COVER SHEET
1 7 4 6
S T I
ED U C A T I ON
H O L D I N G S,
S Y S T E MS
I N C.
(Company's Full Name)
7/ F
i A C A D E M Y
6 7 6 4
A Y A L A
B L D G. ,
A V E. ,
M A K A T I
C I T Y
1 2 2 6
(Business Address : No. Street City / Town / Province)
Ms. VETTE ALVAREZ
(6 3 2) 8 4 1 0 6 2 9
Contact Person
0 3
3 1
Month
Day
Company Telephone Number
SEC FORM 17-Q For the Quarter ended 30 September 2013
Last Friday of September
Month
FORM TYPE
Fiscal Year
Day
Annual Meeting
N A
Secondary License Type, If Applicable
C F D
N A
Amended Articles Number/Section
Dept. Requiring this Doc.
Total Amount of Borrowings
1
2
4
N A
6
Domestic
Total No. of Stocholders
To be accomplished by SEC Personnel concerned
File Number
LCU
Document I.D.
Cashier
STAMPS
N A
Foreign
SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-Q
QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES
REGULATION CODE AND SRC RULE 17(2)(b) THEREUNDER
1.
For the quarterly period ended
30 SEPTEMBER 2013
2.
SEC Identification No.
1746
3.
BIR Tax Identification No.
000-126-853
4.
Exact name of registrant as specified
in its charter
STI EDUCATION SYSTEMS
HOLDINGS, INC.
5.
Province, Country or other
Jurisdiction of incorporation
or organization
Philippines
6.
(SEC Use Only)
Industry Classification
Code
_____________________
7.
Address of Philippine Office
7/F iACADEMY Building
6764 Ayala Avenue
Makati City, 1226
8.
Registrant’s Telephone No.
including Area Code
(632) 844-9553
9.
Former name, former address, former
fiscal year, if changed since last report
10.
JTH DAVIES HOLDINGS, INC.
Securities Registered pursuant to Sections 4 and 8 of the RSA.
Title of Each Class
Number of Shares of
Common Stock Outstanding
and Amount of Debt
Outstanding
-----------------------------------------------------------------------------------------------------COMMON SHARES – 9,904,806,924 - ISSUED AND OUTSTANDING
-----------------------------------------------------------------------------------------------------9,904,806,924 – LISTED SHARES
-----------------------------------------------------------------------------------------------------
11.
Are any or all of these securities listed on the Philippine Stock Exchange?
Yes [ x ]
No [ ]
Annex "A"
STI EDUCATION SYSTEMS HOLDINGS, INC.
(Formerly JTH Davies Holdings, Inc.)
AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF SEPTEMBER 30, 2013 AND MARCH 31, 2013
ASSETS
Current Assets
Cash and cash equivalents (Notes 6 and 16)
Receivables (Notes 7 and 16)
Inventories (Note 13)
Prepaid expenses and other current assets (Note 16)
P
September 30, 2013
March 31, 2013
(Unaudited)
(As Restated)
1,182,034,480 P
394,804,378
42,341,664
137,957,762
1,489,451,909
250,773,204
34,740,103
37,467,793
Total Current Assets
1,757,138,284
1,812,433,009
Noncurrent Assets
Property and equipment (Notes 8 and 10)
3,316,802,176
2,635,275,971
Investment properties
Investments in and advances to associates and joint ventures (Note 9)
Noncurrent receivables (Notes 13 and 16)
Available-for-sale financial assets (Note 16)
Deferred tax assets
Goodwill, intangible and other noncurrent assets (Note 10)
Total Noncurrent Assets
P
LIABILITIES AND EQUITY
Current Liabilities
Short-term loans (Notes 16)
Accounts payable and other current liabilities (Notes 11 and 16)
Current portion of obligations under finance lease
Income tax payable
P
Total Current Liabilities
Noncurrent Liabilities
Long-term debt - net of current portion
Obligations under finance lease - net of current portion
Pension liabilities
Total Noncurrent Liabilities
38,337,698
39,325,291
1,784,833,155
2,905,319,376
463,978,935
463,978,935
33,276,647
4,663,478
32,942,597
799,931,817
10,962,122
642,000,576
6,470,103,025
8,227,241,309 P
6,701,525,749
280,000,000 P
746,038,616
5,118,664
31,133,812
320,685,820
6,419,251
5,030,213
8,513,958,758
1,062,291,092
332,135,284
11,650,506
26,527,730
13,339,807
23,061,832
38,178,236
36,401,639
Total Liabilities (Carried Forward)
1,100,469,328
368,536,923
Equity Attributable to Equity Holders of the Parent Company
Capital stock (Note 12)
Additional paid-in capital (Note 12)
Cost of shares held by a subsidiary (Note 12)
4,952,403,462
1,119,079,467
(500,009,337)
4,952,403,462
1,119,079,467
(500,009,337)
(115,210)
(121,773)
608,316,954
18,636,644
(1,649,670,613)
1,905,291,022
23,615,353
(1,649,448,395)
800,000,000
1,689,438,719
800,000,000
1,352,261,000
7,038,080,086
8,003,070,799
Unrealized mark-to-market loss on available-for-sale financial assets
Share in associates’ unrealized mark-to-market gain on available-forsale financial assets
Cumulative actuarial gain (loss)
Other equity reserve (Note 12)
Retained earnings (Note 12):
Appropriated
Unappropriated
Total Equity Attributable to Equity Holders of the Parent Company
Equity Attributable to Non-controlling Interests
Total Equity
P
88,691,895
142,351,036
7,126,771,981
8,145,421,835
8,227,241,309 P
8,513,958,758
STI EDUCATION SYSTEMS HOLDINGS, INC.
(Formerly JTH Davies Holdings, Inc.)
AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED SEPTEMBER 30, 2013 AND 2012
Six Months Ended
September 30
2012
2013
(Unaudited)
REVENUES
Sale of services:
Tuition and other school fees
Educational services
Royalty fees
Others
Sale of goods - Sale of educational materials and
supplies
P
COSTS AND EXPENSES
Cost of educational services
Cost of educational materials and supplies sold
General and administrative expenses
INCOME BEFORE OTHER INCOME
AND INCOME TAX
OTHER INCOME
Equity in net gains of associates and joint ventures
(Note 9)
Interest expense (Note 10)
Rental income (Note 12)
Interest income (Notes 6 and 12)
Dividend income
Gain (loss) on sale of property and equipment
Gain (loss) on deemed sale (Note 9)
Gain (loss) on swap (Note 9)
INCOME BEFORE INCOME TAX
PROVISION FOR (BENEFIT FROM) INCOME
TAX
Current
Deferred
NET INCOME (Carried Forward)
P
OTHER COMPREHENSIVE INCOME (LOSS)
Actuarial gain (loss)
Share in associates’ unrealized mark-to-market gain on
available-for-sale financial assets, net of realized markto-market gain (loss) recognized to profit or loss
Unrealized mark-to-market loss on available-for-sale
financial assets
TOTAL COMPREHENSIVE INCOME
Net Income Attributable To
Equity holders of the Parent Company
Non-controlling interests
574,387,922 P
79,903,961
7,249,420
37,130,600
424,804,762 P
44,725,248
4,203,958
7,039,329
39,986,106
826,904,297
43,441,652
742,113,555
15,686,116
17,038,931
496,459,413
421,688,088
215,281,723
28,377,043
360,319,906
603,978,672
221,729,085
34,103,234
338,762,045
594,594,364
132,323,710
10,556,982
170,254,418
132,710,030
14,307,559
152,515,532
313,135,110
299,533,121
222,925,625
147,519,191
183,324,303
122,154,967
287,295,466
(615,585)
4,473,163
4,553,281
218,523
32,177
(36,300,592)
(6,699,695)
252,956,738
475,882,363
164,447,878
(36,088,562)
3,648,385
13,040,967
220,546
145,269,214
292,788,405
87,707,011
(266,104)
2,983,690
1,581,294
203,591
32,177
-
51,326,803
(19,117,066)
1,493,750
6,699,247
204,391
-
92,241,659
275,565,962
40,607,125
162,762,092
43,325,856
(22,057,444)
21,268,412
454,613,951 P
23,746,609
(14,777,135)
8,969,474
283,818,931 P
28,219,932
(21,995,234)
6,224,698
269,341,264 P
(4,981,257)
38,640,001
(4,981,257)
(1,313,970,966)
21,632,478
(319,002,502)
6,640
(1,318,945,583)
(475,326)
59,797,153
(323,958,859)
346,668,553
39,815,288
3,748,538
14,416,778
11,067,436
(251,602)
10,815,834
151,946,258
-
(260,277)
-
24,900
(260,277)
(864,331,632) P
343,616,084 P
(54,617,595) P
151,685,981
P
479,569,163 P
(24,955,212)
454,613,951 P
275,963,791 P
7,855,140
283,818,931 P
273,546,010 P
(4,204,746)
147,153,475
4,792,783
151,946,258
(822,471,660) P
(41,859,972)
(864,331,632) P
333,338,575 P
10,277,509
343,616,084 P
P
P
Basic/Diluted Earnings Per Share on Net Income
Attributable to Equity Holders of the Parent Company
677,244,490 P
87,556,149
7,813,742
14,303,810
P
P
Total Comprehensive Income Attributable To
Equity holders of the Parent Company
Non-controlling interests
Three Months Ended
September 30
2012
2013
(Unaudited)
0.048
0.236
269,341,264 P
(46,334,488) P
(8,283,107)
(54,617,595) P
0.028
146,903,743
4,782,238
151,685,981
0.120
STI EDUCATION SYSTEMS HOLDINGS, INC.
(Formerly JTH Davies Holdings, Inc.)
AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
SEPTEMBER 30, 2013
Additional Paid-in
Capital
Capital Stock
At April 1, 2013, as previously reported
Effect of adoption of PAS 19R
As restated
Net income
Other comprehensive income (loss)
Total comprehensive income
Dividend declaration
Acquisition of non-controlling interest
Share of non-controlling interest on dividends
declared by a subsidiary
4,952,403,462
4,952,403,462
-
1,119,079,467
1,119,079,467
-
-
-
Allowance for gain on
Share in Associates’
Cumulative
FV changes in
Unrealized Mark to Actuarial Gain
investments in equity
Market Gain on AFS
(Loss)
securities
Cost of Shares
Held by a
Subsidiary
(500,009,337)
(500,009,337)
-
(121,773)
(121,773)
6,640
6,640
(77)
1,905,291,022
1,905,291,022
(1,297,066,206)
(1,297,066,206)
92,138
23,615,353
23,615,353
(4,981,257)
(4,981,257)
2,548
Other Equity
Reserve
Retained Earnings
- appropriated
(1,649,448,394)
(1,649,448,394)
-
800,000,000
800,000,000
-
(222,219)
-
Retained
Earnings Unappropriated
1,351,854,503
406,497
1,352,261,000
479,569,163
479,569,163
(142,391,444)
-
Equity
Attibutable to Noncontrolling
Interests
Total
7,979,048,950
24,021,850
8,003,070,800
479,569,163
(1,302,040,823)
(822,471,660)
(142,391,444)
(127,611)
-
4,952,403,462
1,119,079,467
(500,009,337)
(115,210)
608,316,954
18,636,644
(1,649,670,613)
800,000,000
1,689,438,719
7,038,080,086
142,037,319
313,716
142,351,035
(24,955,212)
(16,904,760)
(41,859,972)
(733,011)
(11,066,157)
88,691,895
Total Equity
8,121,086,269
24,335,566
8,145,421,835
454,613,951
(1,318,945,583)
(864,331,632)
(142,391,444)
(860,622)
(11,066,157)
7,126,771,981
SEPTEMBER 30, 2012
Capital Stock
At April 1, 2012, as previously reported
Effect of adoption of PAS 19R
As restated
Issuance of shares
Transaction costs - offering
Net income
Other comprehensive income (loss)
Total comprehensive income
Subsidiary's issuance of shares and sale of treasury
shares
Balance at September 30, 2012 (unaudited)
Additional Paid-in
Capital
Cost of Shares
Held by a
Subsidiary
Allowance for Gain on
Share in Associates’
Cumulative
FV Changes in
Unrealized Mark to Actuarial Gain
Investments in Equity
Market Gain on AFS
(Loss)
Securities
551,500,000
551,500,000
2,950,903,462
-
77,592,234
77,592,234
(1,764,375)
-
(500,009,337)
(500,009,337)
-
207,684
207,684
(455,732)
(455,732)
1,039,792,823
1,039,792,823
20,756,030
20,756,030
(14,120,007)
(14,120,007)
-
3,502,403,462
75,827,859
(500,009,337)
(248,048)
1,060,548,853
(14,120,007)
Other Equity
Reserve
Retained Earnings
- appropriated
648,667,135
648,667,135
(2,352,374,390)
(1,703,707,255)
800,000,000
800,000,000
-
Retained
Earnings Unappropriated
668,670,934
(142,087)
668,528,847
275,963,791
Total
-
275,963,791
3,286,421,473
(14,262,094)
3,272,159,379
598,529,072
(1,764,375)
275,963,791
20,300,298
296,264,089
800,000,000
944,492,638
4,165,188,165
Equity
Attibutable to Noncontrolling
Interests
Total Equity
189,795,480
(602,235)
189,193,245
7,855,140
856,854
8,711,994
3,476,216,953
(14,864,329)
3,461,352,624
598,529,072
(1,764,375)
283,818,931
21,157,152
304,976,083
25,302,730
223,207,969
25,302,730
4,388,396,134
STI EDUCATION SYSTEMS HOLDINGS, INC.
(Formerly JTH Davies Holdings, Inc.)
AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
2013
2012
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax
Depreciation and amortization (Note 8)
Provision for impairment
Interest expense
Pension expense
Interest income
Equity in net earnings of associates (Note 9)
Loss on swap
Loss on deemed sale of investments in associates
Gain on disposal of property and equipment
Dividend income
Operating income before working capital changes
Decrease (increase) in:
Receivables
Inventories
Prepaid expenses and other current assets
Increase in accounts payable and other current liabilities
Contribution to plan assets
Benefits paid
Net cash generated from operations
Interest received
Income and other taxes paid
Net cash flows provided by operating activities
P
(125,391,262)
(7,601,561)
(100,190,910)
270,035,501
(8,119,653)
346,688,870
2,593,043
(17,444,347)
331,837,566
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Property and equipment (Note 8)
Noncurrent receivable
Advances to associates and joint ventures
(767,359,984)
Decrease (increase) in:
Investments in and advances to associates and joint ventures
Goodwill and other noncurrent assets
Interest received
Dividends received
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from availment of short-term loans
Payments of:
Short-term loans
Obligations under finance lease
Proceeds from issuance of shares by a subsidiary
Stock issuance costs
Dividends paid
Interest paid
Net cash flows provided by (used in) financing activities
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD
CASH AND CASH EQUIVALENTS AT END OF PERIOD
475,882,363 P
83,799,305
90,000
615,585
6,604,308
(4,553,281)
(287,295,466)
6,699,695
36,300,592
32,177
(218,523)
317,956,755
P
292,788,405
71,912,748
11,584,827
36,088,562
6,786,289
(13,040,966)
(164,447,878)
(220,546)
241,451,441
(56,518,999)
4,204,757
3,994,150
29,325,355
(3,098,033)
219,358,671
2,646,200
(23,174,386)
198,830,485
(853,125)
(723,890,850)
(192,020,916)
(15,231,715)
29,713,364
(157,931,241)
1,960,237
218,523
(894,252,226)
(5,117,090)
3,437,517
220,546
(932,602,508)
280,000,000
529,000,000
(24,387,184)
(615,585)
254,997,231
(560,687,336)
(2,255,992)
624,521,383
(2,453,954)
(1,230)
(36,088,562)
552,034,309
(307,417,429)
(181,737,714)
1,489,451,909
556,282,842
1,182,034,480 P
374,545,128
-1-
STI EDUCATION SYSTEMS HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
1. Corporate Information
a. General
STI Education Systems Holdings, Inc. (formerly JTH Davies Holdings, Inc., “STI Holdings”
or the “Parent Company”) and its subsidiaries (hereafter collectively referred to as the
“Group”) are all incorporated in the Philippines and registered with the Philippine Securities
and Exchange Commission (“SEC”). STI Holdings was originally established in 1928 as the
Philippine branch office of Theo H. Davies & Co., a Hawaiian corporation. It was
reincorporated as a Philippine corporation and registered with the SEC on June 28, 1946. STI
Holdings’ shares were listed on the Philippine Stock Exchange on October 12, 1976. On June
25, 1996, the SEC approved the extension of the Company’s corporate life for another 50
years. The primary purpose of the Company is to invest in, purchase or otherwise acquire and
own, hold, use, sell, assign, transfer, lease, mortgage, pledge, exchange, or otherwise dispose
of real properties as well as personal and movable property of any kind and description,
including shares of stock, bonds, debentures, notes, evidence of indebtedness and other
securities or obligations of any corporation or corporations, association or associations,
domestic or foreign and to possess and exercise in respect thereof all the rights, powers and
privileges of ownership, including all voting powers of any stock so owned, but not to act as
dealer in securities and to invest in and manage any company or institution. STI Holdings
aims to focus on education and education-related activities and investments.
STI Holdings’ registered office address, which is also its principal place of business, is at 7/F,
iAcademy Building, 6764 Ayala Avenue, Makati City.
b. Change in ownership of STI Holdings
i) STI Education Services Group, Inc. (“STI ESG”) and Capital Managers and Advisors,
Inc. (“CMA”) owns 45.54% and 45.50%, respectively, of STI Holdings’ shares as of
March 31, 2012(see Note 12).
On June 14, 2012 and August 10, 2012, the Board of Directors (“BOD”) and stockholders
of STI Holdings, respectively, approved the following: (i) change in its corporate name to
STI Education Systems Holdings, Inc., (ii) the share-for-share swap agreement (“Share
Swap”) with the shareholders of STI ESG (“STI ESG Stockholders”) and (iii) the
corresponding increase in its authorized capital stock from 1,103,000,000 shares with an
aggregate par value of P
=551.5 million to 10,000,000,000 shares with an aggregate par
value of P
=5,000.0 million (see Notes 3and 12). The change in corporate name was
approved by the SEC on September 10, 2012 while the Share Swap agreement and
increase in the authorized capital stock were approved on September 28, 2012.
In view of the increase in its authorized capital stock and pursuant to the Share Swap, STI
Holdings issued 5,901,806,924 shares to STI ESG Stockholders in exchange for
907,970,294 STI ESG shares. As a result, immediately after the Share Swap, the STI
ESG Stockholders who joined the Share Swap owned approximately 84% interest in STI
Holdings while STI Holdings owned 96% of STI ESG (see Notes 3 and12).
-2-
ii) On August 28, 2012, the BOD approved the offering and issuance by way of a follow-on
offering of up to a maximum 3,000,000,000 common shares (the “Offer”) at an offer price
to be determined based on a bookbuilding process and from discussion between STI
Holdings and the International Lead Manager and Domestic Lead Manager. The Offer
comprised of the following: (i) up to 2,627,000,000 common shares offered to the public
on a primary basis (“Primary Offering”); (ii) up to 105,209,527 common shares offered to
the public on a secondary basis by Korea Merchant Banking Corporation (“Secondary
Offering”); and (iii) over-allotment option to purchase up to 273,000,000 common shares
(“Over-allotment Option”), granted to UBS AG, in its role as Stabilizing Agent, on the
same terms and conditions as the Primary Offering and Secondary Offering. The offer
price was set at P
=0.90 per share on October 22, 2012. The Primary Offering and
Secondary Offering were completed on November 7, 2012 while the Over-allotment
Option was exercised on November 28, 2012(see Note 12).
iii)
In November and December 2012, STI Holdings subscribed to 2,100,000,000 STI ESG
shares at a consideration price equal to its par value of P
=2,100.0 million. In July 2013,
STI Holdings acquired additional 328,125 STI ESG shares. As a result, STI Holdings’
ownership interest in STI ESG increased to approximately 99% as of September 30, 2013.
c. STI Education Services Group, Inc. and Subsidiaries (collectively referred to as “STI ESG”)
The Group has investments in several entities which own and operate STI ESG schools. STI
ESG is involved in establishing, maintaining, and operating educational institutions to provide
pre-elementary, elementary, secondary, and tertiary as well as post-graduate courses, postsecondary and lower tertiary non-degree programs. STI ESG also develops, adopts and/or
acquires, entirely or in part, such curricula or academic services as may be necessary in the
pursuance of its main activities, relating but not limited to information technology services,
information technology-enabled services, nursing, education, hotel and restaurant
management, engineering, business studies and care-giving. Other activities of STI ESG
include computer services, such as, but not limited to, programming, systems design and
analysis, feasibility studies, installation support, job processing, consultancy, and other related
activities.
2. Basis of Preparation and Changes to the Group’s Accounting Policies
Basis of Preparation
The accompanying interim condensed consolidated financial statements of the Group have been
prepared in accordance with Philippine Accounting Standards (PAS) 34, Interim Financial
Reporting. Accordingly, the interim condensed consolidated financial statements do not include
all the information and disclosures required in the annual financial statements, and should be read
in conjunction with the annual financial statements of STI Holdings as of and for the year ended
March 31, 2013.
Changes in Accounting Policies, Disclosures and Presentation
The accounting policies adopted in the preparation of the interim condensed consolidated financial
statements are consistent with those followed in the preparation of the annual financial statements
of STI Holdings for the year ended March 31, 2013, except for the adoption of the new and
amended PFRS that became effective beginning on or after April 1, 2013. The adoption of the
following amendments and interpretations did not have any significant effect on the accounting
policies, financial position or performance of the Group, except for additional disclosures:
-3
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. 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 amendments are applicable to the Group and based on the evaluation, the amendments
have no impact on the Group’s financial position or performance but will affect disclosures
only.

