AFS 2018 Annual Report Ammended
AFS 2018 Annual Report Ammended
AFS 2018 Annual Report Ammended
Gentlemen:
The amendment was made to update information on the 2016 reclassifications from
the adoption of PFRS 15 in page 25 under Note 3, Summary of Significant Accounting
Policies, where such updated information was inadvertently included as page 31,
resulting to the omission of the intended contents for page 31 under Note 9,
Investments, which has now been included.
Similarly, the amendment also updates the related information on the reclassified 2016
comparatives in page 45 under Note 17, Cost of Sales, where such updated
information was inadvertently included as page 56, resulting to the omission of the
intended contents for page 56 under Note 24, Income Taxes, which has now been
included.
This correction of the pagination errors has no effect on the consolidated statements of
financial position of the Group as at December 31, 2018 and 2017, and its
consolidated statements of comprehensive income, consolidated statements of
changes in equity and consolidated statements of cash flows for each of the three
years in the period ended December 31, 2018.
Thank you.
Candy
Assistan C• ate Se etary
2nd Floor Tabacalera Bldg., 900 Romualdez St., Paco, Manila, Philippines 1007
Telefax: (632) 523-3055
SECURITIES AND EXCHANGE COMMISSION
4. Exact name of issuer as specified in its charter: Puregold Price Club, Inc.
8. (632) 522-8801 to 04
Issuer's telephone number, including area code
9. N/A
Former name, former address, and former fiscal year, if changed since last report.
10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA
Yes [/] No [ ]
If yes, state the name of such stock exchange and the classes of securities listed therein:
(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17.1 thereunder
or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of The Corporation
Code of the Philippines during the preceding twelve (12) months (or for such shorter period that the
registrant was required to file such reports);
Yes [/] No [ ]
SECForm17-A-AS AMENDED
February 2001
(b) has been subject to such filing requirements for the past ninety (90) days.
Yes [/] No [ ]
13. State the aggregate market value of the voting stock held by non-affiliates of the registrant. The
aggregate market value shall be computed by reference to the price at which the stock was sold, or
the average bid and asked prices of such stock, as of a specified date within sixty (60) days prior to
the date of filing. If a determination as to whether a particular person or entity is an affiliate cannot be
made without involving unreasonable effort and expense, the aggregate market value of the common
stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the
circumstances, provided the assumptions are set forth in this Form. (See definition of "affiliate" in
"Annex B").
15. If any of the following documents are incorporated by reference, briefly describe them and identify
the part of SEC Form 17-A into which the document is incorporated:
SECForm17-A-AS AMENDED
February 2001
PART 1: BUSINESS AND GENERAL INFORMATION
ITEM 1 BUSINESS
In 2008, Puregold was recognized by Reader's Digest Asia's as the Most Trusted Brand
in supermarket category. To expedite market coverage, a new format called "Puregold
Jr. Supermarket" was introduced in the 4th quarter of 2008. By mid-2009, the Company
gained market leadership being the second largest hypermarket and supermarket retailer
in the Philippines in terms of net sales. By 2010, it was already operating 62 stores, and
launched another format called, "Puregold Extra". In the same year and henceforth,
Puregold was recognized by Retail Asia Pacific as one of the top 500 retailers among
the 14 economies of the region.
2011 saw the highest number of store openings in Puregold history with the launch of
38 new stores making its number of stores to a total of 100. In the succeeding year,
Puregold acquired another related retail company which was later called, "S&R
Membership Shopping", under the corporate name "Kareila Management
Corporation", with 6 S&R Membership Shopping Warehouses (patterned after the
Costco and Sam's Club in the USA). Puregold also opened 31 new Puregold organic
stores and acquired Gant Group of Companies known as "Parco supermarkets" with 19
stores.
In 2014, Puregold opened 28 stores, 1 S&R store and 4 S&R New York Style
Pizza/quick service restaurants (QSR). In the same year, Puregold partnered with
Lawson, Inc. and Lawson Asia Pacific Pte Ltd. under a joint venture company called
PG Lawson, Inc. to build and operate a chain of Lawson convenient stores. However,
in 2018, Puregold divested from the joint venture and sold to Lawson, Inc. all its share
in PG Lawson, Inc.
By the end of 2018, Puregold was operating a total of 208 hypermarkets, 104
supermarkets, 29 extra, 13 minimarts, 16 S&R warehouse clubs, 38 S&R-QSRs, for a
total of 408 stores located in the following areas:
Since the incorporation of Puregold, it has never been subjected to nor has been
involved in any bankruptcy, receivership or similar proceedings.
(i) Principal Products and Services. The Company conducts its operations through the
following retail formats and store brands, each of which is strategically located to target
distinct price points and demographics:
➢ Discounters. "Puregold Extra" is the Company's small store format which offers a more
limited number of goods, comprising the Company's top-selling SKUs ranging from
3,000 to 5,000. The average net selling space of these stores is around 400 square
meters.
2
➢ S & R Membership Shopping — S&R Membership Shopping started operations with 4
locations in Metro Manila in 2006. It opened its Cebu warehouse in November 2010,
Pampanga warehouse in November 2011, Davao warehouse in May 2013,
Mandaluyong warehouse in November 2013 and Imus warehouse in December 2014.
In 2015, it opened 1 warehouse in Nuvali, Sta. Rosa. Laguna and 10 QSR outlets. It
opened 2 warehouses located in the provinces of Iloilo and Cagayan de Oro and 7 QSR
outlets in 2016. In 2017, S&R opened 2 warehouses in Dau, Pampanga and
Commonwealth, Quezon City. By the end of 2018, S&R operates 16 warehouses and
38 QSRs.
S&R has adopted a warehouse club concept where most of the products offered are in
club packs. Majority of the merchandise are imported brand names mostly sourced from
the United States. Currently, S&R is the biggest reseller of imported quality products
at very competitive prices.
➢ Entenso Equities, Inc. is wholly owned subsidiary of Puregold holding equity interests
in the following retail formats and brands:
1) Ayagold Retailers, Inc., a 50/50 joint venture with Ayala Land. It opened
mall-based supermarket in July 2015 called "Merkado" located at UP Town
Center, Quezon City and Vertis North Mall, Quezon City on December 8,
2017.
➢ PPCI Subic, Inc. is operating one Puregold branch in Subic Bay, Olongapo City. It has
4,917.70 square meters in selling area.
The Company focuses on two customer segments: retail consumers and resellers. S&R,
on the other hand, serves the "A" "B" and aspirational "C" market segments whose
monthly income is over P80,000. The acquisition of S&R enabled the Company to
widen its market spectrum comprising practically all the socio-economic brackets.
For resellers, the Company has TNAP loyalty/marketing program. It started in 2001
and as of December 31, 2018, the Company served over 480,000 sari-sari stores and
small to medium-size businesses, and more than 350,000 total active TNAP members.
For retail end consumers, the Company has implemented a loyalty Perks program.
Among the many other programs and promotions, Puregold returns favor to the loyal
customers through its "Perks Card". It is a loyalty program open to all Puregold
shoppers who are 18 years old and above. It is specifically designed for customers who
do not own sari-sari stores or related businesses. Points earned have an equivalent peso
3
value which can be converted to a rebate or treat. To further enhance customer
experience, Puregold has even tapped its affiliates into doing partnerships so customer
can enjoy more benefits. Furthermore, with over 1.6 Million Perks members as of
December 2018 Puregold tapped various multi-national suppliers to create exclusive
programs for Perks card holders for the entire year.
As of December 2018, S&R has a total active members of over 800,000. To effectively
serve its customer base, the Company maintains strong relationship with suppliers and
trade partners, working closely with them to satisfy customers with reliable on-time
deliveries.
Foreign Sales. The Company has no branches or stores outside the Philippines.
Cross-dock facilities — About 12% of the suppliers who are unable to directly deliver
to the Company's stores delivers their products to the Company's 2 out-sourced cross-
dock facilities for onward distribution to Puregold stores.
S&R sends out buyers all over the world to source for its best products. Around 60 -
65%of the merchandise that S&R sells are bought and imported directly by S&R. It
currently operates its own 5 distribution centers.
(i) New Product and Services. Another subsidiary, Purepadala, Inc., was incorporated in
2018 mainly to operate the remittance operation of the Company. At present, it has P50
million capital stock. The remittance operation of Puregold will be handled by the core
group of Purepadala. It is expected that Purepadala will focus on the integration and
operation of the remittance within the network and platform of Puregold.
4
(iii) Suppliers. With over 3,000 regular suppliers, the Company's supplier base is
diversified between local suppliers such as San Miguel Corporation, Universal Robina
Corporation, Monde Nissin, and multinational corporations such as Nestle, Unilever
and Procter & Gamble. The Company selects its suppliers using a number of criteria,
including product assortment and quality, market share of the Company in a particular
supplier's location, brand reputation, supplier's capacity, Company business plans and
budgets, logistic possibilities, and compliance with the Company's commercial
principles.
S&R sources majority of its merchandise from global vendors who have been supplying
to membership clubs worldwide for an extended period of time. Most of its products
are sourced from the United States.
(iv) Dependence upon single or few supplier or customer. The Company believes that
its business as a whole is not dependent on any single supplier. The Company's three
largest food suppliers are Nestle Philippines, Universal Robina Corporation and Monde
Nissin. The Company's three largest non-food suppliers are Procter & Gamble,
Unilever Philippines and Globe Telecom Inc.
Further, the Company is not reliant on a single or few customers but to the buying
public in general. The Company's stores target customers who live within walking
distance of its stores and those who use personal or public transport to shop. The
Company provides suitable car parking facilities to accommodate customers who travel
to stores by car, and also locates its stores in areas close to main transportation hubs.
The Company also offers delivery services to resellers who are unable to travel to the
Company's stores.
Likewise, S&R is not dependent on a single or few customers but to the buying public
in general who become members.
The Company believes that its stores can address the needs of its customers through its
wide product range, large selection of food as well as non-food products and increasing
share of private label products. The Company divides its customers into several
categories:
• Retail consumers ("C" and "D" class): These consumers have an average income of
P12,000 to P80,000. A typical ticket for retail consumers ranges from P500 to P3,000
per shopping trip at a frequency of two to four times per month.
• Retail Consumers ("A" and "B" class): For S&R, it is targeting that 4% population of
the Philippines which comprise the "A" and "B" market segment. This segment has an
average income of over 80,000 per month.
Transactions with Related Parties. The Company, in the ordinary course of its
business, engages in a variety of arms-length transactions with related parties. Certain
related party transactions are described below:
5
The Company leases the building from its related parties where some stores are located.
The Company pays its related parties a minimum fixed amount or is calculated in
reference to a fixed sum per square meter of area leased. The terms of the lease are for
the periods ranging from 10 to 35 years, renewable for the same period under the same
terms and conditions. The rent shall escalate by the range from 1% to 7%. Rental
payments are fixed amounts based on the contracts.
The Company is a party to a trademark Licensing Agreement with Mr. Lucio Co, under
which Mr. Co licenses the use of tradenames and trademarks related to the "Puregold"
brand and other Company affiliates, including Puregold Finance, Inc., Puregold Duty
Free-Subic, Inc., Puregold Realty Leasing and Management Inc., Puregold Duty Free,
Inc. and Puregold Properties, Inc. The Company pays Mr. Co royalty fees of 1/20 of
1% of the Company's net sales for the use of tradenames and trademarks. This
Licensing Agreement is for a period of 30 years and is exclusive. Consequently, during
the term of the Licensing Agreement, Mr. Co cannot license the tradenames and
trademarks under this agreement except to Puregold Junior and the Licensed Affiliates.
None of the tradenames and trademarks can also be transferred by Mr. Co.
In 2007, Kareila entered into a concession contract with PSMT Phils., Inc., a company
owned by Mr. Co, for the 4 locations of S&R in Manila. Instead of paying rental to
PSMT, Kareila pays a concession fee of 15% of revenue. The contract was for 5 years
and renewable thereafter. In March 2012, concession fee was reduced to 4%. The
concession fee covered the cost of lease rental, utilities, manpower, security services,
maintenance costs and marketing expenses.
The Company has an agreement with Puregold Finance, Inc., pursuant to which the
employees are able to borrow money from Puregold Finance, Inc., and loan repayments
are made by the Company through salary deductions, which are withheld from
employees to repay Puregold Finance, Inc. The Company is not a guarantor to any of
these loans.
Transactions between related parties are on arm's length basis in a manner similar to
transactions with non-related parties. The terms under which the Company binds itself
with related parties are comparable to those available from unrelated third parties. To
ensure this, the Company uses the terms and provisions it has in place for similar
contracts with unrelated third parties as a benchmark for its agreements with related
parties.
For more detailed information please refer to the related party transactions as
disclosed in the Audited Financial Statements for the Year 2018 attached as Annex
"B
(v) Trademarks. The Company is a party to a trademark Licensing Agreement with Mr.
Lucio Co, under which Mr. Co licenses the use of tradenames and trademarks related
to the "Puregold" brand. The Company pays Mr. Co royalty fees of 1/20 of 1% of the
Company's net sales for the use of the tradenames and trademarks. This Licensing
Agreement is for a period of 30 years and is exclusive. The list of the tradenames and
trademarks subject of the Licensing Agreement is set out below.
6
TRADENAMES TRADEMARKS
(i) Government approvals. Puregold and its subsidiaries have obtained all permits,
licenses and approvals from national and local government units and other government
agencies necessary to construct and/or lease supermarket buildings and operate the
same.
(ii) Effect of existing governmental regulations. Puregold and its subsidiaries have no
knowledge of recent or probable government regulation that may have material adverse
effect on the business operation or financial position of the Company and its
subsidiaries.
(iii) Cost and effect of compliance with environmental laws. The Company estimates its
annual cost for maintaining and renewing the ECCs and other environmental permits
for all its existing stores to be about Four Million Pesos.
Department
Store Operations 5,761
Head Office 1,108
Total 6,869
Rank
Executive 6
Senior Manager 24
Manager 293
Officer 536
Supervisory 2,722
Rank & File 3,288
Total 6,869
7
Employment Status
Regular 5,555
Probationary 576
Contractual 738
Total 6,869
The Company anticipates that it will employ approximately 1,000 employees within
the next 12 months for the planned 25 store openings in 2019, and the Company does
not expect to encounter any difficulty in sourcing the manpower for these additional
positions. The Company believes that its relations with its employees are generally
good. The Company has experienced no material work stoppages or strikes in the past
five years. The Company currently has no labor union nor any collective bargaining
agreement with any group of employees.
(v) Major Risks. The Company considers the following major risks that may have
potential adverse effect on its financial condition and operation, as follows:
The Company may experience difficulty in implementing its growth strategy. The
Company's growth is dependent on its strategy to continue to build stores and
successfully operate stores in new locations in the Philippines. Successful
implementation of this strategy depends upon, among other things:
Failure by the Company to successfully implement its growth strategy due to any of the
reasons identified above or otherwise may have a material adverse effect on its financial
condition and results of operations.
The Company may experience difficulties in expanding into the Visayas and
Mindanao. Expansion into these areas exposes the Company to operational, logistical
and other risks of doing business in new territories. The Company may find it difficult
to obtain regulatory or local government approvals for new stores in these areas due to
8
differences in local requirements and processes. The Company may also experience
difficulty in building the "Puregold" brand name in these new areas. Operationally, the
Company may experience supply, distribution, transportation and/or inventory
management issues due to the limited presence of large retailers and underdevelopment
of distribution networks. Any difficulties the Company experiences with respect to
developing its business presence in the Visayas and Mindanao areas could materially
affect its growth strategy, financial condition and results of operations.
But with the Company's well-recognized brand that has become associated with low
prices, value and a wide assortment of goods, the Company believes it can manage the
risk and successfully expand in Visayas and Mindanao Region. The Company believes
this strong brand equity attracts customers to the Company's newly opened stores
within a shorter time period than brands that are not as well-recognized and contributes
to the Company's ability to achieve profitability from new stores within a short time
period.
The Company may not be able to maintain or improve store sales. The Company may
not be able to maintain or increase the level of store sales that it has experienced in the
recent past. The Company's overall store sales have fluctuated in the past and will likely
fluctuate in the future; a variety of factors affect store sales, including consumer
preferences, competition, economic conditions, pricing, in-store merchandising-related
activities and the Company's ability to source and distribute products efficiently.
The Company, however, plans to continue to improve and renovate existing stores by
upgrading them to address the changing needs and preferences of customers and
enhance their overall shopping experience. These efforts include, among others, re-
modelling store layouts by optimizing and/or expanding the sales floor areas of existing
stores to further improve the visitor traffic, optimally positioning promotional items
and continually maintaining and upgrading store decor. The Company believes that
these efforts make the stores more attractive to customers and contribute to customer
loyalty and to the Puregold brand name.
New stores may place a greater burden on the Company's existing resources and
adversely affect its business. The Company's proposed expansion will place increased
demands on its operational, managerial, financial and administrative resources. These
increased demands could cause the Company to operate its business less effectively,
which in turn could cause deterioration in the financial performance of its existing
stores. New store openings in markets where the Company has existing stores may also
result in reduced sales volumes at its existing stores in those markets. In addition, the
Company, or its third-party vendors and suppliers, may not be able to adapt its
distribution, management information and other operating systems to adequately
supply products to new stores at competitive prices. Any expansion may adversely
affect the efficiency of the Company's existing operations and quality of its customer
service and may materially affect its financial condition and results of operations.
However, the Company's strong relationship with suppliers and trade partners is a key
feature in maintaining its price competitiveness while offering a comprehensive range
of products. The Company sources products from over 3,000 domestic and
multinational suppliers and has maintained a stable relationship with its top suppliers
since it was first established in 1998. The Company believes that these suppliers are
9
able to provide the Company with valuable discounts on merchandise partly because of
its long-standing relationships and good credit history. The Company also collaborates
with these top suppliers through regular meetings and other programs to further
improve the Company's service. The Company believes that these relationships are an
important part of its success in maintaining a stable supplier base.
In Metro Manila's local retail market, the Company has also fostered its relationship
with suppliers through programs such as TNAP, which puts small business owners
directly in contact with suppliers at an annual trade show. To facilitate delivery from
smaller scale suppliers with limited distribution capabilities, the Company engages
third parties to provide cross-docking services. This allows certain suppliers to benefit
from a cost- effective supply chain as the Company assists them to conveniently
outsource part of their delivery obligations. This focus on supplier relationships has
enabled the Company to take advantage of additional supplier discounts that the
Company is then able to reflect by offering competitively priced goods to customers.
These supplier discounts are key to the Company's pricing advantage over its
competitors.
Furthermore, the Company has well-established relationships with key tenants at its
stores such as Jollibee, McDonald's, and Mercury Drug as well as major real estate
companies, such as Ayala Land, Inc., which offers the Company anchor tenant
opportunities at their real estate developments. These relationships serve as key
business partnerships enabling both the Company and its partners to attract customers
to their businesses.
The Company believes that its ability to achieve a strong track record of growth has
largely been due to a business model that emphasizes the following: (1) a multi-format
offering of hypermarket, supermarket and discounter stores; (2) strategic store
locations, and (3) efficient and scalable operations. The Company believes that this
business model differentiates it from its competitors and places it in a position to
achieve further expansion. The Company has strategically-located stores tailored to
maximize coverage and penetration of its targeted market segments. The Company
offers distinct store formats that are suitable for different localities such as in
commercial areas or residential areas. In terms of location, the Company assesses
through informal market research whether a proposed store will be within the catchment
10
area of, and easily accessible by, its target customers. The Company believes that its
careful selection of store locations and focus on specific markets has enabled it to build
brand strength and loyalty across its targeted customer base.
The Company's retail business depends on its ability to source and sell the
appropriate mix of products to suit consumer preferences. The Company's success
depends in part on its ability to source and sell products that both meet its standards for
quality and appeal to customers' preferences. A small number of the Company's
employees are primarily responsible for both sourcing products that meet the
Company's specifications and identifying and responding to changing customer
preferences. Failure to source and market such products, or to accurately forecast
changing customer preferences, could lead to a decrease in the number of customer
transactions at the Company's stores and a decrease in the amount customers spend
when they visit these stores.
The success of the Company's business depends in part on the Company's ability to
develop and maintain good relationships with its current and future suppliers. The
sourcing of the Company's products is dependent, in part, on its relationships with its
suppliers. The Company has had long working relationships with a broad range of
multinational companies such as Procter & Gamble, Unilever, Nestle, Del Monte and
other multinational companies, which provide approximately 38% of its in-store
merchandise. The Company also has long working relationships with domestic
companies such as San Miguel Corporation and Universal Robina Corporation. If the
Company is unable to maintain these relationships, it may not be able to continue to
source products at competitive prices that both meet its standards and appeal to its
customers.
11
To mitigate this risk, the Company intends to continue entering into strategic
partnerships and other business relationships with its suppliers, tenants and other
business partners, such as established real estate developers, with a view to raising its
brand awareness and supporting its growth objectives. The Company also aims to
continue developing its relationships with these suppliers, tenants and other business
partners to capitalize on any further opportunities for synergy and consolidate key
relationships. In addition, the Company intends to enhance its unique relationship with
its customers by further improving its TNAP program and sharing store management
practices with resellers and putting them in contact with key suppliers. The Company
also plans to continue providing customer loyalty incentives to strengthen its market
position across its broad customer base.
