1. business and industrial

COVER SHEET
4 4 0 9
SEC Registration Number
2 G O
G R O UP ,
[ F o r m e r l y
A T S
( A T S C ) ,
I N C .
C o n s o l i d a t e d
I n c . ]
(Company’s Full Name)
1 2 T H
U. N.
F L O O R
T I M E S
A V E.
C O R N E R
E R M I T A
M A N I L A
P L A Z A
T A F T
B U I L D I N G
A V E.
(Business Address: No. Street City/Town/Province)
1 2
JEREMIAS E. CRUZABRA
(02) 528-7412 / (02) 528-7540
(Contract Person)
(Company Telephone Number)
3 1
Month
Day
(Fiscal Year)
0 5
1 7 - A
3 1
Month
Day
(Annual Meeting)
(Form Type)
DECEMBER 31, 2012
(Secondary License Type, If Applicable)
Corporation Finance Department
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
1,965
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.
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, 2012
2.
SEC Identification Number 4409
4.
Exact name of issuer as specified in its charter 2GO Group, Inc.
5.
3. BIR Tax Identification No. 000-313-401
Philippines
6.
Province, Country or other jurisdiction of incorporation
(SEC Use Only)
Industry Classification Code:
or organization
7.
th
12 Floor Times Plaza Bldg. United Nations Ave. corner Taft Ave., Ermita, Manila ______1000____
Address of principal office
8.
Postal Code
(02) 528-7412 / (02) 528-7540
Issuer's telephone number, including area code
9.
ATS Consolidated (ATSC), Inc.; Sergio Osmeña Blvd., North Reclamation Area, Cebu City
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
Number of Shares of Common Stock Outstanding and
Amount of Debt Outstanding
Common stock, P 1 par value
2,446,136,400
11. Are any or all of these securities listed on a Stock Exchange.
Yes [X]
No [ ]
Philippine Stock Exchange - Common Stock
12. Check whether the issuer:
(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17.1 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. Aggregate market value of the voting stock held by non-affiliates as of March 31, 2013:
P 477,587,276.35
2
TABLE OF CONTENTS
PAGE NO.
PART I – BUSINESS AND GENERAL INFORMATION
Item
Item
Item
Item
1
2
3
4
Business
Properties
Legal Proceedings
Submission of Matters to a Vote of Security Holders
4
16
19
20
PART II – OPERATIONAL AND FINANCIAL INFORMATION
Item 5
Item 6
Item 7
Item 8
Market for Registrant’s Common Equity and
Related Stockholder Matters
Management’s Discussion and Analysis of Financial Condition
& Results of Operations
Financial Statements
Information on Independent Accountant and Other Related
Matters
20
21
32
33
PART III – CONTROL AND COMPENSATION INFORMATION
Item 9
Item 10
Item 11
Item 12
Directors and Executive Officers of the Registrant
Executive Compensation
Security Ownership of Certain Beneficial Owners and
Management
Certain Relationships and Related Transactions
34
41
42
44
PART IV – CORPORATE GOVERNANCE
45
Item 13
45
Corporate Governance
PART V – EXHIBITS AND SCHEDULES
Item 14
a. Exhibits
b. Reports on SEC Form 17-C
60
60
SIGNATURES
INDEX TO EXHIBITS, FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES
3
PART I – BUSINESS AND GENERAL INFORMATION
Item 1. Business
2GO GROUP, INC.
Business Development
2GO Group, Inc. (the “Registrant”, the “Company”, or “2GO”), formerly ATS Consolidated (ATSC), Inc., was formed
and organized in May 26, 1949 under the corporate name William Lines, Inc.
Driven by the vision of providing the nation with the best shipping services, on December 21, 1995, William Lines, Inc.,
Carlos A. Gothong Lines, Inc. and Aboitiz Shipping Corporation consolidated their resources and expertise and
marked the birth of William, Gothong & Aboitiz, Inc. (“WG&A”). Thereafter, on February 4, 2004, WG&A changed its
corporate name to Aboitiz Transport System (ATSC) Corporation as a result of the buyout that Aboitiz Equity
Ventures, Inc. (AEV) made of the respective interests of Chiongbian and Gothong in WG&A in 2002. On August 24,
2011, the Securities and Exchange Commission (SEC) approved the change of corporate name of Aboitiz Transport
System (ATSC) Corporation to ATS Consolidated (ATSC), Inc. On March 9, 2012, the SEC approved a subsequent
change of the corporate name of ATS Consolidated (ATSC), Inc. to 2GO Group, Inc.
During the past three (3) years, 2GO and its subsidiaries have engaged into mergers and significant purchases of
shares of stocks.
In July 2010, the SEC approved the statutory merger of the Registrant with Zoom in Packages, Inc. (ZIP), a wholly
owned subsidiary of the Company. Further, in August 2010, the SEC also approved the statutory merger of the
Company with another wholly owned subsidiary – Reefer Van Specialists, Inc (RVSI). The mergers are expected to
further improve the effectiveness and efficiency of freight services of 2GO as well as reduce costs as people,
processes, systems are integrated.
On December 01, 2010, the former major stockholders of 2GO, namely AEV and Aboitiz and Company, Inc. (ACO),
sold their shareholdings in 2GO to Negros Navigation Co., Inc. (NENACO), which sale was consummated on
December 28, 2010. The equity value included all the logistics and shipping businesses of the Company, except its
interest in its joint ventures with the Jebsen Group of Norway. AEV’s and ACO’s shareholdings in 2GO represented
77.24% and 15.96%, respectively, of the total outstanding common shares of 2GO. In February 2011, as a result of
the mandatory tender offer requirement, NENACO's ownership in 2GO increased by 4.92%.
On December 21, 2012, NENACO sold 240,000,000 common shares of 2GO at P1.65 per share to public
shareholders. Thus, decreasing NENACO’s ownership in 2GO from 98.12% to 88.31%.
The majority owner of the registrant, NENACO, is one of the oldest domestic shipping companies in the Philippines. It
was organized and registered with the SEC on July 26, 1932 for the purpose of transporting passengers and cargoes
at various ports of call in the Philippines. Further, its principal office is located at Pier 2, North Harbor, Tondo, Manila.
Corporate Structure
4
On various dates in 2011, the SEC approved the application of the Company and its subsidiaries to amend their
Articles of Incorporation and By-laws, which include, among others, the change in their corporate names to ATS
Consolidated (ATSC), Inc. [formerly Aboitiz Transport System (ATSC) Corporation], ATS Express, Inc. (formerly
Aboitiz One, Inc.), and ATS Distribution, Inc. (formerly Aboitiz One Distribution, Inc.).
Further, to create a unified identity for the Company and its brand structure, in February and March 2012, the
Registrant and its subsidiaries amended its Articles of Incorporation and By-Laws to further change its corporate name
to 2GO Group, Inc. [formerly ATS Consolidated (ATSC), Inc.], 2GO Express, Inc. (formerly ATS Express, Inc.), and
2GO Logistics, Inc. (formerly ATS Distribution, Inc.).
NN-ATS Logistics Management & Holdings Co., Inc. (NALMHCI) was organized and incorporated in November 2011.
It is 100%-owned by 2GO. The purpose of NALMHCI is primarily to act as managing agents, local agents or
representatives of (i) subsidiaries and affiliates engaged in logistics activities, (ii) corporations, (iii) partnerships, (iv)
agencies, (v) associations, (vi) enterprises, (vii) establishments, (viii) institutions, private or governmental, domestic or
foreign, except the management of funds, portfolios, or other similar assets of the managed entities; and to undertake,
organize, form, promote, develop or establish businesses, and all forms of enterprises, whether here or abroad, as are
necessary, suitable, or convenient to be undertaken, organized, formed, promoted, developed or established to carry
out, directly or indirectly, the purposes and interests or to enhance the businesses or to render more valuable or
profitable any of its rights, properties, interests or enterprises.
Further, on March 8, 2012, the SEC approved the registration of Special Container and Value Added Services, Inc.
(SCVASI), a 100%-owned company by the registrant as well. It has a primary purpose of engaging in domestic and/or
international business of transporting any and all kinds of goods and cargoes, by sea, air and land, functioning as nonvessel operating common carrier, engaging in cargo forwarding including acting as cargo consolidator and break-bulk
agent, and courier for mails, letters, pouches, other cargoes and personal effects of any and all kinds, types and
nature.
Brand Structure
The Company is engaged in the movement of people operating under brand names ‘SuperFerry’, ‘SuperCat’, and
‘Cebu Ferries’ and in the movement of cargos operating under the brand name ‘2GO’.
However, with the change in the Company’s corporate name to “2GO Group, Inc.”, the Company and its subsidiaries
started the standardization of its brands on the latter part of 2011 and implemented the following brand structure:
The Company adopted the stronger brand “2GO” as its flagship brand for its various businesses. Going forward, the
Company will function with three core business units, as follows:
2GO Freight —this unit will continue to handle commercial and personal shipping needs including household goods,
auto rolling cargo shipping, containerized shipping, break bulk & LCL consolidation, freight refrigerated vans, and ISO
tank shipments.
5
2GO Travel — integrating the country’s leading passenger ships and fast ferries, Negros Navigation, SuperFerry,
SuperCat, and Cebu Ferries, this unit offers the biggest fleet and the widest choice of route linking Luzon, Visayas,
and Mindanao, through land and sea multimodal transport linkages.
2GO Supply Chain —this unit leverages on the Company’s more than 100 years of expertise in Logistics,
Distribution, Warehousing, and Inventory Management.
With the change in company name and brand structure, the Company further secured the approval of the Maritime
Industry and Authority as to the change of names of majority of its vessels in the latter part of 2012, to wit:
OLD Vessel Names
MV “Superferry 1”
MV “Superferry 2”
MV “Superferry 5”
MV “Superferry 12”
MV “Superferry 20”
MV “Superferry 21”
MV “Cebu Ferry 1”
MV “Cebu Ferry 2”
MV “Cebu Ferry 3”
MV “Supercat 22”
MV “Supercat 23”
MV “Supercat 25”
MV “Supercat 30”
MV “Supercat 32”
NEW Vessel Names
MV “Sta. Rita De Casia”
MV “St. Thomas Aquinas”
MV “St. Joan of Arc”
MV “St. Pope John Paul II”
MV “St. Gregory the Great”
MV “St. Leo the Great”
MV “St. Augustine of Hippo”
MV “St. Anthony de Padua”
MV “St. Ignatius of Loyola”
MV “St. Nuriel”
MV “St. Uriel”
MV “St. Sealthiel”
MV “St. Jhudiel”
MV “St. Braquiel”
All these changes reflect an important redirection for 2GO i.e. towards becoming a world-class transport, logistics, and
supply chain company.
Vessel Fleet
As of December 31, 2012, 2GO and its subsidiaries has a total fleet of 19 operating vessels, of which 13 are
company-owned ships. The fleet consists of 6 fast crafts, 10 RoRo/Pax vessels (of which 3 vessels are time
chartered from its parent company, NENACO), and 3 freighters (all of which are time chartered from NENACO). The
Company’s operating vessel fleet has a combined Gross Registered Tonnage of approximately 122,297 metric tons,
total passenger capacity of approximately 16,348 passengers and aggregate cargo capacity of approximately 1,944
twenty-foot equivalent units (TEUs).
During the course of the year 2012, 2GO and its subsidiaries sold 2 freighter vessels and laid-up 1 fast craft and 2
RoRo/Pax vessels, as part of management’s cost reduction efforts. Management endeavored to reduce vessel
capacity to mitigate inefficient assets that cause enormous expenses in repairs and maintenance.
Currently, 2GO operates 7 RoRo/Pax vessels calling on Manila as their homeport. These vessels are larger
coastwise vessels that sail from Luzon to Visayas and Mindanao. Further, 2GO operates 3 medium-sized vessels,
formerly called the Cebu Ferries, 2 of which have Batangas as their homeport, plying on the Batangas-Caticlan route,
while 1 vessel retained its homeport in Cebu. The 6 fast craft passenger vessels, on the other hand, are smaller fast
crafts that ply on short distances. The Company also operates 3 purely-cargo vessels to fully complement its freight
business.
