1. business and industrial
2. advertising and marketing
3. marketing

April 15, 2004
COVER SHEET
1 8 0 3
S.E.C. Registration Numer
A B S - C B N
BROADCA S T I NG
C O R P O R A T I ON
(Company's Full Name)
A B S - C B N
BROADCA S T I NG
S G T . E S G U ERRA
CEN T ER
A V E . QUE ZON
C I T Y
(Business Address: No. Street City / Town / Province)
RANDOLPH T. ESTRELLADO
924-1610
Contact Person
Company Telephone Number
1 7 - A
Day
Month
Fiscal Year
Day
Month
Annual Meeting
FORM TYPE
Secondary License Type, If Applicable
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders
Domestic
To be accomplished by SEC Personnel concerned
File Number
LCU
Document I.D.
Cashier
STAMPS
Foreign
SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-A
ANNUAL REPORT PURSUANT TO SECTION 17
OF THE SECURITIES REGULATION CODE AND SECTION 141
OF THE CORPORATION CODE OF THE PHILIPPINES
1. For the fiscal year ended December 31, 2003
2. SEC Identification Number 1803
3. BIR Tax Identification No. 301-000406-761V
4. Exact name of issuer as specified in its charter: ABS-CBN BROADCASTING CORP.
5. Philippines
Province, Country or other jurisdiction
of incorporation or organization
6.
(SEC Use Only)
Industry Classification Code:
7. ABS-CBN Broadcasting Centre Complex, Sgt. Esguerra Ave cor Mo Ignacia St., QC 1100
Address of principal office
8. (632) 924-41-01 to 22 / 415-2272
Issuer's telephone number, including area code
9. Not applicable
Former name, former address, and former fiscal year, if changed since last report.
10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA
Title of Each Class
Common Stock, Php1.00 par value
Bank loans
Long-term debt
Number of Shares of Common Stock
Outstanding and Amount of Debt
Outstanding
779,583,312
Php 220.577 mln
Php5,569.874 mln
11. Are any or all of these securities listed on a Stock Exchange.
Yes [ x ]
No [ ]
If yes, state the name of such stock exchange and the classes of securities listed therein:
Philippine Stock Exchange
Class A
12. Check whether the issuer:
(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17
thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141
of The Corporation Code of the Philippines during the preceding twelve (12) months (or for
such shorter period that the registrant was required to file such reports);
Yes [ x ]
No [ ]
(b) has been subject to such filing requirements for the past ninety (90) days.
Yes [ x ]
No [ ]
13. State the aggregate market value of the voting stock held by non-affiliates of the registrant.
Php8,283,796,325
(as of February 29, 2004)
TABLE OF CONTENTS
PART I – BUSINESS AND GENERAL INFORMATION
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II -- OPERATIONAL AND FINANCIAL INFORMATION
Item 5. Market for Issuer’s Common Equity and Related Stockholder Matters
Item 6. Management’s Discussion and Analysis or Plan of Operation
Item 7. Financial Statements
Item 8. Changes in an Disagreements with Accountants on Accounting and
Financial Disclosure
PART III – CONTROL AND COMPENSATION INFORMATION
Item 9. Directors and Executive Officers of the Issuer
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
PART IV – EXHIBITS AND SCHEDULES
Exhibit 1 – Reports on SEC Form 17-C
Exhibit 2 -- 2003 Annual Report to Security Holders
SIGNATURES
PART I - BUSINESS AND GENERAL INFORMATION
Item 1. Business
•
Business Development
ABS-CBN Broadcasting Corporation (“ABS-CBN” or the “Company”) traces its roots from Bolinao
Electronic Corporation (“BEC”) which was established in 1946 as an assembler of radio transmitting
equipment. In 1952, BEC changed its corporate name to Alto Broadcasting Corporation (“ABS”). On
September 24, 1956, the Chronicle Broadcasting Network (“CBN”) which is owned by the Lopez family
was organized. In 1957, ABS acquired CBN and on February 1, 1967, the corporate name was changed to
ABS-CBN Broadcasting Corporation.
With the imposition of martial law in September 1972, ABS-CBN’s operations ceased as the government
took over the Company’s studios and equipment. ABS-CBN resumed commercial operations in February
1986 during the height of the EDSA revolution.
•
Core Business
ABS-CBN is the largest integrated media and entertainment company in the Philippines. The Company
is principally involved in television and radio broadcasting, as well as the production of television
programming for domestic and international audiences and other related businesses.
The Company’s congressional franchise, Republic Act No. 7966, which allows the Company to operate
television and radio stations, was renewed on March 30, 1995 for 25 years. Its broadcasting operations
cover the production of television and radio programs that serve its target audience’s needs for news,
information and entertainment, and public service.
•
Subsidiaries and Affiliates
Company
Subsidiaries
ABS-CBN Center for Communication Arts, Inc.
ABS-CBN Middle East FCLLZ (Dubai)
ABS-CBN Film Productions, Inc. (ABS-CBN Films)
ABS-CBN Global Ltd.
ABS-CBN Interactive, Inc.
ABS-CBN International, Inc.
ABS-CBN Publishing, Inc.
Creative Creatures, Inc.
Creative Programs, Inc.
E-Money Plus, Inc.
Professional Services for Television & Radio, Inc.
Sarimanok News Network, Inc. (SNN)
Sky Films, Inc.
Star Recording, Inc.
Principal
Activities
Ownership
Interest
100.0
100.0(a)
100.0
100.0
100.0
80.0(a)
100.0
100.0
100.0
100.0(a)
100.0
100.0
100.0
Studio 23, Inc.
TV Food Chefs, Inc.
Roadrunner Network, Inc.
Services
Cable and satellite operations
Movie production
Holding company
Services
Cable and satellite operations
Consumer products -- publishing
Services
Cable operation
Services
Services
Cable operation
Services – movie films
Consumer products -- audio
production
Broadcasting
Restaurant & catering services
Services -- post production
Discontinuing Operations
ABS-CBN Consumer Products, Inc. (b)
Consumer products
100.0
100.0
100.0
100.0
98.9
ABS-CBN Europe Societa Per Azioni (b)
ABS-CBN Hong Kong, Ltd. (b)
Cinemagica, Inc. (b)
Shopping Network, Inc. (c)
Services
Services
Services
Consumer products
Associates
AMCARA Broadcasting Network, Inc.
Star Cinema Productions, Inc.
Sky Vision Corporation
Services
Movie production
Cable operation
100.0
100.0
100.0
100.0
49.0
45.0
10.2
indirectly owned through ABS-CBN Global
ceased commercial operations on December 31, 2002
(c) ceased commercial operations on December 31, 2001
(a)
(b)
•
Competition
There are currently 12 commercial television stations – those which derive the majority of their revenues
from the sale of advertising and airtime – in Mega Manila (which includes Metro Manila and parts of
Rizal, Laguna, Cavite and Bulacan), with seven on very high frequency (VHF) and five on ultra high
frequency (UHF).
The major VHF broadcasting networks in the country and their corresponding Mega Manila channels are
as follows:
ABS-CBN Broadcasting Corp.
-Channel 2
National Broadcasting Network
-Channel 4
Associated Broadcasting Corp.
-Channel 5
GMA Network, Inc.
-Channel 7
Radio Philippine Network
-Channel 9
ZOE TV
-Channel 11
Intercontinental Broadcasting Corp.
-Channel 13
Channels 4, 9 and 13 are currently owned by the Philippine government, although the privatization of
Channel 9 and 13 has been proposed.
The principal UHF networks operating in the Philippines and their corresponding Mega Manila channels
are as follows:
Studio 23
-Channel 23, operated by the Company
Southern Broadcasting Network
-SBN 21
RJ Broadcasting
-RJTV 29
National Broadcasting Corp. (MTV Phils) Channel 41
Eagle Broadcasting
-Net 25
For the year 2003, ABS-CBN remained the dominant leader in the industry with a rating of 15.9 per cent
and a 40.0 per cent audience share in Mega Manila.
OVERALL CHANNEL RATINGS AND RANKINGS
IN MEGA MANILA
01January – 31December 2003
6:00am-12:00mn
Audience
Rank
Channel
Rating (%)
Share (%)
1
ABS-CBN
15.9
43.3
2
GMA
13.7
33.5
3
ABC
0.6
1.4
4
5
6
7
Other VHF
Studio 23
Other UHF
Total Cable
Total Channel
2.6
1.5
0.7
4.8
39.8
6.6
3.9
1.8
12.1
100.0
Based on AGB Philippines Mega Manila Households Data
•
Employees
The number of employees and talents of the Company was 4,018 and 3,734 as of December 31, 2003 and
2002, respectively. The number of employees and talents of the Company and its subsidiaries was 6,305,
6,059 and 5,804 as of December 31, 2003, 2002, and 2001, respectively.
•
Risks Relating to the Company
The Company’s results of operations may be negatively affected by adverse economic conditions in the
Philippines since its operations depend largely on its ability to sell airtime for advertising. Historically,
the advertising industry, relative to other industries, has been particularly sensitive to the general
condition of the economy. As a result, the Company’s business may be affected by the general condition
of the economy of the Philippines.
•
Transactions with and/or dependence on related parties
See Note 13 Related Party Disclosures of the Notes to the 2003 Financial Statement attached hereto as
Exhibit “1”.
•
Patents, trademarks, licenses, franchises, concessions, royalty
Republic Act No. 7966, approved on March 30, 1995, granted ABS-CBN the franchise to operate TV and
radio broadcasting stations in the Philippines through microwave, satellite or whatever means including
the use of new technologies in television and radio systems. The franchise is for a term of 25 years. ABSCBN is required to secure from the National Telecommunications Commission (“NTC”) appropriate
permits and licenses for its stations and any frequency in the TV or radio spectrum.
•
Agreements of labor contracts, including duration
ABS-CBN management recognizes two labor unions, one for the supervisory employees and another one
for the rank and file employees. The collective bargaining agreement (CBA) for the supervisory union
will expire on 31 July 2005 while the CBA with the non-supervisory union expires on 10 December 2005.
•
Licenses from foreign and local film and programs aired through the networks
ABS-CBN and its subsidiaries have licenses from foreign and local program and feature film owners to
distribute the same through its networks. The licenses to distribute the foreign programs and foreign and
local feature films grant ABS-CBN and its subsidiaries the right to distribute said programs and films on
free, pay, cable, and satellite TV in the Philippines and in territories wherein The Filipino Channel is
distributed. These licenses for TV rights have an average term of two (3) to three (3) years. Such
programs comprise approximately twenty percent (20%) of the programming of ABS-CBN's Manila VHF
Channel 2 and approximately thirty (30%) percent of the content of its Manila UHF Channel 23. ABSCBN and its wholly-owned subsidiary, Sky Films, Inc., also have the license to distribute local and
foreign feature films in the Philippines for theatrical, TV, and video distribution, with limited ancillary
rights. The licenses for foreign films have an average term of ten (10) to fifteen (15) years.
•
Need for any governmental approval of principal products or services
The principal law governing the broadcasting industry is the 1936 Commonwealth Act. No. 146, as
amended, otherwise known as the Public Service Act. This act seeks to protect the public against
unreasonable charges and inefficient service by public utilities, including companies engaged in
television and radio broadcasting as well as to prevent excessive competition.
The 1987 Philippine Constitution provides that “ownership and management of mass media shall be
limited to citizens of the Philippines, or to corporations, cooperatives or associations wholly-owned and
managed by such citizens” (Section 11, Article XVI). As a result, the Company is highly regulated by the
Philippine Government. The Company’s Congressional Franchise, renewed in 1995 for a term of 25
years, allows the Company to engage in the television and radio broadcasting business.
The government departments and agencies that administer the laws governing the broadcasting industry
are the National Telecommunications Commission (NTC), the Department of Transportation and
Communication (DOTC), the Movie and Television Review and Classification Board (MTRCB), the
Videogram Regulatory Board (VRB), and the Department of Labor and Employment
The NTC is the government agency which regulates the broadcasting industry. Among its specific
functions is the granting of provisional authorities and certificates of public conveniences to own and
operate a broadcasting business within the Philippines. The NTC also regulates the bandwidth allocation
used by the different broadcasting companies through the grant of temporary permits and licenses to
operate television and radio stations.
The DOTC formulates general and specific policies on the broadcasting industry. Although the DOTC
exercises supervision and control over the NTC, it does not have the power to review the acts and
resolutions of the NTC. The MTRCB classifies television programs based on their content, including the
showing of indecent and excessively violent scenes on television. The VRB issues permits to television
stations or networks engaged in the exhibition and distribution of programs in video format.
In addition to the restrictions imposed by the government agencies, a broadcaster must also follow rules
and industry standards promulgated by the Kapisanan ng mga Brodkaster sa Pilipinas (KBP). The KBP is a
trade organization consisting of television and radio operators. It formulates policies and guidelines for
the operations of its members and enforces programming and advertising rules.
•
Costs and effect of compliance with environmental laws
Whenever required, the Company applies for and secures proper permits, clearances or exemptions from
the Department of Environment and Natural Resources, Department of Health, Air Transportation Office,
and other regulatory agencies, for the installation and operation of proposed broadcast stations
nationwide.
Item 2. Properties
The properties of the Company consist of production broadcasting, transmission and office facilities,
almost all of which are owned by the Company. Broadcast operations are principally conducted in the
44,000 square meter ABS-CBN complex located at Sgt. Esguerra Avenue, Quezon City. The complex also
houses the Company’s 650-foot transmitter tower and other broadcast facilities and equipment.
The Company also owns a modern 15-story building located beside the existing ABS-CBN complex. The
building houses the corporate offices of the Company and its subsidiaries engaged in related businesses.
Aside from the corporate offices, the building also has three television soundstages, three sound recoding
studios and other television production facilities. The building has a gross floor area of approximately
100,000 square meters and total office space of approximately 58,000 square meters. The ground floor is
leased to various businesses including banks, retail stores, coffee shops and restaurants. The Company
has received approval from the Philippine Economic Zone Authority to operate as an Information
Technology Zone, enabling potential lessees to take advantage of the incentives and benefits under the
Special Economic Zone Act of 1995.
On 02 September 2002, the Company constituted a first mortgage on some of its properties to secure the
performance of its obligations under the Exchangeable Notes Facility Agreement dated 02 September
2002 (“ENFA”). Under the ENFA, the Company obtained long-term financing in an aggregate amount
up to P3.6 Billion for the purpose of raising permanent working capital and/or refinancing of its shortterm debts or to be used to upgrade its existing plant and network facilities to improve the quality of its
service.
•
Local and Regional Properties
ABS-CBN also owns real estate properties in various parts of the country. Originating stations have the
capacity to produce and broadcast their own programs and to air advertising locally. Relay stations can
only re-transmit broadcasts from originating stations. Affiliate stations are not owned by the Company.
Rather, they are typically independently owned by local Filipino business people and are contracted to
re-broadcast the Company’s originating signals during specified time blocks for negotiated fixed fees.
The following table sets forth the location and use of ABS-CBN’s television and radio stations as of
December 31, 2003:
VHF TV STATIONS
CH
STATION
STATION
TYPE
Location
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Manila
Cebu
Bacolod
Cagayan De Oro
Davao
General Santos
Zamboanga
Naga
Tacloban
Dumaguete
Isabela
Tuguegarao
Cotabato
Baguio
Iligan
Butuan
Ilocos Norte
Legaspi
Olongapo
Batangas
2
3
4
2
4
3
3
11
2
12
2
3
5
3
4
11
7
4
12
10
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Mo. Ignacia St., Diliman, QC
Mt. Busay, Cebu City
Mt. Kanlandog, Murcia, Negros Occ.
Mt. Kitanglad, Bukidnon
Shrine Hill, Matina, Davao City
Brgy. Lagao, Gen. Santos City
Zamboanga City
Naga City
Mt. Naga-naga, Tacloban City
Valencia, Negros Or.
Santiago City, Isabela
Tuguegarao, Cagayan
Cotabato City
Mt. Sto. Tomas, Benguet
Iligan City
Butuan City
San Nicolas, Ilocos Norte
Mt. Bariw, Legaspi
Upper Mabayuan, Olongapo City
Mt. Banoy, Batangas
21
22
23
24
Bohol
Mt. Province
Zambales
Albay
13
11
13
6
Relay
Relay
Relay
Relay
Jagna, Bohol
Mt. Amuyao, Mt. Province
Mt. Bucao, Botolan, Zambales
Malilipot,, Albay
25
26
Masbate Comm. Bctg. Co.
MIT-RTVN
10
7
Affiliate
Affiliate
Masbate, Masbate
Ozamis City
27
28
29
30
31
32
33
MIT-RTVN
St. Jude Thaddeus Inst. of Tech
Sulu Tawi-Tawi Broadcasting
Corporation
Our Lady’s Foundation
Calbayog Comm. Bctg. Corp.
Palawan Bctg. Corp.
Sumuroy Bctg. Corp.
UHF TV STATIONS
NO.
STATION
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
9
12
10
Affiliate
Affiliate
Affiliate
Mt. Palpalan, Pagadian City
Surigao City
Jolo, Sulu
9
10
7
7
Affiliate
Affiliate
Affiliate
Affiliate
Sorsogon, Sorsogon
Calbayog City, Western Samar
Puerto Princesa, Palawan
Catbalogan City, Northern Samar
CH
Manila**
Cebu
Davao
Dagupan
Naga
Batangas
Baguio**
Ilocos Norte
Bacolod
Iloilo**
Zamboanga
Gen. Santos
Tacloban***
Cagayan De Oro
Dumaguete
Zambales
Isabela
Bohol***
Cotabato
Rizal***
Legaspi***
Olongapo
Iligan
Butuan***
Cotabato***
Pagadian***
Palawan
Surigao***
Roxas City
Quezon
Camarines Norte
Kalibo
Dipolog
Lucena City
Lipa City
23
23
21
30
24
36
32
23
22
38
23
36
24
23
24
23
23
40
24
40
23
24
26
22
23
24
23
23
21
22
23
23
42
24
38
STATION
TYPE
Originating
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
STATION LOCATION
Metro Manila
Mt. Busay, Cebu City*
Matina Hills, Davao City*
Dagupan City*
Naga City*
Mt. Banoy, Batangas*
Mt. Sto. Tomas (Baguio)*
San Nicolas, Laoag*
Bacolod City*
La Paz, Iloilo City*
Zamboanga City*
General Santos City*
Tacloban City
Cagayan de Oro City*
Dumaguete City*
Mt. Bucao, Botolan, Zambales*
Santiago City*
Jagna, Bohol
Marbel, S. Cotabato
Antipolo, Rizal
Legaspi City
Olongapo City*
Iligan City*
Butuan City
N. Cotabato
Pagadian City
P. Princesa, Palawan
Surigao City
Roxas City
Baler, Aurora
Daet, Camarines Norte
Aklan
Dipolog City
Lucena City, Lucena
Lipa City, Batangas
* co-located with VHF TV Stations ; **owned by ABS-CBN;*** with pending application with the NTC
FM STATIONS
STATION
1
2
3
4
5
6
7
8
9
10
11
Manila
Cebu
Bacolod
Davao
Baguio
Legaspi
Naga
Laoag
Dagupan
Iloilo
Tacloban
FREQ.