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 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.
A reassessment of control was performed by the Group on all its subsidiaries and associates in
accordance with the provisions of PFRS 10. Following the reassessment and based on the
new definition of control under PFRS 10, the Group determined that the adoption of this
standard does not change its relationship over its subsidiaries and associates, therefore, has no
impact on the Group’s financial position or performance.

PFRS 11, Joint Arrangements
PFRS 11 replaces PAS 31, Interests in Joint Ventures, and SIC 13, Jointly Controlled Entities
- Non-Monetary 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.
There is no impact on the Group’s financial position or performance since its investments in
joint ventures are accounted for under equity method in its consolidated financial statements.
-4
PFRS 12, Disclosure of Involvement with Other Entities
PFRS 12 includes all of the disclosures related to consolidated financial statements that were
previously in PAS 27, as well as all the disclosures that were previously included in PAS 31
and PAS 28, Investments in Associates. These disclosures relate to an entity’s interests in
subsidiaries, joint arrangements, associates and structured entities. A number of new
disclosures are also required. The standard is applicable to the Group and based on the
Group’s adoption of this standard will affect disclosures only and have no impact on the
Group’s financial position or performance.

PFRS 13,Fair Value Measurement
PFRS 13 establishes a single source of guidance under PFRSs 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 when fair value is required or permitted.
This standard should be applied prospectively as of the beginning of the annual period in
which it is initially applied. Its disclosure requirements need not be applied in comparative
information provided for periods before initial application of PFRS 13. The standard is
applicable to the Group and based on the Group’s adoption of this standard does not have a
significant impact on the Group’s financial position and performance.

PAS 1, Presentation of Financial Statements - Presentation of Items of Other Comprehensive
Income or OCI(Amendments)
The amendments to PAS 1 change the grouping of items presented in OCI. Items that can be
reclassified (or “recycled”) to profit or loss at a future point in time (for example, upon
derecognition or settlement) will be presented separately from items that will never be
recycled. The amendments are applicable to the Group and based on the evaluation, the
amendments affect presentation only and have no impact on the Group’s financial position or
performance.
The Group opted not to present supporting notes for the opening balance sheet as permitted by
the amendment to PAS 1, Presentation of financial statement-clarification of the requirements
for comparative information.

