1. finance
2. accounting and auditing

COVER SHEET
9
3 7
S.E.C. Registration Number
E E I
C OR P OR A T I O N
( Company's Full Name )
N o. 1 2
M a n g g a h a n
B a g u m b a y a n
,
S t
r e e t
Q u e z o n
C i
,
t y
(Business Address: No. Street City / Town / Province )
ATTY. FERDINAND G. VILLAFUERTE
(0 2)
Contact Person
0 9
Month
3 0
6
3
5
-
0
8
4 3
Company Telephone Number
S E C
Day
F O R M
1 7 Q
FORM TYPE
Secondary License Type, If Applicable
C
F D
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders
Domestic
Foreign
----------------------------------------------------------------------------------------------------------------------------------------------------To be accomplished by SEC Personnel concerned
___________________________
File Number
LCU
___________________________
Document I.D.
Cashier
STAMPS
Remarks = pls. use black ink for scanning
1
SEC FORM 17-Q
QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES
REGULATION CODE AND SRC RULE 17 (a)-1 (b) (2) THEREUNDER
1.
For the quarterly period ended September 30, 2013
2.
SEC Identification No. 937
3.
BIR Tax Identification No. 000-391-438
4.
Exact Name of Registrant as specified in its charter - EEI Corporation
5.
Province, Country or other Jurisdiction of Incorporation or Organization
Quezon City, Philippines
6.
Industry Classification Code (SEC use only)
7.
Address of Registrant's Principal Office/Postal Code
No. 12 Manggahan St., Bagumbayan, Quezon City 1110
8.
Registrant's Telephone Number, including Area Code
(02) 635-08-43
9.
Former Name, Former Address, and Former Fiscal Year, if changed since last report
Not Applicable
10.
Securities Registered pursuant to Section 4 and 8 of the RSA
Title of Each Class
Number of Shares of Common Stock
Outstanding and Amount of Debt Outstanding
Common shares – P1 par value
Authorized
Issued and Outstanding
11.
Amount
2,000,000,000
1,036,401,386
Are any or all of these securities are listed on the Philippine Stock Exchange?
Yes
12.
No. of shares
2,000,000,000
1,036,401,386
[x]
No
[ ]
Indicate by check mark whether the Registrant.
(a)
has filed all the reports required under Section 17 of the Securities Regulation Code
and SRC Rule 11(a)-1 thereunder and Sections 26 and 141 of the Corporation Code
of the Philippines during the preceding 12 months:
Yes
(b)
[X]
No
[ ]
has been subject to such filing requirements for the past 90 days.
Yes
[ ]
No
2
[X]
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements
The interim Consolidated Financial Statements - EEI Corporation and Subsidiaries - September
30, 2013 with comparative figures for the period ended December 31, 2012 and September 30,
2012. Cash Flows and Schedule of Aging of Accounts Receivable is incorporated by reference as
Exhibit 1.
Item 2.
Management's Discussion and Analysis
EEI CORPORATION and SUBSIDIARIES
Management's Discussion and Analysis
As of 30 September 2013
Results of Operations
EEI Corporation’s unaudited consolidated revenues for the first three quarters of 2013 were P7.98
billion, a 21% decrease compared to the same period in 2012. Lower revenues from the services
business of the Company, a 69% drop, from P2.29 billion in 2012 to P703.5 million in 2013 was due
to the completion of the manpower supply contract of EEI Corporation (Singapore) Pte. Ltd. with
Shaw Stone and Webster Asia Inc., and the Inco Goro Nickel Mining project in New Caledonia.
These two projects contributed significantly to the 2012 revenues. Revenue from construction
contracts was likewise lower by 8% as about seventeen (17) domestic projects are simultaneously
in their completion stage. The completion stage of a project is usually a stage of the construction
life cycle where revenues decelerate considerably. Another contributing factor is the delay in the
resumption of the Communication, Navigation and Surveillance/Air Traffic Management Systems
Development project of the Department of Transportation and Communications under Sumitomo
Corporation. This project was suspended in 2011 and was supposed to have resumed in August
2013. Bad weather conditions during the third quarter of the year also contributed to lower
production numbers. The new projects of the Company won in 2013 are still at their inception stages
and, thus, still have yet to generate significant revenues.
The total consolidated costs and expenses from January to September, 2013 was at P6.88 billion,
23% lower compared to the P8.88 billion in 2012. The expenses pertaining to services decreased
by 78% while that for construction contracts decreased by 9% as a consequence of the lower
construction activities described above.
Interest expense increased by 45%, from P20.71 million in 2012 to P30.06 million in 2013, as a
result of higher loan level to support operating cash flow requirements and to finance significant
capital expenditures for new projects.
EEI Corporation’s consolidated net income for the first three quarters of 2013 was posted at
P621.64 million, 15% lower, compared to the P728.37 million posted in September 30, 2012.
Correspondingly, the earnings per share dropped to P0.60, from P0.703 last year.
In 2012, the Company booked a one-time recovery from its principals amounting to P79.93 million
for the damaged equipment that was burned by insurgents in its Taganito Mining project in Surigao
del Norte.
There are no other significant elements of income or loss that did not arise from the Company’s
continuing operations in 2013.
3
Financial Position
From the start of the year to September 30, 2013, the total current assets of EEI grew by 23%,
amounting to P9.29 billion. Most of this is from the 94% increase in the Company’s work in progress,
from P1.31 billion to P2.70 billion. Cash and cash equivalents increased by P346.54 million, 32%
higher than 2012 yearend figures due to substantial down payment collections from newly awarded
projects.
Total noncurrent assets also grew, from P4.83 billion in December 31, 2012 to P5.33 billion as of
September 30, 2013. This was the result of the 10% increase in property and equipment, from
P3.19 billion to P3.52 billion, mainly from the on-going construction of the 15MW Power Plant in
Tagum, Davao del Norte of EEI Power Corporation, a local subsidiary of the Company; and the 20%
increase in the equity in net earnings from Al Rushaid Construction Company, an associate of EEI
BVI Ltd., a foreign subsidiary of the Company.
In sum, the total assets of the Company increased by P2.26 billion or 18%, from P12.37 billion to
P14.63 billion.
Total liabilities, on the other hand, increased by 24%, from P7.23 billion to P8.97 billion in the nine
month period. This was mainly from the P1.60 billion increase in bank loans, amounting to P2.04
billion as of end of September, 2013, which was required to finance operations and capital
expenditures.
Total equity grew by 10%, from P5.14 billion to P5.66 billion from retained earnings, reduced by the
cash dividend declaration of P0.20 per share in March 2013.
The Company’s book value per share, which ended at P4.96 at the end of 2012, stood at P5.46 as
of September 30, 2013.
There are no known trends, or commitments other than those presented in the financial statements,
which may have material impact on the Company’s liquidity.
Operating Highlights
In the third quarter of 2013, EEI Corporation won the contracts to construct the following:
The Wind Residences Tower 5 of SM Development Corporation in Tagaytay City, Cavite; the Jetty
works for the SM200 Phase 1 of the Sarangani Coal-fired Power plant of Sarangani Energy
Corporation (Alsons Consolidated Resources) in Maasim, Sarangani Province; the 50MW Nabas
Wind Power Plant of Petro Wind Energy, Inc. in Aklan; the 80MW Caparispisan Wind Power Plant of
the North Luzon UPC Asia Corp. in Pagudpod, Ilocos Norte; the MEPF works, utility racks and
building steel structures erection for the Therma South Power Coal-fired Power Plant under
Leighton Contractors, Philippines in Davao; and the rehabilitation of the existing container yard at
the Marine Shipway/Pier 16 of the Manila North Harbour Port, Inc.
The Communication, Navigation and Surveillance/Air Traffic Management Systems Development of
the Department of Transportation and Communication under Sumitomo Corporation, which was
suspended in 2011, also resumed in the third quarter of 2013.
This adds to the following projects which EEI acquired during the first half of the year:
Column Blocks for Keppel Philippines Marine, Inc. in Batangas; the Jetty Piping Modification for the
JG Summit Naptha Cracker Plant in Simlong, Batangas; the Wind Residences Tower 4 of SM
Development Corporation in Tagaytay City, Cavite; Filinvest Festival Supermall Expansion of
4
Filinvest Land, Inc. in Alabang, Muntinlupa City; North Luzon Expressway to McArthur Highway Link
- Phase 2 of Manila North Tollways Corporation; the Food Processing Plant of North South Realty
and Agricultural Development Corporation in Pasig City; and the Philsaga Gold Mining Upgrade of
Philsaga Mining Corporation in Agusan del Sur.
The company is still working on the Grand Hyatt Center of Bonifacio Landmark Realty and
Development Corporation at the Bonifacio Global City in Taguig City; the RCBC Savings Bank and
Corporate Center also at the Bonifacio Global City; seven projects for SM Development Corporation,
namely the Sun Residences Towers 1 and 2 in Quezon City, the Wind Residences Towers 1, 2 and
3 in Tagaytay City, the Green Residences in Manila City, the Mezza II Residences in Sta. Mesa,
Manila City; the SM 3 e-Commerce Building of SM Investments Corporation at the Mall of Asia
Complex in Pasay City; four projects for Megaworld Corporation, namely the One Central Building in
Makati City, the 8 Forbestown and the Uptown Mall and BPO Offices in Bonifacio Global City, and
the Eastwood LeGrand 3 in Quezon City; the Beacon Tower 2 of New Pacific Resources
Management, Inc. in Makati City; the Anchor Skysuites of Gotamco Realty in Binondo, Manila; the
Admiral Bay Suites for Admiral Realty Company, Inc. in Malate, Manila; the Third Atrium to Expand
the Headquarters Building of the Asian Development Bank in Mandaluyong City; the Novotel Manila
of Araneta Center Hotel, Inc. in Quezon City; the Levels Condominium Phase 1-A of Filinvest Land,
Inc. in Alabang, Muntinlupa; the upgrade of the TPA CIL Gold Plant under ARCCON for Philsaga
Mining Corporation in Agusan del Sur; civil and building works for ISBL area for the construction of
the JG Summit Naptha Cracker Plant for Daelim Philippines, Inc. in Simlong, Batangas; the
Engineering, Procurement and Construction package for the 20 Megawatt Maibarara Geothermal
Power Plant between Batangas and Laguna for Petroenergy Resources Corporation; the Asphalt
Plant Facility for Petron Corporation; 10 ML Concrete Reservoir and Pump Station Project for Manila
Water Company, Inc. in Taguig City and the Taganito Nickel Hydrometallurgical Project under the
JGC-Chiyoda joint venture in Claver, Surigao del Norte.
In the nine months of 2013, Al Rushaid Construction Company, Ltd. (ARCC), EEI’s 49% owned
entity in the Kingdom of Saudi Arabia (KSA) was awarded the construction of the 240MW
Petrorabigh Power and Steam Generating Plant under Mitsubishi Heavy Industry; the Maintenance
Contract of the Saudi Aramco Total Refining and Petrochemical Company’s refinery; and the
Mechanical Works of the Port Facilities for SADARA Chemical Company.
ARCC continues to work on the SAMREF Clean Fuels Project for Saudi Aramco Mobil Refinery; the
SADARA MFC Project for Sadara Chemical Co.; the Albayroni Ammonia Energy Optimization
Project for Albayroni-Al Jubail Fertilizer Co; and, Piping shop fabrication for Saudi Aramco.
Outlook
As of September, 2013, the Company’s domestic backlog, which represents portions of existing
local construction contracts that have yet to be completed had a net selling price of P13.57 billion.
The total backlog of the Company, including that of its subsidiaries and overseas projects are worth
P25.28 billion, 36% higher compared to the same period in 2012.
The Company notes an increase in the amount of infrastructure, industrial and power plant projects
being undertaken. The domestic construction industry still appears to be strong as the Company
continues to bid for new local projects and foreign-based projects as well. More investments in
power generation projects, as well as projects for transport systems and infrastructure development
are expected and these could have an impact in the growth of the construction sector.
5
Key Performance Indicators
The most significant key indicators of future performance of the company are the following:
1. Construction contracts and orders – denote the value of construction projects won by
the Company from customers during the year and determines its revenue potential.
Contracts and orders increase during an expansionary period when private business is
on an investment mode, with significant capital expenditures allotted for new capacity
and expansion and upgrading.
In overseas markets, orders tend to rise when investors (quasi private/government
entities) and corporations invest on new upstream and downstream petroleum facilities
and new mining facilities. This usually happens during a period of prolonged high price
of oil or basic metals/minerals which encourages capacity expansion projects and spurs
new infrastructure projects in the host countries. The regime of high petroleum and
metal prices has spurred increased construction activities in the Middle East, East Asia
and Africa.
2. Production – represents the value of construction work accomplished by the Company
during the period in review. It is synonymous to sales revenue since these are
recognized at the value corresponding to the percentage of completion of the projects
and orders. Production is determined by capacity in terms of manpower, equipment and
management resources, and higher productivity of the factors of production. These
translate to better financial performance.
3. Orders backlog – corresponds to the value of unfinished portions of projects; thus
providing a measure of the near-term future source of production and revenues of the
Company. Backlog has a tendency to increase during times when private companies
(both local and foreign) are on an expansionary cycle, as they undertake capital
expansion and/or modernization of their respective factories and plants. It also occurs
when national and local government is on a pump priming mode of investing on
infrastructure. Bigger backlog means a probability of higher profit in the future.
4. Liquidity – refers to existing cash and cash resources and the capability of the Company
to quickly draw financial resources (such as working capital and other credit lines) to fund
operations and construction activities. This ability to deploy financial resources is critical
in fulfilling its contract obligations and ensuring the operational and financial viability of
the Company.