Ports of call
The Company’s extensive presence throughout the country is carried out through its branch operations and agency
networks. These are located primarily in Bacolod, Batangas, Butuan, Cagayan de Oro, Calapan, Caticlan, Cebu,
Cotabato, Davao, Dipolog, Dumaguete, General Santos, Iligan, Iloilo, Jagna, Manila, Ormoc, Ozamis, Puerto
Princesa, Surigao, Tagbilaran, and Zamboanga.
Market Share
As of December 31, 2012, 2GO continues to dominate the Philippine Sea Travel with 96% market share in the
passage service, specifically in ports that they serve, owing to the addition of the Batangas-Caticlan route to the
market base. Freight market share is estimated at 31%.
6
Subsidiaries and Affiliate of 2GO
In 2012, 2GO has four (4) direct subsidiaries and one (1) affiliate, 2GO Express, Inc., The Supercat Fast Ferry Corp.
(SFFC), NALMHCI, SCVASI and MCC Transport Philippines, Inc. (MCCP).
Product Lines and Markets
Briefly, the Company’s product lines and solutions are described as follows:
1. PASSAGE
In 2011, the NN-2GO group, which operated the passage brands under Negros Navigation, SuperFerry, CebuFerries
and Supercat, improved its course as a low-cost operator in the passenger travel market. In January of 2012, the
fusion of a more solid passenger brand, now operating under the name “2GO Travel,” is marketed not only as a lowcost alternative but also as seamless and more leisurely way to travel the Philippine islands. As the 2GO Travel brand
gains its momentum back in the passenger travel market, albeit tough competition from an increasing number of LowCost-Carriers (LLC Airlines), 2GO Travel still maintained its share in the total passenger market.
As 2GO Travel in tandem with 2GO Freight further rationalized routes, a new route was created to service the need
and to aggressively enter the Roro Passenger traffic in the Batangas Port. Furthermore, a new service route was
created, serving Batangas to Caticlan direct. This new route not only made travel from Manila to Panay Island more
comfortable and shorter for the RoRo Market (served by competitors by bus route via Mindoro Island), but also
attracted the tourist market due to Caticlan Port being in close proximity to the popular beach destination, Boracay.
To continue to drive passenger volume and sales, the trademarked “Crazy Sale,” a strong price-centric promotion
offered special discounted rates for selected dates of travel. These special promotions were also heavily marketed
during special events and festivals in all ports of call.
The rapid increase in on-line traffic and on-line booking prompted the improvement and enhancement of the 2GO
Travel website. More information, pictures of modernized vessel accommodations and even information regarding key
destinations are featured on the website to further drive online sales. Moreover, aggressive Social Media campaigns in
popular social media networks such as FaceBook and Twitter has also been utilized to ensure brand exposure in
digital media. The 2GO Travel FaceBook page features all destinations served and things to do in the areas. The page
also promotes all current price-centric promotions and group travel packages, updated hourly to ensure maximum
exposure. This FaceBook page is another channel where customers can also inquire about rates and packages, as an
added customer service.
2GO Travel also further enhanced its “TraveLink” service, which is a service that includes bus and/or boat transfers
with the Ferry ticket. This provides a hassle-free, seamless transportation service that 2GO Travel is now known. The
heavily marketed Boracay Package is always sold complete with TraveLink transfers and has been proven successful.
The 2GO TraveLink service also enables 2GO Travel to offer more travel frequencies to its customers, as an example,
the once a week Manila to Tagbilaran (Bohol) route can be adequately serviced and promoted as 6 times a week
th
since Manila to Cebu is 5 times a week with a connection from Cebu to Tagbilaran via SuperCat; the 6 is a direct
service from Manila to Tagbilaran. When Dumaguete port was closed due to damages it suffered from Typoon Quinta
in the last quarter of 2012, Manila to Dumaguete market was served by TraveLink via Banago and Bredco Ports in
Bacolod. In addition, TraveLink can also include a variety of hotel accommodation in all destinations served as 2GO
Travel has made many partnerships with hotels.
2. FREIGHT
In 2012, the company continued with the rationalization of its fleet with the disposal of two freighters which were too
big for the domestic market and lay-up of two ropax vessels with limited cargo capacity. This resulted in a reduction of
the number of vessels with cargo capability from 17 down to 13 vessels or a reduction in fleet size by 18%. Improved
routing with higher frequency of trips particularly for the ropax vessels as well as better vessel capacity utilization (load
factor) helped compensate for the reduction in fleet size. We were also able to successfully implement a 5% rate
increase by imposing a fuel surcharge to clients for southbound shipments, and adjusting upwardly rates of some
clients who were previously given rates that were not commensurate to the type of service provided.
The combined 2012 volume of 2GO Freight and MCCP cornered 40% market share, making 2GO still the market
leader in the freight business. The Company provides the most comprehensive service network among the shipping
lines, covering at least 17 port links from Luzon (Manila and Batangas). 2GO also has the highest frequency of trips
from Manila to the major ports, with five (5) trips a week to Cebu, Bacolod, Iloilo, Cagayan de Oro, twice weekly
7
sailings to Butuan, and fixed weekly sailings to Zamboanga, Ozamis, Iligan, Tagbilaran, and other ports in the Visayas
and Mindanao. This makes 2GO the preferred shipping line of multinational companies as well as large domestically
owned manufacturing companies that practice just-in-time (JIT) inventory where lower stock levels are kept in
warehouses.
2GO also launched in 2012 the Batangas-Caticlan direct service. This is a major improvement over the RoRo service
of other operators where vehicles from Batangas to Caticlan have to take a RoRo from Batangas to Calapan, Mindoro,
travel over land for three (3) to four (4) hours, and then take another RoRo from Roxas, Mindoro to Caticlan. Even if
we priced ourselves higher than the RoRo operators, truckers tended to patronize our direct service owing to the
shorter travel time and lower maintenance cost of their trucks due the direct trip. 2GO serves the Batangas-Caticlan
route six (6) times a week.
The stable volume of 2GO Express in the consolidation of LCL (Less Container Load) shipments and parcels derived
from the domestic as well as those from the international markets together with the steady improvement of the 2GO
Logistics in the supply chain market, including the growing market of the special containers, like refrigerated vans
(reefers) and Isotanks, also helped provide a solid base for the freight business. As with the dry container market,
2GO is also the dominant player when it comes to reefer vans and Isotanks.
On the cost side, 2GO was able to reduce terminal operating expenses by 23% or P388 million. This was the result of
reduced hustling expenses by minimizing extra movements of containers thru proper planning and close coordination
with consignees to allow direct delivery from port to consignees' door and reduction in leased areas for container
yards by more efficient use of space. For 2013, more substantial savings are expected to be generated with the
consolidation of operations in Manila from 2 ports - South Harbour and North Harbour, to only one port-- North
Harbour.
Competition
1. PASSAGE
An improved 2012 economy and strong domestic spending resulted in increased of Filipinos travelers in some of the
major ports served by 2GO Travel. Competition, however, remained intense with fares and margins under pressure as
industry players try to outdo each other in increasing their share of these markets.
On the long haul routes, Manila-Visayas and Manila-Mindanao, 2GO Travel competes with the airline sector. Cebu
Pacific and Air Philippines deployed bigger crafts further heating up competition on the Manila-Cebu, Cagayan and
Davao routes. Smaller crafts were used to open their service in smaller markets like Iloilo-Cagayan and Davao. Asia
Region-operator Tiger Airways also opened its service on the Manila-Cebu route. Airlines compete primarily by
discounting fares.
2GO Travel on the other hand, continued to drumbeat its bigger baggage allowance and lower shipping fares
especially on late ticket purchases (purchases close to travel date). In July 2012, 2GO Travel has bundled the cost of
meals in its ticket price. At about this time, the airlines came under heavy criticism from the riding public and
Government regulatory offices for their misleading advertisements on their fares – airlines were pressured to explicitly
declare the other charges to these discounted fares in their advertisements.
On the Cebu-Mindanao routes, 2GO Travel’s major competitors include Cokaliong, GP and TransAsia. Competition
relies mainly on departure day sales at the Pier. 2GO Travel offers advance ticket purchases made available through
its 1,000++ outlets nationwide and through its website.
On the Luzon-Panay route, 2GO Travel can proudly claim its role in increasing the tourism traffic to Boracay. 2GO
Travel brought to Boracay a significant number of local tourists who would have taken neither the RORO buses nor
the airplane to Caticlan.
Competition continued to be challenging in the domestic passage market but we have consistently adjusted our
strategies to be able to address the changing and growing demands of a more value-conscious market. 2GO Travel
made its services more affordable, easier to access and more relevant to its customers.
2. FREIGHT
The other major players in the likes of Phil Span Asia Container Corporation (formerly Sulpicio Lines), Solid Shipping
Lines, Oceanic Container Lines, National Marine Corporation, Lorenzo Shipping, and other minor players like Ocean
8
Transport, Moreta Lines, Meridian Lines, and Asian Marine Transport in selected routes, brought a healthy degree of
competition in the market.
With the additional capacities introduced by some major carriers and minor players, some competitors resorted to
offering of lower rates. However, the company managed to maintain the patronage and loyalty of major customers with
the major clients' recognition of service quality with wider network coverage and better frequency of trips offered by
2GO Freight.
Safety, Security and Quality Standards
2GO’s fleet, comprising of the SuperFerries, Cebu Ferries and 2GO freighters, was formerly managed by Aboitiz
Jebsen Bulk Transport Corporation (ABOJEB), an international ship management company. On October 15, 2011, the
Ship Management Division (SMD) of the registrant’s parent company, NENACO, took over the ship, crewing and
purchasing management as well as the ship cost accounting and fuel management of the whole 2GO fleet from
ABOJEB.
NENACO, as a ship management company is certified and compliant with the International Safety Management Code
(ISM) administered by the Maritime Industry Authority (MARINA) and the National Security Programme for Sea
Transport and Maritime Infrastructure (NSPSTMI), a National Ship Security (NSS) certification administered by the
Office for Transport Security. NENACO maintains the whole fleet to international standards of safety, security and
seaworthiness. NENACO ensures that each ship is manned with qualified, certified, medically fit and suitably
experienced seafarers and qualified and competent shore-based technical staff to support the reliable and efficient
operation of the ships meeting the standards of safety, quality and security.
NENACO ensures that the entire 2GO fleet has to undergo a periodic ISM, NSPSTMI/NSS external audits and safety
inspections conducted by the authorities to ensure continuous improvement of safety, security and quality on board.
The ISM code is an International Maritime Organization (IMO) initiated mandatory requirement for all companies that
operate ships. The ISM’s objectives are to prevent maritime accidents, provide competent crews, ensure emergency
preparedness, implement a planned maintenance system and protection of the environment. The National Security
Programme For Sea Transport and Maritime Infrastructure ensures that security threats are recognized and security
breaches are prevented.
NENACO believes that appropriate training for the vessel officers, crew and shore-based personnel is vitally important.
VIDEOTEL, the world’s leading producer and provider of high quality marine training programs, has been the partner of
NENACO for the past 3 years for implementing structured and tailor-made training programs.
NENACO added competent shore-based personnel, sent most of the Technical Superintendents to GL (Germanisher
Lloyd) Academy to undertake a rigid Superintendents Training Course and reorganized to meet the demands of
managing a bigger fleet.
NENACO has started to implement in 2012 the BASS Fleet Management System, an integrated software suite-based
on modern technology covering all the main areas of maritime operations.
Customers
The Company has a wide customer base that includes manufacturers of consumer goods and finished products,
traders of commercial, industrial and agricultural goods as well as the general public. The Company monitors its top 50
customers. No single customer accounts for 20% or more of the Company’s freight revenue.
Purchases of Materials, Parts and Supplies
Materials, parts and supplies are obtained mostly from local suppliers at competitive rates. Fuel and lubes, the biggest
operating expense of the Company is purchased from a major fuel provider.