MHz
101.9
97.1
101.5
101.1
103.1
93.9
93.5
95.5
94.3
91.1
94.3
CALL
SIGN
STATION
TYPE
DWRR
DYLS
DYOO
DXRR
DZRR
DWRD
DWAC
DWEL
DWEC
DYMC
DYTC
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
Originating
LOCATION
Lopez Center, Antipolo City
Mt. Busay, Cebu City
Mt. Kanlandog, Murcia, Negros Occ.
Shrine Hill, Matina, Davao City
Mt. Sto. Tomas, Benguet
Mt. Bariw, Legaspi
Naga City
San Nicolas, Ilocos Norte
Dagupan City
Iloilo City
Tacloban City
12
13
14
15
16
17
18
19
20
Cagayan De Oro
Cotabato
Gen. Santos
Zamboanga
Masbate Comm. Bctg. Co.
Palawan Bctg. Corp.
Tagbilaran Bctg. Corp.
Times Bctg. Corp.
Times Bctg. Corp.
91.9
95.1
92.7
98.7
95.9
99.9
91.1
95.9
99.9
DXEC
DXPS
DXBS
DXFH
DYME
DYPR
DYTR
DXAQ
DXWO
Originating
Originating
Originating
Originating
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
CALL
SIGN
STATION
TYPE
Bulua, Cagayan de Oro City
Cotabato City
Lagao, Gen. Santos City
Zamboanga City
Masbate, Masbate
Puerto Princesa, Palawan
Tagbilaran City
Dipolog City
Pagadian City
AM STATIONS
FREQ. KHz
STATION
LOCATION
1
Manila
630
DZMM
Originating
Obando, Bulacan
2
3
4
5
6
7
8
9
Cebu
Davao
Catbalogan
Fairwaves Bctg. Network
Tagbilaran Bctg. Corp.
First United Bctg. Corp.
Times Bctg. Corp.
Bicol Bctg. System
1512
1296
1188
837
1116
1080
1242
603
DYAB
DXAB
DYRV
DZXE
DYTR
DXRH
DXSY
DWLV
Originating
Originating
Originating
Affiliate
Affiliate
Affiliate
Affiliate
Affiliate
Pardo, Cebu City
Matina, Davao City
Catbalogan, Samar
Mira Hills, Vigan, Ilocos Sur
Dampas, Tagbilaran City
Zamboanga City
Mariano Marcos, Ozamis City
Naga City
Item 3. Legal Proceedings
For the past five years, the Company is not a party in any legal proceedings which involves a claim for
damages in an amount, exclusive of interest and cost, exceeding ten per cent (10%) of the current assets of
the Company.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year
covered by this report.
PART II - OPERATIONAL AND FINANCIAL INFORMATION
Item 5. Market for Issuer’s Common Equity and Related Stockholder Matters
The Company’s common shares have been listed on the Philippine Stock Exchange (PSE) since 1992. Its
Philippine Deposit Receipts were listed in 1999. Common shares may be exchanged for Philippine
Deposit Receipts, and vice-versa. The Company is the only broadcasting network listed on the PSE. The
common shares (ABS) closed at Php19.00 while the Philippine Deposit Receipts (ABSP) closed at
Php18.75 on March 30, 2004.
•
Dividends
The declaration and payment of dividends are subject to certain conditions under existing long-term loan
agreements of the Company. These long-term loan agreements require that the declaration and payment
of dividends shall be made for as long as payments due on said loans and premiums on insurance of
assets are current and updated, and only when such payment will not result in the violation of the
required financial ratios under the relevant long-term loan agreements, an event of default as provided in
the agreements shall not exist or occur as a result of such payment, and the amount of the cash dividends
does not exceed the Company’s net income after taxes for the fiscal year preceding the declaration.
Further, the ENFA requires that (i) no dividend declaration or payment shall be made before the end of
the third quarter of year 2002; (ii) dividend declaration or payment may be made before the end of the
year 2003 provided: (a) the financial ratios required thereunder and all terms and conditions in the
relevant documents are complied with; (b) no Event of Default shall have occurred or be continuing to
occur as a result of such payment; (c) the amount of cash dividends does not exceed the Company’s net
income after taxes for the preceding fiscal year; and (d) it shall have a minimum of P6.1 Billion in funding
facilities less regular principal payment for long term debts; and (iii) dividends may be declared after the
end of year 2003, while any of the obligations under the ENFA remain outstanding, provided that the
conditions referred to under (ii) (a), (b) and (c) are complied with.
Cash Dividends per Share:
Stock Dividends:
Stock Prices:
-NIL- in 2003 & 2002, P 0.60 in 2001, and P 0.50 in 2000
-NIL- in 2003, 2002, 2001, and 2000
2003
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
ABS
Low
High
16.50 10.50
20.75 10.75
26.50 18.75
29.50 24.25
2002
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
35.50
38.00
24.75
22.00
Low
24.00
22.00
21.25
14.00
ABSP
High Low
16.00 10.50
21.00 10.50
27.00 19.00
29.50 24.25
High
36.00
38.00
25.00
22.00
Low
23.75
22.00
21.50
15.00
The number of shareholders of record as of December 31, 2003 was 8,583. Common shares outstanding as
of December 31, 2003 were 779,583,312.
•
Top 20 Stockholders as of December 31, 2003
As of December 31, 2003, the Top 20 stockholders of ABS-CBN own an aggregate of 747,818,264 or 95.93%
of common shares outstanding.
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Shareholder
Lopez, Inc.
PCD Nominee Corporation
Ching Tiong Keng
ABS-CBN Foundation, Inc.
Carlos Salinas, Sr.
Eugenio Lopez III
Leticia T. Dee
Pua Yok Bing
Philippine Communication Satellite Corp.
FG Holdings
David Pua
Meralco Foundation, Inc.
Edan Corporation
Charlotte C. Cheng
Cynthia D. Ching
Citizenship
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
No. of Shares
% Ownership
446,231,607
57.24%
294,161,432
37.73%
1,111,500
0.14%
780,995
0.10%
736,200
0.09%
578,190
0.07%
439,590
0.06%
407,100
0.05%
392,500
0.05%
386,270
0.05%
377,800
0.05%
352,600
0.05%
343,000
0.04%
340,000
0.04%
337,500
0.04%
16
17
18
19
20
•
Century Securities Corporation
Carmela Tiangco
Cualoping Securities Corporation
Franmar Corporation
Gonzalo Roque Jr. &/Or Eric Roque
Filipino
Filipino
Filipino
Filipino
Filipino
320,000
301,395
281,500
271,377
237,150
0.04%
0.04%
0.04%
0.03%
0.03%
Employee Stock Option Plan
The Company had an employee stock option plan (ESOP) which covered 1,403,500 shares at 95% of offer
price during the initial public offering. Collections were made in 48 semi-monthly installments without
interest through payroll deductions. Shares offered under the Plan have been fully paid and issued since
1995.
On March 29, 2000, the Board of Directors approved another ESOP covering 6,080,306 shares. In 2002, all
the shares acquired by the Company covering this ESOP, were exercised by the employees. As of
December 31, 2003 and 2002, there are no more outstanding ESOP.
Item 6. Management’s Discussion and Analysis or Plan of Operation
The Management Discussion and Analysis of Financial Condition and the Results of Operation attached
hereto as Exhibit “1”
Item 7. Financial Statements
The Statement of Management’s Responsibility for Financial Statements prepared in accordance with
SRC Rule 68, as amended is attached hereto as Exhibit “1”.
The Audited Financial Statements as of 31 December 2002 prepared in accordance with SRC Rule 68, as
amended and Rule 68.1 is attached hereto as Exhibit “1”.
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There are no changes in and disagreements with accountants on accounting and financial disclosure
during the two most recent fiscal years or subsequent interim period.
PART III - CONTROL AND COMPENSATION INFORMATION
Item 9. Directors and Executive Officers of the Issuer
Board of Directors
Nominees for Election as Members of the Board of Directors
The following are expected to be nominated as members of the Board of Directors for the ensuing year
(2004-2005):
Eugenio L. Lopez III
Augusto Almeda Lopez
Oscar M. Lopez
Manuel M. Lopez
Presentacion L. Psinakis
Manuel L. Lopez, Jr.
Federico R. Lopez
Peter D. Garrucho
Luis F. Alejandro
Roberto F. De Ocampo (Independent Director)
Cesar B. Bautista (Independent Director)
All of the above nominees are incumbent directors except for Mr. Luis F. Alejandro whose appointment
as President and Chief Operating Officer of ABS-CBN will be effective on May 1, 2004. All the directors
were nominated by Lopez, Inc. All of the directors have a term of office of one year.
Below is a summary of the nominees’ qualifications:
Eugenio L. Lopez III, Filipino, age 52
Chairman & CEO
Mr. Lopez was elected Chairman of the Company’s Board of Directors on December 10, 1997, when his
father, the late Eugenio “Geny” Lopez, Jr., turned over the reins of the family-owned company to the
younger Mr. Lopez, who had been President since 1993. He joined ABS-CBN in 1986 as Finance Director
before he became General Manager in 1988. He graduated with a Bachelor of Arts degree in Political
Science from Bowdoin College. He has a Masters degree in Business Administration from Harvard
Business School. He worked as General Manager of the MIS Group, Crocker National Bank in San
Francisco, USA. Mr. Lopez is a recipient of various Philippine broadcasting industry awards. Mr. Lopez
served as Director of the Company from 1986 to 1997 and as Chairman and CEO since 1997.
Augusto Almeda-Lopez, Filipino, age 76
Vice-Chairman
Mr. Augusto Almeda- Lopez joined the Company in 1962 and has served as Director since 1991. He is a
graduate of the University of the Philippines College of Law class 1952 and finished an Advanced
Management Program course at Harvard University in 1969. Mr. Almeda-Lopez is the Vice-Chairman of
the Company and First Philippine Holdings Corporation, a Trustee of the Meralco Foundation Institute,
and a Director of various companies in the telecommunications, manufacturing and service industries.
Oscar M. Lopez, Filipino, age 74
Board Member
Mr. Oscar M. Lopez joined the Company in 1970 has served as Director since 1966. He is Chairman &
CEO of Benpres Holdings Corporation and First Philippine Holdings Corporation. He studied at Harvard
College and graduated cum laude with a Bachelor of Arts degree. He obtained his Masters degree in
Public Administration at the Littauer School of Public Administration at the Harvard University. Mr.
Lopez was chosen Management Man of the Year 2000 by Management Association of the Philippines.
Manuel M. Lopez, Filipino, age 62
Board Member
Mr. Manuel M. Lopez has served as a Director of the Company since 1970. He also holds the following
positions: Chairman & CEO of Manila Electric Company; Chairman of Philippine Commercial Capital
Incorporated; Chairman of Rockwell Land Corporation; Director of Benpres Holdings Corporation, First
Philippine Holdings Corporation, First Private Power Corporation as well as First Philippine
Infrastructure Development Corporation.
Presentacion L. Psinakis, Filipino, age 68
Board Member
Ms. Psinakis has served as a Director of the Company since 1988. Ms. Psinakis is president of Sierra
Tours, Inc. She is a member of the Board of Trustees of the Eugenio Lopez Foundation, Inc. and also
serves as director of the following companies: Lopez Inc., Benpres Insurance Agency, ADTEL Inc., and
Philippine Commercial Capital, Inc. She took a Bachelor of Arts course in St. Scholastica's College.
Manuel L. Lopez, Jr., Filipino, age 36
Board Member
Mr. Manuel Lopez, Jr. has served as a Director of the Company since 2000. He was Assistant Vice
President for Affiliate Marketing for ABS-CBN International North America from 1993-1996. He then
joined SkyCable and became a Director. He later became Regional Director for Pilipino Cable Corporation
from 1999 up to the present. He is currently Executive Vice-President of Benpres Insurance Agency, Inc.
He graduated with a Bachelor of Science degree in Business Administration from the De La Salle
University.
Federico R. Lopez, Filipino, age 43
Board Member
Mr. Federico R. Lopez has served as a Director of the Company since 1999. He is the President and COO
of First Generation Holdings Corporation and all of the holding company's First Gas subsidiaries since
2002. He also holds the position of Vice President at First Philippine Holdings Corporation. He oversees
the development, financing and implementation of its energy-related projects. Over the past eight years,
Mr. Lopez has been involved in the financing and development of the Sta. Rita 1000 MW project (now in
commercial operations) as well as the 500 MW San Lorenzo Project. Mr. Lopez also sits as director of the
Board of Bauang Private Power Corporation, First Philippine Energy Corporation, President of First
Philippine Conservation, Inc. and Emphasis Salon Systems, Inc. Mr. Lopez is also a trustee of the Hands
On Manila Foundation.
Peter D. Garrucho, Jr., Filipino, age 60
Board Member
Mr. Garrucho has served as a Director of the Company since 1996. He is the Managing Director for
Energy of First Philippine Holdings Corporation, and the Vice-Chairman and CEO of First Generation
Holdings Corporation. He also serves as the CEO for a number of power generation companies. On
March 2000, he was given by Her Majesty, Queen Elizabeth, the award of an Honorary Officer of the
Order of the British Empire. Mr. Garrucho has served in various Cabinet positions in the Philippine
Government. He holds a Bachelor of Arts & a Bachelor of Science in Business Administration degree
from De La Salle University and a Master of Business Administration degree from the Stanford
University.
Roberto F. De Ocampo, Filipino, age 58
Board Member, Independent Director
Dr. de Ocampo has served as a Director of the Company since 2000. Dr. de Ocampo is the current
president of the Asian Institute of Management. During the presidency of Fidel V. Ramos, he was the
Secretary of Finance (1994-1998) and he was concurrently a member of the Board of Governors of the
World Bank, the Asian Development Bank and an Alternate Governor of the International Monetary
Fund. He also served as Chairman and CEO of the Development Bank of the Philippines from 1989 to
1994 and Chairman of the APEC Finance Ministers in 1997. In 1995, he was named "Finance Minister of
the Year" by Euromoney magazine -- the first Filipino and first ASEAN finance minister to be so
recognized. In 1996 and 1997, he was named "Asian Finance Minister of the Year" by the Euromoney and
Asiamoney magazines, respectively. He received his MBA from the University of Michigan, a postgraduate diploma from the London School of Economics and has been conferred three Doctorates
(Honoris Causa).
Cesar B. Bautista, Filipino, age 66
Board Member, Independent Director
Mr. Bautista was elected Director of the Company to fill the vacancy created by the resignation of Mr.
Vicente Jayme. Mr. Bautista recently returned from his posting as Ambassador to the Court of St. James
and Special Envoy of the President to Europe. He was the Secretary of Trade and Industry during the
presidency of Fidel V. Ramos (1996-1998) and was concurrently a member of the Monetary Board, and
was the Chairman of the APEC Economic Minister Meetings, National Development Co., Board of
Investments and the Committee on National Museum Development. He was with Unilever (Philippine
Refining Co.) for 33 years (1960-1993) where he became Chairman and CEO during the last 7 years. In
1998, he received the “Distinguished Alumnus Award” of the University of the Philippines and the
Distinguished Alumnus Award of the Ohio State University. He is currently a director of a number of
private corporations.
Luis F. Alejandro, Filipino, age 52
President and COO (effective May 1, 2004)
Mr. Alejandro has 24 years combined experience in brand/marketing operations and general
management. He started his career at Procter & Gamble where he built a solid 15-year marketing track
record which culminated as Category Manager/Marketing Director of the Beauty Care Category. He
assumed a U.S. posting and Asia marketing responsibilities towards the latter part of his stint in the
consumer goods market leader. In 1995, Alejandro joined Kraft Foods Philippines, Inc. as President and
General Manager. During his term with Kraft, revenues grew at double digit levels while market shares
across categories were at leadership or strong number two positions. He is the Chief Operating Officer of
Heinz UFC Philippines, Inc. and concurrent President and Chief Operating Officer of Southeast Asia
Food, Inc. until April 30, 2004. Mr. Alejandro graduated with an economics degree from Ateneo de
Manila University and earned a Masters Degree in Business Management from the Asian Institute of
Management.
Independent Directors of the Board
The Company’s Independent Directors, Mr. Roberto F. de Ocampo and Mr. Cesar B. Bautista, have one
(1) share of the stock of the Company in their respective names, are both college graduates and possess
integrity, probity and assiduousness. They are persons who, apart from their fees as directors of the
Company, are independent of management and free from any business or other relationship which could,
or could reasonably be perceived to, materially interfere with their exercise of independent judgment in
carrying out their responsibilities as directors of the Company. Specifically, Messrs. De Ocampo and
Bautista: (i) are not directors or officers or substantial stockholders of the Company or its related
companies or any of its substantial shareholders (other than as independent directors of any of the
foregoing); (ii) are not relatives of any director, officer or substantial shareholder of the Company, or any
of its related companies or any of its substantial shareholders; (iii) are not acting as nominees or
representatives of a substantial shareholder of the Company, or any of its related companies or any of its
substantial shareholders; (iv) have not been employed in any executive capacity by the Company, or any
of its related companies or by any of its substantial shareholders within the last five (5) years; (v) are not
retained as professional advisers by the Company, any of its related companies or any of its substantial
shareholders within the last five (5) years, either personally or through their firms; and (vi) have not
engaged and do not engage in any transaction with the Company or with any of its related companies or
with any of its substantial shareholders, whether by themselves or with other persons or through a firm
of which they are partners or companies of which they are directors or substantial shareholders, other
than transactions which are conducted at arms length and are immaterial or insignificant. Mr. De
Ocampo and Mr. Bautista do not possess any of the disqualifications enumerated under Section II (5) of
the Code of Corporate Governance and Section II (D) of SEC Memorandum Circular No. 16, Series of
2002.
The Company has adopted SEC Circular No. 16, Series of 2002 (Guidelines on Nomination and Election
of Independent Directors) and compliance therewith has been made.
Family Relationships
Mr. Oscar M. Lopez is the brother of Mr. Manuel M. Lopez and Mrs. Presentacion L. Psinakis. He is the
uncle of Mr. Eugenio L. Lopez III and Mr. Manuel L. Lopez Jr., and the father of Federico R. Lopez.