6
7
Exhibit 1
EEI CORPORATION AND SUBSIDIARIES
Interim Condensed
Consolidated Financial Statements
September 30, 2013 & 2012 (Unaudited)
and
December 31, 2012 (Audited)
8
EEI CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
At September 30, 2013 and December 31, 2012
(In Thousand Pesos)
September 30,
2013
(Audited)
ASSETS
Current Assets
Cash and cash equivalents
Receivables
Costs and estimated earnings in excess of billings
on uncompleted contracts
Inventories
Other current assets
Total Current Assets
Noncurrent Assets
Investments in associate and joint venture
Available-for-sale securities
Property and equipment
Investment properties
Other noncurrent assets
Total Noncurrent Assets
TOTAL ASSETS
December 31,
2012
(Audited)
1,426,149
3,802,296
1,079,610
3,848,491
2,699,944
414,037
951,619
9,294,045
1,390,689
400,817
819,556
7,539,163
1,243,917
149,690
3,517,383
248,347
175,145
5,334,482
14,628,527
1,040,573
132,323
3,195,306
281,994
182,520
4,832,716
12,371,879
2,037,000
3,297,749
440,000
3,325,431
2,755,524
500,000
8,590,273
2,743,986
500,000
7,009,417
375,458
2,559
2,978
380,995
8,971,268
209,750
2,559
6,986
219,295
7,228,712
1,036,401
477,037
(54,665)
4,192,794
9,413
(3,721)
5,657,259
14,628,527
1,036,401
477,037
(151,963)
3,778,436
6,977
(3,721)
5,143,167
12,371,879
LIABILITIES AND EQUITY
Current Liabilities
Bank loans
Accounts payable & accrued expenses
Billings in excess of costs and estimated earnings
on uncompleted contracts
Current portion of long-term debt
Total Current Liabilities
Noncurrent Liabilities
Long-term debt - net of current portion
Deferred tax liabilities
Other noncurrent liabilities
Total Noncurrent Liabilities
Total Liabilities
Equity
Capital stock
Additional paid-in capital
Cumulative translation adjustments
Retained earnings
Unrealized gain on available-for-sale securities
Treasury stock
Total Equity
TOTAL LIABILITIES AND EQUITY
9
EEI CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
For the periods ended September 30, 2013 and 2012
(In Thousand Pesos Except Earnings Per Share)
JULY TO SEPTEMBER
REVENUE
Construction contracts
Services
JAN. TO SEPTEMBER
2013
2012
2013
2012
2,169,375
2,947,264
7,096,676
7,701,905
164,554
785,656
703,496
2,290,588
Merchandise sales
44,136
45,718
130,106
118,988
Real estate sales
15,802
3,214
46,536
25,771
2,393,867
3,781,852
7,976,814
10,137,252
179,875
136,592
260,173
218,471
7,932
10,509
38,856
31,122
19,433
9,443
71,775
22,597
–
–
–
79,930
2,601,107
3,938,396
8,347,618
10,489,372
Equity in net earnings of associate
and joint venture
Interest income
Other income
Recovery on damaged properties
COSTS AND EXPENSES
Construction contracts
1,989,438
2,667,281
6,332,930
6,968,439
Services
77,156
637,080
407,506
1,813,024
Merchandise sales
36,640
30,353
97,561
81,095
Real estate sales
13,012
1,836
39,007
20,113
2,116,246
3,336,550
6,877,004
8,882,671
195,809
206,111
565,664
542,978
13,089
3,553
30,063
20,714
2,325,144
3,546,214
7,472,731
9,446,363
INCOME BEFORE INCOME TAX
275,963
392,182
874,887
1,043,009
PROVISION FOR INCOME TAX
82,369
116,910
253,249
314,641
193,594
275,272
621,638
728,368
0.187
0.266
0.600
0.703
Selling and administrative expenses
Interest expense
NET INCOME
EARNINGS PER SHARE
10
EEI CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
At September 30, 2013 and December 31, 2012
(In Thousand Pesos)
September 30,
2013
(Unaudited)
Profit for the year
December 31,
2012
(Audited)
621,638
975,232
(184,406)
55,322
(129,084)
(184,406)
55,322
(129,084)
Other comprehensive income for the year, net of tax
97,298
2,436
99,734
(29,350)
(100,937)
1,519
(99,418)
(228,502)
TOTAL COMPREHENSIVE INCOME
592,288
746,730
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Actuarial gains(losses) on defined benefit pension plan
Income tax relating to items that will not be reclassified
Items that may be reclassified subsequently to profit or loss:
Cumulative translation adjustments
Net gain on available-for-sale financial assets
11
EEI CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the periods ended September 30, 2013 and 2012
(In Thousand Pesos)
September 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax
Adjustments for:
Depreciation and amortization
Interest expense
Effects of exchange rate
Equity in net earnings of associate and joint venture
Interest income
Gain on sale of property and equipment
Gain on sale of investment properties
Operating income before changes in working capital
Decrease (increase) in:
Receivables
Cost and estimated earnings in excess of billings
on uncompleted contracts
Inventories
Other current assets
Increase (decrease) in:
Accounts payable & accrued expenses
Billings in excess of costs and estimated earnings
on uncompleted contracts
Net cash generated from (used for) operations
Interest received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
September 30, 2012
874,888
1,043,009
251,210
30,063
39,356
(260,173)
(38,856)
(3,529)
(2,820)
890,139
180,741
20,714
(9,364)
(218,471)
(31,122)
(390)
(871)
984,246
44,230
(131,531)
(1,309,255)
(13,220)
(132,063)
134,840
(2,960)
(163,132)
(83,582)
415,200
11,538
(592,213)
40,821
(24,772)
(258,469)
(834,633)
654,181
1,890,844
32,752
(31,485)
(198,099)
1,694,012
4,567
12,166
1,619
8,023
(14,931)
(55,000)
(574,325)
24,301
7,375
169,771
(426,076)
80
(962,147)
2,454
17,388
86,779
(845,804)
1,740,000
165,708
870,346
109,750
(143,000)
(155,460)
1,607,248
(1,343,336)
(77,730)
(440,970)
346,539
407,238
CASH AND CASH EQUIVALENTS - BEGINNING
1,079,610
880,044
CASH AND CASH EQUIVALENTS - END
1,426,149
1,287,282
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposals of:
Property and equipment
Investment properties
Net reduction in (additions to):
Available-for-sale securities
Investments
Property and equipment
Investment properties
Other noncurrent assets
Dividends received
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from:
Bank loans
Long-term debt
Payments of:
Bank loans
Cash dividends paid
Net cash provided by (used in) financing activities
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS
12
EEI CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the periods ended September 30, 2013 and 2012
(In Thousand Pesos)
Additional
Paid-In
Capital
Capital Stock
Cumulative
Translation
Adjustments
Net Unrealized
Gain on
Available-forSale Securities
Retained
Earnings
Treasury
Stock
Total
(3,721)
5,143,167
For the period ended September 30, 2013
Balances at beginning of year
1,036,401
477,037
(151,963)
Net income
Other comprehensive income
–
–
–
–
Total comprehensive income
Dividends declared
–
–
–
–
Balances at end of the period
1,036,401
3,778,436
–
97,298
–
–
97,298
–
477,037
6,977
621,638
(54,665)
2,436
621,638
(207,280)
2,436
4,192,794
9,413
–
–
–
621,638
99,734
–
–
721,372
(207,280)
5,657,259
(3,721)
For the period ended September 30, 2012
Balances at beginning of year
1,036,401
477,037
(51,025)
2,906,843
5,458
(3,721)
4,370,993
Net income
Other comprehensive income (loss)
–
–
–
–
–
(56,311)
728,368
–
–
2,131
–
–
728,368
(54,180)
Total comprehensive income (loss)
Dividends declared
–
–
–
–
(56,311)
–
728,368
(103,640)
2,131
–
–
–
674,188
(103,640)
1,036,401
477,037
(107,336)
3,531,571
7,589
(3,721)
4,941,541
Balances at end of the period
13
EEI CORPORATION AND SUBSIDIARIES
AGING OF TRADE & RETENTION RECEIVABLES
AS OF SEPTEMBER 30, 2013
(In Thousand Pesos)
120 DAYS/
CURRENT
EEI CORPORATION
30 DAYS
60 DAYS
90 DAYS
OVER
TOTAL
2,173,946
255,444
92,699
48,728
243,787
2,814,604
GULF ASIA INTERNATIONAL CORP.
19,566
14,281
8,778
5,216
11,334
59,175
EEI CONSTRUCTION & MARINE, INC.
10,746
2,581
895
6,707
16,814
37,743
EQUIPMENT ENGINEERS, INC.
5,436
6,007
7,143
10,297
9,709
38,592
EEI POWER CORPORATION
3,900
-
-
184
9,518
13,602
EEI REALTY CORPORATION
125,638
267
174
196
1,775
128,050
-
-
-
9,577
9,577
302,514
3,101,343
PHILMARK, INC.
TOTAL
2,339,232
278,580
14
109,689
71,328
EEI CORPORATION AND SUBSIDIARIES
UNAUDITED SEGMENT INFORMATION
FOR THE PERIODS ENDED SEPTEMBER 30, 2013 AND 2012
(In Thousand Pesos)
2013
Domestic
Foreign
Combined
9,253,397
5,148,334
7,845,885
3,333,720
17,099,282
8,482,054
(7,805,237)
(3,147,572)
9,294,045
5,334,482
14,401,731
11,179,605
25,581,336
(10,952,809)
14,628,527
9,924,416
380,995
5,606,557
661,835
15,530,973
1,042,830
(6,940,700)
(661,835)
8,590,273
380,995
Total Liabilities
10,305,411
6,268,392
16,573,803
(7,602,535)
8,971,268
Revenue
Direct cost
Operating expenses
Interest expense
Other income (charges)
7,978,130
(6,921,581)
(555,837)
(34,504)
117,333
9,405,154
(7,719,478)
(1,044,595)
(78,943)
17,383,284
(14,641,059)
(1,600,432)
(34,504)
38,390
(9,406,470)
7,764,055
1,034,768
4,441
72,241
7,976,814
(6,877,004)
(565,664)
(30,063)
110,631
583,541
(171,707)
(270,792)
291,346
(81,542)
(270,792)
874,887
(253,249)
411,834
209,804
621,638
(977,807)
(327,268)
1,607,248
1,080,568
240,249
(563,527)
102,761
(87,019)
1,043,721
Assets
Current assets
Noncurrent assets
Total Assets
Liabilities
Current liabilities
Noncurrent liabilities
Share of ARCC’s net income
Income before tax
Provision for income tax
Net income
Cash flows arising from:
Operating activities
Investing activities
Financing activities
15
Elimination
530,965
-
(937,394)
(339,057)
563,527
Consolidated
260,173
874,887
(253,249)
621,638
(834,633)
(426,076)
1,607,248
2012
Domestic
Assets
Current assets
Noncurrent assets
Total Assets
Foreign
Combined
Elimination
Consolidated
7,069,165
7,212,732
14,281,897
(7,012,075)
7,269,822
4,511,551
3,547,351
8,058,902
(3,398,995)
4,659,907
11,580,716
10,760,083
22,340,799
(10,411,070)
11,929,729
7,520,355
5,762,509
13,282,864
(6,430,274)
6,852,590
135,099
958,954
1,094,053
(958,954)
135,099
7,655,454
6,721,463
14,376,917
(7,389,228)
6,987,689
Liabilities
Current liabilities
Noncurrent liabilities
Total Liabilities
Revenue
Direct cost
Operating expenses
Interest expense
Other income (charges)
Share of ARCC's net income
Income before tax
Provision for income tax
Net income
Cash flows arising from:
Operating activities
Investing activities
Financing activities
8,719,062
11,102,845
19,821,907
(9,684,655)
10,137,252
(7,647,031)
(524,621)
(9,370,617)
(789,712)
(17,017,648)
(1,314,333)
8,134,976
771,355
(8,882,672)
(542,978)
(32,842)
124,528
84,285
(32,842)
208,813
12,128
(75,163)
(20,714)
133,650
(622,888)
(622,888)
841,359
218,471
639,096
(194,052)
403,913
(120,589)
1,043,009
(314,641)
-
1,043,009
(314,641)
445,044
283,324
728,368
-
728,368
1,400,364
1,060,871
2,461,999
(767,223)
(934,159)
267,502
(666,657)
(179,147)
(845,804)
(210,180)
(651,150)
210,180
(440,970)
-
(440,970)
1,694,012
Notes to operating segments:
1. Intersegment revenues, cost and expenses, assets and liabilities are eliminated on consolidation.
These are accounted for under PFRS.
2. The foreign segment above includes the results of operations of Al Rushaid Construction Company
Ltd. (ARCC) at 100%. The consolidated financial statements of the Group present its 49% share in
ARCC under the equity in net earnings account.
16
85
EEI CORPORATION AND SUBSIDIARIES
Corporate Information
EEI Corporation (the Parent Company) is a stock corporation incorporated on April 17, 1931
under the laws of the Philippines. The Parent Company is a subsidiary of House of Investments,
Inc., which is also incorporated in the Philippines. The ultimate parent company of EEI
Corporation and its subsidiaries (collectively referred to as the Group) is Pan Malayan
Management and Investment Corporation (PMMIC). The registered office address of the Parent
Company is No. 12 Manggahan Street, Bagumbayan, Quezon City.
The Parent Company’s shares of stock are listed and are currently trading at the Philippine
Stock Exchange (PSE).
The Parent Company is engaged in general contracting and construction equipment rental. The
Parent Company’s subsidiaries, associate and joint venture are mainly involved in the provision
of manpower services, construction, trading of construction equipment and parts, power
generation, steel fabrication and real estate.
The accompanying interim consolidated financial statements of the Group were approved and
authorized for issue by its Board of Directors (BOD) on November 12, 2013.
17
Item 1. Financial Statements Required Under SRC Rule 68.1
5.