PAS 19, Employee Benefits (Revised)
Amendments to PAS 19 range from fundamental changes such as removing the corridor
mechanism and the concept of expected returns on plan assets to simple clarifications and
rewording. The revised standard also requires new disclosures such as, among others, a
sensitivity analysis for each significant actuarial assumption, information on asset-liability
matching strategies, duration of the defined benefit obligation, and disaggregation of plan
assets by nature and risk. Once effective, the Group has to apply the amendments
retroactively to the earliest period presented.
The Group reviewed its existing employee benefits and determined that the amended standard
has significant impact on its accounting for retirement benefits. The Group obtained the
services of an external actuary to compute the impact to their consolidated financial
statements. The effects are detailed as follows:
-5-
March 31,2013
April 1, 2012
Increase (Decrease)
Consolidated Statements of
Financial Position
Net pension liability
Deferred tax asset
Other comprehensive income (loss)
Retained earnings
(P
=24,381,322)
(45,756)
23,923,760
411,806
For the Six Months
ended Sept 30, 2012
=14,880,782
P
16,454
(14,716,241)
148,087
For the three months
ended June 30, 2012
Increase (Decrease)
Consolidated Statement of
Comprehensive Income
Pension expense
Provision for income tax
Net income
Other comprehensive income
(loss)

(P
=622,103)
62,210
559,893
38,640,001
=(622,103)
P
62,210
559,893
38,640,001
PAS 27,Separate Financial Statements (as revised in 2011)
As a consequence of the issuance of the new PFRS 10 and PFRS 12, what remains of PAS 27
is limited to accounting for subsidiaries, jointly controlled entities, and associates in the
separate financial statements. The amendment is applicable to the Group and based on the
evaluation, the adoption of the amended PAS 27 will not have a significant impact on the
separate financial statements of the entities in the Group.

PAS 28, Investments in Associates and Joint Ventures (as revised in 2011)
As a consequence of the issuance of the new PFRS 11 and PFRS 12, PAS 28 has been
renamed PAS 28, Investments in Associates and Joint Ventures, and describes the application
of the equity method to investments in joint ventures in addition to associates. The
amendment is applicable to the Group and based on the evaluation, the adoption of the
amended PAS 28 will not have a significant impact on the separate financial statements of the
entities in the Group.

Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine
This interpretation applies to waste removal costs (“stripping costs”) that are incurred in
surface mining activity during the production phase of the mine (“production stripping costs”).
The interpretation addresses the accounting for the benefit from the stripping activity. This
interpretation is not relevant to the Group; thus, does not have any impact on the Group’s
financial position or performance.
-6-
Improvements to PFRSs
These sets of improvements are effective for annual periods beginning on or after January 1, 2013.
The Group adopted these standards as of April 1, 2013.

PFRS 1, First-time Adoption of PFRS - Borrowing Costs
This improvement clarifies that an entity that stopped applying PFRS in the past and chooses,
or is required, to apply PFRS, has the option to re-apply PFRS 1. If PFRS 1 is not re-applied,
an entity must retrospectively restate its financial statements as if it had never stopped
applying PFRS. The amendment does not apply to the Group as the Group is not a first-time
adopter of PFRS.

PAS 1, Presentation of Financial Statements - Clarification of the requirements for
comparative information
This improvement clarifies the difference between voluntary additional comparative
information and the minimum required comparative information. Generally, the minimum
required comparative information is the previous period. The amendment affects disclosures
only and has no impact on the Group’s financial position and performance.

PAS 16, Property, Plant and Equipment - Classification of servicing equipment
This improvement clarifies that major spare parts and servicing equipment that meet the
definition of property, plant and equipment are not inventory. The amendment has no impact
on the Group’s financial position and performance.

PAS 32, Financial Instruments: Presentation - Tax effect of distribution to holders of equity
instruments
This improvement clarifies that income taxes arising from distributions to equity holders are
accounted for in accordance with PAS 12, Income Taxes. The amendment has no impact on
the Group’s financial position and performance.

PAS 34, Interim Financial Reporting - Interim financial reporting and segment information
for total assets and liabilities
The amendment aligns the disclosure requirements for total segment assets with total segment
liabilities in interim financial statements. This clarification also ensures that interim
disclosures are aligned with annual disclosures. The amendment has no impact on the
Group’s financial position and performance.
New Accounting Standards, Interpretations and Amendments to Existing Standards
Effective Subsequent to September 30, 2013
The Group will adopt the following revised standards and interpretations and amendments to existing
standards enumerated below when these become effective. Except as otherwise indicated, the Group
does not expect the adoption of these revised standards, interpretations and amendments to PFRS to
have a significant impact on the consolidated financial statements.
-7-
Effective in 2014

PAS 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 Group’s
financial position or performance.
Effective in 2015

PFRS 9, Financial Instruments: Classification and Measurement
PFRS 9, as issued, reflects the first phase on the replacement of PAS 39 and applies to the
classification and measurement of financial assets and liabilities as defined in PAS 39,
Financial Instruments: Recognition and Measurement. Work on impairment of financial
instruments and hedge accounting is still ongoing, with a view to replacing 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 OCI or profit or
loss. Equity financial assets held for trading must be measured at fair value through profit or
loss. For FVO liabilities, 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 in
respect of the liability’s credit risk in OCI would create or enlarge an accounting mismatch in
profit or loss. All other PAS 39 classification and measurement requirements for financial
liabilities have been carried forward into PFRS 9, including the embedded derivative
separation 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 Group’s financial assets, but
will potentially have no impact on the classification and measurement of financial liabilities.
Deferred Effectivity

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
Philippine SEC and the 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
-8-
Philippine real estate industry is completed. This interpretation is not relevant to the Group,
thus, will not have any impact on Group’s financial position or performance.
Summary of Significant Accounting Policies
Business Combination Involving Entities under Common Control
Where there are business combinations in which all the combining entities within the Group are
ultimately controlled by the same ultimate parent before and after the business combination and
that the control is not transitory (“business combinations under common control”), the Group may
account such business combinations under the acquisition method of accounting or pooling of
interests method, if the transaction was deemed to have substance from the perspective of the
reporting entity. In determining whether the business combination has substance, factors such as
the underlying purpose of the business combination and the involvement of parties other than the
combining entities such as the non-controlling interest, shall be considered.
In cases where the business combination has no substance, the Group shall account for the
transaction similar to a pooling of interests. The assets and liabilities of the acquired entities and
that of the Group are reflected at their carrying values. The difference in the amount recognized
and the fair value of the consideration given, is accounted for as an equity transaction, i.e., as
either a contribution or distribution of equity. Further, when a subsidiary is disposed in a common
control transaction, the difference in the amount recognized and the fair value consideration
received, is also accounted for as an equity transaction. The Group recorded the difference as an
excess of consideration over carrying amount of disposed subsidiary and presented as a separate
component of equity in the combined balance sheets.
Comparatives shall be restated to include balances and transactions as if the entities had been
acquired at the beginning of the earliest period presented as if the companies had always been
combined.
Business Combination and Goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition
is measured as the aggregate of the consideration transferred, measured at acquisition date fair
value and the amount of any non-controlling interest in the acquiree. For each business
combination, the acquirer measures the non-controlling interest in the acquiree either at fair value
or at the proportionate share in the acquiree’s identifiable net assets.
Acquisition costs incurred are expensed and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date. This includes the separation of
embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the fair value of the acquirer’s previously held
equity interest in the acquiree is re-measured to fair value at the acquisition date through profit or
loss. Any contingent consideration to be transferred by the acquirer will be recognized at fair
value at the acquisition date. Subsequent changes to the fair value of the contingent consideration
which is deemed to be an asset or liability, will be recognized in accordance with PAS 39 either in
profit or loss or as a change to other comprehensive income. If the contingent consideration is
classified as equity, it should not be re-measured until it is finally settled within equity
-9-
Basis of Consolidation
The interim condensed consolidated financial statements include the financial statements of STI
Holdings, STI ESG and its subsidiaries as at September 30, 2013 and March 31, 2013. In
assessing control, the existence and effect of potential voting rights that are currently exercisable
or convertible are taken into account. Control is also achieved when the Parent Company has the
power to govern the financial and operating policies of an entity so as to obtain benefits from its
activities. The financial statements of subsidiaries are consolidated from the date on which the
Parent Company obtains control, and continue to be consolidated until the date such control
ceases.
Control over the operations and assets and liabilities of the entity may exist even in cases where
the Parent Company owns little or none of the entity’s equity, such as when the substance of the
relationship between the Parent Company and that entity indicates that the entity is controlled by
the parent company. The interim condensed consolidated financial statements include the
accounts of STI College Kalookan, Inc. (STI-Kalookan) and STI College of Novaliches, Inc. (STINovaliches), which are both non-stock corporations but wherein STI ESG has control by virtue of
management contracts.
Losses within a subsidiary are attributed to the non-controlling interest even if that results in a
deficit balance. A change in the ownership interest of a subsidiary, without a loss of control, is
accounted for as an equity transaction. If the Parent Company loses control over a subsidiary, it:







Derecognizes the assets (including goodwill) and liabilities of the subsidiary;
Derecognizes the carrying amount of any non-controlling interest;
Derecognizes the unrealized other comprehensive income deferred in equity;
Recognizes the fair value of the consideration received;
Recognizes the fair value of any investment retained;
Recognizes any surplus or deficit in profit or loss; and
Reclassifies the Parent Company’s share of components previously recognized in other
comprehensive income to profit or loss or retained earnings, as appropriate.
As at September 30, 2013 and March 31, 2013, subsidiaries of STI Holdings include:
STI ESG
iAcademy
STI College Tuguegarao, Inc. (STI-Tuguegarao)
STI-Kalookan(a)
STI-Novaliches(a)
STI College Batangas, Inc. (STI-Batangas) (b)
STI College of Dagupan, Inc. (STI-Dagupan)
STI College Taft, Inc. (STI-Taft)
De Los Santos - STI College
STI College Quezon Avenue, Inc. (STI-QA)(c)
Principal Activities
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Effective Percentage
of Ownership
Direct
Indirect
99
–
–
100
–
100
–
100
–
100
–
100
–
77
–
75
–
52
–
52
(a)
A subsidiary of STI ESG through a management contract
Acquired in September 2013 from a franchisee
(c)
A wholly owned subsidiary of De Los Santos - STI College
(b)
As at September 30, 2013, STI ESG’s request for confirmatory ruling on the tax-free merger from
the BIR is still pending.
- 10 -
Accounting Policies of Subsidiaries. The financial statements of subsidiaries are prepared using
uniform accounting policies for like transactions and other events in similar circumstances.
Transactions and Balances Eliminated on Consolidation. All significant intra-group balances,
transactions, income and expenses and profits and losses resulting from intra-group transactions
are eliminated in full.
Non-Controlling Interests. Non-controlling interests represent the portion of profit or loss and net
assets in the subsidiaries not held by the Parent Company and are presented in the profit or loss
and within equity in the consolidated statement of financial position, separate from equity
attributable to equity holders of the Parent Company.
3. Business Combinations
a.
Business Combination Involving Entities under Common Control
As discussed in Note 1, as a result of the Share Swap, the original shareholders of STI ESG
owned approximately 84% of STI Holdings while STI Holdings owned approximately 96% of
STI ESG (including its 3% shareholding in STI ESG prior to Share Swap) immediately after
the Share Swap.
Management of the Group assessed that this transaction is a business combination involving
entities under common control since STI Holdings and STI ESG are under common control of
a shareholder (the “Controlling Shareholder”). Business combinations involving entities
under common control are excluded from the scope of PFRS 3, Business Combinations.
Management has elected to adopt the pooling of interests method when preparing the
consolidated financial information in accordance with the guidance provided by the Philippine
Interpretations Committee on its Q&A No. 2011-02 “PFRS 3.2 - Common Control Business
Combinations”.
Under the pooling of interests method:

The assets and liabilities of the combining entities are reflected at their carrying amounts;

No adjustments are made to reflect fair values, or recognize any new assets or liabilities at
the date of the combination. The only adjustments would be to harmonize accounting
policies between the combining entities;

No ‘new’ goodwill is recognized as a result of the combination;

Any difference between the consideration transferred and the net assets acquired is
reflected within equity under “Other equity reserve”;

The income statement in the year of acquisition reflects the results of the combining
entities for the full year, irrespective of when the combination took place; and

