
2,940,285
3,191,013
222,179
222,179
193,313
34,541,837 Co-loading/Reimbursables 22,968,038 Payable within the following
28,660,182 month
5,473,618 Container Repair - Payable
1,864,755 within the following month
18,634,148
Unsecured;
No Impairment
Unsecured;
No Impairment
90,688 Co-loading - Payable in 30 days Unsecured;
337,857
No Impairment
382,855
One Stop Warehousing
Solution, Inc. (OSWSI)
2013
2012
2011
–
–
–
–
–
–
–
–
–
67,388
–
–
23,897,954
–
–
1,642,200
–
–
5,295,437 Various
–
–
Unsecured;
No Impairment
Road Link Solutions, Inc.
(RLSI)
2013
2012
2011
–
–
–
–
–
–
–
–
–
5,341,147
–
–
52,156,134
–
–
–
–
–
6,142,771 Various
–
–
Unsecured;
No Impairment
(Forward)
*SGVFS004263*
- 43 -
Purchases
Management
Fees
(Note 13)
Reimbursable
Expenses
Insurance,
Rental,
Guarantee
Fee, and
Other Services
Amounts
Owed by
Related Parties
(Note 6)
Amounts
Owed to
Related Parties
(Note 11)
Related Parties
Year Freight Revenue
OYG Transport Inc.
2013
2012
2011
P
=–
–
–
P
=–
–
–
P
=–
–
–
P
=–
–
–
P
=1,572,192
1,808,973
2,809,509
P
=–
–
–
P
=55,957 Trucking - Payable in 15 days
50,990
37,125
Unsecured;
No Impairment
Magsaysay Houlder
Insurance Brokers, Inc.
(MHIBI)
2013
2012
2011
–
–
–
–
–
–
–
–
–
–
–
–
13,419,233
10,443,320
7,269,356
69,287
–
–
41,509 Insurance - Payable in 30 days
35,954
240,074
Unsecured;
No Impairment
Asiaport Equipment and
Logistics Corp. (AELC)
2013
2012
2011
–
–
–
–
–
–
–
–
–
–
–
–
33,043,898
41,134,049
77,136,350
–
–
–
2,351,749 Lift on/lift off - Payable in 30
2,799,660 days
13,273,352
Unsecured;
No Impairment
Marine Fuels Philippines,
Inc. (MFPI)
2013
2012
2011
–
–
–
–
99,092
31,333,634
–
–
–
–
–
–
–
–
–
–
–
–
– Fuel - Payable in 30 days
–
999,476
Unsecured;
No Impairment
Dumaguete Coconut Mills,
Inc. (DCM)
2013
2012
2011
3,816,683
9,518,494
3,567,683
–
–
–
–
–
–
–
–
–
897,818
4,726,077
946,107
724,749
321,995
3,133,249
Tao Commodity Trader, Inc.
(TAO)
2013
2012
2011
–
–
–
112,295,243
75,646,717
107,699,169
–
–
–
–
–
–
–
–
–
–
–
–
Pioneer Insurance and Surety
Corp. (Pioneer)
2013
2012
2011
–
–
–
–
–
–
–
–
–
–
–
–
17,602,883
22,539,594
15,935,435
–
–
–
Others
2013
2012
2011
2013
2012
2011
449,843
578,813
1,790,760
P
=248,075,044
195,660,039
101,262,095
–
–
–
P
=112,295,243
75,745,809
139,032,803
–
–
–
P
=31,599,845
31,067,546
32,529,532
–
–
–
P
=6,899,620
8,508,092
8,948,127
13,256,971
21,888,536
9,816,968
P
=252,641,779
196,525,097
235,978,112
1,693,659
3,907,517
61,122
P
=250,732,433
111,925,737
120,195,459
Terms
Conditions
Other shareholders:
Total
34,525
131,053
Rental - first 5 days of the month Unsecured;
No Impairment
664,878 Fuel - Payable in 30 days
12,762,216
7,343,408
Unsecured;
No Impairment
2,454,304 Insurance - Quarterly payment, Unsecured;
4,244,721 payable 1st day of the quarter
No Impairment
4,909,683
1,099,945 Various
3,160,756
4,713,634
P
=73,835,901
52,565,296
108,644,433
Unsecured;
No Impairment
*SGVFS004263*
- 44 Magsaysay Group of Companies:
·
NMCCLI and MFPI are subsidiaries of NMC. NMCCLI has a co-loading agreement with the
Company while MFPI supplies fuel to the Company.
·
MHIBI, a subsidiary of NMC’s parent, handles the marine cargo insurance requirements of the
Company.
·
MSI is a subsidiary of NMC’s parent. The Company entered into a shipmanagement
agreement with MSI whereby the Company appointed MSI as the manager of its vessels for a
period of 12 months from January 1, 2012 to December 31, 2012.
·
AELC is an associate of NMC. In 2008, the Company entered into an equipment and logistics
services contract with AELC.
·
OSLI, a wholly-owned subsidiary of NMC, is engaged in warehousing, project and rolling
cargo handling and other cargo related services.
·
MMSI, a subsidiary of NMC’s parent, is primarily engaged in ship repair including corrosion
control, container van repairs and other similar services.
·
RLSI and OSWLI is a wholly-owned subsidiary of NMC.
Other Shareholders:
·
TAO and DCM are substantially owned by Mr. Julio Sy, or his immediate family. The
Company has a lease agreement with DCM, while TAO is one of the Company’s suppliers of
fuel for its vessels.
·
Pioneer is the Company’s provider of protection and indemnity and hull and machinery
insurance for its vessels.
·
Other related parties mentioned are businesses owned by various shareholders or directors of
the Company and has transactions with the Company in the regular course of business.
Retirement Fund
The Company’s retirement fund is managed by BPI Asset Management (see Note 16).
Compensation of key management personnel:
Short-term employee benefits
Post-employment benefits
2013
P
=17,446,473
1,586,515
P
=19,032,988
2012
P
=15,650,164
1,354,495
P
=17,004,659
24. Leases
Finance Leases
The Company entered into separate lease purchase agreements with Cronos Containers Limited,
SeaCube Containers LLC and Textainer Equipment Management Limited for the lease purchase of
dry van containers. Lease charges for each container shall commence on the first calendar day of
the month following the month in which the container was delivered to the Company and shall
*SGVFS004263*
- 45 continue for a period of 3-8 years and shall be payable in 36 monthly installments in accordance
with the terms and conditions of the lease purchase agreement.
The lease purchase agreement includes the following terms and conditions:
a. the Company shall pay the lessor for any event of loss as defined in the agreement equivalent
to the stipulated loss value; and
b. provided the Company is not in default, the Company has the option to purchase the
containers at the purchase price of US$1 per container at the end of the lease term.
The future minimum lease payments for the obligations under finance lease are as follows:
Within one year
After one year but not more than five years
After five years
Total minimum lease obligations
Less interest portion
Present value of minimum lease obligations
Less current portion
Noncurrent portion
2013
P
=36,298,342
171,466,429
3,182,139
210,946,910
48,790,277
162,156,633
31,997,429
P
=130,159,204
2012
P
=28,746,532
120,819,119
22,252,468
171,818,119
40,058,378
131,759,741
25,811,012
=105,948,729
P
Operating Leases
As of December 31, 2013, the Company’s leases pertain to the lease of container yards,
warehouses/offices, equipments and container vans under various lease agreements for a period
ranging from 1 to 10 years until 2018. The minimum annual rental commitments on these leases
are presented below:
Less than one year
More than one year but not more than five years
2013
P
=12,425,019
49,619,750
P
=62,044,769
2012
P
=23,348,687
66,604,675
P
=89,953,362
Deposits on the above agreements amounting to =
P7,078,641 and P
=6,942,341, in 2013 and 2012,
respectively, is presented as part of “Other noncurrent assets” account in the balance sheets
(see Note 10).
For the years ended December 31, 2013, 2012 and 2011, the Company’s operating leases were
charged to rental under “Terminal expenses” in the statements of income amounting to
P
=55,885,072, P
=49,172,804 and P
=50,350,341 and under “General and administrative expenses” in
the statements of income amounting to =
P9,248,030, P
=8,430,863 and P
=8,690,119, respectively
(see Notes 14 and 15).