Earnings Per Share
The following table presents information necessary to calculate basic earnings per
share:
(In Thousand Pesos)
As of 09.30.13 As of 09.30.12
621,638
728,368
1,036,401
1,036,401
P0.600
P0.703
Net Income
Issued and subscribed shares
Earnings per share
6.
The accompanying interim consolidated financial statements have been prepared in
compliance with Philippine Financial Reporting Standards (PFRS).
7.a.
Basis of Preparation
The accompanying interim consolidated financial statements have been prepared on a
historical cost basis, except available-for-sale (AFS) securities which have been
measured at fair value. The accompanying interim consolidated financial statements are
presented in Philippine Peso (P
= ), which is also the Parent Company’s functional
currency. Except as indicated, all amounts are rounded off to the nearest peso.
Statement of Compliance
The accompanying interim consolidated financial statements have been prepared in
compliance with Philippine Financial Reporting Standards (PFRS)
Changes in Accounting Policies and Disclosures
The accounting policies adopted are consistent with those of the previous financial year
except for the following new and amended PFRS and Philippine Accounting Standards
(PAS) which were adopted as of January 1, 2013. Except as otherwise indicated, the
adoption of these new accounting standards, amendments and interpretations have no
material impact on the Group’s consolidated financial statements.
•
PFRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets and
Financial Liabilities (Amendments)
These amendments require an entity to disclose information about rights of set-off
and related arrangements (such as collateral agreements). The new disclosures
are required for all recognized financial instruments that are set off in accordance
with PAS 32. These disclosures also apply to recognized financial instruments that
are subject to an enforceable master netting arrangement or ‘similar agreement’,
irrespective of whether they are set-off in accordance with PAS 32. The
amendments require entities to disclose, in a tabular format unless another format
is more appropriate, the following minimum quantitative information. This is
presented separately for financial assets and financial liabilities recognized at the
end of the reporting period:
a) The gross amounts of those recognized financial assets and recognized
financial liabilities;
b) The amounts that are set off in accordance with the criteria in PAS 32 when
determining the net amounts presented in the statement of financial position;
c) The net amounts presented in the statement of financial position;
d) The amounts subject to an enforceable master netting arrangement or
similar agreement that are not otherwise included in (b) above, including:
18
i.
Amounts related to recognized financial instruments that do not meet
some or all of the offsetting criteria in PAS 32; and
ii. Amounts related to financial collateral (including cash collateral); and
e) The net amount after deducting the amounts in (d) from the amounts in (c)
above.
The amendments to PFRS 7 are to be retrospectively applied and are effective for
annual periods beginning on or after January 1, 2013. The amendments affect
disclosures only and have no impact on the Group’s financial position or
performance.
•
PFRS 10, Consolidated Financial Statements
PFRS 10 replaces the portion of PAS 27, Consolidated and Separate Financial
Statements, that addresses the accounting for consolidated financial statements. It
also includes the issues raised in SIC 12, Consolidation - Special Purpose Entities.
PFRS 10 establishes a single control model that applies to all entities including
special purpose entities. The changes introduced by PFRS 10 will require
management to exercise significant judgment to determine which entities are
controlled, and therefore, are required to be consolidated by a parent, compared
with the requirements that were in PAS 27. The standard becomes effective for
annual periods beginning on or after January 1, 2013.
•
PFRS 11, Joint Arrangements
PFRS 11 replaces PAS 31, Interests in Joint Ventures, and SIC 13, Jointly
Controlled Entities - Non-Monetary Contributions by Venturers. PFRS 11 removes
the option to account for jointly controlled entities using proportionate consolidation.
Instead, jointly controlled entities that meet the definition of a joint venture must be
accounted for using the equity method. The standard becomes effective for annual
periods beginning on or after January 1, 2013. The Group does not expect a
significant impact from the adoption of this item new standard because it already
adopts the equity method of accounting for its investments in associate and joint
venture.
•
PFRS 12, Disclosure of Interests in Other Entities
PFRS 12 includes all of the disclosures related to consolidated financial statements
that were previously in PAS 27, as well as all the disclosures that were previously
included in PAS 31 and PAS 28, Investments in Associates. These disclosures
relate to an entity’s interests in subsidiaries, joint arrangements, associates and
structured entities. A number of new disclosures are also required. The standard
becomes effective for annual periods beginning on or after January 1, 2013.
The adoption of PFRS 12 will affect disclosures only and have no impact on the
Group’s financial position or performance.
•
PFRS 13, Fair Value Measurement
PFRS 13 establishes a single source of guidance under PFRSs for all fair value
measurements. PFRS 13 does not change when an entity is required to use fair
value, but rather provides guidance on how to measure fair value under PFRS
when fair value is required or permitted. This standard should be applied
prospectively as of the beginning of the annual period in which it is initially applied.
Its disclosure requirements need not be applied in comparative information
provided for periods before initial application of PFRS 13. The standard becomes
effective for annual periods beginning on or after January 1, 2013.
19
•
PAS 1, Presentation of Financial Statements - Presentation of Items of Other
Comprehensive Income or OCI (Amendments)
The amendments to PAS 1 change the grouping of items presented in OCI. Items
that can be reclassified (or “recycled”) to profit or loss at a future point in time (for
example, upon derecognition or settlement) will be presented separately from items
that will never be recycled. The amendments affect presentation only and have no
impact on the Group’s financial position or performance. The amendment becomes
effective for annual periods beginning on or after July 1, 2012. The amendments
will be applied retrospectively and will result to the modification of the presentation
of items of OCI.
•
PAS 27, Separate Financial Statements (as revised in 2011)
As a consequence of the issuance of the new PFRS 10 and PFRS 12, what
remains of PAS 27 is limited to accounting for subsidiaries, jointly controlled
entities, and associates in the separate financial statements. The standard is
applicable with no significant impact on the Group’s financial position or
performance. The amendment becomes effective for annual periods beginning on
or after January 1, 2013.
•
PAS 28, Investments in Associates and Joint Ventures (as revised in 2011)
As a consequence of the issuance of the new PFRS 11 and PFRS 12, PAS 28 has
been renamed PAS 28, Investments in Associates and Joint Ventures, and
describes the application of the equity method to investments in joint ventures in
addition to associates. The standard is applicable with no significant impact on the
Group’s financial position or performance. The amendment becomes effective for
annual periods beginning on or after January 1, 2013.
•
PFRS 1, First-time Adoption of PFRS – Government Loans
The amendments clarify the retrospective application of the requirements of PFRS
9, Financial Instruments and PAS 20, Government Grants on existing government
loans at the date of transition if the information needed to do so has been obtained
at the time of initially accounting for the loans; otherwise, allows prospective
application, where, first-time adopters shall not recognize the benefits of the
government loans at a below-market interest rate as government grant.
Subsequent to the adoption of PFRS, government loans are recognized in
accordance with PFRS 9. Since the Parent Company has not yet adopted PFRS 9,
references made therein shall be read as references to PAS 39. The amendments
do not apply to the Parent Company as it is not a first-time adopter of PFRS.
•
Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a
Surface Mine
This interpretation applies to waste removal (stripping) costs incurred in surface
mining activity, during the production phase of the mine. The interpretation
addresses the accounting for the benefit from the stripping activity. The
interpretation is effective for annual periods beginning on or after January 1, 2013.
This new interpretation is not relevant to the Group.
PAS 19, Employee Benefits (Revised)
Amendments to PAS 19 range from fundamental changes such as removing the
corridor mechanism and the concept of expected returns on plan assets to simple
clarifications and rewording. The revised standard also requires new disclosures
such as, among others, a sensitivity analysis for each significant actuarial
assumption, information on asset-liability matching strategies, duration of the
defined benefit obligation, and disaggregation of plan assets by nature and risk.
20
The amendments become effective for annual periods beginning on or after
January 1, 2013. Once effective, the Group has to apply the amendments
retroactively to the earliest period presented.
•
•
Effective in 2014
PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and
Financial Liabilities (Amendments)
The amendments clarify the meaning of “currently has a legally enforceable right to
set-off” and also clarify the application of the PAS 32 offsetting criteria to settlement
systems (such as central clearing house systems) which apply gross settlement
mechanisms that are not simultaneous. The amendments affect presentation only
and have no impact on the Group’s financial position or performance. The
amendments to PAS 32 are to be retrospectively applied for annual periods
beginning on or after January 1, 2014.
Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate
This interpretation covers accounting for revenue and associated expenses by
entities that undertake the construction of real estate directly or through
subcontractors. The SEC and the Financial Reporting Standards Council (FRSC)
have deferred the affectivity of this interpretation until the final Revenue standard is
issued by the International Accounting Standards Board (IASB) and an evaluation
of the requirements of the final Revenue standard against the practices of the
Philippine real estate industry is completed. The Group does not expect a
significant impact upon adoption of this standard as the Group recognizes revenues
only when the projects are substantially completed.
Annual Improvements to PFRSs (2009-2011 cycle)
The Annual Improvements to PFRSs (2009-2011 cycle) contain non-urgent but
necessary amendments to PFRSs. The amendments are effective for annual
periods beginning on or after January 1, 2013 and are applied retrospectively.
Earlier application is permitted.
•
PFRS 1, First-time Adoption of PFRS - Borrowing Costs
The amendment clarifies that, upon adoption of PFRS, an entity that capitalized
borrowing costs in accordance with its previous generally accepted accounting
principles, may carry forward, without any adjustment, the amount previously
capitalized in its opening statement of financial position at the date of transition.
Subsequent to the adoption of PFRS, borrowing costs are recognized in accordance
with PAS 23, Borrowing Costs. The amendment does not apply to the Group as it is
not a first-time adopter of PFRS.
•
PAS 1, Presentation of Financial Statements - Clarification of the Requirements for
Comparative Information
The amendments clarify the requirements for comparative information that are
disclosed voluntarily and those that are mandatory due to retrospective application
of an accounting policy, or retrospective restatement or reclassification of items in
the financial statements. An entity must include comparative information in the
related notes to the financial statements when it voluntarily provides comparative
information beyond the minimum required comparative period. The additional
comparative period does not need to contain a complete set of financial statements.
On the other hand, supporting notes for the third balance sheet (mandatory when
there is a retrospective application of an accounting policy, or retrospective
restatement or reclassification of items in the financial statements) are not required.
21
The amendments affect disclosures only and have no impact on the Group’s
financial position or performance.
•
PAS 16, Property, Plant and Equipment - Classification of Servicing Equipment
The amendment clarifies that spare parts, stand-by equipment and servicing
equipment should be recognized as property, plant and equipment when they meet
the definition of property, plant and equipment and should be recognized as
inventory if otherwise. The amendment will not have any significant impact on the
Group’s financial position or performance.
•
PAS 32, Financial Instruments: Presentation - Tax Effect of Distribution to Holders of
Equity Instruments
The amendment clarifies that income taxes relating to distributions to equity holders
and to transaction costs of an equity transaction are accounted for in accordance
with PAS 12.
•
PAS 34, Interim Financial Reporting - Interim Financial Reporting and Segment
Information for Total Assets and Liabilities
The amendment clarifies that the total assets and liabilities for a particular reportable
segment need to be disclosed only when the amounts are regularly provided to the
chief operating decision maker and there has been a material change from the
amount disclosed in the entity’s previous annual financial statements for that
reportable segment. The amendment affects disclosures only and has no impact on
the Group’s financial position or performance.
Basis of Consolidation and Investments in Subsidiaries
The consolidated financial statements include the Parent Company and the following
companies that it controls:
Place of Incorporation
EEI (BVI) Limited and Subsidiaries
Clear Jewel Investments, Ltd. (CJIL)
EEI Corporation (Singapore) Pte. Ltd
EEI Nouvelle-Caledonie SARL
Nimaridge Investments, Limited and Subsidiary
EEI (PNG) Ltd.
EEI Corporation (Guam), Inc.
EEI Construction and Marine, Inc. (EEI Marine)
EEI Realty Corporation (EEI Realty)
Equipment Engineers, Inc. (EE)
EEI Power Corporation (EEI Power)
Gulf Asia International Corporation (GAIC)
GAIC Manpower Services, Inc. (GAMSI)
GAIC Profesional Servicess, Inc. (GAPSI)
Bagumbayan Equipment & Industrial Products, Inc.
Philmark, Inc.
Philrock Construction and Services, Inc.
EEI Subic Corporation
22
Effective Percentage of
Ownership
September
2012 2011
2013
British Virgin Islands
British Virgin Islands
Singapore
New Caledonia
British Virgin Islands
Papua New Guinea
United States of America
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Subsidiaries are fully consolidated from the date of acquisition, being the date on which
the Group obtains control, and continue to be consolidated until the date when such
control ceases. All intragroup balances, transactions, unrealized gains and losses
resulting from intra-group transactions and dividends are eliminated in full.
Losses within a subsidiary are attributed to the noncontrolling interest even if that
results in a deficit balance. A change in the ownership interest of a subsidiary, without
a loss of control, is accounted for as an equity transaction. If the Group loses control
over a subsidiary, it:
• Derecognizes the assets (including goodwill) and liabilities of the subsidiary
• Derecognizes the carrying amount of any noncontrolling interest
• Derecognizes the cumulative translation differences, recorded in equity
• Recognizes the fair value of the consideration received
• Recognizes the fair value of any investment retained
• Recognizes any surplus or deficit in consolidated statements of income
• Reclassifies the parent’s share of components previously recognized in other
comprehensive income to profit or loss or retained earnings, as appropriate
Significant Accounting Policies
Cash and Cash Equivalents
Cash includes cash on hand and in banks. Cash equivalents are short-term, highly
liquid investments that are readily convertible to known amounts of cash with original
maturities of three months or less and that are subject to an insignificant risk of change
in value.