ITEM 2 PROPERTIES
a. 14 owned parcels of land with a total of 37,328.57 square meters located in the
following areas:
North Luzon 2
South Luzon 8
Metro Manila 2
V isayas 2
Mindanao 0
Total 14
b. 77 owned buildings with a total of 308,064.39 square meters located in the following
areas:
North Luzon 22
South Luzon 26
Metro Manila 27
V isayas 0
Mindanao 2
Total 77
c. 76 leased parcels of land with a total of 298,005.34 square meters located in the
following areas:
North Luzon 22
South Luzon 24
Metro Manila 28
V i sayas 0
Mindanao 2
Total 76
12
d. 309 leased buildings with a total of 661,324.26 square meters located in the following
areas:
North Luzon 80
South Luzon 83
Metro Manila 108
Visayas 28
Mindanao 10
Total 309
Neither the Company nor any of its subsidiaries has been involved or is involved in any
governmental, legal or arbitration proceedings that may have or have had a material
effect on the Company's business, financial position or profitability.
None of the properties of the Company and its subsidiaries, nor any property of its
affiliates has been or is a subject of any governmental, legal or arbitration proceedings.
During the Annual Stockholders' Meeting in 2018, the following matters were
submitted to a vote of security holders:
The following table shows the high and low prices of the Company's shares in the
Philippine Stock Exchange for the year 2017 and 2018, respectively.
13
July 47.00 45.2
August 47.1 44.00
September 45.85 44.00
October 44.5 40.20
November 43.05 41.8
December 43.3 42.2
The market capitalization of the Company's common shares as of December 31, 2018
based on the closing price of P43.00 per share, was approximately P118 billion. There
are approximately 36 registered holders of common shares owning at least 1 board lot
per 100 shares as of December 31, 2018.
The following are the top 20 registered holders of the Company's securities, number of
shares and percentage to the outstanding shares as of December 31, 2018:
14
Dividend. From 2012 to 2019, the Company declared the following dividends:
Use of proceeds are for general corporate purposes, capital expenditure, and potential
acquisitions. The sale shares represent approximately 3.8% of PGOLD's total issued
and outstanding stock.
The deal was done via an overnight book-built offering with Mr. Lucio L. Co as the
sole selling shareholder. The shares sold by Mr. Co represent part of his indirect
holdings of PGOLD lodged with Deutsche Regis Partners, Inc. Mr. Co also signed a
Subscription Agreement to subscribe to the same number of PGOLD shares and price
per share. The placement price is equivalent to a 6.8% discount from its last close of
P48.30% as at 16 January 2019.
Deutsche Bank AG acted as the placing agent for the transaction.
The Consolidated Audited Financial Statements for 2018 is hereto attached as "Annex
B".
The External Auditor of the Company for fiscal year 2018 is R.G. Manabat & Co.
(KPMG). The partner-in-charge is Dindo Marco M. Dioso. The Company has engaged
R.S. Manabat & Co. since 2007 and there has been no disagreements on accounting
and financial disclosure. Prior to 2017, the partner handling the account of the Company
was Mr. Darwin Virocel.
15
In compliance with SRC Rule 68, (3), (b), (iv) where it states that changes should be
made in assignment of external auditor or assigned partner at least every five (5) years.
The Company and subsidiaries paid R.G. Manabat & Co. (KPMG) the total amount of
P4,800,000.00 for services rendered in 2017 and P4,700,000.00 for services rendered
in 2018. The Company did not engage R.G. Manabat & Co. in any non-audit services.
It has been the policy of the Company, based on its Audit Committee Charter, that the
Audit Committee reviews the reports of the external auditors including the audit and
non-audit services rendered and fees collected by them.
The profile of the incumbent directors and executive officers of the Company,
indicating their respective business experience for the past five (5) years is attached
herewith as"Annex E".
The table below sets the total annual compensation of the CEO, four most highly
compensated executive officers and all other officers as a group unnamed for the year
2017, 2018 and the projected compensation for 2019:
As of December 31, 2018, the following are the persons or group of persons known to
be of record or beneficial owners of more than 5% of the capital stock of the Company:
16
Title of Name, Address of Relationship Name of Citizenship Number of Percent
Class record owner with the Beneficial shares held
Company Owner and
Relationship
with Record
Owner
Common Cosco Capital, Inc. Stockholder/ Parent Filipino 1,410,867,188 51%
No. 900 Romualdez Parent Company
St., Paco, Manila Company
Common The HSBC Stockholder/ Acting for Non-Filipino 393,398,423 14%
broker/ Not various
related clients
Common Lucio L. Co, No. 22 Stockholder/ Record owner Filipino 211,088,022 7.63%
Pili Avenue, South Chairman himself
Forbes Park,
Makati City
Common Susan P. Co Stockholder/ Record owner Filipino 178,242,585 6.44%
No. 22 Pili Avenue, Vice-Chairman herself
South Forbes Park,
Makati City
Common PCD Nominee Stockholder/ Acting for Non-Filipino 588,277,829 21%
Corp. (Non Not related various
Filipin• clients
Common PCD Nominee Stockholder/ Acting for Filipino 455,764,116 16%
Corp. (Filipino) Not related various
clients
In the table below are the shareholdings of the Directors and Executive Officers of the
Company:
17
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company, in the ordinary course of its business, engages in a variety of arms-
length transactions with related parties. Certain related party transactions are described
below:
The Company leases the building from its related parties where some stores are located.
The Company pays its related parties a minimum fixed amount or is calculated in
reference to a fixed sum per square meter of area leased. The terms of the lease are for
the periods ranging from 10 to 35 years, renewable for the same period under the same
terms and conditions. The rent shall escalate by the range from 1% to 7%. Rental
payments are fixed amounts based on the contracts.
The Company is a party to a trademark Licensing Agreement with Mr. Lucio Co, under
which Mr. Co licenses the use of tradenames and trademarks related to the "Puregold"
brand and other Company affiliates, including Puregold Finance, Inc., Puregold Duty
Free-Subic, Inc., Puregold Realty Leasing and Management Inc., Puregold Duty Free,
Inc. and Puregold Properties, Inc. The Parent Company pays Mr. Co royalty fees of
1/20 of 1% of the Company's net sales for the use of tradenames and trademarks. This
Licensing Agreement is for a period of 30 years and is exclusive. Consequently, during
the term of the Licensing Agreement, Mr. Co cannot license the tradenames and
trademarks under this agreement except to Puregold Junior and the Licensed Affiliates.
None of the tradenames and trademarks can also be transferred by Mr. Co.
In 2007, Kareila entered into a concession contract with PSMT Phils., Inc., a company
owned by Mr. Co, for the 4 locations of S&R in Manila. Instead of paying rental to
PSMT, Kareila pays a concession fee of 15% of revenue. The contract was for 5 years
and renewable thereafter. In March 2012, concession fee was reduced to 4%. The
concession fee covered the cost of lease rental, utilities, manpower, security services,
maintenance costs and marketing expenses.
The Company has an agreement with Puregold Finance, Inc., pursuant to which the
employees are able to borrow money from Puregold Finance, Inc., and loan repayments
are made by the Company through salary deductions, which are withheld from
employees to repay Puregold Finance, Inc. The Company is not a guarantor to any of
these loans.
Transactions between related parties are on arm's length basis in a manner similar to
transactions with non-related parties. The terms under which the Company binds itself
with related parties are comparable to those available from unrelated third parties. To
ensure this, the Company uses the terms and provisions it has in place for similar
contracts with unrelated third parties as a benchmark for its agreements with related
parties.
For more detailed information please refer to the related party transactions as
disclosed in the Audited Financial Statements for the Year 2018 attached as Annex
"B„.
18
ITEM 13 CORPORATE GOVERNANCE
As part of the continuing education of the directors and officers of the Company, a
Corporate Governance seminar was held on February 23, 2018 at the Acacia Hotel,
Alabang, Muntinlupa City from 1:00 pm to 5:00 pm. The seminar was conducted by
the Sycip Gorres Velayo & Co., an accredited corporate governance provider of the
SEC.
For the year 2019, another Corporate Governance Seminar will be held on May 14,
2019 in Acacia Hotel, Alabang, Muntinlupa City from 1:00 pm to 5:00 pm by the same
provider.
SIGNATURES
Pursuant to the requirements of Section 17 of the Code and Section 141 of the
Corporation Code, the registrant has duly caused this ANNUAL REPORT (SEC 17-A)
to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of
Manila on April 12, 2019.
By:
G CE E. SY BABY . ACRO
T surer Corporate Se tary
T No. 101-306-940 TIN No. 201-538-302
19
APR 1 2 2019
SUBSCRIBED AND SWORN to before me this day of April 2019 in the
City of Manila, affiants presented competent proof of their identities.
Doc. No.
Page No.
Book No.
Series of 2019.
CH
No ry Public or th City of Ma
Commi <ion No. x.18.0 until Dec , 2019
I No. • 8325
BP Lifetime Me ber No. 09093
PTR No. 80231 3/01-03-19/Mfa.
MCLE Compliance No. V-0012777/12-15-2015
No. 900 Romualdez St., Paco, Manila
20
Annex "A"
The following discussion and analysis of the Group's results of operations, financial condition
and certain trends, risks and uncertainties that may affect the Group's business should be
read in conjunction with the auditors' reports and the Group's 2018 audited consolidated
financial statements and notes attached herewith as Annex "B".
The key performance indicators of the Group as at and for the last three (3) years ended
December 31 are as follows:
Results of Operations:
For the year ended December 31, 2018, the Group earned a consolidated net income of
P6,520 million at 4.6% net margin and an increase of 11.6% from P5,840 million at 4.7% net
margin in 2017. Excluding the one-time gain on sale of investment in joint venture of P363
million, core consolidated net income for the year ended December 31, 2018 amounted to
P6,143 million at 4.4% net margin and an increase of 2.8%. This was principally driven by
the continuous organic expansion of the Group's grocery retail outlets on the back of a
1
sustained strong consumer demand. This has been augmented by combined management
strategies and programs to boost revenue contributions from both the base stores as well as
new stores established in 2018.
The Group's financial performance is presented below for the last three (3) comparative
years ended December 31:
Net Sales
For the year ended December 31, 2018, the Group posted a consolidated net sales of
P140,918 million for an increase of P16,427 million or a growth of 13.2% compared to
P124,491 million in the same period of 2017. New organic stores put up in 2017 were fully
operating in 2018 increasing consolidated net sales in addition to robust like for like stores
sales growth and revenue contributions from new organic stores established during the year.
Like for like consolidated sales performance indicators of the group for the year ended
December 31 are as follow:
PGOLD S&R
Net Sales 5.8% 8.0%
Net Ticket 8.1% 7.8%
Traffic -2.1% 0.2%
Gross Profit
For the year ended December 31, 2018, the Group realized an increase of 11.0% in
consolidated gross profit from P21,476 million in 2017 at 17.3% margin to P23,840 million at
16.9% margin in the same period of 2018, driven by strong sales growth from new and old
stores and sustained continuing suppliers' support through additional trade discounts in the
form of rebates and conditional discounts granted during the period.
2
Other Operating Income
Other operating income increased by P249 million or 9.2% from P2,692 million in 2017 to
P2,941 million in the 2018. This is attributable to increase in concess income and
membership income driven mainly by full operation of 2017 new stores and contribution from
new stores opened in 2018. In 2017, S&R tied up with Unioil and offered a P3.00 discount
on gasoline and P2.00 off on diesel per liter, to all members using their issued membership
cards with magnetic stripes. In March 14 to 18 and September 26 to 30, 2018, S&R held its
5-day sale Members' Treat.
Operating Expenses
Operating expenses increased by P2,325 million or 15.0% from P15,516 million in the year
ended December 31, 2017 to P17,840 million in 2018. The incremental operating expenses
were mainly attributable to manpower costs, as well as rent expenses covering new lease
contracts, depreciation expense and taxes, principally related to the establishment and
operation of new organic stores.
Other income -net amounted to P204 million for year ended December 31, 2018 due to
recognition of a one-time gain on sale of investment in joint venture amounting to P363
million. Interest income increased in the year ended December 2018 due to higher
placement in short-term investment as compared in 2017.
Net Income
For the year ended December 31, 2018, the Group earned a consolidated net income of
P6,520 million at 4.6% net margin and an increase of 11.6% from P5,840 million at 4.7% net
margin in the same period of 2017. Excluding the one-time gain on sale of investment in joint
venture of P363 million, core consolidated net income for the year ended December 31,
2018 amounted to P6,143 million at 4.4% net margin and an increase of 2.8%. This was
principally driven by the continuous organic expansion of the Group's grocery retail outlets
on the back of a sustained strong consumer demand. This has been augmented by
combined management strategies and programs to boost revenue contributions from both
the base stores as well as new stores established in 2018.
Net Sales
For the year ended December 31, 2017, the Group posted a consolidated net sales of
P124,491 million for an increase of P11,902 million or a growth of 10.6% compared to
P112,589 million in the same period of 2016. New stores put up in 2016 were fully operating
in 2017 increasing consolidated net sales in addition to robust like for like stores sales
growth and revenue contributions from new organic stores/outlets put up as well as
acquisitions made during the same period. Like for like consolidated sales performance
indicators of the group for the year ended December 31 are as follow:
3
PGOLD S&R
Net Sales 4.4% 6.5%
Net Ticket 3.9% 5.3%
Traffic 0.5% 1.2%
Gross Profit
For the year ended December 31, 2017, the Group realized an increase of 10.8% in
consolidated gross profit from P19,376 million in 2016 to P21,476 million in 2017 of the
same period, driven by strong sales growth from new and old stores and consistent and
continuing suppliers' support through additional trade discounts in the form of rebates and
conditional discounts granted during the period. Consolidated gross profit margin was
posted at 17.3% and 17.2% for the years ended December 31, 2017 and 2016, respectively.
Other operating income increased by P263 million or 10.8% from P2,429 million in the year
ended December 31, 2016 to P2,692 million in 2017 of the same period. This is attributable
to increase in concession income, membership income and other supplier supports driven
mainly by the full operation of new stores opened in 2016 and contribution from new stores
opened in 2017.
Operating Expenses
Operating expenses increased by P1,808 million or 13.2% from P13,707 million in the year
ended December 31, 2016 to P15,516 million in 2017 of the same period. The increase was
mainly attributable to manpower cost of the Group's new organic stores, as well as rent
expenses relative to new lease contracts, supplies expense and taxes, all related to full year
operation of acquired stores and operation of new organic stores.
Other expenses net of other income amounted to P268 million and P101 million for the years
ended December 31, 2017 and 2016, respectively. The increase was due to interest
expenses from additional bank loans availed during the period and recognition of share in
net loss of joint venture operations.
Net Income
For the year ended December 31, 2017, the Group earned a consolidated net income of
P5,840 million at 4.7% net margin and an increase of 5.7% from P5,526 million at 4.9% net
margin in 2016 of the same period. This was principally driven by the continuous expansion
of the Group both organic as well as strategic acquisitions and investments and combined
management strategies and programs to boost revenue contributions from both the base
stores as well as new stores complemented by sustained operating efficiencies and strategic
costs controls on operating expenses at its current level.
4
Financial Position
The Group's consolidated financial position as at December 31, 2017, 2016 and 2015 are
presented below:
Noncurrent accrued rent 3,692 4.7% 13.2% 3,261 4.6% 12.1% 2,910 4.5%
Long-term loans - net of current
maturities and debt issue costs 1,840 2.3% 0.0% - - -100.0% 2,397 3.7%
Deferred tax liabilities - net 135 0.2% -44.3% 243 0.3% -34.6% 371 0.6%
Retirement benefits liability 478 0.6% -11.1% 538 0.8% 14.7% 469 0.7%
Total Noncurrent Liabilities 6,146 7.8% 52.1% 4,041 5.7% -34.3% 6,147 9.4%
Total Liabilities P23,752 30.3% 1.1% P23,502 32.9% 5.8% P22,210 34.0%
Capital stock 2,800 3.6% 0.5% 2,785 3.9% 0.0% 2,785 4.3%
Additional paid in capital 20,830 26.6% 0.0% 20,830 29.1% 0.0% 20,830 31.9%
Remeasurements of retirement
liability - net of tax 274 0.3% 133.3% 117 0.2% 87.6% 63 0.1%
Treasury stock, at cost (71) -0.1% 25.7% (57) -0.1% 0.0% (57) -0.1%
Retained earnings 30,805 39.3% 26.8% 24,285 34.0% 24.2% 19,551 29.9%
Total Equity 54,638 69.7% 13.9% 47,962 67.1% 11.1% 43,173 66.0%
P78,390 100m% 9.7% P71,464 100.0% 9.3% P65,383 100.0%
5
Comparative Years 2018 and 2017
Current Assets
As at December 31, 2018 and 2017, total current assets amounted to P36,438 million or
46.5% of total assets, and P31,558 million or 44.2% of total assets, respectively, for an
increase of P4,880 million or 15.5%.
Cash and cash equivalents as at December 31, 2018 amounted to P10,687 million or 13.6%
of total assets and increased by P2,622 million or 32.5% compared to previous year-end
balance. Increase in cash balance was due to net cash generated from operations.
Receivables amounted to P4,790 million as at December 31, 2018 or 6.1% of total assets,
with an increase of P220 million or 4.8% from P4,569 million in December 2017. The growth
was due to increase in sales during the year related to full year operation of new organic and
acquired stores.
Merchandise inventory amounted to P19,732 million or 11.5% of total assets at the end of
December 2018. Total inventory increased by P2,035 million or 11.5% principally due to
stocking requirements of new organic and acquired stores.
Investments in trading securities amounted to P37 million as at December 31, 2018 from
P47 million in December 2016 and decreased by P10 million or 22.1% due to unrealized loss
from changes in fair market values.
Prepaid expenses and other current assets increased by P229 million or 23.7% due to
prepayments made for advertising, prepayments for taxes and licenses, availment of new
policies for insurance of new stores and advance payment of rent for soon to open stores.
Noncurrent Assets
As at December 31, 2018 and 2017, total noncurrent assets amounted to P41,952 million or
53.5% of total assets, and P40,121 million or 56.1% of total assets, respectively, for an
increase of P1,830 million or 4.6% as at December 31, 2018.
Investments amounted to P611 million and P802 million as at December 31, 2018 and 2017,
respectively. The net decrease of P191 million was due to sale of investment in joint venture
with Lawson and P33 million additional equity investments in Ayagold during the period to
finance both capital expenditures and working capital requirements for its second Merkado
Supermarket outlet which was opened in December 2017.
Net book values of property and equipment increased by P1,793 million or 10.1% from
P17,696 million in December 2017 to P19,489 million in December 2018. This was due
principally to capital expenditures pertaining to new stores established during the period.
Intangibles and goodwill amounted to P19,736 million and P19,737 million for the years
ended December 31, 2018 and 2017, respectively.
Other noncurrent assets increased by P229 million or 12.2% from P1,886 million in
December 2017 to P2,115 million in December 2018. This was primarily due to increase in
security deposits made in relation to new leases acquired for the establishment of new
Puregold organic stores and S&R warehouses and advance payments made to contractors.
6
Current Liabilities
As at December 31, 2018 and 2017, total current liabilities amounted to P17,606 million or
22.5% of total assets, and P19,461 million or 27.2% of total assets, respectively, for a
decrease of P1,854 million or 9.5%
Accounts payable and accrued expenses increased by P64 million or 0.5% to P11,677
million in December 2018 from P11,613 million in December 2017..
Short-term loans payable increased by P644 million or 15.7% from P4,113 million in
December 2017 to P4,756 million in December 2018 due to net settlement of short term
loans during the year.
Income tax payable decreased by P83 million from P878 million in December 2017 to P794
million in December 2018 due to settlement of tax liabilities due for the third quarter of 2018.
Due to related parties amounted to P43 million and P37 million for the year ended December
2018 and 2017, respectively. This pertains to royalty fees.
Current maturities of long-term debt decreased by P2,399 million to nil in December 2018
due maturity of outstanding balance as of December 2018 portion of which is rolled over for
another seven years and recognized under long term liabilities.
Other current liabilities amounted to P336 million and P417 million for the year ended
December 31, 2018 and 2017, respectively. The decrease in the account was relatively due
to redemption of gift checks and perks points benefits.
Noncurrent Liabilities
As at December 31, 2018 and 2017, total noncurrent liabilities amounted to P6,146 million or
7.8% of total assets, and P4,041 million or 5.7% of total assets, respectively, for an increase
of P2,104 million or 52.1%
Noncurrent accrued rent increased by P432 million or 13.2% from P3,261 million in
December 2017 to P3,692 million in December 2018 due to recognition during the year of
additional allocated rent expense and related liabilities pertaining to the remaining lease
period covering long-term operating lease contracts entered into by the Parent Company
and its subsidiaries in compliance with PAS 17 — Leases.
Long-term loans-net of current maturities and debt issue costs amounted to P1,840 million
as of December 31, 2018. The loan amount was portion of current loans matured during the
year and rolled over for another seven years.
Deferred tax liabilities net of deferred tax assets decreased by P108 million or 44.3% due to
increase in deferred tax assets arising from accrual of rent expense and recognition of
retirement liability.
Retirement benefits liability decreased by P60 million or 11.1% due to actuarial gains
recognized in other comprehensive income reducing the total retirement liability as of
December 31, 2018.