25. Financial Instruments
Financial Risk Management Objectives and Policies
Risk management is carried out by the Management Committee (ManCom) under policies
approved by the Executive Committee (ExCom) and the BOD. Audit Committee identifies,
evaluates, and hedges financial risks in close cooperation with the Company’s ManCom. ExCom
*SGVFS004263*
- 46 and BOD approve written principles provided by ManCom for overall risk management, as well as
written policies, covering specific ones such as internal control policies, freight policies,
purchasing policies and operational policies among others.
The Company’s principal financial instruments consist of borrowings and obligations under
finance leases. The main purpose of these financial instruments is to raise funds for the
Company’s operations. The Company has various financial instruments such as cash and cash
equivalents, trade and other receivables, deposits, loan receivable and others included under other
noncurrent assets, and accounts payable and accrued expenses which arise directly from its
operations.
The Company’s activities expose it to a variety of financial risks. The Company’s overall risk
management program focuses on the unpredictability of financial markets and seeks to minimize
potential adverse effects on the Company’s financial performance. Consistent with prior year, the
Company’s policies for managing each of these risks are summarized below:
Fluctuations in freight rate and cargo volumes
In the cargo liner shipping industry, there are constant fluctuations in cargo volumes arising from
competition and changes in the market environment. Negative trends in cargo volumes and freight
rates have an impact on the Company’s results of operations.
Fuel price fluctuations
Purchases of fuel to operate vessels are vital to the Company’s operations. The market price of
fuel is directly influenced by the price of crude oil in the world market. Any increase in the price
of crude oil and the related increase in the price of fuel will have a negative impact on the
Company’s earnings. The risk involving fuel price fluctuations are borne mostly by the customers
as the Company is allowed to increase freight rates under General Rate Increase and Automatic
Fuel Rate Adjustment.
Interest rate risk
The Company depends on funds procured from external sources to meet substantial capital
expenditure requirements. The Company reviews its exposure to interest rate risk through
quarterly monitoring of actual figures against projections. Management believes that cash
generated from operations is sufficient to pay its obligations under the loan agreements as they fall
due.
The following tables set out the carrying amount as of December 31 by maturity, of the
Company’s financial instruments that are exposed to interest rate risk:
Floating Rate
Long-term borrowings
2013
2012
Fixed Rate
Within 1 Year
1-2 Years
2-5 Years
Total
P
=428,615,714
215,190,669
P
=65,758,719
352,912,413
P
=217,876,067
294,442,040
P
=712,250,500
862,545,122
Within 1 Year
1-2 Years
2-5 Years
Total
Short-term borrowings
2013
2012
P
=232,458,822
39,200,000
P
=–
–
P
=–
–
P
=232,458,822
39,200,000
Obligations under finance
lease
2013
2012
27,902,835
25,811,012
65,903,830
22,761,975
68,349,966
83,186,754
162,156,631
131,759,741
Interest on financial instruments classified as floating rate is repriced at intervals of less than one
*SGVFS004263*
- 47 year. Interest on financial instruments classified as fixed rate is fixed until the maturity of the
instrument. The other financial instruments of the Company that are not included in the above
tables are noninterest-bearing and are therefore not subject to interest rate risk.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates,
with all other variables held constant, of the Company’s income before tax (through the impact on
floating rate borrowings):
Interest-bearing loans and
borrowings
Year
2013
Increase/Decrease
in Basis Points
+10
-20
Effect on Income
Before Tax
(P
=907,982)
1,815,964
+50
-75
(P
=4,423,157)
6,659,252
2012
The sensitivity of the Company’s statement of income is the effect of assumed changes in interest
rates based on the bank’s projection of 91-day interest rates using a combination of technical
analysis and trending techniques.
There is no other impact on the Company’s equity other than those already affecting the statement
of income.
Foreign currency risk
The Company’s foreign currency risk results primarily from the foreign exchange rate movements
of the Philippine peso against foreign currencies. The Company resolved to mitigate this risk by
taking advantage of market trends. Such trends are used to determine the proper timing of foreign
currency transactions in order to realize a foreign currency gain.
The following table demonstrates the sensitivity to a reasonable change in the Philippine peso
exchange rate in relation to foreign currencies based on the bank’s projection of foreign currency
fluctuations, with all variables held constant, of the Company’s income before tax:
2013
Effect on Income Before Tax
2012
2011
US Dollar
Strengthened (2013: 2%, 2012: 2%, 2011: 2%)
Weakened (2013: 1%, 2012: 3%, 2011: 2%)
(P
=2,923,877)
1,461,939
(P
=2,418,547)
3,627,820
(P
=1,811,831)
2,719,815
Japanese Yen
Strengthened (2013: 6%, 2012: 3%, 2011: 3%)
Weakened (2013: 1%, 2012: 12%, 2011: 2%)
(475,550)
79,258
(155,982)
623,928
(448,293)
299,746
Euro
Strengthened (2013: 3%, 2012: 2%, 2011: 5%)
Weakened (2013: 1%, 2012: 4%, 2011: 2%)
457,720
(152,573)
133,378
(266,755)
(201,651)
80,657
There is no other impact on the Company’s equity other than those already affecting the statement
of income.
*SGVFS004263*
- 48 The Company’s foreign currency denominated monetary assets and liabilities as of December 31
consists of:
Current assets
Current liabilities
Noncurrent liabilities
Net foreign currency denominated asset
(liabilities)
Exchange rate used
Peso equivalent
Current assets
Current liabilities
Noncurrent liabilities
Net foreign currency denominated liabilities
Exchange rate used
Peso equivalent
US Dollar
$571,140
(932,322)
(2,931,844)
2013
Japanese
Yen
¥–
(18,697,406)
–
(3,293,026)
44.395
(P
=146,193,889)
(18,697,406)
0.424
(P
=7,925,830)
250,876
60.816
P
=15,257,275
US Dollar
$511,777
(247,894)
(3,209,738)
(2,945,855)
41.05
(P
=120,927,344)
2012
Japanese
Yen
¥–
(10,861,501)
–
(10,861,501)
0.48
(P
=5,199,401)
Euro
€144,560
(22,263)
–
122,297
54.53
P
=6,668,855
Euro
€284,321
(33,445)
–
The Company had a net unrealized foreign exchange loss of =
P11,801,726 and net unrealized gain
of =
P7,648,101 and net unrealized loss of P
=151,661 in 2013, 2012 and 2011, respectively.
Credit risk
Credit risk is defined as the risk of loss arising from the default of an individual, counterparty or
issuer not being able to or unwilling to honor its contractual obligations. The Company’s
exposure to this risk is primarily due to its transactions with its trading customers.
The Company counters this risk by trading only with recognized, creditworthy third parties. It
employs standard process in granting credit lines to customers. It performs thorough evaluation of
its customers’ operations and financial standing to ensure that its customers are able to meet its
contractual obligation.
The Company monitors receivable balances and ensures that customers are able to settle their
obligation within the agreed terms. Its Credit and Collection Department is responsible for the
collection of these receivables and ensures that customers are able to settle their obligation.
Concentration of risk arise when a number of counterparties are engaged in similar business
activities, or activities in the same geographic region, or have similar economic feature that would
cause their ability to meet contractual obligations to be similarly affected by changes in economic,
political or other conditions, such as fluctuations in currencies or interest rates. The Company has
no significant concentration of credit risk.
The Company’s exposure to credit risk arises from default of the counterparty, with a maximum
exposure equal to the carrying amount of its financial assets.