Financial Assets and Financial Liabilities
Date of Recognition
The Group recognizes a financial asset or a financial liability in the consolidated
statement of financial position when it becomes a party to the contractual provisions of
the instrument. Purchases or sales of financial assets that require delivery of assets
within the time frame established by regulation or convention in the marketplace are
recognized on the settlement date. The Group follows the settlement date accounting
where an asset to be received and liability to be paid are recognized on the settlement
date and derecognition of an asset that is sold and the recognition of a receivable from
the buyer are recognized on the settlement date.
Initial Recognition of Financial Assets and Financial Liabilities
All financial assets and financial liabilities are initially recognized at fair value. Except
for securities at fair value through profit or loss (FVPL), the initial measurement of
financial assets and liabilities includes transaction costs. The Group classifies its
financial assets in the following categories: financial assets at FVPL, held-to-maturity
(HTM) investments, AFS securities, and loans and receivables. The Group classifies its
financial liabilities into financial liabilities at FVPL and other financial liabilities. The
classification depends on the purpose for which the investments were acquired and
whether they are quoted in an active market. Management determines the classification
of its investments at initial recognition and, where allowed and appropriate, re-evaluates
such designation at every reporting date.
The Group has no financial assets and financial liabilities at FVPL and HTM investments
as at September 30, 2013 and 2012.
23
Determination of Fair Value
The fair value for financial instruments traded in active markets at the reporting date is
based on their quoted market price or dealer price quotations (bid price for long
positions and ask price for short positions), without any deduction for transaction costs.
When current bid and asking prices are not available, the price of the most recent
transaction is used since it provides evidence of the current fair value as long as there
has not been a significant change in economic circumstances since the time of the
transaction.
For all other financial instruments not listed in an active market, the fair value is
determined by using appropriate valuation techniques. Valuation techniques include
discounted cash flow methodologies, comparison to similar instruments for which
market observable prices exist, and other relevant valuation models.
Derivatives recorded at FVPL
The Group entered into derivative transactions. Derivative instruments (including
embedded derivatives) are carried and recorded in the consolidated statement of
financial position at fair value.
Any gains or losses arising from changes in fair value on derivatives during the year that
do not qualify for hedge accounting were taken directly to the “Foreign exchange gain
(loss) - net” account in the consolidated statement of income.
Embedded derivatives that are bifurcated from the host financial and non-financial
contracts are also accounted for at FVPL.
An embedded derivative is separated from the host contract and accounted for as a
derivative if all of the following conditions are met: a) the economic characteristics and
risks of the embedded derivative are not closely related to the economic characteristic
of the host contract; b) a separate instrument with the same terms as the embedded
derivative would meet the definition of a derivative; and c) the hybrid or combined
instrument is not recognized at FVPL. The Group assesses whether embedded
derivatives are required to be separated from the host contracts when the Group first
becomes a party to the contract. Reassessment of embedded derivatives is only done
when there are changes in the contract that significantly modifies the contractual cash
flows that would otherwise be required.
Day 1 Difference
Where the transaction price in a non-active market is different to the fair value from
other observable current market transactions in the same instrument or based on a
valuation technique whose variables include only data from observable market, the
Group recognizes the difference between the transaction price and fair value (a Day 1
difference) in the consolidated statement of income unless it qualifies for recognition as
some other type of asset. In cases where use is made of data which is not observable,
the difference between the transaction price and model value is only recognized in the
consolidated statement of income when the inputs become observable or when the
instrument is derecognized. For each transaction, the Group determines the appropriate
method of recognizing the Day 1 difference amount.
HTM Investments
Non-derivative financial assets with fixed or determinable payments and fixed maturities
are classified as HTM investments when the Group has the positive intention and ability
to hold it to maturity. After initial measurement, HTM investments are measured at
amortized cost using the effective interest rate (EIR) method, less impairment.
Amortized cost is calculated by taking into account any discount or premium on
24
acquisition and fees or costs that are an integral part of the EIR. The EIR amortization
is included in interest income in the consolidated statement of income. The losses
arising from impairment are recognized in the consolidated statement of income in
finance costs.
The Group did not have any HTM investments as at September 30, 2013 and 2012.
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. Such assets are carried at amortized
cost using the EIR method less any allowance for impairment. Amortized cost is
calculated taking into account any discount or premium on acquisition and include fees
that are an integral part of the EIR and transaction costs. Long-term receivables are
valued using the discounted cash flow methodology. Gains and losses are recognized
in the consolidated statement of income when the loans and receivables are
derecognized or impaired, as well as through the amortization process. Loans and
receivables which are expected to be realized within twelve months from the reporting
date are classified under current assets. Otherwise, these are classified as noncurrent
assets.
The Group’s loans and receivables principally include cash and cash equivalents, trade
receivables (including retention receivables), consultancy fees, other receivables, due
from related parties, miscellaneous deposits and receivable from EEI Retirement Fund,
Inc.
AFS Securities
AFS securities are those non-derivative financial assets that are designated as AFS or
are not classified in any of the three other categories. After initial recognition, AFS
securities are measured at fair value with gains or losses being recognized as a
separate component of the equity until the investment is derecognized or until the
investment is determined to be impaired at which time the cumulative gain or loss
previously reported in the equity is included in the consolidated statement of income.
AFS securities which are expected to be sold within twelve months from the reporting
date are classified under current assets. Otherwise, these are classified as noncurrent
assets.
The fair value of investments that are actively traded in organized financial markets is
determined by reference to quoted market bid prices at the close of business on the
reporting date. For investments where there is no active market, except for investments
in unquoted AFS securities, fair value is determined using valuation techniques. Such
techniques include using recent arm’s length market transactions, reference to the
current market value of another instrument which is substantially the same, discounted
cash flow analysis and option pricing models. In the absence of a reliable basis of
determining fair value, investments in unquoted AFS securities are carried at cost less
allowance for impairment losses, if any.
The Group’s AFS securities represent investments in quoted and unquoted golf, club
and equity shares.
Other Financial Liabilities
Other financial liabilities are non-derivative financial liabilities with fixed or determinable
payments that are not quoted in an active market. These liabilities are carried at cost or
amortized cost in the consolidated statement of financial position. Amortization is
determined using EIR method. Amortized cost is calculated by taking into account any
discount or premium on the issue and fees that are integral part of the EIR. Other
25
financial liabilities which are expected to be settled within twelve months from the
reporting date are classified under current liabilities. Otherwise, these are classified as
noncurrent liabilities. Gains and losses are recognized in the consolidated statement of
income when the liabilities are derecognized.
This accounting policy relates to the consolidated statement of financial position
captions “Bank loans”, “Accounts payable and accrued expenses”, “Due to related
parties” and “Long-term debt” and lease liability under “Other noncurrent liabilities”.
Impairment of Financial Assets
The Group assesses at each reporting date whether there is objective evidence that a
financial asset or a group of financial assets is impaired. A financial asset or a group of
financial assets is deemed to be impaired if, and only if, there is objective evidence of
impairment as a result of one or more events that has occurred after the initial
recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an
impact on the estimated future cash flows of the financial asset or the group of financial
assets that can be reliably estimated. Evidence of impairment may include indications
that a borrower or a group of borrowers is experiencing significant financial difficulty,
default or delinquency in interest or principal payments, the probability that they will
enter bankruptcy or other financial reorganization and where observable data indicate
that there is measurable decrease in the estimated future cash flows, such as changes
in arrears or economic conditions that correlate with defaults.
Assets Carried at Amortized Cost
If there is objective evidence that an impairment loss on loans and receivables carried
at amortized cost has been incurred, the amount of the loss is measured as the
difference between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses that have not been incurred) discounted
at the financial asset’s original EIR (that is, the EIR computed at initial recognition). The
carrying amount of the asset shall be reduced either directly or through the use of an
allowance account. The amount of the loss shall be recognized in the consolidated
statement of income. Loans and receivables, together with the associated allowance
accounts, are written off when there is no realistic prospect of future recovery and all
collateral has been realized.
If, in a subsequent period, the amount of the impairment loss decreases because of an
event occurring after the impairment was recognized, the previously recognized
impairment loss is reversed. Any subsequent reversal of an impairment loss is
recognized in the consolidated statement of income, to the extent that the carrying value
of the asset does not exceed its amortized cost at the reversal date.
Assets Carried at Cost
If there is objective evidence that an impairment loss on an unquoted equity instrument
that is not carried at fair value cannot be reliably measured, the amount of the loss is
measured as the difference between the asset’s carrying amount and the present value
of estimated future cash flows discounted at the current market rate of return for a
similar financial asset.
AFS Securities
For AFS securities, the Group assesses at each reporting date whether there is
objective evidence that a financial asset or group of financial assets is impaired.
In the case of equity investments classified as AFS securities, this would include a
significant or prolonged decline in the fair value of the investments below its cost.
Where there is evidence of impairment, the cumulative loss - measured as the
26
difference between the acquisition cost and the current fair value, less any impairment
loss on that financial asset previously recognized in the consolidated statement of
comprehensive income - is removed from equity and recognized in the consolidated
statement of income. Impairment losses on equity investments are not reversed
through the consolidated statement of income. Increases in fair value after impairment
are recognized directly in the consolidated statement of comprehensive income.
Derecognition of Financial Assets and Liabilities
Financial Assets
A financial asset (or, where applicable a part of a financial asset or part of a group of
similar financial assets) is derecognized when: (a) the rights to receive cash flows from
the asset have expired; or (b) the Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay them in full without material delay to
a third party under a “pass-through” arrangement; and either (i) has transferred
substantially all the risks and rewards of the asset, or (ii) has neither transferred nor
retained substantially all the risks and rewards of the asset, but has transferred control
of the asset.
Where the Group has transferred its rights to receive cash flows from an asset and has
neither transferred nor retained substantially all the risks and rewards of the asset nor
transferred control of the asset, the asset is recognized to the extent of the Group’s
continuing involvement in the asset. Continuing involvement that takes the form of a
guarantee over the transferred asset is measured at the lower of the original carrying
amount of the asset and the maximum amount of consideration that the Group could be
required to repay.
Financial Liabilities
A financial liability is derecognized when the obligation under the liability is discharged
or cancelled or has expired. Where an existing financial liability is replaced by another
from the same lender on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as a
derecognition of the original liability and the recognition of a new liability, and the
difference in the respective carrying amounts is recognized in the consolidated
statement of income.
Offsetting
Financial assets and financial liabilities are only offset and the net amount reported in
the consolidated statement of financial position when there is a currently enforceable
legal right to offset the recognized amounts and the Group intends to either settle on a
net basis, or to realize the asset and the liability simultaneously.
Inventories
Inventories are stated at the lower of cost and net realizable value (NRV). Cost
includes purchase price and other costs directly attributable to its acquisition such as
non-refundable taxes, handling and transportation cost. The cost of real estate
inventories includes (a) land cost; (b) freehold and leasehold rights for land; (c) amounts
paid to contractors for construction; (d) borrowing costs, planning and design cost, cost
of site preparation, professional fees, property taxes, construction overheads and other
related costs.
Non refundable commissions paid to sales or marketing agents on the sale of real
estate units are expensed when paid.
27
Cost of inventories is generally determined using the moving-average method, except
for land inventory of EEI Realty, which is accounted for using the specific identification
method. NRV is the selling price in the ordinary course of business, based on the
market prices at the reporting date and discounted for the time value of money if
material, less the estimated costs of completion of inventories and the estimated costs
necessary to sell.
Other Current Assets
Other current assets pertain to other resources controlled by the Group as a result of
past events and from which future economic benefits are expected to flow to the Group
within the reporting period.
Investments in Associate and Joint Venture
The Group has 49% investment in Al-Rushaid Construction Company Limited (ARCC)
which is incorporated and based in the Kingdom of Saudi Arabia and is currently
accounted for as an associate. It also has 50% investment in ECW Joint Venture, Inc.
(ECW) which is currently accounted for as a joint venture.
The reporting dates and the accounting policies of the associate and joint venture
conform to those used by the Group for like transactions and events in similar
circumstances.
EEI Power Corp. a local subsidiary, invests as a 20% stockholder in PetroWind Energy,
Inc. (PEI), a domestic corporation dealing in electricity generation by wind turbine in the
province of Aklan, Visayas. The Company’s shareholdings have an aggregate number
of 550,000 shares with a Par Value of P100 per share equivalent to P55.0 million.
Investments in associate and joint venture which are jointly controlled entities are
accounted for under the equity method of accounting. Under this method, the cost of
investment is increased or decreased by the equity in the associate and joint venture’s
net earnings or losses since the date of acquisition and reduced by dividends received.
Unrealized intercompany profits are eliminated up to the extent of the proportionate
share thereof.
Investments in Foreign Securities
The group does not have any investment in foreign securities as of September 30, 2013
and 2012.
Property and Equipment
Property and equipment, except for land, are stated at cost, less accumulated
depreciation and amortization and impairment loss, if any. Land is carried at cost less
any impairment in value.
The initial cost of property and equipment consists of its purchase price, including
import duties, taxes and any directly attributable costs of bringing the asset to its
working condition and location for its intended use. Expenditures incurred after the
assets have been put into operation, such as repairs and maintenance, are normally
charged to operation in the year in which the costs are incurred. In situations where it
can be clearly demonstrated that the expenditures have resulted in an increase in the
future economic benefits expected to be obtained from the use of an item of property
and equipment beyond its originally assessed standard of performance, the
expenditures are capitalized as an additional cost of property and equipment.
28
Depreciation is computed using the straight-line method over the following estimated
useful lives:
Number of years
Machinery, tools and construction equipment 5 – 10
Buildings and improvements
20
Furniture, fixtures and office equipment
2 – 10
Transportation and service equipment
4
Amortization of leasehold improvements is computed over the estimated useful life of
the improvement or term of the lease, whichever is shorter.
Construction in progress represents property and equipment under construction and is
stated at cost. This includes cost of construction and equipment and other direct costs.
Construction in progress is not depreciated until such time that the relevant assets are
ready for their intended use.
An item of property and equipment is derecognized upon disposal or when no future
economic benefits are expected from its use or disposal. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the consolidated
statement of income in the year the asset is derecognized. When assets are retired or
otherwise disposed of, the cost and their related accumulated depreciation and
amortization and any impairment in value are removed from the accounts and any
resulting gain or loss is credited to or charged against current operations.
The assets’ residual values, useful lives and methods of depreciation and amortization
are reviewed, and adjusted if appropriate, at each financial year-end.
Investment Properties
Investment properties, except for land, are stated at cost less accumulated depreciation
and impairment loss, if any, including transaction costs. The carrying amount includes
the cost of replacing part of an existing investment property at the time that cost is
incurred if the recognition criteria are met. Land is carried at cost less any impairment in
value.
Investment properties are derecognized when either they have been disposed of or
when the investment property is permanently withdrawn from use and no future
economic benefit is expected from its disposal. Any gains or losses on the retirement or
disposal of an investment property are recognized in the consolidated statement of
income in the year of retirement or disposal.
Transfers are made to or from investment property only when there is a change in use.
For a transfer from investment property to owner-occupied property or inventory, the
deemed cost for subsequent accounting is the carrying value of the investment property
transferred at the date of change in use. If owner-occupied property or inventory
becomes an investment property, the Group accounts for such property in accordance
with the policy stated under property and equipment or inventory, respectively, up to the
date of change in use.
Depreciation is computed using the straight-line method over the estimated useful life of
15 to 20 years.
Software Costs
Software costs are stated at cost less accumulated amortization and any impairment in
value. Costs related to software purchased by the Group for use in the operations are
amortized on a straight-line basis over a period of 3 years.
29
Costs associated with developing and maintaining computer software programs are
recognized as an expense when incurred. Costs that are directly associated with
identifiable and unique software controlled by the Group and will generate economic
benefits exceeding costs beyond one year, are recognized as intangible assets to be
measured at cost less accumulated amortization and provision for impairment losses, if
any.
Impairment of Non-financial Assets
For property and equipment, software costs, investments in associate and joint venture
and investment properties, the Group assesses at each reporting date whether there is
an indication that an asset may be impaired. If any such indication exists, or when
annual impairment testing for an asset is required, the Group makes an estimate of the
asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s
or cash-generating unit’s fair value less costs to sell and its value in use, and is
determined for an individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets. Where the
carrying amount of an asset exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount. In assessing value in use, the
estimated future cash flows are discounted to their present value using pre-tax discount
rate that reflects current market assessments of the time value of money and the risks
specific to the asset. In determining fair value less cost to sell, recent market
transactions are taken into account, if available. If no such transaction can be identified,
an appropriate valuation model is used. These calculations are corroborated by
valuation multiples, quoted share prices for publicly traded subsidiaries or other
available fair value indicators.
An assessment is made at each reporting date as to whether there is any indication that
previously recognized impairment losses may no longer exist or may have decreased. If
such indication exists, the recoverable amount is estimated. A previously recognized
impairment loss is reversed only if there has been a change in the estimates used to
determine the asset’s recoverable amount since the last impairment loss was
recognized. If that is the case, the carrying amount of the asset is increased to its
recoverable amount. That increased amount cannot exceed the carrying amount that
would have been determined, net of depreciation and amortization, had no impairment
loss been recognized for the asset in prior years. Such reversal is recognized in the
consolidated statement of income unless the asset is carried at revalued amount, in
which case the reversal is treated as a revaluation increase.
After such reversal, the depreciation and amortization charge is adjusted in future
periods to allocate the asset’s revised carrying amount, less any residual value, on a
systematic basis over its remaining useful life.
Fair Value Hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of
financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: other techniques for which all inputs which have a significant effect on the
recorded fair value are observable, either directly or indirectly
Level 3: techniques which use inputs have a significant effect on the recorded fair value
that are not based on observable market data.
The quoted AFS securities of the Group fall under level 1 as at September 30, 2013 and
2012. The Group has no financial assets that fall under level 2 and 3 as at September
30, 2013 and 2012. There were no transfers between levels in 2013 and 2012.
30
7.b.
We have nothing to disclose in notes to financial statements regarding seasonality or
cyclicality as it has no material effect on our interim operations.
7.c.
Nature and amount of items affecting assets, liabilities, equity, net income, or cash flows
that are unusual because of their nature, size, or incidents:
Cash and Cash Equivalents
(In Thousand Pesos)
09.30.13
1,373
1,250,436
174,340
1,426,149
Cash on hand
Cash in banks
Short-term investments
12.31.12
3,374
806,044
270,192
1,079,610
Cash in banks earns interest at the respective bank deposit rates. Short-term
investments are made for varying periods up to three months depending on the
immediate cash requirements of the Group and earn interest at the respective shortterm investment rates.
Receivables
(In Thousand Pesos)
Trade receivables
Retention receivables
Advances to suppliers and subcontractors
Consultancy fees
Advances to officers and employees
Other receivables
Less: Allowance for doubtful accounts
09.30.13
1,750,539
1,350,804
528,736
186,320
23,015
177,474
4,016,888
214,592
3,802,296
12.31.12
1,958,850
1,269,604
482,095
166,068
19,189
186,380
4,082,186
233,695
3,848,491
09.30.13
376,305
12.31.12
363,525
33,970
60
3,702
37,732
414,037
25,109
12,073
110
37,292
400,817
Inventories
.
(In Thousand Pesos)
Land at cost
At NRV :
Merchandise
Spare parts and supplies
Construction materials
Other Current Assets
(In Thousand Pesos)
Receivables from EEI Retirement Fund Inc. - net
Input value-added tax (VAT)
Prepaid taxes
Prepaid expenses
Miscellaneous deposits
Restricted cash investment
Supplies and others
31
09.30.13
373,570
326,052
158,058
40,147
45,734
6,471
1,587
951,619
12.31.12
476,022
226,151
7,249
44,304
53,709
6,566
5,555
819,556
Investments in Associate and Joint Venture
(In Thousand Pesos)
09.30.13
Acquisition cost:
Balance at beginning of year
Acquisition
Balance at end of period
Accumulated equity in net earnings:
Balance at beginning of year
Equity in net earnings for the period
Dividends
Balance at end of period
Subtotal
Equity in cumulative translation adjustments
28,223
55,000
83,223
12.31.12
28,223
28,223
1,144,466
260,173
(169,771)
1,234,868
1,318,091
(74,174)
1,243,917
1,044,416
431,115
(331,065)
1,144,466
1,172,689
(132,116)
1,040,573
09.30.13
19,021
130,669
149,690
12.31.12
20,443
111,880
132,323
Available-for-sale Securities
(In Thousand Pesos)
Quoted shares
Unquoted shares
Rollforward analysis of this account follows:
Balance at beginning of year
Acquisitions
Disposals
Net unrealized gain recognized in other
comprehensive income
09.30.13
P
= 132,323
14,931
-
12.31.12
P
= 130,804
-
2,436
P
= 149,690
1,519
P
= 132,323
09.30.13
12.31.12
2,641,755
934,080
550,323
235,878
4,362,036
1,481,363
2,880,673
636,710
3,517,383
2,524,454
894,892
486,039
197,583
4,102,968
1,255,553
2,847,415
347,891
3,195,306
09.30.13
119,168
22,754
30,604
2,619
175,145
12.31.12
119,168
28,139
26,091
9,122
182,520
Property and Equipment
(In Thousand Pesos)
At cost:
Machinery, tools & construction equipment
Land, buildings and improvements
Furniture, fixtures and office equipment
Transportation and service equipment
Less: Accumulated depreciation & amortization
Construction in progress
Other Noncurrent Assets
(In Thousand Pesos)
Deferred income tax
Software cost
Net retirement asset
Others
32
Bank Loans
(In Thousand Pesos)
09.30.13
1,215,000
822,000
2,037,000
Secured bank loans
Unsecured bank loans
12.31.12
350,000
90,000
440,000
Bank loans consist of Peso-denominated bank loans with annual interest rates ranging
from 3.50% to 4.25% and 3.75% to 4.25% as of September 30, 2013 and December
31, 2012, respectively
The secured bank loans are collateralized by an assignment of the Parent Company’s
construction contract with a certain customer with a total contract value of P 3.1
billion as at September 30, 2013.
Accounts Payable and Accrued Expenses
(In Thousand Pesos)
Accounts payable
Accrued expenses
Retention payable
Deferred output taxes
Dividends payable
Advances from joint venture partners
Payable to EEI Retirement Fund Inc.
Others
09.30.13
1,546,009
594,297
444,652
297,649
51,820
32,382
330,940
3,297,749
12.31.12
1,642,218
438,987
365,312
274,727
32,382
165,821
405,984
3,325,431
09.30.13
12.31.12
Long-term Debt
(In Thousand Pesos)
Parent Company
a. Private placement fixed-rate corporate
promissory notes with effective interest
of 6.25% per annum
EEI Power Corporation
b. Peso-denominated seven (7) year term
loan, payable quarterly starting June
2014 with interest of 6.50% per annum
inclusive of two (2) year grace period on
principal amortization
Less: current portion
500,000
500,000
375,458
875,458
500,000
375,458
209,750
709,750
500,000
209,750
7.d.
There was no change in amount reported in prior financial year that have material
effect in the current interim period.
7.e.
As of September 30, 2013, availment of loans amounted to P1.9 billion while
repayment is P143.0 million.
33
7.f.
The BOD of the Parent Company in its meeting held on March 25, 2013 declared a
cash dividend of P0.20 per share to common stockholders of record broken down as
follows:
Record Date
April 11, 2013
June 03, 2013
September 02, 2013
December 02, 2013
Payment Date
April 29, 2013
June 28, 2013
September 26, 2013
December 26, 2013
Amount
P0.05 per share
P0.05 per share
P0.05 per share
P0.05 per share
7.g.
Segment Information - Please refer to pages 15 and 16.
7.h.
There was no material event subsequent to the end of the interim financial period that
has not been reflected in the interim consolidated financial statements.
7.i.
There was no material change in the composition of the issuer during the interim
period, including business combinations, acquisition or disposal of subsidiaries and
long-term investments, restructurings, and discontinuing operations.
7.j.
There was no material change in contingent liabilities or contingent assets since the
last annual statement of financial position.
7.k.
Commitments and Contingencies
a.) Surety Arrangement and Guarantees
The Group is contingently liable for guarantees arising in the ordinary course of
business, including performance, surety and warranty bonds for various
construction projects amounting to P6.8 billion and P7.0 billion as of September
30, 2013 and December 31, 2012, respectively.
b.) Standby Letters of Credit
The Group has outstanding irrevocable domestic standby letters of credit
amounting to P2.1 billion and P942.4 million as of September 30, 2013 and
December 31, 2012, respectively, from local banks which are used as bid, down
payments and performance bonds/guarantees for prospective and ongoing
construction projects. The Group also has outstanding irrevocable foreign standby
letters of credit amounting to USD 1.9 million, JPY 13.4 million and RM 0.25
million as of September 30, 2013 and USD 1.9 million and JPY 13.4 million as of
December 31, 2012
c.) Contingencies
There are pending legal cases against the Company that are being contested by
the Company and its legal counsels. Management and its legal counsels believe
that the final resolution of these cases will not have immediate material effect on
the financial position and operating results of the Company.
34
7.l
Market Information
Quarterly high, low and closing prices of the Company:
2013
January – March
April – June
July – September
High
13.40
15.90
13.50
Low
10.10
11.10
9.30
2012
January – March
April – June
July – September
October – December
6.10
6.62
8.72
10.10
3.44
5.63
6.38
8.41
Close
13.10
13.24
9.67
6.07
6.38
8.65
10.10
As of November 13, 2013, the market price of the Company’s common shares is
P10.62 per share.
35
Item 2
Management’s Discussion and Analysis (MDA) of Financial Position and
Results of Operations.
2.e.
Material change/s (5% or more) from period to period in one or more line items of the
issuer’s financial statements.
Statements of Financial Position
(In Thousand Pesos)
Cash and cash equivalents
Costs and estimated earnings in excess of
billings on uncompleted contracts
Other current assets
Available-for-sale securities
Investments in associate and joint venture
Property and equipment
Investment properties
Bank Loans
Long-term debt - net of current portion
Other noncurrent liabilities
Cumulative translation adjustments
Retained earnings
Net unrealized gain on available-for-sale
securities
Statements of Income
(In Thousand Pesos)
Construction contracts
Services
Merchandise sales
Real estate sales
Cost of construction contracts
Cost of services
Cost of merchandise sales
Cost of real estate sold
Interest expense
Equity in net earnings of associate and
joint venture
Interest income
Other income
Recovery on damaged properties
Provision for income tax
09.30.13
(Unaudited)
1,426,149
12.31.12
Increase (Decrease)
(Audited)
Amount
%
1,079,610
346,539
32%
2,699,944
951,619
149,690
1,243,917
3,517,383
248,347
2,037,000
375,458
2,978
(54,665)
4,192,794
1,390,689
819,556
132,323
1,040,573
3,195,306
281,994
440,000
209,750
6,986
(151,963)
3,778,436
1,309,255
132,063
17,367
203,344
322,077
(33,647)
1,597,000
165,708
(4,008)
(97,298)
414,358
94%
16%
13%
20%
10%
-12%
363%
79%
-57%
-64%
11%
9,413
6,977
2,436
35%
For the period ending
09.30.13
09.30.12
(Unaudited) (Unaudited)
7,096,676
7,701,905
703,496
2,290,588
130,106
118,988
46,536
25,771
6,332,930
6,968,439
407,506
1,813,024
97,561
81,095
39,007
20,113
30,063
20,714
260,173
38,856
71,775
253,249
36
218,471
31,122
22,597
79,930
314,641
Increase (Decrease)
Amount
(605,229)
(1,587,092)
11,118
20,765
(635,509)
(1,405,518)
16,466
18,894
9,349
%
-8%
-69%
9%
81%
-9%
-78%
20%
94%
45%
41,702
7,734
49,178
(79,930)
(61,392)
19%
25%
218%
-100%
-20%
EEI CORPORATION AND SUBSIDIARIES
ANALYTICAL REVIEW
SEPTEMBER 30, 2013
Consolidated Statement of Financial Position Accounts
Cash and cash equivalents
The increase of P346.5 million or 32% is due to substantial collections of downpayment from
newly awarded projects such as CNS/ATM Contract Package2 Project under Sumitomo Corp.
and 81MW Caparispisan Wind Project of North Luzon UPC Asia Corp. amounting to P373.3
million and P225.4 million, respectively.
Costs and estimated earnings in excess of billings on uncompleted contracts
The increase of P1.3 billion or 94% is mainly due to cost incurrence of major on-going domestic
projects which include Beacon Tower2 for New Pacific Resources Management, Inc.; JG
Summit Naptha Cracker Project for Daelim Phils. Inc.; four projects for Megaworld Corporation,
namely the 8 Forbestown Road, Uptown Mall & BPO Offices, One Central Building and
Eastwood LeGrand Tower3; 10ML Concrete Reservoir & Pump Station for Manila Water
Company, Inc.; Sun Residences and Wind Residences for SM Development Corp.; Anchor
Skysuites for Gotamco Realty and Admiral Bay Suites for Admiral Realty Company.
Other current assets
The net increase of P132.1 million or 16% pertains to the increase in various prepaid taxes,
creditable withholding taxes and input value added taxes amounting to P150.8 million and P99.9
million, respectively. These increases were offset with the partial collection of receivable from
EEI Retirement Fund Inc. amounting to P86.5 million.
Available-for-sale securities
The increase of P17.4 million or 13% is mainly due to acquisition of Hermosa Ecozone
Development Corporation’s shares from Seafront Resources Corporation by the Parent
Company amounting to P15 million.
Investments in associate and joint venture
The increase of P203.3 million or 20% is attributed mainly to the additional equity in net earnings
from Al Rushaid Construction Company Ltd. (ARCC), an associate of EEI BVI Ltd., a foreign
subsidiary of EEI Corporation. The acquisition of 550,000 shares of stock of Petro Wind Energy,
Inc. amounting to P55.0 million, by EEI Power Corporation (EEI PC), a local subsidiary of the
Company, also contributed to the increase.
Property and equipment
The net increase of P322.1 million or 10% pertains mainly to the on-going construction of 15MW
Power Plant Project located in Tagum, Davao del Norte, by EEI PC.
Investment properties
The net decrease of P33.6 million or 12% is due to the following:
a. reclassification of accounts from Investment properties to Inventory amounting to P22.0
million, by EEI Realty Corporation, another local subsidiary of the Company.
b. sale of three (3) condominium units and one (1) parking slot by Parent Company located at
Manggahan Village, Pasig City and Fairways Towers, Fort Bonifacio District, Taguig City
amounting to P9.3 million.
37
Bank loans
The net increase of P1.6 billion or 363% is due to loan availments of Parent Company during the
period amounting to P1.7 billion reduced by loan payments amounting to P143.0 million, mainly
from Bank of the Philippine Islands and Landbank of the Philippines to finance operations and
capital expenditures.
Long-term debt - net of current portion
The increase of P165.7 million or 79% is due to loan availment from Rizal Commercial Banking
Corporation by EEI PC.
Other noncurrent liabilities
The decrease of P4.0 million or 57% is due to significant decrease on finance lease of
machinery and equipment by Parent Company from First Malayan Leasing and Finance
Corporation.
Cumulative translation adjustments
The decrease of P97.3 million or 64% relates mainly to translation adjustments of the Group’s
subsidiary investment in associate, whose functional currency is Saudi Arabia Rial (SAR).
Retained earnings
The net increase of P414.3 million or 11% pertains to net income earned by the Group for the
nine month period, reduced by dividends declared of P207.3 million.
Net unrealized gain on available-for-sale securities
The increase of P2.4 million or 35% pertains to the increase in fair market value of quoted
available-for-sale securities, particularly PLDT.
38
Consolidated Statement of Income Accounts
Revenue and costs of construction contracts
The decrease in construction contracts and its corresponding costs is due to significant
decrease in revenue brought about by the near completion of some domestic projects such as
JG Summit Naptha Cracker Project for Daelim Phils. Inc.; 20 Megawatt Maibarara Geothermal
Power Plant for Petroenergy Resources Corporation; Anchor Skysuites for Gotamco Realty;
Autoclave Installation Works for the Taganito Project for Royal Cargo Combined Logistics, Inc.
and Sun Residences Towers 1 & 2 for SM Development Corp.
Revenue and costs of services
The decrease in revenue from services and its related costs are principally due to completion of
manpower supply contract of EEI Corporation (Singapore) Pte. Ltd. with Shaw Stone and
Webster Asia, Inc. in Singapore by April 2013 and for the Inco Goro Nickel Mining Project in
New Caledonia by end of 2012,
Revenue and costs of merchandise sales
The increase in revenue of merchandise sales and related costs is due to significant increase in
sales volume of various stocks.
Real estate sales and costs
The increase in real estate sales and related costs are due to increase in the number of house
and lots sold, from six (6) units as of September 2012 to ten (10) units for the same period in
2013, by EEI Realty Corporation.
Equity in net earnings of associate and joint venture
The increase of P41.7 million or 19% is due to increase in net income of ARCC, where the
Parent Company has a 49% stake.
Interest income
The increase of P7.7 million or 25% pertains to interest earned on long outstanding receivables
from a client amounting to P12.0 million.
Other income
The increase of P49.2 million or 218% is attributed mainly to the following:
a.) Reversal of some retention payables that are outstanding for more than five years amounting
to P18.3 million.
b.) Reversal of last year’s accrual of miscellaneous expenses by Parent Company amounting to
P10.0 million.
c.) Additional take-up of EEI BVI’s management and technical fee income for the year 2012
amounting to P9.0 million.
d.) Gain on sale of various scrap materials amounting to P6.9 million.
Recovery on damaged properties
The decrease of P79.9 million or 100% is due to last year’s recovery on damaged properties
during the NPA raid at Taganito Nickel Hydrometallurgical Project in Claver, Surigao del Norte.
Interest expense
The net increase of P9.3 million or 45% is due to higher loan level as of September 2013
amounting to P2.9 billion compared to P1.1 billion for the same period last year.
Provision for income tax
The decrease of P61.4 million or 20% is due to lower taxable income for the three quarter
ending September 30, 2013 compared to the same period in 2012
39
1. Financial Risk Management Objectives and Policies
The main purpose of the Group’s financial instruments is to raise finances for the Group’s operations.
The main risks arising from the Group’s financial instruments are credit risk, liquidity risk and market
risk. The policies for managing these risks are summarized as follows:
Credit Risk
The exposure to credit risk on its receivables relates primarily to the inability of project owners to fully
settle the unpaid balance of contract receivables and other claims owed to the Group. Credit risk is
managed in accordance with the Group’s credit risk policy which requires the evaluation of the
creditworthiness of the project owners by engaging the service of an accredited third party credit analyst.
The Group does not have any significant concentration of credit risk. Its gross maximum exposure to
credit risk is equivalent to the carrying value of its financial assets as presented in the consolidated
statements of financial position.
Credit risk is managed since the titles of the properties sold by the Group from its real estate operations
are retained until receivables are fully collected and the fair values of these properties held as collateral are
sufficient to cover the carrying values of the receivables.
There can be some credit exposures on project commitments and contingencies as of September 30, 2013
and December 31, 2012 represented by work accomplishments on backlog of projects which are not yet
invoiced. These exposures are, however, limited to a few months’ work accomplishment as work are
frozen as soon as the Group is able to determine that the risk of non-collection materializes. This risk is,
however, mitigated by the Group’s contractor’s lien on the project. A contractor’s lien is the legal right of
a contractor (the Group) to take over the project in-progress and has priority in the settlement of
contractor’s receivables and claims on the project in the event of insolvency of the project owner. The
Group assesses that the value of projects in-progress is usually higher than receivables from and future
commitments with the project owners.
The analyses of loans and receivables are as follows:
Neither
Past Due
nor Impaired
(In Thousand Pesos)
Cash and cash equivalents
Cash in banks
P
= 1,250,436
Short-term investments
174,340
Receivables
Trade & Retention receivables 2,339,232
Consultancy fees
21,563
Other receivables
24,819
Due from related parties
66,559
Miscellaneous deposits
2,897
Receivable from EEI
Retirement Fund Inc.
373,570
P
= 4,253,416
September 30, 2013
Past Due but Not Impaired
Impaired
30 to <60 60 to <90
Financial
<30 days
days
days >90 days
Assets
Total
P
=–
–
P
=–
–
P
=–
–
P
=–
–
P
=–
–
P
= 1,250,436
174,340
278,580
13,330
49,887
–
2,081
109,689
14,991
8,632
–
2,316
71,328
9,975
5,395
–
175
173,232
126,461
53,449
–
34,503
129,282
–
35,292
–
3,762
3,101,343
186,320
177,474
66,559
45,734
–
–
–
P
= 86,873 P
= 387,645 P
= 168,336
373,570
P
= 5,375,776
–
–
P
= 343,878 P
= 135,628
40
(In Thousand Pesos)
Cash and cash equivalents
Cash in banks
Short-term investments
Receivables
Trade & Retention receivables
Consultancy fees
Other receivables
Due from related parties
Miscellaneous deposits
Receivable from EEI
Retirement Fund Inc.
Neither
Past Due
nor Impaired
December 31, 2012
Past Due but Not Impaired
30 to <60 60 to <90
<30 days
days
days >90 days
Impaired
Financial
Assets
Total
=806,044
P
270,192
=
P–
–
=
P–
–
=
P–
–
=
P–
–
=
P–
–
=
P806,044
270,192
2,619,957
21,870
54,171
46,733
49,642
302,974
13,733
2,019
–
707
93,301
18,441
964
–
1,488
17,789
15,180
5,595
–
33
46,071
96,844
22,750
–
1,839
148,362
–
54,149
36,915
3,762
3,228,454
166,068
139,648
83,648
57,471
476,022
=4,344,631
P
–
=
P319,433
–
=
P114,194
–
=
P38,597
–
–
=
P167,504 =
P243,188
476,022
=
P5,227,547
The risk that past due receivables from project owners will not be collected is mitigated by the fact that the
Group can resort to carry out its contractor’s lien over the project with varying degrees of effectiveness
depending on the jurisprudence applicable on or country location of the project. Trade and retention
receivables from project owners are normally high standard because of the creditworthiness of project
owners and the collection remedy of contractor’s lien accorded contractor in certain cases.
The tables below summarize the credit quality of the Group’s neither past due nor impaired loans and
receivables.
(In Thousand Pesos)
September 30, 2013
Neither Past Due nor Impaired
High Grade Standard Grade
Cash and cash equivalents
Cash in banks
Short-term investments
Receivables
Trade & Retention receivables
Consultancy fees
Other receivables
Due from related parties
Other current assets
Miscellaneous deposits
Receivable from EEI Retirement Fund Inc.
Total
P
= 1,250,436
174,340
P
=–
–
P
= 1,250,436
174,340
2,116,609
21,563
11,433
66,559
222,623
–
13,386
–
2,339,232
21,563
24,819
66,559
2,318
373,570
P
= 4,016,828
579
–
P
= 236,588
2,897
373,570
P
= 4,253,416
December 31, 2012
Neither Past Due nor Impaired
High Grade Standard Grade
Total
Cash and cash equivalents
Cash in banks
Short-term investments
Receivables
Trade & Retention receivables
Consultancy fees
Other receivables
Due from related parties
Other current assets
Miscellaneous deposits
Receivable from EEI Retirement Fund Inc.
41
=
P806,044
270,192
=
P–
–
=
P806,044
270,192
2,458,270
21,870
52,873
46,734
161,687
–
1,298
–
2,619,957
21,870
54,171
46,734
37,065
476,022
=
P4,169,070
12,577
–
=
P175,562
49,642
476,022
=
P4,344,632
Neither past due nor impaired trade receivables (including retention receivables), consultancy fees, other
receivables and miscellaneous deposits are classified into ‘high grade’ and ‘standard grade’. Neither past
due nor impaired cash and cash equivalents, due from related parties and receivables from EEI Retirement
Fund, Inc. are normally ‘high grade’ in nature. The Group sets financial assets as ‘high grade’ based on
the Group’s positive collection experience. On the other hand, ‘standard grade’ are those which have
credit history of default in payments.
Liquidity Risk
Liquidity risk is the risk that the Group will be unable to meet its payment obligations as they fall due.
The Group seeks to manage its liquidity risk to be able to meet its operating cash flow requirements,
finance capital expenditures and service maturing debts. To cover its short-term and long-term funding
requirements, the Group intends to use internally generated funds and available short-term and long-term
credit facilities. Credit lines are obtained from BOD-designated banks at amounts based on financial
forecasts approved by BOD.
The tables below summarize the maturity profile of the Group’s financial assets. The maturity groupings
are based on the remaining period from the end of the reporting period to the contractual maturity date.
(In Thousand Pesos)
Loans and receivables
Cash and cash equivalents
Cash on hand and in banks
Short-term investments
Receivables
Trade & Retention receivables
Consultancy fees
Other receivables
Due from related parties
Miscellaneous deposits
Receivable from EEI Retirement Fund Inc.
Principal
Interest
AFS securities
Quoted shares
Unquoted shares
On Demand
< 1 year
= 1,251,809
P
174,340
P
=–
–
2,551,966
21,563
90,794
66,559
7,469
September 30, 2013
1 to < 2 years
Over 2 years
Total
P
=–
–
P–
=
–
P
= 1,251,809
174,340
349,001
164,757
51,388
–
34,503
49,530
–
–
–
–
21,564
–
–
–
–
2,972,061
186,320
142,182
66,559
41,972
–
–
4,164,500
373,570
4,950
978,169
–
–
49,530
–
–
21,564
373,570
4,950
5,213,763
–
–
–
P
= 4,164,500
–
18,789
18,789
P
= 996,958
–
–
–
P
= 49,530
19,021
111,880
130,901
P
= 152,465
19,021
130,669
149,690
P
= 5,363,453
On Demand
< 1 year
1 to < 2 years
Over 2 years
Total
=
P809,418
270,192
=
P–
–
=
P–
–
=
P–
–
=
P809,418
270,192
1,662,524
144,198
31,327
46,734
4,067
1,273,709
21,870
54,171
–
49,642
127,350
–
–
–
–
16,508
–
–
–
–
3,080,091
166,068
85,498
46,734
53,709
–
–
2,968,460
476,022
23,801
1,899,215
–
127,350
–
–
16,508
476,022
23,801
5,011,533
–
–
–
=
P2,968,460
–
–
–
=
P1,899,215
–
–
–
=
P127,350
20,443
111,880
132,323
=
P148,831
20,443
111,880
132,323
=
P5,143,856
December 31, 2012
Loans and receivables
Cash and cash equivalents
Cash on hand and in banks
Short-term investments
Receivables
Trade & Retention receivables
Consultancy fees
Other receivables
Due from related parties
Miscellaneous deposits
Receivable from EEI Retirement Fund Inc.
Principal
Interest
AFS securities
Quoted shares
Unquoted shares
42
The tables below summarize the maturity profile of the Group’s financial liabilities based on
contractual undiscounted payments (both principal and interest).
(In Thousand Pesos)
Accounts payable and
accrued expenses
Bank loans
Principal
Interest
Long-term debt
Peso loan
Interest
Due to related parties
Lease liability
Accounts payable and
accrued expenses
Bank loans
Principal
Interest
Long-term debt
Peso loan
Interest
Due to related parties
Lease liability
On demand
September 30, 2013
< 1 year 1 to < 2 years Over 2 years
P
=485,766 P
=1,996,766
2,037,000
38,025
–
–
500,000
18,773
23,524
7,306
13,969
–
2,438
–
P
=3,100,722 P
=2,022,845
P
=119,093
Total
P
=– P
= 2,601,625
–
–
–
–
75,092
24,744
–
–
P
=218,929
2,037,000
38,025
281,593
875,458
58,771
114,345
–
13,969
–
2,438
P
=340,364 P
= 5,682,860
December 31, 2012
1 to < 2 Over 2 years
years
On demand
< 1 year
Total
=283,181
P
=
P2,377,082
=
P–
=
P–
=
P2,660,263
–
–
440,000
16,854
–
–
–
–
440,000
16,854
–
–
18,710
–
=301,891
P
500,000
37,071
–
5,526
=3,376,533
P
20,975
13,634
–
1,657
=36,266
P
188,775
13,633
–
–
=202,408
P
709,750
64,339
18,710
7,183
=3,917,099
P
Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in the market interest rates (interest rate risk), foreign exchange rates (foreign currency
risk) and market prices (equity price risk).
•
Interest Rate Risk
The Group’s exposure to market rate risk for changes in interest rates relates primarily to the Group’s
variable short-term and long-term obligations. The Group closely monitors the movements of interest
rates, as well as economic factors affecting the trends of these movements. In certain cases,
depending on its assessment of future movements of interest rates, the Group would pre-terminate its
debt and obtain a new loan facility which provides for either floating or fixed interest rates. This is
intended to minimize its financing costs. The Group also monitors its exposure to fluctuations in
interest rates by using sensitivity analysis to estimate the impact of interest rate movements on its
interest income and expense.
The Group is exposed to receivables and borrowings with floating interest rates. The receivable from
EEI Retirement Fund Inc. is earning interest based on bank’s internal average lending rate. As at
September 30, 2013 and December 31, 2012, the outstanding principal amounted to P
=373.6 million
and P
=476.0 million with same last floating rate of 5%.
43
The following tables set out the carrying amount, by maturity, of the Group’s financial instruments
that are exposed to interest rate risk:
Peso floating rate receivables
(In Thousand Pesos)
2013
2012
< 1 year
P
=−
−
1 to < 2 years
P
=−
476,022
2 to < 3 years
P
=373,570
−
Total
P
= 373,570
476,022
The following tables demonstrate the sensitivity to a reasonably possible change in interest rates, with
all variables held constant, of the Group’s profit before tax.
September 30, 2013
Increase/decrease Effect on profit
in basis points
before tax
+50
P
=1,868
-50
(1,868)
Peso floating rate receivables
December 31, 2012
Increase/decrease
Effect on profit
in basis points
before tax
+50
=1,551
P
-50
(1,551)
Peso floating rate receivables
The sensitivity analyses shown above are based on the assumption that interest rate movements will be
more likely be limited to a fifty basis point upward or downward fluctuation in both 2013 and 2012.
The forecasted movements in percentages of interest rates used were sourced by management from an
affiliated bank. These are forecasted movements in the next twelve months. The effect on the
Group’s income statement before tax is computed on the carrying value of the Group’s floating rate
receivables as at September 30, 2013 and December 31, 2012.
There are no other effects of the interest rate sensitivity on the Group’s equity other than those already
affecting the consolidated statements of income.
•
Foreign Currency Risk
Currency risk is the potential decline in the value of the financial instruments due to exchange rate
fluctuations. The Group’s currency arise mainly from cash and receivables which are denominated in
a currency other than the Group’s functional currency or will be denominated in such a currency.
The following tables demonstrate the sensitivity to a reasonably possible change in the US dollar
(USD), Singapore dollar (SGD), Euro (EUR) and Japan yen (YEN) currency rates, with all variables
held constant, of the Group’s profit before tax (due to changes in the fair value of monetary assets and
liabilities):
44
USD
SGD
EUR
YEN
September 30, 2013
Percentage
Effect on profit
increase/decrease in
before tax
foreign currency
(in PHP)
+0.6%
238
+5.2%
299
+1.9%
11
+12.1%
9
USD
SGD
EUR
YEN
USD
SGD
EUR
YEN
-0.6%
-5.2%
-1.9%
-12.1%
(238)
(299)
(11)
(9)
December 31, 2012
Effect on profit
Percentage
increase/decrease in
before tax
foreign currency
(in PHP)
+0.5%
1,186
+5.5%
33
+2.0%
142
+14.9%
12
USD
SGD
EUR
YEN
-0.5%
-5.5%
-2.0%
-14.9%
(1,186)
(33)
(142)
(12)
The sensitivity analyses shown above are based on the assumption that the movements in US dollars,
Singapore dollars, Euro and Japan yen will more likely be limited to the upward or downward
fluctuation of 0.6%, 5.2%, 1.9% and 12.1%, respectively, in 2013, and 0.5%, 5.5%, 2.0%, and 14.9%
in 2012. The forecasted movements in percentages used were sourced by management from an
affiliated bank. These are forecasted movements in the next twelve months.
The effect on the Group’s income before tax is computed on the carrying value of the Group’s foreign
currency denominated financial assets and financial liabilities as at September 30, 2013 and December
31, 2012.
There are no other effects of the foreign currency sensitivity on the Group’s equity other than those
already affecting the consolidated statements of income. The Group’s exposure to foreign currency
changes for all other currencies is not material.
The foreign currency denominated financial assets and financial liabilities in original currencies and
equivalents to the functional and presentation currency are as follows:
45
September 30, 2013
(000)
Financial assets
Cash and cash
equivalents
Receivables
Financial liabilities
Accounts payable and
accrued expenses
USD
SGD
EUR
$651
S$166
€8
YEN
Equivalents in
PHP
P
=34,477
257
908
−
166
1
9
¥169
−
169
$908
–
S$166
–
€9
–
¥169
–
P
=45.520
YEN
Equivalents in
PHP
11,043
45,520
December 31, 2012
(000)
Financial assets
Cash and cash
equivalents
Receivables
Financial liabilities
Accounts payable and
accrued expenses
•
USD
SGD
EUR
$1,702
S$41
€44
=
P73,712
4,770
6,472
9
50
4
48
¥169
−
169
543
$5,929
–
S$50
.22
€48
−
¥169
196,344
270,056
22,292
=247,764
P
Equity Price Risk
The Group’s equity price risk exposure at year-end relates to financial assets whose values will
fluctuate as a result of changes in market prices, principally, equity securities classified as AFS
securities.
Quoted AFS securities are subject to price risk due to changes in market values of instruments arising
either from factors specific to individual instruments or their issuers or factors affecting all
instruments traded in the market.
46
47
EEI CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION AND DISCLOSURES REQUIRED ON SRC
RULE 68 AS AMENDED
September 30, 2013
Philippine Securities and Exchange Commission (SEC) issued the amended Securities Regulation Code Rule
SRC Rule 68 which consolidates the two separate rules and labeled in the amendment as “Part I” and “Part II”,
respectively. It also prescribed the additional information and schedule requirements for issuers of securities
to the public.
Below are the additional information and schedules required by SRC Rule 68, as Amended (2011) that are
relevant to the Group. This information is presented for purposes of filing with the SEC and is not required
part of the basic financial statements.
Schedule A. Financial Assets
The Group is not required to disclose the financial assets in equity securities as the total available-for-sale
securities amounting to P
=150.0 million do not constitute 5% or more of the total noncurrent assets of the
Group as at September 30, 2013.
Schedule B. Amounts Receivable from Directors, Officers, Employees, Related Parties and Principal
Stockholders (Other than Related Parties)
Below is the schedule of advances to employees of the Group with balances above P
=100,000 as at September
30, 2013:
Name
Macapagal, Norman K. (Senior Vice President)
Mercado, Oscar D. (Senior Vice President)
Apolonio, Ferdinand D. (Group Manager)
Delos Reyes, Arnulfo (Assistant Vice President)
Munji, Divina F. (Vice President)
Cabrera, Lovette O. (Project Manager)
Garcia, Raul R. (Construction Superintendent)
Brutas, Crisanto B. (Group Manager)
Villarin , Pantaleon T. Jr. (Manager)
Arcega, Wilson V. (FM - Mechanical)
Castro, Romeo E. (Supervisor)
Alonzo, Antonina J. (Group Supervisor)
Canero, Raul C. (Supervisor)
Sebastian, Catalino (Manager)
Magboo, Jeremer D. ( Operator)
Calinawan, Victorino C. (Manager)
Burgos, Manuel B. ( Construction Manager )
Saringo, Alberto C. ( Vice President )
Cruz, Rodel M. ( Assistant Vice President )
Lopez, Hans Christian O. ( Vice President )
Solijon, Eduardo S. ( Mechanical Supervisor )
San Miguel, Simon Elmer D. ( Asst. Vice President )
Emmanuel Enriquez (Group Manager)
Balance at
beginning of year
=1,532,053
P
1,441,523
1,152,075
105,111
836,376
624,840
253,500
195,851
150,000
142,108
121,512
117,460
108,403
250,000
=7,030,812
P
Additions
=1,300
P
224,324
900,000
40,447
51,939
121,292
116,297
239,469
108,150
228,000
218,825
145,000
120,482
839,035
=3,354,560
P
Collections/
Liquidations
=1,300
P
85,657
31,565
780,243
40,447
4,464
86,617
7,021
2,679
45,000
66,899
76,000
72,942
48,333
350,000
250,000
=1,949,167
P
Balance at
end of period
=
P1,532,053
1,580,190
1,120,510
224,868
836,376
620,376
218,822
188,830
150,000
139,429
121,512
121,292
117,460
71,297
41,504
239,469
108,150
152,000
145,883
96,667
120,482
489,035
=
P8,436,205
The amounts of advances to employees as shown above are expected to be realized within twelve months
from the reporting date and are classified under current assets. There were no amounts written off during
the year.
48
Schedule C. Amounts Receivable from/Payable to Related Parties which are Eliminated during the
Consolidation of Financial Statements
The following is the schedule of receivables from related parties, which are eliminated in the consolidated
financial statements as at September 30, 2013:
Name and Designation of debtor
Equipment Engineers, Inc.
EEI Construction & Marine, Inc.
Gulf Asia International Corp.
GAIC Manpower Services Inc.
GAIC Professional Services Inc.
EEI Power Corp.
EEI Realty Corp
EEI BVI Ltd.
Philmark, Inc.
Philrock Construction & Services, Inc.
Bagumbayan Equipment Industrial Products, Inc.
EEI Corporation (GUAM) Inc.
EEI Singapore Pte Ltd.
EEI Subic Corporation
Balance at
beginning of
year
25,945,294
19,746,658
48,511,291
2,265,889
1,480,000
4,931,740
139,926,040
29,368,544
33,694,029
42,102,496
14,583
2,016,429
3,759,281
907,512
=354,669,786
P
Additions
6,824,985
5,231,015
819,631
15,263
61,147,370
2,341,055
302,156,541
168,542
17,953,116
6,050
=396,663,567
P
Amounts
collected
5,356,058
15,739,542
961,474
1,480,000
4,081,528
26,678,987
331,525,085
20,504,570
=406,327,245
P
Balance at
end of period
27,414,220
9,238,130
48,369,448
2,281,152
61,997,581
115,588,107
33,694,029
42,102,496
14,583
2,184,971
1,207,827
913,562
=345,006,107
P
The amounts of receivables from related parties as shown above are expected to be realized within twelve
months from the reporting date and are classified under current assets. There were no amounts written off
during the year.
The following is the schedule of payable to related parties, which are eliminated in the consolidated financial
statements as at September 30, 2013:
Name and Designation of Debtor
Equipment Engineers, Inc.
EEI Construction & Marine, Inc.
Gulf Asia International Corp.
EEI Power Corp.
EEI Realty Corp
EEI BVI Ltd.
EEI Subic Corporation
Bagumbayan Equipment Industrial Products, Inc.
EEI Singapore Pte Ltd.
Balance at
beginning of
year
192,782,544
80,153,438
6,630,032
4,755,635
148,906
200,807,477
90,000,000
1,526,373
20,222
=576,824,627
P
Additions
30,894,250
118,991,030
20,569,842
167,321
502,584,547
42,400
21,213
=673,270,603
P
Amounts paid
169,608,442
79,389,354
26,574,146
4,755,635
82,950,755
45,560
41,435
=363,365,327
P
Balance at
end of period
54,068,352
119,755,114
625,728
316,227
620,441,268
90,000,000
1,523,214
=886,729,902
P
The amounts of payable to related parties as shown above are expected to be realized within twelve months
from the reporting date and are classified under current assets. There were no amounts written off during
the year.
49
Schedule D. Intangible Asset
The Group has intangible asset amounting to P
=22.8 million as at September 30, 2013.
Description
Software Cost
(included in
“Other
Noncurrent
Asset” account in
the statement of
financial position
Beginning
balance
Additions
of cost
Charged to
cost and
expenses
Charged to
other accounts
Other charges
additions
(deductions)
Ending
balance
=28,139,229
P
=
P–
=5,386,010
P
=–
P
=–
P
=22,753,219
P
Schedule E. Long-term Debt
Below is the schedule of long-term debt of the Group:
Type of Obligation
Term loans
Private placement fixed-rate corporate
promissory notes with effective interest
of 6.25% obtained on October 7, 2011.
The loan matures within two years from
the date of issue
Peso-denominated seven (7) year term
loan, payable quarterly starting June
2014 with interest of 6.50% per annum
inclusive of two-year grace period on
principal amortization
Amount
Current
=500,000,000
P
=500,000,000
P
375,458,000
=875,458,000
P
=500,000,000
P
Noncurrent
Collateral
Clean basis
Machineries and
construction equipment
of the Parent Company
(P
=789.6 million) and
merchandise stocks of
Equipment Engineers,
=82.7 million)
375,458,000 Inc. (P
=375,458,000
P
Schedule F. Indebtedness to Related Parties (Long Term Loans from Related Companies)
The Group is not required to disclose the long term indebtedness to related parties amounting to
P
=2.4 million, which relates to lease liability, as this do not constitute 5% or more of the total liabilities of
the Group as at September 30, 2013.
Schedule G. Guarantees of Securities of Other Issuers
There are no guarantees of securities of other issuing entities by the Group as at September 30, 2013.
Schedule H. Capital Stock
Title of issue
Common Shares
Preferred Shares
Number of
shares
authorized
2,000,000,000
240,000,000
Number of
shares issued
and
outstanding as
shown under
related
balance sheet
caption
1,036,281,485
-
Number of
shares
reserved for
options,
warrants,
conversion
and other
rights
35,000,000
-
50
Number of
shares held
by related
parties
562,798,853
-
Directors,
Officers and
Employees
2,312,208
-
Others
None
-
EEI CORPORATION AND SUBSIDIARIES
SCHEDULE OF FINANCIAL SOUNDNESS INDICATORS
AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012
Financial Soundness Indicator
Below are the financial ratios that are relevant to the Group for the year ended September 30, 2013 and
December 31, 2012:
09.30.13
12.31.12
Current assets
Current liabilities
1.08:1
1.08:1
Net income plus depreciation
Total liabilities
0.23:1
0.17:1
Financial Ratios
Current ratio
Solvency ratio
Debt to equity ratio
Total liabilities
Total equity
1.59:1
1.40:1
Asset-to-equity ratio
Total assets
Total equity
2.59:1
2.41:1
Interest rate coverage ratio
EBIT*
Interest expense
29.10:1
36.10:1
Net income
Average total assets
5%
9%
8%
21%
Return on assets
Return on equity
Net income
Average total equity
*Earnings before interest and taxes (EBIT)
51
EEI CORPORATION
RECONCILIATION OF RETAINED EARNINGS AVAILABLE FOR DIVIDEND
DECLARATION
Unappropriated Retained Earnings, as adjusted to available for
dividend distribution, beginning
=
P1,250,846,177
Add: Net income actually earned/realized during the period
297,708,129
Less:
(207,280,277)
Dividend declarations during the period
Total Retained Earnings, End Available For Dividend Declaration
52
=
P1,341,274,029
EEI CORPORATION AND SUBSIDIARIES
SCHEDULE OF ALL THE EFFECTIVE STANDARDS AND INTERPRETATIONS
UNDER PFRS AS OF SEPTEMBER 30, 2013
Below is the list of all effective PFRS, Philippine Accounting Standards (PAS) and Philippine Interpretations of
International Financial Reporting Interpretations Committee (IFRIC) as of September 30, 2013:
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Adopted
Framework for the Preparation and Presentation of Financial
Statements
Conceptual Framework Phase A: Objectives and qualitative
characteristics
√
Not
Adopted
Not
Applicable
√
PFRSs Practice Statement Management Commentary
Philippine Financial Reporting Standards
PFRS 1
(Revised)
First-time Adoption of Philippine Financial Reporting
Standards
√
Amendments to PFRS 1 and PAS 27: Cost of an
Investment in a Subsidiary, Jointly Controlled Entity or
Associate
√
Amendments to PFRS 1: Additional Exemptions for
First-time Adopters
√
Amendment to PFRS 1: Limited Exemption from
Comparative PFRS 7 Disclosures for First-time Adopters
√
Amendments to PFRS 1: Severe Hyperinflation and
Removal of Fixed Date for First-time Adopters
√
Amendments to PFRS 1: Government Loans
√
Share-based Payment
√
Amendments to PFRS 2: Vesting Conditions and
Cancellations
√
Amendments to PFRS 2: Group Cash-settled Share-based
Payment Transactions
√
PFRS 3
(Revised)
Business Combinations
√
PFRS 4
Insurance Contracts
√
Amendments to PAS 39 and PFRS 4: Financial Guarantee
Contracts
√
PFRS 5
Non-current Assets Held for Sale and Discontinued
Operations
√
PFRS 6
Exploration for and Evaluation of Mineral Resources
√
PFRS 7
Financial Instruments: Disclosures
√
Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets - Effective Date and Transition
√
Amendments to PFRS 7: Improving Disclosures about
Financial Instruments
√
Amendments to PFRS 7: Disclosures - Transfers of
Financial Assets
√
PFRS 2
PFRS 7
(cont.)
53
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Amendments to PFRS 7: Disclosures – Offsetting
Financial Assets and Financial Liabilities
Adopted
Not
Adopted
Not
Applicable
√
√
Amendments to PFRS 7: Mandatory Effective Date of
PFRS 9 and Transition Disclosures
√
PFRS 8
Operating Segments
PFRS 9
Financial Instruments
√
Amendments to PFRS 9: Mandatory Effective Date of
PFRS 9 and Transition Disclosures
√
PFRS 10
Consolidated Financial Statements
√
PFRS 11
Joint Arrangements
√
PFRS 12
Disclosure of Interests in Other Entities
√
PFRS 13
Fair Value Measurement
√
Philippine Accounting Standards
PAS 1
(Revised)
√
Presentation of Financial Statements
Amendment to PAS 1: Capital Disclosures
√
Amendments to PAS 32 and PAS 1: Puttable Financial
Instruments and Obligations Arising on Liquidation
√
Amendments to PAS 1: Presentation of Items of Other
Comprehensive Income
√
PAS 2
Inventories
√
PAS 7
Statement of Cash Flows
√
PAS 8
Accounting Policies, Changes in Accounting Estimates
and Errors
√
PAS 10
Events after the Reporting Date
√
PAS 11
Construction Contracts
√
PAS 12
Income Taxes
√
√
Amendment to PAS 12 - Deferred Tax: Recovery of
Underlying Assets
PAS 16
Property, Plant and Equipment
√
PAS 17
Leases
√
PAS 18
Revenue
√
54
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Adopted
Employee Benefits
√
Amendments to PAS 19: Actuarial Gains and Losses,
Group Plans and Disclosures
√
PAS 19
(Amended)
Employee Benefits
√
PAS 20
Accounting for Government Grants and Disclosure of
Government Assistance
PAS 21
The Effects of Changes in Foreign Exchange Rates
PAS 19
Not
Adopted
Not
Applicable
√
√
√
Amendment: Net Investment in a Foreign Operation
PAS 23
(Revised)
Borrowing Costs
√
PAS 24
(Revised)
Related Party Disclosures
√
PAS 26
Accounting and Reporting by Retirement Benefit Plans
PAS 27
Consolidated and Separate Financial Statements
PAS 27
(Amended)
Separate Financial Statements
PAS 28
Investments in Associates
√
PAS 28
(Amended)
Investments in Associates and Joint Ventures
√
PAS 29
Financial Reporting in Hyperinflationary Economies
PAS 31
Interests in Joint Ventures
√
PAS 32
Financial Instruments: Disclosure and Presentation
√
√
√
√
√
Amendments to PAS 32 and PAS 1: Puttable Financial
Instruments and Obligations Arising on Liquidation
√
Amendment to PAS 32: Classification of Rights Issues
√
√
Amendments to PAS 32: Offsetting Financial Assets and
Financial Liabilities
PAS 33
Earnings per Share
√
PAS 34
Interim Financial Reporting
√
PAS 36
Impairment of Assets
√
PAS 37
Provisions, Contingent Liabilities and Contingent Assets
√
PAS 38
Intangible Assets
√
PAS 39
Financial Instruments: Recognition and Measurement
√
Amendments to PAS 39: Transition and Initial
Recognition of Financial Assets and Financial Liabilities
√
Amendments to PAS 39: Cash Flow Hedge Accounting of
Forecast Intragroup Transactions
√
Amendments to PAS 39: The Fair Value Option
√
Amendments to PAS 39 and PFRS 4: Financial Guarantee
√
55
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Adopted
Not
Adopted
Not
Applicable
Contracts
PAS 39
(cont.)
Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets
√
Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets – Effective Date and Transition
√
Amendments to Philippine Interpretation IFRIC–9 and
PAS 39: Embedded Derivatives
√
Amendment to PAS 39: Eligible Hedged Items
√
PAS 40
Investment Property
PAS 41
Agriculture
√
√
Philippine Interpretations
IFRIC 1
Changes in Existing Decommissioning, Restoration and
Similar Liabilities
√
IFRIC 2
Members' Share in Co-operative Entities and Similar
Instruments
√
IFRIC 4
Determining Whether an Arrangement Contains a Lease
IFRIC 5
Rights to Interests arising from Decommissioning,
Restoration and Environmental Rehabilitation Funds
√
IFRIC 6
Liabilities arising from Participating in a Specific Market
- Waste Electrical and Electronic Equipment
√
IFRIC 7
Applying the Restatement Approach under PAS 29
Financial Reporting in Hyperinflationary Economies
√
IFRIC 8
Scope of PFRS 2
√
IFRIC 9
Reassessment of Embedded Derivatives
√
Amendments to Philippine Interpretation IFRIC–9 and
PAS 39: Embedded Derivatives
√
IFRIC 10
Interim Financial Reporting and Impairment
√
IFRIC 11
PFRS 2- Group and Treasury Share Transactions
√
IFRIC 12
Service Concession Arrangements
√
IFRIC 13
Customer Loyalty Programmes
√
IFRIC 14
The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction
√
Amendments to Philippine Interpretations IFRIC- 14,
Prepayments of a Minimum Funding Requirement
√
IFRIC 16
Hedges of a Net Investment in a Foreign Operation
√
IFRIC 17
Distributions of Non-cash Assets to Owners
√
IFRIC 18
Transfers of Assets from Customers
√
IFRIC 19
Extinguishing Financial Liabilities with Equity
Instruments
√
IFRIC 20
Stripping Costs in the Production Phase of a Surface
Mine
SIC-10
Government Assistance - No Specific Relation to
56
√
√
√
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Adopted
Not
Adopted
Not
Applicable
Operating Activities
Consolidation - Special Purpose Entities
√
Amendment to SIC - 12: Scope of SIC 12
√
SIC-13
Jointly Controlled Entities - Non-Monetary Contributions
by Venturers
√
SIC-15
Operating Leases - Incentives
√
SIC-21
Income Taxes – Recovery of Revalued Non-Depreciable
Assets
√
SIC-25
Income Taxes - Changes in the Tax Status of an Entity or
its Shareholders
√
SIC-27
Evaluating the Substance of Transactions Involving the
Legal Form of a Lease
SIC-29
Service Concession Arrangements: Disclosures.
√
SIC-31
Revenue - Barter Transactions Involving Advertising
Services
√
SIC-32
Intangible Assets - Web Site Costs
√
SIC-12
√
Standards tagged as “Not applicable” have been adopted by the Group but have no significant covered transactions for
the period ended September 30, 2013.
Standards tagged as “Not adopted” are standards issued but not yet effective as of September 30, 2013. The Group will
adopt the Standards and Interpretations when these become effective.
57
EEI CORPORATION AND SUBSIDIARIES
MAP OF RELATIONSHIPS OF THE COMPANIES WITHIN THE GROUP
Group Structure
Below is a map showing the relationship between and among the Group and its ultimate parent company, subsidiaries, and associates as of
September 30, 2013:
58
59