Comparatives are presented as if the entities had always been combined only for the
period that the entities were under common control.
Common control transactions are viewed from the perspective of the ultimate parent or the
Controlling Shareholder. Since STI Holdings and STI ESG were not under common control
- 11 -
from the start, a predecessor entity should be identified. In this case, despite the legal form of
the transaction (i.e. STI Holdings acquires STI ESG common shares through Share Swap) the
predecessor entity is STI ESG since it was controlled by the Controlling Shareholder prior to
STI Holdings. The Controlling Shareholder only acquired STI Holdings in March 2010.
4. Seasonality of Operations
The Group’s business is linked to the academic cycle. The academic cycle which is one academic
year starts in the month of June and ends in the month of March. The revenue of the Group which
is mainly from tuition and other school fees is recognized as income over the corresponding
academic year to which they pertain. Accordingly, revenue is expected to be lower during the first
quarter of the fiscal year as compared to the other quarters if the number of enrollees remains
constant. This information is provided to allow for a proper appreciation of the results of
operations of the Group.
5. Segment Information
The following table shows the reconciliation of the interim consolidated EBITDA to interim
consolidated net income for the six months ended September 30, 2013 and 2012:
Unaudited
Consolidated EBITDA
Depreciation and amortization
Interest expense
Provision for income tax
Consolidated net income
2013
560,297,253
(83,799,305)
(615,585)
(21,268,412)
454,613,951
2012
(As restated see Note 2)
400,789,715
(71,912,748)
(36,088,562)
(8,969,474)
283,818,931
- 12 -
The following tables present revenue and income information regarding geographical segments for the six months ended September 30, 2013 and 2012:
September 30, 2013 (Unaudited)
Metro Manila
Northern Luzon Southern Luzon
Visayas
Mindanao
Eliminations/
Adjustments
Total
Consolidated
Revenues
External revenue
Intersegment revenue
P
= 601,315,341
382,179,841
P
= 40,604,171
-
P
= 132,339,250
-
P
= 18,302,891
P
= 34,342,644
P
= 826,904,297
382,179,841
P
=(382,179,841)
P
= 826,904,297
–
Total Revenues
P
= 983,495,182
P
= 40,604,171
P
= 132,339,250
P
= 18,302,891
P
= 34,342,644
P
= 1,209,084,138
(P
= 382,179,841)
P
= 826,904,297
P
= 133,513,597
-
P
= 11,766,817
-
P
= 53,750,375
-
P
= 3,308,576
-
P
= 5,385,217
-
P
= 207,724,582
-
P
= 15,201,044
287,295,466
P
= 222,925,625
287,295,466
4,333,168
(615,585)
23,628,658
94,670
202,239
87,744
47,505
26,800
26,350
10,899
357,558
4,553,281
(615,585)
24,262,310
(62,538,734)
4,553,281
(615,585)
(38,276,424)
Results
Income before other income and income tax
Equity in net gains of associates and interests in joint ventures
Interest income
Interest expense
Other income
Provision for income tax
Net Income
(17,474,653)
(601,145)
(2,748,464)
(169,029)
(275,121)
(21,268,412)
-
(21,268,412)
P
= 143,385,185
P
= 11,462,582
P
= 51,137,160
P
= 3,192,696
P
= 5,478,552
P
= 214,656,175
P
= 239,957,776
P
= 454,613,951
EBITDA
P
=560,297,253
September 30, 2012
(Unaudited, As restated - see Note 2)
Metro Manila
Northern Luzon
Southern Luzon
Visayas
Mindanao
Total
Eliminations/
Adjustments
Consolidated
Revenues
External revenue
=531,198,268
P
=42,254,391
P
=121,899,144
P
=20,424,907
P
=35,062,524
P
=750,839,234
P
Intersegment revenue
Total Revenues
59,074,073
=590,272,341
P
=42,254,391
P
=121,899,144
P
=20,424,907
P
=35,062,524
P
59,074,073
=809,913,307
P
(59,074,073)
(P
=59,074,073)
–
=750,839,234
P
=126,253,377
P
13,040,967
(19,260,168)
29,589,636
(9,031,684)
=140,592,128
P
P30,666,639
=
164,447,878
(610,000)
610,000
(25,720,705)
=169,393,812
P
=156,920,016
P
164,447,878
12,430,967
(18,650,168)
3,868,931
(9,031,684)
=309,985,940
P
Results
Income before other income and income tax
Equity in net income of associates and interests in joint ventures
Interest income
Interest expense
Other income
Provision for income tax
Net Income
EBITDA
=77,433,181
P
12,908,243
(19,225,188)
29,561,636
(6,592,025)
=94,085,848
P
=6,363,662
P
84,017
(34,980)
(318,007)
=6,094,692
P
=34,108,137
P
17,806
28,000
(1,704,463)
=32,449,480
P
=4,787,954
P
13,010
(239,265)
=4,561,699
P
=3,560,443
P
17,891
(177,924)
=3,400,410
P
=–
P
=750,839,234
P
=409,580,540
P
- 13 -
The following tables present certain assets and liabilities information regarding geographical segments as of September 30, 2013 and March 31, 2013:
September 30, 2013 (Unaudited)
Metro Manila Northern Luzon
Assets and Liabilities
Segment assets(a)
Investments in and advances to associates and joint ventures
Goodwill
Deferred tax assets
Total Assets
Segment liabilities(b)
Short-term loans
Pension liabilities
Obligations under finance lease
Total Liabilities
P
= 5,618,914,822
16,451,226,889
29,518,222
P
= 22,099,659,933
P
= 571,462,925
280,000,000
12,912,806
16,769,170
P
= 881,144,901
P
= 67,169,301
239,189
P
= 67,408,490
P
= 34,006,980
1,633,401
35,640,381
Other Segment Information
Capital expenditure Property and equipment
Depreciation and amortization
Noncash expenses other than depreciation and amortization
(a)
(b)
Segment assets exclude goodwill, investments in and advances to associates and joint ventures and deferred tax assets.
Segment liabilities exclude short-term loans, pension liabilities and obligations under finance lease.
Southern Luzon
Visayas
P
= 272,664,506
12,500,000
1,553,960
P
= 286,718,466
P
= 55,072,508
124,751
P
= 55,197,259
P
= 48,498,553
8,138,611
P
= 56,637,165
P
= 3,615,627
1,010,377
P
= 4,626,004
Eliminations/
Adjustments
Consolidated
P
= 74,640,873 P
= 6,088,462,010
P
= 59,390,790
16,463,726,889 (14,620,278,145)
202,997,168
1,506,475
32,942,597
P
= 76,147,348 P
= 22,585,131,496 (P
= 14,357,890,187)
P
= 6,147,852,800
1,843,448,744
202,997,168
32,942,597
P
= 8,227,241,309
Mindanao
P
= 7,660,562
2,832,535
P
= 10,493,097
Total
P
= 665,244,648
280,000,000
26,527,730
16,769,170
P
= 988,541,548
P
= 111,927,780
P
= 111,927,780
P
= 777,172,428
280.000.000
26,527,730
16,769,170
P
= 1,100,469,328
P
= 762,346,051
83,799,305
411,825
- 14 March 31, 2013 (Audited)
Assets and Liabilities
Segment assets(a)
Investments in and advances to associates and joint ventures
Goodwill
Deferred tax assets
Total Assets
Segment liabilities(b)
Pension liabilities
Obligations under finance lease
Total Liabilities
Northern Luzon
Southern Luzon
Visayas
Mindanao
Total
=20,721,112,618
P
879,468,601
–
9,265,102
=21,609,892,077
P
=53,378,214
P
–
–
259,189
=53,637,403
P
=254,742,544
P
–
–
1,313,080
=256,055,624
P
=51,950,808
P
–
–
124,751
=52,075,559
P
=85,465,639
P
–
–
–
=85,465,639
P
=21,166,649,823
P
879,468,601
–
10,962,122
=22,057,080,546
P
(P
=15,769,230,816)
2,025,850,775
200,258,253
–
(P
=13,543,121,788)
=5,397,419,007
P
2,905,319,376
200,258,253
10,962,122
=8,513,958,758
P
=327,910,278
P
23,061,832
19,759,058
=370,731,168
P
=25,442,403
P
–
=25,442,403
P
=66,682,255
P
–
=66,682,255
P
=3,174,829
P
–
=3,174,829
P
=20,537,146
P
–
=20,537,146
P
=443,746,911
P
23,061,832
19,759,058
=486,567,801
P
(P
=118,030,878)
–
–
(P
=118,030,878)
=325,716,033
P
23,061,832
19,759,058
=368,536,923
P
Other Segment Information
Capital expenditure Property and equipment
Depreciation and amortization
Noncash expenses other than depreciation and amortization
(a)
(b)
Eliminations/
Adjustments
Metro Manila
Segment assets exclude goodwill, investments in and advances to associates and joint ventures and deferred tax assets.
Segment liabilities exclude short-term loans, pension liabilities and obligations under finance lease.
Consolidated
=1,539,623,771
P
156,430,778
58,779,699
- 15 -
6. Cash and Cash Equivalents
This account consists of the following:
Cash on hand and in banks
Cash equivalents
September 30,
March 31, September 30,
2013
2013
2012
(Unaudited)
(Audited)
(Unaudited)
P
=941,157,305 P
=209,549,974 P
=199,551,193
240,877,175 1,279,901,935
172,589,878
P
=1,182,034,480 P
=1,489,451,909 P
=372,141,071
Cash in banks earns interest at their respective bank deposit rates. Cash equivalents are short-term
investments which are made for varying periods of up to three months, depending on the
immediate cash requirements of the Group, and earn interest at their respective short-term
investment rates.
Interest earned from cash in banks and cash equivalents amounted to P
=3.2 million and
=3.8 million for the six months ended September 30, 2013 and 2012, respectively.
P
7. Receivables
This account consists of:
Tuition and other school fees
Educational services
Current portion of advances to associates, joint
ventures and other related parties
(see Note 13)
Advances to officers and employees (see Note
13)
Rent and other related receivables (see Note
13)
Others
Less allowance for doubtful accounts
September 30,
2013
(Unaudited)
P
=307,430,712
57,238,783
March 31,
2013
(Audited)
P
=159,127,235
48,276,130
18,491,444
11,419,489
26,338,900
22,592,828
9,091,301
35,010,708
453,601,848
(58,797,470)
P
=394,804,378
12,970,554
54,202,769
308,589,005
(57,815,801)
P
=250,773,204
- 16 -
8. Property and Equipment
The roll forward analysis of this account follows:
September 30, 2013 (Unaudited)
Land
Buildings
P
= 1,296,723,152
P
= 696,730,272
Office
and School
Equipment
Office
Furniture
and
Fixtures
Leasehold
Improvements
Transportation
Equipment
Computer
Equipment
and
Peripherals
Library
Holdings
Construction
In Progress
Total
Cost, Net of Accumulated Depreciation and
Amortization
Balance at beginning of year
Additions
72,583,294
Reclassification to expense
-
Reclassifications
-
Disposal
-
Depreciation and amortization
-
Balance at end of year
639,807,830(24,581,361)
P
= 61,520,528
P
= 31,012,009
P
= 93,491,471
P
= 22,238,182
P
= 28,880,113
P
= 30,004,142
P
= 374,676,105
53,953,044
15,293,114
7,880,263
6,949,289
17,197,236
11,123,449
524,697,358
-
-
-
-
-
-
-
130,648
23,432
8,749,248
-
89,441
3,707
-
-
-
-
-
(15,125,842)
(6,441,224)
P
= 1,369,306,446
P
= 1,311,956,741
P
= 100,478,378
P
= 39,887,331
P
= 1,369,306,446
P
= 1,586,422,922
P
= 303,863,434
P
= 136,573,980
(16,208,750)
P
= 93,912,232
(40,779)
(4,927,936)
(10,818,238)
(3,515,108)
P
= 35,348,552
P
= 37,616,190
P
= 69,567,979
P
= 312,666,548
P
= 86,132,146
(45,349,224)
(277,317,998)
(48,515,956)
P
= 24,218,756
(595,295,911)
P
= 304,077,552
P
= 2,635.275,971
709,677,047
53,508,395
(40,779)
(81,618,459)
P
= 3,316,802,176
At September 30, 2013:
Cost
Accumulated depreciation and amortization
Net carrying amount
P
= 1,369,306,446
(274,466,181)
P
= 1,311,956,,741
(203,385,056)
P
= 100,478,378
(96,686,648)
P
= 350,530,220
(256,617,988)
P
= 93,912,232
P
= 39,887,332
P
= 24,218,755
P
= 35,348,550
P
= 37,616,190
P
= 304,077,552
P
= 304,077,552
P
= 4,519,141,227
(1,202,339,051)
P
= 3,316,802,176
March 31, 2013 (Audited)
Land
Cost, Net of Accumulated Depreciation and
Amortization
Balance at beginning of year
Additions
Reclassification to other noncurrent assets
Reclassifications
Disposal
=648,949,537
P
1,035,636,448
(387,862,833)
–
–
Buildings
Office
and School
Equipment
Office
Furniture
and Fixtures
=489,952,915
P
113,903,997
–
132,120,932
–
=84,054,171
P
5,571,344
–
–
–
P26,551,149
=
16,164,912
–
–
–
Leasehold
Improvemen
ts
=90,149,525
P
36,937,557
–
–
–
Transportation
Equipment
=20,830,918
P
13,156,923
–
–
(1,172,501)
Computer
Equipment
and
Peripherals
Library
Holdings
=35,817,767
P
17,829,902
–
–
–
=15,802,480
P
20,660,316
–
–
–
Construction
In Progress
=132,120,932
P
374,676,105
–
(132,120,932)
–
Total
=1,544,229,394
P
1,634,537,504
(387,862,833)
–
(1,172,501)
- 17 Depreciation and amortization
Balance at end of year
–
=1,296,723,152
P
(39,247,572)
=696,730,272
P
At March 31, 2013:
Cost
Accumulated depreciation and amortization
Net carrying amount
=1,296,723,152
P
–
=1,296,723,152
P
=927,986,992
P
231,256,720
=696,730,272
P
(28,104,988)
P61,520,527
=
=262,656,033
P
201,135,506
=61,520,527
P
(11,704,053)
P31,012,008
=
=122,600,237
P
91,588,229
=31,012,008
P
(33,595,611)
P93,491,471
=
=337,876,133
P
244,384,662
=93,491,471
P
(10,577,156)
P22,238,184
=
=65,416,128
P
43,177,944
=22,238,184
P
(24,767,558)
P28,880,111
=
=308,398,041
P
279,517,930
=28,880,111
P
(6,458,655)
=30,004,141
P
–
=374,676,105
P
(154,455,593)
=2,635,275,971
P
=82,171,080
P
52,166,939
=30,004,141
P
=374,676,105
P
–
=374,676,105
P
=3,778,503,901
P
1,143,227,930
=2,635,275,971
P
- 18 In 2013, the Group acquired land located in Cainta, Rizal, Las Piñas City, Quezon City, Valencia
Caloocan City and Calamba, aggregating to P
=1,089.33 million. These properties will be the new
sites of the schools of the Group in the areas mentioned.
In September 2013, the Group completed the acquisition of a real estate property with buildings in
Batangas City in the amount of P122.1 million. This is the planned new site of its STI Batangas,