*SGVFS004263*
- 49 The following table shows the Company’s maximum exposure to credit risk:
Cash and cash equivalents*
Trade and other receivables:
Trade receivables
Insurance claims
Advances
Receivables from officers and employees
Other receivables
Loan receivable
Other noncurrent assets
2013
P
=110,204,597
2012
=190,733,593
P
788,743,191
17,338,412
5,499,118
1,083,883
26,322,368
4,840,504
7,344,169
P
=961,376,242
537,386,659
6,267,193
5,997,597
1,181,066
7,234,127
5,842,027
7,641,676
=762,283,938
P
*Excluding cash on hand
Credit quality per class of financial assets are as follows:
Cash and cash equivalents*
Trade and other receivables:
Trade receivables
Insurance claims
Advances
Receivables from officers
and employees
Other receivables
Loan receivable
Other noncurrent assets
2013
Neither Past Due nor Impaired
Standard Sub-standard Past Due but
High Grade
Grade
Grade Not Impaired
P
=110,204,597
P
=–
P
=–
P
=–
Impaired
P
=–
Total
P
=110,204,597
240,949,404
–
5,499,118
75,349,568
17,338,412
–
23,976,453
–
–
448,467,766
–
–
24,824,100
–
–
813,567,291
17,338,412
5,499,118
1,083,883
–
4,840,504
–
P
=362,577,506
–
26,322,368
–
7,344,170
P
=126,354,518
–
–
–
–
P
=23,976,453
–
–
–
–
P
=448,467,766
–
–
–
1,593,091
P
=26,417,191
1,083,883
26,322,368
4,840,504
8,937,261
P
=987,793,434
2012
Neither Past Due nor Impaired
Past Due but
Standard Sub-standard
High Grade
Grade
Grade Not Impaired
=
P190,733,593
P
=–
P
=–
P
=–
Impaired
=
P–
Total
P
=190,733,593
*Excluding cash on hand
Cash and cash equivalents*
Trade and other receivables:
Trade receivables
Insurance claims
Advances
Receivables from officers
and employees
Other receivables
Loan receivable
Other noncurrent assets
121,105,338
–
5,997,597
53,200,734
6,267,193
–
4,491,903
–
–
358,588,684
–
–
23,027,649
–
–
560,414,308
6,267,193
5,997,597
1,181,066
391,324
5,842,027
–
=
P325,250,945
–
6,842,804
–
7,641,767
P
=73,952,498
–
–
–
–
=
P4,491,903
–
–
–
–
=
P358,588,684
–
–
–
1,593,091
=
P24,620,740
1,181,066
7,234,128
5,842,027
9,234,858
=
P786,904,770
*Excluding cash on hand
High grade financial assets are accounts where debtors have established credit integrity, such as
multinational companies in which credit investigations are no longer necessary. Standard grade
financial assets pertain to accounts of debtors who have historically paid their accounts on time
and who have the financial capacity to pay. On the other hand, sub-standard grade financial assets
pertain to accounts of debtors where the Company incurred delays in collection.
*SGVFS004263*
- 50 A financial asset is past due when a counterparty has failed to make payment when contractually
due. Impaired financial assets are those accounts identified by the Company that need to be
provided with allowance. The level of this allowance is evaluated by management on the basis of
factors that affect the collectability of the accounts such as, but not limited to the length of the
Company’s relationship with the customer, the customers’ payment behavior and known market
factors.
Aging analyses per class of financial assets are as follows:
Cash and cash equivalents*
Trade and other receivables:
Trade receivables
Insurance claims
Advances
Receivables from
officers and employees
Other receivables
Loan receivable
Other noncurrent assets
2013
Past Due but Not Impaired
Neither Past
Due nor
Impaired
P
= 110,204,597
Less than
30 Days
P
=–
31-60 Days
P
=–
61-90 Days
P
=–
More than
91 Days
P
=–
Impaired
P
=–
Total
P
= 110,204,597
340,275,425
17,338,412
5,499,118
–
–
–
84,479,055
–
–
80,052,748
–
–
283,935,963
–
–
24,824,100
–
–
813,567,291
17,338,412
5,499,118
1,083,883
26,322,368
4,840,504
7,344,170
P
= 512,908,477
–
–
–
–
P
=–
–
–
–
–
P
= 84,479,055
–
–
–
–
P
= 80,052,748
–
–
–
–
P
= 283,935,963
–
–
–
1,593,091
P
= 26,417,191
1,083,883
26,322,368
4,840,504
8,937,261
P
= 987,793,434
*Excluding cash on hand
Cash and cash equivalents*
Trade and other receivables:
Trade receivables
Insurance claims
Advances
Receivables from
officers and employees
Other receivables
Loan receivable
Other noncurrent assets
2012
Past Due but Not Impaired
Neither Past
Due nor
Impaired
=
P190,733,593
Less than
30 Days
=
P–
31-60 Days
=
P–
61-90 Days
=
P–
More than
91 Days
=
P–
Impaired
=–
P
Total
P
=190,733,593
178,797,975
6,267,193
5,997,597
149,223,784
–
–
69,390,789
–
–
20,596,465
–
–
119,377,646
–
–
23,027,649
–
–
560,414,308
6,267,193
5,997,597
1,181,066
7,234,127
5,842,027
7,641,676
=403,695,254
P
–
–
–
–
=149,223,784
P
–
–
–
–
=69,390,789
P
–
–
–
–
=20,596,465
P
–
–
–
–
=119,377,646
P
–
–
–
1,593,091
=24,620,740
P
1,181,066
7,234,127
5,842,027
9,234,767
=786,904,679
P
*Excluding cash on hand
Liquidity risk
Liquidity risk is the risk that the Company will not be able to settle or meet its financial
obligations when they fall due. To mitigate exposure to such risk, the Company regularly
monitors its cash position and loan due dates to ensure sufficient fund for working capital and to
meet obligations as they fall due.
*SGVFS004263*
- 51 The tables below summarize the maturity profile of the Company’s financial liabilities as of
December 31, 2013 and 2012, based on contractual undiscounted cash flows. The table also
analyses the maturity profile of the Company’s financial assets in order to provide a complete
view of the Company’s contractual commitments. The analysis into relevant maturity grouping is
based on the remaining period at the end of the reporting period to the contractual maturity dates.
Less than
6 Months
Financial liabilities:
Short-term borrowings
Long-term borrowings
Obligations under finance lease
Future interest payable on borrowings
and finance leases
Accounts payable and accrued
expenses
Financial assets:
Cash and cash equivalents
Trade and other receivables:
Trade receivables
Insurance claims
Advances
Receivables from officers and
employees
Other receivables
Loan receivable
Other noncurrent assets
P
=232,458,822
123,665,000
Financial assets:
Cash and cash equivalents
Trade and other receivables:
Trade receivables
Insurance claims
Advances
Receivables from officers and
employees
Other receivables
Loan receivable
Other noncurrent assets
Total
16,061,180
P
=–
290,665,000
15,936,249
P
=–
297,922,500
130,159,204
P
=232,458,822
712,252,500
162,156,633
28,006,229
22,874,435
71,976,767
122,857,431
484,400,240
P
=884,591,471
–
P
=329,475,684
–
P
=500,058,471
484,400,240
P
=1,714,125,626
P
=110,679,597
P
=–
P
=–
P
=110,204,597
424,754,480
6,267,193
5,997,597
363,988,711
–
–
24,824,100
–
–
813,567,291
6,267,193
5,997,597
1,181,066
391,324
5,842,027
7,641,676
P
=562,754,960
–
–
–
–
P
=363,988,711
–
–
–
–
P
=24,824,100
1,181,066
391,324
5,842,027
7,641,676
P
=951,567,771
Over 1 Year
Total
Less than
6 Months
Financial liabilities:
Short-term borrowings
Long-term borrowings
Obligations under finance lease
Future interest payable on borrowings
and finance leases
Accounts payable and accrued
expenses
2013
6 Months
to 1 Year
Over 1 Year
2012
6 Months
to 1 Year
P
=39,158,822
64,082,500
13,007,040
=
P–
87,665,000
12,803,972
=
P–
710,548,539
105,948,729
P
=39,158,822
862,296,039
131,759,741
20,941,179
20,101,467
69,252,257
110,294,903
202,059,738
P
=339,249,279
7,394,024
P
=127,964,463
67,643,584
P
=953,393,109
277,097,346
P
=1,420,606,851
P
=190,733,593
=
P–
=
P–
P
=190,733,593
438,605,417
–
–
55,216,531
–
–
43,564,711
6,267,193
7,234,128
537,386,659
6,267,193
7,234,128
–
–
489,017
–
P
=629,828,027
–
–
512,506
–
P
=55,729,037
1,181,066
5,997,597
4,840,504
7,641,676
P
=76,726,875
1,181,066
5,997,597
5,842,027
7,641,676
P
=762,283,939
*SGVFS004263*
- 52 Classification and Fair Values of Financial Instruments
Set out below is a comparison by category of carrying amounts and fair values of the Company’s
financial instruments that are carried in the financial statements.
