SEC Form 17-Q Form Type

Transcription

1 SEC Number PSE Disclosure Security Code PR-115 SM PRIME HOLDINGS, INC. AND SUBSIDIARIES (Company s Full Name) SM Corporate Offices, Bldg. A 1000 Bay Blvd., SM Central Business Park, Bay City, Pasay City (Company s Address) (Telephone Number) December 31 (Year Ending) (month & day) SEC Form 17-Q Form Type Amendment Designation (If applicable) 2003 Period Ended Date (Secondary License Type and File Number)

2 SECURITIES AND EXCHANGE COMMISSION SEC FORM 17-Q QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SRC RULE 17(2)(b) THEREUNDER 1. For the quarterly period ended JUNE 30, SEC Identification Number BIR Tax Identification No Exact name of registrant as specified in its charter SM PRIME HOLDINGS, INC. 5. PHILIPPINES 6. (SEC Use Only) Province, Country or other jurisdiction Industry Classification Code: of incorporation or organization 7. SM Corporate Offices, Bldg. A, 1000 Bay Blvd., SM Central Business Park, Bay City, Pasay City 1226 Address of principal office Postal Code Registrant's telephone number, including area co de 9. NOT APPLICABLE Former name, former address, and former fiscal year, if changed since last report. 10. Securities registered pursuant to Sections 4 and 8 of the RSA Title of Each Class Number of Shares of Common Stock Outstanding and Amount of Debt Outstanding CAPITAL STOCK, P 1 PAR VALUE 9,935,294, Are any or all of these securities listed on the Philippine Stock Exchange. Yes [X] No [ ] 12. Indicate by check mark whether the registrant: (a) has filed all reports required to be filed by Section 11 of the Securities Regulation Code (SRC) and SRC Rule 11(a) -1 thereunder and Sections 26 and 141 of The Corporation Code of the Philippines during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); Yes [X] No [ ] (b) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

3 SM PRIME HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 AND DECEMBER 31, 2002

4 SM PRIME HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS 2003 Unaudited December 31, 2002 Audited ASSETS Current Assets Cash and cash equivalents (Note 3) 7,354,843,418 8,288,175,876 Receivables - (Notes 4 and 12) 897,256,673 1,077,722,493 Prepaid expenses and other current assets 179,177, ,326,409 Total Current Assets 8,431,277,353 9,514,224,778 Noncurrent Assets Property and equipment - net (Notes 5 and 8) 31,972,917,985 30,572,560,236 Other assets - net (Note 6) 264,400, ,230,132 Total Noncurrent Assets 32,237,318,205 30,840,790,368 40,668,595,558 40,355,015,146 LIABILITIES AND STOCKHOLDERS EQUITY Current Liabilities Accounts payable and accrued expenses (Note 7) 1,261,893,430 1,892,235,172 Income tax payable 296,449, ,549,982 Dividends Payable 45,631,058 - Current portion of long-term debt and loans payable (Note 8) 3,706,100,000 3,377,700,000 Total Current Liabilities 5,310,073,540 5,505,485,154 Noncurrent Liabilities Long-term debt - net of current portion (Note 8) 375,000, ,000,000 Deferred tax liabilities 77,156, ,355,566 Tenants deposits 2,130,100,724 2,074,323,577 Total Noncurrent Liabilities 2,582,256,815 2,727,679,143 Minority interest 700,180, ,585,230 Stockholders Equity (Note 9) Capital stock 9,935,294,157 9,935,294,157 Additional paid-in capital 3,099,777,406 3,099,777,406 Retained earnings Appropriated 7,000,000,000 7,000,000,000 Unappropriated 12,142,488,102 11,343,210,953 Treasury stock (101,474,705) (67,016,897) Total Stockholders Equity 32,076,084,960 31,311,265,619 40,668,595,558 40,355,015,146 See accompanying Notes to Consolidated Financial Statements.