a school purchased in September from a franchisee.
As of September 30, 2013, the construction in progress account includes costs incurred for the
construction of the school buildings and improvements located in Caloocan City, Quezon City,
Las Pinas City and Laguna and the construction of the school buildings and improvements located
in Cainta, Rizal and Caloocan City as at March 31, 2013. As at September 30, 2013 and March
31, 2013, the related construction contracts amounted to P
=1,623.2 million and P
=1,057.2 million,
respectively, inclusive of materials, cost of labor and overhead and all other costs necessary for the
completion of the projects as planned.
Total borrowing costs capitalized as part of property and equipment amounted to nil andP
=19.7
million as at September 30, 2013 and March 31, 2013, respectively. Average interest
capitalization rates are at 3.3% in 2013.
Certain transportation equipment were acquired under finance lease agreements. The net book
value of these equipment amounted to P
=13.7 million and P
=15.9 million as at September 30, 2013
and March 31, 2013, respectively.
The cost of fully depreciated assets still being used by the Group amounted to P
=565.9 million and
=557.7 million as at September 30, 2013 and March 31, 2013, respectively.
P
9. Investments in and Advances to Associates and Joint Ventures
The detailed carrying values of the Group’s investments in and advances to associates and joint
ventures are as follows:
September 30, 2013(Unaudited)
Investments
Advances
Associates:
STI Investments
De Los Santos - General Hospital
STI-Accent
De Los Santos - STI Megaclinic
STI-Alabang
GROW
STI-Marikina
Synergia
Joint ventures:
PHEI
STI-PHNS
Total
P
=1,749,063,450
–
(20,166,002)
–
14,326,499
12,768,446
1,042,897
46,969
P
=–
–
27,423,762
–
216,000
143,571
–
–
P
=1,749,063,450
–
7,257,760
–
14,542,499
12,912,017
1,042,897
46,969
5,940,896
984,427
1,764,007,582
300,000
–
28,083,333
(7,257,760)
P
=20,825,573
6,240,896
984,427
1,792,090,915
(7,257,760)
P
=1,784,833,155
Allowance for impairment loss
P
=1,764,007,582
- 19 -
Investments
Associates:
STI Investments
De Los Santos - General Hospital
STI-Accent
De Los Santos - STI Megaclinic
STI-Alabang
GROW
STI-Marikina
Synergia
Joint ventures:
PHEI
STI-PHNS
Allowance for impairment loss
March 31, 2013 (Audited)
Advances
Total
=2,768,240,741
P
59,440,352
(20,166,002)
18,352,722
14,326,499
10,529,778
1,042,897
46,969
=–
P
–
27,333,762
24,396,410
216,000
143,572
–
–
=2,768,240,741
P
59,440,352
7,167,760
42,749,132
14,542,499
10,673,350
1,042,897
46,969
6,999,009
984,427
2,859,797,392
–
=2,859,797,392
P
600,000
–
52,689,744
(7,167,760)
=45,521,984
P
7,599,009
984,427
2,912,487,136
(7,167,760)
=2,905,319,376
P
Information about and major transactions of significant indirect associates are discussed below:
STI Investments. For the six months ended September 30, 2013 and 2012, the Group’s share in net
earnings of STI Investments amounted to P
=299.5 million and P
=167.7 million, respectively.
De Los Santos - General Hospital and De Los Santos - STI Megaclinic. On December 21, 2012,
De Los Santos - STI College, De Los Santos General Hospital, STI ESG, the Delos Santos family
(a shareholder in De Los Santos - STI College, De Los Santos General Hospital and De Los
Santos - STI Megaclinic) and Metro Pacific Investments Corporation (MPIC) entered into an
investment agreement, wherein MPIC would invest in De Los Santos General Hospital by
subscribing to 401,942 new common shares or equivalent to 51% equity interest in De Los
General Hospital, subject to certain terms and conditions. The terms and conditions include De
Los Santos - STI College’s sale of its 42% ownership in De Los Santos - STI Megaclinic to De
Los Santos General Hospital, in exchange for De Los Santos - STI College’s additional
subscription of 29,399 new common shares or equivalent to 4% equity interest in De Los Santos
General Hospital.
On February 6, 2013, STI ESG executed a Deed of Assignment with De Los Santos General
Hospital wherein the latter would open for subscription to STI ESG 40,000 common shares with
an aggregate par value of P4,000,000. On the same date, De Los Santos STI College also
executed a Deed of Assignment with the De Los General Hospital wherein the latter would
likewise open for subscription to De Los Santos STI College 50,000 common shares with an
aggregate par value of P5,000,000.
On June 3, 2013, STI ESG executed a deed of pledge on all of its De Los Santos General Hospital
shares in favor of Neptune Stroika Holdings, Inc., a wholly owned subsidiary of MPIC, to cover
the indemnity obligations of STI ESG enumerated in its investment agreement with MPIC. The
completion of MPIC’s subscription transpired in June 2013, following the fulfillment of the
conditions specified in the agreement. As a result, De Los Santos - STI Megaclinic and De Los
Santos General Hospital ceased to be associates of the Group effective June 2013. The Group’s
effective percentage ownership in De Los Santos General Hospital was diluted to 10% and
accordingly, such investment was classified as an AFS financial asset.
- 20 -
10. Goodwill, Intangible and Other Noncurrent Assets
This account consists of:
Land (see Notes 8 and 13)
Goodwill
Deposits
Refundable deposits
Intangible assets
Advances to suppliers
Others
September 30
(Unaudited)
P
=387,862,833
202,997168
115,735,321
36,257,604
15,393,097
22,017,087
19,668,707
P
=799,931,817
March 31,
(Audited)
=387,862,833
P
200,258,253
31,962,268
7,711,712
5,314,902
8,890,608
=642,000,576
P
Fair Land
On March 21, 2013, STI ESG’s BOD approved the transfer of the land to TechZone
Philippines, Inc. (TechZone), a related party (see Note 13), in exchange for
condominium units to be developed by TechZone. In April 2013, the said property
was used as collateral for the loan of the said related party. In August 2013, the Deed
of Absolute Sale for the sale of the land was executed between STI ESG and
TechZone in accordance with the BOD approval. Title to the land is now being
transferred in favor of TechZone. Development of the condominium project is
likewise ongoing.
Deposits
The amount of P
=115.7 million represents down payment for the purchase of a
university in the Visayas. This down payment is secured by a pledge on the shares of
the sellers in the university in favor of STI Holdings.
On October 1, 2013, the Group consummated the purchase of the said university.
Intangible Assets
Intangible assets represents STI ESG’s new accounting software, which was
amortized based on its estimated useful life starting July 2013. This account also
represents the costs of various software licenses purchased by a subsidiary for use by
its students.
11. Accounts Payable and Other Current Liabilities This account consists of:
Accounts payable
Accrued Expenses:
Rent
School-related expenses
Salaries, wages and benefits
Advertising and promotion
Contracted services
September 30
(Unaudited)
P
=295,563,328
March 31,
(Audited)
=174,408,815
P
40,390,384
9,690,343
15,523,932
10,077,942
14,485,643
47,913,702
18,514,400
9,283,290
7,131,086
4,259,353
- 21 -
Utilities
Others
Dividends payable (see Note 11)
Unearned tuition and other
school fees
Withholding taxes payable
Others
September 30
(Unaudited)
3,096,108
10,923,306
149,398,665
March 31,
(Audited)
4,187,980
12,189,508
11,840,316
170,494,698
17,077,184
9,317,083
=746,038,616
P
5,342,406
8,115,060
17,499,904
=320,685,820
P
12. Equity
a. Common Stock
Details and movement in common stock follow:
September 30, 2013 (Unaudited)
March 31, 2013 (Audited)
Shares
Amount
Shares
Amount
10,000,000,000
P
= 5,000,000,000
10,000,000,000
=5,000,000,000
P
9,904,806,924
-
P
= 4,952,403,462
-
1,103,000,000
8,801,806,924
=551,500,000
P
4,400,903,462
9,904,806,924
P
= 4,952,403,462
9,904,806,924
=4,952,403,462
P
Common Stock - =
P0.50 par value per share
Authorized
Issued and outstanding:
Balance at beginning of
Issuances (see Note 1)
Balance at end of year
year
In December 2011, the Parent Company issued 397,908,895 and 397,908,894 of its unissued
common shares to STI ESG and CMA, respectively, via a private placement for an aggregate
subscription amount of P
=477.5 million. Documentary stamp taxes paid relative to the
issuances of shares amounting to P
=2.0 million is presented as deduction from additional paidin capital.
The 795,817,789 private placement shares was approved for listing with the Philippine Stock
Exchange on September 28, 2012 subject to the fulfillment of certain conditions. On May 10,
2013, the SEC granted the Parent Company’s request for exemptive relief from the
requirements of the mandatory tender offer relative to the private placement transaction. On
June 27, 2013, the PSE advised the Parent Company to submit a duly executed lock-up
agreement to facilitate the listing of private placement shares.
On September 28, 2012, the Company issued 5,901,806,924 shares to STI ESG stockholders
in exchange for 907,970,294 STI ESG shares pursuant to the Share Swap transaction (see
Note 1).
On November 7, 2012, the Company issued 2,627,000,000 new shares relative to the Primary
Offering at P
=0.90 per share following its listing in the PSE. The transaction resulted to
increases in common stock and APIC of P
=1,313.5 million and P
=1,050.8 million, respectively.
On November 28, 2012, the Company issued 273,000,000 Over-allotment Option shares to
UBS AG (see Note 1) resulting to recognition of common stock and APIC of P
=136.5 million
and P
=109.2 million, respectively.
- 22 -
Transaction costs incurred in connection with the issuance of shares, charged against APIC,
amounted to P
=118.5 million.
Set out below is the Company’s track record of registration of its securities:
Date of Approval
December 4, 2007*
November 25, 2011**
September 28, 2012***
November 7, 2012
November 28, 2012
Number of Shares
Authorized
Issued
1,103,000,000
307,182,211
1,103,000,000
795,817,789
10,000,000,000
5,901,806,924
10,000,000,000
2,627,000,000
10,000,000,000
273,000,000
Issue/
Offer Price
=0.50
P
0.60
2.22
0.90
0.90
*** Date when the registration statement covering such securities was rendered effective by the SEC.
*** Date when the Company filed SEC form 10-1(k) (Notice of Exempt Transaction) with the SEC in accordance with the Securities Regulation
Code and its Implementing Rules and Regulations
*** Date when the SEC approved the increase in authorized capital stock.
As of September 30, 2013 and March 31, 2013, the Company has a total number of shareholders
on record of 1,246 and 1,243, respectively.
b. Cost of Shares Held by a Subsidiary
“Cost of shares held by a subsidiary” account includes 502,308,895 STI Holdings shares owned
by STI ESG as of September 30, 2013 and March 31, 2013 amounting to P
=500.0 million which is
treated as treasury shares in the interim consolidated statements of financial position.
c. Other Comprehensive Income (Loss)
September 30, 2013
(Unaudited)
Actuarial gain (loss)
Share in associates’ unrealized MTM gain (loss) on AFS
financial assets
Unrealized MTM gain (loss) on AFSfinancial assets
Attributable to
Equity
Holders
of the Parent
Company
(P
=4,917,573)
Non-controlling
interests
(P
=63,684)
Total
=4,981,257)
P
=(1,297,066,206)
P
6,640
=(16,904,760)
P
-
=(1,313,970,966)
P
6,640
=(1,301,977,139)
P
=(16,968,444)
P
March 31, 2013
(As restated - see Note 2)
Attributable to
Equity
Holders
of the Parent
Non-controlling
Company
interests
Share in associates’ unrealized MTM gain on AFS
financial assets
Unrealized MTM loss on AFSfinancial assets
Cumulative actuarial gain
=1,905,291,022
P
(121,773)
23,615,353
=1,928,784,602
P
=24,882,689
P
(9,416)
308,407
=25,181,680
P
=(1,318,945,583)
P
Total
=1,930,173,711
P
(131,189)
23,923,760
=1,953,966,282
P
- 23 -
d. Other Equity Reserve
“Other equity reserve” account consists of:
i.
Equity adjustment resulting from the Share Swap transaction (see Note 1). The
impact at acquisition date resulting from the Share Swap transaction amounted to
=1,718.5 million.
P
ii.
Parent Company’s equity adjustment for the excess of acquisition cost over the
carrying value of non-controlling interests in STI ESG, after reattribution of noncontrolling interests’ share in other comprehensive income to the equity holders of the
Parent Company, amounting to P
=68.9 million.
iii.
STI ESG’s other equity adjustment for the excess of acquisition cost over the carrying
value of its remaining non-controlling interests amounting to P
=222,219.
e. Retained Earnings
Consolidated retained earnings represent STI ESG’s retained earnings, net of amount attributable
to NCI, and STI Holdings’ retained earnings from April 1, 2010, after the Controlling
Shareholder’s acquisition of STI Holdings.
13. Related Party Transactions