Selected Major Suppliers of the Registrant:
Items/Services Supplied

Fuel, diesel and lubricants
Major Supplier
1. Petrilliam Blac Corporation
2. Promethium Marketing Co.
9

Vessel repair and drydocking
1. Subic Drydock Corporation
2. Keppel Philippines Marine Inc.

Stevedoring and Arrastre
1. Manila North Harbour Port, Inc.
2. Asian Terminal Inc.

Insurance
1. Pioneer Insurance and Surety Corp.
2. Philippine Charter Insurance Corporation
3. Steamship Mutual Agreement (Bermuda) Limited
Contract for Distribution and Repair and General Services
2GO also contracts with more than 20 major trucking, forwarding and container repair companies in the Philippines,
including affiliated companies, to provide door to door, door to pier, pier to door distribution services required by its
customers, as well as stevedoring and arrastre services. These contracts are conducted on an arms-length basis.
The Company’s passenger ticketing and cargo booking are principally conducted through its network of branches and
sales agents, most of which are situated at ports served by the Company. In addition, independent agencies/outlets
are also maintained in urbanized areas such as Manila, Cebu, and Cagayan de Oro.
These Agencies and Outlets are covered by Agency Contracts renewable annually, subject to certain conditions.
Contracts with affiliated companies for agency and general services are conducted on an arms-length basis.
General service contracts include contracts with engineering, repair and service companies, independent
concessionaires, and janitorial service providers.
Patents, Trademarks, Copyrights, Licenses, Franchises, Concessions and Royalty Agreement held
2GO’s vessels are duly registered with MARINA and subjected to regular survey and ISM audit to ascertain its
adherence to vessel and manning safety standards. The company is the holder of several Certificates of Public
Convenience (CPC), Provisional Authority (PA) and Special Permit (SP) issued by MARINA to service domestic ports
of call.
Related Party Transactions
Related party transactions with both customers and suppliers are discussed in the Note 23 to Consolidated Financial
Statements.
Employees
2GO has a complement of 880 employees as of December 31, 2012, of which, 741 are regular, 68 are probationary,
and 71 are contractual.
The Company is not unionized. It has a Labor Management Council (LMC) that is a member of the Philippine
Association of Labor Management Council, wherein the labor and the management work hand in hand to accomplish
certain goals using mutually acceptable means. With this council, labor and management representatives discuss and
decide on issues of equal concern to both parties. They are social partners sharing a common interest in the success
and growth of the enterprise and the economy. LMC aims to promote harmony among all the 2GO employees, the
officers, staff and other employees of the Company and to establish an equally beneficial relationship.
2GO’s LMC holds a regular yearly convention to bring all chairmen and representatives to a forum with the principals
and officers of the Company. The convention seeks to promulgate resolutions most of which are economic demands
from the Labor sector and management; address all other concerns and issues; amend the charter; and to hold
elections for the officers of the national LMC.
The establishment of the LMC in September 23, 1986 has given rise to more benefits and privileges to the employees.
More significantly the merging of three of the most prominent and well respected shipping lines in the country has seen
a dramatic improvement in terms of employee benefits and privileges far better than any other company in the industry
offers. This includes among others, medical allowances, group hospitalization plan, educational assistance for qualified
dependents, mortuary assistance and privilege pass for employees and their immediate family members.
10
Government Regulations
The MARINA through Memorandum Circular No. 79 requires all owners/operators of inter-island vessels engaged in
Public Transport Service to secure a certificate of accreditation of domestic shipping enterprise / entities from the
Authority before they can provide a water transport service.
The Circular is intended to foster standards for domestic shipping operations in order to protect public interest and to
generate vital information that will enable MARINA to effectively supervise, regulate and rationalize the organizational
movement, ownership and operation of all inter-island water transport utilities, and consequently, to prevent the
proliferation of incompetent, inefficient, unreliable and fly-by-night operators.
Accreditation serves as a prerequisite to the granting of franchises for individual vessel operations. 2GO vessels have
been issued Certificates of Public Convenience/Provisional Authorities to operate in specified routes.
Research and Development Activities
Research and development (R&D) are the company’s activities to discover and create new lines of services and/or
make major improvements on the existing ones. During the year, the Company allocated and spent reasonable
amount on R&D activities. This is consistent with the Company's strategy to focus its efforts on developing and
maintaining its existing value-added businesses where it believes much of its future will lie.
Costs and Effects of Compliance with Environmental Laws
With regard to environmental laws, 2GO follows the regulations embodied in the International Convention for the
Prevention of Pollution from Ships, 1973, as modified by the protocol of 1978 (MARPOL 73/78). The said Convention
includes regulations aimed at preventing and minimizing pollution from ships - both accidental pollution and that from
routine operations - and currently includes, among others, Regulations for the Prevention of Pollution by Oil,
Prevention of Pollution by Harmful Substances Carried by Sea in Packaged Form, Prevention of Pollution by Garbage
from Ships to which the Company observes. During the year, the Company incurred less than a million to comply with
these rules and regulations.
The existing government regulations are intended to achieve the goal of the government to develop the country’s
water transport system. The goal is to provide adequate, safe, efficient, economical and shipping services that are at
par with the world’s best that will cater to the transport requirements of a growing national economy and for regional
development.
Major Risks Involved in the Business of 2GO and its Subsidiaries
Major risks involved in the business of 2GO and its subsidiaries will be discussed in its Annual Corporate
Governance Report in compliance with SEC Memorandum Circular No. 5, Series of 2013.
SIGNIFICANT SUBSIDIARIES OF 2GO
1. 2GO Express, Inc.
Business Development
2GO Express (formerly ATS Express, Inc.; formerly Aboitiz One, Inc.) was incorporated on July 20, 1978. It is 100%
owned by 2GO. It is in the business of offering supply chain solutions in accordance with customers’ needs. 2GO
Express’ operation is supported by a logistical backbone which comprises delivery vans, motorcycles, trucks and
vans, refrigerated trucks and vans, prime movers and trailers. The company has more than 237 retail outlets and
agents at various strategic locations nationwide, providing customers easy access and convenience.
Through 2GO Express’ subsidiaries, it offers a whole range of 2GO supply chain solutions. Supply chain solutions
include warehousing services, transport and logistics, sales and merchandising and trade marketing.
2GO Express’ Subsidiaries
Hapag-Lloyd Philippines, Inc. (HLP)
HLP was incorporated on April 23, 1992. It is 85% owned by 2GO Express.
11
It is in the business of acting as an agent of Hapag-Lloyd AG, a global shipping container line engaged in
global door-to-door container transport. Hapag-Lloyd AG provides global shipping services to major trade
lanes such as Europe, Asia, North America, Canada, the Middle East and the South American East Coast.
Hansa Meyer-ATS Projects, Inc. (HATS)
HATS, formerly Aboitiz Projects TS Corporation, was incorporated on August 5, 1996. It is 50% owned by
2GO Express.
It is in the business of project cargo transportation and management, which involves the haulage and
transportation of heavy and bulk-sized equipment such as those used in mining, power plants and
telecommunication infrastructure.
It is a joint venture between 2GO Express and Hansa Meyer Global Transport Pte. Ltd., a transportation
company headquartered in Germany specializing in project transport logistics and engineering project
management consultancy.
2GO Logistics, Inc.
2GO Logistics (formerly ATS Distribution, Inc.; formerly Aboitiz One Distribution, Inc.) was incorporated on
January 10, 2008. It is 100% owned by 2GO Express.
It is in business of providing complete supply chain management. As of December 31, 2012, it has three (3)
state-of-the-art warehouses, namely Edan warehouse – 6,500 pallet positions
Elisco 1 warehouse – 30,148 pallet positions
Elisco 2 warehouse – 24,000 pallet positions
ScanAsia Overseas Inc. (SOI)
SOI was incorporated on September 13, 1985. The 100%-purchase of SOI in June 2008 completes 2GO’s
portfolio for a full supply chain solutions provider.
It is in the business of sales, marketing, warehousing and transportation of temperature-controlled and
ambient food products to its customers in the Philippines. It is the Philippines’ premier chilled distributor
carrying approximately 80% of the products in the chiller section in any supermarket today. SOI has
nationwide coverage for both retail and foodservice segments. SOI is considered as brand builders vs.
regular trading companies.
Kerry ATS Logistics Inc. (KALI)
KALI was incorporated on March 30, 2009. It is 49% owned by 2GO Express thru KLN Logistics Holdings
Philippines, Inc.
It is in the business that aims to offer innovative, cost effective and reliable services on international air and
sea freight and cargo forwarding, cargo consolidation, as a project cargo and break bulk agent, warehousing
and distribution, trucking and door-to-door delivery. With the global clout of KLN and the domestic dominance
of 2GO, KALI is poised to provide better service to its clients.
WRR Trucking Corporation (WTC)
WTC was incorporated on March 25, 2008. It is 100% owned by 2GO Express.
It is in the business of providing and engaging in the business of transportation, hauling or forwarding of
cargo, freight, merchandise, chassis, goods and other articles within the lawful commerce of men by means
of trucks, automobiles, container vans and rail and to do such other acts and things to transact all business
directly or indirectly incidental or conducive to the prosecution of such business.
12
Participation in Bankruptcy, Receivership or Similar Proceedings
Neither 2GO Express nor any of its subsidiaries has ever been the subject of any bankruptcy, receivership or similar
proceedings.
Merger or Purchase of Significant Amount of Assets Not in the Ordinary Course of Business
In December 2004, 2GO Express acquired additional 12.59%, 15.55% and 9.50% ownership interest in shares of
stock of Aboitiz Logistics, Inc. (ALI), HLP and APTSC (now Hansa Meyer-ATS Projects, Inc.). Further, in October
2006, 2GO Express acquired additional 809,782 common shares or 5.71% from Mr. Edelino Medina in ALI, thus
resulting to a 100% ownership of 2GO Express.
In March 2007, the respective Boards of the then Aboitiz One, Inc. and ALI approved the merging of the two entities
with the former being the surviving entity. The actual merger was effected mid of 2007.
In July 2007, the 2GO Express’ Board approved the acquisition of additional 50% of the outstanding capital stock of
each of RVSI and Refrigerated Transport Services, Inc. (RTSI) making 2GO Express the 100% owner of both
companies. However, in September 2008, RTSI was sold to Mr. Ed Medina.
In June 2008, the 2GO Express Board approved the acquisition of SOI to complement its existing services and
provide a full range of supply chain solutions.
In August 2009, 2GO Express formed a joint venture with Kerry Logistics Network Limited of Hong Kong (KLN) for the
international freight forwarding business. KLN is the leading Asia-based provider of logistics services and supply chain
solutions. It operates in over 300 cities globally, 23 countries worldwide and serve over 127 cities throughout
Mainland China.
Further, in June 2010, SEC approved the declaration of RVSI as property dividend by 2GO Express to 2GO Group,
Inc. However, effective September 2010, RVSI was consequently merged by way of a statutory merger to 2GO
Group, Inc.
Competition
As a full supply chain service provider, 2GO Express does not have any competitor that can offer the same breadth of
services. However, 2GO Express has different competitors on the various components of its portfolio. And, some of
2GO Express’ competitors are also its customers.
Principal Suppliers
2GO Express loads with SuperFerry vessels of 2GO and with Cebu Pacific Air to transport cargoes by sea and air,
respectively. Some of its major truckers include Northern Luzon Trucking and Sun-Gold Forwarding Corp. Other
suppliers include Shell, Petron, and Zenshin.
2GO Express manages a pool of suppliers, mainly small to medium entrepreneurs:
Truckers
• Operate-To-Own – a scheme provided to entrepreneur aspirants, where both parties undergo a contract that 2GO
Express will provide the vehicle under certain terms and conditions and the courier will own it after a defined period.
• Sub-Contracted Truckers – small to medium truckers are outsourced either on a lock-in scheme or variable trip basis
per day.