5 SM PRIME HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Six Months Ended June REVENUES (Note 12) Rent 3,337,621,759 3,052,301,992 Cinema ticket sales 740,188, ,569,867 Others 224,944, ,327,820 4,302,754,372 3,889,199,679 OPERATING EXPENSES (Note 10) 1,790,625,796 1,593,345,071 INCOME FROM OPERATIONS 2,512,128,576 2,295,854,608 INTEREST AND OTHERS Net 135,424,180 37,116,045 INCOME BEFORE INCOME TAX AND MINORITY SHARE IN NET EARNINGS OF SUBSIDIARIES 2,647,552,756 2,332,970,653 PROVISION FOR INCOME TAX (Note 11) Current 582,029, ,144,536 Deferred (91,053,475) (51,939,278) 490,975, ,205,258 INCOME BEFORE MINORITY SHARE IN NET EARNINGS OF SUBSIDIARIES 2,156,576,802 2,010,765,395 MINORITY SHARE IN NET EARNINGS OF SUBSIDIARIES (117,745,013) (135,960,518) NET INCOME 2,038,831,789 1,874,804,877 RETAINED EARNINGS AT THE BEGINNING OF THE PERIOD 18,343,210,953 15,475,735,554 CASH DIVIDENDS (1,239,554,640) (993,529,414) RETAINED EARNINGS AT THE END OF THE PERIOD 19,142,488,102 16,357,011,017 EARNINGS PER SHARE (Note 13) See accompanying Notes to Consolidated Financial Statements.

6 SM PRIME HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Unaudited) Six Months Ended June CAPITAL STOCK - 1 par value Authorized - 10,000,000,000 shares Issued - 9,935,294,157 shares 9,935,294,157 9,935,294,157 ADDITIONAL PAID-IN CAPITAL 3,099,777,406 3,099,777,406 RETAINED EARNINGS (Note 9) Appropriated for capital expansion 7,000,000,000 7,000,000,000 Unappropriated: Balance, beginning of year 11,343,210,953 8,475,735,554 Net income 2,038,831,789 1,874,804,877 Cash dividends (1,239,554,640) (993,529,414) Balance, end of period 12,142,488,102 9,357,011,017 TREASURY STOCK - 18,857,000 shares in 2003 and 11,545,000 shares in 2002 (Note 9) (101,474,705) (67,016,897) 32,076,084,960 29,325,065,683 See accompanying Notes to Consolidated Financial Statements.

7 SM PRIME HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the Quarter April to 2003 and 2002 (Unaudited) 2nd Quarter REVENUES Rent 1,749,521,592 1,592,800,086 Cinema ticket sales 377,676, ,315,864 Others 130,560, ,675,259 2,257,759,122 2,039,791,209 OPERATING EXPENSES 942,100, ,011,420 INCOME FROM OPERATIONS 1,315,658,143 1,200,779,789 INTEREST AND OTHERS Net 63,669,981 6,026,425 INCOME BEFORE INCOME TAX AND MINORITY SHARE IN NET EARNINGS OF SUBSIDIARIES 1,379,328,124 1,206,806,214 PROVISION FOR (BENEFIT FROM) INCOME TAX (Note 8) Current 369,085, ,160,371 Deferred (9,864,053) (21,477,066) 359,221, ,683,305 INCOME BEFORE MINORITY SHARE IN NET EARNINGS OF SUBSIDIARIES 1,020,106, ,122,909 MINORITY SHARE IN NET EARNINGS OF SUBSIDIARIES (56,376,896) (79,206,224) NET INCOME 963,729, ,916,685 RETAINED EARNINGS AT THE BEGINNING OF THE PERIOD 19,418,312,818 16,477,623,746 CASH DIVIDENDS (1,239,554,640) (993,529,414) RETAINED EARNINGS AT THE END OF THE PERIOD 19,142,488,102 16,357,011,017 See accompanying Notes to Consolidated Financial Statements.