Parties are considered to be related if one party has the ability to control the other party or exercise
significant influence over the other party in making financial and operating decisions. This
includes: (a) enterprises or individuals owning, directly or indirectly through one or more
intermediaries, control or are controlled by, or under common control; (b) associates; and
(c) enterprises or individuals owning, directly or indirectly, an interest in the voting power of the
company that gives them significant influence over the company, key management personnel,
including directors and officers of the Group and close members of the family of any such
enterprise or individual.
The following are the Group’s transactions with its related parties:
Amount/Volume
Category
Sept. 30,
2013
March 31, 2013
Outstanding Balance
Receivable (Payable)
Sept. 30, 2013
March 31, 2013
Terms
Conditions
Associates
GROW
Advances for various expenses
and working capital
Rentals and related charges
Amount/Volume
143,572
143,572
5,576,443
8,093,538
Outstanding Balance
30 days upon
receipt of billings
but no intention to
collect within one
year; Noninterestbearing
30 days upon
receipt of billings
but no intention to
collect within one
year; Noninterestbearing
Unsecured; no
impairment
Unsecured; no
impairment
- 24 -
Receivable (Payable)
Sept. 30,
2013
Category
March 31, 2013
Sept. 30, 2013
March 31, 2013
Terms
Conditions
De Los Santos - STI
Megaclinic
Advances for various expenses
and working capital
Interest income
-
-
34,743,437
2,608,782
-
Payable in 5
years; bears 6.50%
interest
Unsecured; no
impairment
30 days upon
receipt of billings;
Noninterest-bearing
Unsecured; no
impairment
-
STI-Alabang
Advances for various expenses
and working capital
-
-
216,000
216,000
STI-Accent
Advances for various expenses
and working capital
90,000
10,365,820
27,423,762
27,333,762
30 days upon
receipt of billings
but no intention to
collect within one
year; Noninterestbearing
3,025,815
300,000
600,000
30 days upon
receipt of billings;
Interest-bearing
Unsecured; no
impairment
26,470,915
250,000,000
250,000,000
30 days upon
receipt of billings;
Interest-bearing
Secured; no impairment
8,227,529
12,706,435
12,651,546
198,000,000
198,000,000
198,000,000
30 days upon
receipt of billings;
Interest-bearing
Secured; no impairment
3,536,389
3,272,500
3,327,389
-
58,830
138,466
165,562
Unsecured; with
impairment
Joint Venture
PHEI
Management fees
300,000
Affiliates
Philippine Women's University
(PWU)*
Principal
Interest
-
UNLAD Resources
Development Corporation
(UNLAD)*
Principal
Interest
-
CMA**
Advances for various expenses
and working capital
-
58,830
30 days upon
receipt of billings;
Noninterest-bearing
Unsecured; no
impairment
Comm & Sense, Inc.**
Rentals and related charges
153,585
147,607
30 days upon
receipt of billings;
Noninterest-bearing
Unsecured; no
impairment
6,074
30 days upon
receipt of billings;
Noninterest-bearing
Unsecured; no
impairment
185,651
30 days upon
receipt of billings;
Noninterest-bearing
Unsecured; no
impairment
(407,670)
30 days upon
receipt of billings;
Noninterest-bearing
Phil First Condominium
Corporation**
Rentals and related charges
-
80,704
6,074
Phil First Insurance Co.,
Inc.**
Rentals and related charges
Employee benefits
(930,980)
1,330,837
826,407
6,716,054
(309,788)
Unsecured; no
impairment
- 25 -
Outstanding Balance
Amount/Volume
Sept. 30,
2013
Category
Receivable (Payable)
March 31, 2013
Sept. 30, 2013
March 31, 2013
Terms
Conditions
PhilCare**
Rentals and related charges
2,382,088
1,314,992
414,512
259,885
Employee benefits
2,996,008
7,278,847
-
-
Facilities fees
150,000
30 days upon
receipt of billings;
Noninterest-bearing
Unsecured; no
impairment
-
-
30 days upon
receipt of billings;
Noninterest-bearing
Unsecured; no
impairment
113,521
113,521
30 days upon
receipt of billings;
Noninterest-bearing
Unsecured; no
impairment
-
PhilPlans**
Rentals and related charges
593,863
Facilities fees
150,000
-
25,000
-
30 days upon
receipt of billings;
Noninterest-bearing
Unsecured; no
impairment
120,000
-
-
-
30 days upon
receipt of billings;
Noninterest-bearing
Unsecured; no
impairment
30 days upon
receipt of billings;
Noninterest-bearing
Unsecured; no
impairment
30 days upon
receipt of billings;
Noninterest-bearing
Unsecured; no
impairment
Liquidated within
one month;
Noninterest-bearing
Unsecured; no
impairment
PhilLife**
Facilities fees
Banclife**
Rentals and related charges
Employee benefits
20,535
-
359,863
15,926
179,911
142,660
-
-
-
36,465
36,465
160,000,000
-
-
2,442,736
-
-
38,694,691
26,338,900
22,592,828
523,572,734
558,282,346
Ventures Securities, Inc.**
Internet charges
-
Classic Finance**
Availment of short-term loan
Interest expense
-
Officers and employees
Advances for various expenses
4,210,306
*Entities under common management
**Entities under common control
Outstanding receivables, before any allowance for impairment, and payables are summarized
below:
September 30,
2013
(Unaudited)
Current portion of advances to associates, joint ventures and
other related parties (see Note 7)
Advances to officers and employees (see Note 7)
Rent and other related receivables (see Note 7)
Advances to associates and joint ventures (see Note 9)
Noncurrent receivable
Accounts payable (see Note 11)
P
=18.491.444
26,338,900
6,593,542
9,591,890
463,978,935
(1,421,977)
P
=523,572,734
March 31,
2013
(Audited)
P
=11,419,489
22,592,828
8,009,020
52,689,744
463,978,935
(407,670)
P
=558,282,346
- 26 -
Other information on major transactions with related parties follows:
a.
Agreements with Philippine Women’s University (“PWU”), UNLAD Resources Development
Corporation (“UNLAD”) and an unrelated individual (“Individual”)
On May 17, 2012, the Individual, who’s a party to the Agreement with the Company, PWU
and UNLAD, assigned his rights, title and interest in the Agreement to Attenborough Holdings
Corporation (“AHC”). AHC thereby assumed the Individual’s obligation to grant a loan to
UNLAD in the principal amount of P
=224.0 million (the “AHC Loan to UNLAD”). Pursuant to
the agreement, the Company and AHC (collectively referred to as the “Lenders”) agreed to
lend UNLAD a principal amount of P
=422.0 million consisting of the Company’s loan to
UNLAD (“Loan to UNLAD”) and the AHC Loan to UNLAD. Accordingly, on June 8, 2012,
the Company entered into an Omnibus Agreement with UNLAD and AHC (“Omnibus
Agreement”) which consisted of: (1) a prefatory agreement; (2) a loan agreement; and (3) a
real estate mortgage.
Under said loan agreement, the Lenders will extend a loan to UNLAD which is payable by
way of conversion into equity in UNLAD. Said conversion into equity in UNLAD must
enable: (a) the Company to acquire, together with the shares acquired by it as payment of the
Company's Loan to PWU, 40.0% of the issued and outstanding capital stock of UNLAD, as
discussed above; and (b) AHC to acquire 20.0% of UNLAD’s issued and outstanding capital
stock.
In June 2012, the Company extended the direct loan to PWU amounting to P
=26.5 million in
accordance with the Agreement, while in August and October 2012, the Company granted the
Loan to UNLAD amounting to P
=166.0 million and P
=32.0 million, respectively.
On March 25, 2013, the joint venture agreement and Omnibus Agreement have been amended
to discontinue imposition of interest on the Loan to PWU, Loan to UNLAD and AHC Loan to
UNLAD effective January 1, 2013.
As of September 30, 2013 and March 31, 2013, noncurrent receivables and accrued interest
consist of loans of P
=448.0 million and P
=16 million, respectively. Interest income for the six
months ended September 30, 2013 and 2012 amounted to nil and P
=7.0 million, respectively.
As of September 30, 2013 and March 31, 2013, the equity interest in UNLAD has not been
assigned to the Company in exchange for the receivables from PWU and the Loan to UNLAD.
The said receivables from PWU and the Loan to UNLAD are presented as “Noncurrent
receivables” in the consolidated statements of financial position.
Currently, the Company is working on the submission of all required documents to effect the
conversion of these receivables into equity. The Company has nominated its representatives as
directors/trustees and officers of PWU and UNLAD.
b.
Land held for Swap
STI ESG’s BOD approved on March 21, 2013 the transfer of the land to TechZone, a company
under common control with the Group, in exchange for condominium units to be developed by
TechZone. In April 2013, the said property was used as collateral for TechZone’s loan, the
proceeds of which will be used by TechZone to develop the property. In August 2013, the
Deed of Absolute Sale for the sale of the land in exchange for condominium units was
executed between STI ESG and TechZone in accordance with the BOD approval. Title to the
- 27 -
land is now being transferred in favor of TechZone. Development of the condominium project
is likewise ongoing.
14. Basic and Diluted Earnings Per Share on Net Income Attributed to Equity Holders
of STI Holdings
The table below shows the summary of net income and weighted average number of common
shares outstanding used in the calculation of earnings per share for the six months ended
September 30, 2013 and 2012:
Net income attributable to equity holders
of STI Holdings
Common shares outstanding
Balance at beginning of period
Issuances (see Note 1)
Weighted average number of common shares
Basic and diluted earnings per share on net income attributed
to equity holders of STI Holdings
2013
(Six MonthsUnaudited)
2012
(Six MonthsUnaudited)
P
=479,569,163
=275,963,791
P
9,904,806,924
1,103,000,000
–
9,904,806,924
5,901,806,924
7,004,806,924
=0.039
P
P
= 0.048
The basic and diluted earnings per share are the same for the six months ended September 30,
2013 and 2012as there are no dilutive potential common shares.
15. Contingencies
There are no material changes in the contingent liabilities or contingent assets since the last annual
balance sheet date. Also, there are no material contingencies and any other events or transactions
during the period.
16. Financial Instruments
Set out below is a comparison by category of carrying amounts and fair values of all of the
Group’s financial instruments.
September 30, 2013 (Unaudited)
Financial Assets
Loans and receivables:
Cash and cash equivalents
Receivables*
Advances to associates and joint ventures (included as
part of “Investments in and advances to associates
and joint ventures” account)
Deposits (included as part of “Prepaid expenses and
other current assets” and “Goodwill, intangible
and other noncurrent assets” accounts)
AFS financial assets
March 31, 2013 (Audited)
Carrying
Amount
Carrying
Amount
Fair Value
P
= 1,182,034,480
832,444,413
P
= 1,182,034,480
832,444,413
=1,489,451,909
P
692,164,311
=1,489,451,909
P
692,164,311
20,825,573
20,735,573
45,521,984
34,781,402
16,781,549
33,276,647
P
= 2,085,362,662
13,213,157
33,276,647
P
= 2,081,704,270
16,670,495
4,663,478
=2,248,472,177
P
12,869,384
4,663,478
=2,233,930,484
P
Fair Value
- 28 -
September 30, 2013 (Unaudited)
Financial Liabilities
Other financial liabilities:
Short-term loans
Accounts payable and other current liabilities**
March 31, 2013 (Audited)
Carrying
Amount
Carrying
Amount
Fair Value
P
= 280,000,000
P
= 280,000,000
=–
P
=–
P
556,448,265
P
= 836,448,265
556,448,265
P
= 836,448,265
305,687,261
=305,687,261
P
305,687,261
=305,687,261
P
Fair Value
**Excluding advances to officers and employees amounting to P
=26,338,900 and =
P 22,592,828 as of September 30, 2013 and March 31, 2013 and 2012, respectively.
** Excluding taxes payable, unearned tuition and school fees, subscriptions payable, SSS, Philhealth and Pag-ibig benefits payable amounting to P
=189,590,351 andP
=14,998,559as
at September 30, 2013 and March 31, 2013, respectively.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of
financial instrument for which it is practicable to estimate such value
Cash and Cash Equivalents, Receivables, Short-term Loans, Accounts Payable and Other Current
Liabilities. Due to the short-term nature of transactions, the fair values of these instruments,
except for noncurrent receivables, approximate the carrying value as of financial reporting date.
The carrying value of noncurrent receivable represents its fair value as the receivable earned
interest until December 31, 2012.
Advances to Associates and Joint Ventures and Deposits. The fair value of these instruments is
estimated as the present value of all future cash flows using the applicable rates for similar type of
the instruments.
AFS Financial Assets. The fair values of publicly-traded instruments are determined by reference
to market bid quotes as of financial reporting date. Investments in unquoted equity securities for
which no reliable basis for fair value measurement is available are carried at cost, net of