Carrying Amount
2012
2013
Loans and Receivables:
Loan receivable
Other noncurrent assets
Other Financial Liabilities:
Obligations under finance lease
Long-term borrowings
Fair Value
2012
2013
P
=4,840,504
7,519,539
P
=12,360,043
P
=5,842,027
7,641,676
P
=13,483,703
P
=5,785,640
7,557,769
P
=12,398,273
P
=7,294,937
8,917,695
P
=16,212,632
P
=162,156,631
713,140,369
P
=875,297,000
P
=131,759,741
862,296,039
P
=994,055,780
P
=162,156,631
713,140,369
P
=875,297,000
P
=131,759,741
862,296,039
P
=994,055,780
The following methods and assumptions are used to estimate the fair value of each class of
financial instruments:
Cash and cash equivalents, trade and other receivables, accounts payable and accrued expenses
and short-term borrowings
The carrying values of cash and cash equivalents, trade and other receivables, accounts payable
and accrued expenses and short-term borrowings approximate their fair values due to the relatively
short-term maturity of these financial instruments.
Loans receivable
The fair value of loans receivable is based on the discounted net present value of cash flows using
effective discount rate of 9.42% as of December 31, 2013 and 2012.
Other noncurrent assets
The fair value of other noncurrent asset pertaining to security deposit is based on the discounted
net present value of cash flows using effective discount rate of 1.01% and 6.30% as of
December 31, 2013 and 2012, respectively.
Long-term borrowings and obligations under finance lease
The fair values of long-term borrowings with variable interest rates approximate their carrying
amounts due to quarterly repricing of interest.
The fair values of obligations under finance lease are based on the discounted net present value of
cash flows using effective discount rates of 0.49% to 4.4% respectively, as of December 31, 2013
and 2012.
Fair Value Hierarchy
The Company uses the following hierarchy for determining and disclosing the fair value of
financial instruments by valuation technique:
*SGVFS004263*
- 53 Level 1:
Quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2:
Those involving inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly (as prices) or indirectly (derived
from prices)
Those inputs for the asset or liability that are not based on observable market data
(unobservable inputs)
Level 3:
As of December 31, 2013 and 2012, the Company held the following financial instruments that are
measured and carried or disclosed at fair value:
December 31, 2013
Disclosed at fair value:
Other noncurrent
assets
Long-term borrowings
Obligations under
finance lease
Loan receivable
Total
Level 1
Level 2
Level 3
P
=7,519,539
713,140,369
P
=−
−
P
=−
−
P
=7,519,539
713,140,369
162,156,633
5,785,640
−
−
−
−
162,156,633
5,785,640
Total
Level 1
Level 2
Level 3
P
=8,917,695
862,296,039
P
=−
−
P
=−
−
P
=8,917,695
862,296,039
131,759,741
7,294,937
−
−
−
−
134,634,879
7,294,937
December 31, 2012
Disclosed at fair value:
Other noncurrent assets
Long-term borrowings
Obligations under
finance lease
Loan receivable
There were no transfers between Level 1 and Level 2 fair value measurement, and there were no
transfers into and out of Level 3 fair value measurement.
26. Capital Management
The primary objective of the Company’s capital management is to ensure that it maintains a strong
credit rating and healthy capital ratios in order to support its business and maximize shareholder
value.
The Company monitors capital using debt-to-equity ratio. It is the policy of the Company to
maintain a debt-to-equity ratio of not more than 1.5 as required by certain lenders. Capital
includes equity attributable to common shareholders, share premium and accumulated earnings.
Debt includes all liabilities, current and long-term interest bearing loans and borrowings and
pension obligation.
*SGVFS004263*
- 54 2012
(As restated,
see Note 2)
Short-term borrowings and other current liabilities
Long-term borrowings
Obligations under finance lease
Pension obligation
Total debt
2013
P
=718,859,062
711,140,369
162,156,633
110,677,483
1,702,833,547
=396,638,729
P
862,296,039
131,759,741
74,068,656
1,464,763,165
Common stock
Additional paid-in capital
Actuarial gains (losses) on defined benefit plan
Treasury shares
Retained earnings
Total equity
555,652,251
459,791,492
(29,198,893)
(3,125,850)
239,481,220
1,222,600,220
555,652,251
459,791,492
(7,232,429)
(3,125,850)
243,023,072
1,248,108,536
Total debt and equity
P
=2,925,433,767
=2,712,871,701
P
The Company manages its capital structure and makes adjustments to it, in light of changes in
economic conditions. To maintain or adjust the capital structure, the Company may declare
dividends, reacquire outstanding shares, or issue new shares.
On October 28, 2010, PSE issued a memorandum regarding the rule for the minimum public
ownership for all listed companies. Based on the memorandum, listed companies shall, at all
times, maintain a minimum percentage of listed securities held by the public of ten percent (10%)
of the listed companies’ issued and outstanding shares, exclusive of any treasury shares or as such
percentage that may be prescribed by the PSE. The Company has complied with the minimum
public ownership.
No changes were made in the objectives, policies or processes during the years ended
December 31, 2013 and 2012.
27. Contingencies
The Company is a defendant in several pending legal cases involving claims for damages and tax
assessment arising from the ordinary course of business. In the opinion of management and the
Company’s legal counsel, the ultimate liability for these lawsuits and claims, if any, would not be
material in relation to the financial position and operating results of the Company. It is possible,
however, that the future results of operations could be materially affected by changes in estimates
or in the effectiveness of the strategies relating to these litigation and claims (see Note 4).
28. Registration with Board of Investments (BOI)
The Company is registered with the BOI as a new operator of domestic shipping cargo vessel
(MV Lorcon Manila) on a preferred pioneer status and (MV Lorcon Dumaguete) and (MV Lorcon
General Santos) on a non-pioneer status, under the provisions of Executive Order (EO) No. 226,
otherwise known as the Omnibus Investment Code of 1987. Under the Company’s registration, it
is entitled to certain tax and nontax incentives which include, among others, income tax holiday
(ITH).
*SGVFS004263*
- 55 Below are the details of the Company’s ITH entitlement:
Vessel
MV Lorcon Manila
MV Lorcon Dumaguete
MV Lorcon General Santos
BOI Approval Date
July 2007
March 2010
July 2012
Commencement Date*
September 2007
June 2010
July 2012
ITH Period
6 years
4 years
4 years
*or actual start of commercial operations, whichever comes first.
The ITH incentives shall be limited only to the revenues generated from the new activity.
Under the terms of the Company’s registration, it is subject to certain requirements, principally
that of following a specified sales volume and sales revenue schedule and securing prior
permission from the BOI before performing certain acts.
Under the Company’s application with the BOI, it can avail of a bonus year in each of the
following cases but the aggregate ITH availment (basic and bonus years) shall not exceed
eight (8) years:
a. The ratio of the total imported and domestic capital equipment to the number of workers for
the project does not exceed US$10,000 to one (1) worker;
b. The net foreign exchange savings or earnings amount to at least US$500,000 annually during
the first three (3) years of operation; and
c. The indigenous raw materials used in the manufacture of the registered product must at least
be fifty (50%) of the total cost of raw materials for the preceding years prior to the extension
unless the BOI prescribes a higher percentage.
29. Note to Statements of Cash Flows
The Company purchased container vans under finance lease agreement for a total consideration
amounting to P
=47,655,527 and =
P83,237,088 in 2013 and 2012, respectively.
30. Supplementary Information Required Under Revenue Regulations (RR) 15-2010
On November 25, 2010, the BIR issued RR 15-2010 which amends certain provisions of
RR 21-2002 prescribing the manner of compliance with any documentary and/or procedural
requirements in connection with the preparation and submission of financial statements
accompanying the tax returns. It requires the disclosures of taxes, duties and licenses paid or
accrued during the taxable year.
In compliance with the requirements set forth by RR 15-2010 hereunder are the information on
taxes, duties and licenses paid or accrued during the taxable year.
VAT
The National Internal Revenue Code of 1997 provides for the imposition of VAT on sales of
goods and services. Accordingly, the Company’s sales are subject to output VAT while its
importations and purchases from other VAT-registered individuals or corporations are subject to
input VAT. R.A. No. 9337 increased the VAT rate from 10.0% to 12.0%, effective
February 1, 2006.
*SGVFS004263*
- 56 The Company is a VAT-registered company with output VAT declaration for the year ended
December 31, 2013 as follows:
Taxable sales:
Sale of services
Net sales/
receipts
Output VAT
=1,771,456,714
P
=212,574,806
P
The Company’s sales that are subjected to VAT are reported under “Freight Revenue” and “Other
Income”.