Executive / Corporate Officers
Maria Rosario N. Santos-Concio, Filipino, age 49
Executive Vice President
As the Entertainment Group Head, Ms. Santos-Concio is in-charge of the content in all of the Company
and its subsidiaries’ entertainment programming. She is currently the host of the longest running drama
anthology “Maalaala Mo Kaya”. She started her career in the Company as a Television Production
Consultant in 1987. Prior to joining the Company, Ms. Santos-Concio was a line producer for the
following companies: BanCom, Audiovision, Vanguard Films, Regal Films, and Vision Exponents. She
also worked as a Film Production Manager for Experimental Cinema of the Philippines (ECP). She is a
winner of the Asia’s Best Actress Award, Baron Travel Girl, and the recipient of various other Philippine
cinema and broadcasting industry awards. Ms. Santos-Concio graduated Cum Laude in A.B.
Communications Arts at St. Paul’s College in Manila.
Rene L. Encarnacion, Filipino, age 50
Senior Vice President
Mr. Encarnacion was appointed Senior Vice-President for Strategic Planning on February 1, 2004. Prior to
this, he was the Senior Vice-President for the ABS-CBN International Group since 2001. He joined Bayan
Telecommunications Inc. in May 1998 as Vice-President for Treasury and became the Senior VicePresident for Finance in January 2000. Mr. Encarnacion has more than 20 years of experience in corporate
finance. He holds a Bachelor of Science degree in Business Economics from the University of the
Philippines and a Master of Business Administration degree from Harvard University.
Nicanor C. Gabunada, Jr., Filipino, age 45
Senior Vice President
Mr. Gabunada has been Senior Vice-President for Integrated Sales & Marketing Division since September
2000. Mr. Gabunada, a valedictorian of the Ateneo de Davao University, with a Bachelor of Science
degree in Management Engineering, earned his Masters Degree in Industrial Economics from the Center
for Research and Communication (now the University of Asia & the Pacific). His various posts prior to
his position in the Integrated Sales division include Vice-President for Research and Business Analysis of
the Company, Program/PR Director for the Drug Association of the Philippines, Economist/Consultant
to the University of Asia and the Pacific and various companies, and General Manager for the Pulse
Research Group.
Ruben R. Jimenez, Filipino, age 52
Senior Vice President
Mr. Jimenez was appointed Senior Vice-President of the Engineering Division in October 2000. He joined
the ABS-CBN group of companies as Managing Director of Video Post in 1987. As the group grew to
include Audio-Post, Pre-Post, Cinevideo and Star Film Laboratories, he played a key role in forging the
merger of these companies into RoadRunner Network Inc. and became its Chief Operating Officer from
1995 to the present. Mr. Jimenez graduated with a Bachelor of Arts degree in Sociology from the
University of the Philippines. He has earned units in Master of Business Administration from the Ateneo
de Manila University School of Business.
Juan L. Manahan, Filipino, age 57
Senior Vice President
Mr. Manahan is currently the Senior Vice-President for the Talent Development and Management Center.
For more than a decade he has spearheaded the highly successful artist search, development, and
management engine of the Company. He was tapped by Mr. Federico Garcia in 1986 to help re-launch
ABS-CBN Entertainment and has been instrumental in developing all types of shows for the network. Mr.
Manahan graduated from the University of California at Berkeley in 1969 with an Art History Degree and
has been a freelance television director for 20 years. His artistic eye and vision for the phenomenal has
given rise to the biggest and brightest stars in the entertainment industry. He is also the network’s most
respected director having been in the forefront of the Company’s top-rating shows and TV specials.
Jose Ramon D. Olives, Filipino, age 41
Senior Vice President
Mr. Olives is Senior Vice-President for Business Development and Special Projects. Prior to his transfer to
Business Development, he held the position of Senior Vice-President for the International Division,
overseeing the operations of The Filipino Channel, the premier cable channel of the Company, in North
America, Middle East, Japan and Australia. He is concurrently the Chief of Staff for the Office of the
Chairman and the Office of the President. Mr. Olives joined the Company in 1987 as an assistant to the
Administrative Director. He has a Bachelor of Arts degree in Communication Research, magna cum
laude, from the University of the Philippines.
Ricardo V. Puno, Filipino, age 58
Senior Vice President
Atty. Puno became the Senior Vice-President for Integrated News and Current Affairs effective March
2003. He returned to the Company after three years of government service and work in the private sector.
He headed the Company’s News and Current Affairs department for almost six years before he left to
assume the post of Press Secretary and Presidential Spokesman in 2000. He is a multi-awarded broadcast
journalist and TOYM awardee. He currently hosts the multi-awarded Current Affairs Program “Dong
Puno Live.” His other television credits include “Dong Puno Tonight” on the ABS-CBN News Channel,
co-anchoring the daily News Program “Pulso! Aksyon Balita!”, and hosting Studio 23’s “Points of View.”
Atty. Puno is a Harvard Law School Master of Laws graduate and is also a Senior Partner in the Puno &
Puno Law Office.
Ma. Socorro V. Vidanes, Filipino, age 42
Senior Vice President
Ms. Vidanes is the Senior Vice-President for Television and Over-all in-charge of TV Production &
Programming. Ms. Vidanes has been with the Company since 1986, starting as an Associate Producer.
She has been involved in the production of all types of programs - talk shows, variety, comedy and
drama. Ms. Vidanes obtained her degree of Bachelor of Arts in Communication Arts from the Ateneo de
Manila University.
Randolph T. Estrellado, Filipino, age 39
Vice President and Chief Financial Officer
Mr. Estrellado has been with the Lopez Group of Companies since 1996, starting as Assistant VicePresident for Treasury of International Communications Corporation, and later as Assistant VicePresident for Finance of its holding company, Benpres Holdings Corporation. He joined the Company as
Assistant Vice-President for Finance in 1998 and was promoted to his current position in 2000. Mr.
Estrellado obtained his Masters Degree in Business Administration from Harvard Business School in
1991. He obtained his degree of Bachelor of Science in Business Management, Honors Program, from
Ateneo de Manila, graduating cum laude in 1986.
Other members of the Company’s senior management team as of 31 January 2004 are as follows:
Vice President, Gov’t & Corporate Affairs & PR
Vice President, Special Projects
Vice President, TV Production - Talk, Variety, & Game
Vice President, TV Production – Acquisitions
Vice President, TV Production –
Comedy & RNG Programming
Vice-President, Creative Communications Management
Vice President, Talent Development & Management Center
Vice President, Creative Entertainment & Synergy
Vice President, Engineering Division
Vice President, Current Affairs
Vice-President, News Production
Vice President, News Operations
Assistant Vice President & Managing Director,
ABS-CBN News Channel
Vice President, Manila Radio Division &ABS-CBN Sports
Vice President, Sales
Vice President, Channel Sales & Marketing Officers
Vice President, Sales & Marketing Planning
Vice President, Research & Business Learning
Vice President, Regional Network Group
Vice President, Logistics
Vice President, Human Resources
Vice President, Information Technology &
Chief Information Officer
Vice President, Chief Legal Counsel
Vice President, Legal Counsel
Vice President, Internal Audit - Communications Group
Vice President, Human Resources - Communications Group
Managing Director , ABS-CBN Film Productions, Inc.
Vice President & Creative Head,
ABS-CBN Film Productions, Inc.
Managing Director , ABS-CBN Interactive, Inc.
Senior Vice President, ABS-CBN Global, Ltd.
Vice President & Managing Director,
ABS-CBN International, N.A.
Vice President & Managing Director, ABS-CBN Telecom
Assistant Vice President & Managing Director,
ABS-CBN Middle East FZ-LLC
Managing Director, ABS-CBN Europe, Ltd.
Managing Director, E-Moneyplus, Inc.
(ABS-CBN Global Money)
President , ABS-CBN Publishing, Inc.
Managing Director, Creative Programs, Inc.
General Manager, Prostar, Inc.
Managing Director, Roadrunner Network, Inc. - Film
Managing Director, Roadrunner Network, Inc. - Star Film Lab.
Managing Director, Roadrunner Network, Inc. –
Radio-Television
Managing Director, Sky Films, Inc.
MA. LOURDES LILIA K. ESPINOSA
MANALASTAS
CARMENCITA A. GUERRERO
ROLDEO ENDRINAL
EVELYN D. RAYMUNDO
JOANNA G. SANTOS
MA. CARMINDA M. DE LEON
MA. YOLANDA R. ALBERTO
JOAQUIN ENRICO C. SANTOS
RODRIGO V. CARANDANG
FATIMA ARLENE S. DE CASTRO
JESUS J. MADERAZO
LUCHI CRUZ-VALDES
JOSE F. MAGSAYSAY, JR.
PETER A. MUSNGI
ORLANDO G. GALANG
DAVID R. DOMINGUEZ
ALDEN M. CASTAÑEDA
VIVIAN Y. TIN
ROLANDO P. VALDUEZA
MERCEDES L. VARGAS
PHILIP LAMBERTO L. BERBA
JOHNNY C. SY
ANDREFANIO D. SANTOS
DANILO V. MORALES
ALFREDO P. BERNARDO
MARIO CARLO P. NEPOMUCENO
MARIA LOURDES N. SANTOS
OLIVIA M. LAMASAN
CARLO L. KATIGBAK
RENE L. ENCARNACION
RAFAEL L. LOPEZ
ZENON D. CARLOS
RAFAEL A. JISON
JOSE C. NOLAN
CANDIDO Q. SANTICO, JR.
ERNESTO L. LOPEZ
OLIVIA FININA G. DE JESUS
GEORGE ANGELO G. PADOLINA
ALEJANDRO R. ESCANO, JR.
ERIC JOHN HAWTHORNE
ARNEDO C. LUCAS
LEONARDO P. KATIGBAK
Vice President & Managing Director,
Star Recording, Inc. (Concurrent)
Vice President, Sales & Distribution, Star Recording, Inc.
Managing Director, Studio 23 (Concurrent)
Assistant Vice President, Managing Director,
TV Food Chefs, Inc.
Managing Director, ABS-CBN Foundation, Inc.
ENRICO C. SANTOS
VILMA B. SELGA
LEONARDO P. KATIGBAK
MYRNA D. SEGISMUNDO
REGINA PAZ L. LOPEZ
Significant Employees
The Company values its human resources. It expects each employee to do his share in achieving the
Company’s set goals.
Involvement of Directors and Officers in Certain Legal Proceedings
For the past five years, the Company is not aware of any bankruptcy proceedings filed by or against any
business of which a director, person nominated to become a director, executive officer, or control person
of the Company is a party of which any of their property is subject.
For the past five years, the Company is not aware of any conviction by final judgment in a criminal
proceeding, domestic or foreign, or being subject to a pending criminal proceeding, domestic or foreign,
of any of its director, person nominated to become a director, executive officer, or control person.
For the past five years, the Company is not aware of any order, judgment, or decree not subsequently
reversed, superseded, or vacated, by any court of competent jurisdiction, domestic or foreign,
permanently or temporarily enjoining, barring, suspending, or otherwise limiting the involvement of a
director, person nominated to become a director, executive officer, or control person of the Company in
any type of business, securities, commodities, or banking activities.
For the past five years, the Company is not aware of any findings by a domestic or foreign court of
competent jurisdiction (in a civil action), the Commission or comparable foreign body, or a domestic or
foreign exchange or electronic marketplace or self regulatory organization, that any of its director, person
nominated to become a director, executive officer, or control person has violated a securities or
commodities law.
Item 10. Executive Compensation
Information as to the aggregate compensation paid or accrued during the last two fiscal years and to be
paid in the ensuing fiscal year to the Company’s chief and five other most highly compensated executive
officers follow:
SUMMARY COMPENSATION TABLE
Annual Compensation
Name
Chief executive and
most highly compensated
executive officers:
Federico M. Garcia
Olivia M. Lamasan
Year
Salary (P)
Bonus (P)
Other Annual
Compensation
2004E
2003
2002
61,788,748
58,291,271
68,169,464*
0
16,613,645
0
0
0
Joaquin Enrico C. Santos
Ma. Lourdes N. Santos
Ma. Rosario N. Santos-Concio
All managers and up
As a group unnamed
2004E
2003
2002
442,602,757
417,549,771
465,351,136*
0
106,287,196
0
0
0
*Compensation figures for 2002 is combined salary and bonus
The directors receive per diems for their attendance at board meetings. There are no other arrangements
for compensation either by way of payments for committee participation or consulting contracts.
There are currently no existing employment contracts with executive officers. There are no arrangements
for compensation or payment to be received from the Company in the event of a resignation, retirement
or termination of the executive officer’s employment or a change in control of the Company. There are no
outstanding warrants or stock options held by the Company’s executives.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Records and Beneficial Owners as of January 31, 2004:
Title
Of class
Name and Address of
Beneficial Owner
Lopez, Inc.
5/F Benpres Bldg,
Exchange Road cor
Meralco Ave., Pasig City
Common ABS-CBN Holdings Corp.
4/F Benpres Bldg,
Exchange Road cor
Meralco Ave., Pasig City
Citizenship
Record /
No. of
Beneficial Shares Held
Per cent
Held
Common
Filipino
Filipino
Record
446,231,607
57.24%
Beneficial 270,554,800
34.71%
Lopez, Inc. is the holding company of the Lopez family. It is owned by the respective holding companies
of the families of Eugenio Lopez, Jr., Oscar M. Lopez, Presentacion L. Psinakis and Manuel M. Lopez. It
has issued convertible notes covering the shares in the Company registered and beneficially owned by it
in favor of Benpres Holdings Corporation.
The Board of Directors of Lopez, Inc. has the power to decide how Lopez Inc.’s shares in ABS-CBN
Broadcasting Corp. are to be voted.
ABS-CBN Holdings Corporation is owned 50% by Lopez, Inc. and 50% by Oscar M. Lopez, Manuel M.
Lopez, Presentacion L. Psinakis, Eugenio Lopez III and Rommel S. Duran. The shares in the Company
registered and beneficially owned by it are covered by Philippine Deposit Receipts (PDR) which gives the
holder thereof the right to delivery or sale of the underlying share. The PDRs are listed with the
Philippine Stock Exchange.
The Board of Directors of ABS-CBN Holdings Corporation has the power to decide how ABS-CBN
Holdings Corporation’s shares in ABS-CBN Broadcasting Corp. are to be voted.
Security Ownership of Management as of February 29, 2004:
As of February 29, 2004, the Company’s directors and senior officers owned an aggregate of 1,641,943
shares of the Company, equivalent to 0.2106% of the Company’s total issued and outstanding capital
stock.
Stockholder Name
Position
Citizenship
Record /
Beneficial
No.
Shares
Held
Percent
Held
Eugenio Lopez III
Augusto Almeda-Lopez
Oscar M. Lopez
Chairman and CEO
Vice-Chairman
Director
Filipino
Filipino
Filipino
Record
Record
Record
578,190
191,009
61,620
0.0742%
0.0245%
0.0079%
Manuel M. Lopez
Presentacion L. Psinakis
Federico R. Lopez
Manuel L. Lopez, Jr.
Peter D. Garrucho, Jr.
Roberto F. De Ocampo
Cesar B. Bautista
Director
Director
Director
Director
Director
Director
Director
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Record
Record
Record
Record
Record
Record
Record
144,201
3
1
1
150
1
1
0.0185%
0.0000%
0.0000%
0.0000%
0.0000%
0.0000%
0.0000%
Ma. Rosario N. Santos-Concio
Executive Vice President
Filipino
Record
173,212
0.0222%
Nicanor C. Gabunada, Jr.
Jose Ramon D. Olives
Ruben R. Jimenez
Rene L. Encarnacion
Senior Vice President
Senior Vice President
Senior Vice President
Senior Vice President
Filipino
Filipino
Filipino
Filipino
Record
Record
Record
Record
55,053
47,109
17,500
578
0.0071%
0.0060%
0.0022%
0.0001%
Leonardo P. Katigbak
Evelyn D. Raymundo
Joaquin Enrico C. Santos
Rodrigo V. Carandang
Vice President
Vice President
Vice President
Vice President
Filipino
Filipino
Filipino
Filipino
Record
Record
Record
Record
58,204
41,076
40,000
30,000
0.0075%
0.0053%
0.0051%
0.0038%
Randolph T. Estrellado
Danilo V. Morales
Eduardo D. Flores
Johnny C. Sy
Vice President & CFO
Vice President
Vice President
Vice President & CIO
Filipino
Filipino
Filipino
Filipino
Record
Record
Record
Record
20,450
20,000
19,167
17,987
0.0026%
0.0026%
0.0025%
0.0023%
Ma. Carminda M. De Leon
Rolando P. Valdueza
Mercedes L. Vargas
Joanna G. Santos
Vice President
Vice President
Vice President
Vice President
Vice President,
ABS-CBN Film Prod’n
Managing Director,
ABS-CBN Foundation
President,
ABS-CBN Publishing
General Manager,
ABS-CBN Publishing
Filipino
Filipino
Filipino
Filipino
Record
Record
Record
Record
17,850
11,800
10,000
5,000
0.0023%
0.0015%
0.0013%
0.0006%
Filipino
Record
25,060
0.0032%
Filipino
Record
22,905
0.0029%
Filipino
Record
21,653
0.0028%
Filipino
Record
12,162
0.0016%
1,641,943
0.2106%
Olivia M. Lamasan
Regina Paz L. Lopez
Ernesto L. Lopez
Thelma S. San Juan
Security Ownership of all Directors and Officers
Changes in Control
There have not been any arrangements that have resulted in a change in control of the Company during
the period covered by this report. The Company is not aware of the existence of any voting trust
arrangement among the shareholders.
Item 12. Certain Relationships and Related Transactions
Relationships and Related Transactions
There had been no material transactions during the past two years, nor is any material transaction
presently proposed, to which the Company was or is to be a party in which any director, executive officer
of the Company, or security holder of more than 10% of the Company’s voting securities, any relative or
spouse of any such director or executive officer or owner of more than 10% of the Company’s voting
securities had or is to have direct or indirect material interest.
Parent Company
Lopez, Inc. is the registered owner of 57.24% of the voting stock of the Company as of February 29, 2004.
Lopez, Inc. is the holding company of the Lopez family. It is owned by the respective holding companies
of the families of Eugenio Lopez, Jr., Oscar M. Lopez, Presentacion L. Psinakis and Manuel M. Lopez. It
has issued convertible notes covering the shares in the Company registered and beneficially owned by it
in favor of Benpres Holdings Corporation.