7
Equity
As at December 31, 2018 and 2017, total equity amounted to P54,638 million or 39.3% of
total assets and P24,285 million or 34.0% of total assets, respectively, for an increase of
P6,676 million or 13.9% as at the end of the year.
Treasury stock amounted to P71 million and P57 million as of December 2018 and 2017,
respectively. The increase in the account pertains to issuance of shares of stock to effect
the merger of Goldtempo Inc., Firstlane Super Traders Co. Inc, and Daily Commodities, Inc.
to the Parent Company.
Retained earnings increased by P6,520 million or 26.8% coming from net after-tax income
realized during the current year.
Treasury stock amounted to P57 million for the year ended December 31, 2018 and 2017.
Current Assets
As at December 31, 2017 and 2016, total current assets amounted to P31,343 million or
43.9% of total assets, and P27,802 million or 42.5% of total assets, respectively, for an
increase of P3,541 million or 12.7%.
Cash and cash equivalents as at December 31, 2017 amounted to P8,066 million or 11.3%
of total assets and increased by P1,650 million or 25.7% compared to previous year-end
balance. Increase in cash balance was due to net cash generated from operations.
Receivables amounted to P4,569 million as at December 31, 2017 or 6.4% of total assets,
with an increase of P688 million or 17.7% from P3,881 million in December 2016. The
growth was due to increase in sales during the year related to full year operation of new
organic and acquired stores.
Merchandise inventory amounted to P17,697 million or 24.8% of total assets at the end of
December 2017. Total inventory increased by P1,209 million or 7.3% principally due to
stocking requirements of new organic and acquired stores.
Investments in trading securities amounted to P47 million as at December 31, 2017 from
P35 million in December 2016 and increased by P12 million or 33.5% due to unrealized gain
from changes in fair market values.
Prepaid expenses and other current assets amounted to P964 million and P982 million as of
December 31, 2018 and 2017, respectively.
Noncurrent Assets
8
As at December 31, 2017 and 2016, total noncurrent assets amounted to P40,121 million or
56.1% of total assets, and P37,581 million or 57.5% of total assets, respectively, for an
increase of P2,540 million or 6.8% as at December 31, 2017.
Investments amounted to P802 million and P800 million as at December 31, 2017 and 2016,
respectively.
Net book values of property and equipment increased by P1,985 million or 12.6% from
P15,712 million in December 2016 to P17,696 million in December 2017. This was due
principally to capital expenditures pertaining to new stores established during the period.
Intangibles and goodwill amounted to P19,737 million and P19,561 million for the years
ended December 31, 2017 and 2016, respectively.
Other noncurrent assets increased by P377 million or 25.0% from P1,509 million in
December 2016 to P1,886 million in December 2017. This was primarily due to increase in
advance rent and deposits made in relation to new leases acquired for the establishment of
new Puregold organic stores and S&R warehouses.
Current Liabilities
As at December 31, 2017 and 2016, total current liabilities amounted to P19,461 million or
27.2% of total assets, and P16,062 million or 24.6% of total assets, respectively, for an
increase of P3,398 million or 21.2%
Accounts payable and accrued expenses increased by P1,969 million or 20.4% primarily due
to increase in trade liabilities and dividend payable as at the end of December 2017.
Short-term loans payable decreased by P905 million or 18.0% from P5,018 million in
December 2016 to P4,113 million in December 2017 due to net settlement of short term
loans during the year.
Income tax payable increased by P34 million from P844 million in December 2016 to P878
million in December 2017 due to recognition of tax liabilities due for the year, for the income
earned on the year ended December 31, 2017.
Due to related parties amounted to P37 million and P34 million for the year ended December
2017 and 2016, respectively. This pertains to royalty fees.
Current maturities of long-term debt increased by P2,279 million due to long-term loans
maturing in 2018 reclassified as current as at December 31, 2017.
Other current liabilities amounted to P417 million and P402 million for the year ended
December 31, 2017 and 2016, respectively.
Noncurrent Liabilities
As at December 31, 2017 and 2016, total noncurrent liabilities amounted to P4,041 million or
5.7% of total assets, and P6,147 million or 9.4% of total assets, respectively, for a decrease
of P2,106 million or 34.3%
9
Noncurrent accrued rent increased by P351 million or 12.1% from P2,910 million in
December 2016 to P3,261 million in December 2017 due to recognition during the year of
additional allocated rent expense and related liabilities pertaining to the remaining lease
period covering long-term operating lease contracts entered into by the Parent Company
and its subsidiaries in compliance with PAS 17 — Leases.
Long-term loans-net of current maturities and debt issue costs was reclassified to current
liabilities as it qualifies as current obligation for the year ended December 31, 2017.
Deferred tax liabilities net of deferred tax assets decreased by P128 million or 34.6% due to
increase in deferred tax assets arising from accrual of rent expense and recognition of
retirement liability.
Retirement benefits liability increased by P69 million or 14.7% due to increase in salary and
discount rate used in determining the liability as at December 31, 2017.
Equity
As at December 31, 2017 and 2016, total equity amounted to P47,962 million or 67.1% of
total assets and P43,173 million or 66.0% of total assets, respectively, for an increase of
P4,789 million or 11.1% as at the end of the year.
Retained earnings increased by P4,734 million or 24.2% coming from net after-tax income
realized net of cash dividend declared during the current year.
Treasury stock amounted to P57 million for the year ended December 31, 2017 and 2016.
Cash Flows
The following table sets forth the Group's statements of cash flows for the last three (3)
years ended December 31:
Net cash provided by operating activities amounted to P7,025 million, P7,641 million and
P2,795 million for the years ended December 31, 2018, 2017 and 2016, respectively. This
was mainly due to increase in operating income driven by aggressive store expansion.
10
Cash flows used in investing activities
Net cash used in investing activities amounted to P3,381 million, P4,137 million and P3,226
million for the years ended December 31, 2018, 2017 and 2016, respectively. Capital
expenditures for acquisitions of equipment, furniture & fixtures, lands, construction of
buildings and improvements on leased assets amounted to P3,658 million in 2018 and
P3,588 million in 2017.
Net cash used in financing activities amounted to P1,022 million in 2018 and P1,855 million
in 2017 pertaining to settlement of loans and dividend payable. Net cash provided by
financing activities amounted to P600 million in 2016 coming from additional loans availed
during the year to augment working capital requirements.
Capital Expenditures
The table below sets out the Group's capital expenditures in 2017, 2016 and 2015.
The Group has historically funded its capital expenditures through internally generated funds
derived from operating cash flows augmented by bank loans if and when necessary. The
group's low leverage ratios would enable the parent company to raise additional equity or
debt capital fundings from the capital market to finance strategic business acquisition
possibilities should the opportunity arise.
11
Financial Risk Management Objectives and Policies
The Group has significant exposure to the following financial risks primarily from its use of
financial instruments:
• Credit Risk
• Liquidity Risk
• Interest Rate Risk
• Foreign Currency Risk
The Group's financial risk management objectives and policies are discussed in Note 28 of
the Group's audited consolidated financial statements.
There are no known trends or any known demands, commitments, events or uncertainties
that will result in or that are reasonably likely to result in the Group's liquidity increasing or
decreasing in any material way.
There are no events that will trigger direct or contingent financial obligation that is material to
the Group, including any default or acceleration of an obligation;
There are no material commitments for capital expenditures other than those performed in
the ordinary course of trade of business in line with the Group's retail outlets expansion
program.
There are no known trends, events or uncertainties that have had or that are reasonably
expected to have a material impact on the revenues or income from continuing operations.
There are no significant elements of income not arising from continuing operations.
The Group experiences the fourth quarter of the year as the peak season relating to
increased sales resulting from Christmas and New Year holidays.
12
Annex "B"
COVER SHEET
For
AUDITED FINANCIAL STATEMENTS
A 1 9 9 8 1 3 7 5 4
GROUP NAME
P U R E G 0 L D P R CE C L U B NC
A N D S U B S A R E S
9 0 0 R 0 m a d e z S t r e e t
P a 0 M a n a
Form Type Department requiring the report Secondary License Type, If Applicable
AAFS
GROUP INFORMATION
Group's email Address Group's Telephone Number/s Mobile Number
No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)
May 2 December 31
Note 1: In case of deatt; nignation orcessation of office of the officerdesiglated as contact parser; such nrident shal I be reported to the
Consnission withirM y(30)calendar days barn the occurrence thereofwith ilk:motion and complete contact detais of the nevv contact person
designated
2 AI 13cures must be preperly and couplet& y Medup, Failure to do so shaff cause the delayer updatirg the corpotatren's records with
the Commission and'ornooreceipt of Notice of Deficiencies, Further, normeceipt of Notice of Deficiencies shaI not excuse Me corporation from
kabgrly for its deficiencies.
PUREGOLD PRICE CLUB, INC. AND SUBSIDIARIES
The management of Puregold Price Club, Inc. and Subsidiaries (the "Group") is responsible for
the preparation and fair presentation of the financial statements including the schedules attached
therein, for the years ended December 31, 2018 and 2017, in accordance with the prescribed
financial reporting framework indicated therein, and for such internal control as management
determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's
ability to continue as a going concern, disclosing, as applicable matters related to going concern
and using the going concern basis of accounting unless management either intends to liquidate the
Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors is responsible for overseeing the Company's financial reporting process.
The Board of Directors reviews and approves the financial statements including the schedules
attached therein, and submits the same to the stockholders.
R.G. Manabat & Co., the independent auditor appointed by the stockholders, has audited the
financial statements of the Company in accordance with Philippi Standards on Auditing, and in
its reports to the stockholders, has expressed its opinion on ss of presentation upon
completion dit.
FERDI VINCENT P4 C)
Presiders
1
GRA E E. SY
Treas rer
APR 1 i"g
Signed this _day of 2019
APR 1 1 2019
SUBSCRIBED AND SWORN to before me this day of affiants exhibiting
to me their respective Tax Identification Number, as follows:
Name TIN
LUCIO L. CO 108-975-971
FERDINAND VINCENT P. CO 208-381-185
GRACE E. SY 301-839-080
Doc. No. 20
Page No. (12
Book No, 2-b
c f•
Series of 2019 pion 20
086 until D 31, :2010
of
o. 58325
113P Member
PTR o.8
E Compliant Pdo2
. t3lhlf-01
023:°
7- ;17
No. 900 Rom. :1/7: - 2 3 -L r
Paco, fr.77.■7:1
2nd Floor Tabacalera Bldg., 900 Romualdez St., Paco, Manila, Philippines 1007
Telefax: (632) 523-3055
R.G. Manabat & Co.
The KPMG Center, 9/F
6787 Ayala Avenue, Makati City
Philippines 1226
Telephone +63 (2) 885 7000
Fax +63 (2) 894 1985
Internet www.kpmg.com.ph
Email [email protected]
Opinion
We have audited the consolidated financial statements of Puregold Price Club, Inc. and
its Subsidiaries (the "Group"), which comprise the consolidated statements of financial
position as at December 31, 2018 and 2017, and the consolidated statements of
comprehensive income, consolidated statements of changes in equity and consolidated
statements of cash flows for each of the three years in the period ended
December 31, 2018, and notes, comprising significant accounting policies and other
explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Group as at
December 31, 2018 and 2017, and its consolidated financial performance and its
consolidated cash flows for each of the three years in the period ended
December 31, 2018, in accordance with Philippine Financial Reporting Standards
(PFRS).
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the consolidated financial statements of the current period.
These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
The risk
Revenue is an important measure used to evaluate the performance of the
Group and is generated from various sources. It is accounted for when sales
transactions are completed, when goods are delivered or services are rendered
to the customers and all economic risks of the Group are transferred. While
revenue recognition and measurement is not complex for the Group, revenues
may be inappropriately recognized in order to improve business results and
achieve revenue growth in line with the objectives of the Group, thus increasing
the risk of material misstatement.
Our response
We performed the following audit procedures, among others, on revenue
recognition:
The risk
The Group holds significant balances pertaining to goodwill, trademark and
customer relationships as a result of several business acquisitions. The annual
impairment test of these assets was significant to our audit since this is complex
and judgmental by nature as it is based on assumptions of future market and/or
economic conditions. The key assumptions used include growth rates, discount
rates and sensitivity analyses.
Our response
We performed the following audit procedures, among others, around impairment
testing of goodwill, trademark and customer relationships:
■ We obtained the Group's discounted cash flow model that tests the carrying
value of goodwill.
Other Information
Management is responsible for the other information. The other information comprises
the information included in the SEC Form 20-IS (Definitive Information Statement),
SEC Form 17-A and Annual Report for the year ended December 31, 2018, but does not
include the consolidated financial statements and our auditors' report thereon. The
SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and Annual Report
for the year ended December 31, 2018 are expected to be made available to us after the
date of this auditors' report.
Our opinion on the consolidated financial statements does not cover the other
information and we will not express any form of assurance conclusion thereon.
In connection with our audits of the consolidated financial statements, our responsibility
is to read the other information identified above when it becomes available and, in doing
so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audits or otherwise
appears to be materially misstated.
KPMG
K1
Management is responsible for the preparation and fair presentation of the consolidated
financial statements in accordance with PFRS, and for such internal control as
management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or
error.
Those charged with governance are responsible for overseeing the Group's financial
reporting process.
Our objectives are to obtain reasonable assurance about whether the consolidated
financial statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditors' report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with PSA will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
■ Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
■ Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the
consolidated financial statements. We are responsible for the direction, supervision
and performance of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters,
the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied
with relevant ethical requirements regarding independence, and communicate with them
all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine
those matters that were of most significance in the audit of the consolidated financial
statements of the current period and are therefore the key audit matters. We describe
these matters in our auditors' report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing
so would reasonably be expected to outweigh the public interest benefits of such
communication.
The engagement partner on the audit resulting in this independent auditors' report is
Dindo Marco M. Dioso.
December 31
Note 2018 2017
ASSETS
Current Assets
Cash and cash equivalents 4 P10,687,359,234 P8,065,646,235
Receivables - net 5, 22 4,789,798,078 4,569,341,716
Merchandise inventory 6 19,731,823,439 17,696,641,161
Financial assets at FVPL 7 36,502,592 46,887,876
Prepaid expenses and other current assets 8 1,192,910,954 964,129,471
Total Current Assets 36,438,394,297 31,342,646,459
Noncurrent Assets
Investments 9 611,053,713 801,616,101
Property and equipment - net 10 19,489,073,780 17,696,372,319
Intangibles and goodwill 11 19,736,251,070 19,737,396,240
Other noncurrent assets 12, 18 2,115,425,536 1,886,062,097
Total Noncurrent Assets 41,951,804,099 40,121,446,757
P78,390,198,396 P71,464,093,216
Noncurrent Liabilities
Noncurrent accrued rent 18 3,692,167,535 3,260,616,193
Long-term loan - net of current maturities 14 1,840,000,000
Deferred tax liabilities - net 24 135,128,978 242,677,396
Retirement benefits liability 23 478,495,654 538,173,177
Total Noncurrent Liabilities 6,145,792,167 4,041,466,766
Total Liabilities 23,752,194,238 23,502,237,065
Equity 25
Capital stock 2,799,914,086 2,785,362,877
Additional paid-in capital 20,830,391,081 20,830,391,081
Remeasurement of retirement benefits - net of tax 273,741,007 117,313,327
Treasury stock, at cost (71,253,489) (56,702,280)
Retained earnings 30,805,211,473 24,285,491,146
Total Equity 54,638,004,158 47,961,856,151
P78,390,198,396 P71,464,093,216
INCOME TAX
Current 2,803,076,753 2,695,668,770 2,550,889,317
Deferred (177,691,296) (151,756,477) (159,755,419)
24 2,625,385,457 2,543,912,293 2,391,133,898
OTHER COMPREHENSIVE
INCOME
Item that will not be reclassified
subsequently to profit or loss
Remeasurements of defined benefits 23 223,258,703 78,103,072 90,219,876
Income tax relating to items that will
not be reclassified subsequently (66,831,023) (23,314,023) (27,044,752)
156,427,680 54,789,049 63,175,124
TOTAL COMPREHENSIVE
INCOME FOR THE YEAR P6,676,148,007 P5,895,000,842 P5,589,405,530
1. Reporting Entity
Puregold Price Club, Inc. (the "Parent Company") was incorporated and registered
with the Philippine Securities and Exchange Commission (SEC) on September 8,
1998. Its shares are listed in the Philippine Stock Exchange (PSE) since October 5,
2011 with stock symbol of PGOLD. Its immediate and ultimate parent company is
Cosco Capital, Inc. (Cosco) which is incorporated in the Philippines. Cosco is
formerly named Alcorn Gold Resources Corporation and is also listed with the PSE
since. September 26, 1998.
The Parent Company is principally involved in the business of trading goods such as
consumer products (canned goods, housewares, toiletries, dry goods, food products,
pharmaceutical and medical goods, etc.) on a wholesale and retail basis. The Group
has three hundred seventy (370) operating stores and thirty-eight (38) food service
stalls. Thirty-two (32) stores and seven (7) food service stalls were newly opened in
2018. Its registered office is located at 900 Romualdez Street, Paco, Manila.
The consolidated financial statements include the accounts of the Parent Company
and the following subsidiaries (collectively referred to as "the Group") which are all
incorporated in the Philippines:
Percentage of
Ownership
2018 2017
Kareila Management Corporation 100 100
S&R Pizza (Harbor Point), Inc. 100 100
S&R Pizza, Inc. 100 100
PPCI Subic, Inc. (PSI) 100 100
Entenso Equities Incorporated (Entenso) 100 100
Goldtempo Company Incorporated (Goldtempo) (b) 100
Daily Commodities, Inc. (DCI) (b) 100
First Lane Super Traders Co., Inc. (FLSTCI) (b) 100
Pure Padala, Inc. (a) 100
(a) Newly incorporated and has not started operations yet
(b) Merged to the Company in 2018
All subsidiaries are engaged in the same business as the Parent Company except
for Entenso whose primary purpose is to invest in, purchase, subscribe for, or
otherwise acquire and own, hold, use, develop, sell, assign, transfer, mortgage,
pledge, exchange, or otherwise dispose real and personal property of every kind of
description.
2. Basis of Preparation
Statement of Compliance
The consolidated financial statements have been prepared in compliance with
Philippine Financial Reporting Standards (PFRS). PFRS are based on International
Financial Reporting Standards (IFRS) issued by the International Accounting
Standards Board (IASB). PFRS which are issued by the Philippine Financial
Reporting Standards Council (FRSC), consist of PFRS, Philippine Accounting
Standards (PAS), and Philippine Interpretations.
Basis of Measurement
The Group's consolidated financial statements have been prepared on the historical
cost basis of accounting, except for:
Judgments
In the process of applying the Group's accounting policies, management has made
the following judgments, apart from those involving estimations, which have the most
significant effect on the amounts recognized in the consolidated financial statements:
The Group has determined that its investments in joint arrangements are classified
as investments in joint ventures.
2
As at December 31, 2018 and 2017, the carrying amount of its investments in joint
ventures amounted to P169.63 million and P360.19 million, respectively
(see Note 9).
The Group has determined that its properties are classified as owner-occupied
properties.
-3-
Estimates
The key estimates and assumptions used in the consolidated financial statements
are based on management's evaluation of relevant facts and circumstances as at the
reporting date. Actual results could differ from such estimates.
Estimates of NRV are based on the most reliable evidence available at the time the
estimates are made on the amount the inventories are expected to be realized.
These estimates take into consideration fluctuations of prices or costs directly
relating to events occurring after reporting date to the extent that such events confirm
conditions existing at reporting date. The NRV is reviewed periodically to reflect the
accurate valuation in the financial records.
In addition, the estimation of the useful lives of property and equipment is based on
collective assessment of industry practice, internal technical evaluation and
experience with similar assets. It is possible, however, that future results of
operations could be materially affected by changes in estimates brought about by
changes in factors mentioned above. The amounts and timing of recorded expenses
for any period would be affected by changes in these factors and circumstances.
A reduction in the estimated useful lives of property and equipment would increase
recorded operating expenses and decrease noncurrent assets.
-4-
Depreciation and amortization recognized in profit or loss amounted to
P1,854.84 million, P1,599.80 million and P1,379.09 million in 2018, 2017 and 2016,
respectively (see Notes 10 and 20). Property and equipment, net of accumulated
depreciation and amortization, amounted to P19,489.07 million and P17,696.37
million as at December 31, 2018 and 2017, respectively (see Note 10).
Estimating Useful Lives of Computer Software and Licenses and Leasehold Rights
The Group estimates the useful lives and amortization methods of computer software
and licenses and leasehold rights based on the period and pattern in which the
assets' future economic benefits are expected to be consumed by the Group. The
estimated useful lives and amortization period of computer software and licenses
and leasehold rights are reviewed at each reporting date and are updated if there are
changes in the expected useful lives or the expected pattern of consumption of future
economic benefits embodied in the computer software and licenses and leasehold
rights. It is possible, however, that future results of operations could be materially
affected by changes in estimates brought about by changes in the assumptions
used.
The factors that the Group considers important which could trigger an impairment
review include the following:
significant changes in the manner of use of the acquired assets or the strategy
for overall business; and
-5-
Determining the net recoverable amount of assets requires the estimation of cash
flows expected to be generated from the continued use and ultimate disposition of
such assets. While it is believed that the assumptions used in the estimation of fair
values reflected in the separate financial statements are appropriate and reasonable,
significant changes in these assumptions may materially affect the assessment of
recoverable amount and any resulting impairment loss could have a material adverse
impact on the results of operations.