The Company’s sales of services are based on actual collections received, hence may not be the
same as amounts accrued in the statement of income.
The amount of input VAT claimed are broken down for the year ended December 31, 2013
is as follows:
Balance at January 1
Current year’s purchases:
Capital goods subject to amortization
Services lodged under direct costs
From importation
Claims for tax credit/refund and other adjustments
Input tax application against output VAT
Balance at December 31
P
=–
20,621,419
167,977,242
2,954,215
191,552,876
(191,552,876)
P
=–
Importations
The landed cost of the Company’s importations amounted to =
P24,618,460 for the year.
Documentary stamps tax
The documentary stamps tax paid/accrued during the year on the bill of lading amounted to
P
=726,115.
Other taxes and licenses:
This includes all other taxes, local and national, including real property taxes, licenses and permit
fees lodged under the “Taxes and licenses” account in “General and administrative expenses” in
the statement of income.
Details of other taxes and licenses for the year ended December 31, 2013 follows:
License and permits fees
Real property tax
Others
P
=1,919,276
377,161
983,604
P
=3,280,041
Withholding taxes
Details of withholding taxes for the year ended December 31, 2013 follows:
Expanded withholding taxes
Tax on compensation and benefits
Final withholding taxes
P
=31,449,240
23,051,363
246,524
P
=54,747,127
*SGVFS004263*
- 57 Tax Assessment
Currently, the Company has a pending case with the Court of Tax Appeals (CTA) allegedly for
deficiency taxes for the year 2008 amounting to =
P2.01 billion, inclusive of penalties, interest and
surcharges. Last April 14, 2014, the CTA granted the Company’s Motion to Admit Surety Bond
which restrained the collection of subject deficiency taxes until further order from the CTA.
*SGVFS004263*
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Tel: (632) 891 0307
Fax: (632) 819 0872
ey.com/ph
BOA/PRC Reg. No. 0001,
December 28, 2012, valid until December 31, 2015
SEC Accreditation No. 0012-FR-3 (Group A),
November 15, 2012, valid until November 16, 2015
INDEPENDENT AUDITORS’ REPORT
ON SUPPLEMENTARY SCHEDULES
The Board of Directors and Shareholders
Lorenzo Shipping Corporation
20th Floor Times Plaza Building
United Nations Avenue
Ermita, Manila
We have audited in accordance with Philippine Standards on Auditing, the financial statements of
Lorenzo Shipping Corporation as of December 31, 2013 and 2012 and each of the three years in the
period ended December 31, 2013, included in this Form 17-A and have issued our report thereon dated
April 14, 2014. Our audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in the Index to Financial Statements and
Supplementary Schedules are the responsibility of the Company’s management. These schedules are
presented for purposes of complying with Securities Regulation Code Rule 68, As Amended (2011),
and are not part of the basic financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our opinion, fairly state, in all
material respects, the information required to be set forth therein in relation to the basic financial
statements taken as a whole.
SYCIP GORRES VELAYO & CO.
Leovina Mae V. Chu
Partner
CPA Certificate No. 99910
SEC Accreditation No. 1199-A (Group A),
March 15, 2012, valid until March 14, 2015
Tax Identification No. 209-316-911
BIR Accreditation No. 08-001998-96-2012,
January 11, 2012, valid until January 10, 2015
PTR No. 4225232, January 2, 2014, Makati City
April 14, 2014
*SGVFS004263*
A member firm of Ernst & Young Global Limited
LORENZO SHIPPING CORPORATION
INDEX TO FINANCIAL STATEMENTS
AND SUPPLEMENTARY SCHEDULES
Reconciliation of Unappropriated Retained Earnings Available for Dividend Distribution
Schedule of all Effective Standards and Interpretations under PFRS
LORENZO SHIPPING CORPORATION
RECONCILIATION OF RETAINED EARNINGS AVAILABLE FOR
DIVIDEND DECLARATION
DECEMBER 31, 2013
Unappropriated Retained Earnings, beginning
Adjustment:
Other unrealized gains or adjustments to the retained earnings as a
result of certain transactions accounted for under PFRS
Unappropriated Retained Earnings, as adjusted, beginning
Net income based on the face of the Audited Financial Statements
Add: Equity share in net loss of associate
Less: Non-actual/unrealized income net of tax
Benefit from deferred income tax
Change in accounting for employee benefits
Net income actual/realized
Less:
Dividend declaration
Treasury shares
Unappropriated Retained Earnings, as adjusted, ending
=243,023,072
P
(50,179,534)
192,843,538
10,324,204
160,762
(1,208,003)
(591,285)
8,685,678
(13,866,056)
(3,125,850)
(16,991,906)
=184,537,310
P
*SGVFS004263*
LORENZO SHIPPING CORPORATION
SCHEDULE OF ALL EFFECTIVE STANDARDS AND INTERPRETATIONS
DECEMBER 31, 2013
The table below presents the list of Philippine Financial Reporting Standards (PFRS) [which consist of
PFRS, Philippine Accounting Standards (PAS) and Philippine Interpretations] and Philippine
Interpretations Committee (PIC) Q&As effective as of December 31, 2013:
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Effective as of December 31, 2013
Framework for the Preparation and Presentation of Financial
Statements
Conceptual Framework Phase A: Objectives and qualitative
characteristics
Adopted
Not
Adopted
Not
Applicable
4
4
PFRSs Practice Statement Management Commentary
Philippine Financial Reporting Standards
PFRS 1
(Revised)
First-time Adoption of Philippine Financial Reporting
Standards
4
First-time Adoption of Philippine Financial Reporting
Standards-Meaning of ‘Effective PFRSs’
Amendments to PFRS 1 and PAS 27: Cost of an
Investment in a Subsidiary, Jointly Controlled Entity or
Associate
PFRS 2
PFRS 4
PFRS 5
4
Amendments to PFRS 1: Additional Exemptions for Firsttime Adopters
4
Amendment to PFRS 1: Limited Exemption from
Comparative PFRS 7 Disclosures for First-time Adopters
4
Amendments to PFRS 1: Severe Hyperinflation and
Removal of Fixed Date for First-time Adopters
4
Amendments to PFRS 1: Government Loans
4
Share-based Payment
4
Amendments to PFRS 2: Vesting Conditions and
Cancellations
4
Amendments to PFRS 2: Group Cash-settled Share-based
Payment Transactions
4
Share-based Payment-Definition of Vesting Condition
PFRS 3
(Revised)
See footnote*
See footnote*
4
Business Combinations
Business Combinations: Accounting for Contingent
Consideration in a Business Combination
See footnote*
Business Combinations-Scope Exceptions for Joint
Arrangements
See footnote*
Insurance Contracts
4
Amendments to PAS 39 and PFRS 4: Financial Guarantee
Contracts
4
Non-current Assets Held for Sale and Discontinued
Operations
4
*SGVFS004263*
-2-
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Effective as of December 31, 2013
PFRS 6
Exploration for and Evaluation of Mineral Resources
PFRS 7
Financial Instruments: Disclosures
PFRS 8
Adopted
4
Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets
4
Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets - Effective Date and Transition
4
Amendments to PFRS 7: Improving Disclosures about
Financial Instruments
4
Amendments to PFRS 7: Disclosures - Transfers of
Financial Assets
4
Amendments to PFRS 7: Disclosures - Offsetting
Financial Assets and Financial Liabilities
4
Amendments to PFRS 7: Mandatory Effective Date of
PFRS 9 and Transition Disclosures
4
Operating Segments
4
See footnote*
Financial Instruments
4
Amendments to PFRS 9: Mandatory Effective Date of
PFRS 9 and Transition Disclosures
PFRS 10
See footnote*
4
Consolidated Financial Statements