8 SM PRIME HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax 2,647,552,756 2,332,970,653 Adjustments for: Depreciation and amortization 526,785, ,410,849 Unrealized foreign exchange loss (3,609,948) 6,788,748 Interest expense 74,123, ,764,592 Interest income (315,524,861) (252,163,060) Operating income before working capital changes 2,929,327,537 2,731,771,782 Increase in: Receivables 180,465,821 61,281,043 Prepaid expenses other current assets (31,311,130) (65,897,888) Increase (decrease) in: Accounts payable and accrued expenses (707,372,360) 98,981,436 Tenants deposits 55,777,147 85,806,327 Net cash provided by operating activities 2,426,887,015 2,911,942,700 Income taxes paid net of creditable withholding tax (521,130,359) (368,760,953) Net cash provided by operating activities 1,905,379,590 2,543,181,747 CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment net (1,927,143,529) (1,675,877,658) Interest received 330,497, ,343,020 Decrease (increase) in other assets 3,829,911 4,719,362 Net cash used in investing activities (1,592,815,628) (1,432,815,276) CASH FLOWS FROM FINANCING ACTIVITIES Payment of cash dividends (1,239,554,640) (993,529,414) Net proceeds (repayments) of loans 203,400,000 (302,614,900) Payment of treasury stock (34,457,808) - Interest paid (76,878,985) (230,502,233) Increase (decrease) in minority interest (110,404,987) (182,796,732) Net cash used in financing activities (1,257,896,420) (1,709,443,279) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (933,332,458) (599,076,808) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 8,288,175,876 7,636,446,646 CASH AND CASH EQUIVALENTS AT END OF PERIOD 7,354,843,418 7,037,369,838 See accompanying Notes to Consolidated Financial Statements.

9 SM PRIME HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Corporate Information SM Prime Holdings, Inc. (the Parent Company) was incorporated on January 6, 1994 to develop, conduct, operate and maintain the business of modern commercial shopping centers and all businesses related thereto such as the conduct, operation and maintenance of shopping center spaces for rent, amusement centers, or cinema theaters within the compound of the shopping centers. Its main sources of revenues include rent income from leases in mall and food court, cinema ticket sales and amusement income from bowling and ice-skating. The Parent Company is 56% directly and indirectly owned by SM Investments Corporation. The registered office and principal place of business of the Parent Company is Building A, SM Corporate Offices, Bay Boulevard, SM Central Business Park, Bay City, Pasay City Summary of Significant Accounting Policies Basis of Preparation The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the Philippines and under the historical cost convention. Adoption of New Statements of Financial Accounting Standards (SFAS)/ International Accounting Standards (IAS) The Parent Company and its subsidiaries adopted the following SFAS/IAS effective January 1, 2002: SFAS 16/IAS 16, Property, Plant and Equipment ; SFAS 24/IAS 24, Related Party Disclosures ; SFAS 27/IAS 27, Consolidated Financial Statements and Accounting for Investments in Subsidiaries ; and SFAS 36/IAS 36, Impairment of Assets. The new SFAS/IAS provide more specific criteria and guidelines and require additional disclosures to the consolidated financial statements. The adoption of the abovementioned SFAS/IAS does not have a material effect on the consolidated financial statements.

10 New Accounting Standards Effective Subsequent to 2002 The Accounting Standards Council has approved the following accounting standards which will be effective subsequent to 2002: SFAS 10/IAS 10, Events After the Balance Sheet Date, which prescribes the accounting and disclosures related to adjusting and non-adjusting subsequent events. SFAS 37/IAS 37, Provisions, Contingent Liabilities and Assets, which provides the criteria for the recognition and bases for measurement of provisions, contingent liabilities and contingent assets. It also specifies the disclosures that should be included with respect to these items. SFAS 38/IAS 38, Intangible Assets, which establishes the criteria for the recognition and measurement of intangible assets. Intangible assets that are recognized should be amortized generally over 20 years. The new standard also requires that expenditures on research, startup, training, advertising and relocation be expensed as incurred. The Company will adopt SFAS 10/IAS 10, SFAS 37/IAS 37 and SFAS 38/IAS 38 in 2003 and, based on current circumstances, does not believe the effect of adoption will be material. In addition, the ASC has approved SFAS 21/IAS 21, Changes in Foreign Exchange Rates, which provides restrictive conditions for the capitalization of foreign exchange losses. The Parent Company will adopt SFAS 21/IAS 21 in 2005 Basis of Consolidation The consolidated financial statements include the accounts of the Parent Company, First Asia Realty Development Corporation (FARDC), a 54.37%-owned subsidiary and the following whollyowned subsidiaries: Premier Central, Inc., Consolidated Prime Dev. Corp. and Premier Southern Corp. (collectively referred to as the Group ). Subsidiaries are consolidated from the date on which control is transferred to the Parent Company and cease to be consolidated from the date on which control is transferred out of the Parent Company. Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. Intercompany balances and transactions, including intercompany profits and unrealized profits and losses are eliminated. Cash and Cash Equivalents Cash includes cash on hand and in banks. Cash equivalents are highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of change in value. Trade Receivables Trade receivables are recognized and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection is no longer probable.