As at December 31, 2018 and 2017, the following are the carrying amounts of
nonfinancial assets:
Management assessed that there are no impairment losses on the Group's non-
financial assets for the years ended December 31, 2018 and 2017.
As at December 31, 2018 and 2017, the Group recognized deferred tax assets
amounting to P1,328.70 million and P1,197.47 million, respectively (see Note 24).
The Group has not recognized any provision as at December 31, 2018 and 2017.
6-
3. Summary of Significant Accounting Policies
The accounting policies set out below have been applied consistently to all years
presented in these consolidated financial statements, except for the change in
accounting policy as explained below.
-7-
The Group has not designated any financial liabilities as FVTPL. There are no
changes in classification and measurement for the Group's financial liabilities.
For assets in the scope of the PFRS 9 impairment model, impairment losses are
generally expected to increase and become more volatile.
The Group assessed that the impact of providing ECL in its financial assets is
immaterial (see Note 28).
Hedge Accounting
The Group has not entered into hedge accounting, thus this has no impact on the
Group's financial statements.
-8-
New or Revised Standards, Amendments to Standards, and Interpretations Not Yet
Adopted
A number of new and amendments to standards and interpretations are issued for
annual periods beginning after January 1, 2018. However, the Group has not applied
the following relevant new or amended standards in preparing the financial
statements. Unless otherwise stated, none of these are expected to have a
significant impact on the Group's financial statements.
Future adoption of the standards will result in the recognition of the right-of-use
(ROU) of asset, lease liability and additional disclosures. Management is still
evaluating the financial impact of the new standard on the Group's consolidated
financial statements as of the reporting period including the transition approach
that will be adopted.
The following amended standards and interpretations are relevant but not expected
to have a significant impact on the Group's consolidated financial statements.
-9-
Effective January 1, 2020
-10-
c) clarifying that the users to which the definition refers are the primary users of
general purpose financial statements referred to in the Conceptual
Framework;
e) aligning the wording of the definition of material across PFRS Standards and
other publications.
The amendments are expected to help entities make better materiality judgments
without substantively changing existing requirements.
Financial Instruments
Initial Recognition and Subsequent Measurement. A financial instrument is any
contract that gives rise to a financial asset of one entity and financial liability or equity
instrument of another entity.
Financial Assets
Initial Recognition and measurement. Financial assets are classified, at initial
recognition, as financial assets at FVPL, loans and receivables, held-to-maturity
(HTM) investments or AFS financial assets. All financial assets are recognized
initially at fair value plus, in the case of financial assets not recorded at FVPL,
transactions costs that are attributable to the acquisition of the financial asset.
The Group has no financial assets at FVPL and HTM investments.
Purchases or sales of financial assets that require delivery of assets within a time
frame established by regulation or convention in the market place (regular way
trades) are recognized on the trade date, i.e., the date the Group commits to
purchase or sell the asset.
After initial recognition, AFS financial assets are measured at fair value with
unrealized gains or losses being recognized in other comprehensive income
and are reported as "Cumulative unrealized gain (loss) on AFS financial
assets" in equity. When the financial asset is disposed of, the cumulative
gain or loss previously recorded in other comprehensive income is
recognized in profit or loss. Interest earned on the investments is reported
as interest income using the effective interest method. Dividends earned on
financial assets are recognized in profit or loss as "Dividend income" when
the right of payment has been established. The Group considers several
factors in making a decision on the eventual disposal of the investments.
The major factor of this decision is whether or not the Group will experience
inevitable further losses on investments.
■ the rights to receive cash flows from the asset have expired;
■ the Group retains the rights to receive cash flows from the asset, but has
assumed an obligation to pay them in full without material delay to a third
party under a "pass-through" arrangement; or
the Group has transferred its rights to receive cash flows from the asset and
either: (a) has transferred substantially all the risks and rewards of the asset,
or (b) has neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the asset.
-12-
When 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 pay.
Financial Liabilities
Initial Recognition and Measurement. Financial liabilities are classified, at initial
recognition, as financial liabilities at FVPL or loans and borrowings.
All financial liabilities are recognized initially at fair value and in case of loans and
borrowings, net of directly attributable transaction costs.
Financial liabilities are classified as current, except for maturities greater than
twelve months after the reporting date. These are classified as noncurrent
liabilities.
The Group's financial liabilities include accounts payable and accrued expenses,
dividends payable and long-term debts, except payable to government agencies.
Financial Assets
Initial Recognition and measurement. Financial assets are classified as financial
assets measured at amortized cost, FVPL and FVOCI.
-13-
In order for a financial asset to be classified and measured at amortized cost or
FVOCI, it needs to give rise to cash flows that are 'solely payments of principal
and interest (SPPI)' on the principal amount outstanding. This assessment is
referred to as the SPPI test and is performed at an instrument level.
The Group's business model for managing financial assets refers to how it
manages its financial assets in order to generate cash flows. The business
model determines whether cash flows will result from collecting contractual cash
flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within a time
frame established by regulation or convention in the market place (regular way
trades) are recognized on the trade date, i.e., the date that the Group commits to
purchase or sell the asset.
The Group has no financial assets at FVOCI with recycling of cumulative gains or
losses (debt instruments) as at December 31, 2018.
■ Financial assets at Amortized Cost. This category is the most relevant to the
Group. The Group measures financial assets at amortized cost if both of the
following conditions are met:
• The financial asset is held within a business model with the objective to
hold financial assets in order to collect contractual cash flows; and
• The contractual terms of the financial asset give rise on specified dates
to cash flows that are SPPI on the principal amount outstanding.
Financial assets at amortized cost are subsequently measured using the EIR
method and are subject to impairment. Gains and losses are recognized in
the profit or loss when the asset is derecognized, modified or impaired.
Financial assets at amortized cost are classified as current assets when the
Group expects to realize the asset within 12 months from reporting date.
Otherwise, these are classified as noncurrent assets.
Gains and losses on these financial assets are never recycled to the
separate statement of comprehensive income. Dividends earned on financial
assets are recognized in profit or loss as "dividend income", when the right of
payment has been established, except when the Group benefits from such
proceeds as a recovery of part of the cost of the financial asset, in which
case, such gains are recorded in OCI. Equity instruments designated at
FVOCI are not subject to impairment assessment.
-14-
As at December 31, 2018, this category includes the Group's unquoted
equity securities. Prior to adoption of PFRS 9, these financial assets were
classified as AFS financial assets.
■ the rights to receive cash flows from the asset have expired;
■ the Group retains the rights to receive cash flows from the asset, but has
assumed an obligation to pay them in full without material delay to a third
party under a "pass-through" arrangement; or
■ the Group has transferred its rights to receive cash flows from the asset and
either: (a) has transferred substantially all the risks and rewards of the asset,
or (b) has neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the asset.
When 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 pay.
Financial Liabilities
Initial Recognition and Measurement. Financial liabilities are classified, at initial
recognition, as financial liabilities at FVPL or loans and borrowings.
All financial liabilities are recognized initially at fair value and in case of loans and
borrowings, net of directly attributable transaction costs.
Financial liabilities are classified as held for trading if they are incurred for the
purpose of repurchasing in the near term.
Gains or losses on liabilities held for trading are recognized in the separate
statement of comprehensive income.
-15-
Loans and borrowings. This is the category most relevant to the Group. After
initial recognition, interest-bearing loans and borrowings are subsequently
measured at amortized cost using EIR method. Gains and losses are
recognized in the statement of income when the liabilities are derecognized
as well through the EIR amortization process.
A financial asset is credit impaired when one or more events that have a detrimental
impact on the estimated future cash flows of the financial asset have occurred.
When determining whether the risk of default on a financial instrument has increased
significantly since initial recognition, the Group considers reasonable and
supportable information that is relevant and available without undue cost or effort.
This includes both quantitative and qualitative information and analysis, based on the
Group's historical experience, credit assessment and including forward-looking
information.
The information analyzed by the Group includes the following, among others:
-16-
■ existing and forecast changes in the business, financial and economic
conditions.
■ the debtor is unlikely to pay its credit obligation to the Group in full, without
recourse by the Group to actions such as realizing security (if any is held); or
■ the debtor is past due more than 90 days on any material credit obligation to the
Group.
Inputs into the assessment of whether a financial instrument is in default and their
significance may vary over time to reflect changes in circumstances.
Trade and other receivables are written off (either partially or in full) when there is no
realistic prospect of recovery. This is generally the case when the Group determines
that the borrower does not have assets or sources of income that could generate
sufficient cash flows to repay the amounts subject to the write-off. However, the
financial assets that are written off could still be subject to enforcement activities in
order to comply with the Group's procedures for recovery of amounts due.
Business Combinations
Business combinations and acquisition of entities other than those under common
control are accounted for using the acquisition method as at the acquisition date -
i.e., when control is transferred to the Group.
• if the business combination is achieved in stages, the fair value of the pre-
existing equity interest in the acquiree; less
• the net recognized amount (generally fair value) of the identifiable assets
acquired and liabilities assumed.
Subsidiaries
Subsidiaries are entities controlled by the Group. In accordance with PFRS 10
Consolidated Financial Statements, the Group controls an entity when it is exposed
to, or has the rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the entity. The financial
statements of the subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control ceases.
-17-
Loss of Control
On the loss of control, the Group derecognizes the assets and liabilities of the
subsidiary and any non-controlling interests and other components of equity related
to the subsidiary. Any surplus or deficit arising on the loss of control is recognized in
profit or loss. If the Group retains any interest in the previous subsidiary, then such
interest is measured at fair value on the date that control is lost. Subsequently, that
retained interest is accounted for as an equity-accounted investee or as an AFS
financial asset depending on the level of influence retained.
The financial statements of the subsidiaries are prepared for the same reporting
period as the Parent Company, using consistent accounting policies for like
transactions and other events in similar circumstances.
The fair value of an asset or liability is measured using the assumptions that market
participants would use when pricing the asset or liability, assuming that market
participants act in their economic best interest.
The Group uses valuation techniques that are appropriate in the circumstances and
for which sufficient data are available to measure fair value, maximizing the use of
relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the
consolidated financial statements are categorized within the fair value hierarchy,
described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:
• Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly; and
■ Level 3: inputs for the asset or liability that are not based on observable market
data.
For assets and liabilities that are recognized in the consolidated financial statements
on a recurring basis, the Group determines whether transfers have occurred
between Levels in the hierarchy by re-assessing the categorization at the end of
each reporting period.
-18-
`Day 1' Profit. Where the transaction price in a non-active market is different from 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 the fair value (a 'Day 1' profit) in profit or loss unless it qualifies for
recognition as some other type of asset. In cases where data used is not
observable, the difference between the transaction price and model value is only
recognized in profit or loss 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' profit amount.
Merchandise Inventory
Merchandise inventory is stated at the lower of cost and NRV. Cost is determined
using the moving average method. Costs comprise of purchase price, including
duties, transport and handling costs, and other incidental expenses incurred in
bringing the merchandise inventory to its present location and condition.
NRV is the estimated selling price in the ordinary course of business, less the
estimated costs necessary to make the sale.
Initially, an item of property and equipment is measured at its cost, which comprises
its purchase price and any directly attributable costs of bringing the asset to the
location and condition for its intended use. Subsequent expenditures are added to
the carrying amount of the asset when it is probable that future economic benefits, in
excess of the originally assessed standard of performance, will flow to the Group. All
other subsequent expenditures are recognized in profit or loss.
Number of Years
Building 15 - 30
Furniture and fixtures 3 - 20
Office and store equipment 2 - 15
Leasehold improvements 15 - 20 or term of the lease,
whichever is shorter
The useful lives and depreciation and amortization method are reviewed at each
reporting date to ensure that they are consistent with the expected pattern of
economic benefits from those assets.
The useful lives and depreciation and amortization method are reviewed at each
reporting date to ensure that they are consistent with the expected pattern of
economic benefits from those assets.
-19-
When an asset is disposed of, or is permanently withdrawn from use and no future
economic benefits are expected from its disposal, the cost and accumulated
depreciation, amortization and impairment losses, if any, are removed from the
accounts and any resulting gain or loss arising from the retirement or disposal is
recognized in profit or loss.
An associate is an enterprise in which the investor has significant influence but not
control, generally accompanying a shareholding between 20% and 50% of the voting
rights.
The Group's investments in joint ventures and associates are accounted for under
the equity method of accounting. Under the equity method, investments in joint
ventures and associates are initially recognized at cost and the carrying amount is
increased or decreased to recognize the Group's share of the profit or loss of the
investments in joint ventures and associates after the date of acquisition. The
Group's share in profit or loss of the joint ventures and associates are recognized in
the Group's profit or loss. Dividends received from the investments in joint ventures
and associates reduce the carrying amount of the investments.
The Group assessed the useful life of trademark and customer relationship to be
indefinite. Based on an analysis of all the relevant factors, there is no foreseeable
limit to the period over which the asset is expected to generate cash inflows for the
Group.
Trademark and customer relationship with indefinite useful lives are tested for
impairment annually either individually or at the cash-generating unit level. Such
intangibles are not amortized. The useful life of an intangible asset with an indefinite
life is reviewed annually to determine whether indefinite life assessment continues to
be supportable. If not, the change in the useful life assessment from indefinite to
finite is made on a prospective basis.
-20-
Computer software and licenses and leasehold rights separately acquired by the
Group that has finite useful life is measured at cost less accumulated amortization
and impairment losses, if any.
Subsequent costs are capitalized only when they increase the future economic
benefits embodied in the assets to which they relate. All other expenditures are
recognized in profit or loss when incurred.
The amortization is computed using the straight-line method over the estimated
useful life of the capitalized software from the date it is available for use and
amortized over five (5) years. Leasehold rights are amortized on a straight-line basis
over the lease period of twenty (20) years. The estimated useful life and the
amortization method of an intangible asset with finite useful life are reviewed at each
reporting date.
Gain or loss on disposal or retirement of an intangible asset with finite useful life is
recognized in profit or loss when the asset is disposed of or retired.
Goodwill
Goodwill that arises on the acquisition of subsidiaries is presented with intangible
assets. The Group measures goodwill at the acquisition date as:
■ If the business combination is achieved in stages, the fair- value of the pre-
existing equity interest in the acquire; less
■ The net recognized amount (generally fair value) of the identifiable assets
acquired and liabilities assumed.
- 21 -
The recoverable amount of an asset or CGU is the greater of its value in use and its
fair value less costs to sell. In assessing value in use, the estimated future cash
flows are discounted to their present value of money and the risks specific to the
asset or CGU. For impairment testing, assets are grouped together into the smallest
group of assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or CGUs. Subject to an operating
segment ceiling test, CGUs to which goodwill has been allocated are aggregated so
that the level at which impairment testing is performed reflects the lowest level at
which goodwill is monitored for internal reporting purposes. Goodwill acquired in a
business combination is allocated to groups of CGUs that are expected to benefit
from the synergies of the combination.
Employee Benefits
Short-term Employee Benefits
Short-term employee benefits are expensed as the related service is provided. A
liability is recognized for the amount expected to be paid if the Group has a present
legal or constructive obligation to pay this amount as a result of past service provided
by the employee and the obligation can be estimated reliably.
Remeasurements of the net defined benefit liability, which comprise actuarial gains
and losses, the return on plan assets (excluding interest) and the effect of the asset
ceiling (if any, excluding interest), are recognized immediately in other
comprehensive income. The Group determines the net interest expense (income) on
the net defined benefit liability (asset) for the period by applying the discount rate
used to measure the defined benefit obligation at the beginning of the annual period
to the then net defined benefit liability (asset), taking into account any changes in the
net defined liability (asset) during the period as a result of contributions and benefit
payments. Net interest expense and other expenses related to the defined benefit
plan are recognized in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting
change in benefit that relates to past service or the gain or loss on curtailment is
recognized immediately in profit or loss.
-22-
The Group has a non-contributory multi-employer plan which is accounted for as a
defined benefit plan. The Group is not required to pre-fund the future defined benefits
payable under the Retirement Plan before they become due. For this reason, the
amount and timing of contributions to the Retirement Fund to support the defined
benefits are at the Group's discretion. However, in the event a defined benefit claim
arises and the Retirement Fund is insufficient to pay the claim, the shortfall will then
be due and payable by the Group to the Retirement Fund.
The Group recognizes gains and losses on the settlement of a defined benefit plan
when the settlement occurs.
Equity
Capital Stock
Capital stock is classified as equity. Incremental costs directly attributable to the
issuance of capital stock are recognized as a deduction from equity, net of any tax
effects.
Treasury Stock
Own equity instruments which are reacquired are carried at cost and are deducted
from equity. No gain or loss is recognized in profit or loss on the purchase, sale,
issue or cancellation of the Group's own equity instruments. When the shares of
stock are retired, the capital stock account is reduced by its par value and the excess
of cost over par value upon retirement is charged to additional paid-in capital to the
extent of the specific or average additional paid-in capital when the shares of stock
were issued and to retained earnings for the remaining balance.
-23-
Revenue Recognition
Revenue from Contracts with Customers
The Company is in the business of trading goods such as consumer products
(canned goods, housewares, toiletries, dry goods, food products, etc.) on a
wholesale and retail basis. Revenue from contracts with customers is recognized
when control of the goods or services are transferred to the customer at an amount
that reflects the consideration to which the Company expects to be entitled in
exchange for those goods or services. The Company is the principal in its revenue
arrangements except for concession income. The following specific recognition
criteria must also be met before revenue is recognized:
■ Sale of Goods is recognized at the point in time when control of the asset is
transferred to the customer, generally upon delivery. If it is probable that
discounts will be granted and the amount can be measured reliably, then the
discount is recognized as a reduction of revenue as the sales are recognized.
Accordingly, advances received prior to delivery of goods are recorded as
unearned revenues and are earned upon physical delivery and acceptance by
customer. Unearned revenues are classified as current liabilities.
■ Membership Income refers to fees from members wherein such fees permit only
membership, and all other services or products are paid for separately. The fee
is recognized as revenue when no uncertainty as to its collectability exists.
■ Dividends are recognized when the Group's right as a shareholder to receive the
payment is established.
Cost of Sales
Cost of sales includes the purchase price of the products sold, as well as costs that
are directly attributable in bringing the merchandise to its intended condition and
location. These costs include the cost of storing and transporting the products
(i.e., freight costs or trucking costs, cross-dock delivery fees, and other direct costs).
Vendor returns and allowances are generally deducted from cost of sales.
-24-
The Group adopted PFRS 15 retrospectively which resulted to the following
reclassifications in the statements of comprehensive income:
As Previously
Classified Adjustments As Reclassified
December 31, 2018:
Cost of Sales P117,944,366,898 (P866,691,542) P117,077,675,356
Other Income:
Display Allowance 635,015,006 (635,015,006)
Merchandising Support 22,988,919 (22,988,919)
Endcap/Pallet Income 95,245,536 (95,245,536)
Listing Fee 113,442,081 (113,442,081)
December 31, 2017:
Cost of Sales 103,836,274,555 (821,125,841) 103,015,148,714
Other Income:
Display Allowance 581,265,482 (581,265,482)
Merchandising Support 98,362,240 (98,362,240)
Endcap/Pallet Income 71,587,143 (71,587,143)
Listing Fee 69,910,976 (69,910,976)
December 31, 2016:
Cost of Sales 94,051,006,454 (837,342,205) 93,213,664,249
Other Income:
Display Allowance 550,447,640 (550,447,640)
Merchandising Support 151,203,463 (151,203,463)
Listing Fee 70,254,459 (70,254,459)
Endcap/Pallet Income 65,436,643 (65,436,643)
Before adoption of PFRS 15, display allowance and listing fee are classified under
other operating income. The classification was based on the Group's assessment
that the other income are distinct and separately identifiable. With the
implementation of PFRS 15, management assessed that these other income would
not occur without the purchase of goods from the suppliers and they are highly
dependent on the purchase of the supplier products. Thus, these income are not
distinct and should be accounted for as a reduction of the purchase price.
Operating Expenses
Operating Expenses constitute costs of administering the business. These are
recognized as expenses as incurred.
Borrowing Costs
Borrowing costs are recognized as expenses when incurred, except to the extent
capitalized. 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. If the
carrying amount of the asset exceeds its recoverable amount, an impairment loss is
recognized.
Income Taxes
Current Tax
Current tax is the expected tax payable or receivable on the taxable income or loss
for the year, using tax rates enacted or substantively enacted at the reporting date,
and any adjustment to tax payable in respect of previous years.
-25-
Deferred Tax
Deferred tax is recognized in respect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax liabilities are recognized for all taxable
temporary differences, except:
■ where the deferred tax liability arises from the initial recognition of goodwill or of
an asset or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor taxable profit or
loss; and
Deferred tax assets are recognized for all deductible temporary differences,
carryforward benefits of unused tax credits - Minimum Corporate Income Tax (MCIT)
and unused tax losses - Net Operating Loss Carryover (NOLCO), to the extent that it
is probable that taxable profits will be available against which the deductible
temporary differences, and the carryforward benefits of MCIT and NOLCO can be
utilized, except:
■ where the deferred tax asset relating to the deductible temporary difference
arises from the initial recognition of an asset or liability in a transaction that is not
a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
The carrying amount of deferred tax assets is reviewed at each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax assets to be utilized. Unrecognized
deferred tax assets are reassessed at each reporting date and are recognized to the
extent that it has become probable that future taxable profits will allow the deferred
tax assets to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply in the year when the asset is realized or the liability is settled, based on tax
rates (and tax laws) that have been enacted or substantively enacted at the reporting
date.