Amendments: Investment Entities
PFRS 11
Joint Arrangements
PFRS 12
Disclosure of Interests in Other Entities
See footnote*
4
4
Amendments: Investment Entities
PFRS 13
Not
Applicable
4
Operating Segments-Aggregation of Operating Segments
and Reconciliation of the Total of the Reportable
Segments’ Assets to the Entity’s Assets
PFRS 9
Not
Adopted
Fair Value Measurement
See footnote*
4
Fair Value Measurement-Short-term Receivables and
Payables
See footnote*
Fair Value-Measurement-Portfolio Exception
See footnote*
Philippine Accounting Standards
PAS 1
(Revised)
Presentation of Financial Statements
4
Amendment to PAS 1: Capital Disclosures
4
4
Amendments to PAS 32 and PAS 1: Puttable Financial
Instruments and Obligations Arising on Liquidation
PAS 2
Amendments to PAS 1: Presentation of Items of Other
Comprehensive Income
4
Inventories
4
*SGVFS000889*
-3-
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Effective as of December 31, 2013
Adopted
PAS 7
Statement of Cash Flows
4
PAS 8
Accounting Policies, Changes in Accounting Estimates
and Errors
4
PAS 10
Events after the Reporting Period
4
PAS 11
Construction Contracts
PAS 12
Income Taxes
Not
Adopted
Not
Applicable
4
4
4
Amendment to PAS 12 - Deferred Tax: Recovery of
Underlying Assets
PAS 16
Property, Plant and Equipment
4
Property, Plant and Equipment-Revaluation Method
See footnote*
PAS 17
Leases
4
PAS 18
Revenue
4
PAS 19
Employee Benefits
4
4
Amendments to PAS 19: Actuarial Gains and Losses,
Group Plans and Disclosures
PAS 19
(Revised)
Employee Benefits
4
Amendments to PAS 19: Defined Benefit Plans: Employee
Contributions
PAS 20
Accounting for Government Grants and Disclosure of
Government Assistance
PAS 21
The Effects of Changes in Foreign Exchange Rates
See footnote*
4
4
4
Amendment: Net Investment in a Foreign Operation
PAS 23
(Revised)
Borrowing Costs
4
PAS 24
(Revised)
Related Party Disclosures
4
Related Party Disclosures-Key Management Personnel
See footnote*
PAS 26
Accounting and Reporting by Retirement Benefit Plans
4
PAS 27
Consolidated and Separate Financial Statements
4
Amendments: Investment Entities
PAS 27
(Amended)
See footnote*
Separate Financial Statements
4
Amendments: Investment Entities
4
PAS 28
Investments in Associates
4
PAS 28
(Amended)
Investments in Associates and Joint Ventures
4
Amendments: Investment Entities
4
PAS 29
Financial Reporting in Hyperinflationary Economies
4
PAS 31
Interests in Joint Ventures
4
PAS 32
Financial Instruments: Disclosure and Presentation
4
*SGVFS000889*
-4-
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Effective as of December 31, 2013
Adopted
Not
Applicable
Amendments to PAS 32 and PAS 1: Puttable Financial
Instruments and Obligations Arising on Liquidation
4
Amendment to PAS 32: Classification of Rights Issues
4
Amendments to PAS 32: Offsetting Financial Assets and
Financial Liabilities
PAS 33
Earnings per Share
PAS 34
Interim Financial Reporting
PAS 36
Impairment of Assets
See footnote*
4
4
4
Amendments to PAS 36: Recoverable Amount Disclosures
for Non-financial Assets
PAS 37
Provisions, Contingent Liabilities and Contingent Assets
PAS 38
Intangible Assets
See footnote*
4
4
Intangible Assets-Revaluation Method
PAS 39
Not
Adopted
Financial Instruments: Recognition and Measurement
See footnote*
4
Amendments to PAS 39: Transition and Initial Recognition
of Financial Assets and Financial Liabilities
4
Amendments to PAS 39: Cash Flow Hedge Accounting of
Forecast Intragroup Transactions
4
Amendments to PAS 39: The Fair Value Option
4
Amendments to PAS 39 and PFRS 4: Financial Guarantee
Contracts
4
Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets
4
Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets - Effective Date and Transition
4
Amendments to Philippine Interpretation IFRIC 9 and PAS
39: Embedded Derivatives
4
Amendment to PAS 39: Eligible Hedged Items
4
Amendments to PAS 39: Recognition and Measurement:
Novation of Derivatives and Continuation of Hedge
Accounting
See footnote*
PAS 40
Investment Property
4
PAS 41
Agriculture
4
Philippine Interpretations
IFRIC 1
Changes in Existing Decommissioning, Restoration and
Similar Liabilities
4
IFRIC 2
Members' Share in Co-operative Entities and Similar
Instruments
4
IFRIC 4
Determining Whether an Arrangement Contains a Lease
4
*SGVFS000889*
-5-
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Effective as of December 31, 2013
Adopted
Not
Adopted
Not
Applicable
IFRIC 5
Rights to Interests arising from Decommissioning,
Restoration and Environmental Rehabilitation Funds
4
IFRIC 6
Liabilities arising from Participating in a Specific Market Waste Electrical and Electronic Equipment
4
IFRIC 7
Applying the Restatement Approach under PAS 29
Financial Reporting in Hyperinflationary Economies
4
IFRIC 8
Scope of PFRS 2
4
IFRIC 9
Reassessment of Embedded Derivatives
4
Amendments to Philippine Interpretation IFRIC 9 and PAS
39: Embedded Derivatives
4
IFRIC 10
Interim Financial Reporting and Impairment
4
IFRIC 11
PFRS 2 - Group and Treasury Share Transactions
4
IFRIC 12
Service Concession Arrangements
4
IFRIC 13
Customer Loyalty Programmes
4
IFRIC 14
The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction
4
Amendments to Philippine Interpretations IFRIC 14,
Prepayments of a Minimum Funding Requirement
4
IFRIC 15
Agreements for the Construction of Real Estate
4
IFRIC 16
Hedges of a Net Investment in a Foreign Operation
4
IFRIC 17
Distributions of Non-cash Assets to Owners
4
IFRIC 18
Transfers of Assets from Customers
4
IFRIC 19
Extinguishing Financial Liabilities with Equity
Instruments
4
IFRIC 20
Stripping Costs in the Production Phase of a Surface Mine
4
IFRIC 21
Levies
SIC-10
Government Assistance - No Specific Relation to
Operating Activities
4
SIC-12
Consolidation - Special Purpose Entities
4
Amendment to SIC - 12: Scope of SIC 12
4
SIC-13
Jointly Controlled Entities - Non-Monetary Contributions
by Venturers
4
SIC-15
Operating Leases - Incentives
4
SIC-21
Income Taxes - Recovery of Revalued Non-Depreciable
Assets
4
SIC-25
Income Taxes - Changes in the Tax Status of an Entity or
its Shareholders
4
SIC-27
Evaluating the Substance of Transactions Involving the
Legal Form of a Lease
4
See footnote*
*SGVFS000889*
-6-
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Effective as of December 31, 2013
Adopted
Not
Adopted
Not
Applicable
SIC-29
Service Concession Arrangements: Disclosures.
4
SIC-31
Revenue - Barter Transactions Involving Advertising
Services
4
SIC-32
Intangible Assets - Web Site Costs
4
*SGVFS000889*
LORENZO SHIPPING CORPORATION
Map showing relationship to parent company, middle parent, subsidiaries and associates
As of December 31, 2013
A. Magsaysay,
Inc.
Magsaysay People
Resources Corp.
(100% owned by
AMI)
Magsaysay Maritime
Corporation
(100% owned by
AMI)
Magsaysay Houlder Insurance
Brokers, Inc.
(60% owned by MMC;
40% owned by Houlders
Insurance Brokers)
Magsaysay Center for Hospitality
and Culinary Arts
(100% owned by MPRC)
Magsaysay Global Services, Inc.
(55% owned by MPRC;
45% owned by AMI)
Magsaysay Trade
and Shipping, Inc.
(100% owned by
AMI)
Magsaysay Lines,
Inc.
(100% owned by
AMI)
Magsaysay Transport
and Logistics Corp.
(100% owned by AMI)
Filipinas Maritime Transport
Corporation
(60% owned by MTLC)
20% by Mitsui OSK Lines, Ltd.
20% by Exeno Yamamizu Corp.)
Magsaysay Shipmanagement, Inc.
(100% owned by MTLC)
Kaligayahan Realty Company, Inc.
(100% owned by MMC)
National Marine Corporation
(60% owned by MLI;
40% owned by FMI, Ltd.)
Shiplink
Lorenzo Shipping
Corporation
Maliwanag Realty Co., Inc.
(100% owned by MSI)
NMC Containers Lines, Inc.