Resignation of Directors
No director has resigned or declined to stand for re-election to the Board of Directors since the date of the
last annual meeting of the Company because of a disagreement with the Company on matters relating to
the Company’s operations, policies and practices.
SIGNATURES
Pursuant to the requirements of Section 17 of the Code and Section 141 of the Corporation
Code, this report is signed on behalf of the issuer by the undersigned, thereunto duly
authorized, in the City of ________________________on__________, 2004.
By:
<original signed>
JOSE RAMON D. OLIVES*
Senior Vice President
<original signed>
RANDOLPH T. ESTRELLADO
Vice President & CFO/Comptroller
<original signed>
MANUEL L.M. TORRES
Corporate Secretary
SUBSCRIBED AND SWORN to before me this _____ day of _________ 2004 affiant(s)
exhibiting to me his/their Residence Certificates, as follows:
NAME
JOSE RAMON D. OLIVES
RANDOLPH T. ESTRELLADO
MANUEL L.M. TORRES
RES.CERT.NO.
DATE OF ISSUE
PLACE OF ISSUE
15241424
09766583
22266676
February 26, 2004
January 23, 2004
January 20, 2004
Makati City
Quezon City
Pasig City
<original notarized>
NOTARY PUBLIC
*
Officer-in-charge from March 30, 2004 until April 27, 2004 while Mr. Eugenio Lopez III is on vacation leave
EXHIBIT 1: Reports on SEC Form 17-C
For the past six months, the Company has filed the following SEC Form 17-C reports and financial
statements:
Subject of 17-C
! Inclusion of BNP Paribas in ENFA
Date Filed
July 29, 2003
Financial Statements
! 1Q2003_17Q Amended
! 2Q2003_17Q
! 2Q2003_17Q Amended
! 1Q2003_17Q Amended
! 3Q2003_17Q
Date Filed
July 24, 2003
August 13, 2003
August 14, 2003
October 13, 2003
November 13, 2003
ABS-CBN BROADCASTING CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES
FORM 17-A, Item 7
December 31, 2003
For the Year Ended December 31, 2002
Page No.
Consolidated Financial Statements
Consolidated Statement of Management’s Responsibility for Financial Statements
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 2003 and 2002
Consolidated Statements of Income and Retained Earnings
for the years ended December 31, 2003, 2002 and 2001
Consolidated Statements of Cash Flows
for the years ended December 31, 2003, 2002 and 2001
Notes to Consolidated Financial Statements
Supplementary Schedules
Report of Independent Public Accountants on Supplementary Schedules
A.
B.
C.
D.
E.
F.
G.
H.
I.
*
Marketable Securities - (Current Marketable Equity Securities and Other Shortterm Cash Investments)
Amounts Receivable from Directors, Officers, Employees, Related Parties and
Principal Stockholders (Other than Affiliates)
Non-current Marketable Equity Securities, Other Long-term Investments, and
Other Investments
Indebtedness to Unconsolidated Subsidiaries and Affiliates
Intangible Assets - Other Assets
Long-term Debt
Indebtedness to Affiliates and Related Parties (Long-term Loans from Related
Companies)
Guarantees of Securities of Other Issuers
Capital Stock
*
*
*
*
*
*
F
*
*
I
These schedules, which are required by RSA Rule 68.1, have been omitted because they are either not
required, not applicable or the information required to be presented is included in the Company's
consolidated financial statements or the notes to consoli
Schedule F. Long Term Debt
(Amounts in Thousands Php)
Title of Issue and type of
obligation
Amount
authorized by
indenture
Amount shown under caption
"Current portion of long-term
debt" in related balance sheet
Amount shown under
caption "Long-Term Debt"
in related balance sheet
Exchangeable Notes Facility Agreement
3,637,850
855,965
2,353,903
Syndicated Loans under JEXIM 4
2,000,000
760,000
1,100,000
Banco Santander
1,000,013
500,007
0
TOTAL
6,637,863
2,115,971
3,453,903
I
Title of Issue
Capital Stock
779,583,312
779,583,312
1,500,000,000
Number of
Shares
Issued and
Outstanding
1,500,000,000
Number of
Shares
Authorized
(a) Lopez, Inc.
(b) Under PCD Nominee Corporation owned by ABS-CBN Holdings Corporation
Common stock at P1 par value
Schedule
-
-
Number of
Shares
reserved for
options, warrants
conversions and
other rights
716,786,407
446,231,607
270,554,800
Number of
Shares
Held by
Related Parties
(a)
(b)
1,641,942
1,641,942
Directors,
Officers and
Employees
Others
-
-
STATEMENT OF MANAGEMENT’S RESPONSIBILITY
FOR FINANCIAL STATEMENTS
The management of ABS-CBN Broadcasting Corporation is responsible for all
information and representations contained in the parent company and
consolidated balance sheets as of December 31, 2003 and 2002 and the related
parent company and consolidated statements of income and retained earnings
and cash flows for each of the three years in the period ended December 31,
2003, 2002, and 2001. The financial statements have been prepared in
conformity with generally accepted accounting principles in the Philippines and
reflect amounts that are based on the best estimates and informed judgment of
management with an appropriate consideration to materiality.
In this regard, management maintains a system of accounting and reporting which
provides for the necessary internal controls to ensure that transactions are properly
authorized and recorded, assets are safeguarded against unauthorized use or
disposition and liabilities are recognized. The management likewise discloses to the
company’s audit committee and to its external auditor: (i) all significant deficiencies
in the design or operation of internal controls that could adversely affect its ability to
record, process, and report financial data; (ii) material weaknesses in the internal
controls; and (iii) any fraud that involves management or other employees who
exercise significant roles in internal controls.
The Board of Directors reviews the financial statements before such statements are
approved and submitted to the stockholders of the company.
Sycip, Gorres, Velayo & Co., the independent auditors appointed by the
stockholders, have audited the parent and consolidated financial statements of
the Company in accordance with generally accepted auditing standards in the
Philippines and have expressed their opinion on the fairness of presentation
upon completion of such audit, in their report to stockholders and the Board of
Directors.
Signed under oath by the following:
<original signed>
JOSE RAMON D. OLIVES
Senior Vice President*
<original signed>
RANDOLPH T. ESTRELLADO
Vice President and Chief Financial Officer
*
Officer-in-charge from March 30, 2004 until April 27, 2004 while Mr. Eugenio Lopez III is on vacation leave
ABS-CBN BROADCASTING CORPORATION
AND SUBSIDIARIES
Parent Company Financial Statements
December 31, 2003 and 2002
Consolidated Financial Statements
December 31, 2003 and 2002
and Years Ended December 31, 2003, 2002 and 2001
and
Report of Independent Auditors
COVER SHEET
1 8 0 3
SEC Registration Number
A B S - C B N
A N D
B R O A D C A S T I N G
C O R P O R A T I O N
S U B S I D I A R I E S
(Company’s Full Name)
M o t h e r
I g n a c i a
E s g u e r r a
S t r e e t
A v e n u e ,
c o r n e r
Q u e z o n
S g t .
C i t y
(Business Address: No. Street City/Town/Province)
Randolph T. Estrellado
415-2272
(Contact Person)
1 2
3 1
Month
Day
(Company Telephone Number)
A A F S
(Form Type)
Month
(Fiscal Year)
Day
(Annual Meeting)
(Secondary License Type, If Applicable)
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
8,057
Total No. of Stockholders
Domestic
Foreign
To be accomplished by SEC Personnel concerned
File Number
LCU
Document ID
Cashier
STAMPS
Remarks: Please use BLACK ink for scanning purposes.
#
ABS-CBN BROADCASTING CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(Amounts in Thousands)
Parent Company
Consolidated
December 31
2002
2002
2003
2003
ASSETS
Current Assets
Cash and cash equivalents (Note 5)
Receivables - net (Notes 6, 8 and 13)
Current portion of program rights (Note 10)
Other current assets - net (Notes 7 and 22)
Total Current Assets
Noncurrent Assets
Due from related parties (Notes 8 and 13)
Investments and advances (Notes 8, 10 and 13)
Property and equipment at cost - net (Notes 9, 13, 14 and 27)
Program rights - net of current portion (Note 10)
Assets of discontinuing operations (Note 4)
Other noncurrent assets - net (Notes 8,10, 13, 14 and 22)
Total Noncurrent Assets
P
=803,202
2,336,666
566,992
237,427
3,944,287
=465,441
P
2,190,725
546,889
229,303
3,432,358
P
= 1,580,355
3,787,808
880,975
562,678
6,811,816
=715,588
P
3,425,668
751,055
414,825
5,307,136
150,894
3,417,545
10,513,881
863,633
466
2,107,264
17,053,683
160,444
3,257,116
10,887,556
1,023,876
2,719
2,198,972
17,530,683
273,303
342,111
10,843,512
936,212
17,118
2,978,649
15,390,905
264,799
612,901
11,266,453
1,152,624
39,512
3,094,372
16,430,661
=20,963,041 P
=21,737,797
=22,202,721 P
P
= 20,997,970 P
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Bank loans (Notes 11 and 14)
Accounts payable and other current liabilities
(Notes 12, 13 and 23)
Income tax payable
Current portion of:
Long-term debt (Notes 9, 10, 11 and 14)
Obligations for program rights (Note 10)
Total Current Liabilities
Noncurrent Liabilities
Long-term debt - net of current portion (Notes 9, 10, 11 and 14)
Due to related parties (Note 13)
Deferred tax liabilities - net (Note 22)
Obligations for program rights - net of current portion (Note 10)
Liabilities of discontinuing operations (Note 4)
Total Noncurrent Liabilities
Minority Interest
Stockholders’ Equity (Note 15)
Capital stock
Capital paid in excess of par value
Equity adjustments from translation of subsidiaries (Note 8)
Retained earnings
Philippine deposit receipts convertible to common shares
Total Stockholders’ Equity
P
=220,577
=425,587
P
P
=220,577
=425,587
P
1,419,299
101,634
1,738,996
192,972
2,442,234
124,357
2,440,447
205,663
2,115,971
149,855
4,007,336
484,438
87,203
2,929,196
2,115,971
256,183
5,159,322
484,438
141,462
3,697,597
3,453,903
201,303
224,569
2,777
–
3,882,552
5,393,294
291,665
239,803
17,935
–
5,942,697
3,453,903
75,473
224,870
13,370
16,652
3,784,268
5,393,294
113,073
239,803
47,461
36,793
5,830,424
–
–
151,049
118,628
779,583
706,047
130,251
11,692,201
(200,000)
13,108,082
779,583
706,047
109,201
10,696,317
(200,000)
12,091,148
779,583
706,047
130,251
11,692,201
(200,000)
13,108,082
779,583
706,047
109,201
10,696,317
(200,000)
12,091,148
=20,963,041 P
=21,737,797
P
= 20,997,970 P
=22,202,721 P
See accompanying Notes to Financial Statements.
ABS-CBN BROADCASTING CORPORATION AND SUBSIDIARIES
STATEMENTS OF INCOME
(Amounts in Thousands, Except Per Share Amounts)
Parent Company
Consolidated
Years Ended December 31
2002
2002
2003
2003
AIRTIME AND OTHER BROADCASTING
RELATED REVENUES (Note 13)
Less agency commission, marketing expenses
and co-producers’ share (Note 16)
NET SALES AND SERVICES (Note 13)
COST AND OPERATING EXPENSES
Production costs (Notes 13, 17, 23 and 24)
Cost of sales and services
(Notes 13, 18, 23 and 24)
General and administrative
(Notes 13, 19, 23 and 24)
Depreciation (Note 9)
Amortization of program rights (Note 10)
INCOME FROM OPERATIONS
OTHER INCOME (EXPENSES)
Interest and other financial charges - net
(Notes 11, 14 and 20)
Equity in net losses of investees (Note 8)
Miscellaneous - net (Notes 13 and 21)
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAX
P
=10,092,171
2001
=9,003,346 P
P
=11,064,409
=9,914,146
P
=9,922,504
P
1,861,144
8,231,027
1,710,685
7,292,661
1,980,743
9,083,666
1,830,221
8,083,925
1,636,559
8,285,945
–
8,231,027
–
7,292,661
3,631,692
12,715,358
2,824,930
10,908,855
2,055,743
10,341,688
3,361,497
2,959,727
3,500,521
3,083,396
2,664,260
–
–
1,816,706
1,481,371
1,100,598
1,407,650
1,048,481
486,148
6,303,776
1,151,705
1,100,650
420,440
5,632,522
3,046,473
1,218,101
819,230
10,401,031
2,608,405
1,393,756
709,497
9,276,425
2,324,338
945,710
511,228
7,546,134
1,927,251
1,660,139
2,314,327
1,632,430
2,795,554
(596,547)
(219,623)
471,763
(344,407)
(673,335)
(416,843)
266,940
(823,238)
(585,710)
(115,367)
59,023
(642,054)
(668,989)
(139,028)
45,105
(762,912)
(629,588)
(39,888)
54,505
(614,971)
1,582,844
836,901
1,672,273
869,518
2,180,583
PROVISION FOR INCOME TAX (Note 22)
571,417
398,807
660,846
431,424
794,031
INCOME FROM CONTINUING
OPERATIONS AFTER INCOME TAX
1,011,427
438,094
1,011,427
438,094
1,386,552
LOSS FROM DISCONTINUING
OPERATIONS AFTER INCOME TAX
(Notes 4 and 8)
NET INCOME (Note 25)
(2,253)
(272,314)
(2,253)
(272,314)
(8,219)
P
=1,009,174
=165,780
P
P
=1,009,174
=165,780
P
=1,378,333
P
Basic EPS
Income from continuing operations
after income tax
Loss from discontinuing operations
after income tax
P
=1.314
=0.569
P
P
=1.314
=0.569
P
=1.802
P
(.003)
P
= 1.311
(0.354)
P0.215
=
(.003)
P
=1.311
(0.354)
P0.215
=
(0.011)
P1.791
=
Diluted EPS
P
= 1.311
=0.215
P
P
=1.311
=0.215
P
=1.791
P
EARNINGS PER SHARE (EPS) (Note 25)
See accompanying Notes to Financial Statements.
#
ABS-CBN BROADCASTING CORPORATION AND SUBSIDIARIES
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Amounts in Thousands, Except Number of Shares and Per Share Amounts)
2003
CAPITAL STOCK - P
=1 par value (Note 15)
Authorized - 1,500,000,000 shares
Issued and outstanding - 779,583,312 shares
Years Ended December 31
2002
2001
P
=779,583
=779,583
P
=779,583
P
CAPITAL PAID IN EXCESS OF PAR VALUE
706,047
706,047
706,047
EQUITY ADJUSTMENTS FROM TRANSLATION
OF SUBSIDIARIES (Note 8)
Balance at beginning of year
Translation adjustments during the year
Balance at end of year
109,201
21,050
130,251
98,150
11,051
109,201
(73,293)
171,443
98,150
8,300,000
–
8,300,000
8,300,000
–
8,300,000
6,000,000
2,300,000
8,300,000
2,396,317
1,009,174
2,230,537
165,780
3,633,889
1,378,333
(13,290)
–
3,392,201
11,692,201
–
–
2,396,317
10,696,317
(481,685)
(2,300,000)
2,230,537
10,530,537
(200,000)
(200,000)
(200,000)
RETAINED EARNINGS
Appropriated:
Balance at beginning of year
Appropriation for expansion projects (Note 15)
Balance at end of year
Unappropriated:
Balance at beginning of year
Net income
Cash and scrip dividends - P
=0.017 per share in 2003
and P
=0.60 per share in 2001 (Note 28)
Appropriation for expansion projects (Note 15)
Balance at end of year
PHILIPPINE DEPOSIT RECEIPTS CONVERTIBLE
TO COMMON SHARES (Note 15)
P
=13,108,082
=12,091,148
P
=11,914,317
P
See accompanying Notes to Financial Statements.