Current tax and deferred tax are recognized in profit or loss except to the extent that
it relates to a business combination, or items recognized directly in equity or in other
comprehensive income.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right
exists to set off current tax assets against current tax liabilities and the deferred
taxes relate to the same taxable entity and the same taxation authority.
-26-
Value Added Tax (VAT)
Revenues, expenses and assets are recognized net of the amount of VAT, except:
receivables and payables that are stated with the amount of tax included.
The net amount of tax recoverable from, or payable to, the taxation authority is
included as part of "Prepaid expenses and other current assets" or "Accounts
payable and accrued expenses" in the consolidated statements of financial position.
Leases
Group as Lessee
Leases in which a significant portion of the risks and rewards of ownership is
retained by the lessor are classified as operating leases. Payments made under
operating leases are recognized in profit or loss on a straight-line basis over the term
of the lease. Cumulative excess of rent expense over billing from lessors are
presented as noncurrent accrued rent in the consolidated statements of financial
position.
Group as Lessor
Leases where the Group does not transfer substantially all the risks and benefits of
ownership of the assets are classified as operating leases. Rent income from
operating leases is recognized as income on a straight-line basis over the lease
term. Initial direct costs incurred in negotiating an operating lease are added to the
carrying amount of the leased asset and recognized as an expense over the lease
term on the same basis as rent income. Cumulative excess of rent income over
billing to tenants are presented as accrued rent income classified as part of
noncurrent assets.
Related Parties
Parties are considered to be related if one party has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in
making financial and operating decisions. Parties are also considered to be related if
they are subject to common control. Related parties may be individuals or corporate
entities.
Segment Reporting
An operating segment is a component of an entity that engages in business activities
from which it may earn revenues and incur expenses (including revenues and
expenses relating to transactions with other components of the same entity), whose
operating results are regularly reviewed by the entity's chief operating decision
maker to make decisions about resources to be allocated to the segment and assess
its performance, and for which discrete financial information is available.
The Group determines and presents operating segments based on the information
that is internally provided to the Chairman and the President, collectively as the
Group's chief operating decision maker. The Group assessed that its retailing
business as a whole represents a single segment.
-27-
Provisions and Contingencies
A provision is recognized when the Group has a legal or constructive obligation as a
result of a past event; it is probable that an outflow of economic benefits will be
required to settle the obligation; and a reliable estimate can be made on the amount
of the obligation.
Provisions are revisited at each reporting date and adjusted to reflect the current
best estimate. If the effect of the time value of money is material, provisions are
determined by discounting the expected future cash flows at a pretax rate that
reflects the current market assessment of the time value of money, and, where
appropriate, the risks specific to the liability. Where discounting is used, the increase
in the provision due to the passage of time is recognized as interest expense.
Cash in banks earns annual interest at the respective bank deposit rates. Money
market placements are highly liquid investments that are readily convertible into cash
and are subjected to insignificant risk of changes in value. These investments have
maturity dates of an average of 30 days with an annual interest rates ranging from
0.60% to 5.80% in 2018, 0.30% to 2.00% in 2017, and 0.50% to 2.00% in 2016.
Interest income earned from cash in banks and money market placements amounted
to P37.40 million, P21.66 million, and P12.69 million in 2018, 2017, and 2016,
respectively.
-28-
5. Receivables
Non-trade receivables represent the amounts due from suppliers with respect to
"demo" or "sampling" conducted by suppliers' representatives and strategic locations
granted to suppliers with regard to the display of their products in the selling area of
the stores. This account also includes due from tenants in relation to rentals of store
spaces and advances to employees which are collected by the Company through
salary deduction.
6. Merchandise Inventory
This account consists of groceries and other consumer products (canned goods,
housewares, toiletries, dry goods, food products, etc.) held for sale in the ordinary
course of business on wholesale or retail basis.
The Group's merchandise inventory at cost as at December 31, 2018 and 2017
amounted to P19,731.82 million and P17,696.64 million, respectively. Inventory cost
as at December 31, 2018 and 2017 is lower than NRV.
-29-
The movements and balances of these investments in trading securities are as
follows:
2018 2017
Prepaid expenses P835,455,304 P532,078,547
Input VAT 177,157,046 362,760,754
Deferred input VAT 180,298,604 69,290,170
P1,192,910,954 P964,129,471
Prepaid taxes and licenses pertain to payments made to government for the
unexpired portion of registration fees and other taxes.
Input VAT represents accumulated input taxes from purchases of goods and
services for business operation and purchases of materials and services for the
building and leasehold construction which can be applied against future output VAT.
Deferred input VAT represents accumulated input taxes for purchases of capital
assets more than P1.00 million and unbilled services for the building and leasehold
construction which can be applied against future output VAT.
-30-
9. Investments
a. Investment in Associate
On October 31, 2014, the Group through Entenso subscribed and paid additional
one hundred ninety thousand eight (190,008) common shares from the unissued
capital stock of the SRS for total cost of P19,000,800.
The carrying amount of its investment and its share in the net income of SRS
follow:
2018 2017
Carrying Amount
Balance at beginning of the year P433,542,657 P424,424,914
Share in net income 6,673,814* 9,117,743
P440,216,471 P433,542,657
*Unrecognized share in net income
The following table summarizes the financial information of SRS and the
reconciliation of the share of net assets to the carrying amount of the Group's
interest in SRS:
2018 2017
Percentage of ownership 49.34% 49.34%
Current assets P3,955,182,333 P1,063,945,081
Noncurrent assets 221,748,333 205,634,823
Current liabilities (3,825,817,091) (933,892,391)
Noncurrent liabilities (18,405,154) (16,505,265)
Net assets 332,708,421 319,182,248
Group's share of net assets 164,158,335 157,484,521
Goodwill 276,058,136 276,058,136
Carrying amount of interest in joint venture P440,216,471 P433,542,657
Gross income P483,357,637 P451,395,033
Operating expenses 469,831,463 432,915,619
Net income/Total comprehensive income 13,526,174 18,479,414
Group's share of total comprehensive
income P6,673,814 P9,117,743
- 31 -
b. Investments in Joint Ventures
In 2017, the Parent Company subscribed and paid additional 1,400,000 common
shares at P100.00 par value for a total amount of P140.00 million while Lawson
subscribed and paid additional 600,000 common shares at P100.00 par value for
a total amount of P60.00 million.
In April 2018, the Parent Company sold all of its investment in PLCI for a total
consideration of P600 million which resulted in a gain on sale amounting to
P363 million.
The carrying amount of its investment and its share in the losses of PLCI follow:
2018 2017
Balance at beginning of the year P237,189,738 P256,995,907
Additions 140,000,000
Share in net loss (159,806,169)
Disposal (237,189,738)
P - P237,189,738
The following table summarizes the financial information of PLCI and the
reconciliation of the share of net assets to the carrying amount of the Group's
interest in PLCI as at December 31, 2017:
-32-
AyaGold. Retailers, Inc.
On July 8, 2013, the Group through Entenso entered into a joint venture
agreement with Varejo Corp., an entity engaged in operations of small
convenience stores, to incorporate a new company, AyaGold Retailers, Inc.
(AyaGold), for the investment in and operation of mid-market supermarkets and
to pursue other investment opportunities in the Philippine retail sector as both
parties may agree. AyaGold was incorporated in the Philippines on July 8, 2013
and started operation on July 31, 2015 with the opening of its first supermarket
"Merkado" located at U.P. Town Center.
(b) Participating in dividends declaration for common shares and may be entitled
to such dividends as may be determined and approved by the Board of
Directors;
(c) Entitled to receive out of the assets of the joint venture available for
distribution to the parties, before any distribution of assets is made to holders
of common shares, distributions in the amount of the issue value per
outstanding redeemable preferred share, plus declared and unpaid dividends
to the date of distribution; and
The carrying amount of its investment and its share in the losses of AyaGold
follow:
2018 2017
Balance at beginning of the year P123,004,546 P110,350,626
Additions 32,500,000
Share in net income 14,127,350 12,653,920
P169,631,896 P123,004,546
-33-
The following table summarizes the financial information of Ayagold and the
reconciliation of the share of net assets to the carrying amount of the Group's
interest in Ayagold:
2018 2017
Percentage of ownership 50% 50%
Current assets P267,156,027 P259,740,877
Noncurrent assets 199,643,384 155,517,973
Current liabilities (135,618,781) (173,016,250)
Net assets 331,180,630 242,242,600
Group's share of net assets 165,590,315 121,121,300
Adjustments 4,041,581 1,883,246
Carrying amount of interest in joint venture P169,631,896 P123,004,546
Gross income P159,191,383 P120,857,719
Operating expenses 130,936,683 95,549,879
Net income (loss)/Total comprehensive
income (loss) 28,254,700 25,307,840
Group's share of total comprehensive
income P14,127,350 P12,653,920
Acquisitions of Subsidiaries
The following are the developments relating to the Parent Company's investments in
subsidiaries in 2018 and 2017:
Company E Corporation
On January 14, 2013, the Parent Company's BOD approved the acquisition of
Company E Corporation (the company behind the Eunilaine Foodmart and Grocer E
Supermart chains). The Parent Company acquired 290,000 common shares of
Company E representing its total outstanding shares at P1,137.93 per share through
cash. Company E has seven supermarkets within Metro Manila, six in Rizal province
and two in the province of Cavite which will operate the same store as the Parent
Company. As at December 31, 2014, there are fourteen stores in operation and one
store in Rizal was closed in the same year.
- 34 -
On March 25, 2014, the BOD approved the merger of the Parent Company with
Company E Corporation. It was then ratified by at least two-thirds (2/3) votes of the
stockholders on May 13, 2014. In April 1, 2015, upon approval by the SEC of the
merger, the existence of Company E ceased and all its assets and liabilities were
merged with the Parent Company.
The Parent Company issued 766,406,250 new common shares, with P1 par value,
from its own authorized but unissued capital in exchange for 1,703,125 common
shares, with P100 par value per share, of Kareila representing 100% of its
outstanding capital stock. The fair market value of the Company's shares based on
the observable market price as at the date of acquisition is P21.50 per share or
P16,477.73 million. The Company incurred acquisition-related cost of P3.83 million.
This cost has been included as part of operating expenses.
On December 21, 2012, the BOD of Kareila approved the declaration of stock
dividends amounting to P329.69 million from its unrestricted retained earnings as at
December 31, 2012. The date of record and date of payment are April 15, 2013 and
April 30, 2013, respectively.
On November 28, 2013, the BOD of Kareila resolved to increase its authorized
capital stock from P500 million divided into 5 million shares, with par value of P100
per share to P3,000 million pesos divided into 30 million shares with a par value of
P100 per share. Out of the increase in the authorized capital stock of P2,500 million,
25% of which or P625 million had been actually subscribed by the Parent company
out of the stock dividend declared by Kareila. On the same date, the Kareila
amended its articles of incorporation. Subsequently, on December 13, 2013, SEC
approved the Kareila's application of its increase in authorized capital stock.
-35-
10. Property and Equipment
Office and
Furniture and Store Leasehold Construction
Building Fixtures Equipment Improvements Land in Progress Total
Cost
Balance, December 31, 2016 P5,242,351,630 P2,287,626,748 P6,828,713,195 P7,561,407,341 P379,809,187 P602,029,363 P22,901,937,464
Additions 367,679,075 171,949,590 544,593,984 456,292,266 29,667,128 2,021,010,633 3,591,192,676
Reclassifications 282,481,436 46,373,964 337,014,145 905,680,602 26,751,530 (1,598,301,677)
Disposals (721,739) (13,563,437) (729,745) (15,014,921)
Balance, December 31, 2017 5,892,512,141 2,505,228,563 7,696,757,887 8,922,650,464 436,227,845 1,024,738,319 26,478,115,219
Additions 236,614,230 154,915,290 882,850,069 630,970,963 1,753,032,868 3,658,383,420
Reclassifications 246,162,042 27,649,427 326,540,912 1,053,420,820 (1,653,773,201)
Disposals (4,273,738) (27,821,466) (11,374,253) (43,469,457)
Balance, December 31, 2018 6,375,288,413 2,683,519,542 8,878,327,402 10,595,667,994 436,227,845 1,123,997,986 30,093,029,182
Accumulated Depreciation and
Amortization
Balance, December 31, 2016 887,916,623 945,803,715 3,999,455,501 1,357,139,269 7,190,315,108
Depreciation and amortization 187,950,914 181,796,799 824,051,506 406,005,100 1,599,804,319
Reclassifications 6,235,334 (6,235,334)
Disposals (601,756) (7,483,305) (291,466) (8,376,527)
Balance, December 31, 2017 1,082,102,871 1,126,998,758 4,816,023,702 1,756,617,569 8,781,742,900
Depreciation and amortization 206,515,275 204,747,335 955,465,682 488,112,881 1,854,841,173
Reclassifications (18,496) (1,796,693) 1,700,955 114,234
Disposals (2,247,592) (25,477,171) (4,903,908) (32,628,671)
Balance, December 31, 2018 1,288,599,650 1,327,701,808 5,747,713,168 2,239,940,776 10,603,955,402
Carrying Amount
December 31, 2017 P4,810,409,270 P1,378,229,805 P2,880,734,185 P7,166,032,895 P436,227,845 P1,024,738,319 P17,696,372,319
December 31, 2018 P5,086,688,763 P1,355,817,734 P3,130,614,234 P8,355,727,218 P436,227,845 P1,123,997,986 P19,489,073,780
-36-
As at December 31, 2018 and 2017, the Parent Company has outstanding payable
for property additions amounting to P1.66 million and P2.56 million, respectively
(see Note 13). In addition, interest expense related to loans amounting to
P81.73 million, P76.40 million and P75.44 million was capitalized in 2018, 2017 and
2016, respectively (see Note 14).
a. Goodwill
The cost of goodwill is allocated to the CGUs as follows:
2018 2017
Kareila P12,079,473,835 P12,079,473,835
Budgetlane Supermarkets 837,974,199 837,974,199
DCI and FLSTCI 685,904,317 685,904,317
Gant 742,340,804 742,340,804
Company E 358,152,015 358,152,015
B&W 187,203,888 187,203,888
PJSI 11,370,121 11,370,121
Merger of PJSI and Gant to
Parent Company 4,142 4,142
P14,902,423,321 P14,902,423,321
2018 2017
Balance at beginning of the year P14,902,423,321 P14,715,769,906
Additions 187,203,888
Fair value adjustments (550,473)
P14,902,423,321 P14,902,423,321
On September 26, 2017, the Parent Company acquired substantially all the
assets and rights of B&W Supermart and took over the operations of five (5)
supermarkets located in Roxas City, Capiz for a total consideration of P270.00
million. The acquisition resulted in goodwill amounting to P187.20 million.
-37-
The following summarizes the identifiable assets acquired:
The Group's consolidated revenue would have increased by P238.08 million and
its net income would have increased by of P17.68 million of the Group had this
acquisition taken on January 1, 2017.
The following are the key assumptions used by the management in the
estimation of the recoverable amount:
Net Sales. Growth rates and gross profit margins used to estimate future
performance are highly dependent on past performance and experience of
growth rates and operating gross profit margins achievable in the relevant
industry and in line with the economy or with the nominal Gross Domestic
Product. This assumes that the market share of the subsidiaries in their
respective territories will also grow at par with the economy.
The revenue growth rates used for the gross revenues are as follows:
Discount Rate. Discount rates are derived from the Group's Weighted Average
Cost of Capital (WACC) which is used by the management to assess operating
performance and to evaluate future investment proposals. In determining
appropriate discount rates, regard has been given to various market information,
including, but not limited to, five-year government bond yield, bank lending rates
and market risk premium. The pre-tax discount rates used are as follows:
2018 2017
Kareila 13.30% 15.67%
Budgetlane Supermarkets 13.10% 11.94%
Gant 13.60% 15.77%
DCI and FLSTCI 13.60% 10.19%
Company E 13.50% 15.77%
B&W Supermart 13.00% 15.50%
PJSI 13.50% 15.77%
-38-
Terminal Growth Rate. The long-term rate used to extrapolate the cash flow
projections of the acquired investments beyond the period covered by the recent
budget excludes expansions and possible acquisitions in the future.
Management also recognizes the possibility of new entrants, which may have
significant impact on existing growth rate assumptions. Management however,
believes that new entrants will not have a significant adverse impact on the
forecast included in the cash flow projections. The terminal growth rates used in
the cash flow projections for all cash generating units are 5.00% and 3.00% in
2018 and 2017, respectively.
Revenue Discount
Growth Rate Rate
Budgetlane Supermarkets 12.00% 15.80%
B&W Supermart 19.00% 12.30%
-39-
c. Leasehold Rights and Computer Software and Licenses
On January 25, 2013, the Parent Company executed a memorandum of
agreement with various lessors, namely, BHF Family Plaza, Inc. (BHF), Lim Y-U
Group, Inc., and R&A Malvar Trading Company, Inc. which paved the way for the
establishment of five (5) Puregold stores previously owned and operated by
these lessors. Under the agreement, the lessors agreed to sell to the Parent
Company all merchandise inventories, equipment, furniture and fixtures as well
as granting of rights to lease the buildings owned by each lessor for a period of
twenty (20) years upon compliance of the conditions set forth in the
memorandum of agreement. As a result of the transaction, the Parent Company
recognized leasehold rights representing the excess of cost paid over the fair
value of all assets acquired which will be amortized on a straight-line basis over
the lease period.
The movements and balances of leasehold rights and computer software and
licenses as at and for the years ended December 31 consist of:
Computer
Software and Leasehold
Licenses Rights
Cost
Balance, January 1, 2017 P307,050,219 P75,355,005
Additions 29,475,602
Balance, December 31, 2017 336,525,821 75,355,005
Additions 39,660,637
Balance, December 31, 2018 376,186,458 75,355,005
Accumulated Amortization
Balance, January 1, 2017 123,764,631 12,937,959
Amortization 35,551,095 3,767,750
Balance, December 31, 2017 159,315,726 16,705,709
Amortization 37,038,056 3,767,751
Balance, December 31, 2018 196,353,782 20,473,460
Carrying Amount
December 31, 2017 P177,210,095 P58,649,296
December 31, 2018 P179,832,676 P54,881,545
Accrued rent income pertains to the excess of rent income over billing to tenants in
accordance with PAS 17, Leases.
-40-
13. Accounts Payable and Accrued Expenses
The average credit terms on purchases of certain goods from suppliers is 30 days.
The Group entered into the following loan facilities for additional working capital:
2018 2017
Metrobank P2,447,500,000 P2,987,500,000
Cosco Capital 900,000,000 300,000,000
BDO 900,000,000 825,000,000
AUB 500,000,000
Puregold Finance 8,800,000
P4,756,300,000 P4,112,500,000
Short-term loans are payable from three to twelve months and bear interest from
4.75% to 5.75% and 2.13% to 2.88% in 2018 and 2017, respectively.
The loan proceeds were used for inventory financing and other short-term
working capital requirements.
In 2017, Kareila entered into unsecured short-term loans with Cosco at 2.50%
interest rate per annum. In 2018, the loan was renewed for another six months at
4.75% interest per annum. An additional loan of P600.00 million was obtained in
2018 at 5.00% interest rate per annum.
- 41 -
b. Long-term Loans Payable
i. On June 13, 2013, the Parent Company issued a P2 billion promissory note
to a local bank, which is payable on May 21, 2018 and bears interest at
3.50% per annum. The interest is payable every month.
On May 2, 2018, the Parent Company partially paid the loan and the
remaining balance of P1.44 billion was rolled over which is payable after 7
years and bears interest at 6.40% per annum.
2018 2017
Balance at beginning of the year P795,346 P2,903,342
Amortizations (795,346) (2,107,996)
Balance at end of year P - P795,346
ii. On July 23, 2013, Kareila signed and executed a P500.00 million unsecured
loan agreement with a local bank. The loan shall be repaid in lump sum after
5 years. Its related interest is at 3.50% per annum. In 2015, P100.00 million
of the loan was repaid in advance by the Company. The remaining balance
of P400.00 million was renewed in 2018 for another 7 years at 6.40% interest
rate per annum.
The loans are unsecured and are not subject to any covenants.
2018
Carrying Contractual 1 Year Within More than
Amount Cash Flows or Less 1 - 5 Years 5 Years
Long-term loans
including current
portion P1,440,000,000 P1,523,273,143 P13,165,714 P52,662,857 P1,457,444,572
400,000,000 423,131,429 3,657,143 14,628,571 404,845,715
2017
Carrying Contractual 1 Year Within More than
Amount Cash Flow or Less 1 - 5 Years 5 Years
Long-term loans
including current
portion P1,999,204,654 P2,069,204,654 P13,976,705 P2,055,227,949 P -
There are no debt covenants for above unsecured loans entered into by the
Group.
-42-
Interest expense from these loans amounting to P81.73 million, P76.40 million
and P75.44 million were capitalized in 2018, 2017 and 2016, respectively and
recognized in building and leasehold improvements under property and
equipment account (see Note 10). Remaining interest expense that was charged
to profit and loss amounted to P174.60 million, P129.70 million and P101.47
million in 2018, 2017 and 2016, respectively.