(100% owned by NMC)
MBM Maritme Holdings, Inc
(40% owned by MLI;
20% owned by Crest Holdings, Inc;
20% owned by FMI, Ltd.)
Batangas Bay Carriers, Inc.
(100% owned by MBM
One Stop Logistics Solutions,
Inc.
(100% owned by NMC)
Laguna Lake Carriers, Inc.
(100% owned by BBCI)
Fast Cranes
Boracay Beach & Yacht Club, Inc.
(100% owned by Kaligayahan)
Magsaysay Learning
Resources, Inc.
(100% owned by AMI)
Magsaysay Agencies, Inc.
(67% owned by MMC;
33% by Mitsui OSK Lines, Ltd.)
Asia Port
MagTECH Solutions & Marine
Consultancy Services, Inc.
(100% owned by MTLC)
Star of Asia Human
Resource Training and Dev't.,
Inc.
(51% owned by MLRI;
49% owned by Daniel L.
Lacson)
Magsaysay MOL Marine, Inc.
(75% owned by MAI;
25% by Mitsui OSK Lines, Ltd.)
DIPCI
APEX Equipment
Corp.
(100% owned by
Road Link)
One Stop Distribution,
Inc.
(100% owned by
NMC)
NMC Ship Agency and
Brokerage, Inc.
(100% owned by NMC)
Clean Oil Resources, Inc.
(100% owned by NMC)
Magsaysay MOL
Shipmanagement, Inc.
(100% owned by MMMI)
Islas Tankers Seatransport
Corporation
Alameda Property Private
Holding, Inc.
FM Maritime Services Ltd.
(BVI)
Acqua Y Oro Corporation
Masaya Realty Co., Inc.
(100% owned by AMI)
Sole Cruises, Inc.
(100% owned by MTLC)
One Stop
Warehousing
Solutions, Inc.
(100% owned by
NMC)
Marine Fuels Philippines, Inc.
(100% owned by NMC)
Offshore Bunkers Philippines, Inc.
(100% owned by NMC)
Magsaysay Resource &
Support Services, Inc
(100% owned by AMI)
Magsaysay-Seacor, Inc.
(60% owned by MLI
40% by Seacor Capital(Asia) Ltd.)
Fairex Trading (Asia)
Corporation
(100% owned by MRSS)
LEGEND:
NMC Chartering Co., Inc.
100% owned by NMC
Magsaysay Global BPO,
Inc.
(100% owned by AMI)
Ascend Training
Cooperation Foundation,
Inc.
Falmont Shipping
(Philippines),
Homer
Foundation,Inc.
Inc.
(100% owned by FMS Ltd.
Magsaysay Institute of
Shipping, Inc.
MOL Training Center
(Philippines), Inc.
Santiago Bundok Property
Owners Association, Inc.
Jointly Owned with AMI
Global Process Manager
(100% owned by AMI)
CreativesAsia Company,
Inc.
(100% owned by AMI)
Non-Stock Corporations
Held by Individuals
Pakyaw.Com, Inc.
(100% owned by AMI)
PeopleLink, Inc.
(100% owned by AMI)
Jointly owned with Third
Parties
TravelPeople Ltd., Inc.
(20% owned by MLI;
80% owned by AMI)
TravelServices, Inc.
(70% owned by TravelPeople
30% by Prima Ventures Dev't
Corporation)
Icebox
Sun Cruises, Inc.
(97% owned by MLTC;
0.64% by Ma. Cristina S. Cortez
0.64% by DHO
0.64% by EUM
0.64% by Robert Alexander Ho
0.64% by Helen Constance Ho)
Paros Maritime, Inc.
(100% owned by BBCI)
Road Link Solutions, Inc.
(100% owned by NMC)
Magsaysay Marine Services, Inc.
(100% owned by MTLC)
Transocean Transport Corporation
(100% owned by MTSI)
Islas Maritime Holdings, Inc.
(40% owned by MLI;
30% owned by Crest Holdings;
30% owned by FIM, Ltd.)
Islas Gas Carriers, Inc.
(40% owned by MLI;
26% owned by ILEX Marine Ltd.;
10% by DHO;
7% by RAU;
10% by EUM;
7% by Antony L. Marden)
Islas Tankers Shipping Corporation
(50% owned by MLI;
25% owned by ILEX;
25% owned by SWM International
Holdings Corporation)
Magsaysay Shipping Corporation
(100% owned by MTSI)
Transbulk Shipping Corporation
(100% owned by MTSI)
Transportes Navieros, Inc.
(100% owned by Transbulk)
Trilines Shipping, Inc.
(100% owned by Transbulk)
Trytrans Shipping Corporation
(100% owned by Transbulk)
Schedule A
1 of 1
LORENZO SHIPPING CORPORATION
Schedule A - Financial Assets
As of December 31, 2013
Name of Issuing entity and
and association of each issue
No. of shares or
principal amount
of bonds and notes
Amount shown in
the balance sheet
None
Note:
Financial assets of the Company comprise of the following loans and receivables:
Cash and cash equivalents
110,204,597
Trade receivables
788,743,191
Other receivables
26,322,368
Insurance claims
17,338,412
Advances
5,499,118
Loans Receivable
4,840,504
Receivables from officers and employees
1,083,883
Other noncurrent assets
7,344,170
Value based on
market quotation at
balance sheet date
Income received
and accrued
LORENZO SHIPPING CORPORATION
Schedule B - Amounts Receivable from Directors, Officers, Employees and Principal Stockholders
As of December 31, 2013
Name and Designation of debtor(1)
Sunny M. Fernandez
No other receivables above P100,000
January 1, 2013
128,020.00
Additions
Deduction
Amount
Amount
Collected(2) Written-off(3)
Current
Non Current
December 31, 2013
128,020.00
Schedule C
1 of 1
LORENZO SHIPPING CORPORATION
Schedule C - Indebtedness of Unconsolidated Subsidiaries and Affiliates
As of December 31, 2013
Name of Affiliates
Not Applicable
January 1, 2013
December 31, 2013
LORENZO SHIPPING CORPORATION
Schedule D - Intangible Assets - Other Assets
As of December 31, 2013
Description (1)
January 01, 2013
Additions at
Cost (2)
PLDT
P
57,350.00
MWSS
22,800.00
CISO
250,000.00
UBIX (copier machine)
17,360.00
Whouse Cagayan de Oro
65,400.00
DSA-injunction bond share
33,000.00
Advances to Phil Trident
881,273.86
Advances to Phil Trident-Cebu Branch
205,738.74
REFUND OF SECURITY DEPOSIT(OR#198130 - 04-13-2007)
Luis Ong Real Estate (Bacolod Whse. Rental)
48,600.00
Deposit in the North Harbor Modernization Project
285,447.99
3 months deposit -CY Davao
1,442,250.00
3 months advance -CY Davao
1,442,250.00
Advances -PPA ( Cebu Port Authority)
250,000.00
Advances to Chua, Enrique-Gensan Branch
100,000.00
SMART
10,000.00
Copylink Enterprises
20,000.00
Imelda Tan - rental deposit
15,000.00
PHIL. SYNERGETIC VENTURES CORP. - payment for contribution of 3rd party
114,430.00
collection project
SUN CELLULAR - advance payment (20 units @ Plan 250)
5,000.00
PPA (Bond deposits for wharfage charges at Pier 6)
350,000.00
SUN CELLULAR - 1mo. deposit (82 units @ Plan 350)
28,700.00
EASTERN TELECOM PHILS., INC.