#
ABS-CBN BROADCASTING CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
Parent Company
Consolidated
Years Ended December 31
2002
2002
2003
2003
2001
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations before
income tax
Adjustments for:
Depreciation
Interest expense and other financial charges
Amortization of:
Program rights
Deferred charges
Production and distribution business
Equity in net losses of investees
Provisions for:
Doubtful accounts
Retirement expense
Decline in values of marketable securities
and club shares
Inventory obsolescence
Gain on sale of property and equipment
Interest income
Unrealized foreign exchange (gains) losses
Dividend income
Minority interest
Loss on sale of employee stock option plan
(ESOP)
Operating income before working capital changes
Decrease (increase) in:
Receivables
Program rights
Other current assets
Increase (decrease) in:
Accounts payable and other current liabilities
Obligations for program rights
Cash generated from operations
Income tax paid
Net cash provided by operating activities of
continuing operations
Net cash provided by (used in) operating activities
of discontinuing operations
Net cash provided by operating activities
P
=1,582,844
=836,901
P
P
=1,672,273
=869,518
P
=2,180,583
P
1,048,481
636,415
1,100,650
687,567
1,218,101
637,780
1,393,756
692,113
945,710
652,976
486,148
23,368
–
219,623
420,440
5,775
–
416,843
819,230
23,368
42,588
115,367
709,497
5,775
49,392
139,028
511,228
–
28,748
39,888
73,508
82,675
37,620
55,675
179,430
87,566
153,477
58,975
139,430
19,700
48,286
–
(63,572)
(39,868)
(5,168)
(79)
–
–
–
–
(14,232)
10,813
(280)
–
48,286
4,753
(47,656)
(52,070)
(5,168)
(94)
27,393
–
2,661
–
(23,124)
10,813
(292)
(3,167)
–
950
–
(23,388)
9,477
(7,289)
3,100
–
4,092,661
–
3,557,772
–
4,771,147
–
4,058,422
47,489
4,548,602
(217,959)
(346,008)
(4,217)
245,801
(351,520)
(63,963)
(523,423)
(732,738)
(154,642)
(358,422)
(765,907)
(74,676)
(800,208)
(503,194)
240,166
(408,002)
47,494
3,163,969
(681,896)
171,056
(37,540)
3,521,606
(625,038)
(92,309)
80,630
3,348,665
(754,037)
575,960
(84,610)
3,350,767
(645,247)
(232,736)
191,413
3,444,043
(881,875)
2,482,073
2,896,568
2,594,628
2,705,520
2,562,168
–
2,482,073
–
2,896,568
2,520
2,597,148
(104,589)
2,600,931
(165,597)
2,396,571
(Forward)
#
-2Parent Company
Consolidated
Years Ended December 31
2002
2002
2003
2003
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment
Decrease (increase) in:
Amounts due from related parties
Investments and advances
Other non-current assets
Interest received
Dividends received
Proceeds from sale of property and equipment
Proceeds from sale of ESOP
Net cash used in investing activities of continuing
operations
Net cash provided by investing activities
of discontinuing operations
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Interest and other financial charges paid
Payments of:
Long-term debt
Bank loans
Cash and scrip dividends
Proceeds from bank loans
Increase (decrease) in amounts due to
related parties
Net cash used in financing activities of
continuing operations
Net cash provided by (used in) financing activities
of discontinuing operations
Net cash used in financing activities
EFFECT OF TRANSLATION ADJUSTMENTS TO
CASH AND CASH EQUIVALENTS
(P
= 697,791)
(P
=702,760)
9,550
(353,721)
28,941
38,378
79
77,137
–
8,774
(683,905)
(120,102)
14,232
280
–
–
(897,427)
(1,483,481)
–
(897,427)
(P
=817,670)
164
151,284
10,923
50,580
94
77,537
–
2001
(P
=896,930) (P
=2,405,755)
228,043
(234,613)
(277,944)
23,124
292
–
–
(51,166)
350,797
(571,443)
23,388
7,289
–
111,877
(527,088)
(1,158,028)
(2,535,013)
–
(1,483,481)
4,457
(522,631)
38,693
(1,119,335)
48,743
(2,486,270)
(636,105)
(704,178)
(637,470)
(708,723)
(779,134)
(506,898)
(14,102)
(13,290)
–
(560,007)
(388,455)
–
376,057
(506,898)
(14,102)
(13,290)
–
(560,007)
(388,455)
–
376,057
(320,000)
(1,579,545)
(465,422)
3,134,437
(90,362)
202,422
(46,982)
145,057
(184,998)
(1,260,757)
(1,074,161)
(1,218,742)
(1,136,071)
(194,662)
–
(1,260,757)
–
(1,074,161)
(21,095)
(1,239,837)
64,725
(1,071,346)
140,388
(54,274)
13,872
–
15,969
337,761
338,926
864,767
411,107
(163,448)
–
337,761
–
338,926
(14,118)
850,649
(1,171)
409,936
23,534
(139,914)
465,441
126,515
715,588
304,481
467,929
–
465,441
–
126,515
27,309
742,897
28,480
332,961
4,946
472,875
803,202
–
465,441
–
1,580,355
13,191
715,588
27,309
304,481
28,480
P
=803,202
=465,441
P
P
=1,593,546
=742,897
P
=332,961
P
(314)
4,059
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Net increase (decrease) in cash and cash
equivalents of continuing operations
Net increase (decrease) in cash of discontinuing
operations
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR
Cash and cash equivalents at beginning of year of
continuing operations
Cash at beginning of year of discontinuing
operations
CASH AND CASH EQUIVALENTS
AT END OF YEAR
Cash and cash equivalents at end of year of
continuing operations
Cash at end of year of discontinuing operations
See accompanying Notes to Financial Statements.
#
ABS-CBN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Amounts in Thousands Unless Otherwise Specified)
1. Corporate Information
ABS-CBN Broadcasting Corporation (“ABS-CBN” or “Parent Company”) is incorporated in the
Philippines. The Parent Company’s core business is television and radio broadcasting. Its
subsidiaries and associates are involved in the following related businesses: video/audio post
production, movie production, audio recording and distribution, film distribution, cable and directto-home television distribution and telecommunication services overseas. Other activities of the
subsidiaries include merchandising and licensing, internet services and publishing. As fully
discussed in Note 4, the Parent Company has discontinued the operations of several subsidiaries in
2002.
The number of employees and talents of the Parent Company was 4,018 and 3,734 as of
December 31, 2003 and 2002, respectively. The number of employees and talents of the Parent
Company and its subsidiaries (collectively referred to as the “Company”) was 6,305, 6,059 and
5,804 as of December 31, 2003, 2002 and 2001, respectively.
The Parent Company is 57% owned by Lopez, Inc. (Lopez) (see Note 15).
The registered office address of the Company is Mother Ignacia Street corner Sgt. Esguerra
Avenue, Quezon City.
The accompanying financial statements for the year ended December 31, 2003 and 2002 were
authorized for issue by the Board of Directors (BOD) on March 10, 2004.
2. Summary of Significant Accounting Policies
The principal accounting policies adopted in preparing the accompanying financial statements are
as follows:
Basis of Preparation
The accompanying financial statements have been prepared in accordance with generally accepted
accounting principles in the Philippines under the historical cost convention.
Changes in Accounting Policies
On January 1, 2003, the Company adopted the following Statements of Financial Accounting
Standards (SFAS)/International Accounting Standards (IAS):
ƒ SFAS 22/IAS 22, “Business Combinations,” requires that an acquisition where an acquirer can
be identified should be accounted for by the purchase method. Any goodwill arising from the
acquisition should be amortized generally over 20 years. Adoption of this standard has not
resulted in any adjustment as goodwill arising from acquisition is being amortized over 10 to
20 years.
#
-2ƒ SFAS 37/IAS 37, “ Provisions, Contingent Liabilities and Contingent Assets,” provides the
criteria for the recognition and bases for measurement of provisions, contingent liabilities and
contingent assets. Additional disclosures required by the standard were included in the
financial statements.
ƒ SFAS 10/IAS 10, “ Events After the Balance Sheet Date,” prescribes the accounting and
disclosures related to adjusting and non-adjusting subsequent events. Additional disclosures
required by the standard were included in the financial statements, principally the date of
authorization for release of the financial statements.
New Accounting Standards Effective Subsequent to 2003
The Accounting Standards Council has approved the following accounting standards which will
be effective subsequent to 2003:
ƒ SFAS 21/IAS 21, “ Changes in Foreign Exchange Rates,” provides restrictive conditions for
the capitalization of foreign exchange losses. The Company will adopt SFAS 21/IAS 21 in
2005. This standard will not have an impact on the Company as the Company does not
capitalize foreign exchange losses.
ƒ SFAS 12/IAS 12, “ Income Taxes,” prescribes the accounting treatment for current and
deferred income taxes. The standard requires the use of a balance sheet liability method in
accounting for deferred income taxes. It requires the recognition of a deferred tax liability and,
subject to certain conditions, deferred tax asset for all temporary differences with certain
exceptions. The standard provides for the recognition of a deferred tax asset when it is
probable that taxable income will be available against which the deferred tax asset can be
used. It also provides for the recognition of a deferred tax liability with respect to asset
revaluations. The Company will adopt SFAS 12/IAS 12 in 2004. The Company has not yet
determined the financial impact of the adoption of the standard.
ƒ SFAS 17/IAS 17, “ Leases,” prescribes the accounting policies and disclosures to apply to
finance and operating leases. Finance leases are those that transfer substantially all risks and
rewards of ownership to the lessee.
A lessee is required to capitalize finance leases as assets and recognize the related liabilities at
the lower of the fair value of the assets or the present value of the minimum lease payments.
The lessee should also depreciate the leased asset. On the other hand, lessees should expense
operating lease payments.
A lessor is required to record finance leases as receivables at an amount equal to the net
investment in the lease. Lease income should be recognized on the basis of a constant
periodic rate of return on the lessor’s outstanding net investment. On the other hand, a lessor
should present as an asset and depreciate accordingly assets that are subject to operating
leases.
Due to the significant number of leases that the Company is a party to and the assessment that
need to be made as to whether these would qualify as finance leases, the Company has not yet
determined the financial statement impact of the adoption of SFAS 17/IAS 17 in 2004.
#
-3Basis of Consolidation and Investments
The consolidated financial statements of the Company include the Parent Company and its
subsidiaries as of December 31 of each year (see Note 8).
Subsidiaries are consolidated from the date on which control is transferred to the Company and
cease to be consolidated from the date on which control is transferred out of the Company.
The purchase method of accounting is used for acquired businesses. Companies acquired or
disposed of during the year are included in the consolidated financial statements from the date of
acquisition to the date of disposal.
Consolidated financial statements are prepared using uniform accounting policies for like
transactions and other events in similar circumstances. Intercompany balances and transactions,
including intercompany profits and unrealized profits and losses are eliminated.
The net income attributable to minority shareholders’ interests are shown as part of
“ Miscellaneous - net” account in the statements of income.
The Company’s investments in its associates are accounted for under the equity method of
accounting. An associate is an entity in which the Company has significant influence and which is
not a subsidiary. The investments in associates are carried in the balance sheets at cost plus postacquisition changes in the Company’s share in the net assets of the associates, less any impairment
in value. The statements of income reflect the Company’s share in the results of operations of the
associates. Unrealized gains arising from transactions with its associates are eliminated to the
extent of the Company’s interest in the associates, against the investments in the associates.
Unrealized losses are eliminated similarly but only to the extent that there is no evidence of
impairment of the asset transferred. The Company’s investments in its subsidiaries and associates
include goodwill (net of accumulated amortization) on acquisition, which is treated in accordance
with the accounting policy for goodwill stated below.
In the parent company financial statements, investments in subsidiaries and associates are
accounted for under the equity method of accounting.
Other Investments
Other investments held on a long-term basis are valued at cost less any permanent decline in value
and are included in the “ Other noncurrent assets” account in the balance sheets.
Foreign Currency Transactions and Translation
Transactions in foreign currencies are recorded using the exchange rate at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are restated using
the closing exchange rate at balance sheet date. All differences are taken to the statements of
income.
Financial statements of foreign subsidiaries that are not integral to the operations of the Parent
Company are translated at year-end exchange rates with respect to the balance sheet, and at the
average exchange rates for the year with respect to the statement of income. Resulting translation
differences are included in equity. Upon disposal of a foreign entity, accumulated exchange
differences are recognized in the statements of income as a component of the gain or loss on
disposal.
#
-4Cash and Cash Equivalents
Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash with original maturities of three
months or less and that are subject to an insignificant risk of change in value.
Receivables
Trade receivables are recognized and carried at original invoice amount less an allowance for any
uncollectible amounts. Other receivables are stated at face value, after allowance for doubtful
accounts. An estimate for doubtful accounts is made when collection of the full amount is no
longer probable.
The Company maintains an allowance for doubtful accounts at a level considered adequate to
provide for potentially uncollectible receivables. The level of allowance is evaluated by
management based on collection experience and other factors that may affect collectibility. A
review of the age and status of receivables, designed to identify potential charges to the allowance,
is performed on a continuous basis. The allowance is established by charges to income in the
form of provision for doubtful accounts.
Program Rights
Rights to programs available for broadcast are initially capitalized at the amounts of total license
fees under the covering license agreements and are charged to income on the basis of program
usage. To the extent that a given future expected benefit period is shorter than the initial Company
estimates, the Company writes off the purchase price or the license fee sooner than anticipated.
The Company classifies its program rights into current and non-current amounts based on
estimated year of usage.
Inventories
Inventories included under “ Other current assets - net” account in the balance sheets are valued at
the lower of cost or net realizable value. Net realizable value of inventories that are for sale is the
selling price in the ordinary course of business, less the cost of marketing and distribution. Net
realizable value of inventories not held for sale is the current replacement cost. Cost is determined
on the first-in, first-out method. Unrealizable inventories are written off.
Property and Equipment
Property and equipment are carried at cost (including capitalized interest), less accumulated
depreciation and any impairment in value.
The initial cost of property and equipment comprises its purchase price, including import duties,
taxes and any directly attributable costs of bringing the asset to its working condition and location
for its intended use. Expenditures incurred after the property and equipment have been put into
operation, such as repairs and maintenance, are normally charged to income as incurred. In
situations where it can be clearly demonstrated that the expenditures have resulted in an increase
in the future economic benefits expected to be obtained from the use of an item of property and
equipment beyond its originally assessed standard of performance, the expenditures are capitalized
as an additional cost of property and equipment.
#
-5Depreciation is computed on a straight-line basis over the following estimated useful lives:
Land improvements
Building and improvements
Television, radio, movie and auxiliary equipment
Other equipment
10 years
20 to 40 years
10 to 15 years
3 to 10 years
The useful life and depreciation method are reviewed periodically to ensure that the method and
period of depreciation are consistent with the expected pattern of economic benefits from items of
property and equipment.
When assets are retired or otherwise disposed of, the cost and the related accumulated depreciation
and impairment loss are removed from the accounts and any resulting gain or loss is credited or
charged to current operations.
Construction in progress represents equipment under installation and building under construction
and is stated at cost which includes cost of construction and other direct costs. Construction in
progress is not depreciated until such time that the relevant assets are completed and put into
operational use.
Impairment of Assets
Starting January 1, 2002, an assessment is made at each balance sheet date whenever there is any
indication of impairment of any asset. If any such indication exists, the asset’ s recoverable
amount is estimated. An asset’ s recoverable amount is calculated as the higher of the asset’ s value
in use or its net selling price. An impairment loss is recognized only if the carrying amount of an
asset exceeds its recoverable amount. An impairment loss is charged to operations in the period in
which it arises.
A previously recognized impairment loss is reversed only if there has been a change in the
estimates used to determine the recoverable amount of an asset, however, not to an amount higher
than the carrying amount that would have been determined (net of any depreciation), had no
impairment loss been recognized for the asset in prior years.
A reversal of an impairment loss is credited to current operations.
Deferred Charges
Costs such as participation fees, legal fees and other direct costs incurred in connection with
securing a long-term debt are deferred and amortized on a straight-line basis over the term of the
loan. These are presented as part of “ Other noncurrent assets” account in the balance sheets.
Goodwill
Goodwill, which is stated at cost less accumulated amortization and any impairment in value,
represents the excess of the cost of the acquisition over the Company’ s share in the fair value of
identifiable net assets of a subsidiary and associate at the date of acquisition. The investments in
subsidiaries and associates in the parent company financial statements and the investments in
associates in the consolidated financial statements included goodwill (net of accumulated
amortization). Goodwill is amortized on a straight-line basis over the estimated useful life of 10 to
20 years.
#
-6Tax Credits
Tax credits from government airtime sales availed under Presidential Decree No. 1362 are
recognized in the books upon actual airing of government commercials and advertisements. This is
included under “ Other noncurrent assets” account in the balance sheets.
Production and Distribution Business
Production and distribution business, included under “ Other noncurrent assets - net” account in the
consolidated balance sheets, is recorded at acquisition cost. This is amortized on a straight-line
basis over a period of 10 to 20 years.
Income Tax
Deferred income tax is provided using the liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial
reporting bases of assets and liabilities and their related tax bases; net operating loss carryover
(NOLCO); and the carry forward benefit of the excess of the minimum corporate income tax
(MCIT) over the regular corporate income tax. Deferred tax assets and liabilities are measured
using the tax rate applicable to taxable income in the years in which those temporary differences
are expected to be recovered or settled and NOLCO and MCIT are expected to be applied. A
valuation allowance is provided for deferred tax assets when it is more likely than not that some or
all of the deferred tax assets will not be realized in the future.
Revenue
Revenue is recognized when it is probable that the economic benefits associated with the
transaction will flow to the Company and the amount of the revenue can be measured reliably.
Airtime revenue is recognized as income on the dates the advertisements are aired.
The fair values of barter transactions are included in airtime revenue and the related accounts.
These transactions represent advertising time exchanged for program materials, merchandise or
service.
Other broadcasting related revenue are short-messaging-system/text-based revenues, sale of news
materials and Company-produced programs which are recognized upon billing and delivery.
Net sales and services of subsidiaries include:
a. Subscription fees and channel lease revenue, which are recognized under the accrual basis in
accordance with the terms of the agreements.
b. Telecommunications revenue, which are recognized when earned. These are stated net of the
share of the other telecommunications carriers, if any, under existing correspondence and
interconnection agreements. Interconnection fees and charges are based on agreed rates with
the other telecommunications carriers.
c. Sales of inventories, which are recognized, net of discounts, when delivery has taken place
and transfer of risks and rewards has been completed.
d. Revenue from services, which are recognized when services are rendered.
#
-7Rental income is recognized as income based on the lease agreement.
Interest income is recognized on a time proportion basis that reflects the effective yield on the
asset.
Dividends are recognized when the shareholders’ right to receive payment is established.
Operating Lease
Lease payments under an operating lease are recognized as an expense based on the terms of the
lease agreement.
Provisions
Starting in 2003, provisions are recognized when the Company has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation and a reliable estimate can be made of
the amount of the obligation. If the effect of the time value of money is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and, where appropriate, the risks specific to the
liability. Where discounting is used, the increase in the provision due to the passage of time is
recognized as an interest expense.
In prior years, provisions for loss contingencies are accrued when it is probable that a liability has
been incurred at balance sheet date and the amount can be reasonably estimated. Otherwise, the
loss contingency is disclosed.
Borrowing Costs
Borrowing costs are generally expensed as incurred. Borrowing costs are capitalized if they are
directly attributable to the acquisition, construction or production of a qualifying asset.
Capitalization of borrowing costs commences when the activities to prepare the asset are in
progress and expenditures and borrowing costs are being incurred. Borrowing costs are
capitalized until the assets are ready for their intended use. If the resulting carrying amount of the
asset exceeds its recoverable amount, an impairment loss is recorded. Borrowing costs include
interest charges and other costs incurred in connection with the borrowing of funds.
For financial reporting purposes, interest on loans used to finance the construction of a multistorey building project is capitalized as part of cost of the building during the construction period.
For income tax reporting purposes, such interest is treated as a deductible expense during the
period the interest was incurred.
Pension Plan
Pension expense is determined using the projected unit credit method. This method reflects
services rendered by employees to the date of valuation and incorporates assumptions concerning
employees’ projected salaries. Pension expense includes current service cost plus amortization of
past service cost, experience adjustments and changes in actuarial assumptions over the expected
average remaining working lives of the covered employees.
#
-8Earnings Per Share (EPS)
Basic EPS amounts are calculated by dividing the net income for the period attributable to
common shareholders by the weighted average number of common shares outstanding during the
period.
Diluted earnings per share are computed as if the stock options were exercised at the beginning of
the year and as if the funds obtained from exercise were used to purchase shares at the average
market price during the year.
3. Segment Information
Segment information is prepared on the following bases:
Business segments: for management purposes, the Company is organized into three business
activities - broadcasting, cable and satellite, and other businesses. This segmentation is the basis
upon which the Company reports its primary segment information. The broadcasting segment is
principally the television and radio broadcasting activities which generates revenue from sale of
national and regional advertising time. Cable and satellite business primarily develops and
produces programs for cable television, including delivery of television programming outside the
Philippines through its DTH satellite service, cable television channels and blocked time on
television stations. Other businesses include movie production, consumer products and services.
Geographical segments: although the Company is organized into three business activities, they
operate in three major geographical areas. In the Philippines, its home country, the Company is
involved in broadcasting, cable operations and other businesses. In the United States and other
locations (which includes Middle East and Milan), the Company operates its cable and satellite
operations to bring television programming outside the Philippines.
Inter-segment transactions: segment revenue, segment expenses and segment results include
transfers among business segments and among geographical segments. Such transfers are
accounted for at competitive market prices charged to unaffiliated customers for similar services.
Those transfers are eliminated in consolidation.
#
-9Business Segment Data
The following tables present revenue and income information and certain asset and liability information regarding business segments for the years ended December 31, 2003, 2002 and 2001.
2003
Broadcasting
2002
2001
Revenue
External sales
Inter-segment sales
Total revenue
P
=8,632,432
73,070
P
=8,705,502
=7,725,348
P
–
=7,725,348
P
=8,102,374
P
–
=8,102,374
P
Results
Segment result
Interest and other financial charges - net
Equity in net earnings (losses) of associates
Others
Pre-acquisition loss
Minority interest
Income tax
Loss from discontinuing operations after tax
Net income (loss)
P
=1,927,027
(596,054)
(221,902)
472,287
–
–
(571,338)
(2,253)
P
=1,007,767
=1,565,210
P
(673,254)
(416,843)
277,136
–
–
(398,807)
(272,314)
=81,128
P
=2,883,983
P
(626,003)
(188,315)
111,251
–
–
(786,605)
(8,219)
=1,386,092
P
Assets and liabilities
Segment assets
Investments in associates - at equity
Consolidated total assets
Segment liabilities
Other segment information
Depreciation and amortization of program rights
Noncash expenses other than depreciation and
amortization of program rights
Cable and satellite
2002
2003
P
=2,956,024
120,455
P
=3,076,479
(P
=29,111)
7,798
2,279
12,715
–
(27,195)
(44,422)
–
(P
=77,936)
=2,359,011
P
85,810
=2,444,821
P
2001
2003
=1,702,979
P
80,392
=1,783,371
P
P
=1,126,902
53,981
P
=1,180,883
Other Businesses
2002
Eliminations
2002
2003
2001
=824,496
P
91,188
=915,684
P
=536,335
P
68,168
=604,503
P
P
=–
(247,506)
(P
=247,506)
=–
P
(176,998)
(P
=176,998)
P
=342,283
–
104,256
(432,098)
–
(198)
–
–
P
=14,243
=324,960
P
(1,004)
277,815
(273,608)
6,380
(151)
–
–
=334,392
P
(P
=66,625)
2,136
–
18,225
(6,380)
3,318
(22,141)
–
(P
=71,467)
(P
=92,222)
(6,906)
–
45,334
–
–
(2,436)
–
(P
=56,230)
P
=74,128
2,546
–
33,512
–
–
(45,086)
–
P
=65,100
(P
=191,115)
3,133
–
20,185
–
–
(10,476)
–
(P
=178,273)
(P
=68,232)
3,321
–
11,919
–
–
(4,990)
–
(P
=57,982)
2003
Consolidated
2002
2001
=– P
P
=12,715,358
(148,560)
–
(P
=148,560) P
=12,715,358
=10,908,855
P
–
=10,908,855
P
=10,341,688
P
–
=10,341,688
P
P
=2,314,327
(585,710)
(115,367)
86,416
–
(27,393)
(660,846)
(2,253)
P
=1,009,174
=1,632,430
P
(668,989)
(139,028)
41,938
–
3,167
(431,424)
(272,314)
=165,780
P
=2,795,554
P
(629,588)
(39,888)
57,605
–
(3,100)
(794,031)
(8,219)
=1,378,333
P
2001
=72,025
P
–
148,427
(110,899)
–
(3,100)
–
–
=106,453
P
P
=18,966,735
2,536,156
P
=21,502,891
P
=8,141,574
=18,418,753
P
2,370,716
=20,789,469
P
=8,478,769
P
=19,071,712
P
2,568,504
=21,640,216
P
=9,497,791
P
P
=2,863,943
3,722
P
=2,867,665
P
=1,331,504
=1,910,588
P
–
=1,910,588
P
=570,401
P
=2,034,277
P
–
=2,034,277
P
=466,153
P
P
=1,167,642
–
P
=1,167,642
P
=489,140
=883,594
P
–
=883,594
P
=329,466
P
=1,208,274
P
–
=1,208,274
P
=887,825
P
P
=1,741,220
=1,721,764
P
=1,243,962
P
P
=142,152
=134,719
P
=130,463
P
P
=183,647
=246,770
P
=82,513
P
(P
=29,688)
=–
P
=–
P
242,369
127,405
90,065
111,969
92,625
69,050
31,653
50,250
29,713
–
–
–
=61,404 (P
P
=1,059,150) P
(P
=1,140,653)
=21,857,667
(1,969,353)
(1,983,252)
(2,253,871)
286,007
=1,907,949) (P
=3,042,402) P
(P
=3,394,524) (P
=22,143,674
(P
=90,418) (P
=1,140,230) P
(P
=1,243,498)
=8,718,720
=21,274,339
P
401,363
=21,675,702
P
=9,288,218
P
=21,255,113
P
585,252
=21,840,365
P
=9,711,539
P
P
=2,037,331
=2,103,253
P
=1,456,938
P
385,991
270,280
188,828
Geographical Segment Data
The following tables present revenue and expenditure and certain asset information regarding geographical segments for the years ended December 31, 2003, 2002 and 2001.
2003
Revenue
External sales
Inter-segment sales
Total revenue
Other segment information
Segment assets
Capital expenditures
Property and equipment
Intangible assets
P
=10,348,840
247,506
P
=10,596,346
Philippines
2002
2001
2001
2003
=1,506,497
P
–
=1,506,497
P
P
=190,333
–
P
=190,333
=23,830,388
P
P
=1,211,504
=821,615
P
=1,052,379
P
P
=2,154,989
2,319,299
503,194
33,274
–
25,745
–
86,456
–
14,178
–
=8,835,191
P
148,560
=8,983,751
P
=21,907,556
P
=21,171,704 P
849,440
765,907
United States
2002
=1,749,326
P
=2,176,185 P
–
–
=1,749,326
P
=2,176,185 P
=8,921,334
P
176,998
=9,098,332
P
770,218
732,738
2003
Others
2002
=238,195
P
–
=238,195
P
2003
P
=–
(247,506)
(P
=247,506)
Eliminations
2002
=–
P
(176,998)
(P
=176,998)
2001
2003
Consolidated
2002
2001
=– P
P
=10,341,688
=10,908,855 P
=12,715,358 P
(148,560)
–
–
–
(P
=148,560) P
=10,908,855 10,341,688
=12,715,358 P
=854,480 (P
P
=1,907,949) (P
=3,042,402) P
=21,840,365
=21,675,702 P
=3,394,523) (P
=22,143,674 P
21,745
212,359
–
–
–
–
–
–
817,670
732,738
896,930
978,266
2,405,755
503,194
#
- 10 4. Discontinuing Operations
In 2002, following the rigid review of the operations of the various subsidiaries, the Parent
Company’ s BOD approved the discontinuance of operations of ABS-CBN Consumer Products,
Inc., ABS-CBN Europe Societa Per Azioni, Cinemagica, Inc., ABS-CBN Hongkong, Ltd. and
Shopping Network, Inc., which have been incurring losses. These subsidiaries were engaged in
varied businesses including operating retail stores and direct sales service centers, cable shopping
network, concert production, remittances and telecom retail, and local and foreign film
productions, which were deemed not aligned with the Parent Company’ s core businesses.
ABS-CBN Consumer Products, Inc. ceased operations in the fourth quarter of 2002 and closed
21 retail stores and direct sales service centers nationwide, resulting in a loss of P
=113.4 million.
Shopping Network, Inc. shut down its cable shopping network and two retail outlets in 2002,
representing P
=20.7 million of the total loss. ABS-CBN Hongkong, Ltd., the one-stop-shop for
Filipinos in Hong Kong, ceased its activities in concert production, remittance, and telecom retail
sales in October 2002 and resulted in a loss of P
=57.8 million. In parallel, the investment in ABSCBN Europe Societa Per Azioni amounting to P
=28.8 million was charged to expense in 2002 as
operations of the Company’ s remittance offices in Torrino, Padova and Milan are winding up in
January 2003. Ventures in local and foreign film production and related operations comprise the
balance of the loss from discontinuing operations for 2002.
The results of operations of the above-mentioned subsidiaries for the period until discontinuance
have been presented in the statements of income as “ Loss from Discontinuing Operations After
Income Tax.”
Total assets and liabilities of the discontinued subsidiaries are presented in the consolidated
balance sheets separately as “ Assets of discontinuing operations” and “ Liabilities of discontinuing
operations” .
In the parent company financial statements, “ Assets of discontinuing operations” represent the
remaining advances of the parent company to the above subsidiaries. The Parent Company’ s
investment in discontinued subsidiaries has been reduced to zero in 2002.
Assets and liabilities of discontinuing operations are as follows:
Assets:
Cash
Receivables - net
Other current assets
Due from related parties
Property and equipment at cost - net
Other noncurrent assets
Liabilities:
Accounts payable and other current liabilities
Due to related parties
2003
2002
P
=13,191
1,023
653
67
167
2,017
P
=17,118
=27,309
P
4,063
793
1,454
4,527
1,366
=39,512
P
P
=12,645
4,007
P
=16,652
=11,691
P
25,102
=36,793
P
#
- 11 The results of discontinuing operations are as follows:
Net sales and services
Costs and expenses:
Cost of sales and services
General and administrative
Income (loss) from discontinuing operations
Other income (expenses) - net:
Interest and other financial charges
Miscellaneous
Income (loss) from discontinuing operations
before income tax
Provision for income tax
Loss from discontinuing operations
after income tax
2003
P
=4,129
2002
=47,197
P
2001
=196,209
P
246
6,098
6,344
(2,215)
37,858
290,538
328,396
(281,199)
50,494
128,370
178,864
17,345
(306)
268
(38)
1,004
8,900
9,904
220
(4,113)
(3,893)
(2,253)
–
(271,295)
1,019
13,452
21,671
(P
=2,253)
(P
=272,314)
(P
=8,219)
5. Cash and Cash Equivalents
Cash on hand and in banks
Short-term investments
Parent Company
2002
2003
=193,198
P
P
=128,967
272,243
674,235
=465,441
P
P
=803,202
Consolidated
2002
2003
=426,482
P
P
=800,806
289,106
779,549
=715,588
P
P
=1,580,355
Cash in banks earn interest at the respective bank deposit rates. Short-term investments are made
for varying periods of up to three months depending on the immediate cash requirements of the
Company, and earn interest at the respective short-term investment rates.
6. Receivables
Trade receivables (see Notes 8 and 13)
Advances to suppliers
Other receivables
Less allowance for doubtful accounts
Parent Company
2002
2003
=2,073,854
P
P
=2,155,399
18,162
70,033
181,542
222,257
2,273,558
2,447,689
82,833
111,023
=2,190,725
P
P
=2,336,666
Consolidated
2002
2003
=3,368,267
P
P
=3,554,687
18,162
70,033
293,432
397,294
3,679,861
4,022,014
254,193
234,206
=3,425,668
P
P
=3,787,808
Other receivables include receivables from employees arising from the Employee Stock Option
Plan (ESOP) amounting to P
=23.5 million as of December 31, 2002. The receivable was
subsequently collected in 2003.
#
- 12 7. Other Current Assets
Parent Company
2002
2003
=107,706
P
P
=122,683
45,253
49,160
8,722
9,799
67,622
55,785
=229,303
P
P
=237,427
Prepaid taxes
Deferred tax assets - net (see Note 22)
Inventories at net realizable value
Prepaid expenses and others
Consolidated
2002
2003
=180,290
P
P
=233,200
62,095
59,047
68,660
148,890
103,780
121,541
=414,825
P
P
=562,678
Inventories consist mainly of materials and supplies of the Parent Company and records and other
consumer products held for sale by subsidiaries.
8. Investments and Advances
Investments in subsidiaries and associates at equity
Advances to subsidiaries and associates
(see Note 13)
Parent Company
2002
2003
Consolidated
2002
2003
P
=2,536,156
=2,370,716
P
P
=286,007
=401,363
P
881,389
P
=3,417,545
886,400
=3,257,116
P
56,104
P
=342,111
211,538
=612,901
P
Investments in subsidiaries and associates follow:
Company
Place of
Incorporation
Subsidiaries
Continuing Operations
ABS-CBN Center for Communication Arts, Inc.
ABS-CBN FCLLZ Dubai
Philippines
Dubai, KSA
ABS-CBN Film Productions, Inc. (ABS-CBN
Films)
ABS-CBN Global Ltd. (ABS-CBN Global)
ABS-CBN Interactive, Inc.
ABS-CBN International, Inc. (ABS-CBN
International)
ABS-CBN Publishing, Inc.
Philippines
Creative Creatures, Inc. (CCI)
Creative Programs, Inc. (CPI)
E-Money Plus, Inc.
Professional Services for Television & Radio, Inc.
Sarimanok News Network, Inc. (SNN)
Sky Films, Inc. (Sky Films)
Star Recording, Inc.
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Studio 23, Inc. (Studio 23)
TV Food Chefs Inc.
Philippines
Philippines
Roadrunner Network, Inc. (Roadrunner)
Philippines
Cayman Islands
Philippines
California, USA
Philippines
Principal Activities
Services
Cable and satellite
operations
Movie production
Holding company
Services
Cable and satellite
operations
Consumer products publishing
Services
Cable operation
Services
Services
Cable operation
Services - movie films
Consumer products audio production
Broadcasting
Restaurant and catering
services
Services - post
production
Ownership Interest
2003
2002
100.0
100.0
100.0(a)
100.0(a)
100.0
100.0
100.0
100.0
100.0
80.0(a)
80.0(a)
100.0
100.0
100.0
100.0(a)
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
98.9
98.9
#
- 13 -
Company
Place of
Incorporation
Principal Activities
Discontinuing Operations
ABS-CBN Consumer Products, Inc. (b)
ABS-CBN Europe Societa Per Azioni (b)
ABS-CBN Hongkong, Ltd. (b)
Cinemagica, Inc. (b)
Shopping Network, Inc. (c)
Philippines
Italy
Hong Kong
Philippines
Philippines
Consumer products
Services
Services
Services
Consumer products
Associates
AMCARA Broadcasting Network, Inc. (Amcara)
Star Cinema Productions, Inc. (Star Cinema)
Sky Vision Corporation (Sky Vision)
Philippines
Philippines
Philippines
Services
Movie production
Cable operation
Ownership Interest
2003
2002
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
49.0
45.0
10.2
49.0
45.0
10.2
Consolidated
2002
=541,281
P
2001
=586,142
P
(a)
indirectly-owned through ABS-CBN Global
ceased commercial operations on December 31, 2002
(c)
ceased commercial operations on December 31, 2001
(b)
Acquisition costs
Accumulated equity in net earnings
(losses):
Balance at beginning of year
Equity in net losses for the year
from continuing operations
Loss from discontinuing
operations after income tax
Balance at end of year
Equity adjustments from translation of
subsidiaries:
Balance at beginning of year
Translation adjustments during the
year
Balance at end of year
Parent Company
2002
2003
=3,915,567
P
=4,279,580 P
2003
P
=541,292
(1,654,052)
(964,895)
(139,918)
(890)
(219,623)
(416,843)
(115,367)
(139,028)
(39,888)
–
(1,873,675)
(272,314)
(1,654,052)
–
(255,285)
–
(139,918)
–
(890)
38,998
109,201
98,150
–
–
–
21,050
130,251
P
=2,536,156
11,051
109,201
=2,370,716
P
–
–
P
=286,007
–
–
=401,363
P
–
–
=585,252
P
Equity in net losses from continuing operations includes goodwill amortization of P
=43,576 in 2003
and P
=27,507 in 2002 in the parent company statements of income and P
=20,152 in 2003, P
=13,192 in
both 2002 and 2001 in the consolidated statements of income (see Note 10).
The detailed carrying values of investments which are carried under the equity method follow:
CPI
ABS-CBN Global
Roadrunner
Sky Vision
SNN
Studio 23
ABS-CBN Films
Amcara
CCI
Others
Parent Company
2002
2003
=939,566
P
P
=997,603
392,387
378,739
262,071
276,242
357,024
240,334
64,731
204,308
77,644
77,826
–
58,668
44,339
45,673
44,473
19,029
188,481
237,734
=2,370,716
P
P
=2,536,156
Consolidated
2002
2003
P
=–
=–
P
–
–
–
–
357,024
240,334
–
–
–
–
–
–
44,339
45,673
–
–
–
–
=401,363
P
P
=286,007
#
- 14 The carrying value of the investments exceeded the Company’ s equity in net assets of the
subsidiaries and associates by P
=418,114 and P
=461,690 as of December 31, 2003 and 2002,
respectively, in the parent company financial statements, and P
=302,276 and P
=322,428 as of
December 31, 2003 and 2002, respectively in the consolidated financial statements.
Condensed financial information of the associates follows:
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Revenue
Cost and expenses
Operating income (loss)
Net loss
2003
P
=4,659
1,042,677
450,928
601,244
125,821
108,056
64,942
(780,684)
2002
=238,523
P
2,266,026
358,804
1,149,006
487,177
550,290
(63,113)
(862,583)
2001
=336,293
P
2,923,147
291,979
1,024,916
182,520
189,009
(6,489)
(884,174)
Sky Vision and CPI
On July 18, 2001, the Parent Company, along with Lopez, Inc. and Benpres Holdings Corporation
(collectively, the Benpres Group), signed a Master Consolidation Agreement (MCA) whereby it
agreed with the Philippine Long Distance Telephone Company and Mediaquest Holdings, Inc.
(collectively, the PLDT Group) to consolidate their respective ownership or otherwise their rights
and interests in Sky Vision and Unilink Communications Corporation (Unilink) under a holding
company to be established for that purpose. Beyond Cable Holdings, Inc. (Beyond) was
incorporated on December 7, 2001 as the holding company. Sky Vision owns Central CATV, Inc.
(Central) and Pilipino Cable Corporation (PCC), which in turn operate cable television systems in
Metro Manila and key provincial areas under the tradenames “ Sky Cable” and “ Sun Cable.”
Unilink owns The Philippine Home Cable Holdings, Inc. (Home), which operates cable television
systems in Metro Manila and key provincial areas under the tradename “ Home Cable.”