Dividend
Short Term Long Term Payable
Loans Loans (Notes 13
Payable Payable and 25) Total
Balance at January 1, 2018 P4,112,500,000 P2,399,204,654 P1,106,152,562 P7,617,857,216
Changes from financing
cash flows
Availment of loans 2,058,800,000 1,758,800,000
Payment of loans (1,415,000,000) (560,000,000) (1,975,000,000)
Payment of dividends - (1,106,152,562) (1,106,152,562)
Total changes from
financing cash flows 343,800,000 (560,000,000) (1,106,152,562) (1,322,352,562)
Other changes
Liability-related
Amortization of debt issue
costs 795,346 795,346
Total liability-related
changes 795,346 795,346
Balance at
December 31, 2018 P4,756,300,000 P1,840,000,000 P - P6,296,300,000
Deposits represent amounts paid by the store tenants for the lease of store spaces
which are refundable upon termination of the lease.
Unredeemed gift certificates represent issued yet unused gift certificates. These will
be closed to sales account upon redemption and are due and demandable.
Loyalty and rewards are provided for the point's redemption of "Tindahan ni Aling
Puring" and PERKS members. Points are earned upon purchase of participating
items and may be used as payments of their purchases which make it due and
demandable.
Promotion fund is promotional discount granted for the Group's promotion and
advertising activities in partnership with suppliers.
-43-
Others include trust receipts payable and cashier's bond withheld from each cashier
to compensate for any possible cash shortages in the store.
The Group generates revenue primarily from trading goods such as consumer
products (canned goods, housewares, toiletries, dry goods, food products, etc.) on a
wholesale or retail basis. The revenue from contracts with customers is
disaggregated by revenue streams.
Sale of goods pertain to the net sales recognized in selling the Group's inventories
and recognized at a point in time when control of the asset is transferred to the
customer, generally upon delivery.
There are other promises in the contracts that are separate performance obligations
to which a portion of the transaction price needs to be allocated.
The transaction involves the Group committing to two performance obligations: the
good purchased; and the rights related to the PERKS loyalty points. The Group
allocates customer payments between products sales and loyalty points, based on
their relative stand-alone selling prices.
Revenue from the PERKS loyalty points is recognized upon redemption. The Group
is unable to determine the number of points that will be used and assumes 100%
redemption to ensure that it is not highly probable that there will be a significant
reversal of revenue. In this case, management would recognize the revenue
allocated to the points on redemption and on expiration of the points.
Total amount of PERKS loyalty points earned amounted to P77.25 million and
P57.28 million in 2018 and 2017, respectively.
-44-
17. Cost of Sales
As Reclassified
Note 2018 2017 2016
Beginning inventory 6 P17,696,641,161 P16,487,824,308 P12,982,832,312
Add: Purchases 119,112,857,634 104,223,965,567 96,718,656,245
Total goods available for sale 136,809,498,795 120,711,789,875 109,701,488,557
Less ending inventory 6 19,731,823,439 17,696,641,161 16,487,824,308
P117,077,675,356 P103,015,148,714 P93,213,664,249
As Lessee
The Group leases warehouses, parking spaces and certain lands and buildings
where some of its stores are situated or constructed. The lease terms range from 5
to 42 years, renewable for the same period under the same terms and conditions.
The rent is subject to escalation on the average of 1% to 10%. Rental payments are
either fixed monthly or fixed per square meter based on the contracts.
The Group is required to pay advance rental payments and security deposits on the
above leases which are either fixed monthly rent or fixed per square meter. These
are shown under "Prepaid expenses and other current assets" account and "Other
noncurrent assets" account, respectively, in the consolidated statements of financial
position (see Notes 8 and 12).
As Lessor
The Group subleases portion of its store space to various lessees for an average
lease term of one to ten (1-10) years. The lease contracts may be renewed upon
mutual agreement by the parties. Rental payments are computed either based on
monthly sales or a certain fixed amount, whichever is higher. Upon inception of the
lease agreement, tenants are required to pay certain amounts of deposits. Tenants
likewise pay a fixed monthly rent which is shown under "Other current liabilities"
account in the consolidated statements of financial position (see Note 15).
Rent income recognized in profit or loss in 2018, 2017 and 2016 amounted
P407.25 million, P388.65 million and P377.28 million, respectively (see Note 19).
-45-
The scheduled maturities of non-cancellable minimum future rental collections are as
follows:
Membership income pertains to fees from members of Kareila, PPCI and Subic
wherein such fees permit only membership, and all other services or products are
paid for separately.
Rent income relates to the income earned for the store spaces occupied by the
tenants.
Demo/sampling income pertains to the fee paid by the suppliers for the privilege
granted by Kareila in allowing a representative of the supplier to conduct a demo or
give away samples of their products inside the selling area of the stores.
-46-
20. Operating Expenses
21. Others
Gain (loss) on insurance claim represents the excess of (short on) the insurance
proceeds received over the cost of the inventories and machineries damaged by
flood and fire.
-47-
22. Related Party Transactions
Other than the items disclosed in Note 9, the Group's significant transactions and balances with related parties are as follows:
Outstanding Balances
Amount of Trade Non Trade Trade Non Trade Due to
Transactions Receivable Receivable Payable Payable Loans Related
Related Party Year Note for the Year (see Note 5) (see Note 5) (see Note 13) (see Note 13) (see Note 14) Parties Terms Conditions
Parent
Dividends 2017 P564,137,807 P- P - P - P564,137,807 P - P - Due and Unsecured
demandable
Repairs and maintenance 2017 39,836 39,836 Due and Unsecured
Representation and 2018 47,827 47,827 demandable no impairment
entertainment
2018 e 600,000,000 900,000,000
Loans 2017 e 300,000,000 300,000,000 Due and Unsecured;
demandable
Interest expense 2017 13,031,250 - Due and Unsecured
Insurance 2018 c 13,156 13,156 demandable
Other Related Parties*
Rent 2018 a 808,482,339 3,088 25,747,668 Due and Unsecured;
2017 a 696,146,148 232,455 41,960,431 demandable no impairment
Concession expense 2018 b 522,618,432 92,395,254 Due and Unsecured
2017 b 503,476,012 172,790,277 demandable
Purchase of merchandise 2018 c 2,237,787,289 504,052,460 - Due and Unsecured
2017 c 2,093,968,112 - 589,760,330 demandable
Sale of merchandise 2018 c 55,568,081 12,786,493 - Due and Unsecured;
2017 c 69,055,889 24,344,715 demandable no impairment
Security deposits 2018 c 25,854,101 Due and Unsecured;
2017 c 5,435,937 13,099,795 demandable no impairment
Repairs and maintenance 2018 c 10,309,072 8,340,292 15,323 Due and Unsecured;
2017 c 6,681,741 4,867,503 313,724 demandable no impairment
Utilities expense 2018 c 236,456,733 5,748,592 2,010,376 Due and Unsecured;
2017 c 167,323,201 966,401 6,910,791 demandable no impairment
Forward
-48-
Outstanding Balances
Amount of Trade Non Trade Trade Non Trade Due to
Transactions Receivable Receivable Payable Payable Loans Related
Related Party Year Note for the Year (see Note 5) (see Note 5) (see Note 13) (see Note 13) (see Note 14) Parties Terms Conditions
Advances 2018 c P - P - P116,000,000 P - P - P - P Due and Unsecured;
2017 c - 116,000,000 . - demandable no impairment
Communications 2018 c 370,597 2,793 14,251 - Due and Unsecured
2017 c 324,274 6,570 demandable
Management fee 2018 c 13,962,618 2,072,162 Due and Unsecured
2017 c 11,064,691 - 1,581,800 - demandable
Supplies 2018 c 21,431,727 57,933 3,307,349 Due and Unsecured
2017 c 12,206,325 18,960 2,156,077 demandable
Insurance 2018 c 990,985 94,657 6,395 Due and Unsecured
2017 c 1,181,662 485 - 14,202 - demandable
Taxes and licenses 2018 c 225,981 30,376 - Due and Unsecured
2017 c 228,358 3,029 70,336 - demandable
Fixed asset 2018 c 359,048 359,048 - Due and Unsecured
demandable
Employee benefits 2018 c 184,782 465 - - Due and Unsecured
2017 c 2,192,102 202,755 13,817 - demandable
Representation and
entertainment 2018 c 2,695 2,695 Due and Unsecured
Other Income 2018 c 2,082 2,082 demandable
2017 c 224,051 224,051 -
Loans 2018 8,800,000
Key Management Personnel
Royalty expense 2018 d 54,342,743 - 43,474,532 Due and Unsecured
2017 d 46,331,866 37,065,831 demandable
Rent expense 2018 a 23,208,327 -
2017 a 22,532,356
Short-term benefits 2018 34,208,308
2017 121,742,192 - -
Total 2018 P12,786,493 P130,703,004 P504,052,460 P1,025,568,778 P - P43,474,532
-49-
a. Lease of Building
The Group leases the building from its related parties where some stores are
located. The Group pays its related parties a minimum fixed amount or is
calculated in reference to a fixed sum per square meter of area leased. The
terms of the lease are for the periods ranging from ten to thirty-five (10-35) years,
renewable for the same period under the same terms and conditions. The rent
shall escalate by the range from 1% to 7%. Rental payments are fixed amounts
based on the contracts.
Under the contract, the Consignor offered to consign goods at the aforesaid
four (4) stores and the Consignee accepted the offer subject but not limited to the
terms and conditions stated as follows:
■ The Consignee hereby grants to the Consignor the right to consign, display
and offer for sale, and sell goods and merchandise as normally offered for
sale by Consignee, at the selling areas at the four (4) stores.
■ The Consignor shall give the Consignee a trade or volume discount of its
gross sales.
■ The proceeds of sale of the Consignor shall remain the sole property of the
Consignor and shall be kept by the Consignee strictly as money in trust until
remitted to the Consignor after deducting the amounts due to the Consignee.
■ The term of the contract shall be for a period of five (5) years beginning on
the date/s of the signing of the agreement or of the opening of the four (4)
stores whichever is later, renewable upon mutual agreement of the parties.
On February 23, 2012, a new agreement was made between the Consignor and
Consignee. Under the new agreement, the Consignor offered to consign goods
at the aforesaid four (4) stores and the Consignee accepted the offer subject but
not limited to the terms and conditions stated as follows:
■ The Consignor shall pay the Consignee four percent (4%) monthly
consignment/concession fee based on the Consignor's monthly gross sales.
-50-
Goods sold by the consignor shall be checked-out and paid at the check-out
counters of and be manned and operated by the Consignor and issued
receipts through the point-of-sale (POS) machines in the name of the
Consignor. The proceeds of the sale are and shall remain as the sole
property of the Consignor subject to its obligation to pay the consideration
stipulated.
• Ownership of the goods delivered to the Consignor at the stores shall remain
with the Consignor. Except for the right of Consignee to the payment of the
consideration in the amount, manner and within the periods stipulated.
d. Royalty Agreement
On August 15, 2011, the Group ("licensee") entered into a license agreement
with a stockholder ("licensor") for its use of trademark and logo. The licensee will
pay the licensor royalties in an amount equivalent to 1/20 of 1% of net sales for
the period of thirty (30) years, renewable upon mutual written consent of the
parties. These royalty fees and payables are unsecured, non-interest bearing
and due and demandable.
e. Loans
As discussed in Note 14, Kareila entered into unsecured short - term loans with
Cosco amounting to P900.00 million and P300.00 million in 2018 and 2017,
respectively. These loans are to be settled in cash upon its maturity.
The Parent Company entered into unsecured short-term loan with Puregold
Finance amounting to P8.80 million for 2018.
f. A stockholder has granted the Parent Company the right to use the trademark
used in the stores of KMC as part of the sale of KMC to the Parent Company
(Note 11).
- 51 -
Related Party Transactions and Balances Eliminated During Consolidation
The terms, conditions, balances and the volume of related party transactions which
were eliminated during consolidation are as follows:
2018 2017
Sales P789,173 P6,632,929
2018 2017
Receivables P10,016,237 P11,260,418
Amount of
Transaction 2018 2017
KMC P475,000,000 P475,000,000 P475,000,000
Subic 200,000,000
P475,000,000 P675,000,000
The Parent Company and its subsidiaries has unfunded, noncontributory, defined
benefit plan covering all of its permanent employees. Contributions and costs are
determined in accordance with the actuarial studies made for the plan. Annual cost
is determined using the projected unit credit method. The Group's latest actuarial
valuation date is December 31, 2018. Valuations are obtained on a periodic basis.
2018 2017
Present value of defined benefit obligation P504,207,438 P564,085,747
Fair value of plan assets (25,711,784) (25,912,570)
Retirement benefits liability P478,495,654 P538,173,177
-52-
The following table shows reconciliation from the opening balances to the closing
balances for present value of defined benefit obligation:
2018 2017
Balance at January 1 P564,085,747 P494,733,328
Included in Profit or Loss
Current service cost 132,931,025 121,772,174
Interest cost 32,152,888 26,616,653
165,083,913 148,388,827
Included in other Comprehensive Income
Remeasurements gain:
Actuarial gain arising from:
Financial assumptions (343,324,419) (39,549,415)
Experience adjustment 118,362,197 (39,486,993)
(224,962,222) (79,036,408)
Balance at December 31 504,207,438 P564,085,747
2018 2017
Beginning of the year P25,912,570 P25,475,333
Interest income 1,477,016 1,370,573
Remeasurement loss (1,677,802) (933,336)
End of the year P25,711,784 P25,912,570
2018 2017
Remeasurements of retirement liability at
beginning of year (P167,393,168) (P89,290,096)
Actuarial gain on defined benefit obligation (223,258,703) (78,103,072)
Remeasurements of retirement liability at
end of year (P390,651,871) (P167,393,168)
2018 2017
Cash in banks P1,810,041 P2,032,605
Debt instruments - government bonds 23,657,118 23,648,111
Trust fees payable (12,770) (13,059)
Other 257,395 244,913
P25,711,784 P25,912,570
-53-
The following were the principal actuarial assumptions at the reporting date:
2018 2017
Discount rate 7.53% 5.70%
Future salary increases 8.00% 8.00%
Assumptions regarding future mortality have been based on published statistics and
mortality tables.
The weighted average duration of the defined benefit obligation at the end of the
reporting period is 26.3 years.
Sensitivity Analysis
Reasonably possible changes at the reporting date to one of the relevant actuarial
assumptions, holding other assumptions constant, would have affected the defined
benefit obligation by the amounts shown below:
2018
Increase Decrease
Discount rate (1% movement) (P105,323,932) P83,525,380
Future salary increase rate (1% movement) 103,955,284 (84,070,916)
2017
Increase Decrease
Discount rate (1% movement) (P105,136,263) P134,997,650
Future salary increase rate (1% movement) 123,240,684 (99,204,506)
These defined benefit plans expose the Group to actuarial risks, such as longevity
risk, interest rate risk, and market (investment) risk.
Funding Arrangements
Since the Group does not have a formal retirement plan, funding to the plan are paid
by the Group when needed.
2018
Carrying Contractual Within Within Within
Amount Cash Flows 1 Year 1 - 5 Years 5 - 10 Years
Defined benefit
obligation P504,207,438 P167,249,749 P29,708,291 P26,241,559 P111,299,899
2017
Carrying Contractual Within Within Within
Amount Cash Flows 1 Year 1 - 5 Years 5 - 10 Years
Defined benefit
obligation P564,085,747 P123,425,704 P23,214,858 P19,300,587 P80,910,259
-54-
On February 17, 2014, the Parent Company entered into a multi-employer retirement
plan agreement with a trust Group. The Parent Company made an initial cash
contribution of P25 million pesos.
The reconciliation of the income tax expense computed at the statutory income tax
rate to the actual income tax expense as shown in profit or loss for the years ended
December 31 is as follows:
- 55 -
The components of the Group's deferred tax liabilities (DTL) net of deferred tax
assets (DTA) in respect to the following temporary differences are shown below:
2018 2017
Amount DTA (DTL) Amount DTA (DTL)
Accrued rent expense* P3,667,726,623 P1,100,317,987 P3,239,251,146 P971,775,344
Retirement benefits
liability 893,142,763 267,942,829 730,176,907 218,704,955
NOLCO 15,367,497 4,610,249
Allowance for
impairment losses on
receivables 7,462,327 2,238,698 7,462,327 2,238,698
Recognition of DTA due
to Merger 389,731 116,919 389,731 116,919
DTA 4,568,721,444 1,370,616,433 3,992,647,608 1,197,446,165
Fair value of intangible
assets from business
combination (4,599,113,528) (1,379,734,058) (4,599,113,528) (1,379,734,058)
Actuarial gains (390,677,587) (117,203,276) (167,393,168) (50,079,841)
Accrued rent income (29,360,256) (8,808,077) (34,365,544) (10,309,662)
DTL (5,019,151,371) (1,505,745,411) (4,800,872,240) (1,440,123,561)
Net (P450,429,927) (P135,128,978) (P808,224,632) (P242,677,396)
*Excluding accrued rent expense of PPCI Subic which is subject to SBMA tax rules
The realization of these deferred tax assets is dependent upon future taxable income
that temporary differences and carry forward benefits are expected to be recovered
or applied.
25. Equity
On June 7, 2011, the BOD approved the issuance of 50,000,000 shares. These were
subscribed and paid in full on June 10, 2011.
The initial public offering of the Parent Company's shares with an offer price of
P12.50 per share resulted to the issuance of 500,000,000 common shares in 2011.
The additional paid-in capital net of direct transaction costs amounted to P5,168.82
million.
The Parent Company acquired 100% equity interest of Kareila in exchange for the
766,406,250 common shares of the Parent Company's authorized but unissued
capital stock on May 28, 2012. The fair value of shares as at the acquisition date is
P21.50 per share. The additional paid-in capital net of direct transaction costs
amounted to P15,661.57 million.
-56-
As at December 31, 2018 and 2017, the Parent Company has 40 stockholders with
at least one board lot at the PSE, for a total of 2,799,914,086 and 2,785,362,877
(P1.00 per share par value) issued and outstanding common shares, respectively.
Treasury Stock
The Group's treasury shares as at December 31 are as follows:
On February 26, 2013, the SEC approved the application for merger of the Parent
Company, PJSI and Gant. As a consideration for the said merger, the Parent
Company issued shares of stocks equivalent to 16,911,162 shares at P26.55 per
share. Considering that the ultimate owner of PJSI and Gant is the Parent Company,
the shares issued were recognized as treasury stock.
On December 18, 2014, the BOD approved to buy back the Parent Company's
shares up to P1.00 billion or approximately 30.0 million shares within one year from
the approval or until November 4, 2015. As at December 31, 2018 and 2017, the
Parent Company already bought P34.53 million worth of shares as treasury stock.
On March 12, 2015, the SEC approved the application of merger of the Parent
Company and Company E. As a consideration for the said merger, the Parent
Company issued shares of stocks equivalent to 2,045,465 shares at par value.
Considering that the ultimate owner of Company E is the Parent Company, the stock
shares issued were recognized.
On November 22, 2017, SEC approved the application of the merger of Parent
Company, Goldtempo Group Incorporated, Daily Commodities, Inc., and First Lane
Super Traders Co., Inc. As a consideration for the merger, the Parent Company
issued shares of stocks equivalent to 14,551,209 shares at P39.00 per share.
Considering that the ultimate owner is the Parent Company, the shares issued were
recognized as treasury stock in the consolidated financial statements.
Retained Earnings
On December 22, 2016, the Group's BOD approved the declaration of a regular
dividend of P0.20 per share and special dividend of P0.10 per share on record date
of January 12, 2017 and payment date of January 20, 2017. The total amount of
dividends is P829.61 million.
On December 15, 2017, the Group's BOD approved the declaration of a regular
dividend of P0.20 per share and special dividend of P0.20 per share on record date
of January 2, 2018 and payment date of January 26, 2018. The total amount of
dividends is P1,106.15 million.
-57-
On December 15, 2017, KMC's BOD approved an appropriation of retained earnings
amounting to P4.7 billion to finance the construction of six (6) new stores and twelve
(12) QSRs.
The Group operates through stores in several locations. The combined financial
statements of all stores is reviewed by the Chief Operating Decision Maker on a
monthly basis and assesses the Group's profitability and financial position of the
whole retail business. The nature of products, class of customers, and regulatory
environment is the same for all the stores.
As at December 31, 2018, 2017 and 2016, the Group has no dilutive debt or equity
instruments.
■ Credit Risk
• Liquidity Risk
■ Interest Rate Risk
• Other Market Price Risk
This note presents information about the Group's exposure to each of the above
risks, the Group's objectives, policies and processes for measuring and managing
risks, and the Group's management of capital.
The Group's principal financial instruments include cash and cash equivalents and
investments in trading securities. These financial instruments are used to fund the
Group's operations and capital expenditures.
The BOD has overall responsibility for the establishment and oversight of the
Group's risk management framework. They are responsible for developing and
monitoring the Group's risk management policies.
-58-
The Group's risk management policies are established to identify and analyze the
risks faced by the Group, to set appropriate risk limits and controls, and to monitor
risks adherence to limits. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions and the Group's activities. All risks
faced by the Group are incorporated in the annual operating budget. Mitigating
strategies and procedures are also devised to address the risks that inevitably occur
so as not to affect the Group's operations and detriment forecasted results. The
Group, through its training and management standards and procedures, aims to
develop a disciplined and constructive control environment in which all employees
understand their roles and obligations.