Agents
2GO Express’ retail outlets are also composed of agents who accept documents, cargo and money for outbound
transactions, and deliver the same for inbound transactions. They are paid on commission scheme or fix fee per day
depending on the type of product, volume handled, and geographic location. Aside from commission, agents are
supported through advertising and promotional activities to direct customers to their outlets. Incentive schemes are
also in place to encourage sales and compliance to operating policies and procedures.
Outsourced Functions
Certain functions are outsourced to third parties and are being paid either per piece, per head, per man-hour or fix fee
depending on the type of activity. The objective is to focus on business units’ core competencies.
13
Service level agreements are drawn for each supplier. Regular performance reviews or evaluations are conducted in
order to ensure compliance and adherence to the contract as well as to all policies and procedures set.
2GO Express looks at its suppliers as partners, with a joint commitment that as it grows its business, it also grows
theirs.
Customer
2GO Express and its subsidiaries’ primary customers are manufacturers of high-value, fast moving consumer goods,
electronics and telecommunication companies who recognize the need to outsource parts of or their entire supply
chain. They are open to integrate, collaborate, and share information.
Currently, the industries that fall as our secondary customers are pharmaceuticals, branded apparels, automobiles,
retailers, distributors and financial institutions.
Transactions With and/or Dependence on Related Parties
Services to and from related parties consist mostly of cargo freight, handling and hauling, and management services
which are made at normal market price.
Effect of Existing or Probable Governmental Regulations
The passage of Republic Act 9337 last May 24, 2005 has abolished the franchise tax of 2GO Express. It is now
subject to the corporate income tax.
2. The Supercat Fast Ferry Corporation (SFFC)
SFFC was incorporated on June 20, 2001. It is 100% owned by 2GO.
It is in the business of providing fast craft passenger services under the “Supercat” brand name. At present, SFFC
operates eight (8) fast craft vessels with a total gross weight of 1,813 tons and a total passage capacity of 2,305
passengers. Its vessels service the ports of Cebu, Ormoc, Tagbilaran, Bacolod, Iloilo, Batangas and Calapan.
3. NN-ATS Logistics Management & Holding Co., Inc. (NALMHCI)
NALMHCI was organized and incorporated on November 22, 2011. It is a wholly-owned subsidiary of 2GO. The
purpose of NALMHCI is primarily to act as managing agents, local agents or representatives of (i) subsidiaries and
affiliates engaged in logistics activities, (ii) corporations, (iii) partnerships, (iv) agencies, (v) associations, (vi)
enterprises, (vii) establishments, (viii) institutions, private or governmental, domestic or foreign, except the
management of funds, portfolios, or other similar assets of the managed entities; and to undertake, organize, form,
promote, develop or establish businesses, and all forms of enterprises, whether here or abroad, as are necessary,
suitable, or convenient to be undertaken, organized, formed, promoted, developed or established to carry out, directly
or indirectly, the purposes and interests or to enhance the businesses or to render more valuable or profitable any of
its rights, properties, interests or enterprises.
NALMHCI is the holding company of the following companies with its percentage ownership:
Company Name
(1)
J & A Services Corporation
(1, 2)
Red.Dot Corporation
(3)
Super Terminal Inc.
Supersail Services Inc.
North Harbor Tugs Corporation
Sungold Forwarding Corporation
(1)
(2)
(3)
Acronym
J&A
RDC
STI
SSI
NHTC
SFC
% Ownership
80.0
80.0
50.0
100.0
58.9
51.1
The Company directly owns the remaining 20% ownership in J&A and RDC
RDC was incorporated on October 3, 2009 and started its commercial operations on February
1, 2010
NALMHCI has control over STI since it has the power to cast the majority of votes at the BOD’s
meeting and the power to govern the financial and reporting policies of STI
14
4. Special Container and Value Added Services, Inc. (SCVASI)
SCVASI was formed and organized on March 8, 2012. It is a wholly-owned subsidiary of the registrant. It has a
primary purpose of engaging in domestic and/or international business of transporting any and all kinds of goods and
cargoes, by sea, air and land, functioning as non-vessel operating common carrier, engaging in cargo forwarding
including acting as cargo consolidator and break-bulk agent, and courier for mails, letters, pouches, other cargoes and
personal effects of any and all kinds, types and nature.
Item 2. Properties
2GO
Vessels
As of December 31, 2012, 2GO and its subsidiaries has a total fleet of 19 operating vessels, of which 13 are
company-owned ships. The fleet consists of 6 fast crafts, 10 RoRo/Pax vessels (of which 3 vessels are time
chartered from its parent company, NENACO), and 3 freighters (all of which are time chartered from NENACO). The
Company’s operating vessel fleet has a combined Gross Registered Tonnage of approximately 122,297 metric tons,
total passenger capacity of approximately 16,348 passengers and aggregate cargo capacity of approximately 1,944
twenty-foot equivalent units (TEUs).
During the course of the year 2012, 2GO and its subsidiaries sold 2 freighter vessels and laid-up 1 fast craft and 2
RoRo/Pax vessels, as part of management’s cost reduction efforts. Management endeavored to reduce vessel
capacity to mitigate inefficient assets that cause enormous expenses in repairs and maintenance.
Currently, 2GO operates 7 RoRo/Pax vessels calling on Manila as their homeport. These vessels are larger
coastwise vessels that sail from Luzon to Visayas and Mindanao. Further, 2GO operates 3 medium-sized vessels,
formerly called the Cebu Ferries, 2 of which have Batangas as their homeport, plying on the Batangas-Caticlan route,
while 1 vessel retained its homeport in Cebu. The 6 fast craft passenger vessels, on the other hand, are smaller fast
crafts that ply on short distances. The Company also operates 3 purely-cargo vessels to fully complement its freight
business.
Land, Buildings and Warehouses
The Company owns several pieces of land and a number of buildings and warehouses. These are used in the normal
course of business. For details of their locations, please refer to Exhibit III.
Insurance Coverage
The 2GO vessels are appropriately supported by the top Marine Insurance players throughout the world. The Hull and
Machinery insurance, which insures physical damage to the ships, is being underwritten by reputable local and foreign
insurers and is fronted by Pioneer Insurance. Likewise, the War & Strikes cover which protects the vessels against
war and war-like operations is insured through Pioneer Insurance.
The Protection and Indemnity (P&I) Insurance covering the legal liabilities of the shipowners such as but not limited to
pollution, wreck removal and damages to fixed and floating objects is placed with The Steamship Mutual Underwriting
Association (Bermuda) Ltd.
The Marine Cargo insurance covering claims arising from losses and damages to cargoes is placed with Philippine
Charter Insurance Corporation and Chartis Insurance Philippines, Inc (formerly Philam Insurance Co., Inc) whilst the
insurance cover specifically tailored to protect Bangko Sentral ng Pilipinas (BSP) shipments is fronted by Pioneer
Insurance.
The Commercial General Liability of all the Company's owned, affiliated and associated offices are fully insured by
Oriental Assurance Corporation.
Furthermore, all passengers boarding any 2GO vessels are secured against injuries and/or loss of life with Philippine
Charter Insurance Corporation. On the other hand, members of the technical crew of the 2GO vessels are insured with
Philippine Charter Insurance Corporation.
15
The land-based employees, on the other hand, are covered by Chartis Insurance Philippines, Inc.
The rest of the Company's properties nationwide, including the containers vans & the container handling equipment
are likewise fully covered with insurance policies issued by respectable insurance companies in the country.
Container Yard and Warehousing Facilities
The Company has one of the most extensive networks of container yards and warehousing facilities nationwide.
Most of the Company’s container yards have been cemented, whether in whole or in part, to achieve greater efficiency
in terminal operations, allow for shorter turnaround time in port, greater utilization in stacking of containers and lower
repair and maintenance costs for the operating equipment used at the container yards.
The Company also has sufficient warehouse space. Warehouses are either owned or leased by the Company. The
Company’s warehouse network consists of warehouses at Bacolod, Butuan, Cebu, Davao, Dumaguete, General
Santos, Iligan, Iloilo, Ozamis, Zamboanga and Manila.
Containers and Other Equipment
2GO owns and leases a variety of containers and other equipment of various types and sizes for use in its cargo
operations including forklift, top loaders, yard tractors and trailers or chassis. Master lease agreements entitle the
Company to use the containers in exchange for a per diem rate for the duration of the lease. Lease purchase
agreements allow the Company to use the containers for a specified number of years while it continues to pay the
lessor a fixed per diem rate and gives the Company the option to acquire the containers at the end of the lease.
Installment purchase agreements allow the Company to pay the full purchase price of the containers by installments in
accordance to a fixed schedule.
Containers under capital leases as of December 31, 2012 are shown under the “Property and Equipment” account in
Note 14 of the consolidated financial statements.
Liens and Encumbrances
Detailed discussion as regards the mortgage, liens and encumbrance over the properties of the registrant are
disclosed under Note 20 of the consolidated financial statements.
2GO EXPRESS
Leases
Major leases of 2GO Express include rental offices, outlets and warehouses nationwide. The lease contracts for its
outlets nationwide are renewable every year.
Item 3. Legal Proceedings
There are certain legal cases filed against 2GO and its subsidiaries in the normal course of business. Management
and its legal counsel believe that they have substantial legal and factual bases for their position and are of the opinion
that losses arising from these cases, if any, will not have a material adverse impact on the consolidated financial
statements.
Item 4. Submission of Matters to a Vote of Security Holders
Nothing was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders,
through the solicitation of proxies or otherwise.
16
PART II - OPERATIONAL AND FINANCIAL INFORMATION
Item 5.
A.
Market Price of and Dividends on Registrant’s Common Equity and Related Stockholder Matter.
Market Information
The Common Stock of the Corporation is listed at the Philippine Stock Exchange. As of latest market date, March 26,
2013, the market price of the Company’s common stock is P1.67 per share.
Below is the range of high and low bid information for the Company’s common equity for each quarter within the last
two fiscal years and any subsequent interim period:
B.
2013
First Quarter
P
= 2.00
P
= 1.67
2012
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
P
= 4.72
2.94
1.96
2.85
P
= 1.33
1.75
1.69
1.62
2011
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
P
= 1.95
1.94
1.90
1.48
P
= 1.77
1.61
1.20
1.33
Stockholders
The number of common shareholders of record as of March 31, 2013 was 1,952. The top 20 common stockholders as
of March 31, 2013 are as follows:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Name
Negros Navigation Co., Inc.
R A L Holdings and Equities Corporation
BIVI Realty Development Corporation
East Asian BBB Realty Inc.
PCD Nominee Corporation (Filipino)
Union Properties, Inc.
Abacus Securities Corporation
Santiago Tanchan III
Constantine Tanchan
PCD Nominee Corporation (Foreign)
Harrison Abella Ong
Fast Cargo Transport Corp.
Philips Multiemployer Retirement Plan
Ramon Rivero
Prudential Guarantee & Ass Inc.
AMA Rural Bank or Mandaluyong, Inc.
Alexander J. Tanchan
Quality Investments & Sec Corp
Elizabeth Chiu
Ramon R. Rivero
No. of Shares Held
2,160,141,991
119,000,000
80,000,000
41,000,000
19,509,328
1,578,125
1,530,000
1,262,500
1,262,500
1,144,426
890,062
744,875
631,250
600,000
458,287
441,875
430,260
416,625
378,750
320,000
% to total
88.308%
4.865%
3.270%
1.676%
0.798%
0.065%
0.063%
0.052%
0.052%
0.047%
0.036%
0.030%
0.026%
0.025%
0.019%
0.018%
0.018%
0.017%
0.015%
0.013%
As of March 31, 2013, the total number of shares owned by the public is equivalent to 285,296,991 shares or
equivalent to 11.66%.
17
C.
Dividends Declaration
On December 01, 2010, the Board approved the declaration of a special cash dividend equivalent to P0.15 per share
to all 2GO stockholders of record as of December 15, 2010. The special cash dividend represents the sales proceeds
of the Aboitiz Jebsen companies net of taxes and other related costs. Dividends were paid on January 12, 2011.
Further, there were no dividends declared during the years 2011 and 2012.