Pursuant to the MCA, the Benpres Group and the PLDT Group shall, respectively, own 66.5% and
33.5% of Beyond upon the transfer of their respective ownership and rights and interests in Sky
Vision and Unilink into Beyond. Although the original agreement envisions the transfers to be
completed within six months from signing date, or by January 18, 2002, the Benpres Group and
the PLDT Group agreed to extend this Closing date.
On December 3, 2003, the Benpres and PLDT Groups, together with the PLDT Beneficial Trust
Fund, executed an Amendment Agreement to the MCA whereby additional closing conditions
were incorporated into the MCA and wherein the Closing Date was extended until such time the
parties shall have completed all conditions precedent under the MCA and the Amendment
Agreement, including the share transfers described above.
In relation to the consolidation discussed above, a competitor company filed a case before
National Telecommunications Commission (NTC) asking for NTC to declare as null and void the
consolidation of the cable operating companies. It is the opinion of the Company’ s legal counsels
that the case filed by the competitor company is without legal basis.
#
- 15 In December 2001, the cable companies declared a suspension of payments of principal and
interest due on their loans and thereafter proposed to the creditors a comprehensive restructuring
plan (Plan). As of March 10, 2004, the required majority of Sky Vision and Central’ s creditors
and a substantial majority of Home’ s creditors have signed the memorandum of agreement (MOA)
covering the restructuring plan. The MOA provided the framework under which Sky Vision,
Central and Home and the creditors mutually agree to restructure the outstanding debt obligations
which shall become the basis for the Debt Restructuring Agreement, and consent to the proposed
consolidation and merger of Sky Vision, Central and Home. The restructuring terms include,
among others, a stipulation that any or all other amounts accrued but unpaid by Sky Vision and its
major cable operating subsidiaries in respect of interest (including default interest and penalties),
fees (including guarantee fees) and commissions under the terms of existing principal obligations
be forgiven on the restructuring date. The MOA shall be effective for a period of 120 days or until
such date that a Debt Restructuring Agreement is entered into and signed, whichever comes first.
The MOA for the restructuring of the outstanding debt obligation of Sky Vision and Home expired
on February 15, 2004 and has been extended to April 30, 2004. PCC has also been in discussion
with its creditors on the planned restructuring of its loans. As of March 10, 2004, PCC has signed
its debt restructuring agreement with its creditors.
The Plan submitted to the creditors involves the merger of Sky Vision and Home Cable into one
entity and the infusion of new equity to fund the purchase of set-top boxes. The installation of settop boxes is crucial to the entity’ s new business case where piracy of its service will be drastically
reduced if not eliminated. The Parent Company has a firm commitment for debt financing to fund
the said equity infusion in Sky Vision. This loan for Sky Vision will be fully secured and requires
the full consent of all creditors of the Parent Company. As of March 10, 2004, the Parent
Company has secured 51% consent of its creditors. The Parent Company does not foresee any
reason for its creditors to withhold consent. The Debt Restructuring Agreement of Sky Vision,
Central and Home Cable will be signed upon receipt of the equity infusion of the Parent Company
in Sky Vision.
CPI acquired the production and distribution business of three cable channels of Central and has a
cable lease agreement with Central and its cable affiliates for the airing of these channels to their
franchise areas.
As of December 31, 2003, total amount of the Company’ s related investments in Sky Vision is as
follows:
Carrying value of investment in Sky Vision
Receivable of CPI from Sky Vision
Portion of the production and distribution business
related to Central and its cable affiliates
=240,334
P
368,296
175,938
=784,568
P
#
- 16 9.
Property and Equipment at Cost
Parent Company
Cost:
At January 1
Additions
Disposals
Reclassifications
Transfers from (to) subsidiaries
At December 31
Accumulated depreciation:
At January 1
Depreciation charge for the year
Disposals
Reclassifications
Transfers from (to) subsidiaries
At December 31
Net book value
Land and
Land
Improvements
(see Note 27)
Building
and
Improvements
(see Note 27)
Television,
Radio, Movie
and Auxiliary
Equipment
=304,569
P
–
(11,793)
–
–
292,776
=9,086,200
P
–
(1,772)
249,839
–
9,334,267
=4,139,679
P
35,841
–
57,361
(84,253)
4,148,628
=1,840,995
P
142,174
(1,606)
69,286
(56,030)
1,994,819
P28,268
=
519,776
–
(376,486)
(341)
171,217
P
=15,399,711
697,791
(15,171)
–
(140,624)
15,941,707
=14,670,556
P
702,760
(158,811)
104,268
80,938
15,399,711
–
–
–
–
–
–
=292,776
P
460,216
352,715
–
–
–
812,931
=8,521,336
P
2,810,007
396,808
–
(11,574)
(83,383)
3,111,858
=1,036,770
P
1,241,932
298,958
(1,606)
11,574
(47,821)
1,503,037
=491,782
P
–
–
–
–
–
–
=171,217
P
4,512,155
1,048,481
(1,606)
–
(131,204)
5,427,826
P
=10,513,881
3,534,889
1,100,650
(158,811)
–
35,427
4,512,155
=10,887,556
P
Other
Equipment
Construction
in Progress
Total
December 31,
2003
December 31,
2002
Consolidated
Land and
Land
Improvements
Cost:
At January 1
Additions
Disposals
Reclassifications
At December 31
Accumulated depreciation:
At January 1
Depreciation charge for the year
Disposals
Reclassifications
At December 31
Net book value
Building and
Improvements
Television,
Radio, Movie
and Auxiliary
Equipment
Other
Equipment
Construction
in Progress
Total
December 31,
2003
December 31,
2002
=304,569
P
–
(11,793)
–
292,776
=9,165,837
P
7,954
(1,772)
228,541
9,400,560
=4,826,142
P
100,525
(2,633)
6,435
4,930,469
=2,166,492
P
197,127
(50,146)
141,510
2,454,983
P28,268
=
519,435
–
(376,486)
171,217
P
=16,491,308
825,041
(66,344)
–
17,250,005
=15,667,215
P
902,690
(199,520)
120,923
16,491,308
–
–
–
–
–
=292,776
P
518,281
357,989
–
(8,783)
867,487
=8,533,073
P
3,240,344
483,161
(2,286)
(22,722)
3,698,497
=1,231,972
P
1,466,230
376,951
(34,177)
31,505
1,840,509
=614,474
P
–
–
–
–
–
=171,217
P
5,224,855
1,218,101
(36,463)
–
6,406,493
P
=10,843,512
4,030,619
1,393,756
(199,520)
–
5,224,855
=11,266,453
P
#
- 17 Property and equipment of the Parent Company with a carrying amount of P
=9,219 million as of
December 31, 2003 was pledged as collateral to secure the Parent Company’ s long-term debt
(see Note 14).
Unamortized borrowing costs capitalized as part of property and equipment amounted to
P1,088,964 and P
=
=1,127,760 as of December 31, 2003 and 2002, respectively. Borrowing costs
capitalized for the year ended December 31, 2001 amounted to P
=132,268. No borrowing cost was
capitalized beginning 2002.
The gross carrying value of fully depreciated assets that are still in use amounted to P
=3,504,321 in
2003 and P
=2,977,564 in 2002 in the parent company balance sheets and P
=3,924,146 in 2003 and
P
=3,357,040 in 2002 in the consolidated balance sheets.
10. Other Noncurrent Assets
Parent Company
2002
2003
Tax credits:
With tax credit certificates (TCCs)
P
=1,745,968
Pending issuance of TCCs but supported by
telecast orders
166,763
Deferred charges (net of accumulated amortization
of =
P29,143 in 2003 and P
=5,775 in 2002)
93,249
Production and distribution business - net
(see Notes 8 and 13)
–
Others - net (see Note 22)
101,284
P
=2,107,264
Consolidated
2002
2003
=1,378,522
P
P
=1,745,968
=1,378,522
P
580,653
166,763
582,181
109,719
93,249
109,719
–
130,078
=2,198,972
P
666,591
306,078
P
=2,978,649
709,179
314,771
=3,094,372
P
Tax credits represent claims on the government arising from airing of government commercials
and advertisements. Pursuant to Presidential Decree No. 1362, these will be collected in the form
of TCCs which the Parent Company can use in paying for import duties and taxes on its
broadcasting equipment. The Parent Company expects to utilize these tax credits within the next
10 years.
Investment in club shares (included in “ Others - net” ) with a carrying value of P
=17,232 as of
December 31, 2003 was pledged as part of collateral to secure the Parent Company’ s long-term
debt (see Note 14).
Production and distribution business consists of the production and distribution business of CPI as
discussed in Note 13, and the distribution business in Middle East which represents the
unamortized portion of the goodwill that arose from the sponsorship between Arab Digital
Distribution (ADD) and ABS-CBN FCLLZ Dubai. This agreement grants the Company the right
to operate in the Middle East with ADD as Saudi sponsor. The goodwill is amortized over a
period of 10 years.
#
- 18 Movement of program rights (shown separately in the balance sheets), goodwill (included in
investments and advances account) and production and distribution business follows:
Program Rights
Balance at January 1, 2003
Additions
Amortization during the period
Balance at December 31, 2003
Less current portion
Noncurrent portion
Parent Company
=1,570,765
P
346,008
(486,148)
1,430,625
566,992
=863,633
P
Goodwill
Parent Company
Consolidated and Consolidated
=1,903,679
P
=461,690
P
732,738
–
(819,230)
(43,576)
1,817,187
418,114
880,975
–
=936,212
P
=418,114
P
Production
and Distribution
Business
Consolidated
=709,179
P
–
(42,588)
666,591
–
=666,591
P
In accordance with international accounting standards, the Company adopted a policy of
classifying program rights into current and non-current based on estimated year of usage.
Accordingly, the related obligations for program rights which was previously presented as
“ Accounts payable and other current liabilities” in the balance sheets, was shown separately in the
parent company and consolidated financial statements and was also classified into current and
noncurrent based on expected year of payments.
In the consolidated financial statements, goodwill amounting to P
=302,276 (P
=322,428 in 2002)
which represents goodwill in associates, is presented under “ Investments and advances” account in
the balance sheets, while goodwill amounting to P
=115,838 (P
=139,262 in 2002) which represents
goodwill from subsidiaries are presented as part of “ Other noncurrent assets” account in the
balance sheets. The amortizations of production and distribution business were presented under
the “ General and administrative” expense account in the consolidated statements of income.
11. Bank Loans
Unsecured peso-denominated
Unsecured dollar-denominated
Parent Company and Consolidated
2002
2003
=234,679
P
P
=220,577
190,908
–
=425,587
P
P
=220,577
Peso-denominated loans bear average annual interest rates of 9.92% in 2003 and 11.42% in 2002.
Dollar-denominated loans bear average annual interest rate of 5.0% in 2002.
On September 2, 2002, the Parent Company received a notice of default dated August 30, 2002
from Standard Chartered Bank and BNP Paribas for its outstanding loan balance amounting to
=100,000 and P
P
=190,908 (US$3,600), respectively. In August 2003, BNP Paribas has agreed to
participate in the Exchangeable Notes Facility Agreement (ENFA) and accordingly, the loans have
been classified as long-term (see Note 14). As of March 10, 2004, the Parent Company is still
negotiating with other banks for possible refinancing of the Standard Chartered Bank loan.
#
- 19 12. Accounts Payable and Other Current Liabilities
Trade
Accrued production cost and other
expenses (see Note 13 and 23)
Accrued taxes
Accrued interest and other current
liabilities
Parent Company
2002
2003
=473,431
P
P
=333,851
Consolidated
2002
2003
=693,904
P
P
=696,121
685,054
305,655
685,559
407,023
980,566
417,649
1,038,635
456,487
94,739
P
=1,419,299
172,983
=1,738,996
P
347,898
P
=2,442,234
251,421
=2,440,447
P
13. Related Party Disclosures
In the parent company financial statements, significant transactions of the Parent Company with
its subsidiaries, associates and a related party follow:
Expenses and charges paid by the Parent Company
which are reimbursed by the subsidiaries and
associates
Technical facilities order charges for the use of the
Parent Company’ s facilities
Airtime revenue from Sky Films, ABS-CBN Films,
Star Cinema and Bayan Telecommunications
Holdings, Inc. (Bayantel), a subsidiary of Lopez,
Inc.
Rental charges of the Parent Company for the use
of office space
Blocktime fees charged to Studio 23 for the use
of the Parent Company’ s equipment
2003
2002
P
=434,036
=482,028
P
169,452
126,715
71,092
80,022
38,809
35,770
16,423
18,960
Other transactions with subsidiaries and associates include cash advances for working capital
requirements.
The amounts and balances resulting from the above transactions are reflected in the parent
company balance sheets in the following accounts:
Due from related parties
Advances (see Note 8)
Accounts payable and other current liabilities (see
Note 12)
Due to related parties
2003
P
=150,894
881,389
2002
=160,444
P
886,400
40,854
201,303
13,219
291,665
#
- 20 In the consolidated financial statements, transactions of the Company with its associates and
related parties follow:
Termination cost charges of Bayantel to
ABS-CBN Global
License fees charged by CPI to Central (a),
PCC and Home Cable
Blocktime fees paid by Studio 23 to
Amcara (b)
Expenses and charges paid for by the
Parent Company which are reimbursed
by the concerned related parties
Airtime revenue from Star Cinema and
Bayantel
Rental charges of the Parent Company for
the use of office space
2003
2002
2001
P
=99,846
=147,120
P
=103,852
P
135,788
136,300
103,827
82,675
105,063
114,500
22,152
92,347
50,005
14,031
62,571
45,131
9,214
7,299
–
Other transactions with associates include cash advances for working capital requirements.
On a consolidated basis, the amounts and balances resulting from the above transactions are
reflected in the consolidated balance sheets in the following accounts:
Receivables (see Note 6)
Due from related parties
Advances (see Note 8)
Due to related parties
2003
P
=279,902
273,303
56,104
75,473
2002
=178,561
P
264,799
211,538
113,073
a. License Fees Charged by CPI to Central
On December 29, 2000, the Parent Company and CPI entered into a Sale Agreement with
Central for the acquisition of production and distribution business and the related program
rights and property and equipment of three cable channels, namely, Lifestyle Channel, Pinoy
Blockbuster Channel and Video-ok Channel for P
=671,141. Pinoy Blockbuster Channel and
Video-ok Channel have been renamed as Cinema One and Myx, respectively, in 2003.
CPI entered into a cable lease agreement (Agreement) with Central for the airing of these
channels to the franchise areas of Central and its cable affiliates. The Agreement with Central
is for a period of five years effective January 1, 2001, renewable upon mutual agreement.
Under the terms of the Agreement, CPI will receive license fees from Central computed based
on agreed rates and on the number of subscribers of Central. As the owner of the said cable
channels, CPI will develop and produce its own shows and acquire program rights from
various foreign and local suppliers.
b. Blocktime Fees Paid by Studio 23 to Amcara
Studio 23, Inc. owns the program rights being aired in UHF Channel 23 of Amcara. On
July 1, 2000, it entered into a blocktime agreement with Amcara for its provincial operations.
#
- 21 14. Long-term Debt
Exchangeable notes (see Note 11)
Syndicated loans payable to local banks
Loan payable to a local bank
Less current portion
Parent Company and Consolidated
2002
2003
=3,437,726
P
P
=3,209,868
1,940,000
1,860,000
500,006
500,006
5,877,732
5,569,874
484,438
2,115,971
=5,393,294
P
P
=3,453,903
Exchangeable Notes
On September 2, 2002, the Parent Company entered into an Exchangeable Notes Facility
Agreement (ENFA) with a local bank and certain financial institutions (Facility Lenders) for a
term loan facility with an aggregate amount of P
=3,437,726 for the purpose of raising permanent
working capital and/or refinancing of its short-term loans used or to be used to upgrade its existing
plant and network facilities. The term loan facility is classified as Floating Rate Notes and Fixed
Rate Notes both with a term of 5 years and which are exchangeable into bonds subject to the bond
issuance requirements as provided for in the ENFA. The ENFA is covered by a Mortgage Trust
Indenture (MTI) entered into by the Parent Company and facility lenders over the Company’ s
property and equipment with a net book value of P
=9,219 million and investment in club shares
with a carrying value of P
=17,232 as of December 31, 2003.
On September 16, 2002, short-term loans amounting to P
=3,437,726 were converted to P
=2,838,236
floating rate notes and P
=599,490 fixed rate notes with an interest rate of 8.0808% and 13.1313%,
respectively. Interest payments are due every quarter starting December 16, 2002 while principal
payments will be due every quarter starting September 16, 2003 until September 16, 2007.
The ENFA contains provisions regarding, among others, change in character of the business,
change in controlling ownership, availment of any indebtedness, merger and consolidation,
declaration of dividends, purchase of its own capital stock, maintenance of certain financial ratios
and granting of guarantees. As of December 31, 2003, the Parent Company is in compliance with
the covenants of the ENFA.
In August 2003, BNP Paribas participated in the ENFA and accordingly, the loans have been
classified as long-term (see Note 11).
Syndicated Loans Payable to Local Banks
Syndicated loans payable to local banks consist of long-term loans under JEXIM 4 program of a
local development bank amounting to P
=2,000,000. The loan was used to finance the construction
of the multi-storey building and acquisition of equipment. The loan is payable in 15 unequal
quarterly payments commencing in May 2002 with interest payable quarterly in arrears at 10.93%
per annum.
Loan Payable to a Local Bank
The Parent Company has a Loan Agreement with a local bank for US$37,908 payable in two
equal installments, without need of notice or demand, on March 19, 2002 and 2004. Interest is
payable quarterly at three-fourths percent (3/4%) above 3-month LIBOR.
#
- 22 The Parent Company has a forward foreign exchange agreement (forward contract) with the same
bank which is co-terminus with the term of the loan. Under the terms of the forward contract, the
Parent Company shall pay the local bank, on each due date of the loan, the equivalent Philippine
peso amount of the dollar loan based on its original spot exchange rate of P
=26.38. The Philippine
peso amount of the loan shown in the balance sheets is based on its original spot exchange rate of
=26.38.
P
Under the terms of the above loans, the Parent Company shall use the proceeds of the loans
exclusively for the purpose of financing the construction of its multi-storey building and
acquisition of equipment. The loan covenant requires the Parent Company to, among others,
maintain certain financial ratios; not allow any of its assets to be subject to any lien, except to the
extent allowed in the loan; and, contract another loan with a maturity of more than one year, if
such obligation will result in a violation of the prescribed financial ratios.
With the conversion of majority of ABS-CBN’ s short-term loans in September 2002 to long-term
secured loans in relation to the ENFA, the existing syndicated loans payable to a local bank
amounting to P
=1,860,000 and the long-term loan payable to a local bank amounting to P
=500,006
as of December 31, 2003 were secured, by including them in the MTI discussed above. The
payment schedules of the syndicated loan and the loan payable to a local bank remained the same.