Credit Risk
Credit risk represents the risk of loss the Group would incur if credit customers and
counterparties fail to perform their contractual obligations.
The credit risk for due from related parties and security deposits was considered
negligible since these accounts have high probability of collection and there is no
current history of default.
The credit quality of the Group's financial assets based on its historical experience is
as follows:
-59-
As of December 31, 2017
Grade A Grade B Grade C Total
At amortized cost:
Cash in banks and
cash equivalents P7,153,665,988 P - P - P7,153,665,988
Security deposits 1,489,124,969 1,489,124,969
Receivables - net 4,569,341,716 4,569,341,716
P13,212,132,673 P - P - P13,212,132,673
The Group has assessed the credit quality of the following financial assets that are
neither past due nor impaired as high grade:
a. Cash in bank and cash equivalents were assessed as high grade since these are
deposited in reputable banks with good credit standing, which have a low
profitability of insolvency and can be withdrawn anytime. The credit quality of
these financial assets is considered to be high grade.
c. Due from related parties and security deposits were assessed as high grade
since these have a high profitability of collection and there is no history of default.
The Group applies the simplified approach using provision matrix in providing for
ECL which permits the use of the lifetime expected loss provision for trade and other
receivables. The expected loss rates are based on the Group's historical observed
default rates. The historical rates are adjusted to reflect current and forward looking
macroeconomic factors affecting the customer's ability to settle the amount
outstanding. However, given the short period exposed to credit risk, the impact of
this macroeconomic factor identified has not been considered significant within the
reporting period.
2018 2017
Gross Amount Impairment Gross Amount Impairment
Current P2,930,178,205 P P3,175,206,725 P -
Past due 1-30 days 955,111,912 631,452,179
Past due 31-60 days 420,908,784 249,645,750
More than 60 days 491,061,504 7,462,327 513,037,062 7,462,327
P4,797,260,405 P7,462,327 P4,569,341,716 P7,462,327
Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations
as they fall due. The Group manages liquidity risk by forecasting projected cash
flows and maintaining balance between continuity of funding and flexibility in
operations. Treasury controls and procedures are in place to ensure that sufficient
cash is maintained to cover daily operational working capital requirements.
Management closely monitors the Group's future and contingent obligations and sets
up required cash reserves as necessary in accordance with internal requirements.
-60-
The following are the contractual maturities of financial liabilities, including estimated
interest payments and excluding the impact of netting agreements:
As at December 31, 2018
More than
Carrying Contractual 1 Year 1 Year - More than
Amount Cash Flow or Less 5 Years 5 Years
Financial Liabilities
Accounts payable and
accrued expenses* P11,503,533,469 P11,503,533,469 P11,503,533,469 P - P -
Short-term loans payable 4,756,300,000 4,456,300,000 4,456,300,000
Due to related parties 43,474,532 43,474,532 43,474,532
Long-term debt including
current portion 1,840,000,000 1,946,404,572 16,822,857 67,291,428 1,862,290,287
Other current liabilities** 154,204,614 154,204,614 154,204,614
Noncurrent accrued rent 3,692,167,535 3,692,335,478 128,329,117 456,123,294 3,107,883,067
'excluding statutory payables to the government
**excluding promotion fund, loyalty and rewards, unredeemed gift certificates VAT payable and other current liabilities
of Kareila
Sensitivity Analysis
A 2% increase in interest rates would have increased equity and net income by
P13.96 million, P10.02 million and P7.76 million, for the years ended December 31,
2018, 2017 and 2016, respectively. A 2% decrease in interest rates would have had
the equal but opposite effect. Assuming a 10% interest rate and on the basis that all
other variables remain constant.
- 61 -
Other Market Price Risk
The Group's market price risk arises from its investments in trading securities carried
at fair value. The Group manages its risk arising from changes in market price by
monitoring the changes in the market price of the investments.
Capital Management
The Group's objectives when managing capital are to increase the value of
shareholders' investment and maintain steady growth by applying free cash flow to
selective investments. The Group set strategies with the objective of establishing a
versatile and resourceful financial management and capital structure.
There were no changes in the Group's approach to capital management during the
year.
The carrying amounts of Group's financial instruments approximate their fair values
as at December 31, 2018 and 2017.
The following methods and assumptions are used to estimate the fair values of each
class of financial instruments:
Accounts Payable and Accrued Expenses, Short-term Loans, Due to Related Parties
and Other Current Liabilities
The carrying amounts of accounts payable and accrued expenses, due to related
parties, short-term loans and other current liabilities approximate fair values due to
the relatively short-term maturities of these financial instruments. The difference
between the carrying amounts and fair values of noncurrent accrued rent and other
current liabilities is considered immaterial by management.
-62-
Long-term Loans including Current Maturities
The fair value of interest-bearing fixed rate loans is based on the discounted value of
expected future cash flows using the applicable market rates for similar types of
instruments as at reporting date. Effective rates used in 2018 and 2017 range from
3.50% to 6.40% and 2.00% to 3.50%, respectively.
■ Level 2: inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e., as prices) or
indirectly (i.e., derived from prices).
■ Level 3: inputs for the asset or liability that are not based on observable market
data (unobservable inputs).
As at December 31, 2018 and 2017, the Group's investment in financial assets
measured at FVPL and FVOCI were measured based on Level 1 and Level 3
classification, respectively.
As at December 31, 2018 and 2017, the Group has not introduced any movement
among Levels 1, 2 and 3 classifications.
-63-
ANNEX "C"
We have audited, in accordance with Philippine Standards on Auditing, the financial statements of
Puregold Price Club, Inc. and Subsidiaries (the "Group") as at and for the year ended December 31, 2018,
on which we have rendered our report dated March 29, 2019.
Our audit was made for the purpose of forming an opinion on the basic financial statements of the Company
taken as a whole. The supplementary information in the accompanying Schedule of Philippine Financial
Reporting Standards and Interpretations is the responsibility of the Company's management.
This supplementary information is presented for purposes of complying with the Securities Regulation Code
Rule 68, As Amended, and is not a required part of the basic financial statements. Such supplementary
information has been subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial
statements taken as a whole.
•• - • •
DINDO MARCO M. DIOSO
Partner
CPA License No. 0095177
SEC Accreditation No. 1387-AR-1, Group A, valid until May 31, 2020
Tax Identification No. 912-365-765
BIR Accreditation No. 08-001987-30-2016
Issued October 18, 2016; valid until October 17, 2019
PTR No. MKT 7333616
Issued January 3, 2019 at Makati City
2
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
Not Not
INTERPRETATIONS Adopted
Adopted Applicable
Effective as of December 31, 2018
PFRS 11 Joint Arrangements ./
PFRS 16 Leases V
PAS 2 Inventories V
3
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
Not Not
INTERPRETATIONS Adopted
Adopted Applicable
Effective as of December 31, 2018
4
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
Not Not
INTERPRETATIONS Adopted
Adopted Applicable
Effective as of December 31, 2018
5
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
Not Not
INTERPRETATIONS Adopted
Adopted Applicable
Effective as of December 31, 2018
PAS 39 Financial Instruments: Recognition and Measurement .7
PAS 41 Agriculture .7
IFRIC 21 Levies i
6
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
Not Not
INTERPRETATIONS Ad opted
Adopted Applicable
Effective as of December 31, 2018
IFRIC 22 Foreign Currency Transactions and Advance ✓
Consideration
IFRIC 23 Uncertainty over Income Tax Treatments ✓
SIC-7 Introduction of the Euro ✓
SIC-10 Government Assistance - No Specific Relation to ✓
Operating Activities
SIC-15 Operating Leases - Incentives ✓
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-32 Intangible Assets - Web Site Costs ✓
Philippine Interpretations Committee Questions and Answers ✓
PIC Q&A PAS 18, Appendix, paragraph 9 - Revenue recognition for ✓
2006-01 sales of property units under pre-completion contracts
PIC Q&A PAS 27.10(d) - Clarification of criteria for exemption from ✓
2006-02 presenting consolidated financial statements
PIC Q&A PAS 20.24.37 and PAS 39.43 -Accounting for government ✓
2007-02 loans with low interest rates
PIC Q&A PAS 40.27 - Valuation of bank real and other properties ✓
2007-03 acquired (ROPA)
PIC Q&A PAS 19.78 - Rate used in discounting post-employment
2008-01- benefit obligations ✓
Revised
PIC Q&A Framework.23 and PAS 1.23 - Financial statements ✓
2009-01 prepared on a basis other than going concern
PIC Q&A PAS 1R.16 - Basis of preparation of financial statements ✓
2010-02
PIC Q&A PAS 1 Presentation of Financial Statements - Current/non- ✓
2010-03 current classification of a callable term loan
PIC Q&A PFRS 3.2 - Common Control Business Combinations ✓
2011-02
PIC Q&A Accounting for Inter-company Loans ✓
2011-03
PIC Q&A PAS 32.37-38 - Costs of Public Offering of Shares ✓
2011-04
PIC Q&A PFRS 1.D1-D8 - Fair Value or Revaluation as Deemed ✓
2011-05 Cost
PIC Q&A PFRS 3, Business Combinations (2008), and PAS 40,
2011-06 Investment Property -Acquisition of Investment properties - ✓
asset acquisition or business combination?
PIC Q&A PFRS 3.2 -Application of the Pooling of Interests Method
2012-01 for Business Combinations of Entities Under Common ✓
Control in Consolidated Financial Statements
PIC Q&A Cost of a New Building Constructed on the Site of a ✓
2012-02 Previous Building
PIC Q&A Conforming Changes to PIC Q&As - Cycle 2013 ✓
2013-02
7
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
Not Not
INTERPRETATIONS Adopted
Adopted Applicable
Effective as of December 31, 2018
PIC Q&A PAS 19 - Accounting for Employee Benefits under a
2013-03 Defined Contribution Plan subject to Requirements of ,/
(Revised) Republic Act (RA) 7641, The Philippine Retirement Law
PIC Q&A Conforming Changes to PIC Q&As - Cycle 2015 v.,
2015-01
PIC Q&A Conforming Changes to PIC Q&As - Cycle 2016 ../
2016-01
PIC Q&A PAS 32 and PAS 38 -Accounting Treatment of Club ,./
2016-02 Shares Held by an Entity
PIC Q&A PAS 2 and PAS 16 - Capitalization of operating lease cost ,./
2017-02 as part of construction costs of a building
PIC Q&A PAS 28 - Elimination of profits and losses resulting from i
2017-03 transactions between associates and/or joint ventures
PIC Q&A PAS 24 - Related party relationships between parents, V
2017-04 subsidiary, associate and non-controlling shareholder
PIC Q&A PFRS 7 - Frequently asked questions on the disclosure
2017-05 requirements of financial instruments under PFRS 7, i
Financial Instruments: Disclosures
PIC Q&A PAS 2, 16 and 40 - Accounting for Collector's Items i
2017-06
8
1-
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
Not Not
INTERPRETATIONS Adopted
Adopted Applicable
Effective as of December 31, 2018
PIC Q&A Cost of investment in subsidiaries in SFS when pooling is
I
2018-06 applied
PIC Q&A Cost of an associate, joint venture, or subsidiary in V
2018-07 separate financial statements
PIC Q&A Accounting for the acquisition of non-wholly owned V
2018-08 subsidiary that is not a business
PIC Q&A Classification of deposits and progress payments as V
2018-09 monetary or non-monetary items
PIC Q&A Scope of disclosure of inventory write-down V
2018-10
PIC Q&A Classification of land by real estate developer V
2018-11
PIC Q&A PFRS 15 implementation issues affecting the real estate V
2018-12 industry
PIC Q&A Conforming Changes to PIC Q&As - Cycle 2018 v
2018-13
PIC Q&A PFRS 15 - Accounting for Cancellation of Real Estate v
2018-14 Sales
PIC Q&A PAS 1- Classification of Advances to Contractors in the V
2018-15 Nature of Prepayments: Current vs. Non-current
PIC Q&A PFRS 13 - Level of fair value hierarchy of government
2018-16 securities using Bloomberg's standard rule on fair value v
hierarchy
PIC Q&A Accounting for service charges under PFRS 15, Revenue
I
2019-01 from Contracts with Customers
PIC Q&A Accounting for cryptographic assets v
2019-02
9
PUREGOLD PRICE CLUB, INC. AND SUBSIDIARIES
Map of Group of Companies Within which the Company Belongs
As at December 31, 2018
PUREGOLD
PRICE CLUB INC.
HPI SPI lee OM W.W. Walt Mrdb MR6 e., ea” M. IMN MN NM
Il
C. t.
lAertozacio
S&R Pizza S&R Pizza, Inc. San Roque AyaGold, Retailers, Inc.
(Harbor Point), Inc. (100%) Supermarkets (49.34%) (50%)
(100%)
Notes:
PurepAciA Inc. — Recently incorporated in October 2018
Legend:
Subsidiary NE Budget Lane and agkitempaStores previously under Entenso Equities,
■■■■ IN Joint Venture Inc. have been merged with PPCI-Parent effective January 1, 2018
A'A
InvetArnent in Associate
All shares in investment in Joint Venture PG Lawson Inc. have also been sold
during the year
PUREGOLD PRICE CLUB, INC. AND SUBSIDIARIES
SCHEDULE A. FINANCIAL ASSETS
Notes:
Name and Designation Balance at beginning Amounts Amounts written Not Balance at end
Additions Current
of debtor (i) of period collected (ii) off (iii) Current of period
NOT APPLICABLE
PUREGOLD PRICE CLUB, INC. AND SUBSIDIARIES
SCHEDULE C. AMOUNTS RECEIVABLE FROM RELATED PARTIES WHICH ARE ELIMINATED DURING THE CONSOLIDATION OF SEPARATE
FINANCIAL STATEMENTS
Amount shown
under caption
Amount shown under
Title of Issue "Current portion Number of
Outstanding caption "Long-Term
and type of Lender of long-term Interest Rates Periodic Final Maturity
Balance Debt" in related
obligation (i) debt" in related Installments
balance sheet (iii)
balance sheet
(ii)
Metropolitan
Long-term Bank and
P1,440,000,000 P - P1,440,000,000 6.4% N/A
debt Trust
Company
Metropolitan
Long-term Bank and 3.5%
400,000,000 P - 400,000,000 N/A
debt Trust
Company
Totals P1,840,000,000 P - P1,840,000,000
PUREGOLD PRICE CLUB, INC. AND SUBSIDIARIES
SCHEDULE F. INDEBTEDNESS TO RELATED PARTIES (LONG TERM LOANS FROM RELATED PARTIES)
NOT APPLICABLE
PUREGOLD PRICE CLUB, INC. AND SUBSIDIARIES
SCHEDULE G. GUARANTEES OF SECURITIES OF OTHER ISSUERS
NOT APPLICABLE
PUREGOLD PRICE CLUB, INC. AND SUBSIDIARIES
SCHEDULE H. CAPITAL STOCK
Years Ended
December 31
2018 2017
Current ratio (Current assets over
current liabilities) 2.07:1 1.61:1
Solvency ratio (Profit plus depreciation
and amortization over total liabilities) .35:1 .32:1
Bank debt-to-equity ratio (Bank debt
over total equity) 0.03:1 0.03:1
Asset-to-equity ratio (Total assets over
total equity) 1.43:1 1.49:1
Interest rate coverage ratio (Profit before
interest and taxes over interest
expense) 53.38:1 63.64:1
Operating profit margin (Operating profit
over net sales) 16.92% 17.25%
Net profit margin (Profit over net sales) 4.63% 4.69%
PUREGOLD PRICE CLUB, INC.
SCHEDULE OF RECONCILATION OF RETAINED EARNINGS AVAILABLE
FOR DIVIDEND DECLARATION
FOR THE YEAR ENDED DECEMBER 31, 2018
(Amounts in Thousands)
The following are the summary of the SEC From 17-C filed to SEC by the company:
1. Lucio L. Co — Chairman
2. Susan P. Co — Vice-Chairman
3. Ferdinand Vincent P. Co - President
4. Leonardo B. Dayao — Director
5. Pamela Justine P. Co — Director
6. Jack E. Huang - Director
7. Edgardo G. Lacson — Independent Director
8. Marilyn V. Pardo — Independent Director
9. Jaime S. Dela Rosa — Independent Director
10. Levi B. Labra — Board Consultant
11. Andres S. Santos — Legal Counsel
12. Baby Gerlie I. Sacro — Corporate Secretary
13. Candy H. Dacanay-Datuon —Assistant Corporate Secretary & Compliance Officer
14. John Marson T. Hao — VP for Investor Relations
15. Teodoro A. Polinga — Comptroller
16. Anthony G. Sy — President, Kareila Management Corp.
17. Gisela Altura — Comptroller, Kareila Management Corp.
18. Antonio Delos Santos II — VP for Operations
19. Joseph U. Sy — Senior Regional Manager
20. Denise Maria D. Carolino — VP for Administration
21. Edgar Tacorda —Audit Manager
22. Rowena Perez Guzman - Audit
23. Caroline G. Exconde — Associate Lawyer
24. Lalette V. Alea — Site Acquisition Manager
The Corporate Governance Seminar was conducted by SGV & Co. on February 23, 2018 at the
Guajes Room, Acacia Hotel, Alabang Muntinlupa City.
Stockholders of records as of the close of business March 15, 2018 are entitled to notice of, and to
vote of at such meeting. The stock and transfer book of the company will be closed from April 23,
2018 to May 8, 2018.
The Board of Directors of Puregold Price Club, Inc. has approved the following:
1. The Audited Consolidated Financial Statements of Puregold Price Club, Inc. for the year 2017.
The Annual Report (SEC 17-A) including the Audited Consolidated Financial Statements will be
filed on or before April 16, 2018.
2. Press Release
Manila, Philippines — Puregold Price Club, Inc. (PGOLD) has reported a consolidated net
income of Php 5.84 billion in 2017 which represents a 5.7% growth compared to Php 5.53
billion in the same period in 2016. Consolidated Net margins for the period is at 4.7%.
Puregold stores registered better than expected same store sales growth (SSSG) of 4.4% and
6.5% for S&R stores in 2017 which were driven by the strong consumer demand and the
sustained economic growth of the country.
Puregold consolidated net sales increased by 10.6% to Php 124.5 billion in 2017 due to the
continued strong consumer demand from its existing Puregold, S&R Membership warehouse
clubs and S&R New York Style Pizza stores. Income from Operations grew to Php 8.65 billion
in 2017, up by 6.9% compared to Php 8.1 billion during the same period last year.
As of end 2017, Puregold group has a total of 372 stores nationwide. These include 309
Puregold stores, 14 S&R membership shopping warehouse, and 32 S&R New York Style QSR,
9 NE Bodega Supermarkets and 8 Budgetlane Supermarkets.
We will continue to expand our store network by opening 25 new Puregold stores and 2 new
S&R warehouse in 2018.
1. Call to Order
2. Approval of Minutes of the previous meeting and ratification of all acts of the management
since the last stockholders meeting
3. Annual Report
4. Election of Lucio Co
5. Election of Susan Co
6. Election of Ferdinand Vincent Co
7. Election of Pamela Justine Co
8. Election of Jack Huang
9. Election of Marilyn V. Pardo as Independent Director
10. Election of Edgardo G. Lacson as Independent Director
11. Election of Jaime S. Dela Rosa as Independent Director
12. Re-appointment of R.G. Manabat & Company as External Auditor for the year 2018
13. Other Matters
14. Adjournment
No other matter was discussed during the meeting aside from items 1 to 14 above.
All directors attended the stockholders meeting.
The business profile of the directors for the past five years are as follows:
Mr. Co has been the Chairman of Puregold Price Club, Inc. since it was incorporated in September
1998.
Mr. Co currently holds the following positions in other publicly-listed companies:
He is a member of the Board of Trustees of Adamson University and Luis Co Chi Kiat Foundation,
Inc.
Mr. Co has been an entrepreneur for the past 40 years.
Mrs. Co has been the Vice-Chairman of Puregold Price Club, Inc. since it was incorporated in
September 1998.
Mrs. Co currently holds the following positions in other publicly-listed companies:
❑ Vice-Chairman of Cosco Capital, Inc.
❑ Director of Philippine Bank of Communications
She is concurrently serving as Chairman of Alphaland Makati Tower, Inc. and Director of the
following companies:
❑ Bellagio Holdings, Inc.
❑ Blue Ocean Holdings, Inc.
❑ Canaria Holdings Corporation
❑ Ellimac Prime Holdings
❑ Kareila Management Corp.
❑ KMC Realty Corp.
❑ Luis Co Chi Kiat Foundation, Inc.
❑ Meritus Prime Distributions
❑ Montosco, Inc.
❑ Nation Realty, Inc.
❑ NE Pacific Shopping Center Corporation
CIP.G. Holdings, Inc.
❑ Patagonia Holdings Corp.
❑ PPCI Subic Inc.
❑ Premier Wines and Spirits
❑ Puregold Duty Free (Subic), Inc.
❑ Puregold Duty Free, Inc.
❑ Puregold Properties, Inc.
❑ Puregold Realty Leasing & Management, Inc.
❑ Pure Petroleum Corp., Inc.