impairment.
Fair Value Hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial
instruments by valuation technique:
Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair
value are observable, either directly or indirectly.
Level 3: Techniques which use inputs which have a significant effect on the recorded fair value
that are not based on observable market data.
As of September 30, 2013 and March 31, 2013, there were no other financial assets and liabilities
other than AFS financial assets which are measured at fair value determined in reference with
quoted prices in active market (Level 1 Hierarchy).
For the six months ended September 30, 2013 and 2012, there were no transfers between Level 1
and 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.
- 29 -
17. Notes to Interim Condensed Consolidated Statements of Cash Flows
Non-cash investing and financing activities pertain to the following:
a. Acquisitions of property and equipment under finance lease recorded under the “Property and
equipment” account amounting to P
=4.1 million and P
=9.4 million as of September 30, 2013 and
2012, respectively.
b. Unpaid progress billing for construction in progress amounting to P
=233.5 million and P
=0.72
million as at September 30, 2013 and 2012, respectively.
- 30 -
STI EDUCATION SYSTEMS HOLDINGS,
INC.
AGING OF ACCOUNTS RECEIVABLES
as of September 30, 2013
TYPE OF ACCOUNTS
RECEIVABLE
TOTAL
1-30 DAYS
(a) Current Receivables
394,804,378 172,189,807
(b) Non-Current Receivables
463,978,935
858,783,313
ACCOUNTS
RECEIVABLE
DESCRIPTION
31-60
DAYS
61-90
DAYS
33,577,961
20,901,969 168,134,641
-
172,189,807
-
33,577,961
NATURE/DESCRIPTION
(a) Current Receivables
Tuition fees & other receivables from students
(b) Non-Current Receivables
Related party transactions arising from JVA
and Shareholders’ Agreements with PWU and
Unlad
-
over 90 DAYS
463,978,935
20,901,969 632,113,576
COLLECTION PERIOD
Monthly
Annex “B”
STI EDUCATION SYSTEMS HOLDINGS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
This discussion summarizes the significant factors affecting the operating results and
financial condition of STI Education Systems Holdings, Inc. and its subsidiaries
(hereafter collectively referred to as the “Group”) for the six months ended
September 30, 2013 and 2012. The following discussion should be read in
conjunction with the attached interim condensed consolidated financial statements
of the Group as of and for the period ended September 30, 2013. All necessary
adjustments have been made to present fairly the financial position, results of
operations, and cash flows of the Group as of September 30, 2013, and for all the
other periods presented.
I.
RESULTS OF OPERATIONS
a. Three months ended September 30, 2013 vs. three months ended
September 30, 2012
For the three months ended September 30, 2013 the Group generated gross
revenues of P496.5 million, earned a net income of P269.3 million and total
comprehensive loss of P54.6 million. As compared to the same period last
year, this represents P74.8 million increase in revenues and P117.4 million
increase in net income. Total comprehensive income decreased to a loss of
P54.6 million from an income of P151.7 million for the same period last
year as a result of a decrease in an associate’s unrealized mark-to-market
gain on available for sale (AFS) financial assets. The decrease in the
associate’s unrealized mark-to-market gain resulted from: (1) the sale by
the associate of some of the AFS financial assets; and (2) a decline in the
market value of the remaining AFS financial assets from the previous
period. Other comprehensive income pertains substantially to the Group’s
share in associates’ unrealized mark-to-market gain or loss on AFS
financial assets.
1
b. Six months ended September 30, 2013 vs. six months ended September
30, 2012
For the six months ended September 30, 2013 the Group generated gross
revenues of P826.9 million, earned a net income of P454.6 million and total
comprehensive loss of P864.3 million.
The 11% increase in gross revenues resulted mainly from the increase in
the number of students of STI Education Services Group, Inc. (STI ESG)
and its subsidiaries from 68,363 last year to 71,195 students this year
resulting in increased revenues from tuition and other school fees. STI
ESG’s enrolment mix was more favorable in 2013 as compared to 2012,
with more students opting for the four-year programs rather than the twoyear programs. Tuition fees were also increased by 5% for old students
and 7% for new students. iAcademy, STI ESG’s, subsidiary had a 44%
increase in tuition fee income arising primarily from increased number of
students and at the same time more students enrolling in programs with
higher tuition fees.
Cost of educational services decreased by 3% as a result of the decrease in
faculty salaries and other direct expenses. The drop in the faculty salary
cost resulted from the decrease in the number of faculty members in the
programs with declining enrollment, notably the nursing program, in
which faculty members generally have high salaries. Cost of student
activities and programs also decreased by 24% or P12.0 million this year as
compared to the same period last year.
Interest expense went down remarkably by 98% or P35.5 million since all
previous bank loans were fully paid while new loans were only secured
towards the end of the period. The P0.6 million interest expense recorded
in 2013 were only for those obligations under finance lease of equipment.
Equity in net gains of associates and joint ventures increased by 75% or
P122.8 million due to realized gain on sale of bonds and equities held by
an associate.
II.
FINANCIAL CONDITION
The Group’s total assets as at September 30, 2013 amounted to P8,227.2
million, 3% lower than the amount as at March 31, 2013. The decrease was
mainly due to the decline in the market value of financial assets held by an
associate.
2
Cash and cash equivalents declined by P307.4 million or 21% from
P1,489.4 million to P1,182.0 million as at March 31, 2013 and September 30,
2013, respectively. The decrease is due to the continuing disbursements
for the construction of schools as part of the Group’s expansion program
and the deposit made for the planned acquisition of West Negros
University. Property and Equipment increased by 26%mainly due to the
near completion of construction of buildings for STI ORCA and the
ongoing construction of buildings for STI Cubao and STI Caloocan and the
purchase of furniture and equipment for STI ORCA and STI Caloocan.
Preparatory work on building construction for STI Calamba has also
commenced. This is in line with the planned expansion of the existing
facilities of STI owned schools. The Group also completed the acquisition
of a real estate property, with buildings, in Batangas City to serve as the
new site for its STI College Batangas, a school purchased in September
from a franchisee. A deposit of P115.7 million has also been made for the
acquisition of West Negros University in the Visayas. Investments in
associates and joint ventures decreased by 39% due to the decline in
market value of financial assets of an associate.
Total liabilities increased by 199% or P731.9 million mainly due to increase
in payables related to construction of school facilities amounting to P422.5
million and availment of P280.0 million short term loans.
Debt-to-equity ratio stood at 0.15:1.00 as at September 30, 2013, there being
only P280.0 million bank loans outstanding. The Group uses internallygenerated funds and the proceeds from the follow-on offering to pay for
the acquisition and/or construction of schools.
III.
KEY PERFORMANCE INDICATORS (KPIs)
The top five key performance indicators of the Group include tests of
profitability, liquidity and solvency. Profitability refers to the Group’s
earning capacity and ability to earn income for its stockholders. This is
measured by profitability ratios analyzing margins and returns. Liquidity
refers to the Group’s ability to pay its short-term liabilities as and when
they fall due. Solvency refers to the Group’s ability to pay all its debts as
and when they fall due, whether such liabilities are current or non-current.
3
As of
September
30, 2013
As of
September
30, 2012
Return on Net income
attributable to equity
equity
holders of the Parent
company divided by
average equity
attributable to equity
holders of the Parent
company (annualized)
12%
14%
Gross
profit
margin
71%
KPI
Manner of
Calculation
Gross profit divided
by total revenues
4
66%
Discussion
Net income
attributable to equity
holders of the Parent
Company for the sixmonth period
increased 74% from
P276.0 million in 2012
to P479.6 million in
2013. Meanwhile
equity attributable to
equity holders of the
parent company
increased at a faster
rate at 101%due to the
additional shares
issued arising from the
follow-on offering and
the new shares issued
resulting from the
share-for-share swap
between the
shareholders of STI
ESG and STI Holdings.
Increase in gross profit
margin resulted
mainly from the
increase in the number
of students of STI ESG
and its subsidiaries
from 68,363 last year to
71,195 students this
year resulting to
increased revenues
from tuition and other
school fees. Direct
costs were also
reduced.
Manner of
Calculation
KPI
As of
September
30, 2013
As of
March 31,
2013
Discussion
Current
ratio
Current assets divided
by Current liabilities
1.65:1.00
5.46:1.00
The substantial
decrease in current
ratio on September 30,
2013 is due to the
payments made for
acquisition of property
and equipment in
accordance with the
expansion plan.
Quick ratio
Current assets less
inventories and
prepayments divided
by Current liabilities
1.48:1.00
5.24:1.00
0.15:1.00
0.05:1.00
Decrease in cash of
P307.4 million due to
the acquisition of
property and
equipment related to
expansion plans.
The company
remained debt free for
most of the six-month
period. Income is
recognized during the
six-month period thus
the favorable debt to
equity ratio.
Debt to
Total liabilities divided
equity ratio by Total equity
IV.
MATERIAL CHANGES IN BALANCE SHEET ACCOUNTS
Decrease in Cash and cash equivalents by P307.4 million or 21% was due
to the deposit made relative to the planned acquisition of a university in
the Visayas and acquisition of properties intended for STI Batangas and
STI Las Piñas and the purchase of STI Batangas College. In addition, there
are continuing disbursements for the purchase of furniture and equipment
for STI ORCA along with the completion of the building thereat. Further,
there is ongoing construction in sites intended for STI Caloocan and STI
Cubao.
Current receivables increased by P144.0 million or 57% primarily due to
the increase in the number of students from 68,363 last year to 71,195 this
school year. The receivables from students doubled from P159.1 million as
of March 31, 2013 to P307.4 million as of September 30, 2013. This follows
the schools’ academic cycle. The academic cycle, which is one academic
5
year, starts in the month of June and ends in March of the succeeding
calendar year.
Inventories increased by 22% mainly due to the increased inventory of
uniforms and school supplies in preparation for the second semester.
Prepayments increased by 268% or P100.5 million due to substantial
increases in VAT input taxes and creditable withholding taxes arising
from the swap of the Group’s land in Makati City in exchange for units in
the condominium building being constructed in the same property.
Property and equipment rose by 26% or P681.5 million due to the
purchase of furniture and equipment for STI ORCA, completion of the
construction of STI ORCA, construction costs for STI Cubao and STI
Caloocan, and improvement of various facilities in other owned schools.
The Group also purchased a piece of property with buildings, in Batangas
City for P122.1 million envisioned to be the new site of its newly acquired
STI College Batangas.
Investments in and advances to associates and joint ventures decreased by
39% mainly due to the decline in the market value of investments in bonds
and equities held by an associate.
Available-for-sale financial assets increased by P28.6 million due to
reclassification of investments in De Los Santos-STI Megaclinic, Inc.
(Megaclinic) and De Los Santos General Hospital, Inc. (the Hospital) from
Investments in and advances to associates and joint ventures account as a
result of the Investment Agreement entered into with Metro Pacific
Investments Corporation (MPIC) which was implemented in June 2013.
The infusion of equity in the Hospital by MPIC resulted to a dilution of the
ownership of the Group to 10%, thus the reclassification. The Investment
Agreement also states that shareholdings of De Los Santos–STI College
(DLS-STI College) in Megaclinic would be swapped with shares in the
Hospital.
Noncurrent assets increased by P157.9 million or 25% due to the deposit
made relative to the planned acquisition of West Negros University and
the purchase of computer licenses for STI ESG.
Short-term loans of P280.0 million were availed to finance short-term
working capital requirements.
Accounts payable and other current liabilities increased by P425.4 million
or 133% due to the increase in unearned revenues relative to collected
tuition and other school fees which will be recognized as income up to the
end of the semester. The increase was also caused by unpaid bills for
6
construction of school buildings and P149.4 million of cash dividends
which are still payable as of September 30, 2013.
Current and noncurrent portion of obligations under finance lease
decreased by 20% and 13%, respectively, mainly due to payment of
monthly amortizations. These obligations pertain mostly to company
vehicles and computer equipment purchased under finance lease
arrangements.
Income tax payable increased to P31.1 million from P5.0 million last March
31 reflecting the substantial increase in taxable income as tuition fees
collected in advance are taxable in full upon receipt.
Pension liabilities increased by 15%, as a result of the adoption of the
accounting standard, Revised PAS 19, Employee Benefits, that removed
the corridor mechanism and amended the concept of expected returns on
plan assets, net of benefits actually paid. The Group recognized the impact
retroactively based on actuarial valuation.
Unrealized mark-to-market gains or losses on available-for-sale financial
assets, including the Group’s share in its associates’ unrealized mark-tomarket gains or losses on their available-for-sale financial assets decreased
by net amount of P1,297.0 million. This represents a decline in the gains
earlier reported as of March 31, 2013 by an associate as a result of: (1) the
realization of gains on some of the AFS assets; and (2) decrease in market
values of bonds and equities held by an associate as of September 30, 2013.
Retained earnings increased due to the net income earned during the
period.
V.
MATERIAL CHANGES IN INCOME STATEMENT ACCOUNTS
The increase in the total revenues of P84.8 million or 11% from last year is
due to the increase in the number of students of STI ESG and its
subsidiaries from 68,363 to 71,195 students and the favorable enrollment
mix resulting in higher revenues from tuition and other school fees.
Tuition and other school fees increased by P102.8 million to P677.2 million
from last year’s P574.4 million, reflective of the increase in number of
students. In addition, STI ESG’s enrollment mix was more favorable in
2013 than in 2012, as enrollment leaned more towards STI Network’s fouryear programs than the two-year programs. Ratio in 2013 was 75% fouryear programs and 25% two-year programs, as compared to 70% and 30%,
respectively, in 2012. The four-year programs charge higher tuition and
bring in more revenue per student. Further, there are increases of 5% and
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7% in tuition fees for the old and new students, respectively. In addition,
iAcademy, STI ESG’s subsidiary had a 25% increase in number of students
and more enrollees in programs with higher tuition fees.
Revenues from educational services also increased by P7.6 million or 10%
to P87.5 million this year.
Other income went down by P22.8 million or 61% due to various one-time
adjustments recognized last year arising from the merger of schools with
the parent company.
Sale of educational materials and supplies decreased by 8%. The sale of
uniforms was put on hold at the beginning of the first semester due to a
planned change in design.
Cost of educational services slightly decreased by 3% from P221.7 million
last year to P215.3 million for the same period this year as a result of the
decrease in the faculty salaries and other direct expenses. The drop in the
faculty salaries resulted from the decrease in the number of faculty
members in the programs with declining enrollment, notably the nursing
program, in which faculty members generally have high salaries. Cost of
student activities and programs also decreased by 24% or P12.0 million
this year as compared to the same period last year.
Cost of educational materials and supplies sold went down by 17% from
P34.1 million to P28.4 million due to the change in product mix of items
sold.
General and administrative expenses increased by P21.5 million or 6%
from P338.8 million last year to P360.3 million this year, mainly due to
increases in salaries and wages of P4.0 million as vacant plantilla positions
were filled up. Depreciation costs also increased due to the recognition of
depreciation of the new buildings in STI Fairview, STI Novaliches and STI
ORCA. Costs of utilities and outside services likewise increased
substantially as STI Fairview and STI ORCA became fully operational.
Professional fees increased by P7.4 million substantially resulting from the
costs of legal and financial due diligence work on the planned acquisition
of West Negros University in the Visayas. The increases in costs were
partially offset by the minimal provision for doubtful accounts and
impairment losses this year as compared to last year.
Equity in net gains of associates and joint ventures increased by P122.8
million due to the gains realized on the sale of equities and bonds held by
an associate.
Interest expense decreased from P36.1 million last year to P0.6 million this
year. The bank loans were fully paid towards the end of 2012. The
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interest expense of P0.6 million pertains to obligations under finance lease
covering various computer and transportation equipment.
Rental income decreased by P0.8 million as facilities originally being
leased out were utilized as school premises.
Interest income went down by P8.5 million due mainly to discontinued
imposition of interest on the loans to Philippine Women’s University
(PWU) and Unlad Resources Development Corporation (UNLAD).
Loss on deemed sale amounting to P36.3 million represents the amount
deemed lost due to the dilution of the Group’s ownership in the Hospital
from 33% to 10%.
Loss on swap in the amount of P6.7 million pertains to the exchange of
shares of Megaclinic with the shares in the Hospital held by DLS-STI
College.
Provision for income tax increased by P12.3 million as a result of the
increase in taxable income.
Other comprehensive income decreased by P1,373.8 million due to the
decline in the gains earlier reflected as unrealized mark-to-market
gain/loss on March 31, 2013.
VI.
FINANCIAL RISK DISCLOSURE
The Group’s present activities expose it to liquidity risk, credit risk,
interest rate risk and equity price risk.
Liquidity risk – Liquidity risk relates to the possibility that the Group
might not be able to settle its obligations/commitments as they fall due.
To cover its financing requirements, the Group uses internally-generated
funds and avails of various bank loans. On November 7, 2012 the
Company received the proceeds from its follow on offering. The usage of
funds is in line with the plan as approved by the SEC and the PSE. There
are still unutilized funds as of September 30, 2013, which funds are
invested in short-term bank deposits that provide flexibility of
withdrawing the funds anytime. The Group regularly evaluates available
financial products and monitors market conditions for opportunities to
enhance yields at acceptable risk levels.
Credit risk – Credit risk is the risk that the Group will incur a loss arising
from students, franchisees or counterparties that fail to discharge their
contractual obligations. The Group manages and controls credit risk by
setting limits on the amount of risk that the Group is willing to accept for
9
individual counterparties and by monitoring expenses in relation to such
limits.
It is STI ESG’s policy to require students to pay all their tuition and other
incidental fees before they can get their report cards and other credentials.
Receivable balances are monitored such that exposure to bad debts is
minimal.
STI Holdings’ loan exposure to UNLAD and PWU are secured by real
estate mortgages which minimize the credit risk to these institutions.
VII.
AGREEMENTS/COMMITMENTS AND CONTINGENCIES/OTHER
MATTERS
a. There are no changes in accounting estimates used in the preparation of
unaudited interim condensed consolidated reports for the current and
prior financial period.
b. Except for STI Holdings’ commitments under the JVA with PWU,
UNLAD and AHC, and under the Shareholders’ Agreement governing
the aforementioned parties’ relationship as shareholders of the joint
venture company, there are 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.
VIII. MATERIAL EVENT/S AND UNCERTAINTIES KNOWN TO
MANAGEMENT THAT WOULD ADDRESS THE PAST AND WOULD
HAVE AN IMPACT ON FUTURE OPERATIONS
a. There are no known trends, demands, commitments, events or
uncertainties that will have an impact on the Group’s liquidity except
for the contingencies and commitments enumerated in Note 13 of the
Notes to Interim Condensed Consolidated Financial Information
attached as Annex “A”.
b. Except for STI Holdings’ commitments under the JVA with PWU,
UNLAD and AHC and under the Shareholders’ Agreement governing
the aforementioned parties’ relationship as shareholders of the joint
venture company, there are 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.
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c. Except for the conditions set forth in the accession made by STI
Holdings to the JVA and Shareholders’ Agreement between PWU,
Unlad, AHC and Mr. Eusebio H. Tanco, there are no other events that
will trigger direct or contingent financial obligations that are material
to the Group, including any default or acceleration of an obligation.
d. On June 3, 2013, STI ESG executed a deed of pledge on all of its shares
in the Hospital in favor of Neptune Stroika Holdings, Inc., a wholly
owned subsidiary of MPIC, to cover the indemnity obligations of STI
ESG enumerated in the Investment Agreement with MPIC.
e. There are no material events and uncertainties known to management
that would address the past and would have an impact on future
operations of the Group.
f. As of September 30, 2013, STI ESG has purchased land in OrtigasCainta, Caloocan, Cubao and Las Piñas.Construction of school facilities
in Ortigas-Cainta and Caloocan commenced in 2012. Source of funds
for the capital expenditures is the follow-on offering of STI Holdings.
Aside from the planned expansion as approved by government
regulatory bodies, there are no other material commitments for capital
expenditures.
g. 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/revenues/income from continuing
operations.
h. There are no significant elements of income or loss that did not arise
from the Group’s continuing operations.
i. The Group’s business is linked to the academic cycle. The academic
cycle which is one academic year starts in the month of June and ends
in the month of March. The core business and revenues of the Group
which is mainly from tuition and other school fees is recognized as
income over the corresponding academic year to which they pertain.
11
STI EDUCATION SYSTEMS HOLDINGS, INC.
FINANCIAL RATIOS
Key Performance
Indicator
As of and for
the six
months
ended
September 30,
2013
As of and for
the six
months
ended
September
30, 2012
1.65:1.00
0.72:1.00
1.48:1.00
0.66:1.00
1.11:1.00
0.35:1.00
Total liabilities divided by
Total equity
0.15:1.00
0.26:1.00
Total assets divided by
Total equity
1.15:1.00
1.26:1.00
774.06:1.00
9.11:1.00
Manner of Calculation
LIQUIDITY RATIOS
Current assets divided by
Current ratio
Current liabilities
Quick ratio
Current assets less
inventories and
prepayments divided by
Current liabilities
Cash ratio
Cash and cash equivalents
divided by Current
liabilities
SOLVENCY RATIOS
Debt to equity ratio
Asset to equity ratio
Interest coverage ratio
Earnings before interest
and taxes divided by
interest expenses of the
same period
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PROFITABILITY
RATIOS
Return on equity
Return on assets
Manner of Calculation
Net income attributable to
equity holders of the Parent
company divided by
average equity attributable
to equity holders of the
Parent company
(annualized)
Net income divided by
Total assets (annualized)
As of and for
the six
months
ended
September 30,
2013
As of and for
the six
months
ended
September
30, 2012
12%
14%
12%
10%
Net profit margin
Net income divided by
Total revenues
55%
38%
Gross profit margin
Gross profit divided by
total revenues
71%
66%
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