Item 6.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
KEY PERFORMANCE INDICATORS (KPI)
The following KPI’s are used to evaluate the financial performance of 2GO Group and its subsidiaries. The amounts
are in millions of pesos except for the financial ratios.
a.
Revenues – 2GO Shipping revenues are mainly composed of freight and passage revenues and they are
recognized when the related services are rendered. Total Revenue for the full year ended December 31, 2012 is
P13.7 billion.
b.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) - is calculated by adding back
interest expense, amortization and depreciation into income before income tax, excluding extraordinary gains or
losses. EBITDA for the full year 2012 is P1.4 billion.
c.
Income (Loss) before income tax (IBT) – is the earnings of the company before income (loss) tax expense.
The Loss Before Income Tax for full year 2012 is P135.1 million.
d.
Debt-to-equity ratio – is determined by dividing total liabilities over stockholders’ equity. 2GO Group debt-toequity ratio for the full year 2012 is 2.84:1.00. Total liabilities decreased by P530.1 Million and total equity stood
at P2.9 billion or 12% lower compared to 2011 due to net loss incurred for the full year of 2012.
e.
Current ratio – is measured by dividing total current assets by total current liabilities. The Company’s current
ratio as of December 31, 2012 is 0.88:1:00. Total current asset is P5.2 billion or 11% lower than 2011 due to
reduction in cash & cash equivalents, trade & other receivables and assets held for sale. Total current liabilities
are P6.0 billion or 9% increased compared to 2011.
The following table shows comparative figures of the Top Five key performance indicators (KPI) for 2012 versus 2011
(amounts in millions except for the financial ratios) based on the consolidated financial statements of 2GO and its
subsidiaries:
Revenues
EBITDA (a)
IBT (b)
Debt-to-Equity Ratio (c)
Current Ratio (d)
Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2010
13,725
12,971
11,611
1,139
1,027
710
(135)
(821)
(1,535)
2.84:1.00
2.67:1.00
2.18:1.00
0.88:1.00
1.07:1.00
0.57:1.00
Note: The figures above are in P’MM except otherwise indicated.
a) Earnings before interest, taxes, depreciation and amortization (calculated by adding back interest expense and
amortization and depreciation into income before income tax, excluding extraordinary gains and losses).
b) Income before income tax or loss before income tax
c) Total liabilities / total stockholders’ equity.
d) Total current assets / total current liabilities.
18
CONSOLIDATED INCOME STATEMENT
In P'MM
REVENUES
Frei ght – (Note 23)
Sale of goods
Passage - net
Service fees (Note 23)
Food and beverages
Others
COSTS AND EXPENSES (Note 25)
Operating
Cost of goods sold (Note 8)
Termi nal
Overhead
OTHER INCOME (CHARGES)
Impairment loss on goodwill, property and equipment and
assets held for sale (Notes 10 and 14)
Equity in net earnings (l osses) of associates (Note 12)
Interest and financi ng charges (Notes 26)
Others - net (Note 26)
INCOME (LOSS) BEFORE INTEGRATION COSTS
INTEGRATION COSTS (Note 27)
INCOME (LOSS) BEFORE INCOME TAX FROM CONTINUING OPERATIONS
PROVISION FOR (BENEFIT FROM)
INCOME TAX (Notes 29)
NET INCOME (LOSS) FROM CONTINUING OPERATIONS
NET INCOME FROM DISCONTINUED OPERATIONS (Note 30)
NET INCOME (LOSS)
ATTRIBUTABLE TO:
Equity holders of the Parent Company:
Net i ncome (loss) from continui ng operations
Net i ncome from discontinued operati ons
Net income (loss) for the peri od attributabl e to equity holders of the parent
Non-controlling interests:
Net i ncome (loss) from continui ng operations
Net i ncome from discontinued operati ons
Net income for the period attributable to non-controll ing interests
Years Ended December 31
2012
6,329
2,439
2,128
1,841
376
611
13,725
2011
5,678
3,029
2,384
1,251
260
369
12,971
9,523
1,933
1,073
1,113
13,641
8,192
2,602
1,495
1,034
13,323
0
35
(401)
147
(219)
(135)
(135)
251
(386)
(386)
(397)
(397)
7,093
2,207
1,474
1,476
12,250
1,330
(669)
(423)
79
318
16%
(26%)
(28%)
8%
2%
69%
14%
8%
8%
99%
63%
20%
12%
8%
103%
(224)
(15)
(408)
300
(346)
(698)
(123)
(821)
(779)
40
(229)
71
(897)
(1,536)
(1,536)
224
50
7
(153)
127
837
123
714
(100%)
0%
(2%)
(51%)
(37%)
(120%)
100%
(87%)
0%
0%
(3%)
1%
(2%)
(1%)
0%
(1%)
(2%)
(0%)
(3%)
2%
(3%)
(5%)
(1%)
(6%)
(195)
(626)
(626)
(421)
(1,114)
359
(755)
446
488
0
239
(229%)
(78%)
0%
(38%)
2%
(3%)
0%
(3%)
(2%)
(5%)
0%
(5%)
(634)
(634)
(1,114)
305
(809)
238
0
238
(0)
54
53
(755)
2
0
2
239
10
9
-
10
(386)
2010
'12 vs '11
5,326
651
2,566
(589)
2,179
(256)
1,064
590
160.60
116
316
243
11,611
754
% to Revenue
%
variance 2012 2011
11%
46%
44%
(19%)
18%
23%
(11%)
16%
18%
47%
13%
10%
45%
3%
2%
66%
4%
3%
6% 100% 100%
9
(626)
Two years after the integration with NENACO, the Group has shown significant improvements in its operations.
o
Consolidated net income before integration and financing charges almost turned 360 to P265.7 million from net loss
of P290.3 million in 2011. This can be attributed largely to realization of the synergies from the integration of NN and
2GO operations.
Consolidated revenues jumped 6% to P13.7 billion in 2012 from P13.0 billion in 2011. The shipping business
accounted for 71% of the total revenues, while supply chain contributed 29% of total revenues. The freight revenues
swelled 10% or P556.0 million to P6.3 billion from P5.7 billion last year. Passage revenues, including food and
beverage, soared 6% to P2.8 billion from P2.6 billion in 2011. This can be attributed largely to vessel and route
rationalization implemented by Management.
Revenues from the supply chain business decreased by 7% to P4.0 billion from P4.3 billion in 2011 mainly due to the
disengagement of some identified principals showing negative profitability. The lost revenues from disengaged
principals will eventually be replaced by revenues from new principals showing good profit margins.
The costs and expenses likewise increased, but to a lower extent than the revenues. Costs and expenses increased
by P318 million, or a 2% increase over the same period last year. This is mainly attributable to increase in fuel prices
for the full year mitigated by stringent cost management.
19
Earnings per Share
Earnings Per Share is computed by dividing Net Income (Loss) Attributable to Equity Holders of the Parent over
weighted average number of common shares outstanding for the year. Earnings per share for the full year of 2012
stood at (P0.16)/share compared to (P0.26)/share last year.
Other changes (+/-5% or more) in the financial statement not covered in the above discussion
FY 2012 vs. FY 2011
Revenue
>47% or P590 million increase in service fees
>66% or P243 million increase in ’other’ revenues
>45% or P116 million increase in food and beverages
Cost & Expenses
>8% or P79 million increase in overhead costs
>28% or P423 million decrease in Terminal costs
>26% or P669 million decrease in Cost of Goods Sold
Other Income / (Charge)
>100% or P224 million decrease in Impairment loss and goodwill, property and equipment
And assets held for sale
>51% or P153 million decrease in Other items
BALANCE SHEETS
31-Dec
2012
ASSETS
Current Assets
Cash and cash equivalents (Note 6)
Trade and other receivables (Note 7)
Inventories (Note 8)
Other current assets (Note 9)
Assets held for sale (Note 10)
Total Current Assets
Noncurrent Assets
Property and equipment - net (Notes 14 and 21)
Available-for-sale (AFS) investments (Note 11)
Investments in associates (Note 12)
Investment property (Note 15)
Software development costs - net (Note 16)
Deferred tax assets - net (Note 29)
Goodwill (Notes 5)
Other noncurrent assets (Note 17)
Total Noncurrent Assets
TOTAL ASSETS
2011
Amount
%
'12 vs '11 variance
% to Total
2012
2011
788
2,807
370
925
4,890
359
5,249
906
2,898
407
996
5,208
693
5,901
(118)
(91)
(156)
44
(318)
(333)
(652)
(13%)
(3%)
(38%)
4%
(6%)
100%
(11%)
7%
25%
3%
8%
44%
3%
47%
7%
24%
3%
8%
43%
6%
49%
4,576
9
120
10
11
794
250
197
5,966
11,215
4,651
9
100
10
14
964
250
233
6,231
12,132
(1,545)
(1)
20
1.00
(3)
(170)
(36)
(265)
(917)
(33%)
(7%)
20%
10%
(22%)
(18%)
0%
(15%)
(4%)
(8%)
41%
0%
1%
0%
0%
7%
2%
2%
53%
100%
38%
0%
1%
0%
0%
8%
2%
2%
51%
100%
(Forward)
20
LIABILITIES AND EQUITY
Current Liabilities
Loans payable (Note 18)
Trade and other payables (Notes 19 and 23)
Income tax payable
Redeemable preferred shares (Notes 22 and 24)
Current portions of:
Long-term debt - net (Note 20)
Obligations under finance lease (Notes 14 and 21)
Total Current Liabilities
Noncurrent Liabilities
Long-term debt-net of current portion (Note 20)
Obligations under finance lease - net of current portion (Notes 14 and 21)
Accrued retirement benefits (Note 28)
Other noncurrent liabilities
Total Noncurrent Liabilities
Total Liabilities
Equity
Attributable to the equity holders of the Parent Company:
Share capital (Note 24)
Additional paid-in capital
Acquisitions of non-controlling interests (Note 24)
Excess of cost over net asset value of investments (Note 24)
Unrealized gain on sale of available-for-sale investments (Note 11)
Share in cumulative translation adjustments of associates (Note 11)
Retained earnings (deficit) (Note 23)
Treasury shares (Note 23)
Non-controlling Interests
Total Equity
TOTAL LIABILITIES AND EQUITY
1,384
3,528
7
7
1,215
3,432
6
26
169
96
2
(19)
14%
3%
100%
100%
12%
31%
0%
0%
10%
28%
0%
0%
993
78
5,997
786
30
5,495
208
48
502
26%
158%
9%
9%
1%
53%
6%
0%
45%
2,185
45
59
9
2,298
8,296
3,178
92
52
8
3,331
8,826
(993)
55
7
1
(1,032)
(530)
100%
60%
13%
7%
(31%)
(6%)
19%
0%
1%
0%
20%
74%
26%
1%
0%
0%
27%
73%
2,485
911
6
(11)
0
5
(446)
(59)
2,891
28
2,920
11,215
2,485
911
6
(11)
0
5
(50)
(59)
3,288
19
3,306
12,132
0
0
0
0
0
0
(397)
0
(396)
10
(387)
(917)
0%
0%
0%
0%
42%
0%
798%
0%
(12%)
53%
(12%)
(8%)
22%
8%
0%
(0%)
0%
0%
(4%)
(1%)
26%
0%
26%
100%
20%
8%
0%
(0%)
0%
0%
(0%)
(0%)
27%
0%
27%
100%
The Group’s total assets for the full year ending December 31, 2012 was P11.22 billion, 8% lower than P12.13 billion
as of December 2011.
The bulk of the difference came from current assets, which at the start of the year stood at P5.9 billion, went down to
P5.25 billion as of December 2012. Trade and other receivables decreased by 3% or P91 million. Assets held for
sale decreased by P333 million due to the sale of two (2) freighter vessels, namely 2GO1 and 2GO2. The sale of
vessels is part of management’s cost reduction efforts. Management endeavored to reduce vessel capacity to
mitigate inefficient assets that cause enormous expenses in repairs and maintenance. Cash and cash equivalents
likewise decreased by P118 million due to various payments made. Inventories also decreased by P156 million or
38% relative to the sale of vessels.