❑ S&R Pizza (Harbor Point), Inc.
❑ S&R Pizza, Inc.
❑ San Jose City I Power Corp.
❑ Union Energy Corporation
❑ Union Equities, Inc.
Mrs. Co received a Bachelor of Science Degree in Commerce from the University of Santo Tomas.
Mr. Co has been a Director of Puregold Price Club, Inc. since 2003. He was first elected President
of the Company on May 12, 2015.
Mr. Ferdinand Vincent P. Co is also the Chairman and President of Alerce Holdings Corp. and
Director of:
❑ Union Equities, Inc.
❑ KMC Realty Corporation
❑ League One, Inc.
❑ Meritus Prime Distributions
❑ Nation Realty, Inc.
❑ Patagonia Holdings Corp.
❑ PPCI Subic, Inc.
❑ VFC Land Resources, Inc.
❑ Alphaland Makati Tower, Inc.
❑ Bellagio Holdings, Inc.
❑ Blue Ocean Holdings, Inc.
❑ Canaria Holdings Corporation
❑ Ellimac Prime Holdings, Inc.
❑ Entenso Equities, Inc
❑ Kareila Management Corp.
❑ P.G. Holdings, Inc.
❑ PSMT Philippines, Inc.,
❑ Premier Wine & Spirits, Inc.
❑ Puregold Duty Free (Subic), Inc.
❑ Puregold Finance, Inc.
❑ Puregold Properties, Inc.
❑ Puregold Realty Leasing & Management, Inc.
❑ Pure Petroleum Corp.
❑ San Jose City Power Corp.
❑ Union Energy Corporation
Mr. Co received a Bachelor of Science Degree in Entrepreneurial Management from the University
of Asia and the Pacific.
Mr. Dayao was the President of Puregold Price Club, Inc. from 2005 to 2014. He was first elected
as one of the members of the Board in 1998.
Mr. Dayao concurrently holds the following positions in other publicly-listed companies:
❑ President of Cosco Capital, Inc.
❑ Vice-Chairman of the Philippine Bank of Communications
He received a Bachelor of Science Degree in Commerce from the Far Eastern University.
He is a Certified Public Accountant and has completed Basic Management Program at Asian
Institute of Management and earned units in MBA from University of the Philippines-Cebu.
Ms. Co has been a Director of Puregold Price Club, Inc. since 2003.
She also serves as Director for the following companies:
❑ Alerce Holdings Corp.
❑ Bellagio Holdings, Inc.
❑ Blue Ocean Holding, Inc.
❑ Ellimac Prime Holdings, Inc.
❑ Fertuna Holdings Corp.
❑ Invesco Company, Inc.
❑ Kareila Management Corporation
❑ KMC Realty Corporation
❑ League One, Inc.
❑ Meritus Prime Distributions, Inc.
❑ Montosco, Inc.
❑ Nation Realty, Inc.
❑ P.G. Holdings, Inc.
• Patagonia Holdings Corp.
❑ PSMT Philippines, Inc.
❑ Pure Petroleum Corp.
❑ Premier Wine & Spirits, Inc.
❑ Puregold Duty Free (Subic), Inc.
❑ Puregold Properties, Inc.
❑ S&R Pizza (Harbor Point), Inc.
❑ S&R Pizza, Inc.
❑ SPC Resources, Inc.
❑ Union Energy Corporation
❑ Union Equities, Inc.
❑ VFC Land Resources, Inc.
She graduated from Thames International School with a Bachelor's Degree of Entrepreneurship.
Mr. Huang was elected Director of Puregold Price Club, Inc. on May 30, 2017.
He is concurrently the Operations Manager and Vice-President for Visayas & Mindanao area of
Abacus Securities Corporation. He is also a member of the Board of Trustees of Sacred Heart
School — Ateneo de Cebu.
Mr. Huang started in Abacus in 1992. Before working with Abacus, Mr. Huang worked in Ayala
Investment and Development Corporation from 1975 to 1983. He also worked in the Bank of the
Philippine Islands from 1983 to 1990.
Mr. Huang graduated from Ateneo De Manila University in 1975 with a degree of Bachelor of Arts in
Economics.
Mrs. Pardo held the following positions from the Company's incorporation to December 2016: Chief
Executive Officer of Asian Holdings Corporation, Downtown Properties, Inc., Casa Catalina
Corporation, Catalina Commercial Properties, Inc.
Mrs. Pardo received a Bachelor of Liberal Arts and an Associates Degree in Business from
Assumption College in 1960.
He is a Member of:
❑ Management Association of the Philippines
❑ Board of Trustees of De La Salle
Mr. Lacson is a former Trustee of Home Development Mutual Fund and Past President and
Honorary Chair of Philippine Chamber of Commerce and Industry.
Mr. Lacson graduated from the De La Salle University with a Degree of Bachelor of Science in
Commerce.
Mr. Dela Rosa was elected Independent Director of Puregold Price Club, Inc.
on May 30, 2017.
He is a former Director of Alcorn Gold Resources Corporation, PNCC — Skyway Corporation of the
Philippines, and Development Bank of the Philippines. He also used to be the President of Portman
Mining Philippines, Cabaluan Chromite Corp., and Food Terminal, Inc. He also worked as Head of
Ayala Investment and Development Corporation and Philsec Investment Corporation for Visayas
and Mindanao and Assistant Vice-President of Citibank.
He used to be an Associate Executive Trustee of the Asset Privatization Trust and former Director
of Coco Life Insurance and Coco Life General Insurance.
Mr. Dela Rosa graduated from the Far Eastern University with a degree of Bachelor of Science,
major in Accounting in 1964. He finished the Program on Global Financial Systems in 2002 at the
John F. Kennedy School of Government, Harvard University.
1. Audit Committee — It will function as Audit Committee and assume the functions of Risk
Oversight Committee and Related Party Transactions Committee.
Ex-officio officers: Ted Polinga (Comptroller) and Maritess Lontoc (Internal Auditor)
Approval of the Financial Statements for the First Quarter - 2018 of the Company.
The SEC 17-Q Report will be submitted on or before May 15, 2018.
On August 10, 2018, the Board of Directors of Puregold Price Club, Inc. has approved its
Consolidated Financial Report as of June 30, 2018. The SEC 17-Q Report will be filed on or before
August 14, 2018.
Manila, Philippines — Puregold Price Club, Inc. (PGOLD) has reported a consolidated net income of
Php 3.08 billion in the first half of 2018 which represents a 25.6% growth compared to Php 2.49
billion in the same period in 2017. Consolidated Net margin for the period is at 4.8%.
Puregold stores registered stronger than expected same store sales growth (SSSG) of 6.1% on the
first six months of 2018 while S&R registered a SSSG of 5.9% during the same period. The strong
SSSG numbers were driven by higher consumer spending fueled by higher levels of take-home pay
as a result of the tax reform law and the sustained economic growth of the country.
Puregold consolidated net sales increased by 11.1% to Php 64.03 billion in the first six months of
2018. 79% of the revenues is attributed from the Puregold Stores network and 21% coming from
S&R Membership warehouse clubs and S&R New York Style Pizza stores. Income from Operations
grew to Php 3.97 billion in first half of 2018, up by 10.1% compared to Php 3.6 billion during the
same period last year.
As of June 2018, Puregold group has a total of 393 stores nationwide. These include 341 Puregold
stores, 16 S&R membership shopping warehouse, and 36 S&R New York Style QSR
We are on track in delivering 25 new Puregold stores and 2 new S&R warehouse as a part of our
store network expansion in 2018.
August 15, 2018 August 16, 2018
Company Presentation for Investor's Briefing Teleconference to be held today, August 15, 2018,
3:00 P.M.
In partnership with banks, financial institutions, and other financial technology entities,
PUREPADALA, INC. is intended to operate a cash remittance business for the benefit of the
customers and shoppers of Puregold Group of Companies.
Before operating as such, the Company will undergo the regular process, and subject to the
approval, of the regulatory government agencies.
In partnership with banks, financial institutions, and other financial technology entities,
PUREPADALA, INC. is intended to operate a cash remittance business for the benefit of the
customers and shoppers of Puregold Group of Companies.
Before operating as such, the Company will undergo the regular process, and subject to the
approval, of the regulatory government agencies.
1. The Consolidated 3rd Quarter Financial Report of Puregold Price Club, Inc.
2. The renewal of the buy back program of another year and up the maximum amount of One
Billion Pesos.
Manila, Philippines — Puregold Price Club, Inc. (PGOLD) has reported a consolidated net income of
Php 4.62 billion in the first nine months of 2018 which represents an 18.4% growth compared to
Php 3.9 billion in the same period in 2017. Consolidated Net margin for the period is at 4.6%.
Puregold stores registered stronger than expected same store sales growth (SSSG) of 5.8% on the
first nine months of 2018 while S&R registered a SSSG of 8.8% during the same period. We are
optimistic that we will be able to sustain our SSSG in the last quarter of 2018 to be driven by higher
consumer spending fueled by higher levels of take-home pay as a result of the tax reform law.
Puregold consolidated net sales guidance to 12% to 14% for the full year of 2018 from 7% to 9%
guidance last quarter. Puregold and S&R SSSG guidance for 2018 has also been increased to 4%
to 6% from its initial guidance of 2% to 4% early this year.
As of September 2018, Puregold group has a total of 397 stores nationwide. These include 345
Puregold stores, 16 S&R membership shopping warehouse and 36 S&R New York Style QSR.
We are on track in delivering 25 new Puregold stores and 2 new S&R warehouse as part of our
store network expansion in 2018.
November 15, 2018 November 15, 2018
Company Presentation for Investor's Briefing Teleconference held on November 15, 2018, 3:00
P.M.
November 20, 2018 November 21, 2018
Press Release of Puregold Price Club, Inc. entitled "Puregold's Official Statement dated November
20, 2018."
Official Statement
This is to inform the public that "Puregold Price Club, Inc." or "PUREGOLD" is not in any way
connected with "Amana Puregold" now operating as supermarket in Doha, Qatar.
PUREGOLD is a registered trademark in the Philippines and we are currently taking legal action to
secure the said trademark in Qatar and in other parts of the world for the protection of the public
especially Overseas Filipino Workers.
ANNEX "E"
Mr. Co has been a Director and Chairman of the Company since it was incorporated in
September 1998.
He is a member of the Board of Trustees of Adamson University and Luis Co Chi Kiat
Foundation, Inc.
Mrs. Co has been a Director, Vice-Chairman of Puregold Price Club, Inc. since it was
incorporated in September 1998.
She is currently the Chairman of Tower 6789 Corporation (Alphaland Makati Tower,
Inc.) and Director of the following private companies: Bellagio Holdings, Inc., Blue
Ocean Holdings, Inc., Canaria Holdings Corporation, Ellimac Prime Holdings, Kareila
Puregold Properties, Inc., Puregold Realty Leasing & Management, Inc., S&R Pizza
(Harbor Point), Inc., S&R Pizza, Inc., San Jose City I Power Corp., Union Energy
Corporation and Union Equities, Inc.
Mr. Co has been a Director of the Company since 2003. He was first elected President
of the Company on May 12, 2015.
Mr. Ferdinand Vincent P. Co currently holds the following positions: Chairman and
President of Alerce Holdings Corp., Invesco Company, Inc., KMC Realty Corporation,
League One, Inc., Patagonia Holdings Corp., PPCI Subic, Inc., SPC Resources, Inc.
VFC Land Resources, Inc.; President of Ayagold Retailers, Entenso Equities
Incorporated, and Union Equities, Inc.; and Director of Tower 6789 (formerly:
Alphaland Makati Tower, Inc.), Bellagio Holdings, Inc., Blue Ocean Holdings, Inc.,
Canaria Holdings Corporation, Daily Commodities, Inc., Ellimac Prime Holdings, Inc.,
Fertuna Holdings Corp., Meritus Prime Distributions, Inc., P.G. Holdings, Inc., PSMT
Philippines, Inc., Premier Wine & Spirits, Inc., Puregold Duty Free (Subic), Inc.,
Puregold Finance, Inc., Puregold Properties, Inc., Puregold Realty Leasing &
Management, Inc., San Jose City Power Corp., and Union Energy Corporation.
Mr. Dayao was the President of the Company from 2005 to 2014. He was first elected
as one of the members of the Board in 1998.
Mr. Dayao currently holds the following positions in other publicly-listed companies:
President of Cosco Capital, Inc. and Vice-Chairman of the Philippine Bank of
Communications.
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He received a Bachelor of Science Degree in Commerce from the Far Eastern
University. He is a Certified Public Accountant and has completed Basic Management
Program at Asian Institute of Management and earned units in MBA from University
of the Philippines-Cebu.
She graduated from Thames International School with a Bachelor of Science Degree in
Entrepreneurship.
Mr. Huang is currently the Operations Manager and Vice-President for Visayas &
Mindanao area of Abacus Securities Corporation. He is also a member of the Board of
Trustees of Sacred Heart School — Ateneo de Cebu.
Mr. Huang started in Abacus in 1992. Before working with Abacus, Mr. Huang worked
in Ayala Investment and Development Corporation from 1975 to 1983. He also worked
in the Bank of the Philippine Islands from 1983 to 1990.
He also serves as Director of Cebu Business Continous Forms and Richmedia Network,
Inc., both privately-owned companies.
Mr. Huang graduated from Ateneo De Manila University in 1975 with a degree of
Bachelor of Arts in Economics.
Mrs. Pardo was first elected as an Independent Director of the Company on October 5,
2010.
Mrs. Pardo is presently the Chairman and Chief Executive Officer of Asian Holdings
Corporation, Downtown Properties, Inc., Casa Catalina Corporation and Catalina
Commercial Properties, Inc.
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Mrs. Pardo obtained her Bachelor of Liberal Arts and an Associate Degree in Business
from Assumption College in 1960.
Mr. Lacson was first elected as an Independent Director of the Company on October 5,
2010.
Mr. Lacson graduated from the De La Salle University with a Degree of Bachelor of
Science in Commerce.
Mr. Dela Rosa graduated from the Far Eastern University with a degree of Bachelor of
Science, major in Accounting in 1964. He finished the Program on Global Financial
Systems in 2002 at the John F. Kennedy School of Government, Harvard University.
Ms. Sacro has been the Corporate Secretary of the Company since 2000. Prior to joining
the Company, she was employed by Plaza Fair, Inc. in the Compensation and Benefit
Section of the Human Resources Department.
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ATTY.CANDY H. DACANAY-DATUON, 40 years old, Filipino
Assistant Corporate Secretary and Compliance Officer
Atty. Dacanay-Datuon has been the Compliance Officer and Assistant Corporate
Secretary of the Company since November 25, 2011. Ms. Dacanay-Datuon is a lawyer
and a member of the Philippine Bar since 2004. On the same year, she was employed
as counsel for the Company. She is currently the Corporate Secretary of Ayagold
Retailers, Inc., Da Vinci Capital Holdings, Inc., Kareila Management Corporation,
League One Finance and Leasing Corporation, S&R Pizza (Harbor Point), Inc. and
S&R Pizza, Inc.
She received a Bachelor of Arts, Cum Laude, in Political Science from the Colegio de
San Juan de Letran and a Bachelor of Laws Degree from the University of Santo Tomas.
Mr. Polinga has been the Company's Comptroller since March 2015.
He is a founding member of Alchem Energy Limited and Summit Minerals, PTE. LTD.
He used to work as Chief Finance Officer of Phoenix Petroleum Philippines from 2007
to 2008; Deputy CFO for PT Citramegah Karya Gemilang — Libya branch from 2008
to 2010; Senior Vice President for Finance of Citadel Commercial Group, 2001 to 2003;
Senior Vice-President for Business Development of Citadel Group, 2003 to 2005; Vice-
President, CFO and Director of Unicol Management Services, 1989 to 2001. Mr.
Polinga is a Certified Public Accountant.
Atty. Santos has been with the Company since February 01, 2005.
Prior to joining the Company, he worked as a clerk at Jose S. Santos Jr. Law Office
(1971-1978); Manager of the Legal Department at BLTB Company (1986-1993); and
Manager of the Legal Department at Fontana Development Corporation (2001-2005).
Atty. Santos graduated with a Bachelor of Arts from Arellano University and received
his Bachelor of Laws degree at the University of the East.
Mrs. Carolino has been the Vice-President for Administration of the Company since
February 01, 1995.
Prior to that, she worked at Uniwide Sales, Inc. as an Assistant Pricing Supervisor under
their Supermarket Department and later on became the Purchasing Manager (1987 to
1992).
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Mrs. Carolino graduated from the University of Santo Tomas with a degree of Bachelor
of Science in Architecture.
Mr. Delos Santos has been with the Company since October 1, 2012.
Prior to joining the Company, he worked at Right Good Phils., Inc. as a Management
Trainee (1993-1994), Distributor Sales Supervisor (1994-1995), and Operations
Manager (1995-1999); Key Account Manager under the Customer Business
Development Dept. at Procter & Gamble Philippines, Inc. (1999-2000); P&G Team
Leader at Right Good Phils., Inc. — P&G Distributor (2000-2003); Managing Director
of Right Good Phils., Inc. — P&G Distributor, Solutions Center, Inc. — Globe Telecom
Distributor and Go, Grow and Glow Foods Inc. — Globe Telecom Distributor (2003-
2005); National Sales Manager/Multi-Functional Selling Team Leader at Colgate
Palmolive Philippines, Inc. (2005-2007) and eventually their National Sales Training
(2007-2012).
Mr. Delos Santos graduated from Ateneo de Manila University with a degree of
Bachelor of Arts in Economics.
Ms. Lontoc has 15 years of experience in wholesale and retail operation audit including
business processes standardization, system and process efficiencies and improvements.
She worked with Dairy Farm International based in Singapore and Malaysia from 2011
to 2013 as Senior Business Consultant and Pilipinas Makro from 2001 to 2011 as
Systems and Audit Manager.
She first joined the Lucio Co Group of Companies in the year 2013 as Senior Manager
for Executive Office.
Mr. Sy has been with the Company since June 01, 1997.
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MS. MARIA TERESA B. PUNZALAN, 43 years old, Filipino
Regional Manager
Ms. Punzalan has been with the Company since October 16, 2002.
Prior to joining the Company, she worked as a Store Supervisor at Binggo! Covenient
Store, Jollimart Phils. Corporation (1998-2001) and Supermarket Department
Supervisor at Isetann Supermarket and Department Store Inc. (2001-2001).
Ms. Punzalan graduated from Polytechnic University of the Philippines with a degree
of Bachelor of Science in Industrial Engineering.
Mr. Kuan has been with the Company since October 04, 2006.
Prior to joining the Company, he worked as the Assistant Brand Manager of Nestle
Philippines, Inc. (1997-1999) and Chief Operating Officer at Creative Dining Inc.
(2000-2006).
Mr. Kuan graduated from Ateneo de Manila University with a degree of Bachelor of
Science in Management and received his master's degree in Entrepreneurship at the
Asian Institute of Management.
Mr. Gayamo has been with the Company since September 17, 2004.
Mr. Gayamo graduated from Asian Institute of Maritime Studies with a Bachelor of
Science degree in Marine Transportation.
Mr. Hau has been with the Company since January 01, 1999.
He graduated from the University of Santo Tomas with a degree of Bachelor of Science
in Industrial Engineering.
Mr. Kaw has been with the company since May 29, 2006.
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He graduated from Chaing Kai Shek College with a degree of Bachelor of Science in
Commerce Major in Computer Data Management.
Mr. Anggala has been with the Company since March 01, 2001.
Mr. Anggala graduated from the University of Santo Tomas with a degree of Bachelor
of Science in Industrial Engineering.
Mr. Bechayda has been with the Company since January 06, 1999.
Mr. Bechayda graduated from International Electronics and Technical Institute with a
degree of Bachelor of Science in Computer Management.
Ms. Tacorda has been with the Company since October 18, 2004.
Ms. Tacorda got her Bachelor of Science degree in Accountancy at the Philippine
School of Business Administration.
Ms. Dela Pefia has been with the Company since October 3, 2005.
She used to work as a Secretary of the Operations Manager at Mariwasa Ceramic Inc.
(1997-1998); Executive Assistant of the General Manager & CMO Officer at Right
Goods Philippines, Inc. (1998-2003); and Administrative Officer at G3 Food
Incorporated (2003-2005).
Ms. Dela Pefia graduated from her course in Computer Systems and Business
Management from International Electronics and Technical Institute.
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) MS. SEVERINA L. DE PANO, 44 years old, Filipino
Regional Manager
Ms. De Pano has been with the Company since September 18, 2005.
Prior to that she worked at Uniwide Warehouse Club, Inc as a Receiving, Sucat
Paranaque Branch (1992-1996); Area-in-Charge, Wholesale Department, Cabuyao
Laguna Branch (1996-1997); Store Officer-in-Charge, Los Banos Laguna Branch
(1997); Supervisor, Fashion and Personal Care, Cabuyao Laguna Branch (1998-2004)
and Store Assistant Manager Trainee, Cabuyao Laguna Branch (2005).
She received her 2-year diploma course of Computer Programming at Central College
of the Philippines
Mr. Hao has been with the Company since December 15, 2014. He used to work as a
Director for Investor Relations of Megaworld Corporation from 2004 to 2014.
Mr. Hao graduated from Ateneo de Manila University with a degree of Bachelor of
Science in Management Engineering.