11,000.00
PHIVIDEC IND. - 1 Year Sec. Dep. - Cagayan Branch
562,500.00
PHILIPPINE PORTS AUTHORITY - 3 mos. Addt'l for LCL extn. area
227,673.60
JULIO SY, SR - I Mo. Sec. Dep. CY R2
300,000.00
JULIO SY, SR - I Mo. Sec. Dep. CY R2 (JOS HOLDINGS) ESCALATION 33,000.00
JULIO SY, SR - I Mo. Sec. Dep. CY R2 (JOS HOLDINGS) ESCALATION
P
36,300.00
MANILA NORTH HARBOR PHIL. INC. - Pier 10 Office rental
16,353.60
HAPPY COMMUNICATIONS, INC
25,000.00
HAPPY COMMUNICATIONS, INC
9,500.00
HAPPY COMMUNICATIONS, INC
25,000.00
HAPPY COMMUNICATIONS, INC
9,500.00
COPYLINK ENTERPIRSES INC
15,000.00
COPYLINK ENTERPIRSES INC
15,000.00
MERALCO
18,740.00
GLORIA C. LIMPIO
100,000.00
Deductions (3)
Charged to Costs &
Charged to
Expenses
Other Accounts
P
P
Other Changes
Additions
(Deductions)
P
P
December 31, 2013
P
(373,751.00)
57,350.00
22,800.00
250,000.00
17,360.00
65,400.00
33,000.00
881,273.86
205,738.74
(373,751.00)
48,600.00
285,447.99
1,442,250.00
1,442,250.00
250,000.00
100,000.00
10,000.00
20,000.00
15,000.00
114,430.00
5,000.00
350,000.00
28,700.00
11,000.00
562,500.00
227,673.60
300,000.00
33,000.00
36,300.00
16,353.60
25,000.00
9,500.00
25,000.00
9,500.00
15,000.00
15,000.00
18,740.00
100,000.00
Deposits (Cebu Branch):
UBIX - copier rental
2 months adavance/deposits of Jerson Tormon's house
2 months adavance/deposits of Jerson Tormon's house (PARTIAL REFUND)
2,700.00
12,000.00
(1,500.00)
2,700.00
12,000.00
(1,500.00)
Deposits (Iloilo Branch):
Golden Gate (office rental)
Golden Gate (Additional)
36,000.00
6,000.00
36,000.00
6,000.00
Page 1 of 2
LORENZO SHIPPING CORPORATION
Schedule D - Intangible Assets - Other Assets
As of December 31, 2013
Description (1)
Golden Gate (Additional)
Golden Gate (Additional)
Solid Gas
PPA- rental deposit
Reduce space occupied from 4000sqm. to 3613sqm.
PPA- rental deposit (M&R)
January 01, 2013
7,500.00
4,950.00
15,000.00
413,145.60
(39,971.84)
82,629.12
Additions at
Cost (2)
Deductions (3)
Charged to Costs &
Charged to
Expenses
Other Accounts
Other Changes
Additions
(Deductions)
(9,928.34)
(31,386.22)
Deposits (Cotabato Branch):
Two (2) empty tanks for acetylene & oxygen
CY Building (2 months deposit & 1 month advance)
December 31, 2013
7,500.00
4,950.00
15,000.00
413,145.60
(39,971.84)
82,629.12
(9,928.34)
(31,386.22)
5,000.00
48,000.00
5,000.00
48,000.00
40,000.00
572,315.33
113,452.92
68,071.74
50,000.00
40,000.00
572,315.33
113,452.92
68,071.74
50,000.00
25,000.00
25,000.00
100,000.00
100,000.00
62,272.00
62,272.00
Investment in One Team Services, Inc. (OTSI)
250,000.00
250,000.00
Others:
DSA
PLDT
North Harbor Project
514,000.00
2,000.00
183,334.63
514,000.00
2,000.00
183,334.63
Deposits (Bacolod Agency):
Deposit - Bacolod Top
CY rental deposit - Belina Ong
CY rental deposit - Helen Edith Tan
CY rental deposit - Joaquin Gochanco
PPA (Bond deposits for wharfage charges at Bacolod CY)
Deposits (Gensan Branch):
Guarantee Deposit-PPA (June 09, 2006)
Deposits (Zamboanga Agency):
PHILIPPINE PORTS AUTHORITY
Deposits (Dumaguete Agency):
J.O.S HOLDINGS, INC
Allowance for Impairment loss- deposits
TOTAL
P
(1,593,091.60)
7,891,675.69 P
136,300.00
Page 2 of 2
P
-
P
-
P
(415,065.56) P
(1,593,091.60)
7,612,910.13
Schedule E
1 of 1
LORENZO SHIPPING CORPORATION
Schedule E - Long-term Debt
As of December 31, 2013
Amount
Authorized by
Indenture
Name of Issuer and
Type of Obligation
Banco de Oro
P
Amount shown
as Current
182,394,942
56,028,930
227,500,000
227,500,000
Metropolitan Bank and Trust
Company
92,500,000
92,500,000
Metropolitan Bank and Trust
Company
208,745,427
35,842,118
711,140,369
411,871,048
Banco de Oro
P
Amount shown
as Long-term
126,366,012 Annual interest rate is equal to PDST-F plus 1.25 spread subject to quarterly
repricing. Principal with interest payable quarterly.
Annual int. rate equivalent to PDST-F rate plus 2.5% or the simple average of
the PHIBOR and PDST-F when the PHIBOR rate is 200 points higher than
the corresponding PDST-F. Principal payable semi-annually with interest
payable quarterly.
-
Annual int. rate is equal to PDST-F plus minimum of 1.25% spread inclusive
of Gross Receipts Tax rate (GRT), or the BSP Overnight lending rate plus
GRT, whichever is higher at the time of the repricing. Principal payable
quarterly with interest payable monthly.
172,903,309 Annual int. rate is equal to PDST-F plus minimum of 1.25% spread inclusive
of Gross Receipts Tax rate (GRT), or the BSP Overnight lending rate plus
GRT, whichever is higher at the time of the repricing. Principal payable
quarterly with interest payable monthly.
299,269,321
Schedule F
1 of 1
LORENZO SHIPPING CORPORATION
Schedule F- Indebtedness of Unconsolidated Subsidiaries and Affiliates
As of December 31, 2013
Name of Affiliates
None
January 1, 2013
December 31, 2013
Schedule G
1 of 1
LORENZO SHIPPING CORPORATION
Schedule G - Guarantees of Securities of Other Issuers
As of December 31, 2013
Name of Issuer of Securities Guaranteed
by the Company
None
Title of Issue of
Each Class of
Securities Guaranteed
Total Amount
Guaranteed and
Outstanding
Amount Owned
by Person for which
Statement is Filed
Nature of
Guarantee
Schedule H
1 of 2
LORENZO SHIPPING CORPORATION
Schedule H - Capital Stock
As of December 31, 2013
Title of Issue
Common Shares
Number of
Shares
Authorized
991,183,999
Number of Shares
Issued and
Outstanding
555,652,251
Number of Shares
Reserved for
Options, Warrants
Conversions
and Other Rights
Number of Shares Held By
Directors,
Officers and
Affiliates
Employees
Others
National Marine Corporation
276,520,756
National Marine Corporation (c/o PCD Nominee102,628,805
Pioneer Insurance
PCD Nominee (Filipino and Non-Filipino)
Others
Julio Sy Sr
Michael Escaler
Arsenio Cabrera
Deogracias Vistan
Antony Luis Marden
Doris Teresa M. Ho
Roberto A. Umali
Edgardo A. Bautista
Patingo, Alexander Moring
Alluad, Sabado Calosa
Antonio, Rosalinda Dayao
Argete, Roberto Villablanca
Arrabaca, Remegio Olimban
Baclayo, Roberto Ropa
Crodua, Mario Roferos
Cuison, Rosalio Tanierla
Diapera, Reynaldo Dumalag
De Jesus, Yolanda Rabuga
Del Fonso, Leila Jaca
Enriquez, Maria Lourdes Aguhar
Fernandez, Sunny M.
Ganacias, Sammy Chiong
Goli, Mario Lucero
Laput, Jeshua Gonzales
Lamqui, Alex Alipio
Magbanua, Ernie Insoy
Mendoza, Virginia Delatina
Millondaga, Jimmy Caturas
Tan, Imelda
-
42,744,511
231,250
30,000
3,750
1
1
1,188,701
1,000
1250
1250
1250
1250
1250
1250
1250
1250
1250
1250
1250
1250
1250
1250
1250
1250
1250
1250
1250
1250
1250
Treasury
Shares
75,193,750
30,145,950
26,935,026
-
-
Schedule H
2 of 2
LORENZO SHIPPING CORPORATION
Schedule H - Capital Stock
As of December 31, 2013
Title of Issue
Number of
Shares
Authorized
Number of Shares
Issued and
Outstanding
Number of Shares
Reserved for
Options, Warrants
Conversions
and Other Rights
Number of Shares Held By
Directors,
Officers and
Affiliates
Employees
Others
Tampus, Nelson Lapiz
Ylade, Charlie Quillanora
379,149,561
1250
1250
44,227,964
Treasury
Shares
-
132,274,726
(1,010,000)
(1,010,000)