11 Supplies Inventory Supplies inventory (shown as part of Prepaid expenses and other current assets account in the consolidated balance sheets) is carried at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. Net realizable value is the current replacement cost. Property and Equipment Property and equipment are stated at cost (including capitalized borrowing costs and foreign exchange losses) less accumulated depreciation. When assets are sold or retired, their cost and accumulated depreciation are eliminated from the accounts and any gain or loss resulting from their disposal is included in the consolidated statements of income. The initial cost of property and equipment comprises its purchase price, including import duties, taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the fixed assets have been put into operation, such as repairs and maintenance, are normally charged to current operations. 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. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows: Buildings and improvements Building equipment, furniture and others 10 to 35 years 3 to 15 years The useful lives and depreciation method are reviewed periodically to ensure that the period and method of depreciation are consistent with the expected pattern of economic benefits from items of property and equipment. Construction in progress represents structures under construction and is stated at cost. This includes cost of construction, property and equipment and other direct costs. Construction in progress is not depreciated until such time the relevant assets are completed and put into operational use. Starting January 1, 2002, the carrying values of property and equipment and other long-lived assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and when the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount. Impairment losses, if any, are charged to current operations. No impairment losses were recognized in Preoperating Expenses Expenses incurred by the subsidiaries prior to the start of commercial operations and in bringing new facilities into operations (shown under Other noncurrent assets account in the consolidated balance sheets) have been deferred and are being amortized over 10 years. Provisions Provisions for loss contingencies are accrued when it is probable that a liability had been incurred at balance sheet date and the amount can be reasonably estimated. Otherwise, the loss contingency is disclosed.

12 Revenue Recognition Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized: Rent income. Rent income from mall operations is recognized when earned in accordance with the terms of the lease agreements. Cinema ticket sales and others. Revenue from cinema ticket sales, skating, bowling and billiards, and others is recognized upon receipt of cash from the customer. Interest. Revenue is recognized as the interest accrues (taking into account the effective yield on the assets). Dividends. Revenue is recognized when the shareholder s right to receive the payment is established. Income Tax Deferred income tax is provided using the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial reporting bases of assets and liabilities and their related tax bases. Deferred tax assets and liabilities are measured using the tax rate expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Foreign Currency-Denominated Transactions Gains or losses arising from foreign currency-denominated transactions are generally credited or charged to current operations. Unrealized foreign exchange gains or losses arising from the restatement of foreign currency-denominated long-term loans (used for working capital purposes) are deferred (shown as part of Other noncurrent assets account in the consolidated balance sheets) and amortized over the remaining term of the loan up to The unrealized foreign exchange gains or losses arising from the restatement of foreign currency-denominated loans used to acquire property and equipment were capitalized up to 2001 as part of the carrying amount of the related assets. For income tax purposes, exchange gains and losses are treated as taxable income or deductible expense in the year such are realized. Borrowing Costs Borrowing costs are generally expensed as incurred. Borrowing costs are capitalized if they are directly attributable to the acquisition or construction of a qualifying asset. Capitalization of borrowing costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Borrowing costs are capitalized until the assets are substantially ready for their intended use. Borrowing costs are capitalized when it is probable that they will result in future economic benefits to the Company. If the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognized. Retirement Plan The Parent Company has a distinct, funded, noncontributory retirement plan covering all permanent employees administered by a Board of Trustees. Retirement costs are actuarially determined using the projected unit credit method. This method reflects service rendered by employees to the date of valuation and incorporates assumptions concerning employees projected salaries. Retirement costs include current service cost plus amortization of past service cost, experience adjustments and changes in actuarial assumptions over the expected average remaining working lives of the covered employees.