Property and equipment decreased by P1.55 billion. During the second quarter of the current year the company sold
real property located in Lapuz, Iloilo and two aircraft for cash proceeds of P93.3 million and P3 million, respectively.
Total liabilities went down by P530 million from the beginning of the year balance of P8.8 billion to P8.3 billion at the
end of December of 2012. The current portion of the long-term debt increased since the loan payable on its second
year is higher than the previous year. There was also a decrease of P3.1 billion in the non-current portion of the longterm debt due to payments made during the year.
Total equity stood at P2.92 billion at the end of the year, 12% lower compared to the beginning of the year which is at
P3.3 billion due to losses incurred by the Group in 2012.
21
CASHFLOW STATEMENTS
in P'MM
Net cash flows from operating activities
Net cash flows used in investing activities
Net cash flows from financing activities
EFFECTS OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Years Ended December 31
2012
2011
2010
1,382
(524)
600
(432)
286
(3,391)
(1,070)
340
2,500
2
(118)
0
102
0
(291)
The Group ended the year with a net decrease in cash of P118 million. The Group received the settlement of notes
payable from its parent company, Negros Navigation Co, Inc. The bulk portion of its cash was used to pay off financial
obligations. Part of it was also used for capital expenditures related to drydocking and other maintenance costs of its
vessels.
Other Information
Other material events and uncertainties known to management that would address the past and would have an impact
on 2GO’s future operations are discussed below.
i.
Total fuel/lubes expense is a major component of 2GO’s total cost and expenses. 2GO is constantly looking
for ways to reduce fuel consumption to lessen the impact of the increasing fuel prices on the bottom line.
ii.
Except as disclosed in the management discussion and notes to the financial statements, there are no other
known events that will trigger direct or contingent financial obligation that is material to 2GO, including any
default or acceleration of an obligation. There are also no other known trends, events or uncertainties that
have had or that are reasonably expected to have a material favorable or unfavorable impact on revenues or
income from operations.
iii.
All significant elements of income or loss from continuing operations are already discussed in the
management discussion and notes to financial statements. Likewise any significant elements of income or
loss that did not arise from 2GO continuing operations are disclosed either in the management discussion or
notes to financial statements.
iv.
There is no material off-balance sheet transaction, arrangement, obligation, and other relationships of 2GO
with unconsolidated entities or other persons created during the reporting period.
v.
Seasonal aspects of the business are considered in 2GO’s financial forecast.
vi.
2GO does not expect any liquidity or cash problem within the next twelve months. Capital expenditures are
funded through cash generated from operations and additional borrowings.
Company Outlook
With NN as parent company they have installed and implementing certain strategies and action plans to achieve
positive and healthy operating results for 2GO Group in terms of financial performance, financial condition and cash
flows for 2013. Major schemes includes perpetuating fleet and route rationalization for Shipping business and more
aggressive sales and marketing strategies for the Supply Chain business. Comprehensive review and implementation
of cost saving initiatives which include the One Port project and maximization of the takeover of the ship management.
A robust management reporting system ensuring the financial results and operating performance of the business units
to optimize revenue and collection targets as well as attaining the savings from containment measures. The
restructuring of long-term debt with counter party bank so that available cash in custody of the parent company will be
mostly utilized in covering its operating activities so that set objectives will be met as planned.
Item 7. Financial Statements
The consolidated financial statements and schedules listed in the accompanying Index to Financial Statements and
Supplementary Schedules are filed as part of this SEC Form 17-A.
22
The management is not aware of any significant or material events or transactions not included nor disclosed in the
consolidated financial statements in compliance with the SRC Rule 68.
Item 8. Information on Independent Accountant and Other Related Matters
The accounting firm of SGV & Co. (SGV) has been 2GO's Independent Public Accountant since year 1977. This is
reckoned to be the approximate date based on the available records. Representatives of SGV will be present during
the annual meeting and will be given the opportunity to make a statement if they so desire. They are also expected to
respond to appropriate questions if needed.
In August 2009, the Board of Directors of 2GO approved the consolidation of its Audit Committee to the newly created
Audit and Corporate Governance Committee. The incumbent members of the said Committee are: Mr. Francis C.
Chua as chairperson, Messrs. Patrick Ip, Mark E. Williams and Geoffrey M. Seeto as members, and Mr. Evan C.
McBride as ex-officio member.
At its regular board meeting on April 23, 2009, the Board of Directors approved a resolution to delegate to the Board of
Directors the authority to appoint the Company’s external auditors. The stockholders ratified the same resolution
during its annual stockholders meeting.
Further, in compliance with the SEC guidelines on the rotation of external auditors under SRC Rule 68, Paragraph
3(b)(iv), 2GO has already adopted and incorporated the said guidelines in its Code of Corporate Governance.
Moreover, the Registrant will also adopt and observe the two-year cooling of period in the re-engagement of the same
signing partner or individual auditor in compliance with the provisions under SRC Rule 68, Paragraph 3(b)(ix).
Ms. Josephine H. Estomo has been assigned as the signing partner of 2GO starting fiscal year 2011. She replaced
Mr. Ladislao Z. Avila Jr., who had been the signing partner since fiscal year 2006, in compliance with the five years
rotation requirement under SRC Rule 68, Paragraph 3(b)(iv).
(1) External Audit Fees and Services
Estimates for
December 31, 2013
Year ended December
31, 2012
Audit Fees
Audit-Related Fees
All Other Fees
P
1,300,000
P
TOTAL
P
1,300,000
P 1,300,000
1,300,000
Year ended December
31, 2011
P
1,300,000
P 1,300,000
Audit Fees
This represents professional fees for financial assurance services rendered for the Company’s Annual Financial
Statements, review and opinion for SEC Annual Report.
Audit-Related Fees
This represents professional fees for technology and security risk services rendered by the external auditor in
connection with the Audit on Company’s Annual Financial Statements.
All Other Fees
This represents fees for services rendered in reviewing and issuing opinion with regards to the Company’s annual
reportorial requirement with Maritime Industry Authority (MARINA).
Audit services provided to the Company by external auditor, SGV, have been pre-approved by the Audit and
Corporate Governance Committee and recommended to the Board of Directors for approval. The Audit and Corporate
Governance Committee has reviewed the magnitude and nature of these services to ensure that they are compatible
with maintaining the independence of the external auditor.
23
(2) Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There was no event in the past years where SGV and the Registrant had any disagreements with regard to any matter
relating to accounting principles or practices, financial statement disclosure or auditing scope or procedure.
PART III - CONTROL AND COMPENSATION INFORMATION
Item 9. Directors and Executive Officers of the Registrant
The names, ages, citizenship, position and offices held or will hold, and brief description of business experience during
the past 5 years (except those years stated otherwise) and other directorships held in reporting companies, including
name of each company, of all directors and executive officers are as follows:
DIRECTORS
Mr. Francis C. Chua, 62 years old, Filipino, has served as Chairman of the Board since July 2011 and as an
Independent Director of 2GO since January 2011. He is also the Chairman of the Board Audit and Corporate
Governance Committees. Mr. Chua also sits as the Chairman of the Board of NENACO since July 2011. His other
current positions include Honorary Consulate General of the Republic of Peru in Manila; President and Eminent Adviser
of the Philippine Chamber of Commerce and Industry; Chairman of the Philippine Chamber of Commerce and Industry
Foundation, CLMC Group of Companies, and Green Army Philippines Network Foundation; President of DongFeng
Automotive, Inc. and Philippine Satellite Corporation; Director of Philippine Stock Exchange, National Grid Corporation
of the Philippines, Bank of Commerce, Basic Energy, and Overseas Chinese University; and Trustee of Xavier School
Educational Trust Fund, and Adamson University. He graduated with a Bachelor of Science degree in Industrial
Engineering from the University of the Philippines.
Mr. Sulficio O. Tagud, Jr., 62 years old, Filipino, has served as the President and Chief Executive Officer and a
Director of 2GO since December 2010. Mr. Tagud is also the Chairman of the Compensation, Remuneration and
Nomination Committee of the Company. Prior to this, he has served as Chairman of the Board of the Company from
October 2004 up to July 2011, as Chairman and CEO of C&P Homes, Inc., as President of ML &H Corp., Capital
Securities One, Inc. and Bonifacio Land Corporation. He was also a Director of Bonifacio Development Corp. and
Public Estates Authority and PEA Tollways. Further, current positions of Mr. Tagud include the following: Chairman
and President of KGLI-NM Holdings, Inc. since July 2008; President, Chief Executive Officer and a Director of NENACO
since 2004; Chairman & CEO of Negros Holdings & Management Corporation since December 2006; and Chairman of
the Philippine Liner Shipping Association. He graduated Class Valedictorian with a Bachelor of Science degree in
Business Administration, major in Economics (Magna Cum Laude) at Xavier University, Cagayan De Oro City. He also
completed his Masters in Industrial Economics at the Center for Research and Communication in Manila, and Masters
in Business Administration at the Ateneo de Manila University. He also completed Real Estate Development Program at
the Urban Land Institute at Washington, D.C., U.S.A.
Mr. Jeremias E. Cruzabra, 46 years old, Filipino, has served as Director since December 2010, Treasurer and Chief
Finance Officer since June 2011, and Corporate Information Officer since December 2011 of 2GO. He has served also
as the Chief Finance Officer of NENACO since April 2004; Chief Finance Officer and Board Director of KGLI-NM
Holdings, Inc. since July 2008; Vice-President and Chief Finance Officer/Treasurer of Negros Holdings & Management
Corporation since December 2006; Court-Appointed Receiver of Selegna Holdings Corporation since November 2006;
Chief Finance Officer (and later Trustee) of Sapphire Securities, Inc. (owned by the Brunei Investment Agency) from
1997 to 1999. In 1999, he co-founded Business Sense, Inc. (BSI), a business-consulting firm that specializes in strategy
formulation and productivity improvement. BSI is affiliated with INPACT Asia-Pacific, an international network of public
accounting firms. He started his career with SGV & Co. (a member company of Ernst & Young) from 1988 to 1992.
After SGV, Mr. Cruzabra held managerial/executive positions in several subsidiaries of Metro Pacific Corporation from
1992 to 1997. Mr. Cruzabra, who is a Certified Public Accountant, graduated with a Bachelor of Science degree in
Commerce, major in Accounting (Magna Cum Laude). He completed his Masters in Business Administration at
Murdoch University in Perth, Western Australia. Mr. Cruzabra is also a Certified Securities Representative in the
Philippine Stock Exchange.
Amb. Raul Ch. Rabe, 72 years old, Filipino, has been an Independent Director of 2GO since December 2010. He is
also the Chairman of the Risk Management Committee. He also served as an Independent Director of NENACO since
December 2010; Independent Director of KGLI-NM Holdings, Inc. since July 2008; Director of Bancommerce
Investment Corporation since 2007; Director of Vivant Corporation since 2002; Director of Bank of Commerce since
2001; Corporate Secretary of Manila Economic and Cultural Office since 2001, and Of Counsel for Rodrigo,
24
Berenguer and Guno Law Offices since 1999. He graduated with a Bachelor of Arts degree at the University of Santo
Tomas, and Bachelor of Laws degree from the Ateneo de Manila Law School and a member of the Philippine Bar
since 1965. He also completed the Colombo Plan Scholarship on Diplomacy at the Australian Institute of Foreign
Service in Canberra, Australia.
Atty. Monico V. Jacob, 67 years old, Filipino, has served as an Independent Director of 2GO since December
2011. He also sits on the Board of NENACO as an Independent Member since December 2010. As a partner of the
Jacob & Jacob Law Firm, he has been involved in corporate recovery work including rehabilitation receiverships and
restructuring advisory in the following firms: The Uniwide Group of Companies, ASB Holdings, Inc., RAMCAR Group
of Companies, Atlantic Gulf and Pacific Company of Manila, Inc., Petrochemicals Corporation of Asia-Pacific, All Asia
Capital and Trust Corporation (now know as Advent Capital and Finance Corporation), Nasipit Lumber Company, Inc.
and NENACO. His current positions include: President and CEO of Systems Technology Institute, Inc. (STI),
Information and Communications Technology Academy, Inc., PhilPlans First, Inc., Philhealthcare, Inc., Banclife
Insurance Co. Inc., and JTH Davies Holdings, Inc.; Member of the Boards of Jollibee Foods, Inc., Advent Capital and
Finance Corp., Asian Life Financial Assurance, Asian Terminals, Inc., Mindanao Energy, Inc., Phoenix Petroleum
Philippines, Inc., De los Santos – STI College, De los Santos – STI Medical Center, Philippine Health Educators, Inc.,
Philippine Women's University, Unlad Resources Development Corporation, and Anvaya Cove Beach and Nature
Club; and Chairman of the Boards of Total Consolidated Asset Mgmt, Inc., and Global Resource for Outsourced
Workers, Inc. He received his Bachelor of Arts in Liberal Arts from Ateneo de Naga and Bachelor of Laws from the
Ateneo de Manila University.
Mr. Nelson T. Yap, 54 years old, Filipino, has served as Director of 2GO since December 2011. Mr. Yap has over 30
years of professional experience in public accounting, financial management, treasury, analysis, controls, accounting,
budgeting, tax planning and management reporting with a multinational insurance company, a Hong Kong regional
headquarter overseeing operations in Netherlands Antilles, U.K., France, Australia, and the U.S., and with a listed BPO
company. During the past 5 years, He has served as a Director of NENACO since December 2011; Group Comptroller
of Paxys, Inc., a publicly-listed BPO company, from 2006 to September 2011; and as Treasurer/Comptroller of NGL
th
Pacific Limited from 2005 to June 2006. Mr. Yap, a Certified Public Accountant (15 Board placer), graduated with a
Bachelor of Science degree in Commerce, major in Accounting (Cum Laude) from the Xavier University, Cagayan De
Oro City. He took his Masters in Business Administration from Ateneo Graduate School of Business (no thesis) and
further completed the same from Murdoch University in Perth, Western Australia.
Mr. Mark E. Williams, 39 years old, American, has served as Director of 2GO since December 2010. He is also a
member of the Board Compensation, Remuneration and Nomination, and Board Audit and Corporate Governance
Committees. He currently sits as a Director of NENACO since December 2010; Investment Director of KGL Investment
Company, Damietta International Port Company, KGLI-NM Holdings, Inc. and Global Gateway Development
Corporation. Mr. Williams has extensive experience in the energy and logistics industries and worked with Horizon
Propane LLC in the capacity of Director of Financial Planning and Analysis and later as Vice President of Finance and
Assistant Treasurer. In 2004, Mr. Williams accepted a position as a Director at Cross Holdings LLC, a privately held
investment firm, where he led teams in all aspects of the deal process, from sourcing, to due diligence and post
acquisition management and operational restructuring of portfolio companies along with assessing various real estate
investment opportunities. Mr. Williams also lead a team charged with the outsourcing of manufacturing of outdoor
related products to manufacturers in China and advised a US based materials handling company owned by the
principals of Cross Holdings. He is a Certified Public Accountant and obtained his Bachelor of Science degrees in
Accounting, Business Administration, and Finance at the University of Akron in Akron, Ohio, U.S.A. He completed his
Juris Doctorate degree at Case Western Reserve University, Cleveland, Ohio, U.S.A., and also obtained a Masters
degree in Business Administration, concentration in Finance, from Weatherhead School of Management of the same
university.
Mr. Geoffrey M. Seeto, 43 years old, Australian, has been appointed as a Director of 2GO since October 2011. Mr.
Seeto is also a Member of the following Company Board Committees: (i) Compensation, Remuneration and
Nomination; (ii) Audit and Corporate Governance; and (iii) Risk Management. He is also a member of the Board of
NENACO since December 2010. He is the Head of Asia Infrastructure, Singapore with Babcock and Brown. He led
infrastructure investments including PPP transactions throughout Singapore, Thailand and other ASEAN countries.
Prior to Babcock and Brown, he spent 10 years with ABN Amro Bank in Singapore, the Netherlands and Canada, also
specializing in infrastructure investments, mergers and acquisitions. He received his Bachelor of Economics Degree
and Masters of Law from the University of Sydney, Australia.
Mr. Patrick Ip, 43 years old, Chinese, was appointed as Director of 2GO since October 2011. He currently sits as a
Member of the Board Risk Management and Board Audit and Corporate Governance Committees of 2GO. Mr. Ip is also
a Director of NENACO; Member of the Hong Kong Institute of Directors; and Head of Portfolio Supervision
25
Management for China-ASEAN Capital Advisory Company, the advisor to the China-ASEAN Investment Cooperation
Fund. Prior to this he was the Chief Financial Officer of the private equity arm of the French bank, Natixis. There he
was responsible for all private equity activities in Asia (ex India). Throughout his career he gained substantial
experience in auditing and financial transaction advisory, legal and compliance, litigation and arbitration as well as
hedge fund and alternative investment. Mr. Ip is a Chartered Financial Analyst, a Certified Public Accountant (Hong
Kong) and a Chartered Certified Accountant with PwC in London. He took his Bachelor of Laws degree from the
London University Law Schools and his Bachelor of Arts degree major in Accounting and Finance from the Leeds
University, UK.
EXECUTIVE OFFICERS
Mr. Fred S. Pajo, 58 years old, Filipino, is the Executive Vice-President and Chief Operating Officer of NENACO. He
concurrently handles the same function in 2GO Group, Inc. Further, Mr. Pajo has been with NENACO for more than 30
years, holding various significant positions such as Branch Manager, Officer-in-Charge, Deputy Area Head, Assistant
Vice President for Freight Business and Vice President for Operations. He has served as VP Head of Freight Business
Division and President for Brisk Nautilus Dock Integrated Services, Inc., a wholly owned subsidiary of the NENACO
since 2005. Mr. Pajo also became the President of the NENACO in January 2007 and 2010. Further, he currently
serves as Director of Hansa Meyer-ATS Projects, Inc., Hapag-Lloyd Philippines, Inc. Mr. Pajo earned his degree in
Bachelor of Science in Business Administration from the Ateneo de Cagayan – Xavier University.
Mr. Jose Manuel L. Mapa, 46 years old, Filipino, is the Executive Vice-President – Freight Sales of NENACO and
2GO Group. Mr. Mapa has been with NENACO for more than fourteen (14) years and his career progression has
indicated that he has made major contributions in the company’s operations. He started as an Executive Assistant for
Marketing and Special Projects, gradually moving up to be the AVP/Deputy Area Head-Negros Occidental Area for
NENACO, taking charge of the freight and passage business of the area and on to Vice President / Head – National
Freight Business, later on to Executive Vice President/Head – Passage Business. He obtained his Master’s degree in
Business Administration at the University of St. La Salle Graduate School, Bacolod City. He also completed his
Bachelor of Science degree in Agribusiness Management at the University of the Philippines in Los Banos, Laguna
where he received several awards including the University of the Philippines President’s Award (National Award) for
Outstanding Student, the UPLB University Council Award for Outstanding Student, UPLB Outstanding Student Leader
Award.
Mr. Wilmer A. Alfonso, 60 years old, Filipino, has served as Vice President for Ports Services since 2006. He has
been with 2GO Group since January 1971. He holds the following positions: Chairman of Attina Security Services Inc.,
and Vestina Security Services Inc., President of North Harbor Tugs Corp., United South Dockhandlers, Inc., Supersail
Services Inc., Astir Engineering Works, Inc., J&A Services Corporation, Red.Dot Corporation, Sun-Gold Forwarding
Corporation and NN-ATS Logistics Management & Holdings Co., Inc. Mr. Alfonso is a Certified Public Accountant. He
graduated with a Bachelor of Science degree in Accounting from the University of San Carlos.
Ms. Zenaida R. Cabral, 51 years old, Filipino, is the Executive Vice-President and Chief Corporate Services Officer
of NENACO and the Company. She joined NENACO in 2008, and has worked in all facets of Human Resources and
Organization Development field for over 20 years largely in a managerial/executive role with varied experiences in
different industries such as service, pharmaceutical, electronics, manufacturing, consultancy services, manning and
executive search, allowing her to distinctly excel in her career. One of her most remarkable work stints was with Solid
Electronics Corporation of the Solid Group which handles all the branches that carries the “Sony” brand in the
Philippines. Her remarkable contribution to the company for 10 years was significantly acknowledged by Sony, Thailand
when she was officially invited to share her HR expertise before the 50-member management team of the region. Ms.
Cabral graduated with a Bachelor of Arts degree major in Psychology. She earned her masters degree units in Labor
Management Relations from the University of the Philippines, School of Labor and Industrial Relations and completed
her Organization Development course from the Ateneo de Manila University.
Mr. Stephen Rey R. Tagud, 33 years old, Filipino, is the Vice-President – Passage of NENACO and 2GO Group. He
has over nine (9) solid years of professional experience in sales, marketing, business operations, international
hospitality operations management, hotel sales, operations and destination management from Europe and the USA
and has handled several clients such as Hewlett Packard, LG, Unilever, Wells Fargo, Ford, and Carlson Marketing
Group. Mr. Tagud introduced significant innovations to the company such as the “Revenue Management” concept
where he spearheaded aggressive revenue management strategies that significantly increased both passenger
revenue and volume in a highly competitive transportation market. He also launched the “NN Freight” brand to further
bring the Freight business to the next level of service and efficiency. He further launched other revenue-generating
programs such as the “Suite Sweet Sale” and creative in-house merchandising to boost sales of food & beverage items
on-board the passenger vessels. He completed his undergraduate studies from University of Nevada Las Vegas, USA
where he graduated Cum Laude. He also earned his post-graduate studies from the Swiss Hotel Management School
26
“Les Roches” of Bulche, Switzerland and from the Universidad Europa de Madrid with a degree of Master in Business
Administration major in International Hospitality Management, Finance & Marketing.
Atty. Amado R. Santiago III, 46 years old, Filipino, has served as the Corporate Secretary of 2GO since December
2010. He is the Managing Partner of the Santiago & Santiago Law Offices and is engaged in the general practice of
law. He specializes in corporate litigation, which includes corporate rehabilitation proceedings under the Securities and
Exchange Commission Rules on Corporate Recovery, Interim Rules of Procedure on Corporate Rehabilitation and the
Rules of Procedure on Corporate Rehabilitation. He is also engaged in the practice of taxation law. He received his
Bachelor of Science degree in Management, major in Legal Management (1988) from the Ateneo de Manila
University. He graduated from the Ateneo de Manila School of Law in 1992 and is a member of the Philippine Bar.
Atty. Manuel Eduardo C. Carlos, 37 years old, Filipino, has served as the Assistant Corporate Secretary since
December 2010. He is a Senior Associate Lawyer at the Santiago & Santiago Law Offices. Under this law firm, he
specializes in corporate mergers and acquisitions and corporate housekeeping. He is also engaged in the practice of
taxation law. He acts as corporate counsel, director and/or corporate secretary/assistant corporate secretary of various
corporate clients. He received his Bachelor of Science degree in Management, major in Legal Management (1997)
from the Ateneo de Manila University. He graduated from the Ateneo de Manila School of Law in 2002 and is a member
of the Philippine Bar.
Nomination Committee and Nominees for Election as Members of the Board of Directors
In compliance with SEC Guidelines on the Nomination and Election of Independent Directors under SRC Rule 38, the
Company Board created on February 26, 2003 a Nomination Committee (which was consolidated with the
Compensation/Remuneration Committee in August, 2009.). As of December 31, 2012, the composition of the Board
Compensation, Remuneration and Nomination Committee is as follows:
Chairman:
Members:
Mr. Sulficio O. Tagud Jr.
Mr. Mark E. Williams
Mr. Patrick Ip
The Compensation, Remuneration and Nomination Committee promulgated the guidelines, which govern the
conduct of the nomination of the members of the Company Board. It had pre-screened and short listed all
candidates and came up with the following individuals as nominees for independent directors for the ensuing year
(2013-2014):
(1) Amb. Raul Ch. Rabe as nominated by Mr. Jeremias E. Cruzabra
(2) Mr. Francis C. Chua as nominated by Mr. Nelson T. Yap
(3) Atty. Monico V. Jacob as nominated by Mr. Jeremias E. Cruzabra
The nominating persons are not related to the nominees within the fourth degree of consanguinity.
Further, the Committee approved on July 20, 2005 the Company’s Amended By-Laws incorporating the procedures for
the nomination and election of Independent Directors under Rule 38 of the Securities Regulation Code, as the same
may be amended from time to time.
Period in Which Directors and Executive Officers Should Serve
The directors and executive officers should serve for a period of one (1) year and until the election and qualification of
their successors.
Terms of Office of a Director
The nine (9) directors shall be stockholders and shall be elected annually by the stockholders owning a majority of the
outstanding common shares of the Registrant for a term of one (1) year and shall serve until the election and
qualification of their successors.
Any vacancy in the board of directors other than removal or expiration of term may be filled by a majority vote of the
remaining members thereof at a meeting called for that purpose if they still constitute a quorum, and the director or
directors so chosen shall serve for the unexpired term.
27
Significant Employees
The Corporation considers the contribution of every employee important to the fulfillment of its goals.
Family Relationships
Stephen Rey R. Tagud is the son of Sulficio O. Tagud, Jr. and are, thus, related to each other within the fourth degree
of consanguinity.
Other than the one disclosed above, there are no other family relationships within the fourth degree of consanguinity
known to the Registrant.
Involvement in Certain Legal Proceedings
To the knowledge and/or information of 2GO, none of its nominees for election as directors, the present members of its
Board of Directors or its executive officers, is presently or during the last five (5) years been involved in any legal
proceeding in any court or government agency on the Philippines or elsewhere which would put to question their ability
and integrity to serve 2GO and its stockholders.
With respect to its nominees for election as directors, the present members of its Board of Directors and its executive
officers, the Company is not aware that during the past five (5) years up to even date of: (a) any bankruptcy petition
filed by or against any business of which such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time; (b) any conviction by final judgment of such person in a criminal
proceeding, excluding traffic violations and other minor offenses; (c) such person being subject to any order, judgment,
or decree, not subsequently reversed, suspended or vacated, by any court of competent jurisdiction, domestic or
foreign, permanently or temporarily enjoining, barring, suspending or otherwise limiting such person’s involvement in
any type of business, securities, commodities or banking activities; and (d) such person being found 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 other organized trading market or self regulatory organization, to have violated a securities or
commodities law or regulation and the judgment has not been reversed, suspended, or vacated.
Resignation or Refusal to Stand for Re-election by Members of the Board of Directors
No Director has declined to stand for re-election to the board of directors since the date of the last annual meeting of
the Registrant because of a disagreement with the Registrant on matters relating to the Registrant’s operations,
policies and practices.
28
Item 10. Executive Compensation
The following table summarizes certain information regarding compensation paid or accrued during the last three fiscal
years and to be paid in the ensuing fiscal year to the Registrant Chief Executive Officer and each of the Registrant
four other most highly compensated executive officers:
SUMMARY OF COMPENSATION TABLE
Amounts in Thousands of Pesos (‘000s)
Year
Salary
Bonus
th
th
(13 and 14
Months Pay)
Other Annual
Compensation
Top Five (5) Highly Compensated Executives:
Sulficio O. Tagud Jr. – President and Chief Executive Officer
(2012 and 2013 only)
Jeremias E. Cruzabra – EVP-Chief Finance Officer, Treasurer and Corporate
Information Officer (2012 and 2013 only)
Zenaida R. Cabral – VP-Chief Corporate Services (2012 and 2013 only)
Stephen R. Tagud – VP-Passage (2012 and 2013 only)
Jose Manuel L. Mapa – EVP-Freight Sales (2012 and 2013 only)
Fred S. Pajo – EVP-Chief Operating Officer (2012 and 2013 only)
Lilian P. Cariaso – Chief Finance Officer, CIO and CRO (2011 only)
Evelyn L. Engel – Chief Executive Officer – Passage (2011 only)
Susan V. Valdez – Chief Executive Officer – Freight (2011 only)
Charity Joyce Marohombsar – VP Customer Care Management (2011 only)
All above named officers as a group
All officers and directors as group unnamed
2011
2012
Projected
2013
2011
2012
16,366
12,570
12,570
3,454
1,048
3,531
-
25,213
13,645
4,202
1,137
-
Projected
2013
13,645
3,710
-
On June 2011, Mr. Ramon G. Villordon Jr. was appointed as the Company’s President until his resignation on
December 2011 and on the same date, Mr. Sulficio O. Tagud Jr. was appointed by the Company’s Board of Directors
as the new President of 2GO.
Further, Ms. Evelyn L. Engel, Ms. Lilian P. Cariaso, Ms. Charity Joyce Marohombsar and Ms. Susan V. Valdez have
resigned from the Company effective 30 June, 31 July, 31 August and 10 September 2011, respectively.
The Company has no significant or special arrangements of any kind as regard to the compensation of all officers and
directors other than the funded, noncontributory tax-qualified retirement plans covering all regular employees.
Each director receives a monthly allowance of P80,000 except for the Chairman of the Board who receives P120,000
a month. Further, a per diem of P30,000 is given to each Director and P45,000 for the Chairman for every Board
meeting attended. Such allowances and per diems are shared equally with NENACO whenever board meetings of
NENACO and the Company are held on the same day.
Further, for 2013 estimates the compensation of the company’s officers is shared proportionately with NENACO. The
above share of 2GO is equivalent to the 80% compensation of the officers.
Except for the regular company retirement plan, which by its very nature will be received by the officers concerned
only upon retirement from the Company, the above-mentioned directors and officers do not receive any profit sharing
nor any other compensation in the form of warrants, options, bonuses, etc.
Likewise, there are no standard arrangements that compensate directors directly or indirectly, for any services
provided to the Company either as director or as committee member or both or for any other special assignments.
29
Item 11. Security Ownership of Certain Beneficial Owners and Management
Security ownership of certain record and beneficial owners of five per centum (5%) or more of the outstanding
capital stock of the Registrant as of March 31, 2013:
Title of
Class
Common
Name and Address of Record Owner
and Relationship with 2GO
0
Negros Navigation Co.,
Inc.
Pier 2, North Harbor, Manila
(PARENT COMPANY)
Name of Beneficial Owner and Citizenship No. of Shares
Relationship with Record Owner
Held
Negros Navigation Co., Inc.
Authorized Representative:
Mr. Sulficio O. Tagud Jr.
President
Filipino
2,160,141,995
Percent
of Class
88.31%
NENACO, the parent company of the Registrant, is one of the oldest domestic shipping companies in the Philippines. It
is 59.59% owned by KGLI-NM Holdings, Inc. and 39.88% by China-ASEAN Marine B.V.
Security Ownership of Management – Record and Beneficial Owners as of March 31, 2013:
Title of
Class
Name of Beneficial Owner and
Position
Common
Francis C. Chua
Chairman of the Board, Independent
Director
Filipino
Sulficio O. Tagud, Jr.
President and CEO
Filipino
Jeremias E. Cruzabra
CFO, Treasurer, CIO
Filipino
Nelson T. Yap
Director
Mark E. Williams
Director
Filipino
Geoffrey M. Seeto
Director
Raul Ch. Rabe
Independent Director
Australian
Patrick Ip
Director
Monico V. Jacob
Independent Director
Chinese
Common
Common
Common
Common
Common
Common
Common
Common
TOTAL
Citizenship
American
Filipino
Filipino
Amount and nature of ownership
(Indicate record and/or beneficial)
1,000 – “direct”
9,000 – “indirect”
Record Owner: PCD Nominee Corporation
(Filipino)
1,000 – “indirect”
Record Owner: PCD Nominee Corporation
(Filipino)
1,000 – “indirect”
Record Owner: PCD Nominee Corporation
(Filipino)
1 – “direct”
1,000 – “indirect”
Record Owner: PCD Nominee Corporation
(Non-Filipino)
1 – “direct”
1,000 – “indirect”
Record Owner: PCD Nominee Corporation
(Filipino)
1 – “direct”
1 – “direct”
Percent
of Class
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
1,004 ”direct”;
13,000 “indirect”
Security Ownership of the Directors and Officers in the Registrant as a Group: Common is 14,004 shares; Preferred –
none.
Voting trust holders of 5% or More
No person holds more than five per centum (5%) of a class under a voting trust agreement or similar arrangement.
Changes in Control
In December 28, 2010, NENACO purchased the shareholdings of AEV in 2GO comprising 1,889,489,607 common
shares at a purchase price of approximately PhP3.55 billion and the shareholdings of ACO in 2GO comprising
390,322,384 common shares at a purchase price of approximately PhP734 million.
In February 2011, as a result of the mandatory Tender Offer, NENACO purchased an additional 120,330,004 common
shares in 2GO.
30
On December 21, 2012, NENACO caused the sale of 240,000,000 common shares of stock that NENACO holds in
2GO, at a price of P1.65 per share, via regular Block Sale and through the facilities of the Philippine Stock Exchange,
to the following unrelated third parties:
1.
2.
3.
R A L Holdings and Equities Corporation – 119,000,000 common shares;
BIVI Realty Development Corporation – 80,000,000 common shares
East Asian BBB Realty, Inc. – 41,000,000 common shares
NENACO now owns 2,160,141,995 common shares of 2GO, equivalent to 88.31% of the total outstanding common
shares of the Company.
Item 12. Certain Relationships and Related Transactions
In the ordinary course of business, the Registrant has transactions with fellow subsidiaries, associates, and other
related companies consisting of ship management services, charter hire, management services, courier services,
purchases of steward supplies, availment of stevedoring, arrastre, trucking, rental and repair services. The Registrant
needs these services to complement its services to the freight and passage customers.
The identification of the related parties transacting business with the Registrant and how the transaction prices were
determined by the parties are discussed in the Note 24 of the consolidated financial statements. The Registrant will
continue to engage the services of these related parties as long as it is economically beneficial to both parties.
The Corporation has no transaction during the last two years or proposed transaction to which it was or is to be a party
in which any of its directors, officers, or nominees for election as directors or any member of the immediate family of
any of the said persons had or is to have a direct or indirect material interest.
Moreover, 2GO and its subsidiaries do not have existing or proposed transactions with parties that are considered
outside of the definition of “related parties” but have the influence of negotiating the terms of material transactions that
may not be available to other, more clearly independent parties on an arm’s length basis.
PART IV – CORPORATE GOVERNANCE
In compliance with SEC Memorandum Circular No. 5, Series of 2013, the Company undertakes to submit its Annual
Corporate Governance Report on or before May 30, 2013.
31
PART V - EXHIBITS AND SCHEDULES
Item 14. Exhibits and Reports on SEC Form 17-C
a)
Exhibits - See accompanying Index to Exhibits
The exhibits, as indicated in the Index to Exhibits are either not applicable to the Company or require no answer.
b) Reports on SEC Form 17-C
During the last six months of CY 2012, the Company filed the SEC 17-C report. The list of the reports submitted to the
Commission is as follows:
Date of
Report
Dec 21
Oct 25
Oct 05
Jun 01
Title of Report
Sale of 240 Million Shares of Negros Navigation Co., Inc.
in 2GO Group, Inc.
Board of Directors’ Approval on the Mandatory
Redemption of Redeemable Preferred Shares
Compliance with SEC Memorandum re Guidelines for the
Assessment of the Performance of Audit Committees of
Companies Listed in the Exchange
Appointment of Members of the Board Committees,
Executive Officers and External Auditor
Item No.
Item Title
9
Other Events
9
Other Events
9
Other Events
4
Resignation, Removal or
Election of Registrant’s Directors
or Officers
32
33