Repayments of long-term debt are scheduled as follows:
2004
2005
2006
2007
=2,115,971
P
1,955,965
855,965
641,973
=5,569,874
P
15. Stockholders’ Equity
a. On April 24, 1998, Benpres Holdings Corporation, Inc. (BHC), then major stockholder of
ABS-CBN, transferred all of its investments in ABS-CBN to Lopez, BHC’ s parent company,
in exchange for convertible and nonconvertible notes (Notes). The convertible notes can be
exchanged by BHC for the ABS-CBN shares transferred. The Notes shall terminate on any
earlier date if the convertible notes have been converted or when Lopez has satisfied its
obligations with respect to all such convertible notes that have been properly converted. After
the transfer, Lopez had all the voting rights associated with the shares.
On December 28, 1998, BHC sold a portion of the Notes to ABS-CBN for P
=800,000, the
equivalent market value of the underlying 40 million ABS-CBN shares.
On September 29, 1999, ABS-CBN Holdings Corporation (50% owned by Lopez), offered
132 million Philippine Deposit Receipts (PDRs) relating to 132 million ABS-CBN shares.
Each PDR grants the holder, upon payment of the exercise price and subject to certain other
conditions, the delivery of one ABS-CBN share or the sale of and delivery of the proceeds of
such sale of one ABS-CBN share. The ABS-CBN shares are still subject to ownership
restrictions on shares of corporations engaged in mass media and ABS-CBN may reject the
transfer of shares to persons other than Philippine nationals. The PDRs may be exercised at
#
- 23 any time from October 7, 1999 until the expiry date as defined in the terms of the offering.
Any cash dividends or other cash distributions in respect of the underlying ABS-CBN shares
shall be applied by ABS-CBN Holdings Corporation towards payment of operating expenses
and any amounts remaining shall be distributed pro-rata among outstanding PDR holders. The
PDRs were listed in the Philippine Stock Exchange on October 7, 1999.
The Notes held by ABS-CBN were amended to allow for conversion into shares or into PDRs.
ABS-CBN converted P
=200,000 of the Notes into PDRs underlying 10 million ABS-CBN
shares and these are shown as “ Philippine deposit receipts convertible to common shares” in
the Stockholders’ Equity section of the balance sheets. The remaining P
=600,000 of the Notes
underlying 30 million ABS-CBN shares were converted into 30 million PDRs and these PDRs
were included in the PDR offering described above.
b. On March 29, 2000, the BOD approved an ESOP covering 6,080,306 shares. In 2002, all the
shares acquired by the Parent Company covering this ESOP, were exercised by the employees.
As of December 31, 2003 and 2002, there are no more outstanding ESOP.
c. On March 28, 2001, the BOD approved the additional appropriation on retained earnings
amounting to P
=2.3 billion for expansion projects.
d. Unappropriated retained earnings available for dividend distribution is adjusted to exclude the
Company’ s accumulated equity in net losses of subsidiaries and associates amounting to
=1,873,675, P
P
=1,654,052 and P
=964,895 as of December 31, 2003, 2002 and 2001, respectively.
16. Agency Commission, Marketing Expenses and Co-producers’ Share
Agency commission
Marketing expenses and
co-producers’ share
Parent Company
2002
2003
=1,312,650
P
=1,427,440 P
2003
P
=1,542,477
Consolidated
2002
2001
=1,418,258 P
P
=1,380,707
433,704
P
=1,861,144
438,266
P
=1,980,743
411,963
=1,830,221
P
398,035
=1,710,685
P
255,852
=1,636,559
P
Industry rules allow ABS-CBN to sell up to 18 minutes of commercial spots per hour of television
programming. These spots are sold mainly through advertising agencies which act as the buying
agents of advertisers, and, to a lesser extent, directly to advertisers. Substantially, all gross airtime
revenue, including airtime sold directly to advertisers, is subject to a standard 15% agency
commission.
Marketing expenses are commissions paid to the Company’ s account executives who promote the
Company’ s entertainment programs and news and current affairs programs to advertising agencies.
The Company has co-produced shows which are programs produced by ABS-CBN together with
independent producers. Under this arrangement, ABS-CBN provides the technical facilities and
airtime, and handles the marketing of the show. The co-producer shoulders all other costs of
production. The revenue earned on these shows is shared between ABS-CBN and the co-producer.
#
- 24 17. Production Costs
Personnel expenses and talent fees
(see Note 23)
Facilities related expenses
(see Notes 13 and 24)
Other program expenses
(see Note 13)
Parent Company
2002
2003
2003
Consolidated
2002
2001
P
=2,021,474
=1,708,544
P
P
=2,093,655
=1,784,635
P
=1,588,917
P
626,193
626,111
651,983
627,836
545,717
713,830
P
=3,361,497
625,072
=2,959,727
P
754,883
P
=3,500,521
670,925
=3,083,396
P
529,626
=2,664,260
P
18. Cost of Sales and Services
Inventory cost
Termination costs (see Note 13)
Facilities related expenses
(see Notes 13 and 24)
Personnel expenses (see Note 23)
Other expenses (see Note 13)
2003
P
=483,281
393,898
Consolidated
2002
=429,436
P
249,418
2001
=356,185
P
220,564
312,266
152,292
474,969
P
=1,816,706
311,852
129,053
361,612
=1,481,371
P
148,972
125,302
249,575
=1,100,598
P
19. General and Administrative Expenses
Personnel expenses (see Note 23)
Facilities related expenses
(see Notes 13 and 24)
Contracted services
Entertainment, amusement and
recreation
Provision for doubtful accounts
Other expenses (see Note 13)
Parent Company
2002
2003
=458,015
P
P
=578,494
2003
P
=1,374,699
Consolidated
2002
2001
=1,107,850
P
=842,406
P
241,046
141,689
203,642
84,965
426,945
342,040
363,893
180,723
276,065
153,250
99,201
73,508
273,712
P
=1,407,650
86,574
37,620
280,889
=1,151,705
P
111,462
179,430
611,897
P
=3,046,473
101,485
153,477
700,977
=2,608,405
P
92,375
139,430
820,812
=2,324,338
P
Parent Company
2002
2003
2003
20. Interest and Other Financial Charges
Interest expense and other financial
charges
Interest income
(P
=636,415)
39,868
(P
=596,547)
(P
=687,567)
14,232
(P
=673,335)
(P
=637,780)
52,070
(P
=585,710)
Consolidated
2002
(P
=692,113)
23,124
(P
=668,989)
2001
(P
=652,976)
23,388
(P
=629,588)
#
- 25 21. Miscellaneous
Intercompany revenue (see Note 13)
Foreign exchange losses
Dividend income
Minority interest
Others
Parent Company
2002
2003
=220,645
P
P
=303,188
(13,558)
(10,705)
280
79
–
–
59,573
179,201
=266,940
P
P
=471,763
2003
P
=21,249
(8,182)
94
(27,393)
73,255
P
=59,023
Consolidated
2002
=24,544
P
(7,410)
292
3,167
24,512
=45,105
P
2001
P2,023
=
(17,387)
7,289
(3,100)
65,680
=54,505
P
22. Income Tax
Significant components of deferred tax assets and liabilities are as follows:
Deferred tax assets:
Current (shown as part of “ Other current assets
- net” ) (see Note 7)
Allowance for doubtful accounts
Unrealized foreign exchange loss
Allowance for inventory obsolescence
Less valuation allowance
Noncurrent (shown as part of “ Other noncurrent
assets - net” ) (see Note 10)
NOLCO
Accrued retirement expense
MCIT
Preoperating expenses written off
Less valuation allowance
Deferred tax liabilities noncurrent - net
Capitalized interest, duties and taxes (net
of accumulated depreciation)
Project development costs written off
Accrued retirement expense and others
Parent Company
2002
2003
P
=35,527
13,633
Consolidated
2002
2003
49,160
–
P
=49,160
=26,506
P
18,747
–
45,253
–
=45,253
P
P
=74,946
13,633
2,900
91,479
32,432
P
=59,047
=81,342
P
18,747
2,150
102,239
40,144
=62,095
P
P
=–
–
–
–
–
–
P
=–
=–
P
–
–
–
–
–
=–
P
P
=212,712
60,778
7,856
–
281,346
281,346
P
=–
=79,119
P
5,525
6,394
167,925
258,963
258,963
=–
P
P
=355,107
(68,226)
(62,312)
P
=224,569
=379,176
P
(90,968)
(48,405)
=239,803
P
P
=355,107
(68,226)
(62,011)
P
=224,870
=379,176
P
(90,968)
(48,405)
=239,803
P
2003
P
=672,731
(11,885)
P
=660,846
Consolidated
2002
2001
=444,267
P
P854,537
=
(12,843)
(60,506)
=431,424
P
=794,031
P
The provision for (benefit from) income tax is as follows:
Current
Deferred
Parent Company
2002
2003
=415,494
P
P
=590,558
(16,687)
(19,141)
=398,807
P
P
=571,417
#
- 26 MCIT of the subsidiaries amounting to P
=7,856 can be claimed as tax credit against future
regular corporate income tax as follows:
Year Incurred
2001
2002
2003
Expiry Dates
December 31, 2004
December 31, 2005
December 31, 2006
Amount
=2,585
P
2,172
3,099
=7,856
P
NOLCO of the subsidiaries amounting to P
=664,727 can be claimed as deductions from regular
corporate income tax as follows:
Year Incurred
2001
2002
2003
Expiry Dates
December 31, 2004
December 31, 2005
December 31, 2006
Amount
=108,346
P
120,800
435,581
=664,727
P
The reconciliation of income from continuing operations before income tax computed at the
statutory tax rate to provision for income tax as shown in the statements of income is as follows:
Statutory tax rate
Additions to (reduction in) income
taxes resulting from the tax
effects of:
Equity in net losses of investees
Interest income subject to final
tax
Change in valuation allowance
Nondeductible interest and
others
Effective tax rate
Parent Company
2002
2003
32%
32%
2003
32%
Consolidated
2002
32%
2001
32%
4
16
2
5
1
(1)
–
(1)
–
(1)
1
(1)
6
–
1
1
36%
1
48%
6
40%
8
50%
2
36%
23. Pension Plan
The Company has a funded, noncontributory and actuarially computed pension plan covering
substantially all of its employees. The benefits are based on years of service and compensation
during the last year of employment.
As of January 1, 2003, the latest actuarial valuation of the Parent Company, the actuarial present
value of pension benefits amounted to P
=360.9 million. The fair value of the plan assets amounted
to P
=60.9 million. The unfunded present value of pension benefits amounted to P
=300.0 million.
On a consolidated basis, as of January 1, 2003, the latest actuarial valuation of the Company, the
actuarial present value of pension benefits amounted to P
=373.7 million. The fair value of the plan
assets amounted to P
=60.9 million. The unfunded present value of pension benefits amounted to
=312.8 million.
P
#
- 27 The principal actuarial assumptions used to determine pension benefits were a discount rate of
12%, a salary increase of 9% and a return on plan assets of 12%. Actuarial valuations are made at
least once every three years. The Company’ s annual contribution to the pension plan consists of
payment covering the current service cost for the year plus payment towards funding the actuarial
accrued liability.
Total pension expense of the Company amounted to P
=87.6 million in 2003 and P
=59.0 million in
2002 and P
=19.7 million in 2001 (P
=82.7 million in 2003 and P
=55.7 million in 2002 for the parent
company).
24. Commitments and Contingencies
a. The Parent Company and subsidiaries lease office facilities, space and satellite equipment.
Future annual minimum lease payments are as follows:
Period
January 1, 2004 - December 31, 2004
January 1, 2005 - December 31, 2005
January 1, 2006 - December 31, 2006
January 1, 2007 - December 31, 2007
January 1, 2008 - December 31, 2008
Thereafter
Amount
=279,269
P
177,445
144,367
134,787
117,144
35,419
b. The Company has contingent liabilities with respect to claims and lawsuits filed by third
parties. Management, after consultations with outside legal counsels, is of the opinion that the
eventual liability from these claims cannot be presently determined, if any, and an adverse
judgment in any one case will not materially affect its financial position and results of
operations.
c. As a customer of the Manila Electric Company ("Meralco"), an associate of Lopez, the
Company could expect to receive a refund for some of its previous billings. On April 30,
2003, the Third Division of the Supreme Court (SC) denied the Urgent Motion for
Consideration filed by Meralco, rendering the SC decision dated November 15, 2002 final and
executory. The decision mandates that Meralco refund its customers P0.167 per kilowatt-hour
starting with the billing cycles from February 1998 until May 2003, or credit the refund in
favor of the customers against their future power consumption.
Meralco had reached an agreement with the Energy Regulatory Commission (ERC) on the
manner and timing of the refund. The refund to the smaller, mostly residential, customers
(Refund Phases I to III) will first be satisfied and is presently ongoing. Refunds to
commercial and industrial customers (Refund Phase IV) are proposed to be paid over a period
of approximately five years starting May 2005. Details of Refund Phase IV will require further
ERC approval.
The Company is covered by Refund Phase IV. It will recognize the Meralco refund when it is
virtually certain of collection, both as to amount and timing of receipt.
#
- 28 25. EPS Computations
Basic EPS amounts are calculated by dividing the net income for the period attributable to
common shareholders by the weighted average number of common shares outstanding during the
period.
For the purpose of calculating diluted EPS, the net income attributable to common shareholders
and the weighted average number of shares outstanding are adjusted for the effects of all dilutive
potential common shares from exercise of share options. The number of common shares is the
weighted average number of common shares plus the weighted average number of common shares
which would be issued on the exercise of share options. Share options are deemed to have been
converted into common shares on the date when the options were granted.
The following table presents information necessary to calculate EPS:
(a) Income from continuing operations
after income tax
(b) Loss from discontinuing operations
after income tax
(c) Net income
(d) Weighted average shares
outstanding
Number of shares under option
Weighted number of shares that
would have been issued at fair
value
(e) Adjusted weighted average common
shares - diluted
Parent Company
2002
2003
2003
Consolidated
2002
2001
P
= 1,011,427
=438,094
P
P
=1,011,427
=438,094
P
=1,386,552
P
(2,253)
P
=1,009,174
(272,314)
P165,780
=
(2,253)
P
=1,009,174
(272,314)
P165,780
=
(8,219)
=1,378,333
P
769,583,312
–
769,583,312
–
769,583,312
–
769,583,312
–
–
–
–
–
769,583,312
769,583,312
769,583,312
769,583,312
769,456,218
769,583,312
825,306
(952,400)
Basic EPS:
Income from continuing operations
after income tax (a/d)
Loss from discontinuing operations
after income tax (b/d)
Basic EPS (c/d)
P
=1.314
=0.569
P
P
=1.314
=0.569
P
=1.802
P
(.003)
P
= 1.311
(0.354)
P0.215
=
(.003)
P
=1.311
(0.354)
P0.215
=
(0.011)
P1.791
=
Diluted EPS (c/e)
P
= 1.311
=0.215
P
P
=1.311
=0.215
P
=1.791
P
Outstanding stock options will have a dilutive effect under the treasury stock method only when
the average market price of the underlying common shares during the period exceeds the exercise
price of the option.
In 2001, where the effect on EPS of the assumed conversion of stock options would be antidilutive, basic and diluted EPS are stated at the same amount. As of December 31, 2003 and
2002, there are no more outstanding ESOP (see Note 15).
#
- 29 26. Note to Statements of Cash Flow
Noncash investing and financing
activities:
Conversion of short-term loans to
long-term debt
Transfer of TCC from a subsidiary
and an associate
Transfer of property and equipment
from subsidiaries
Sale of ESOP on account
Parent Company
2002
2003
2003
Consolidated
2002
2001
P
=190,908
=3,437,726
P
P
=190,908
=3,437,726
P
=–
P
–
232,997
–
201,305
–
–
–
45,511
–
–
–
–
–
–
82,558
27. Registration with Philippine Economic Zone Authority
On February 13, 2003, the Philippine Economic Zone Authority (PEZA) under Resolution
No. 03-038 of its Board of Directors, approved the Parent Company’ s application for the
declaration of the 10,000 square meter lot located along Mother Ignacia Avenue corner Sgt.
Esguerra Street, Diliman Quezon City, as an Information Technology (IT) Zone to be known as
Eugenio Lopez Jr. Communication Center (ELJCC) and registration of the Company as
Developer/Operator of the said IT zone.
Pursuant to Republic Act 7916 (as amended), its Implementing Rules and Regulation, and PEZA
Board Resolution No. 03-038 on June 25, 2003, the President of the Philippines issued
Proclamation No. 410 creating and designating the 10,000 square meters of land where ELJCC is
located, as an Information Technology (IT) Zone. Accordingly the Parent Company became a
PEZA registered Developer/Operator of ELJCC subject to the terms and condition of the
Registration Agreement.
The Parent Company, however, is not entitled to PEZA incentives under Republic Act No. 7916
(as amended).
28. Other Matter
In 1972, the Parent Company discontinued its operations when the government took possession of
its property and equipment. In the succeeding years, the properties were used without
compensation to the Parent Company by Radio Philippines Network, Inc. (RPN) from 1972 to
1979, and Maharlika Broadcasting System (MBS) from 1980 to 1986. A substantial portion of
these properties was also used from 1986 to 1992 without compensation to the Parent Company by
People’ s Television 4, another government entity. In 1986, the Parent Company resumed
commercial operations and was granted temporary permits by the government to operate several
television and radio stations.
The Parent Company, together with Chronicle Broadcasting System, filed a civil case on
January 14, 1988 against Ferdinand E. Marcos and his family, RPN, MBS, et. al, before the
Sandiganbayan to press collection of the unpaid rentals for the use of its facilities from September
1972 to February 1986 totaling P
=305,400 plus legal interest compounded quarterly and exemplary
damages of P
=100,000.
#
- 30 The BOD resolved on June 27, 1991 to declare as scrip dividends, in favor of all stockholders of
record as of that date, whatever amount that may be recovered from the foregoing pending claims
and the rentals subsequently settled in 1995. The scrip dividends were declared on March 29,
2000. In 2003, additional scrip dividends of P
=13,290 were recognized for the said stockholders.
On April 28, 1995, the Parent Company and the government entered into a compromise settlement
of rental claims from 1986 to 1992. The compromise agreement includes payment to the Parent
Company of P
=29,914 (net of the government’ s counterclaim against the Parent Company of
=67,586) by way of tax credits or other forms of noncash settlement as full and final settlement of
P
the rentals from 1986 to 1992. The TCCs were issued in 1998.
#