13 Basic Earnings Per Share (EPS) Basic earnings per share is computed based on the weighted average number of issued and outstanding shares of stock during the year. Business Segment The Parent Company has one primary business segment, which is shopping mall operations. 3. Cash and Cash Equivalents This account consists of: Cash and other cash items include short-term cash investments, including accrued interest. Cash in banks earn interest at the respective bank deposit rates. Temporary investments are made for varying periods depending on the immediate cash requirements of the Company, and earn interest at the respective temporary investment rates. 4. Receivables This account consists of: 2003 December 31, 2002 Rent P=868,467,195 P=1,042,198,853 Others 28,789,478 35,523,640 P=897,256,673 P=1,077,722, Property and Equipment This account consists of: 2003 December 31, 2002 Cost: Land and improvements 9,207,931,166 9,207,931,166 Building and improvements 21,767,274,404 21,408,343,528 Building equipment, furniture and others 3,957,704,586 3,620,142,578 34,932,910,156 34,236,417,272 Accumulated depreciation 5,898,509,987 5,371,724,208 Net book value 29,034,400,169 28,864,693,064 Construction in progress and others 2,938,517,816 1,707,867,172 31,972,917,985 30,572,560,236 Land with a carrying value of P=184 million is mortgaged to secure FARDC s long-term debt and loans payable (see Note 8).

14 6. Other Noncurrent Assets This account consists of: 2003 December 31, 2002 Preoperating expenses - net P=83,240,071 P=81,797,375 Deposits and others 181,160, ,432,757 P=264,400,220 P=268,230, Accounts Payable and Accrued Expenses This account consists of: 2003 December 31, 2002 Liability for purchased land P=583,059,704 P=1,008,280,430 Deferred income tax - 34,975,332 Accrued operating expenses and others 678,833, ,979,410 P=1,261,893,430 P=1,892,235, Long-term Debt and Loans Payable In 2002, the Parent Company obtained US dollar-denominated short-term loans amounting to US$50 million which bear interest at prevailing market rates. FARDC has a 5-year term loan amounting to P=1,000 million obtained on December 26, The loan is payable in equal quarterly installments of P=62.5 million starting March 26, 2002 up to December 26, 2005 and bears variable interest rates determined in accordance with the loan agreement. The loan is collateralized by a real estate mortgage on certain portion of the land of FARDC (see Note 5). The loan agreement also contains certain covenants and restrictions on the part of FARDC. The account Current portion of long-term debt and loans payable in the consolidated balance sheet includes short-term peso denominated loans of P=270 million obtained by the Company s subsidiary, FARDC. 9. Retained Earnings The retained earnings account is restricted for the payment of dividends to the extent of P=101 million representing the cost of shares held in treasury and the Parent Company s accumulated equity in the net earnings of subsidiaries totaling P=4,231 million and P=3,783 million in 2003 and 2002, respectively. These earnings are not available for dividend distribution until such time that the Parent Company receives the dividends from the subsidiaries.

15 10. Operating Expenses This account consists of: 2003 Depreciation and amortization P=526,785,779 P=422,347,014 Administrative 366,646, ,685,439 Film rentals 388,163, ,121,898 Business taxes and licenses 203,693, ,461, Others 305,335, ,729,268 P=1,790,625,796 P=1,593,345, Income Tax The disproportionate relationship between income before income tax and the provision for income tax is due mainly to interest income already subjected to final tax. 12. Related Party Transactions The parent Company and FARDC, in the regular conduct of business, have entered into transactions with related companies principally consisting of leasing and management service agreements. 13. Basic EPS Computation Basic EPS is computed as follows: (a) Net income P=2,038,831,789 P=1,874,804,877 (b) Weighted average number of issued and outstanding shares during the period 9,935,294,157 9,935,294,157 Basic EPS (a/b) P=0.205 P=0.189

16 SIGNATURES Pursuant to the requirements of the Securities Regulation Code, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Registrant: SM PRIME HOLDINGS, INC. PRINCIPAL FINANCIAL/ACCOUNTING OFFICER : JEFFREY C. LIM VP Finance and Administration Date: