F 0 0 D
sl
Contact Person
Month
Day
Month
Year
Fiscal Year
Day
Year
Annual Meeting
17-Q
Secondary License Type, lf Applicable
I I I I
Domestic
I I I
File Number
LCU
I I I I I
Document I.D.
Cashier
------------------ STAMPS
----------------
_j
Foreign
COVER SHEET
JOLLIBEE FOODS CORPORATION
(Company's Full Name)
(Company's Address)
(632) 634-1111
Telephone Number
December 31
(Fiscal Year Ending)
.Quarterly Be port
For the Quarter Ended March 3'1, 2014
(Form Type)
Amendment DGsignation (If applicable)
(Secondary License Type and File Number)
Cashier
LCU
DTU
77487
S.E.C REG. No.
Central Receiving Unit
File Number
Document I.D.
2.
3.
4.
5.
PHILIPPINES
Province, country or other jurisdiction of incorporation or organization
6.
7.
8.
(632) 634-1111
Registrant's telephone number, including area code
9.
N/A
Former name, former address and former fiscal year, if changed since last report.
Common
Treasury Shares:
Common
16,447,340
Note: Total common outstanding share of 1,052,716,140 is inclusive of 12,500 and 4,000 MSOP shares subject tor listing and
1,578,721 shares entrusted with Deutsche Regis Parlners, Inc_ with the following details:
MSOP Shares:
Beginning balance (per SEC Form 17-C dated May 13, 2014)
507,819
(200 000)
307,819
Are any or all of the securities listed on the Philippine Stock Exchange?
Yes
12.
1 270
[ X ]
No
SIGNATURE
'A SA
r r te Finance
nee Officer
b.
c.
d.
e.
f.
Amount
P<t
(in PHP)
ASSETS
Current Assets
Cash and cash equivalents (Notes 6, 30 and 31)
9,713,860,696
2,723,655,812
3,543,165,275
2,018,879,606
17,999,561,389
21,479,461
3,341,094,500
11,944,340,610
678,845,336
9,102,754,573
21,449,708
783,338,930
1,964,532,961
27,857,836,079
9,903,877,068
3,082,872,678
3,560,432,134
(190,016,372)
(359.216,866)
(17,266,859)
(19)
(11.7)
(0.5)
1,836,995,105
181,884,501
9.9
18,384,176,985
{384,615,596}
[2.11
21,479,461
3,322,393,765
11,772,440,510
751,767,041
9,103,636,848
21,267,251
756,196,860
1,893,275,392
27,642,457'128
46,026l634,113
18,700,735
171,900,100
(72,921,705)
(882,275)
182.457
27,142,070
71,257,569
215,378,951
,169 36.645)
0.6
15
(9.7)
(0.0)
0.9
3.6
3.8
0.8
(0.4)
45,857,397,468
LIABILITIES AND EQUITY
Current Liabilities
Trade payables and other current liabilities (Notes 16, 30 and 31)
Income tax payable
Current portion of:
Long-tenn debt (Notes 18, 30 and 31)
Liabili!): for acguisition of businesses {Notes 11, 30 and 31)
Total Current Liabilittes
Noncurrent Liabilities
Noncurrent portion of:
Long-term debt (Notes 18, 30 and 31)
Liability for acquisition of businesses (Notes II, 30 and 31)
Provisions (Note 17)
Derivative liability (Notes 18, 30 and 31)
Pension liability (Note 25)
Operating lease payables (Note 29)
Defened tax liabilities-net {t!ote 24)
Total Noncurrent Liabilities
Total Liabilities
Equity Attributable to Equity Holders of the Parent Company (Note 30)
Capital stock (Note 19)
Additional paid-in capital (Note 26)
Cwnulative translation adjustments of foreign substdiaries, joint venmres and an associate
Remcasurement gain (loss) on net defined benefit plan - net of tax
Comprehensive loss on derivative liability (Note 18)
Excess of cost over the canying value of non-controlling
interests acquired (Note 19)
Retained earnings (Note 19):
Appropriated for future expansion
UnaJ2J2WQriated
Less cost of common stock held in treas- (Note 19)
Non-controlling Interests l}!ote Ill
Total Eguity
12,799,604,600
270,303,405
14,249,926,021
154,744,537
(1,450,321,421)
115,558,868
(102)
74.7
1,298,181,474
109,701,568
1,106,275,244
107,666,875
191,906,230
2,034,693
{ 1 ,140,821,630)
17.3
19
{7.3)
(154,601,091)
1,220,469
(3.8)
t.-1,477,791,047
15,618,612,677
3,908,369,409
130,228,401
30,500,639
8,147,571
956,035, 160
1,568,251,018
4,062,970,500
129,007,932
30,500,639
4,532,600
932,841,109
1,569,071,461
318,157,118
7,047,081,359
22,665,694,036
312,363,933
6,913,896,131
21,391,687,178
1,051,866,109
3,698,682,511
(140,111)
(472,054,212)
(6,134,708)
1,051,430,791
3,640,716,729
38,306,710
(472,054,212)
(3,411,504)
(542,764,486)
(542,764,486)
0.9
3,614,971
79.8
23,194,051
2.5
(820,443)
(0.1)
(5,793,185)
{1.8)
{ 133,1 85128)
{1.9)
(I ,274,006,858)
(5.6)
435318
57,965.782
(38,446,821)
0.0
16
(100.4)
(1,723,204)
79.8
I 0,200,000,000
9,895,476,793
23,824,931,896
180,511,491
10,200,000,000
8,817.166,243
22,729390,271
180,511,491
1,078,310,550
1,095,541,625
12.2
48
23,644,420,405
821,289,885
24,465,710,290
45,857,397,468
22,548,878,780
812,061,297
23,360,940,077
46p26l634lll3
1,095,541,625
9,228,588
1,104,770,213
(169,236,645)
4.9
II
4.7
(0.4l
Change
2013
201
Pesos
Pet
Pesos
Pet
95.0%
5.0%
17,223.9\1,067
94.9%
5.1%
2013 to 2014
Pesos
Pet
2,639.661,056
15.3%
REVENliES
Net saks
Royalty, franchise fees and others (Note 20)
19,863,572,123
I ,050,2-1.0,307
20,913,812,.430 IOO.O;.,
COST OF SALES (l'-;ote 21)
Cost of inventories
Store and manufacturing costs
GROSS I'ROFIT
EXI'ENSES
General and administrative expenses (Note 22)
Advc11ising and promotions
.J8,0%
IO,OH,l97,765
7,071,206,.J99 33.8%
17,116,-W.J,264 81.8%
3,797,408,166
18.2%
1,975,766,114
437,311,262
2,4]3,077,486
1,384,330,680
9,4",{,
2.1 >y,,
11.5'\\,
6.6'.,
931.017,117
18,15-t928,184 100.0%
119.:223,190
15.2%
8,685.195317
47.8%
14,867,532,404
341%
819%
1.359.002.448
889,869,-f 12
15.6%
6.182,337,087
2.248,871,860
15.1%
3.287395,780
18.1%
510,012.386
15.5%
9.5%
2.1%
250,710,429
14.5%
1,725,055,795
386,125,431
2,111,181,226 11.6%
1,176;214,554
Interest expense
6.5%
301,8%,260
208.!16J26
( 16.846.874)
51,190,317
0.3%
69.!37.201
0.4%
(33,60!,668)
-0.1%
(43,689,228)
-0.2%
18,688,659
0,1%
25,-H7,973
0.1%
(17,0.f2,170)
-0.1%
72,335,764
0.3%
I,-H8,312,933
6.9%
387,995,390
1.9'Y,,
(37,673,H3)
-0.2%
1.7"/,,
350,321,957
NET INCOME
OTIIF.R COMPREHENSIVE LOSS
Other eomprehensi\e income to be rcclassrficd to profit or loss in subsequent periods:
Cumulati\e translation adjustments of foreign subsld!ilries.joint ventures and associates
Comprchensi\e loss on derivative liabilny (i\ote 18}
5.3%
1,097,990,976
(46,578,891)
-0.1%
(5,042,971)
0.0%
0.0%
(51,611,863)
-0.2%
1,046,369,113
1.190.-::>09,887
380,997,708
0.1%
6.6%
2.!%
113%
10%
17.7";0
!0.087.560
-24.4%
23.!%
(6.759.314) -26.6%
1,493.967
5.2%
55.252.267 323.4%
258,103,046
21.7"/o
6,997,682
!.8%
(71,421,477) -0.4%
33.748,044
47.3%
309,576.231
40,745,726
13.2%
!.7%
880,633,656
(7,693.955)
49%
217357320
0.0'%
(38.884.937) -505.4%
0.0%
(5,684.682)
0.0%
24.7"/o
(5.0-+2.97!) -100.0%
5,684,682
100.0%
(!3.378,637) -0.1%
(38.24).226) -285.9"/o
5.0%
867.255,0!9
4.8%
179,114.094
I ,078,310,550
5.2'Y,,
183,642.618
20.5%
0.1%,
5.3'Y,,
894.667,932
(14,034,276)
4.9"/o
19,680,416
0.!%
33.714.702
240.2%
880.633,656
4.9"/o
217.357320
24.7%
4.9"/
1,097,990,976
(28.536.137) -0.2%
17.083,497
14_4%
51.185,831
OPERATING INCOME
INTEREST INCO IE (EXPENSE) (:'lote 23)
Interest income
ll.l!%
2,758.88.f,2.f6
20.7"/o
1,037,140,525
5.0";.,
886.973.977
9,218.588
I ,046,369, I 13
0.0%
( 14,034,276) -0.!%
!50.166.548
!6 9"/o
23.262.86-t , 165.8";0
5.0%
872.939,701
173,-f29.412
4.8%
19.9"/o
1.025
0.854
0171
20.0%
1.002
0.851
0. 15!
17.7%
19
Rctnined Earnings (Note
)
Cust of
Remeasurement l;arealized Gaiu Comprehensive E;o;eess of Cost over
('ummoa Stuck
gain (loss) on net on Available-forLuss on
the Currying Vlllue
Derivative
ufNun-cuatrolling
Appruprilllcd
fur
He Ill iu
defined benefit
Sale Financilll
Treasury
plan- net uftnx
Assets
Liability
Interests Acquired
Future
(Note 2)
(Note 10)
(:'<ole 18)
(Note 19)
t;;o;pansion UnappmpriateU
(Note 19)
Non-controlling
I nil rests
Total (Notes 2 and II)
Total Equity
fin PHI')
(3,411,504)
8,817,166,243
(180,511,491) 22,548,878,780
I ,078,310,550
1,078,310,550
19,680,426
1,097,990,976
(38,44(,,821)
(38,446,821)
(2,723,204)
(2,723,204)
(542,764,486) 10,200,000,000
(2,723,204)
(38,446,821)
reported
Note 2)
1,063,859.559
l,063,859,559
1,037,140,525
1,078,310,550
18,612,192
39,353,590
-+35,318
( 17.177,8&4)
( 17.177,884)
3. 84. I 9.."109
3,284.139.."109
(140, Ill)
( 4 72,054,212)
(351 ,379.055)
(351,379,055)
(7,6'n.9551
535,649
1.064,395,208
(17,177,884)
(46,578,892)
(5,042,971)
9,228,588
1,046,369,113
19,0-+7,510
39,353,590
19,047,510
39,353,590
(224,657.742)
(224.657.742)
(6,134, 708)
(542,764,486)_
10,200,000,000
102,626,82'1
(7,087.197)
(.'i-12.764,486)
5.000.000,()(Xl
102,626,829
(7,087,197)
(542,764,486)
5,000,000,000
9,895,476, 793
12,808,533,096
62.621.108
12,871.154.204
0 "+,007,93
(180,511 ,491)
{5.684.68::!)
(5.684.682)
58,401,100
23,644,420,405
( 180,511 ,401)
( 180,511,491)
21,160,238,680
162_036,634
10,998,202,046
894,667,932
(7.693,955)
(5.684,682)
!lXI.-:!l!9.295
(7,693.955)
535.649
(8,132,071)
(2,319,767)
l!04.1>67.'l1
23.045.190
23,580,839
35.856.086
35,856,086
58.90U76
3.343.040.585
59,436,925
21,938,928,266
(359,073,010)
(230,342.424)
\02,626.829
(7,087,197)
(54:;)64.486)
5.000.000.000
13.765.822,136
(180,511,491)
821,289,885
58,401,100
24,465,710,290
7 3.100,982
733,100,982
( 14,034,276)
( 14.0"14.276)
28,6!8,386
28.618,386
747.685.092
I ,893.."130.1>6
162.036,634
21,731J03,028
880.633,656
(7,6'!3,955)
(5,6!\4,682)
&,7. S .01'l
D.580.8W
35.856,086
28,618.386
88.055.311
22,686.613.358
Change
1013
Amt
Pet
(In PHP)
CASH FLOWS FROM OPERATI,GACTIVITJES
1,448,312,933
1,190.209.887
258,103,CJ.l.6
759,849,063
717,482,931
42,366,132
79,459,644
(52,290,327)
39,353,590
35,438,260
44,021,384
124.2%
(69,137.201)
( 16,846,874)
-24.4%
35,856.086
3,497,504
38,968.628
71,569.500
(32,600.872)
-45.6%
12,751,639
37,430,516
37.226.066
(24.474,427)
-65.7%
35.491.820
1,938,706
33,601,668
43,689,228
27,042,170
(6,549,495)
(1,002,899)
28,536,137
21.7%
5.9%
9.8%
2,416,927,140
5.5%
(I 0,087,560)
-23.1%
(1,493,967)
17,281,797
87.0J8,942
2,230.673,453
-5.2%
(23,831,292)
-137.9%
(88,031,841)
-101.2%
186,253,687
8.3%
334A43,257
3,071,840
(178,630,3-15)
(1,500,031,304)
1,075,779,588
55,544,483
79,696,373
(258,461.-135),.
(67,58-1.155)
(143,393.263)
I,740,930,973
68,889,843
254,746,884
(261,533,275)
319 6%
-101 2%
111,046,190
164.3%
I ,256,639,041
516.3 -0
(665,151,385)
-38.2%
-19.4%
(272,436,522)
(241 ,650,856)
( 13,345,360)
30,785,666
858,887,549
1,568,169,960
(709,282,411)
-45.2%
(883.098,873)
14.062.873
120,456,447
148,744,468
13.6%
1057.7%
54,640,365
(246,610,112)
-451.3%
(814,395,635)
218,322,091
J6.8%
(6,359,747)
1,633,051,766
-47.3%
(I,633,051 ,766)
(65,163.309)
65,163,309
100 0%
12.7%
(1 ,003,555,310)
161,807,3-11
(191,969,747)
(1 ,031,717'726)
(7,096,016)
( 13,455,763)
100.0%
Proceeds from
Issuances of and subscriptions to caprtal stock
19,047,510
(16,881,421)
(14,930,928)
(188,761,105)
(1 ,155,167)
9,903,877,068
9,713,860,696
23,580.839
I,632,000.000
(4,533,329)
( 1,632,000,000)
(30,982.280)
28,618.386
(58,453,893)
695,320.432
(715,813)
( 4,099.858)
(28,618,386)
(43,522,965)
( 884,081 ,537)
539,454
-19.2%
-100.0%
-13.2%
-100.0%
-74.5%
-127.1%
75.4%
8,848,591,584
1,055,285,48-1
11.9%
9,543,196,203
170,664,493
1.8%
'\\i'l\\
- Number
of Stores
Dec-13
Stores
Jollibee
Co-owned
Franchised
Total
Greenwich
Co-owned
Franchised
Multibrand
Total
Red Ribbon -Phils
Co-owned
Franchised
Total
Chowking-Phils
Co-owned
Franchised
Total
Mang lnasal
Co-owned
Franchised
Total
Buraer Kina
Total Philippines
China:
Yonghe King
Co-owned
Franchised
Total
Hongzhuangyuan
Co-owned
Franchised
Total
San Pin Wang
Co-owned
Franchised
Total
Total China
Open
Ownership
Change
Net
403
408
811
11
17
17
120
77
1
2
6
11
158
120
278
2
8
10
163
237
400
4
3
7
39
420
459
34
2,181
1
3
4
1
42
306
8
314
1
1
2
2
42
1
43
29
31
20
3
83
1
13
41
9
4
3
1
72
19
5
2
26
98
583
2,764
4
1
5
4
(4)
171
234
405
40
420
460
35
2,217
308
8
316
42
1
43
44
1
45
404
1
(1)
1
1
36
4
1
(1)
2
1
121
79
2
202
159
128
287
1
3
3
410
418
828
(1)
1
2
7
US:
Jollibee
Red Ribbon
Chowking
Jinia
Total us
1
(1)
2
199
44
1
45
402
Mar-14
Stores
29
32
19
3
83
1
12
43
10
4
3
1
74
1
6
13
3
8
1
3
5
20
5
2
27
101
588
55
14
41
2,805
163
147
84
70
9
77
58
12
11
31-Mar-13
31-Mar-14
23,836.6
27,305.4
%Growth
14.6%
l.
Corporate Information
Jollibee Foods Corporation (the Parent Company) was incorporated in the Philippines. The Parent
Company and its subsidiaries (collectively referred to as "the Jollibee Group") are involved
primarily in the development, operation and franchising of quick service restaurants under the
trade names "Jollibee", "Chowking", "Greenwich", "Red Ribbon", "Yang He King", "Hong
Zhuang Yuan", "Mang !nasal", "Burger King", "San Pin Wang" and "12 Hotpot". The other
activities of the Jollibee Group include manufacturing and property leasing in support of the quick
service restaurant systems and other business activities (see Notes 2 and 5).
The common shares of the Parent Company were listed and have been traded in the Philippine
Stock Exchange (PSE) beginning July 14, 1993.
The registered office address of the Parent Company is IOth Floor, Jollibee Plaza Building, No. I0
Emerald Avenue, Ortigas Centre, Pasig City.
The consolidated financial statements as at March 3 l, 2014 and December 3 1, 2013 and for the
three months ended March 3 I, 2014 and 2013 were reviewed and recommended for approval by
the Audit Committee as well as approved and authorized for issuance by the Board of Directors
(BOD) on May 13, 2014.
Amendments to PFRS l, First-time Adoption of Philippine Financial Reporting Standards Government Loans
The amendments to PFRS 1 require first-time adopters to apply the requirements of PAS 20,
Accounting for Government Grants and Disclosure of Government Assistance, prospectively
to government loans existing at the date of transition to PFRS. However, entities may choose
to apply the requirements of PAS 39, Financial Instruments: Recognition and Measurement,
and PAS 20 to government loans retrospectively if the information needed to do so had been
obtained at the time of initially accounting for those loans. These amendments are not
relevant to the Jollibee Group.
- 2
- 14
The Revised PAS 19 also amended the definition of short-term employee benefits and requires
employee benefits to be classified as short-term based on expected timing of settlement rather
than the employee's entitlement to the benefits. In addition, the Revised PAS 19 modifies the
timing of recognition for termination benefits. The modification requires the termination
benefits to be recognized at the earlier of when the offer cannot be withdrawn or when the
related restructuring costs are recognized.
Changes to definition of short-term employee benefits and timing of recognition for
termination benefits do not have any impact to the Jollibee Group's financial position and
financial performance.
The Jollibee Group applied Revised PAS 19 retrospectively in the current period in
accordance with the transitional provisions set out in the revised standard. The opening
consolidated statement of financial position of the earliest comparative period presented,
January I, 2012, and the comparative figures have been accordingly restated. The changes in
accounting policies have been applied retrospectively. The effects of adoption on the
consolidated financial statements are as follows:
December 3 I ,
2013
January I,
2012
December 31,
2012
Retained eamings
1'406,535,327
117,994,172
(288,541,!55)
(1,067,054)
2013
1'502,437,895 (1'269,295,496)
147,984,700
(53,607, 127)
(353,386,141)
128,728,399
(I ,067,054)
63,688,162
Years Ended
2012
2011
income
Increase (decrease) in:
General and administrative expenses
Income before income tax
Provision for income tax
!'-
Net income
1'1,477,996
1,477,996
(410,942)
(1,067,054)
(1'86,959,970)
86,959,970
(23,271 ,808)
63,688,162
(1,067,054)
63,688,162
(0.001)
(0.001)
(350,596,092)
(500,959,899)
0.030
0.029
182,335,526
remeasurement gains/losses
Other comprehensive income
Total comprehensive income
Total comprehensive income attributable to:
(103,199,623)
(247,396,469)
(247,396,469)
(147,573,758)
(353,386,141)
(354,453,195)
53,607,127
128,728,399
192,416,561
(247,396,469)
(354,453,195)
192,416,561
Non-controlling interests
The adoption did not have an impact on consolidated statement of cash flows.
This revised standard also requires more extensive disclosures. The disclosures are provided in
Note 25. Revised PAS 19 has been applied retrospectively, with following permitted
exceptions:
a) The carrying amounts of other assets have not been adjusted for changes in employee
benefit costs that were included before I January 2012; and
b) Sensitivity disclosures for the defined benefit obligation for comparative period,
December 3 I, 20 12, have not been provided.
PAS 28, Investments in Associates and Joint Ventures (As Revised in 2011)
As a consequence of the issuance of the new PFRS II, Joint Arrangements, and PFRS 12,
Disclosure of Interests in Other Entities, PAS 28 has been renamed PAS 28, Investments in
Associates and Joint Ventures, and describes the application of the equity method to
investments in joint ventures in addition to associates. The adoption of the amended PAS 28
did not have a significant impact on the separate or stand-alone financial statements of the
entities in the Jollibee Group.
6-
PAS 34, Interim Financial Reporting- Interim Financial Reporting and Segment
Information for Total Assets and Liabilities
The amendment clarifies that the total assets and liabilities for a particular reportable
segment need to be disclosed only when the amounts are regularly provided to the chief
operating decision maker and there has been a material change from the amount disclosed
in the entity's previous annual financial statements for that reportable segment. The
amendment affects disclosures only and has no impact on the Jollibee Group's financial
position or performance.
7beginning on or after January I, 2014 with earlier application permitted, provided PFRS 13 is also
applied. The amendments affect disclosures only and has no significant impact on the Jollibee
Group's financial position or performance.
New Accounting Standards, Interpretations and Amendments to Existing Standards
Effective Subseguent to December 31. 2013
The Jollibee Group will adopt the following revised standards, interpretations and amendments
when these become effective.
Effective January I. 20I4 (Unless otherwise indicated)
- 19
Effective January I, 2015 (Unless otherwise indicated)
Amendments to PAS 19, Employee Benefits- Defined Benefit Plans: Employee Contributions
The amendments apply to contributions from employees or third parties to defined benefit
plans. Contributions that are set out in the formal terms of the plan shall be accounted for as
reductions to current service costs if they are linked to service or as part of the
remeasurements of the net defined benefit asset or liability if they are not linked to service.
Contributions that are discretionmy shall be accounted for as reductions of current service cost
upon payment of these contributions to the plans. The amendments to PAS I 9 are to be
retrospectively applied for annual periods beginning on or after July 1, 2014. The amendment
will have no significant impact on the Jollibee Group's financial position or performance.
- I0 b)
The amendments also clarity that the amount of the adjustment of the accumulated
amortization should form part of the increase or decrease in the carrying amount
accounted for in accordance with the standard.
The amendments are effective for annual periods beginning on or after July I, 2014. The
amendments shall apply to all revaluations recognized in annual periods beginning on or
after the date of initial application of this amendment and in the immediately preceding
annual period. The amendments will have no impact on the Jollibee Group's financial
position or performance.
- II -
- 23
With Deferred Effective Date
Power over the investee (i.e., existing rights that give it the current ability to direct the
relevant activities of the investee);
Exposure, or rights, to variable returns from its involvement with the investee; and
The ability to use its power over the investee to affect its returns.
When the Jollibee Group has less than a majority of the voting or similar rights of an investee, the
Jollibee Group considers all relevant facts and circumstances in assessing whether it has power
over an in vestee, including:
The contractual arrangement with the other vote holders of the investee;
Rights arising from other contractual arrangements; or
The Jollibee Group's voting rights and potential voting rights.
The Jollibee Group re-assesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of control. Consolidation of a
subsidiary begins when the Jollibee Group obtains control over the subsidiary and ceases when the
Jollibee Group loses control of the subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in the consolidated financial
statements from the date the Jollibee Group gains control until the date the Jollibee Group ceases
to control the subsidiary.
Profit or loss and each component ofOCJ are attributed to the equity holders of the Parent
Company and to the non-controlling interests, even if this results in the non-controlling interests
having a deficit balance. When necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with the Jollibee Group's accounting
policies. All intra-group assets and liabilities, equity, income, expenses and cash tlows relating to
transactions between members of the Jollibee Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a Joss of control, is accounted for as an
equity transaction. If the Jollibee Group loses control over a subsidiary, it:
Non-controlling interests represent the interests in the subsidiaries not held by the Parent
Company, and are presented separately in the consolidated statement of income and within equity
in the consolidated balance sheet, separately from equity attributable to holders of the Parent
Company.
The consolidated financial statements include the accounts of the Parent Company and the
following wholly-owned and majority-owned subsidiaries as at March 31, 2014 and December 31,
2013:
March 2014
Philippines
Philippines
Philippines
Philippines
USA
USA
Singapore
Philippines
Singapore
Singapore
PRC
British Virgin Island
tB\'IJ
PRC
PRC
PRC
PRC
I'RC
PRC
PRC
PRC
Singapore
PRC
Singapore
USA
PRC
B\'1
Vietnam
Indonesia
Indonesia
Hong Kong
B\'1
PRC
BVI
BVI
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
USA
(Unaudited)
Direct
Indireet
Ownershi
OwnershiE:
100
Leasmg
Digital pnnting
Adverlising
Inacti"e
Food ser.icc
Food scr.ice
Holding company
FinanciJI
accounung,
human rcoourccs
and lo_istics
ser.tces
!!old in!! company
Food ser.ice
December 2013
{Audited)
D1rcct
Indirect
OwnershiJ:
Ownersh'11:
100
100
100
100
100
100
100
100
100
100
100
70
100
100
70
100
100
100
60
50
100
100
60
50
100
100
100
100
100
100
100
60
100
100
60
Food ser.-'!Ce
100
100
Holdtng company
Food ser.ice
Food ser.ice
Food sen.-icc
Food ser.tce
Food ser.ice
Food ser.ice
Food ser.ice
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
55
55
70
Food scr.icc
Holding company
Food service
Holding comp ny
Food ser.ice
,\1anagement
compan;
Holdtng company
Food ser.ice
Food scr.icc
Dormant
Dormant
Holding company
Business management
ser.-JCe
Holding eompany
Holding company
Holding company
Holding company
Holding company
Food ser.ice
Oonnant
Dormant
Dormant
Inactive
Dormant
Perf Res/aura/lis. !tK'. af.1u bold.1 .1/wr.s"' l'trj'li 1110/tKl mul Pnf-\!OA
On June 18, 200-1, the luckholda., 'ifihc .Joi/Jha Uraup npprowd 1he Plan uf.\lager of ill<' ihrt'<' dorm""' mml"""n
ad/arch 31, 201-1.
70
100
100
99
81
99
81
100
100
100
100
100
100
100
100
100
100
100
85
100
100
100
100
100
100
100
85
100
100
54
53
53
100
100
100
100
100
100
100
100
100
100
54
53
53
All other assets are classified as noncurrent. A liability is classified as current when:
The Jollibee Group classifies all other liabilities as noncurrent. Deferred tax assets and liabilities
are classified as noncurrent assets and liabilities.
Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market pa1ticipants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either:
The principal or the most advantageous market must be accessible by the Jollibee Group.
The fair value of an asset or a liability is measured using the assumptions that market pmticipants
would use when pricing the asset or liability, assuming that market participants act in their
economic best interest. A fair value measurement of a non-financial asset takes into account a
market participant's ability to generate economic benefits by using the asset in its highest and best
use or by selling it to another market participant that would use the asset in its highest and best
use.
The fair value for financial instruments traded in active markets at the reporting date is based on
their quoted price or binding dealer price quotations, without any deduction for transaction costs.
Where the Jollibee Group has financial assets and financial liabilities with offsetting positions in
market risks or counterparty credit risk, it has elected to use the measurement exception to
measure the fair value of its net risk exposure by applying the bid or ask price to the net open
position as appropriate. For all other financial instruments not traded in an active market, the fair
value is determined by using valuation techniques deemed to be appropriate in the circumstances.
Valuation techniques include the market approach (i.e., using recent arm's length market
transactions adjusted as necessary and reference to the current market value of another instrument
that is substantially the same) and the income approach (i.e., discounted cash flow analysis and
option pricing mode Is making as much use of available an supportable market data as possible).
- 16 -
The Jollibee 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 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 I -Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level2- Valuation techniques for which the lowest-level input that is significant to the fair
value measurement is directly or indirectly observable
Level3- Valuation techniques for which the lowest-level input that is significant to the fair
value measurement is unobservable
For assets and liabilities that are recognized in the consolidated financial statements on a recurring
basis, the Jollibee Group determines whether transfers have occurred between levels in the
hierarchy by reassessing categorization (based on the lowest-level input that is significant to the
fair value measurement as a whole) at the end of each reporting period.
The Jollibee Group's management detetmines the policies and procedures for both recurring fair
value measurement and non-recurring measurement. At each reporting date, the management
analyzes the movements in the values of assets and liabilities which are required to be remeasured
or reassessed as per the Jollibee Group's accounting policies. For this analysis, the management
verifies the major inputs applied in the latest valuation by agreeing the information in the
valuation computation to contracts and other relevant documents.
For the purpose of fair value disclosures, the Jollibee Group has detennined classes of assets and
liabilities based on the nature, characteristics and risks of the asset or liability and the level of the
fair value hierarchy as explained above.
Cash and Cash Equivalents
Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash with original maturities of three
months or less from the date of acquisition and are subject to an insignificant risk of change in
value.
Financial Instruments
Date of Recognition. The Jollibee Group recognizes a financial asset or a financial liability in the
consolidated statements of financial position when it becomes a party to the contractual provisions
of an instrument. In the case of a regular way purchase or sale of financial assets, recognition and
derecognition, as applicable, is done using trade date accounting. A regular way purchase or sale
is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset
within the time frame established generally by regulation or convention in the market place
concerned.
Financial instruments are classified as liability or equity in accordance with the substance of the
contractual arrangement. Interest, dividends, gains or losses relating to financial instruments or a
component that is financial liability are reported as expense or income. Distribution to holders of
financial instruments classified as equity is charged directly to equity, net of any related income
tax benefits.
- 28
Initial Recognition and Measurement. Financial instruments are recognized initially at fair value,
which is the fair value of the consideration given (in case of an asset) or received (in case of a
liability). Transaction costs that are directly attributable to the acquisition or issue of the financial
instruments are included in the initial measurement of all financial assets and liabilities, except for
financial assets and liabilities measured at fair value through profit or loss (FVPL).
Subsequent to initial recognition, the Jollibee Group classifies its financial instruments in the
following categories: financial assets and financial liabilities at FVPL, loans and receivables, held
to-maturity (HTM) investments, AFS financial assets, other financial liabilities and derivatives
designated as hedging instruments in an effective hedge. The classification depends on the
purpose for which the instruments are acquired and as liabilities were incurred whether they are
quoted in an active market. Management determines the classification of its financial instruments
at initial recognition and, where allowed and appropriate, re-evaluates this classification at every
repmting date.
For all other financial instruments not traded in an active market, the fair value is determined
using appropriate valuation techniques. Valuation techniques include net present value
techniques, comparison to similar instruments for which observable market prices exist, option
pricing models and other relevant valuation models for which sufficient data are available to
measure fair value, maximizing the use of relevant observable inputs and minimizing the use of
unobservable inputs.
Determination of Amortized Cost. The amortized cost of financial instruments is computed using
the effective interest method less any allowance for impairment. The calculation takes into
account any premium or discount on acquisition and includes transaction costs and fees that are
integral part of the effective interest.
"Day I" Difference. Where the transaction price in a non-active market is different from the fair
value of other observable current market transactions in the same instrument or based on a
valuation technique whose variables include only data from observable market, the Jol!ibee Group
recognizes the difference between the transaction price and fair value (a "Day I" difference) in
profit or loss unless it qualifies for recognition as some other type of asset or liability. In cases
where unobservable data is used, 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 Jollibee Group determines the appropriate method of
recognizing the "Day I" difference amount.
Financial Assets
Financial Assets at FVPL. Financial assets at FVPL include financial assets held-for-trading and
financial assets designated as at FVPL upon initial recognition.
Financial assets are classified as held-for-trading if they are acquired for the purpose of selling in
the near term. Gains or losses on investments held-for-trading are recognized in profit or loss.
Financial assets may be designated as at FVPL at initial recognition if the following criteria are
met:
the designation eliminates or significantly reduces the inconsistent treatment that would
otherwise arise from measuring the assets or recognizing gains or losses on them on a
different basis;
the assets are part of a group of financial assets which are managed and their performance
evaluated on a fair value basis, in accordance with a documented risk management strategy; or
the financial asset contains an embedded derivative, unless the embedded derivative does not
significantly modify the cash flows or it is clear, with little or no analysis, that it would not be
separately recorded.
The Jollibee Group has no financial assets at FVPL as at March 31, 2014 and December 31, 2013.
Loans and Receivables. Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are not entered into with the
intention of immediate or short-term resale and are not classified or designated as AFS financial
assets or financial assets at FVPL. After initial measurement, such financial assets are
subsequently measured at amortized cost using the effective interest method, less any impairment
in value. Amortized cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of effective interest rate (EIR). Gains and
losses are recognized in profit or loss when the loans and receivables are derecognized or impaired,
as well as through the amortization process.
The Jollibee Group's cash and cash equivalents, receivables, and security and other deposits are
classified under this category.
HTA1Investments. Non-derivative financial assets with fixed or determinable payments and fixed
maturity are classified as HTM when there is a positive intention and ability to hold to maturity.
Financial assets intended to be held for an undefined period are not included in this category. HTM
investments are subsequently measured at amortized cost. This cost is computed as the amount
initially recognized minus principal repayments, plus or minus the cumulative
amortization using the effective interest method of any difference between the initially recognized
amount and the maturity amount less allowance for impairment. Amortized cost is calculated by
taking into account any discount or premium on acquisition and fees or costs that are an integral
part of effective interest rate. Gains and losses are recognized in profit or loss when the financial
assets are derecognized or impaired, as well as through the amortization process.
The Jollibee Group has no HTM investments as at March 31, 2014 and December 31, 2013.
AFS Financial Assets. AFS financial assets are non-derivative financial assets that are designated
in this category or are not classified in any of the other categories. AFS financial assets include
equity and debt securities. Equity investments classified as AFS are those which are intended to
be held for an indefinite period oftime and are neither classified as held-for-trading nor designated
as at FVPL. Debt securities are those which are intended to be held for an indefinite period of
time and which may be sold in response to needs of liquidity or in response to changes in market
conditions.
After initial measurement, AFS financial assets are subsequently measured at fair value with
unrealized gains or losses recognized as "Unrealized gains on available-for-sale financial assets"
account in other comprehensive income until the financial asset is derecognized or determined to
be impaired at which time the accumulated gains or losses previously reported in other
comprehensive income are included in profit or loss. Interest earned while holding AFS financial
asset is reported as interest income using effective interest rate method. If the fair value cannot be
measured reliably, AFS financial assets are measured at cost, being the fair value of the
consideration paid for the acquisition of the investment, less any impairment in value. All
transaction costs directly attributable to the acquisition are also included in the cost of investment.
- 19The Jollibee Group evaluates whether the ability and intention to sell its AFS financial assets in
the near term is still appropriate. When in rare circumstances. the Jollibee Group is unable to
trade these financial assets due to inactive markets; the Jollibee Group may elect to reclassifY
these financial assets if the management has the ability and intention to hold the assets for
foreseeable future or until maturity.
For a financial asset reclassified from AFS category. the fair value carrying amount at the date of
reclassification becomes its new amortized cost and any previous gain or loss on the asset that has
been recognized in equity is amortized to profit or loss over the remaining life of the investment
using effective interest rate method. Any difference between the new amortized cost and the
maturity amount is also amortized over the remaining life of the asset using the EIR. If the asset is
subsequently determined to be impaired, then the amount recorded in equity is reclassified to
profit or loss.
The Jollibee Group's investments in club shares are classified under this category as at March 31,
2014 and December 31,2013.
Financial Liabilities
Financial Liabilities at FVPL. Financial liabilities at FVPL include financial liabilities that are
held-for-trading and financial liabilities designated as at FVPL upon initial recognition.
Financial liabilities are classified as held-for-trading if acquired for the purpose of repurchasing in
the near term. Gains or losses on liabilities held-for-trading are recognized in profit or Joss.
The Jollibee Group has no financial liability classified under this category as at March 31, 2014
and December 31,2013.
Derivative Financial instruments and Hedge Accounting. The Jollibee Group uses currency
swaps to manage its foreign exchange and interest rate risk exposures on its United States Dollar
(USD) denominated variable rate loan. Accruals of interest on the receive-and pay-legs of the
cross-currency swap are recorded as interest expense in the consolidated statements of
comprehensive income.
Derivative financial instruments are initially recognized at fair value on the date on which a
derivative contract is entered into and are subsequently measured at fair value. Derivatives are
carried as assets when the fair value is positive and as liabilities when the fair value is negative.
Any gains or losses arising from changes in fair value on derivatives that do not qualifY for hedge
accounting are taken directly to profit or loss.
For the purpose of hedge accounting, derivatives can be designated as cash flow hedges or fair
value hedges, depending on the type of risk exposure.
At the inception of a hedge relationship, the Jollibee Group formally designates and documents the
hedge relationship to which the Jollibee Group wishes to apply hedge accounting and the risk
management objective and strategy for undertaking the hedge. The documentation includes
identification of the hedging instrument, the hedged item or transaction, the nature of the risk
being hedged and how the entity will assess the hedging instrument's effectiveness in offsetting
the exposure to changes in the hedged item's fair value or cash flows attributable to the hedged
risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value
or cash flows and are assessed on an ongoing basis to determine that they actually have been
highly effective throughout the financial reporting periods for which they were designated.
- 20The Jollibee Group accounts for its cross-currency swaps as cash flow hedges of foreign exchange
and interest rate exposure on its outstanding floating rate US-denominated loan of Perf
(see Note 18).
Cash Flow Hedge. Cash flow hedges are hedges on the exposure to variability of cash flows that
are attributable to a particular risk associated with a recognized asset, liability or a highly probable
forecast transaction and could affect profit or loss. The effective portion of the gain or loss on the
hedging instrument is recognized in the consolidated statements of comprehensive income and
directly in equity, while the ineffective portion is recognized immediately in profit or loss.
Amounts taken to equity are transferred to the profit or loss when the hedged transaction affects
profit or loss, such as when hedged financial income or expense is recognized or when a forecast
sale or purchase occurs. Where the hedged item is the cost of a nonfinancial asset or liability, the
amounts taken to equity are transferred to the initial carrying amount of the nonfinancial asset or
liability.
If the forecast transaction is no longer expected to occur, amounts previously recognized in equity
are transferred to the consolidated statements of comprehensive income. If the hedging instrument
expires or is sold, terminated or exercised without replacement or rollover, or if its designation as
a hedge is revoked, amounts previously recognized in equity remain in equity until the forecast
transaction occurs. If the related transaction is not expected to occur, the amount is recognized in
the profit or loss.
Other Financial Liabilities. This category pertains to financial liabilities that are not
held-for-trading or not designated as at FVPL upon the inception of the liability where the
substance of the contractual arrangements results in the Jollibee Group having an obligation either
to deliver cash or another financial asset to the holder, or to exchange financial assets or financial
liabilities with the holder under conditions that are potentially unfavorable to the Jollibee Group.
These include liabilities arising from operations or borrowings.
Other financial liabilities are recognized initially at fair value and are subsequently carried at
amortized cost, taking into account the impact of applying the effective interest method of
amortization (or accretion) for any related premium, discount and any directly attributable
transaction costs. Gains and losses are recognized in profit or loss when the liabilities are
derecognized, as well as through the amortization process.
This category includes long-term debt (including current portion), liability for acquisition of
businesses (including current portion), trade payables and other current liabilities (excluding local
and other taxes, and unearned revenue from gift certificates) and operating lease payable.
The components of issued financial instruments that contain both liability and equity elements are
accounted for separately, with the equity component being assigned the residual amount after
deducting from the instrument as a whole the amount separately determined as the fair value of the
liability component on the date of issue.
Debt Issue Costs
Debt issue costs are deducted against long-term debt and are amortized over the terms of the
related borrowings using the effective interest method.
- 21 -
- 33
Quoted AFS Equity Investments. In the case of equity investments classified as AFS financial
assets, an objective evidence of impainnent would include a significant or prolonged decline in the
fair value of the investments below its cost. 'Significant' is to be evaluated against the original
cost of the investment and 'prolonged' against the period in which the fair value has been below
its original cost. When there is evidence of impairment, the cumulative loss which is measured as
the difference between the acquisition cost and the current fair value, less any impairment loss on
that financial asset previously recognized in other comprehensive income under "Unrealized gain
(loss) on available-for-sale financial assets" account, is removed from equity and recognized in the
profit or loss. Impairment losses on equity investments are not reversed through profit or loss;
increases in fair value after impairment are recognized directly as other comprehensive income.
Derecognition of Financial Assets and Liabilities
Financial Assets. A financial asset (or, where applicable a part of a financial asset or patt of a
group of similar financial assets) is derecognized when:
(a) the rights to receive cash flows from the asset have expired;
(b) the Jollibee Group retains the right 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
(c) the Jollibee Group has transferred its rights to receive cash flows from the asset and either (i)
has transferred substantially all the risks and rewards of the asset, or (ii) has neither
transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.
When the Jollibee Group has transferred its rights to receive cash flows from the asset or has
entered into a "pass-through" arrangement, and 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 Jollibee Group's continuing involvement in the asset. In that case, the Jollibee Group
also recognizes an associated liability. The transferred asset and the associated liability are
measured on a basis that reflects the rights and obligations that the Jollibee Group has retained.
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 the
consideration that the Jollibee Group could be required to pay.
Financial Liabilities. A financial liability is derecognized when the obligation under the liability
is discharged, cancelled or has expired.
When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts is recognized in profit or loss.
Offsetting Financial Instruments
Financial assets and financial liabilities are offset and the net amount is reported in the
consolidated statements of financial position if, and only if, there is a currently enforceable legal
right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize
the asset and settle the liability simultaneously.
Inventories
Inventories are valued at the lower of cost and net realizable value. Costs are accounted for as
follows:
Processed inventories
Net realizable value of processed inventories is the estimated selling price in the ordinary course of
business, less estimated costs of completion and the estimated costs necessary to make the sale.
Net realizable value of food supplies, packaging, store and other supplies is the current
replacement cost.
Net realizable value of novelty items is the estimated selling price in the ordinary course of
business, less the estimated costs necessary to make the sale.
Other Current Assets
Other current assets include deposits which pertain to advance payments to suppliers to be applied
for future purchases, prepaid expenses which are paid in advance and recorded as asset before
these are utilized; and creditable withholding taxes, which represent claims for refund with the
Bureau of Internal Revenue.
Propertv, Plant and Equipment
Property, plant and equipment, except land, are stated at cost less accumulated depreciation and
amortization and any accumulated impairment in value. Such cost includes the cost of replacing
part of property, plant and equipment at the time that cost is incurred, if the recognition criteria are
met, and excludes the costs of day-to-day servicing. Land is stated at cost less any impai1ment in
value.
The initial cost of property, plant and equipment consists of its purchase price, including import
duties and taxes and any other costs directly attributable in bringing the asset to its working
condition and location for its intended use. Expenditures incurred after the property, plant and
equipment have been put into operation, such as repairs and maintenance, are normally charged to
income in the year in which the costs are incurred. In situations where it can be clearly
demonstrated that the expenditures have resulted in an increase in the future economic benefits
expected to be obtained from the use of an item of property, plant and equipment beyond its
originally assessed standard of performance, the expenditures are capitalized as additional costs of
property, plant and equipment.
- 24Depreciation and amortization are calculated on a straight-line basis over the following estimated
useful lives of the assets:
Land improvements
Plant, buildings, condominium units and improvements
Leasehold rights and improvements
Office, store and food processing equipment
Furniture and fixtures
Transportation equipment
5 years
5 - 40 years
2 - I 0 years or term of the lease,
whichever is shorter
2-15years
3 - 5 years
3 - 5 years
An item of property, plant and equipment is derecognized upon disposal or when no future
economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition
of the asset (calculated as the difference between the disposal proceeds and the carrying amount of
the asset) is included in profit or loss in the period the asset is derecognized.
The residual values, if any, useful lives and depreciation and amortization method of the assets are
reviewed and adjusted, if appropriate, at each financial period.
When each major inspection is performed, its cost is recognized in the carrying amount of the
property, plant and equipment as a replacement if the recognition criteria are satisfied.
Construction in progress represents structures under construction and is stated at cost less any
impairment in value. This includes the cost of construction and other direct costs. Cost also
includes interest on borrowed funds incurred during the construction period. Construction in
progress is not depreciated until such time that the relevant assets are completed and readily for
use.
Fully depreciated assets are retained in the accounts until they are no longer in use and no further
depreciation and amortization is credited or charged to profit or loss.
Investment Properties
Investment properties consist of land and buildings and building improvements held by the
Jollibee Group for capital appreciation and rental purposes. Investment properties, except land,
are carried at cost, including transaction costs, less accumulated depreciation and amortization and
any impairment in value. Cost also includes the cost of replacing part of an existing investment
property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of
day-to-day servicing of an investment property. Land is carried at cost less any impairment in
value.
The depreciation of buildings and building improvements are calculated on a straight-line basis
over the estimated useful lives of the assets which are five (5) to twenty (20) years.
The residual values, if any, useful lives and method of depreciation and amortization of the assets
are reviewed and adjusted, if appropriate, at each financial year-end.
Investment property is derecognized when either it has been disposed of or when the investment
property is permanently withdrawn from use and no future economic benefit is expected from its
disposal. Any gains or losses on the retirement or disposal of an investment property are
recognized in profit or loss in the year of retirement or disposal.
- 25Transfers to investment property are made only when there is a change in use, evidenced by
ending of owner-occupation, or commencement of an operating lease to another party. Transfers
from investment property are made only when there is a change in use, evidenced by
commencement of owner-occupation or commencement of development with a view to sell.
Business Combinations
Business combinations are accounted for using the acquisition method. Applying the acquisition
method requires the (a) determination whether the Jollibee Group will be identified as the
acquirer, (b) determination of the acquisition-date, (c) recognition and measurement of the
identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquiree
and (d) recognition and measurement of goodwill or a gain from a bargain purchase.
When the Jollibee Group acquires a business, it assesses the financial assets and liabilities
assumed for appropriate classification and designation in accordance with the contractual terms,
economic circumstances and pertinent conditions as at acquisition date.
The cost of an acquisition is measured as the aggregate of the (a) consideration transferred by the
Jollibee Group, measured at acquisition-date fair value, (b) amount of any non-controlling interest
in the acquiree and (c) acquisition-date fair value of the Jollibee Group's previously held equity
interest in the acquiree in a business combination achieved in stages. Acquisition costs incurred
are expensed and included in "General and administrative expenses" account in the consolidated
statements of comprehensive income.
Initial Measurement of Non-controlling Interest. For each business combination, the Jollibee
Group measures the non-controlling interest in the acquiree using the proportionate share of the
acquiree's identifiable net assets.
Business Combination Achieved in Stages. In a business combination achieved in stages, the
Jollibee Group remeasures its previously held equity interests in the acquiree at its acquisition-date
fair value and recognizes the resulting gain or loss, if any, in profit or loss.
Measurement Period. If the initial accounting for a business combination is incomplete by the end
of the reporting period in which the combination occurs, the Jollibee Group reports in its
consolidated financial statements provisional amounts for the items for which the accounting is
incomplete. The measurement period ends as soon as the Jollibee Group receives the information
it was seeking about facts and circumstances that existed as at the acquisition-date or learns that
more information is not obtainable. The measurement period does not exceed one year from the
acquisition-date.
Contingent Consideration or Earn-out. Any contingent consideration or earn-out to be transferred
by the Jollibee Group is recognized at fair value at the acquisition date. Subsequent changes to the
fair value of the contingent consideration which is deemed to be an asset or liability, is recognized
either in profit or loss or as a change to OCI. If the contingent consideration is classified as
equity, it should not be remeasured until it is finally settled within equity.
Goodwill or Gain on a Bargain Purchase
Initial Measurement of Goodwill or Gain on a Bargain Purchase. Goodwill is initially measured
by the Jollibee Group at cost being the excess of the total consideration transferred over the net
identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair
value of the net assets of the subsidiary acquired, the difference is recognized in profit or loss as
gain on a bargain purchase. Before recognizing a gain on a bargain purchase, the Jollibee Group
determines whether it has correctly identified all of the assets acquired and all of the liabilities
assumed and recognize any additional assets or liabilities that are identified in that review.
represents the lowest level within the Jollibee Group at which the goodwill is monitored for
internal management purposes; and
is not larger than an operating segment as defined in PFRS 8, Operating Segments, before
aggregation.
Frequency of Impairment Testing. Irrespective of whether there is any indication of impainnent, the
Jollibee Group tests goodwill acquired in a business combination for impairment annually as at
September 30 and more frequently when circumstances indicate that the carrying amount is
impaired.
Allocation of Impairment Loss. An impairment loss is recognized for a CGU if the recoverable
amount of the unit or group of units is less than the carrying amount of the unit or group of units.
The impairment loss is allocated to reduce the canying amount of the assets of the unit or group of
units first to reduce the carrying amount of goodwill allocated to the CGU or group of units and
then to the other assets of the unit or group of units pro rata on the basis of the carrying amount of
each asset in the unit or group of units.
Intangible Assets
Intangible assets acquired separately are measured at cost on initial recognition. Following initial
recognition, intangible assets are canied at cost less any accumulated amortization and any
accumulated impairment loss. The useful lives of intangible assets are assessed at the individual
asset level as either finite or indefinite.
Intangible assets with finite lives are amortized over the useful economic life using the straight line
method and assessed for impairment whenever there is an indication that the intangible assets may
be impaired. At a minimum, the amortization period and the amortization method for an intangible
asset with a finite useful life are reviewed at least at each financial year-end. Changes in the
expected useful life or the expected pattern of consumption of future economic benefits embodied
in the asset are accounted for by changing the amortization period or method, as appropriate, and
treated as changes in accounting estimates.
Intangible assets with indefinite useful lives are tested for impairment annually either individually
or at the CGU level. Such intangible assets are not amortized. The useful life of an intangible asset
with an indefinite life is reviewed annually to detennine whether the 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.
The estimated useful lives used in amortizing computer software and other intangible assets are
disclosed in Note 14.
Gains or losses arising from derecognition of an intangible asset are measured as the difference
between the net disposal proceeds and the carrying amount of the asset, and are recognized in
profit or loss when the asset is derecognized.
- 39
Impairment of Nonfinancial Assets
The carrying values of interests in and advances to joint ventures, co-venturers and associate,
property, plant and equipment, investment properties, goodwill and other intangible assets are
reviewed for impairment when events or changes in circumstances indicate that the carrying value
may not be recoverable. If any such indication exists, and if the carrying value exceeds the
estimated recoverable amount, the assets or CGU are written down to their recoverable amounts.
The recoverable amount of the asset is the greater of fair value less costs to sell or value in use.
The fair value less costs to sell is the amount obtainable from the sale of an asset in an arm's length
transaction between knowledgeable, willing parties, less costs of disposal. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the
asset. For an asset that does not generate largely independent cash inflows, the recoverable amount
is determined for the CGU to which the asset belongs. Impairment losses are recognized in profit
or loss in those expense categories consistent with the function of the
impaired asset.
For nonfinancial assets, excluding goodwill, an assessment is made at each reporting date as to
whether there is any indication that previously recognized impairment losses may no longer exist
or may have decreased. If such indication exists, the recoverable amount is estimated. A
previously recognized impairment loss is reversed only if there has been a change in the estimates
used to determine the asset's recoverable amount since the last impairment loss was recognized.
If that is the case, the carrying amount of the asset is increased to its recoverable amount. That
increased amount cannot exceed the carrying amount that would have been determined, net of
depreciation and amm1ization, had no impairment loss been recognized for the asset in prior years.
Such reversal is recognized in profit or loss. After such a reversal, the depreciation charge is
adjusted in future periods to allocate the asset's revised carrying amount, less any residual value
on a systematic basis over its remaining useful life.
Capital Stock and Additional Paid-in Capital. Capital stock is measured at par value for all shares
issued. Incremental costs incurred directly attributable to the issuance of new shares are shown in
equity as a deduction from proceeds, net of tax. Proceeds and/or fair value of considerations
received in excess of par value, if any, are recognized as additional paid-in capital.
Retained Earnings. Retained earnings represent the Jollibee Group's accumulated earnings, net of
dividends declared.
Dividends. The Jollibee Group recognizes a liability to make cash distribution to its equity holders
when the distribution is authorized and the distribution is no longer at the discretion of the Group.
As per the corporate laws in the Philippines, a distribution is authorized when it is approved by the
BOD. A corresponding amount is recognized directly in the equity. Dividends for the year that
are approved after the financial reporting date are dealt with as an event after the reporting period.
Treasury Shares. Acquisitions of treasury shares are recorded at cost. The total cost of treasury
shares is shown in the consolidated statements of financial position as a deduction from the total
equity. Upon re-issuance or resale of the treasury shares, cost of common stock held in treasury
account is credited for the cost of the treasury shares determined using the simple average method.
Gain on sale is credited to additional paid-in capital. Losses are charged against additional paid-in
capital but only to the extent of previous gain from original issuance, sale or retirement for the
same class of stock. Otherwise, losses are charged to retained earnings.
Advertising and promotions expenses include costs incurred for advertising schemes and
promotional activities for new products. The amount of expenses incuned by the Jollibee Group
is reduced by the network advertising and promotional costs reimbursed by the Jollibee Group's
franchisees and subsidiaries.
Pension Benefits
The net defined benefit liability or asset is the aggregate of the present value of the defined benefit
obligation at the end of the reporting period reduced by the fair value of plan assets (if any),
adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceiling
is the present value of any economic benefits available in the form of refunds from the plan or
reductions in future contributions to the plan.
The cost of providing benefits under the defined benefit plans is actuarially determined using the
projected unit credit method.
Defined benefit costs comprise the following:
Service cost
Net interest on the net defined benefit liability or asset
Remeasurements of net defined benefit liability or asset
Service costs which include current service costs, past service costs and gains or losses on non
routine settlements are recognized as expense in profit or loss. Past service costs are recognized
when plan amendment or curtailment occurs. These amounts are calculated periodically by
independent qualified actuaries.
Net interest on the net defined benefit liability or asset is the change during the period in the net
defined benefit liability or asset that arises from the passage of time which is determined by
applying the discount rate based on government bonds to the net defined benefit liability or asset.
Net interest on the net defined benefit liability or asset is recognized as expense or income in
profit or loss.
Remeasurements comprising actuarial gains and losses, return on plan assets and any change in
the effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized
immediately in other comprehensive income in the period in which they arise. Remeasurements
are not reclassified to proftt or loss in subsequent periods.
Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance
policies. Plan assets are not available to the creditors of the Jollibee Group, nor can they be paid
directly to the Jollibee Group. Fair value of plan assets is based on market price information.
When no market price is available, the fair value of plan assets is estimated by discounting
expected future cash flows using a discount rate that reflects both the risk associated with the plan
assets and the maturity or expected disposal date of those assets (or, if they have no maturity, the
expected period until the settlement ofthe related obligations). If the fair value of the plan assets
is higher than the present value of the defined benefit obligation, the measurement of the resulting
defined benefit asset is limited to the present value of economic benefits available in the form of
refunds from the plan or reductions in future contributions to the plan.
The Jollibee Group's right to be reimbursed of some or all of the expenditure required to settle a
defined benefit obligation is recognized as a separate asset at fair value when and only when
reimbursement is virtually certain.
- 31 -
The Jollibee Group also participates in various government-defined contribution schemes for the
PRC-based and USA-based subsidiaries. Under these schemes, pension benefits of existing and
retired employees are guaranteed by the local pension benefit plan, and each subsidiary has no
further obligations beyond the annual contribution.
Employee Leave Entitlement
Employee entitlements to annual leave are recognized as a liability when they are accrued to the
employees. The undiscounted liability for leave expected to be settled wholly before twelve
months after the end of the annual reporting period is recognized for services rendered by
employees up to the end of the reporting period.
Share-based Payments
The Jollibee Group has stock option plans granting its management and employees an option to
purchase a fixed number of shares of stock at a stated price during a specified period (equity
settled transactions).
The cost ofthe options granted to the Jollibee Group's management and employees that becomes
vested is recognized in profit or loss over the period in which the performance and/or service
conditions are fulfilled, ending on the date on which the relevant management and employees
become fully entitled to the award ("vesting date").
The fair value is determined using the Black-Scholes Option Pricing Model. The cumulative
expense recognized for the share-based transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired and the Jollibee Group's best estimate
of the number of equity instruments that will ultimately vest. The charge or credit in profit or loss
or the investment account for a period represents the movement in cumulative expense recognized
as of the beginning and end of that period.
No expense is recognized for awards that do not ultimately vest, except for awards where vesting
is conditional upon a market condition, which are treated as vested irrespective of whether or not
the market condition is satisfied, provided that all other performance conditions are satisfied.
Where the terms of a share-based award are modified, as a minimum, an expense is recognized as
if the terms had not been modified. In addition, an expense is recognized for any modification,
which increases the total fair value of the share-based payment agreement, or is otherwise
beneficial to the management and employee as measured at the date of modification.
Where a share-based award is cancelled, it is treated as if it had vested on the date of cancellation,
and any expense not yet recognized for the award is recognized immediately. However, if a new
award is substituted for the cancelled award, and designated as a replacement award on the date
that it is granted, the cancelled and new awards are treated as if there were a modification of the
original award.
Research and Development Costs
Research costs are expensed as incurred. Development cost incurred on an individual project is
capitalized when its future recoverability can reasonably be regarded as assured. Any expenditure
capitalized is amortized in line with the expected future sales from the related project.
- 32Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of
the agreement at inception date of whether the fulfillment of the arrangement is dependent on the
use of a specific asset or assets or the aiTangement conveys a right to use the asset even if that is
not explicitly specified in the agreement.
Jollibee Group as Lessee. Leases which do not transfer to the Jollibee Group substantially all the
risks and benefits of ownership of the asset are classified as operating leases. Operating lease
payments are recognized as expense in profit or loss on a straight-line basis over the lease term
and carried at amortized cost. The related accretion is recognized as interest income and the
amortization as rent expense. Associated costs, such as maintenance and insurance, are expensed
as incurred.
Jol/ibee Group as Lessor. Leases which do not transfer to the lessee substantially all the risks and
benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in
negotiating an operating lease are added to the carrying amount of the leased asset and recognized
over the lease term on the same basis as rent income. Rent income from operating leases is
recognized as income in profit or loss on a straight-line basis over the lease term. Contingent rents
are recognized as revenue in the period in which they are earned.
Provisions
Provisions are recognized when the Jollibee Group has a present obligation (legal or constructive)
as a result of a past event, it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation and a reliable estimate can be made of the amount of the
obligation. If the effect of the time value of money is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market 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.
Foreign Currency Transactions and Translations
The consolidated financial statements are presented in Philippine peso, which is the Parent
Company's functional and presentation currency. Each entity in the Jollibee Group determines its
own functional currency and items included in the financial statements of each entity are measured
using that functional cuiTency. Transactions in foreign currencies are recorded in Philippine peso
using the exchange rate at the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies are restated using the closing rate of exchange at reporting date. All
differences are recognized in profit or loss. Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the exchange rates as at the dates of the
initial transactions.
The functional currencies of the Jollibee Group's foreign operations are lJS dollar (USD), RMB,
Indonesia rupiah, Vietnam dong and Hong Kong dollar. As of the reporting date, the assets and
liabilities of foreign subsidiaries are translated into the presentation currency of the Parent
Company at the rate of exchange ruling at the reporting date while the income and expense
accounts are translated at the weighted average exchange rates for the year. The resulting
translation differences are included in the consolidated statements of changes in equity under the
account "Cumulative translation adjustments of foreign subsidiaries, joint ventures and an
associate" and in other comprehensive income. On disposal of a foreign subsidiary, the
accumulated exchange differences are recognized in profit or loss.
- 33 -
Current Tax. Current tax liabilities for the current and prior periods are measured at the amount
expected to be paid to the tax authority. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted at reporting date.
Current income tax relating to items recognized directly in equity is recognized in equity and not
in the profit or loss. Management periodically evaluates positions taken in the tax returns with
respect to situations in which applicable tax regulations are subject to interpretation and
establishes provisions where appropriate.
Deferred Tax. Deferred tax is provided using balance sheet liability method, on all temporary
differences at reporting date between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes.
Defened tax assets are recognized for all deductible temporary differences and carryforward
benefits of unused tax credits from excess of minimum corporate income tax (MClT) over regular
corporate income tax (RCIT) and net operating loss carryover (NOLCO), to the extent that it is
probable that taxable profit will be available against which the deductible temporary differences
and carryforward benefits of excess ofMClT over RClT 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; 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
profit will allow the deferred tax assets to be recovered.
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 transactions,
affects neither the accounting profit nor taxable profit; and
in respect of taxable temporary differences associated with investments in subsidiaries and
interest in a joint venture, where the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will not reverse in the foreseeable
future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the
year when the asset is realized or the liability is settled, based on tax rates and tax laws that have
been enacted or substantially enacted at the reporting date.
Deferred tax relating to items recognized outside profit or loss. Deferred tax items are recognized
in correlation to the underlying transaction either in OCI or directly in equity.
- 45
Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate
recognition at that date, are recognized subsequently if new information about facts and
circumstances change. The adjustment is either treated as reduction in goodwill, as long as it does
not exceed goodwill, if it was incurred during the measurement period or recognize in profit or loss.
Deferred tax assets and 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.
Value Added Tax (VAT). Revenue, expenses and assets are recognized net of the amount of tax,
except:
where the tax incurred on a purchase of assets or services is not recoverable from the taxation
authority, in which case the tax is recognized as part of the cost of acquisition of the asset or
as part of the expense item as applicable; and
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
"Other current assets" or "Trade payables and other current liabilities" accounts in the consolidated
statements of financial position.
Earnings per Share (EPS) Attributable to Equity Holders of the Parent Company
Basic EPS is calculated by dividing the net income for the year attributable to the equity holders of
the Parent Company by the weighted average number of common shares outstanding during the
year, after considering the retroactive effect of stock dividend declaration, if any.
Diluted EPS is computed by dividing the net income for the year attributable to the equity holders
of the Parent Company by the weighted average number of common shares outstanding during the
period, adjusted for any potential common shares resulting from the assumed exercise of
outstanding stock options. Outstanding stock options will have dilutive effect under the treasury
stock method only when the average market price of the underlying common share during the
period exceeds the exercise price of the option.
Where the EPS effect of the shares to be issued to management and employees under the stock
option plan would be anti-dilutive, the basic and diluted EPS would be stated at the same amount.
Contingencies
Contingent liabilities are not recognized in the consolidated financial statements but are disclosed
unless the possibility of an outflow of resources embodying economic benefits is remote.
Contingent assets are not recognized in the consolidated financial statements but are disclosed
when an inflow of economic benefits is probable.
Business Segments
The Jollibee Group is organized and managed separately according to the nature of operations and
geographical locations of businesses. The three major operating businesses of the Jollibee Group
are food service, franchising and leasing while geographical segments are segregated to Philippine
businesses and international businesses. These operating and geographical businesses are the
basis upon which the Jollibee Group reports its primary segment information presented in Note 5.
4.
- 36Assessing Joint Control of an Arrangement and the Type of Arrangement. Joint control is the
contractually agreed sharing of control of an arrangement which exists only when decisions about
the relevant activities require the unanimous consent of the parties sharing control. The Jollibee
Group assessed that it has joint control in all joint arrangements by virtue of a contractual
agreement with other stockholders. The Jollibee Group's joint ventures have separate legal entity
and the shareholders have right to their net assets (see Note 11).
Impairment of AFS Financial Assets- Significant or Prolonged Decline in Fair Value and
Calculation of Impairment Loss. The Jollibee Group determines that an AFS financial asset is
impaired when there has been a significant or prolonged decline in the fair value below its cost.
The Jollibee Group determines that a decline in fair value of greater than 20% of cost is
considered to be a significant decline and a decline for a period of more than 12 months is
considered to be a prolonged decline. This determination of what is significant or prolonged
requires judgment. In making this judgment, the Jollibee Group evaluates, among other factors,
the normal volatility in price. In addition, impairment may be appropriate when there is evidence
of deterioration in the financial health ofthe investee, industry and sector performance.
To compute for the impairment of AFS equity instruments, the Jollibee Group expands its analysis
to consider changes in the in vestee's industry and sector performance, legal and regulatory
framework, changes in technology, and other factors that affect the recoverability of the Jollibee
Group's investments.
There were no provisions for impairment Joss on AFS financial assets in 2014 and 2013. The
canrying amount of AFS financial assets amounted to 1'21.5 million as at March 31, 2014 and
December 31,2013 (see Note 10).
Estimates and Assumptions
The key estimates and assumptions concerning the future and other key sources of estimation
uncertainty at reporting date that has a significant risk of causing a material adjustment to the
canrying amounts of assets and liabilities within the next financial year are discussed below.
Impairment Loss on Receivables. The Jollibee Group maintains an allowance for impairment losses at
a level considered adequate to provide for potential uncollectible receivables. The level of allowance
is evaluated on the basis of factors that affect the collectability of the accounts. These factors include,
but are not limited to, the length of the Jollibee Group's relationship with the customers and
counterparties, average age of accounts and collection experience. The Jollibee Group performs a
regular review of the age and status of these accounts, designed to identifY accounts with objective
evidence of impairment and provide the appropriate allowance for impairment losses. The review is
done quarterly and annually using a combination of specific and collective assessments.
The amount and timing of recorded expenses for any period would differ if the Jollibee Group made
different judgments or utilized different methodologies. An increase in allowance account would
increase general and administrative expenses and decrease current assets.
Provision for impairment Joss on receivables in 2014 and 2013 amounted to 1'24.8 million and
1'34.0 million, respectively, resulting from specific and collective assessments. The canrying
amount of receivables amounted to 1'2,723. 7 million and 1'3,082.9 million as at March 31, 2014
and December 31,2013, respectively (see Note 7 and 22).
Net Realizable Value of Inventories. The Jollibee Group writes down inventories to net realizable
value, through the use of an allowance account, whenever the net realizable value of inventories
becomes lower than the cost due to damage, physical deterioration, obsolescence, changes in price
levels or other causes.
- 37The estimates of net realizable value are based on the most reliable evidence available at the time
the estimates are made of the amounts 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
allowance account is reviewed on a regular basis to reflect the accurate valuation in the financial
records.
The Jollibee Group assessed that the net realizable value for some inventories is lower than cost,
hence, it recognized provision for inventory obsolescence amounting to .1>14.2 million and
.1>15.8 million in 2014 and 2013, respectively (see Note 22). The carrying amount of inventories
amounted to .1>3,543.2 million and .1>3,560.4 million as at March 31, 2014 and December 31, 2013,
respectively (see Note 8).
Estimation of Useful Lives of Property, Plant and Equipment and Investment Properties. The
Jollibee Group estimates the useful lives of property, plant and equipment and investment
properties based on the period over which the property, plant and equipment and investment
properties are expected to be available for use and on the collective assessment of the industry
practice, internal technical evaluation and experience with similar assets. The estimated useful
lives of property, plant and equipment and investment properties are reviewed periodically and
updated if expectations differ from previous estimates due to physical wear and tear, technical or
commercial obsolescence and legal or other limits in the use of property, plant and equipment and
investment properties. However, it is possible that future financial performance could be
materially affected by changes in the estimates brought about by changes in the factors mentioned
above. The amount and timing of recording the depreciation and amortization for any period
would be affected by changes in these factors and circumstances. A reduction in the estimated
useful lives of property, plant and equipment and investment properties would increase the
recorded depreciation and amortization and decrease noncurrent assets.
There was no change in the estimated useful lives of property, plant and equipment and
investment properties in 2014 and 2013.
Impairment of Goodwill and Other Intangible Assets. The Jollibee Group determines whether
goodwill and other intangible assets with indefinite useful life is impaired at least on an annual basis
or more frequently if events or changes in circumstances indicate that the carrying value may be
impaired. This requires an estimation of the value in use of the CGU to which the goodwill is
allocated. Estimating the value in use requires the Jollibee Group to make an estimate of the expected
future cash flows from the CGU and also to choose a suitable discount rate in order to calculate the
present value of those cash flows.
Management has determined that goodwill and other intangible assets are not impaired. The carrying
amount of goodwill and other intangible assets amounted to .1>9,102.8 million and .1>9,103.6 million as
at March 31, 2014 and December 31, 2013, respectively (see Notes 2 and 14).
Estimating the Fair Values of Acquiree 's Identifiable Assets and Liabilities. Where the fair values of
the acquiree's identifiable assets and liabilities cannot be derived from active markets, the Jollibee
Group determined the fair values using internal valuation techniques and generally accepted valuation
approaches. The inputs to these valuation approaches are taken from historical experience and
observable markets where possible, but where this is not feasible, estimates are used in establishing
fair values. The estimates may include discount rates and assumptions used in cash flow projections.
The fair values of the identifiable net assets acquired from San Pin Wang in 2012 amounted to
.1>46.4 million (see Note II).
- 38Impairment of Property, Plant and Equipment and Investment Properties. The Jollibee Group
performs impairment review of property, plant and equipment and investment properties when certain
impairment indicators are present. Detetmining the fair value of assets, which requires the
determination of future cash flows expected to be generated ftom the continued use and ultimate
disposition of such assets, requires the Jollibee Group to make estimates and assumptions that can
materially affect the consolidated financial statements. Future events could cause the Jollibee Group
to conclude that the assets are impaired. Any resulting impairment loss could have a material adverse
impact on the Jollibee Group's financial position and performance.
Provision for impairment loss amounted to 1'9.0 million and 1'24.9 million in 2014 and 2013,
respectively (see Note 22). The aggregate carrying values of property, plant and equipment and
investment properties amounted to 1'12,623.2 million and '12,524.2 million as at March 31,2014
and December 31, 2013, respectively (see Notes 12 and 13).
Realizability of Deferred Tax Assets. The carrying amounts of deferred tax assets at each reporting
date is reviewed and reduced to the extent that there are no longer sufficient taxable profits available
to allow all or part of the deferred tax assets to be utilized. The Jollibee Group's assessment on the
recognition of deferred tax assets on deductible temporary differences and carryforward benefits of
excess ofMCIT over RCIT and NOLCO is based on the forecasted taxable income. This forecast is
based on past results and future expectations on revenue and expenses.
The carrying amount of deferred tax assets- net amounted to 1'783.3 million and 1'756.2 million as
at March 31,2014 and December 31,2013, respectively (see Notes 2 and 24).
Present Value of Defined Benefit Obligation. The cost of defined benefit pension plans and other postemployment medical benefits as well as the present value of the defmed benefit obligation are
determined using actuarial valuations. The actuarial valuation involves making various assumptions.
These assumptions include, among others, discount rate and rate of increase in compensation. Due to
the complexity of the valuation, the underlying assumptions and its long-term nature, defined benefit
obligations are highly sensitive to changes in these assumptions. All assumptions are reviewed at
each reporting date.
In determining the appropriate discount rate, management considers the interest rates of government
bonds that are denominated in the currency in which the benefits will be paid, with extrapolated
maturities corresponding to the expected duration of the defined benefit obligation.
The mortality rate is based on publicly available mortality tables for the specific country and is
modified accordingly with estimates of mortality improvements. Future salary increases and pension
increases are based on expected future inflation rates for the specific country.
The carrying amount of pension liability amounted to 1'956.0 million and '932.8 million as at March
31, 2014 and December 31, 2013, respectively (see Note 25).
Share-based Payments. The Parent Company measures the cost of its equity-settled transactions with
management and employees by reference to the fair value of the equity instruments at the grant date.
Estimating fair value for share-based payment transactions requires determining the most appropriate
valuation model, which is dependent on the terms and conditions of the grant. The estimate also
requires determining the most appropriate inputs to the valuation model including the expected life of
the share option, volatility and dividend yield and making assumptions about these inputs. The fair
value of the share option is being determined using the Black-Scholes Option Pricing Model. The
expected life of the stock options is based on the expected exercise behavior of the stock option
holders and is not necessarily indicative of the exercise patterns that may occur. The volatility is
- 39based on the average historical price volatility which may be different from the expected volatility of
the shares of the Parent Company.
Total expense arising from share-based payment recognized by the Jollibee Group amounted to
f'39.4 million and f'35.9 million for the three months ended March 3 l, 2014 and 2013, respectively
(see Notes 22 and 26).
Fair Value of Financial Assets and Liabilities. The Jollibee Group canies certain financial assets
and liabilities at fair value, which requires extensive use of accounting estimates and judgments.
The significant components of fair value measurement were determined using verifiable objective
evidence (i.e., foreign exchange rates, interest rates, volatility rates). The amount of changes in
fair value would differ if the different valuation methodologies and assumptions are utilized. Any
changes the fair value of these financial assets and liabilities would directly affect profit or loss.
The fair value of financial assets and liabilities are discussed in Note 31.
Contingent Consideration or Earn-out. The Jollibee Group has an existing joint venture agreement
with contingent consideration or earn-out provisions. This requires the estimation of payout
associated with the probability-weighted discounted cash flow model, taking into consideration the
specific conditions outlined in the purchase agreement that must be met to satisfY the contingency.
The Jollibee Group has recognized a contingent consideration amounting to RMB17.3 million
(f'121.7 million) in 2012 (see Notes 2 and ll ).
Provisions. The Jollibee Group recognizes a provision for an obligation resulting from a past event
when it has assessed that it is probable that an outflow of resources will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation. These assessments are
made based on available evidence, including the opinion of experts. Future events and developments
may result in changes in these assessments which may impact the financial condition and results of
operations.
There were no additional provisions recorded in 2014 and 2013. Total outstanding provisions for
legal claims and restructuring costs amounted to f'30.5 million as at March 31,2014 and
December 31,2013 (see Note 17).
Contingencies. The Jollibee Group is currently involved in litigations, claims and disputes which
are normal to its business. The estimate of the probable costs for the resolution of these claims has
been developed in consultation with the Jollibee Group's legal counsels and based upon an
analysis of potential results (see Note 29).
5.
Segment Information
For management purposes, the Jollibee Group is organized into segments based on the nature of
the products and services offered and geographical locations. The Executive Management
Committee monitors the operating results of its segments separately for resource allocation and
performance assessment. Segment results are evaluated based on operating profit or loss and is
measured consistently with operating profit or loss in the consolidated financial statements.
- 40Business Segments
The Jollibee Group's operating businesses are organized and managed separately according to the
nature of the products and services provided, with each segment representing a strategic business
unit that offers different products and serves different markets.
The food service segment is involved in the operations of quick service restaurants and the
manufacture of food products to be sold to Jollibee Group-owned and franchised quick service
restaurant outlets.
The franchising segment is involved in the franchising of the Jollibee Group's quick service
restaurants store concepts.
The leasing segment leases store sites mainly to the Jollibee Group's independent franchisees.
The following tables present certain information on revenues, expenses, assets and liabilities and
other segment information of the different business segments as at March 31, 2014 and 2013 and
for the three months ended March 31,2014 and 2013:
Food Service
Revenues from external customers
Inter-segment revenues
Segment revenues
Segment expenses
Impairment losses on property, plant and
equipment, investment properties,
receivables, inventory and contingencies
Equity in net loss of joint ventures and an associate
Other segment income
Segment result
19,940,085
6,130,362
26,070,447
(25,570,124)
(51,720)
(27,042)
7!,848
493,409
(In Thousands)
928,129
45,598
177,128
842,724
888,322
1,105,257
(177,128)
(880,723)
928,129
1'(7,150,214)
(7,150,214)
7,150,214
487
8,086
Consolidated
1!20,913,812
20,913,812
(19,477,761)
1'-
(51,720)
(27,042)
72,335
1,429,624
Interest income
Interest expense
Income before income tax
Provision for income tax
Net income
Assets and Liabilities
Segment assets
Deferred tax assets
Consolidated assets
1!44,7[2,567
769,58[
45,482,148
1'-
Segment liabilities
Deferred tax liabilities
Long-tenn debt- including current portion
Income tax Ea able
Consolidated liabilities
15,494,542
309,401
5,206,551
265,703
1!2[,276,197
1'-
1!1,003,555
758,482
1'-
1'1'-
361,492
13,758
1!375,250
1'-
107,927
2,962
1'-
1'-
4,601
1!5,490
1'-
1'-
1'-
1,367
1!45,074,059
783,339
1!45,857,398
1!15,602,469
312,363
5,206,55[
270,304
21,391,687
Pl,003,555
759,849
- 41 -
Food Service
Revenue from external customers
Inter-segment revenue
Segment revenue
Segment expenses
Impairment losses on property, plant and
equipment, investment properties
and security deposit
Equity in net loss of joint ventures and an associate
p ( 7,292,370
5,274,979
22,567,349
(22, !03,200)
(!08,796)
(28.536)
!6,7!9
343,536
Franchising
P82!,487
!56,4!7
977,904
( ( 56,4 !7)
P82!.487
Eliminations
Consolidated
I'-
!8,!54,928
(In Thousand )
P4!,07!
725,507
766.578
(767,204)
(6,!56,903)
(6,156,903)
6,!56,903
!8,!54,928
(!6,869,9!8)
I'-
( !08,796)
(28,536)
( 7,083
!,!64,76!
364
( 262)
Interest income
Interest expense
Income before income tax
69,!37
(43,689)
!,!90,209
(309,576)
P880,633
P4!,358,928
!,068,194
P42,427,!22
I'-
P45!.887
!7.800
I'P469.687
I'-
13,598,298
77!,052
P4!,8!0,8!5
!,085,994
P42,896,809
I'-
I'-
!7.627
3.549
5,--1-05,065
143,43 [
p !3,7 ( 5,925
774,60!
5,405,065
3.453
P!9,9!7,846
883,099
715,8!7
I'-
I'I'-
I'!,666
!46,884
20,042,475
I'-
!24,629
I'-
P883,099
7!7,483
Geographical Segments
The Jollibee Group's geographical segments are based on the location of the assets producing
revenues in the Philippines and in other locations (which includes PRC and USA). Sales to
external customers disclosed in the geographical segments are based on the geographical location
of the customers.
Majority of the Jollibee Group's revenues were generated from the Philippines, which is the
Jollibee Group's country of domicile.
The Jollibee Group does not have a single external customer which revenue amounts to l 0% or
more of the Jollibee Group's revenues.
The following table presents revenues, segment assets and capital expenditures of the Jollibee
Group's geographical segments:
March 2014 (Unaudited)
International Eliminations Consolidated
(In Thousands)
1'16,166,037
1'4,785,578
(1'37,803) 1'20,913,812
28,957,692
16,116,367
45,074,059
753,136
250,419
1,003,555
Philippines
Segment revenues
Segment assets
Capital expenditures
- 53
Philippines
Segment revenues
Segment assets
Capital expenditures
1'14,291,818
27,512,417
649,672
Cash on hand
Cash in banks
Shmt-term deposits
March2014
(Unaudited)
1'199,277,665
3,820,125,274
5,694,457'757
1'9,713,860,696
December 2013
(Audited)
1'220,019,290
4,313,506,109
5,370,351,669
1'9,903,877,068
Cash in banks earn interest at the respective savings or special demand deposit rates. Short-term
deposits are made for varying periods of up to three months depending on the immediate cash
requirements of the Jollibee Group, and earn interest at the respective short-term deposit rates.
Interest income earned from cash in banks and short-term deposits amounted to 1'24.0 million and
1'43.9 million for the three months ended March 31, 2014 and 2013, respectively (see Note 23 ).
7.
Receivables
This account consists of:
Trade
Less allowance for impairment loss
Advances to employees
Current portion of employee car plan receivables
Others
Trade receivables are non interest-bearing and are generally on 30-60 day terms.
Advances to employees, current pmtion of employee car plan receivables and other receivables
are normally collectible within the next financial year.
The movements in the allowance for impairment loss for trade receivables as at March 3 l, 2014
and December 3 I, 2013 are as follows:
March 2014
(Unaudited)
1'274,461,795
24,773,609
218,039
1'299,453,443
December 2013
(Audited)
'1'260, 138,120
34,007,984
(22,801,774)
3,117,465
'1'274,461,795
The provisions in 2014 and 2013 resulted from specific and collective impairment assessments
performed by the Jollibee Group.
8. Inventories
At cost:
Food supplies and processed inventories
Packaging, store and other supplies
At net realizable value Novelty items
Packaging, store and other supplies
Total inventories at lower of cost and net
realizable value
March 2014
(Unaudited)
December 2013
(Audited)
1'3,393,406,012
115,621,449
3,509,027,461
'1'3,390,581,280
119,209,912
3,509,791,192
34,137,814
50,640,942
1'3,543,165,275
'1'3,560,432, 134
The cost of novelty items and packaging, store and other supplies carried at net realizable value
amounted to '1'64.9 million and 67.2 million as at March 31,2014 and December 31,2013,
respectively.
The movements in the allowance for inventory obsolescence are as follows:
The Jollibee Group perfonns an aging analysis of food supplies and packaging materials on hand
in determining the amount of provision or reversal to be recognized. Based on this assessment,
the Company booked provisions for inventory obsolescence amounting to Pl7.3 million and
P9.4 million in 2014 and 2013, respectively.
- 55
March 2014
(Unaudited)
1>968,849,946
December 2013
(Audited)
1'840,873,736
476,268,052
317,143,164
162,899,190
93,719,254
1>2,018,879,606
465,306,028
297,092,018
147,069,555
86,653,768
1'1,836,995,105
Deposits to suppliers are generally applied to purchase of inventories and availment of services
within the next financial year.
Prepaid expenses consist of the unexpired portion of insurance, advertising, prepaid car plan and
other expenses paid in advance. Supplies pertain to the unused office and operating supplies as at
the end of the period.
Prepaid taxes mainly represent creditable withholding taxes that can be applied in the following
year against the corporate income tax of the Jollibee Group.
The change in fair value in 2013 was as a result of the reversal of previously recorded OCI of
certain public utility companies' shares out of AFS to "Other receivables" as they have already
been called for redemption. There were no movements in 2014 and 2013.
II. Business Combinations, Incorporation of New Subsidiaries, and Interests in and Advances to
Joint Ventures, Co-venturers and Associate
A. Business Combinations
Business Combination through Acquisition of Equity Shares
Acquisition in 2012
San Pin Wang. On March 9, 2012, the Jollibee Group, through JWPL, completed its acquisition of
55% of Guangxi San Pin Wang Food and Beverage Management Company Limited ("San Pin
Wang") which operates the San Pin Wang beef noodle business in South China for a total
acquisition cost ofRMB30.0 million (!'195.9 million). The Jollibee Group paid RMB20.0 million
(!'135.1 million) as of December 31,2012. The remaining RMBIO.O million (!'67.6 million) was
paid in March 2013. The remaining 45% is held by Guangxi Zong Kai Food Beverage Investment
Company Limited ("GZK").
Subsequent to the acquisition date, the Jollibee Group and GZK contributed additional
investments amounting to RMBII.O million (I'74.6 million) and RMB9.0 million (!'59.2 million),
respectively.
The primary reason for the acquisition of San Pin Wang is to expand the Jollibee Group's chain of
quick service restaurants and to serve high-quality but affordable noodles to urban areas in China.
As part of the purchase agreement with GZK, a contingent consideration has been agreed. This
consideration is contingent upon a target net income after tax of San Pin Wang for the next three
years. In May 2013, the Jollibee Group paid RMB7.5 million (I'50.1 million) as the contingent
consideration for the year 2012. The remaining contingent consideration is due for final
measurement and payment to the former shareholders in May 2016.
The fair values of the identifiable assets acquired and liabilities assumed as at the date of
acquisition were as follows:
Cash and cash equivalents
Receivables
Inventories
Other current assets
Property, plant and equipment (Note 12)
Other noncurrent assets
Total identifiable assets acquired
LessTrade payables and other current liabilities
Net identifiable assets acquired
!'7,525,090
2,894,103
13,041,495
31,336,869
71,613,166
13,891,399
140,302,122
93,867,653
!'46,434,469
Cash
Subscription payable
Contingent consideration
Total
Non-controlling interests' share in the net assets acquired
Aggregate amount
1'135,110,309
60,826,786
121,743,395
317,680,490
20,895,511
338,576,001
46,434,469
1'292, 141,532
Goodwill pertains to the value of expected synergy arising from the business combination.
The fair value of acquired receivables approximates their carrying value. No impairment loss was
provided on these receivables.
The net cash outflow on the acquisition is as follows:
Cash paid on acquisition
Less cash acquired from subsidiary
1'135,110,309
7,525,090
1'127,585,219
San Pin Wang contributed RMB I 06.0 million (1'709.6 million) and RMB 0.94 million
(1'6.5 million) from the date of acquisition to December 31, 2012 to the consolidated revenue and
consolidated net income for the period, respectively. If the business combination had taken place
at the beginning of2012, consolidated revenue and consolidated net income for the year would
have been RMB10,640.7 million (1'71,212.6 million) and RMB539.6 million (1'3,712.2 million),
respectively.
Below is the rollforward analysis of the unpaid purchase considerations as at March 31, 2014 and
December 31,2013:
March 2014
(Unaudited)
1'71,651,719
677,883
1'72,329,602
RMB10,000,000
1'72,329,602
December 2013
(Audited)
!>185,522,383
1,772,743
(115,254,984)
(388,423)
1>71,651,719
In original currency
RMB9,800,000
1>71 ,651,719
The balance of liability for acquisition ofMang !nasal as at March 31,2014 and December 31,
2013 are as follows:
March 2014
(Unaudited)
P75,000,000
P75,000,000
December 2013
(Audited)
1>72,292,267
2,707,733
1>75,000,000
As at March 31,2014, the Jollibee Group has not yet settled the final installment payment of
!>75.0 million pending fulfillment of ce1iain conditions in the contract.
The liability for acquisition of Mang !nasal was classified under "Current portion of liability for
acquisition of businesses" in the statements of financial position as at March 31,2014 and
December 31,2013, respectively.
The Jollibee Group's primary reason for the business combination is to grow Mang !nasal's sales
from existing stores through application of the Jollibee Group's knowledge of consumers and
available recipes and products, continued expansion ofMang !nasal's store network, cost
improvement on its raw materials and operational efficiency by applying the Jollibee Group's
technology and scale.
Business Combination through Purchase of Assets
Chowking US Operations. On May 27,2011, the Jollibee Group, through its wholly-owned
subsidiary, TTC, entered into an Asset Purchase Agreement with Fortune Capital Corporation,
owner and operator of all Chowking stores in the US as the master licensee therein, to purchase
the latter's property and equipment, inventories and security deposits of its twenty (20) existing
stores. The purchase consideration amounted to USD16.0 million (1:'693.3 million). The Jollibee
Group paid USD 12.0 million (1:'520.0 million) of the total consideration as of December 31, 2011.
The balance shall be paid over the next five (5) years.
First and second year payments of the outstanding balance were paid in May 2012 and 2013
amounting to USD 0.8 million (1:'33.7 million) and USD 0.8 million (1:'34.6 million), respectively.
The balance of liability for acquisition of Chowking US operations as at March 31, 2014 and
December 31,2013 is as follows:
March 2014
(Unaudited)
1'90,023,088
1,725,647
851,632
1'92,600,367
December 2013
(Audited)
1:'109,757,490
6,620,533
(34,560,000)
8,205,065
1:'90,023,088
USD2,066,281
USD2,026,908
1'34,701,568
57,898,799
1'92,600,367
1:'32,666,875
57,356,213
1'90,023,088
With this acquisition, the Jollibee Group is poised to take a more active role to further the growth
of the Chowking business in the USA.
Business Combination Achieved in Stages
Chow Fun. On March 31,2011, the Jollibee Group, through its wholly-owned subsidiary, JWPL,
acquired from Aspen Partners, LLC 2,400 shares of Chow Fun Holdings, LLC ("Chow Fun") for
USD3.2 million (1:'139.6 million), bringing up its equity share in Chow Fun to 80.55%. The
Jollibee Group (through JWPL) previously held 13.89% equity share in Chow Fun. Chow Fun is
the developer and owner of Jinja Bar and Bistro in New Mexico, USA.
- 49 -
The carrying amount of the previously held equity interest in Chow Fun was presented as part of
AFS financial assets in 2010. Prior to the business combination, the previously held equity
interest was remeasured at the acquisition-date fair value resulting to a loss amounting to
!>12.8 million which was recognized in the statements of comprehensive income under "General
and administrative expenses" account in 2011.
The Jollibee Group's objective in this venture is to enhance its capability in developing Asian food
restaurant concepts for the mainstream consumers in the United States as part of its long-term
strategy.
Fair Values of Net Identifiable Assets Acquired
The fair values of the identifiable assets acquired and liabilities assumed from Mang !nasal, BK
Group, Chowking US Operations, and Chow Fun as at the dates of acquisitions were as follows:
Mang !nasal
1'132,213,023
113,733,554
126,423,715
557,888
263,083,640
2,004,255,942
26,086,618
2,666,354,380
BK Group
1'17,071 ,231
5,951,921
13,302,567
3,245,199
222,303,494
3,323,559
50,269,948
315,467,919
Chowking
US Operations
262,106,940
Chow Fun
1'4,870,336
331,325
3,883,969
3,073,027
105,912,607
6,322,410
282,944,900
118,071,264
1'-14,515,550
Less:
Trade payables and other
current liabilities
Long-term liabilities
Income tax payable
Deferred tax liabilities
271,381,354
168,691,196
59,145,715
628,717,866
I, 102,058
30,976,291
3,
23,760,278
77,128,142
6,889,470
The carrying amount o[Mang !nasal and BK Group's property, plant and equipment amounted to F-171.
fl.119.9 million, respectively, at the date of acquisition
1'2,700,000,000
BK Group
1'--
Chowking
US Operations
Chow Fun
1'519,960,000
1'139,644,000
139,950,677
659,910,677
139,644,000
65,454,545
?76,243,250
2,976,243,250
65,454,545
512,132,834
51,289,436
3,488,376,084
116,743,981
659,910,677
3,340,345
29,092,500
172,076,845
1,707,109,445
1'1,781,266,639
111,498,774
1'5,245,207
276,055,430
1'383,855,247
17,182,844
1'154,894,00 I
Cash paid:
Mang !nasal
BK Group
Chowking US Operations
Chow Fun
Less cash acquired from subsidiary:
Mang !nasal
BKGroup
Chowking US Operations
Chow Fun
2011
2010
--
P2,700,000,000
519,960,000
139,644,000
659,604,000
2,700,000,000
132,213,023
17,071,231
4,870,336
21,941,567
1"637,662,433
132,213,023
1"2,567,786,977
Acquirees' Contribution to Consolidated Revenues and Consolidated Net Income During the Year
of Acquisition
The BK Group, Chowking US Operations, and Chow Fun contributed 1"719.4 million and
1"23.6 million from the date of acquisition to December 31,2011 to the consolidated revenues and
net income for the period, respectively. If the business combinations had taken place at the
beginning of 2011, consolidated revenues and net income for the year would have been
1"63,170.9 million and 1"3,262.1 million, respectively.
B. Incorporation of New Subsidiaries
Golden Beeworks Pte. Ltd (Golden Beeworks). On May 16,2012, the Jollibee Group, through
GPPL, entered into an agreement to fonn Golden Beeworks together with Beeworks, Inc
("Beeworks"), to own and operate Jollibee stores in Singapore. Under the agreement, the parties
will establish Golden Beeworks in Singapore which will be owned 60% by GPPL and 40% by
Beeworks. GPPL will have full management control of the company, while leveraging on
Beework's experience, reputation and network to establish the "Jollibee" brand in Singapore. The
initial funding for Golden Beeworks is USDI.O million. Golden Beeworks was incorporated on
July 19,2012 and stmted its commercial operation on March 12,2013.
As at March 31,2014, capital contributions of the Jollibee Group to Golden Beeworks amounted
to 1"38.6 million.
C. Partly-owned Subsidiaries with Material Non-Controlling Interest
Financial information of subsidiaries that have material non-controlling interests are provided
below:
Proportion of equity interest held by non-controlling interests:
Mang !nasal
JFPPL
San Pin Wang
2014
Philippines
Singapore
People's Republic of China
30%
30%
45%
2013
30%
30%
45%
-62
Summarized Unaudited Statement of Comprehensive Income for the three months ended
March 31, 2014
Revenues
Net income (loss)
Net income (loss) attributable to
non-controlling interests
Other comprehensive income (loss)
Other comprehensive income (loss)
attributable to non-controlling
interests
Total comprehensive income (loss)
Dividends paid to non-controlling
interests
Mang lnasal
1'1,478,730,894
51,636,051
JFPPL
1'276,736,285
(5,052,160)
15,490,815
(1,399,154)
2,978,407
51,636,051
(5,052,160)
6,618,681
Summarized Unaudited Statement of Comprehensive Income for the three months ended
March 31, 2013
Revenues
Net income
Net income attributable to
non-controlling interests
Other comprehensive income (loss)
Other comprehensive income (loss)
attributable to non-controlling
interests
Total comprehensive income
Dividends paid to non-controlling
interests
Mang !nasal
1'1,239,963,0 16
44,215,194
JFPPL
1'178, I 02,970
(8,425,833)
13,264,558
(2,527,750)
(7,640,764)
44,215,194
(8,425,833)
(12,526,054)
Mang I nasal
1'1,130,481,716
384,040,756
909,918,334
19,315,458
585,288,680
JFPPL
1'532,620,670
450,719,804
496,318,390
179,260,000
307,762,084
175,586,604
92,328,625
78,630,370
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Total equity
Equity attributable to non-controlling
interests
Mang !nasal
1'1,160,523,661
336,151,664
833,984,844
129,446,412
533,244,069
JFPPL
1'401,781,653
440,901,558
313,682,561
177,580,000
351,420,650
159,973,221
105,426,195
82,705,320
Summarized Unaudited Cash Flow Information for the three months ended March 31, 2014
Net cash provided by (used in)
operating activities
Mang lnasal
JFPPL
(1>6,763,127)
(1>4,653,843)
(60,137,073)
(9,818,246)
10,506,503
55,959,176
(16,581,373)
5,852,660
1'116,096,249
Summarized Unaudited Cash Flow Information for the three months ended March 31, 2013
Mang !nasal
JFPPL
San Pin Wang
Net cash provided by (used in)
operating activities
f'145,050,863
(42,037,793)
activities
Net increase in cash and cash
equivalents
1'8,654,648
(1'3,466,311)
(24,453,101)
6,147,955
81,380,000
I 03,013,070
65,581,547
2,681,644
1'3,139,672,243 !'3,113,802,292
143,477,229
I 57,675,953
3,283,149,472 3,271,478,245
50,915,520
57,945,028
1'3,341,094,500 !'3,322,393,765
SuperFoods Group. On January 20,2012, upon fulfillment of certain legal and regulatory
requirements in Vietnam, the Jollibee Group, through JWPL, acquired effective ownership of 50%
share in the business of the SuperFoods Group through formation of joint ventures. This consists
of a 49% share in SF Vung Tau Joint Stock Company, organized in Vietnam, and a 60% share in
Blue Sky Holding Limited in Hongkong (the SuperFoods Holding Companies). The formation of
joint ventures is an implementation of the Framework Agreement made on May 20,2011 between
the Jollibee Group, through JWPL and its partner, Viet Thai International Joint Stock Company and
Viet Thai International Company limited (collectively, Superfoods Group). The Framework
Agreement provided for the Jollibee Group to contribute a total of USD25 million to gain 50%
effective ownership of the joint ventures. Loans and deposits were made to Superfoods Group and
co-venturers prior to the formation of the joint ventures in 2012.
Pursuant to the Framework Agreement, the preliminary consideration for the 50% share in
Superfoods Group amounted to a cash payment of USD25 million in 2011.
-64
The Supplemental Agreement further provides the following formula that might result in
additional payment on the part of JWPL in 2016:
(a) The actual EBITDA results ofSuperfoods Group multiplied by specified multiples reduced by
its net debt and multiplied by 30% weight recognized for the First Portion Measurement Period
(January !-December 31, 2012) and the actual EBITDA results of Superfoods Group multiplied
by specified multiples reduced by its net debt and multiplied by 20% weight recognized for the
Second Portion Measurement Period (for July I, 2015 to June 30, 2016);
the resulting amount of which will be compared with:
(b) The aggregate balance of 'Interests in the joint ventures' and 'Advances to joint ventures and
co-venturers' and accrued interests as of June 30,2016.
If the resulting amount of the above formula is positive (contingent consideration):
(a) The co-venturers shall sell its I share in JSF Investments to JWPL for a purchase price equal
to the Loan to co-venturers and accrued interests (the Outstanding Balance) and the proceeds
shall be used by the co-venturers to repay the Loan; and
(b) The contingent consideration is payable in cash to the co-venturers.
If the result of the above formula is negative (negative earnout):
(a) The co-venturers shall still sell its I share in JSF Investments to JWPL at USDI.O;
(b) The co-venturers shall repay the loan if the consolidated EBITDA of the Superfoods Holding
Companies for the Second Portion Measurement Period is:
1.
11.
111.
JWPL shall be required to pay the co-venturers an additional amount based upon achieving a
positive amount resulting from the above formula. Based on management's assessment using the
above earn-out formula, no additional consideration needs to be recognized as of January 20,
2012, December 31, 2012 and December 31, 2013.
In accordance with the Framework Agreement, JWPL, through its 99%-owned subsidiary JSF,
extended loans to the SuperFoods Group with the details as follows:
Loan to Co-venturers
Loan to the owners of the SuperFoods Group amounting to USD35.0 million (!>1,568.5 million),
extended on June 30,2011, is payable in June 2016. The loan bears interest of5% per annum
payable in lump sum also in June 2016. The loan is agreed to be used for general corporate
purposes. Total interest from this loan amounted to USD0.4million (!>23.0 million) for the first
quarter of2014 and USD1.4 million (!>62.7 million),USD 1.8 million (!>79.7 million) and USD 1.0
million (!>43.6 million) for the years ended December 31, 2013, 2012 and 2011, respectively. The
USD35.0 million loan is secured by a mortgage by the co-venturers of all their shares in
SuperFoods Holding Companies.
On April 30, 2013, an additional loan was extended to SuperFoods Group amounting to
USDl.O million (!>44.8 million) payable in February 2014 but was extended to Apri12015. The
loan bears interest of 5% per annum payable in lump sum also in April20 14. The loan is agreed
to be used for general corporate purposes. Total interest from this loan amounted to USDO.O I
million (!>0.6 million) for the first qumter of 2014 and USD0.03 million (!> 1.5 million) in 2013.
On August 22,2013, an additional loan was extended to SuperFoods Group amounting to
USDl.O million (!>44.8 million) payable in August 2014. The loan bears interest of 5% per annum
payable in lump sum also in August 2014. The loan is agreed to be used for general corporate
purposes. Total interest from this loan amounted to USDO.Ol (!>0.6 million) for the first quaJter of
2014 and USD0.02 million (!>0.8 million) in 2013.
Loan to Blue Skv
On June 10, 2011, a loan was extended to Blue Sky Holdings Limited (Blue Sky), the Hong Kong
based joint venture, amounting to USDS.O million (!>224.1 million) payable in June 2014. The
loan bears interest of 5% per annum payable also in June 2014. Total interest from this loan
amounted to USD0.06million (!>2.8 million) for the first quarter of2014 and USD0.25 million
(!>11.4 million), USD0.25 million(!> 11.4 million) and USD0.14 million (!>6.2 million) for the
years ended December 31, 2013, 2012 and 2011, respectively.
On May 7, 2012, an additional loan was extended to Blue Sky amounting to USD2.5 million (!
>112.0 million) payable in May 2014. The loan bears interest of5% per annum payable also in
May 2014. Total interest from this loan amounted to USD0.03 million (!>1.4 million) for the first
quaJter of 2014 and USDO.l3 million (!>5 .7 million) and USD.08 million (!>3.7 million) for the
years ended December 31,2013 and 2012, respectively.
The details of Jollibee Group's interests in SuperFoodsjoint venture and advances to co-venturers
as at March 3 I, 2014 and December 31, 2013 are as follows:
March 2014
(Unaudited)
1"1,086,562,975
(172,909,359)
(19,872,954)
(192,782,313)
2,200,148,676
24,928,344
20,814,561
2,245,891,581
!>3,139,672,243
December 2013
(Audited)
1'1,086,562,975
(72,463,639)
(I 00,445,720)
(172,909,359)
1,877,068,264
88,790,000
81,335,640
152,954,772
2,200,148,676
1'3,113,802,292
The aggregate amounts of assets and liabilities as at March 31, 2014 and December 31, 2013 of
SuperFoods Group are as follows:
Current assets
Noncurrent assets
Total assets
March 2014
{Unaudited)
1"437,081,268
1,039,891,090
1"1,476,972,358
December 2013
(Audited)
1'402,113,549
980,914,259
1'1,383,027,808
Current liabilities
Noncurrent liabilities
Total liabilities
1"889,274,243
341,520,831
P1,230,795,074
1'473,141,806
609,348,409
I'1,082,490,215
March 2014
(Unaudited)
1"111,380,755
December 2013
(Audited)
1'88,194,498
716,560,612
336,217,760
342,640,106
609,348,409
-67
The amounts of the income and expenses account include the following:
Revenues
Net loss
Other comprehensive income
Total comprehensive income
Dividends received tfom the joint venture
March 2014
(Unaudited)
1'464,532,079
(39,745,907)
March 2013
(Unaudited)
!>337,094,707
(37,748,188)
(39,745,907)
(37,748,188)
March 2014
(Unaudited)
1'11,229,698
85,247
9,146,336
March 2013
(Unaudited)
!>8,814,006
180,505
10,075,534
Reconciliation of the above summarized financial information to the canying amount of the
interest in the associate recognized in the consolidated financial statements:
Net assets
Proportion of the Jollibee Group's ownership
Goodwill
Cumulative translation adjustments
Wowprime. On August 22,2012, the Jollibee Group, through JWPL and GPPL, entered into an
agreement with Hoppime Ltd., a subsidiary ofWowprime Corporation of Taiwan (Wowprime)
and some key executives ofWowprime, to establish a joint venture entity to own and operate
the 12 Hotpot brand in the People's Republic of China, Hong Kong and Macau. The "12 Hotpot"
restaurant is known in Taiwan for its low-priced hot dishes.
The joint venture entity, incorporated as WJ Investments Limited (WJ), is 48% owned by the
Jollibee Group and 48% by Wowprime's subsidiary and executives. The remaining 4% is owned
by certain individuals with experience in the retail sector in China. Through their subsidiaries,
Jollibee Group and Wowprime will share equal control and management ofWJ.
The Jollibee Group has invested USD2.4 million (P98.0 million) as at December 31,2012. The
first store started commercial operations in January 2013. On October 31, 2013, the Jollibee Group
invested an additional USD2.4 million (Pl03.6 million).
The details of Jollibee Group's interest in Wowprime joint venture as at March 31, 2014 and
December 31,2013 are as follows:
March 2014
(Unaudited)
1'157,675,953
December 2013
(Audited)
1'98,040,000
I 03,608,000
-=-'-'(1'-'4 ,1 9 8?-,7 2:.::4 )----::-:( 4 3-"9,7:':2o_O:,c-:4:-:7_!_)
1'143,477,229
1'157,675,953
The aggregate amounts of assets and liabilities as at March 31, 2014 and December 31, 2013
pertaining to Wowprime are as follows:
March 2014
{Unaudited)
1'235,507,063
107,102,317
1'342,609,380
Current assets
Noncurrent assets
Total assets
Total liabilities
1'21,835,545
December 2013
(Audited)
!"280,636,849
95,707,772
P376,344,621
P23,160,593
March 2014
(Unaudited)
1'217,060,182
December 2013
(Audited)
1"255,653,861
14,672,775
15,594,727
The amounts ofthe income and expenses account include the following:
Revenues
Net loss
Total comprehensive loss
March 2014
(Unaudited)
1'33,696,929
(29,580,675)
(29,580,675)
March 2013
(Unaudited)
1"4,502,864
(20,129,257)
(20,129,257)
March 2014
(Unaudited)
1'5,553,421
1,672,119
March 2013
(Unaudited)
1"539,091
103,398
-69
Reconciliation of the above summarized financial information to the carrying amount of the
interest in the joint venture recognized in the consolidated financial statements:
Net assets
March 2014
(Unaudited)
1'320,773,835
December 2013
(Audited)
1'353,184,028
Proportion
of the
Jollibee
Group's
ownership
48%
48%
1
Cumula
6
tive
9
translati
,
on
5
adjust
2
ments
8
,
3
3
3
(
1
1
,
8
5
2
,
3
8
0
)
1'143,497,229
I'157,675,95
Interest in an
Associate
Entrek. The
Jollibee
Group,
through JIBL,
has l/3 or
33.33%
ownership
over Entrek
(B) SON BHD
(Entrek), a
company that
operates
Jollibee stores
in Brunei. As
at December
-70
Reconciliation of the above summarized financial information to the carrying amount of the
interest in the joint venture recognized in the consolidated financial statements:
3
4
,
2
5
5
,
5
m
b
e
r
2
0
1
3
(
A
u
d
i
t
e
d
)
1
'
3
3
3
,
9
-71
Reconciliation of the above summarized financial information to the carrying amount of the
interest in the joint venture recognized in the consolidated financial statements:
8
8
1
M
a
r
c
h
2
0
1
3
(
U
n
a
u
d
i
t
e
d
)
1
'
1
1
5
,
3
3
9
,
9
4
9
1
7
,
6
2
2
,
1
1
2
-72
Reconciliation of the above summarized financial information to the carrying amount of the
interest in the associate recognized in the consolidated financial statements:
March 2014 December 2013
(Unaudited)
(Audited)
1>228,136,531
1'215,048,707
33.33%
33.33%
76,045,510
71,682,902
(16,660,000)
( 16,660,000)
(1,440,482)
(4,107,382)
!>57,945,028
1'50,915,520
Net assets
Proportion of the Jollibee Group's ownership
Write-off of investment in 2011
Cumulative translation adjustments
E. Signing of Joint Venture Agreement
On February 25, 2014, the Jollibee Group, through GPPL, signed a joint agreement with Golden
Crown Foods LLC (GCFL) to establish a joint venture entity to own and operate the Jollibee brand
in the United Arab Emirates.
The Jollibee Group shall own 49% of the joint venture entity while GCFL will own 51%. GPPL
and GCFL will share control and management of the joint venture entity equally. The initial
funding for the formation of the joint venture entity is approximately USD0.08 million.
P666,214
Pl,698,277
Addit!OUS
Rrlirrmcnts and disposals
Reclassifications (Note 13)
Translation adjustments
Balance at end ofpenod
Atcumulatrd Depreeiation and Amortization
Balance at beginning of period
Depreciation and amortization (Notes 21 and 22)
Retirements and disposals
Reclassifications
Translation adiustmrnts
Balance at end of period
Ateumulated Impairment Losses
Balance at brginning of period
Additions during the period
(Note 1)
Balance at end of eriod
NN Book Value
366
Offitr, Storr
and Fond
Furniture
Transpor-
Proccuing
'"'
tat ion
Eguiem nt
Eguiemrnt
Fixtures
(In Thou_.,mt/.,)
555
(132,822)
(33,163)
131,507
666,769
1,664,165
7,313
26
720,755
12,955
(31,762)
(19)
23,254
7,197,208
385,686
(46,162)
(804)
p0,9SI)
7,608,975
316,095
(63,134)
725,183
7,524,947
7.863,911
7,339
1'659,430
11938,982
P5,786,847
932
1,043
ConstruNion
in Pro ;rrss
Total
1'888,507
33,721
(4,921)
501
2,636
920,444
P376,573
11,525
(6,962)
618,496
32,570
(3,960)
(109)
1,424
266,673
10,798
(6,934)
16,419,420
758,130
(151,952)
(92)
270,445
14,648
648,421
(290)
380,846
11548,004
357,207
(8,730)
(168,214)
j1,194)
727,073
1'28,208,061
l,OOJ,SSS
(286,202)
(33,163)
ll7,535
29,009,786
0
17,040,246
16,200
16,200
9,000
25,200
P3,H9,584
9,000
25,200
Pll,944,340
P272,023
Pll0,401
P727,073
Land and
Land
lmprovemenls
Cost
Balance at begmning of year
1'661,794
Plant,
Buildings,
Condominium
Leasehold
L'nits and
Rights and
Improvements Improvements
1'1,678,661
5,704
Addttions
Retirements and disposals
Reclassifications
Translation adiustments
Balance at end ofvear
4,420
666,214
7,186
127
8"
!3,058
1,698,'>77
668,534
5!534
7'>0, 755
!>923,867
135,420
(187,167)
3,388
12,999
888,507
11361,975
52,518
(44,368)
1,962
4,486
376,573
Construction
in Progress
!>292.754
1,096.563
(240,<J46)
(612,260)
11,8<JJ
548,004
Total
P25,793,108
3,907,876
(2, 149 ,829)
854
656,052
28,208,061
6,064,413
1,607,616
(678,604)
(1,106)
7,045,793
1,22'),317
(759,<J32)
665,546
124,933
(177,943)
(12)
252,672
46,024
(35,674)
1,075
14,704,144
3,05'),551
( 1,652, 153)
204,889
7,197,208
')3,754
7,608,975
5,972
618,4%
2,576
266,673
307,878
16,419,420
"
687
7,JJJ
Pl1,68J,920 Pl0,190,137
1,20U48
1,416,123
(865,474)
(811 ,874)
526,')67
7'),<J43
438,072
171,124
12,985,033
11,045,453
Office, Store
and Food
Processing
Equipment
29,500
( 13,300)
16,200
P658,901
P977,522
P5,787,825
Pl,420,278
29,500
( 13,300)
16,200
P270,01l
P109,900
1'548,004
P11,772,441
The cost of fully depreciated property, plant and equipment still in use amounted to
1'6,641.6 million and 1'7,448. 7 million as at March 3 I, 2014 and December 31, 2013, respectively.
Loss on disposals and retirements of property, plant and equipment amounted to 1'79.5 million and
1'35.4 million for the three months ended March 31, 2014 and 2013, respectively.
Construction in progress account mainly pertains to costs incurred for ongoing construction of
plants and properties, including soon-to-open stores.
In 2012, the Jollibee Group performed preliminary impairment assessments of its store fixed
assets after the typhoon and other calamities given that there is an indication that the carrying
value may not be fully recoverable. As a result, the Jollibee Group provided allowance for
impairment loss on office, store and food processing equipment amounting to 1'29.5 million. In
2013, the Jollibee Group reassessed the recoverable amount of the office, store and food
processing equipment of which reassessment process includes actual inspection of the Jollibee
Group's existing assets. Consequently, the Jollibee Group recognized a reversal of impairment
loss amounting to 1'13.3 million as a result of the reassessment of impairment previously
recognized.
and Building
Land
Cost
Balance at beginning of period
Retirements and disposals
Reclassifications (Note 12)
Translation adjustments
Balance at end of period
(Forward)
1'714,455
714,455
Improvements
(In Thousands)
1'336,030
(145,766)
33,163
11,693
235,120
Total
1'1,050,485
(145,766)
33,163
11,693
949,575
Total
(In Thousands)
252,271
1,718
(37,747)
8,041
224,283
252,271
1,718
(37,747)
8,041
224,283
46,447
1'668,008
1'10,837
46,447
1'678,845
Improvements
(In Thousands)
Total
Cost
Balance at beginning of year
Translation adjustments
Balance at end of year
Accumulated Depreciation and Amortization
1'714,455
714,455
1'3H086
12,944
336,030
237,081
12,905
2,285
252,271
237,081
12,905
2,285
252,271
1!83,759
46,447
1!751,767
46,447
1!668,008
1'1,037,541
12,944
1,050,485
In 2014, the J ollibee Group transferred certain units of a building with carrying amount ofJ>332
million as at March 31,2014 from property, plant and equipment to investment prope1ty due to
end of owner-occupation,
The cost offully depreciated buildings still being leased out by the Jollibee Group amounted to
1"202,0 million as at March 31,2014 and December 31,2013,
The Jollibee Group's investment properties have aggregate fair values ofJ>I ,348,7 million as at
March 31, 2014 and December 31, 2013 as determined by independent appraisers, Asian
Appraisal and Tan- Gatue Appraisal Associates, Inc, in 20 II, The management does not expect a
significant change in the fair value in 2014 and 2013, The valuations performed by the
independent appraisers are in accordance with recognized professional appraisal standards.
In determining the fair value of the investment prope11ies, the independent appraisers used the
market data approach for land and cost approach for buildings and building improvements, For
land, fair value is based on sales and listings of comparable properties within the vicinity after
adjustments for differences in location, size and shape of the lot, time elements and other factors
between the prope11ies and their comparable properties, For buildings and building improvements,
fair value is based on the current cost of replacement of the properties in accordance with
prevailing market prices for materials, labor, and contractors' overhead, profit and fees in the
locality after adjustments for depreciation due to physical deterioration, functional
and economic obsolescence based on personal inspection of the buildings and building
improvements and in comparison to similar new properties. Fair value hierarchy disclosures for
investment properties have been provided in Note 31.
Rent income derived from income-generating properties amounted to 1'7.5 million and 1'8.2
million for the three months ended March 31, 2014 and 2013, respectively (see Notes 20 and 29).
Direct operating costs relating to the investment properties that generated rent income recognized
under "Cost of sales" and "General and administrative expenses" accounts in the consolidated
statements of comprehensive income amounted to 1'7.8 million and 1'6.2 million for the three
months ended March 31, 2014 and 2013, respectively.
No investment properties as at March 31, 2014 and December 3 1, 2013 have been pledged as
security or collateral for the Company's debts.
Goodwill
Trademark
Computer software
Other intangible assets, net of accumulated
amortization
March 2014
(Unaudited)
1'6,822,526,341
2,004,255,942
267,270,178
December 2013
(Audited)
1'6,822,526,341
2,004,255,942
267,270,178
8,702,112
1'9,102,754,573
9,584,387
1'9, I 03,636,848
1'2,497,252,906
1,781,266,639
737,939,101
434,651,055
429,016,109
106,264,544
383,855,247
292,141,532
154,894,001
5,245,207
6,822,526,341
2,004,255,942
1'8,826,782,283
Computer software
The Jollibee Group's computer software pertains to its Enterprise Resource Planning (ERP)
System. The Jollibee Group expects the asset to be available for use starting July I, 2014 and will
have an estimated useful life offive years.
Other intangible assets
The rollforward analysis of other intangible assets as at March 3 I, 2014 and December 31, 20 13 is
as follows:
March 2014
(Unaudited)
December 2013
(Audited)
1'18,052,904
j> 16,034,234
1'18,052,904
2,018,670
!>18,052,904
Accumulated amortization:
Balance at beginning of period
Amortization
Balance at end of period
1'8,468,517
882,275
1'9,350,792
!>5,257,372
3,211,145
!>8,468,517
1'8,702,112
9,584,387
!>9,584,387
10,776,862
Cost:
Balance at beginning of period
Additions
Balance at end of period
Yang He King
Geographical
Location
Pre-tax
Discount Rate
Long-term
Growth Rate
PRC
Philippines
11.83%
9.69%
7.80%
6.80%
Philippines
USA
PRC
USA
USA
Philippines
PRC
9.69%
9.12%
11.83%
9.12%
9.12%
9.69%
11.83%
6.80%
3.50%
7.80%
3.50%
3.50%
6.80%
7.80%
Key assumptions with respect to the calculation of value in use of the groups ofCGUs as at
December 31, 2013 on which management had based its cash flow projection to undertake
impairment testing of goodwill are as follows:
a) Discount rates- discount rates represent the current market assessment of the risks specific to
each CGU, regarding the time value of money and individual risks of the underlying assets
which have not been incorporated in the cash flow estimates. The discount rate calculation is
based on the specific circumstances of the Jollibee Group and its CGUs and derived from its
weighted average cost of capital (WACC). The WACC takes into account both debt and
equity. The cost of equity is derived using the Capital Asset Pricing Model (CAPM). The
cost of debt is based on the interest bearing borrowings the Jollibee Group is obliged to
service. CGU-specific risk is incorporated by applying individual beta factors. The beta
factors are evaluated annually based on publicly available market data.
b) Long-term growth rates- rates are determined with consideration of historical and projected
results, as well as the economic environment in which the CGUs operate.
c) Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) margin- is based
on the most recent value achieved in the year preceding the start of the budget period, and
adjusted for planned efficiency improvement, if any.
No impairment loss was recognized for goodwill and trademark for the three years ended 2013,
2012 and 2011.
March 2014
(Unaudited)
December 2013
(Audited)
1'1,396,047,814
l'l,360,230,842
279,466,340
239,797,867
115,886,619
61,261,913
13,433,144
21,773,874
76,663,257
1'1,964,532,961
I 06,011,234
61,26!,913
13,433,144
21,303,019
91,237,373
J>l,893,275,392
Security and other deposits represent deposits for operating leases entered into by the Jollibee
Group as lessee, including returnable containers and other deposits. The security deposits are
recoverable from the lessors at the end of the lease term, which ranges JJ-om three to twenty years.
These are presented at amortized cost. The discount rates used range from 0.23%% to 8.65% in
2013 and 2012. The difference between the fair value at initial recognition and the notional
amount of the security deposits is charged to "Deferred rent expense" account and amortized on
straight-line basis over the lease terms.
Accretion of interest on financial assets amounted to J>3 .4 million for the three months ended
March 31,2014 and 2013 (see Note 23).
- 78
Trade
Accruals for:
Local and other taxes
Advertising and promotions
Salaries, wages and employee benefits
Rent
Utilities
Freight
Operating supplies
Repairs and maintenance
Professional fees
Store operations, corporate events and others
Customers' deposits
Unearned revenue from gift certificates
Dividends payable
Other current liabilities
March 2014
(Unaudited)
1'5,043,991,107
December 2013
(Audited)
1'6,006,639,836
1,504,933,279
1,650,647,422
1,187,620,299
1,022,817,189
1,151,883,577
1,516,033,345
525,098,664
534,417,910
342,628,146
329,764,448
186,435,992
197,069,154
174,724,487
179,434,140
160,482,129
143,883,572
107,553,968
114,884,136
1,532,262,997
1,572,317,710
563,490,354
602,1 00,377
47,629,038
22,084,561
22,338,443
29,374,422
307,622,975
269,366,944
1'12,799,604,600 Pl4,249,926,021
Trade payables to suppliers are non interest-bearing and are normally settled on a 30-day term.
Accrued expenses, local and other taxes and customers' deposits are noninterest-bearing and are
normally settled within the next financial year.
I 7. Provisions
The Jollibee Group has outstanding provisions amounting to 1'30.5 million as at
March 31, 2014 and December 31, 2013, consisting mainly of provisions for legal claims.
Provisions for legal claims, which amounted to 1'29.3 million, include estimates oflegal services,
settlement amounts and other costs of claims made against the Jollibee Group. Other information
on the claims is not disclosed as this may prejudice the Jol!ibee Group's position on such claims.
The Jollibee Group's management, after consultation with its legal counsel, believes that the
provisions are sufficient to meet the costs related to the claims.
Principal
Unamortized debt issue cost
March 2014
(Unandited)
P5,213,709,974
(7,159,091)
P5,206,550,883
December 2013
(Audited)
P5,176,745,744
(7,500,000)
P5,169,245,744
USD-denominated:
Loan I
Loan 2
Loan 3
Loan4
Loan 5
PHP-denom inated:
Loan 6
Loan 7
Less current portion
March 2014
(Unaudited)
December 2013
(Audited)
P1,792,600,000
448,150,000
334,658,974
806,670,000
179,260,000
!>1,775,800,000
443,950,000
329,362,744
799,110,000
177,580,000
1,492,840,909
152,371,000
5,206,550,883
1,298,181,474
P3,908,369,409
1,492,500,000
150,943,000
5,169,245,744
1,106,275,244
!>4,062,970,500
- 67The loan agreements above provide certain restrictions and requirements principally with respect
to maintenance of required financial ratios and material change in ownership or control. As at
March 31, 2014 and December 31, 2013, the Jollibee Group is in compliance with the terms of its
loan covenants.
USD-denominated loan of JFPPL. Loan 5 consists of a 5-year unsecured loan acquired from a
local bank on May 8, 2013 amounting to USD4.0 million (or !'163.3 million) with an interest rate
based on three-month USD LIBOR plus spread of I 00 basis points subject to repricing every
quarter. The principal is payable on May 7, 2018, the date of maturity.
PHP-denominated loans of the Parent Company. On December 9, 2013, the Parent Company
refinanced its !'1,500.0 million term loan from MBTC due on December 16,2013 by availing a
term loan of the same amount (Loan 6). The new loan is payable over five years and six months
from the date of drawdown with annual principal repayments of!'15.0 million starting on the 30'"
month from the date of drawdown and !'1,455.0 million upon maturity. The loan is subject to a
variable interest rate based on three-month Philippine Dealing System Treasury Fixing (POST-F)
rate plus spread of 1.25%, which is payable and is reset on a quarterly basis, and to an interest rate
floor based on the Bangko Sentral ng Pilipinas (BSP) Overnight Reverse Repurchase Agreement
Rate. The loan was drawn on December 16, 2013 and will mature on June 17, 2019. The Parent
Company incurred debt issue costs of!'7.5 million, representing documentary stamp tax, in
relation to this loan in 2013.
Under the loan agreement with MBTC, the Parent Company has an option to convert the variable
interest rate into a fixed interest rate based on the PDST-F rate for the remaining term of the loan
and the spread of 1.00% on any interest payment date. The Parent Company also has an option to
prepay the loan in full or in multiples of!'lO.O million on any interest payment date.
The balance of the Company's long-term debt as at March 31, 2014 and December 31, 2013 is as
follows:
March 2014 December 2013
(Unaudited)
(Audited)
Principal
1'1,500,000,000 !'1,500,000,000
Less unamortized debt issue cost
(7,159,091)
(7,500,000)
!'1,492,840,909 !'1,492,500,000
The movements in unamortized debt issue cost in 2014 and 2013 are as follows:
March 2014
(Unaudited)
1'7,500,000
(340,909)
1'7,159,091
December 2013
(Audited)
!'I 0,296,795
7,500,000
(I 0,296,795)
!'7,500,000
Under the loan agreement, the Parent Company is subject to certain debt covenants which include
among others the maintenance of a required Debt-to-Equity ratio and Debt-to-EBITDA ratio not to
exceed 3.0. The Parent Company is in compliance with these debt covenants as at March 31,2014
and December 31,2013.
- 68PHP-denominated loan of Perf Restaurants, Inc.(Perj). Loan 7 was originally a 5-year unsecured
USD-denominated loan availed on December 20, 20 II by Perf. On the same day, the loan
ofUSD3.4 million was converted to 1'149.2 million bearing fixed interest rate of 5.32% per
annum.
The loan contains certain restrictive covenants and requirements with respect to the following:
(a) Maintenance of the following ratios for the duration of the loan agreements: (I) minimum debt
service coverage of 1.5: I; and (2) maximum debt to (EBITDA) of 4: I.
(b) Restrictions on changes in ownership structure; incurrence of any additional loans with term of
more than one year; repayment of intercompany borrowings from the Parent Company except
those agreed upon signing of this Facility Agreement; investing or entering into any business
substantially different from the business in which Perf is presently engaged; and enter into
merger or consolidation, except where Perf is the surviving corporation, and the Parent
Company remains as the majority beneficial owner of the surviving corporation.
As at March 31,2014 and December 31,2013, Perf is in compliance with the terms of the loan
agreement.
Derivative, Hedges and Hedge Effectiveness Testing
In 2012, Loan 7 was converted into a deliverable cross-currency swap transaction to hedge in full
the foreign currency risk and interest rate risk on its floating rate. Under the cross-currency swap,
Perf received at inception PHP notional amount ofl'149.2 million and paid USD notional amount
ofUSD3.4 million based on the PHP/USD spot reference rate of1'43.87. At every interest
payment date, Perf will receive variable interest based on 3-month US LIBOR plus spread and will
pay fix interest rate. At maturity date, Perf will receive USD notional amount of
USD3.4 million and pay PHP notional amount of1'149.2 million. The USD receipts from the
cross-currency swap correspond with the expected interest fixed principal amount due on the
hedged loan. Similar with the hedged loan, the cross-currency swap is non-amortizing and will
mature on December 21, 2016.
Effectively, the cross-currency swap transformed the floating rate USD loan into a fixed rate PHP
loan.
Since the critical terms of the hedged loan and cross-currency swap matched, the hedge was
assessed to be highly effective. As such, there was no ineffectiveness recognized in the profit or
loss for the years ended December 31, 2013 and 2012.
The movement in fair value of cash flow hedge presented in equity under other comprehensive
loss in 2014 and 2013 follows:
- 69The foreign exchange revaluation of the hedged loan, amounting to P1.4 million and P13.4
million, was recognized in other comprehensive loss on derivative liability for the three months
ended March 31, 2014 and year ended December 31, 2013, respectively.
The net movement in the fair value of the Company's derivative liability for the periods ended
March 31, 2014 and December 31, 2013 follows:
March 2014
(Unaudited)
1'4,532,600
3,614,971
1'8,147,571
December 2013
(Audited)
1-'22,782,820
(20,212,711)
1,962,491
1-'4,532,600
Interest expense recognized on long-te1m debt amounted to 1-'29.2 million and 1>39.1 million for
the three months ended March 31,2014 and 2013 (see Note 23).
19. Equity
a. Capital Stock
The movements in the number of shares are as follows:
March 2014
(Unaudited)
1'1,450,000,000
December 2013
(Audited)
PI ,450,000,000
1'1,068,608,675
435,318
1,069,043,993
PI ,063,859,559
4,749,116
I ,068,608,675
(17,177,884)
1'1,051,866,109
(17,177,884)
PI,051,430,791
The total number of shareholders of the Parent Company is 3,225 and 3,244 as at March 31,
2014 and December 31,2013, respectively.
b. Treasury Shares
The cost of common stock of the Parent Company held in treasury ofl>l80.5 million consists
of 16,447,340 shares as at March 3 l, 2014 and December 3 l, 2013.
- 70c. Excess of Cost over the Carrying Value of Non-controlling Interests Acquired
The amount of excess of cost over the carrying value of non-controlling interests acquired as
at March 3 I, 2014 and December 31, 2013, recognized as part of"Equity Attributable to
Equity Holders of the Parent Company" section in the consolidated statements of financial
position, resulted from the following acquisitions of non-controlling interests:
20% of Greenwich in 2006
I 5% of Belmont in 2007
40% of Adgraphix in 2010
1'168,257,659
375,720,914
( 1 ,214,087)
1'542,764,486
d. Retained Earnings
The Jollibee Group has a cash dividend policy of declaring one-third of the Jollibee Group's
net income for the year as cash dividends. It uses best estimate of its net income as basis for
declaring cash dividends. Actual cash dividends per share declared as a percentage of the EPS
are 75.5%, 61.5% and 33.8% in 2013,2012 and 201 I, respectively.
The Parent Company's retained earnings available for dividend declaration, computed based
on the guidelines provided in SEC Memorandum Circular No. 11, amounted to 1'8,307.5
million and 1'1'7,895.7 million as at March 31,2014 and December 31, 20!3, respectively.
The Parent Company's cash dividend declarations for 2013 and 2012 follow:
Cash Dividend
per Share
Total Cash
Dividends
Declared
Declaration Date
Record Date
Payment Date
2013
April 11
August 6
November 12
May7
September 19
November 29
May 30
October 14
December 16
1'0.65
2.00
0.71
1'3.36
1'680,017,923
2,099,932,206
745,597,226
1'3,525,547,355
2012
Apri112
November 12
November 12
May 9
December 3
December 3
May31
December 19
December 19
1'0.58
1.00
0.62
1'2.20
1'602,206,230
I ,044,303,255
647,468,018
1'2,293,977,503
An important part of Jollibee Group's growth strategy is the acquisition of new businesses in
the Philippines and abroad. Examples were acquisitions of85% ofYonghe King in 2004 in
PRC (1'1,200.0 million), !00% of Red Ribbon in 2005 (1'1,700.0 million), the remaining 20%
minority share in Greenwich in 2007 (1'384.0 million), the remaining 15% share ofYonghe
King in 2007 (1'413.7 million), 100% of Hong Zhuang Yuan restaurant chain in PRC in 2008
(1'2,600.0 million), 70% ofMang !nasal in 20!0 (1'2,976.2 million), 100% ofChowking US
Operations in 201 I (1'693.3 million), 55% of San Pin Wang (1'195.9 million plus a contingent
consideration) and 48% ofWJ Investments Limited (1'98.0 million) in 2012.
The Jollibee Group plans to continue to make substantial acquisitions in the coming years.
The Jollibee Group uses its cash generated from operations to finance these acquisitions and
capital expenditures. These limit the amount of cash dividends that it can declare and pay
making the level of the retained earnings higher than the paid-up capital stock.
- 71 In support of the Jollibee Group's strategy, the BOD approved the appropriation of retained
earnings for future expansion and capital expenditure. Thus as at March 31, 2014 and
December 31, 2013, the details of the appropriated retained earnings follow:
Amount
Projects
Timeline
Acquisition of 8usinesses
Capital Expenditures
2013-2018
2013-2018
1'7,600,000,000
2,600,000,000
I'10,200,000,000
The unappropriated retained earnings of the Parent Company is also restricted to the extent of
cost of common stock held in treasury amounting to 1'180.5 million in both periods as well as
the undistributed retained earnings of its subsidiaries which amounted to 1'825.4 million and
1'629.2 million as at March 31,2014 and December 31,2013, respectively.
Royalty fees
Franchise fees
Rent income (Note 29)
Service fees
Other revenues
March 2014
(Unaudited)
1>905,976,696
39,446,697
25,798,326
19,800,215
59,218,373
March 2013
(Unaudited)
1'810,553,296
28,304,680
25,444,326
15,627,062
51,087,753
1>1,050,240,307
1'931,017,117
-72-
Cost of inventories
Personnel costs:
Salaries, wages and employee
benefits
Pension expense (Note 25)
Rent (Note 29)
Electricity and other utilities
Depreciation and amortization
(Notes 12 and 13)
Supplies
Contracted services and
professional fees
Repairs and maintenance
Security and janitorial
Communication
Entertainment, amusement
and recreation
Others
March 2014
(Unaudited)
10,044,197,765
March 2013
(Unaudited)
1'8,685,195,317
2,155,413,010
19,257,805
1,597,733,567
888,454,060
1,908,729,384
18,895,457
1,420,407,256
787,665,982
690,050,469
498,291,641
653,665,233
426,791,535
492,570,568
199,112,719
89,563,862
34,947,273
351,899,705
166,722,065
78,082,118
32,811,693
6,693,378
6,742,451
329,973,281
400,069,074
17,116,404,264 I'14,867,532,404
March 2013
(Unaudited)
1'825,995,869
35,856,086
16,596,363
210,138,743
67,564,212
82,320,775
45,503,127
63,817,699
55,769,206
15,800,294
- 73 -
March 2014
(Unaudited)
March 2013
(Unaudited)
9,000,000
24,910,870
3,751,639
12,315,196
24,895,611
19,980,471
18,268,391
15,320,113
14,294,092
10,101,878
7,802,381
3,674,334
3,212,059
23,058,222
17,258,709
18,513,264
14,131,564
11,435,833
13,406,881
12,515,854
4,158,819
(3,134,978)
6,038,342
2,760,300
147,949,867
160,706,844
1'1,975,766,224 1"1,725,055,795
Interest income:
Cash and cash equivalents
(Note 6)
Accretion of interest on refundable deposits
and employee car plan
receivables (Note 15)
Loan and advances (Note 18)
Interest expense:
Long-term debt (Note 18)
Accretion of interest on the liability from
acquisition of businesses and customers'
deposits (Notes 11 and 15)
March 2014
(Unaudited)
March 2013
(Unaudited)
1'23,955,604
1"43,907,362
3,375,198
24,959,525
1'52,290,327
3,386,355
21,843,484
1"69,137,201
(1'29,153,448)
(1"39,149,630)
(4,448,220)
(1'33,601,668)
( 4,539,598)
(1"43,689,228)
-87
March 2014
(Unaudited)
Other income (expense):
Write-off of other liabilities
Rebates and suppliers' incentives
Foreign exchange gain (loss)- net
Charges to franchisees
Penalties and charges
Pre-termination of operating leases
Other rentals
Insurance claims and others
1'26,319,631
23,108,969
6,149,167
3,501,190
5,615,424
689,754
3,187,230
3,764,399
1'72,335,764
March 2013
(Unaudited)
1'604,970
9,237,558
(5,370,242)
5,657,555
1,183,999
1,281,978
903,951
3,583,728
'17,083,497
March 2014
(Unaudited)
March 2013
(Unaudited)
1'200,298,366
3,304,002
'181,177,266
7,784,445
104,344,589
45,776,612
34,271,821
1'387 ,995,390
161,000,253
29,761,330
1,274,414
'380,997,708
On December 18, 2008, the BIR issued Revenue Regulations No. 16-2008, which implemented
the provisions of Republic Act 9504 (R.A. 9504) on Optional Standard Deduction (OSD). This
regulation allowed both individuals and corporate taxpayers to use OSD in computing for taxable
income. Corporations may elect a standard deduction equivalent to 40% of gross income, as
provided by law, in lieu of the itemized allowed deductions.
For the periods ended ended March 31,2014 and 2013, Zenith, Grandworth and RRBHI, wholly
owned subsidiaries, elected to use OSD in computing for its taxable income. The total tax benefits
from the availment ofOSD amounted to '14.0 million and '9.5 million in 2014 and 2013,
respectively.
The components of the Jollibee Group's recognized net deferred tax assets follow:
March 2014
(Unaudited)
December 2013
(Audited)
1>228,358,176
!'227,428,655
246,509,134
91,072,524
117,074,290
233,568, I 77
77,033,807
121,663,646
52,653,520
26,372,545
23,559,573
55,275,147
27,770,876
20,616,788
8,495,659
2,319,549
7,381,302
803,796,272
9,073,014
2,599,563
7,513,467
782,543,140
7,601,331
8,110,116
5,341,747
3,742,190
2,407,133
1,968,063
4,777,031
26,346,280
!'756,196,860
3,529,659
2,421,802
2,286,938
4,617,612
20,457,342
1>783,338,930
The components of the Jollibee Group's recognized net deferred tax liabilities follow:
March 2014
(Unaudited)
December 2013
(Audited)
1>184,247,486
176,089,745
123,233,175
22,688,381
!'184,292,117
171,799,170
98,883,194
22,688,381
March 2014
(Unaudited)
Accumulated impairment loss in value
of property, plant and equipment,
investment properties, and other
nonfinancial assets
Unamortized past service costs
Unaccreted discount on security deposits
and employee car plan receivables
Provisions for legal claims
Excess of MClT over RCIT
Others
Deferred tax liabilities:
Excess of fair value over book value of
identifiable assets of acquired businesses
Unrealized foreign exchange gain
Prepaid rent
Deferred rent expense
Operating lease receivables
Others
Deferred tax liabilities- net
December 2013
(Audited)
1>16,706,347
13,250,797
1"17,165,614
13,948,206
13,507,510
9,150,192
7,920,246
2,310
566,796,189
13,944,952
9,150,192
2,204,170
2,310
534,078,306
699,906,215
136,906,738
29,937,001
9,531,966
705,641,848
111,144,838
23,436,251
9,531,966
22,926
2,457,595
852,235,424
1"318,157,118
2,878,202
879,160,122
1>312,363,933
OSD
The availment of the OSD method also affected the recognition of several deferred tax assets and
liabilities. Deferred tax assets and liabilities, for which the related income and expense are not
considered in determining gross income for income tax purposes, are not recognized. This is
because the manner by which the Jollibee Group expects to recover or settle the underlying assets
and liabilities, for which the deferred tax assets and liabilities were initially recognized, would not
result to any future tax consequence under the OSD method. Meanwhile, deferred tax assets and
liabilities, for which the related income and expense are considered in determining gross income
for income tax purposes, are recognized only to the extent of their future tax consequence under
OSD method. Hence, the tax base of these deferred tax assets and liabilities is reduced by the
40% allowable deduction provided for under the OSD method.
Accordingly, the Jollibee Group's deferred tax assets and liabilities, which were not recognized
due to the use of the OSD method in future years, are as follows:
March 2014
(Unaudited)
December 2013
(Audited)
1'10,334,189
3,963,705
I'l0,334,189
1,641,000
13,741,757
8,209,098
596,512
329,400
118,378
1'38,934,039
3,963,705
25,858
3,676,834
14,185,024
8,001,665
627,013
350,016
118,378
1'41,282,682
1'7,986,602
182,947
241,062
8,410,611
1'30,523,428
1'8,300,360
201,113
247,985
8,749,458
1'32,533,224
As at March 31, 2014, NOLCO and excess of MC!T over RCIT of the Philippine-based entities
that can be claimed as deductions from taxable income and income tax due, respectively, are as
follows:
Carry Forward
Benefit up to
NOLCO
Excess of
MC!Tover
RCIT
1'46,795,723
121,422,688
135,356,669
1'303,575,080
1'8,658,861
16,383,798
6,437,!60
1'31,479,819
Year Incurred/Paid
2014
2013
2012
The PRC enterprise income tax law provides that income tax rates are unified at 25%. As of
March 31, 2014, NOLCO of the PRC-based entities that can be claimed as deductions from
taxable income are as follows:
Year Incurred
2014
2013
2012
2011
2010
2009
Carry Forward
Benefit Up to
December 3 l, 2019
December 31, 2018
December 31, 2017
December 3 l, 2016
December 3 l, 2015
December 31, 2014
Tax Losses
1'51,763,830
198,770,320
461,236,090
191,018,116
79,438,672
3,809,509
1'986,036,537
Deferred Tax
at25%
1'12,940,957
49,692,580
115,309,023
47,754,529
19,859,668
952,377
1'246,509,134
- 78The following are the movements in deferred tax assets on NOLCO of the PRC-based entities:
March 2014
(Unaudited)
1'233,568,177
18,327,541
December 2013
(Audited)
1'275,552,028
49,692,580
(85,576,892)
(20,0 I 7,365)
{5,386,584)
13,917,826
1'246,509,134
1'233,568,177
- 79-
AtJanuary 1,2013,asrestated
Pension expense:
Current service cost
Net interest
Adjustments due to curtailment
Less benefits aid
Remeasurements in other comprehensive
Present Value
of Defined
Benefit
Obligation
f'l,879,417,452
162,902,800
120,486,015
3,846,757
287,235,572
169,833,368
Fair Value
of Plan Assets
f'l ,357,838,850
80,944,803
80,944,803
143,509,013
Pension
Liabilit
1"521 ,578,602
162,902,800
39,541,212
3,846,757
206,290,769
26,324,355
income:
58,504,692
159,546,177
(58,504,692)
159,546,177
249,554,608
409,100,785
1"2,405,920,441
58,504,692
119,300,000
1"1,473,079,332
249,554,608
350,596,093
(119,300,000)
1"932,841,109
Net interest
Less benefits aid
Remeasurements in other comprehensive
Present Value
of Defined
Benefit
Obligation
f'1,302,672,393
Fair Value
of Plan Assets
1"1,293,293,375
Pension
Liabilit
1"9,379,018
99,266,478
108,018,074
207,284,552
178,078,217
104,912,344
104,912,344
133,300,505
99,266,478
3,1 05,730
102,372,208
44,777,712
46,578,825
(46,578,825)
income:
180,380,738
367,157,986
547,538,724
1"1,879,417,452
180,380,738
367,157,986
46,578,825
500,959,899
46,354,811
(46,354,811)
f'l ,3 57,838,850
1"521, 578,602
The maximum economic benefit available is a combination of expected refunds from the plan and
reductions in future contributions.
The overall expected rate of return on plan assets is determined based on the market prices
prevailing on that date, applicable to the period which the obligation is to be settled.
- 80-
The following table presents the estimated fair values of the assets of the plan:
December 31,
2013
Pl52,755,806
973,525,894
December 31,
2012
P58,002,779
993,931,235
95,381,636
76,370,495
63,636,911
43,015,008
58,864,127
102,421,815
48,697,750
2,418,680
30,966,661
45,773,280
12,337,971
46,175,322
31,985,361
16,393,271
30,984,022
17,455,532
(26,056,807)
(44,121,567)
J>1,473,079,332 PI ,357,835,850
Investments in government securities which consist of retail treasury bonds that bear interest
ranging from 5.50%-7.38% and have maturities from August 2020 to October 2037 and fixed
rate treasury notes that bear interest ranging from 4.42%-9.91% and have maturities from
February 2015 to August 2037.
Investments in debt securities consist of long-term corporate bonds in the power sector, which
bear interest ranging from 6.30%-7.75% maturing on April2017.
Other financial assets held by the retirement plan are primarily accrued interest income on
cash and cash equivalents, debt instruments and other securities.
Pension costs as well as the present value of the pension liability are determined using actuarial
valuations. The actuarial valuation involves making various assumptions. The principal
assumptions used in determining pension for the defined benefit plans are shown below:
Discount rate
December 3 I,
20I3
5.00%- 6.00%
6.50%- 7. I 1%
December 3 I ,
20I2
5.70%- 6.30%
7.00%- 7.50%
January I,
20I2
6.50%- 7.20%
5.00%-7.50%
- 81 -
The sensitivity analysis below has been determined based on reasonably possible changes of each
significant assumption on the defined benefit obligation as of the end of the reporting period,
assuming if all other assumptions were held constant:
Discount rates
Future salary increases
1'1,015,034,231
(778,272,017)
Shown below is the maturity analysis of the undiscounted benefit payments as at December 31,
2013:
December 31,
2013
Less than I year
1'223,365,460
More than 1 year to 5 years
921,649,113
More than 5 years to 1 0 years
930,779,042
The Jollibee Group does not have a formal asset-liability matching strategy. The overall
investment policy and strategy of the retirement plan is based on the client suitability assessment,
as provided by its trust bank, in compliance with the Bangko Sentral ng Pilipinas requirements. It
does not, however, ensure that there will be sufficient assets to pay the retirement benefits as they
fall due while attempting to mitigate the various risks of the plan.
The plan assets are primarily exposed to financial risks such as liquidity risk and price risk.
Liquidity risk pertains to the plan's ability to meet its obligation to the employees upon retirement.
To effectively manage liquidity risk, the trustee bank maintains assets in cash and short-term
deposits. Price risk pertains mainly to fluctuation in market prices of the retirement funds
marketable securities. In order to effectively manage price risk, the trustee bank continuously
assesses these risks by closely monitoring the market value of the securities and implementing
prudent investment strategies.
The Jollibee Group expects to contribute .1'237.1 million to the defined benefit pension plans in
2014.
The average duration of the defined benefit obligation is 10 years as at March 31, 2014 and
December 31,2013, respectively.
Defined Contribution Plan
The employees of the PRC-domiciled and CSA-based subsidiaries of the Jollibee Group are
members of a state-managed pension benefit scheme operated by the national governments. These
subsidiaries are required to contribute a specified percentage of their payroll costs to the pension
benefit scheme to fund the benefits. The only obligation of these subsidiaries with respect to the
pension benefit scheme is to make the specified contributions.
The contributions made to the scheme and recognized as part of other employee benefits
amounted to .1'156.8 million .1'280.2 million, and 1'121.2 million in 2013,2012 and 2011,
respectively.
- 82-
- 83 The movements in the number of stock options outstanding and related weighted average exercise
prices (WAEP) are as follows:
larch 2014
December 2013
(Audited)
(Unaudited)
Number of
O[!tions
33,404,194
WAEP
P62.69
16,915,937
1!83.77
(213,096)
48.24
16,702,841
899,295
Number of
O tions
December 2012
(Audited)
Number of
33,404,194
WAEP
P62.69
29,808,694
WAEP
P5307
P84.22
16,788,056
3,595,500
(3,373,561)
(94,058)
16,915,937
P63.90
142.51
46.34
74.45
P83. 77
17,505,395
3,018,030
(3,375,915)
(359,454)
16,788,056
P52.39
107.90
41.80
80.52
P63.90
P58.03
10,216,427
P57.83
10,367,798
P45.83
Oetions
The average share price is I'162.75, 1'143.27 and 1'1 03.41 as of March 3 I, 2014, December 31,
2013 and 2012, respectively. The weighted average remaining contractual life for the stock
options outstanding as of December 31,2013,2012 and 2011 is 4.83 years, 4.66 years and 4.88
years, respectively.
The weighted average fair value of stock options granted in 2013, 2012 and 20 II is 1'30.55,
1'23.43 and 1'23.67, respectively. The fair value of share options as at the date of grant is
estimated using the Black-Scholes Option Pricing Model, taking into account, the terms and
conditions upon which the options were granted. The option style used for this plan is the
American style because this option plan allows exercise before the maturity date. The inputs to
the model used for the options granted on the dates of grant for each MSOP cycle are shown
below:
Risk-free
MSOPCycle
J st
2nd
3rd
4tl>
5th
6th
7th
8th
9th
10"
Year of Grant
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Dividend Yield
1.72%
1.72%
1.72%
1.70%
1.80%
2.00%
2.00%
2.00%
2.00%
2.00%
Expected
Volatility
36.91%
36.91%
36.91%
28.06%
26.79%
30.37%
29.72%
34.53%
28.72%
29.38%
Interest
Rate
6.20%
6.20%
6.20%
6.41%
8.38%
5.28%
5.2)!'/o;>
4.18%
3.50%
2.68%
Expected
Life of
the Option
5-7 years
5-7 years
5-7 years
3-4 years
3-4 years
3-4 years
3-4 years
3-4 years
3-4 years
3-4 years
Stock Price
on Grant
Date
P24.00
29.00
35.00
52.50
34.00
48.00
70.00
89.90
107.90
145.00
Exercise
Price
P20 00
27.50
32.32
50.77
39.85
45 45
57.77
89.90
107.90
145.00
The expected life of the stock options is based on historical data and current expectations and is
not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the
assumption that the historical volatility over a period similar to the life of the options is indicative
of future trends, which may also not necessarily be the actual outcome.
ELTIP. TheELTIP entitlement is given to members of the corporate management committee.
Each ELTIP cycle refers to the period commencing on the ELTIP entitlement date and ending on
the last day of the ELTIP exercise period. Actual grant and vesting is conditional upon
achievement of the Jollibee Group's minimum medium to long-term goals and individual targets in
a given period, and the employment of the employee-participants to the Jollibee Group within the
vesting period. If the goals are achieved, the options will be granted. Starting with the 3rd ELTIP
cycle, a percentage of the options to be granted are based on the percentage of growth in annual
earnings per share such that I 00%, 50% or 25% of the options granted when percentage of
- 97
growth in annual earnings per share are 12% and above, 10% to less than 12% or 8% to less than
I 0%, respectively.
The exercise price of the stock options is determined by the Jollibee Group with reference to
prevailing market prices over the three months immediately preceding the date of entitlement.
The J ollibee Group does not pay cash as a form of settlement. Starting with the 3rd ELTIP cycle,
the exercise price of the option is determined by the Jollibee Group with reference to the closing
market price as of the date of grant.
On July I, 2004, the Compensation Committee gave an entitlement of 22,750,000 options under
the 1st ELTIP cycle to eligible participants. The options will vest at the rate of one-third of the
total options granted on each anniversary date which will start after a year of the ELTIP grant
date. One-third of the options granted, or 7,583,333 options, vested and may be exercised starting
July I, 2007 and expired on June 30, 2012. On July I, 2008 and October 19,2012, a total
entitlement of20,399,999 and 24,350,000 options was given to eligible participants under the 2nd
and 3rd ELTIP cycle, respectively.
The movements in the number of stock options outstanding for the 2nd and 3rd ELTIP cycles and
related WAEP for the years ended December 31, 2013, 2012 and 2011 follow:
March 2014
{!;!naudited}
Number of
WAEP
O[!tions
67,499,999
56.66
December 2013
(Audited)
Number of
Oetions
WAEP
67.499,999
P56.66
37,186,110
39.85
37,81!,665
750,000
(1,375,555)
P80.51
105.00
39.85
1'82.77
37,186,110
P82.51
82.51
(222,222)
36,963,888
12,613,888
1'39.85
12.836,110
P-39.85
December 2012
(Audited)
Number of
Options
WAEP
66,749,999
P56.12
27,674,569
23,600,000
(12,962,905)
(499,999)
37,811,665
7,411,665
P32.52
105.00
24.19
39.85
P80.51
P39.85
The weighted average remaining contractual life for the stock options outstanding as of20!3,
2012 and 2011 is 5.30 years, 5.68 years and 3.02 years, respectively.
The fair value of stock options granted is 1'22.96 in 2013 and 2012. The fair value of share options
as at the date of grant is estimated using the Black-Scholes Option Pricing Model, taking into
account the tenus and conditions upon which the options were granted. The option style used for
this plan is the American style because this option plan allows exercise before the maturity date.
The stock options granted under the 2nd and 3rd ELTIP cycles will expire on April 30, 2017 and
2020, respectively. The inputs to the model used for the options granted on the dates of grant for
each ELTIP cycle is shown below:
ELTIP Cycle
I"
2"'
3''
Year of Grant
2004
2008
2012
Dividend
Yield
1.72%
1.80/n
2.00%
Expected
Volatility
36.91%
26.79%
28.74%
Risk-free
Interest Rate
6.20%
8.38%
3.60%
Expected
Life of
the OEtion
5 years
3-4 years
3-4 years
Stock Price
on Grant
Date
P24.00
34.00
105.00
Exercise
Price
P20.00
39.85
105.00
The expected life of the stock options is based on historical data and current expectations and is
not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the
assumption that the historical volatility over a period similar to the life of the options is indicative
of future trends, which may also not necessarily be the actual outcome.
The cost of the stock options expense charged to operations under "General and administrative
expenses" account amounted to P39.4 million and P35.9 million for the three months ended March
31,2014 and 2013, respectively (see Note 22).
2013
P584,663,115
150,418,741
46,292,773
2012
(As restated see Note 2)
P442,497,940
76,984,373
41,900,346
2011
(As restatedsee Note 2)
P391 ,620,377
73,596,182
28,897,958
34,443,875
P815,818,504
28,405,255
P589,787,914
25,322,690
P519,437,207
Number of shares
December 20 12
(Audited)
782,130
Cost
Market value
Unrealized gain
1>6,816,800
30,969,810
P24,153,01 0
P6,503,796
31,003,941
P24,500,145
P25,598,922
79,777,260
P54,178,338
- 99
March 2013
(Unaudited)
1,052,362,115
1,047,673,347
53,721,020
7,129,607
(29,680,330)
1,076,402,805
(2,898,592)
1,051,904,362
1'1.025
1.002
I'0.854
0.851
There were no anti-dilutive options outstanding as at March 31, 2014 and December 31, 2013.
five years
More than five years
2013
I'2,500,831 ,215
2012
I'2,391 ,671,677
2011
I'2,407,191,659
8,090,153,478
7,953,687,706
8,699,820,241
3,911,301,278
5,965,097,801
5,546,484,166
I'14,502,285,971 I' 16,310,457,184 I'l6,653,496,066
Rent expense recognized on a straight-line basis amounted to I'1,673.4 million and I'l,502.7
million for the three months ended March 31, 2014 and 2013, respectively (see Notes 21
and 22). The difference of rent expense recognized under the straight-line method and the rent
amounts due in accordance with the terms of the lease agreements amounting to I'4.7 million
and I'2.2 million for the three months ended March 31, 2014 and 2013, respectively, are
2013
1'2, 184,390
2012
1'25,350,190
20 II
1'25,856,500
5,223,839
41,607,749
2,314,149
1'69,272,088
66,466,637
1'7,408,229
1'92,323,137
Rent income recognized on a straight-line basis amounted to 1'25.8 million and 1'25.4 million
for the three months ended March 31, 2014 and 2013, respectively (see Note 20). The
difference of rent income recognized under the straight-line method and the rent amounts in
accordance with the terms of the lease agreements amounting to 1'0.2 million and 1'0.1 million
for the three months ended March 31, 2014 and 2013, respectively, are included under
"Operating lease receivables" account in the consolidated statements of financial position.
c. Contingencies
The Jollibee Group is involved in litigations, claims and disputes which are normal to its
business. Management believes that the ultimate liability, if any, with respect to these
litigations, claims and disputes will not materially affect the financial position and financial
performance of the Jollibee Group. Thus, other than the provisions in Note 17, there were no
other provisions made for contingencies.
2013
USD
PHP
+100
-100
(101,186)
109,430
(11 0,395)
115,129
+100
-100
(4,522,944)
4,877,210
(4,900,986)
5,111,152
Increase/
Effect in
Profit or Loss
Decrease
in Basis Points Before Income Tax
2012
USD
PHP
Effect in
Equity Before
Income Tax
Effect in
Equity Before
Income Tax
+100
-100
(9,209)
5,699
(9,209)
5,699
+100
-100
(378,029)
233,944
(378,029)
233,944
- 89The Jollibee Group also has transactional foreign currency exposures. Such exposure arises from
the Jollibee Group's Philippine operations' cash and cash equivalents, receivables and long-term
debt in foreign currencies.
The Jollibee Group's exposure to interest rate risk relates primarily to Perfs long-term debt with
floating interest rates. Floating rate financial instruments are subject to cash flow interest rate risk.
The Company's interest rate exposure management policy centers on reducing the Company's
overall interest expense and exposure to changes in the interest rates.
The following table shows the Jollibee Group's Philippine operations' foreign currency
denominated monetary assets and liabilities and their peso equivalents as at March 31, 2014 and
December 31,2013:
March 2014
(Unaudited)
December 2013
(Audited)
PHP
USD
RMB
I ,095,583
45,698,238
11,677,089
388,260
- (152,388,000) (3,400,000)
8,074
USD
RMB
8,074
Long-term debt
1,018,291
260,533
(3,400,000)
Net exEosure
(2,121,176)
8,074
Assets
Cash and cash equivalents
Receivables
Eguivalent
(95,012,673) (1,916,157)
PHP
Eguivalent
48,697,439
17,236,812
- (150,943,000)
8,074 (85,008,749)
USD
RMB
44.82
40.80
7.24
6.59
The following table demonstrates the sensitivity to a reasonably possible change in USD and
RMB to Philippine peso exchange rate, with all other variables held constant, of the Jollibee
Group's income before income tax (due to changes in the fair value of monetary assets and
liabilities) as at March 31, 2014 and December 31, 2013:
Appreciation (Depreciation)
March 2014
(Unaudited)
Effect on
Income
Before Income
Tax
December 2013
(Audited)
Effect on
Income
Effect on
Effect on
Before Income
Equity Before
Equity Before
Income Tax
Tax
Income Tax
(In Thousands)
USD
1'1.50
(1.50)
1.00
(1.00)
(1'3,182)
3,182
(2,121)
2,121
(1'3,182)
3,182
(2,121)
2,121
(1'2,874)
2,874
(1,916)
1,916
(1'2,874)
2,874
(1,916)
1,916
RMB
0.95
(0 95)
0.63
(0.63)
7.7
(7,7)
5.1
(5.I)
7,7
(7.7)
5.1
(5.1)
7.7
(7.7)
5.1
(5.1)
7.7
(7.7)
5.1
(5.1)
- 90-
Credit Risk
Credit risk is the risk that a customer or counterparty fails to fulfill its contractual obligations to
the Jollibee Group. This includes risk of non-payment by borrowers and issuers, failed settlement
of transactions and default on outstanding contracts.
The Jollibee Group has a strict credit policy. Its credit transactions are with franchisees that have
gone through rigorous screening before granting them the franchise. The credit terms are very
short, while deposits and advance payments are also required before rendering the service or
delivering the goods, thus, mitigating the possibility of non-collection. In cases of non-collection,
defaults of the debtors are not tolerated; the exposure is contained the moment a default occurs
and transactions that will increase the exposure of the Jollibee Group are not permitted.
The Jollibee Group has no significant concentration of credit risk with counterparty. The Jollibee
Group's franchisee profile is such that no single franchisee accounts for more than 5% of the total
system wide sales of the Jollibee Group.
The aging analysis ofloans and receivables as at March 31, 2014 and December 31, 2013 are as
follows:
March 2014 {Unaudited}
Neither
Past
Due nor
lmJ2aircd
1!'9,514.6
1!'9,514.6
1'-
1'-
2,804.9
144.3
100.2
81.9
1,651.2
144.3
100.2
81.9
192.6
129.5
1,396.0
21.4
P14,063.3
1,392.2
21.4
12,905.8
Total
Over 120
Imeaired
1'-
]'-.
P-
126.3
405.9
299.4
3.8
1!'129.5
192.6
P126.3
P405.9
P303.2
Past
Due nor
Total
ImEaired
1-30
P9,683.9
9,683.9
,._
31-60
n Millions)
(I
Receivables:
Trade
Employee car plan receivables**
Advances to employees
Other receivables***
Other noncurrent assets:
Security and other deposits
0 eratin lease receivable
3,128.4
139.4
112.2
76.8
1,782.3
139.4
112.2
76.8
1,360_2
21.3
p; 14,522.2
1.360 2
21.3
P13,176 1
,._
ImEaired
61-120
Over 120
,._
,._
,._
294.3
92.3
91.0
594 0
274.5
P294.3
P92.3
P9\.0
P594.0
274.5
*Excluding cash on hand amounling to P-199.3 m1ffion and P 220.0 million in 201-1 and 2013, respecti,ely.
**Including noncurre/11 ponio11 aj employee car plan rece1rub!es.
***lixc!udmg receivables/ram gowrnmenl agendes amounting ra #7.6 mlllwn and f!6.6 mUllan in 20!-1 and 2{)]3. respe('/il'ely.
- 91 -
Credit Risk Exposure and Concentration. The table below shows the maximum exposure to credit
risk of the Jollibee Group as at December 31, without considering the effects of collaterals and
other credit risk mitigation techniques:
20!3
Gross Maximum
Exposure
(a)
(b)
Net
Exposure*
(c)(a)- (b)
(In Millions)
Financial Assets
Loans and Receivables
Cash and cash equivalents*
Receivables:
Trade
Employee car plan receivables
Advances to employees
Other receivables****
Other noncurrent assets:
Security and other deposits
Operating lease receivable
1'9,683.9
l'l29.l
3,!28.4
!39.4
ll2.2
76.8
1'9,554.8"
96.8
3,031.6***
!39.4
ll2.2
76.8
!,360.2
2!.3
1'!4,522.2
!,360.2
2!.3
1'!4,296.3
1'225.9
20!2
Gross Maximum
Exposure
(a)
Financial Assets
Loans and receivables:
Cash and cash equivalents*
Receivables***:
Trade
Employee car plan receivables
Advances to employees
Other receivables****
Other noncurrent assets:
Security and other deposits
Operating lease receivable
Net Exposure*
(c) (a)-(b)
1'8,654.5
l'l22.l
1'8,532.4*'
2,7!4.8
143.3
95.5
!42.2
2!2.8
2,502.0***
I, l6l.l
22.6
1'!2,934.0
!43.3
95.5
!42.2
1'334.9
l, l6l.l
22.6
1'!2,599.!
"'Excluding cash on hand amouming to P220.0 million and Pl94.1 million in 2013 and 2012. respectively.
*"' Grossfinandal assets after taking into account insurance bank deposits for cash and cash equivalents.
"'**Gross financial assets after taking into account payables to the same counterparty.
****Excluding receivables from government agencies amounting to P6.6 million and P?.7 million in 2013 and 2012.
respectively.
With respect to credit risk arising from financial assets of the Jollibee Group, the Jollibee Group's
exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to
the carrying amount of these instruments.
- 92Credit Quality. The tables below show the credit quality by class of financial assets that are
neither past due nor impaired, based on the Jollibee Group's credit rating system as at
March 31,2014 and December 31,2013.
March 2014 (Unaudited)
Past Due or
Total
Impaired
(In Millions)
Loans and Receivables
Cash and cash equivalents*
Receivables:
Trade
Employee car plan receivables**
Advances to employees
Other receivables***
Other noncurrent assets
Security and other deposits
Operating lease receivable
P9,514.6
P9,514.6
2,804.9
144.3
100.2
81.9
1,085.0
144.3
100.2
81.9
1,396.0
21.4
1,392.2
21.4
P14,063.3
Pl2,339.6
499.8
66.4
1,153.7
3.8
P499.8
P66.4
1,157.5
B
(ln Millions)
Past Due or
Impaired
P9,683.9
P9,683.9
!'-
!'-
!'-
3,128.4
139.4
112.2
76.8
1,171.2
139.4
539.5
71.6
1,346.1
112.2
76.8
1,360.2
1,360.2
21.3
21.3
Pl4,522.2
Pl2,565.0
P539.5
1'71.6
Pl,346.1
*Hxc!udmg cash on hand amounting 10 P 199.3 million and P220.0 million m 201-1 and 2013, respecflve/y.
**Including noncurren/ poriion of employee car plan receivables.
***!:Xcluding recervablesfrom govemmenl agencres amowrtmg ro P7.6 million and ?6.6 million in 201-1 and 2013, respectively.
The credit quality of financial assets is managed by the Jollibee Group using internal credit
ratings, as shown below:
A -
For counterparty that is not expected by the Jollibee Group to default in settling its
obligations, thus, credit risk exposure is minimal. This counterparty normally includes
financial institutions, related parties and customers who pay on or before due date.
B -
For counterparty with tolerable delays (normally from 1 to 30 days) in settling its
obligations to the Jollibee Group. The delays may be due to cut-off differences and/or
clarifications on contracts/billings.
C -
For counterparty who consistently defaults in settling its obligation, but with continuing
business transactions with the Jollibee Group, and may be or actually referred to legal
and/or subjected to cash before delivery (CBD) scheme. Under this scheme, the
customer's credit line is suspended and all subsequent orders are paid in cash before
delivery. The CBD status will only be lifted upon full settlement of the receivables and
approval of management. Thereafter, the regular credit term and normal billing and
collection processes will resume.
Liguidity Risk
The Jollibee Group's exposure to liquidity risk refers to the risk that its financial liabilities are not
serviced in a timely manner and that its working capital requirements and planned capital
expenditures are not met. To manage this exposure and to ensure sufficient liquidity levels, the
Jollibee Group closely monitors its cash flows.
- 106
On a weekly basis, the Jollibee Group's Cash and Banking Team monitors its collections,
expenditures and any excess/deficiency in the working capital requirements, by preparing cash
position reports that present actual and projected cash flows for the subsequent week. Cash
outflows resulting from major expenditures are planned so that money market placements are
available in time with the planned major expenditure. In addition, the Jollibee Group has short term
cash deposits and has available credit lines with accredited banking institutions, in case there is a
sudden deficiency. The Jollibee Group maintains a level of cash and cash equivalents deemed
sufficient to finance the operations. No changes were made in the objectives, policies or processes
of the Jollibee Group during the periods ended March 31, 2014 and December 31, 2013.
The Jollibee Group's financial assets, which have maturity of less than 12 months and are used to
meet its short-term liquidity needs, are cash and cash equivalents and trade receivables amounting
to 1>9,514.6 million and 1>2,505.4 million, respectively, as at March 31, 2014 and 1>9,683.9 million
and 1>2,853.9 million, respectively, as at December 31,2013.
The tables below summarize the maturity profile of the Jollibee Group's financial liabilities based
on the contractual undiscounted cash flows as at March 31, 2014 and December 31, 2013:
March 2014 {Unaudited
Due and
Demandable
Financial Assets
Loans and receivables:
Cash and cash equivalents
P4,019,.t02,939
Receivables:
Trade
Employee car plan receivables*
Advances to employees
Other receivables**
Other noncurrent assets:
Security and other deposits
OEerating lease receivable
Total
Financial Liabilities
Trade payables and other current liabilities***
Long-term debt (including current portion)
Liability for acquisition of businesses (including
current portion)
02erating lease Eayablc
Net Financial Assets (Liabilities)
Less than
l Year
F5,694,457,757
854,209,415
4,873,612,354
1,651,216,143
144,332,753
100,205,530
81,927,496
2,260,812
7,674,400,491
1,263,155,7ll
5,406,294
1,268,562,005
11,272,807,761
1,298,181,474
3,908,369,409
109,701,568
130,228,401
494,650,869
143,910,534
P4,873,612,354
12,824,601,337
(P5,150,200,846)
4,533,248,679
(P3,264,686,674)
lto5Years
P9,713,860,696
2,505,425,558
144,332,753
100,205,530
81,927,496
132,892,103
13,782,602
146,674,705
1,396,047,814
21,449,708
13,963,249,555
11,272,807,761
5,206,550,883
929,689,615
239,929,969
1,568,251,018
929,689,615
(P783,014,910)
18,287,539,631
{P4,324,290,076)
P4,533,525,399
P5,370,351,669
1,071,558,963
1,782,338,205
139,377,532
112,214,103
76,835,563
1'-
P9,903,877,068
2,853,897,168
139,377,532
112,214,103
76,835,563
2,260,812
7,483,377,884
1,230,748,216
5,223,837
1,235,972,053
129,482,626
13,782,602
143,265,228
1,360,230,842
21,267,251
14,467,699,527
11,035,616,216
1,106,275,244
2,594,907,750
1,468,062,750
11,035,616,216
5,169,245,744
107,666,875
144,730,977
129,007,932
494,650,869
929,689,615
236,674,807
1,569,071,461
12,394,289,312
P5,605,084,362 (P4,910,91 1,428)
3,218,566,551
(Fl,982,594,498)
(P2,254,487,137)
5,605,084,362
Financial Liabilities
Trade payables and other current liabilities***
Long-tenn debt (including current portion)
Liability for acquisition of businesses (including
current portion)
Oeeratmg lease eayable
Less than
1 Year
2,397,7 52,365
18,010,608,228
(f13,542,908,70 1)
lto5Years
Capital Management
Capital includes equity attributable to equity holders of the Parent Company.
The primary objective of the Jollibee Group's capital management is to ensure that it maintains a
strong credit rating and healthy capital ratios in order to support its business and maximize
shareholder value. The Jollibee Group has sufficient capitalization.
The Jollibee Group generates cash flows from operations sufficient to finance its organic growth. It
declares cash dividends representing about one-third of its consolidated net income, a ratio that
would still leave some additional cash for future acquisitions. lfneeded, the Jollibee Group would
borrow money for acquisitions of new businesses.
As at March 31,2014 and December 31,2013, the Jollibee Group's debt ratio and net debt ratio
are as follows:
Debt Ratio
March 2014
(Unaudited)
1'21,391,687,178
December 2013
(Audited)
1'22,665,694,036
23,644,420,405
22,548,878,780
1'45,036, I07,583
1'45,214,572,816
47%
50%
March 2014
(Unaudited)
1'21,391,687,178
9,713,860,696
11,677,826,482
December 2013
(Audited)
1'22,665,694,036
9,903,877,068
12,761,816,968
23,644,420,405
22,548,878,780
1'35,322,246,887
1'35,310,695,748
33%
36%
Total debt
Less cash and cash equivalents
The fair value of the financial assets and liabilities is included at the amount at which the
instrument could be exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale. The following methods and assumptions were used to estimate the fair
values:
- 95 Financial Instruments whose Carrying Amounts Approximate Fair Value. Management has
determined that the carrying amounts of the following financial assets and financial liabilities
based on their notional amounts reasonably approximate their fair values because of their short
term maturities.
March 2014
(Unaudited)
December 2013
(Audited)
1'9,713,860,696
1'9,903,877,068
2,505,425,558
I 00,205,530
28,446,134
81,927,496
21,449,708
P12,451,315,122
2,853,897,168
112,214,103
33,366,298
76,835,513
21,267,251
1'13,001,457,401
1'10,120,703,183
1,568,251,018
1'11,688,954,201
1'11,035,616,216
1,569,071,461
1'12,604,687,677
Financial Assets
*Excluding receivables from government agencies amounting to !27.651. 095 and P6.559.596 m 2014 and 2013. respecnvely
**Excluding "Accrued salaries. wages and employee benefits. "Output J-"AT and other local taxes" and "Unearned revem1e
from gift certificates
Cash and Cash Equivalents, Receivables, and Trade Payables and Other Current Liabilities The
management assessed that cash and cash equivalents, receivables, employee car plan receivables,
trade payables and other current liabilities approximate their carrying amounts largely due to the
short-term maturities of these instruments.
Financial Instruments Carried at Amounts Other than Fair Value.
Financial Assets
Security deposits and other noncurrent assets:
Security deposits
Noncurrent portion of employee car plan
receivables
AFS Financial Assets
Investments in club shares and shares of public
utility companies
March 2014
(Unaudited)
December 2013
(Audited)
1>1,396,047,814
1'1,414,161,439
129,319,763
116,155,190
21,479,461
!>1,546,847,038
21,479,461
1'1,551,796,090
There were no transfers between Level I and Level 2 fair value measurements, and no transfers
into and out of Level 3 fair value measurements during the period.
AFS Financial Assets
The fair value of investments that are traded in organized financial markets are determined by
reference to quoted market bid prices at the close of business at reporting date.
The Jollibee Group does not have the intention to dispose these financial assets in the near term.
2012
2.01%-5.50%
!.95%-4.11%
The following table provides the fair value measurement hierarchy of the Jollibee Group's
recurring financial assets and liabilities.
Quantitative disclosure fair value measurement hierarchy for assets as at December 31, 2013:
Significant
Unobservable
Date of Valuation
Inputs
(Levell)
P21,479,461
December 31, 20 13
December31,2013
714,455,447
336,029,815
1,414,161,439
116,155,190
21,479,461
714,455,447
336,029,815
-
1,414,161,439
116,155,190
Significant
Unobservable
Inputs
(Level 3)
Quantitative fair value measurement hierarchy for assets as at December 31, 2012:
Date of
Valuation
Assets measured at fair value:
Available-for-sale financial assets
Quoted equity sharesClubshares
Assets for which fair values are disclosed:
Investment properties:
Land
Building
Other noncurrent assets:
Security and other deposits
Employee car plan receivables
December31,2012
128,149,438
714,455,447
323,085,398
1,206,391,545
98,986,724
Pl28,149,438
714,455,447
323,085,398
-
1,206,391,545
98,986,724
Quantitative fair value measurement hierarchy for liabilities as at December 31, 2013:
Date of Valuation
Liabilities measured at fair value:
Derivative liability
Contingent consideration
P4,532,600
Significant
Unobservable
Inputs
(Level 3)
P121,743,395
- 97Quantitative disclosure fair value measurement hierarchy for liabilities as at December 31, 2012:
Date of Valuation
Liabilities measured at fair value:
Derivative liability
Contingent consideration
December31,2012
December 31,2012
I'-
22,782,820
121,743,395
Contingent consideration
Significant Unobservable
Valuation Technique
Input Range of 1nput
Multiple sccnario Revenue growth rate used 7.8% to 25.0%
weighted-probability
to forecast EBITDA
approach
Item 2. Management Discussion and Analysis of Results of Operations and Financial Condition
for the First Quarter of 2014
JOLLIBEE FOODS CORPORATION (JFC) AND SUBSIDIARIES
The following Management Discussion and Analysis should be read in conjunction with the submitted
Unaudited Consolidated Financial Statements as at and for the quarters ended March 31, 2014 and
2013.
The accounting policies adopted are consistent with those of the previous financial
year.
Please refer to Note 2 of the attached Unaudited Consolidated Financial Statements of the Jollibee Group
for the Summary of Significant Accounting Policies for the Basis of Preparation, Statement of
Compliance, Accounting Policies, Restatement of Comparative Financial Statements and Basis of
Consolidation for the new PFRS which became effective in 2013.
Causes for Any Material Changes (Increase or decrease of 5% or more in the financial statements)
Results of Operations
For the Quarter Ended March 31.2014 vs. March 31.2013
Revenues and System Wide Sales
Quarters Ended March 31
2014
27,305.4
26,913.8
Change
2013
23,836.6
18,154.9
Amount
3,468.8
2,768.9
Pet
14.6%
15.2%
System wide sales, a measure of all sales to consumers, both from company-owned and franchised
stores grew by 14.6% in the first quarter of 2014 compared to the same period last year driven by strong
same store sales and additional stores. Worldwide same store sales growth was around 6.0% to 7.0%,
practically all from higher volume of customers and purchases per store while growth in store network
was 5.8%. There were also slight upward adjustments in selling prices in the first quarter to cover the
increase in cost of raw materials. The changes in exchange rates accounted for about 2% of the total
sales growth.
The Philippine business reported a 12.3% growth in system wide sales while the foreign business grew
by 24.3% with the China business growing by 22.3%, Southeast Asia and the Middle East business by
39.1% and the US business by 19.5%.
Consolidated revenues, which consist of sales by company-owned stores, fees from stores operated by
franchisees and commissary sales to stores, operated by franchisees grew by 15.2%, higher than the
growth in system wide sales as company-owned store network grew faster than franchised stores.
The Jollibee Group opened 55 stores (Philippines 42; Foreign 13) and closed 14 stores (Philippines 6;
Foreign business 8) during the quarter. It ended the first quarter of 2014 with 2,805 stores, 5.8% higher
than the first quarter of 2013.
Cost of Sales
Consolidated cost of sales increased to 1217,116.4 million, which is 122,248.9 million or 15.1% higher than
consolidated cost of sales for the first quarter of 2013. The following table summarizes the breakdown of
the Jollibee Group's cost of sales for the quarters ended March 31,2014 and 2013, respectively, and the
percentage of each component and the consolidated cost of sales to consolidated revenues:
Amounts in PhMillions
Change
2013
Amount
Pet
Pct1o Rev
2014
2013
COST OF SALES
Cost of inventories
10,044.2
8,665.2
47.8%
1,359.0
15.6%
48.0%
246.7
0.4
1n.3
100.8
36.4
71.5
140.7
32.4
11.5
2.1
0.0
70.1
2,248.9
12.9%
1.9%
12.5%
12.8%
5.6%
16.8%
40.0%
19.4%
14.7%
6.5%
0.7%
21.2%
15.1%
10.3% 10.5%
0.1%
0.1%
7.6%
7.8%
4.2%
4.3%
3.3%
3.6%
2.4%
2.4%
2.4%
1.9%
1.0%
0.9%
0.4%
0.4%
0.2%
0.2%
0.0%
0.0%
1.9%
1.8%
81.9% 81.9%
Personnel costs:
Salaries, wages and employee benefits
Pension expense
Rent
Supplies
Contracted services and professional fees
Repairs and maintenance
Security and janitorial
Communication
Entertainment, amusement and recreational E
Others
2,165.4
19.3
1,697.7
888.6
690.1
498.3
492.6
199.1
89.6
34-9
6.7
400.1
17,116A
1,908.7
18.9
1,420.4
787.7
653.7
426.8
351.9
166.7
78.1
32.8
6.7
330.0
14,867.5
Consolidated cost of inventories increased mainly due to higher sales volume and increase in raw
material prices, particularly pork, beef, oil and rice. As a percent of revenues, cost of inventories
increased from 47.8% in the first quarter of 2013 to 48.0% in the first quarter of 2014.
The increase in other cost items such as personnel costs, rent, electricity and other utilnies,
depreciation and amortization, supplies, contracted services, repairs and maintenance, security and
janijorial and communication was driven by new stores opened during the period.
Consolidated other cost of sales increased due to higher expenses related to store delivery service
and increased transportation and travel expenses.
Gross Prof"rt
Consolidated gross profit for the first quarter of 2014 increased to 123,797.4 million, 12510.0 million or
15.5% higher than the consolidated gross prom of 123,287.4 million in the first quarter of 2013. Gross
profit margin for the year improved, from18.1% in the first quarter of 2013 to 18.2% in the first quarter of
2014.
Expenses
Consolidated expenses increased to 122,413.1 million, 12301.9 million or 14.3% higher than the same
period last year. The following table summarizes the breakdown of the Jollibee Group's consolidated
expenses for the quarters ended March 31, 2014 and 2013 and the percentage of each expense item to
the consolidated revenues:
Pet to Rev
2014
2013
Personnel costs:
Salaries, wages and employee benefits
Stock options expense
Pension expense Taxes
and licenses
Transportation and travel
Rent
Professional fees
Depreciation and amortization
Provisions for impairment losses on:
Receivables
Inventory
Property, plant and equipment
Security and other deposits
Entertainment, amusement and
recreational expenses
Contracted Services
Communication
Repairs and maintenance
Electricity and other utilities
Supplies
Training
Insurance
Donations
Security and janitorial
1,002.8
39.4
18.2
287.1
78.6
75.7
73.5
69.8
826.0
35.9
16.6
210.1
67.6
82.3
45.5
63.8
176.9
3.5
1.6
77.0
9.1
(6.7)
28.0
6.0
21.4%
9.8%
9.5%
36.6%
13.4%
-8.1%
61.4%
9.4%
4.8%
0.2%
0.1%
1.41l/o
0.4%
0.4%
0.4%
0.3%
4.5%
0.2%
0.1%
1.2%
0.4%
0.5%
0.3%
0.4%
24.8
14.2
9.0
3.8
55.8
15.8
24.9
12.3
(31.0)
(1.6)
(15.9)
(8.6)
-55.6%
-10.2%
-63.9%
-89.5%
0.1%
0.1%
0.0%
0.0%
0.3%
0.1%
0.1%
0.1%
24.9
20.0
18.3
15.3
14.3
10.1
7.8
3.7
3.2
2.8
23.1
17.3
18.5
14.1
11.4
13.4
12.5
4.2
1.8
2.7
(0.2)
1.2
2.9
(3.3)
(4.7)
(0.5)
3.2
8.0%
15.8%
-1.3%
8.4%
25.0%
-24.7%
-37.7%
-11.6%
100.0%
-54.3%
0.1%
0.1%
0.1%
0.1%
0.1%
0.0%
0.0%
0.0%
0.0%
0.8%
9.4%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.0%
0.0%
0.0%
0.8%
9.5%
437.3
386.1
51.2
13.3%
2.1%
2.1%
2,413.1
2,111.2
301.9
14.3%
11.5%
11.6%
0.0%
Consolidated personnel costs increased primarily due to performance-related increases in basic pay,
employee promotions, upgrades in employee benefrts and additional accruals for stock option and
pension expenses.
Consolidated taxes and licenses expense increased due to higher business-related taxes and license
fees resulting from higher revenues.
Consolidated transportation and travel expense increased due to higher fuel consumption and travel
expenses, particularly of the Parent Company and Fresh N' Famous.
The decrease in consolidated rent expense was driven by the China business, primarily Yonghe King,
due to reclassification of cold storage rental fees to cost of sales in 2014.
Consolidated professional fees expense increased due to increases in accounting, audit, legal, and
tax service fees related to the merger of Jollibee (China) Food and Beverage Management Co. with
Shanghai Yonghe King.
The increase in consolidated depreciation and amortization was driven by the foreign business as a
result of its growing asset base.
Consolidated provisions declined due to lower prov1s1ons for impairment losses on receivables,
inventory, property, plant and equipment and security deposits.
Consolidated entertainment, amusement and
representation expenses of the Jollibee business.
recreation
expenses increased
due
higher
Consolidated contracted service fees increased primarily due to increase in head count and service
fees.
Consolidated repairs and maintenance expense increased primarily due to higher building
maintenance expenses.
Consolidated electricity and other utilities expenses increased mainly due to
water consumption of the Anhui {China) office and warehouses.
Consolidated supplies expense decreased due to lower usage of office supplies of the Corporate
Functions, particularly Human Resources - Training and Research and Development as well as the
Greenwich business.
Consolidated training expense decreased due to lower expenses of the Jollibee
business.
The decrease in consolidated insurance expense due to lower expense of the Foreign
business.
The increase in consolidated donation expense was driven by the Red Ribbon business for
donations made to the Apl de Ap Foundation.
Consolidated security and janitorial expense decreased due to lower janitorial expenses of the Red
Ribbon business and Mang !nasal business.
Consolidated corporate events and others increased due to higher employee-related expenses and
higher expenses related to corporate and franchise events.
The increase in consolidated advertising and promotions expense for the first quarter of 2014 was
due to the higher advertising spending of the Philippine business, particularly Chowking for their new
TV commercial launched during the quarter.
Operating Income
Consolidated operating income for the first quarter of 2014 increased by 17.7% or 208.1 million to
P1,384.3 million driven by strong revenue growth.
As a percentage of revenues, operating income improved from 6.5% in the first quarter of 2013 to 6.6%
in the first quarter of 2014 due to slightly higher gross profit margin and lower general and
administrative expenses as percentages of revenues.
Interest Income (Expense)
Quarters Ended March 31
Pet to Rev
Change
2014
2013
Amount
Pet
2014
2013
Interest income
62.3
133.6)
18.7
69.1
(43.:Q
25.4
(16.8)
10.1
(6.81
24.4%
23.1%
-26.6%
0.3o/o
-0.2%
0.1%
0.4%
-0.2%
0.1%
Interest ex se
Consolidated interest income for the first quarter of 2014 declined compared to the same period last year
primarily due to lower money market (Peso) placement rates. See Note 23 to the accompanying
Unaudited Consolidated Financial Statements for more information.
Consolidated interest expense decreased due to lower bank loans and lower interest rates. See Note 23
of the accompanying Unaudited Consolidated Financial Statements for more information.
Change
2014
2013
(27.0)
(28.5)
Amount
1.5
Pet
5.2%
PdtoRev
2014
2013
.0.1%
-0.2%
Consolidated equity in net loss of joint ventures and an associate pertaining to JFC's share in the net
losses of Superfoods Group and Wow Prime and net earnings of Entrek, the Company that operates
Jollibee stores in Brunei, decreased during the year. The lower losses were due to the improvement in
profitability of Superfoods particularty Highlands Coffee.
Other Income
Quarters Ended March 31
Amounts in
Php Millions
Change
2014
2013
Amount
26.3
23.1
6.1
3.5
5.6
0.7
3.2
3.8
72.3
0.6
9.2
(5.4)
5.7
1.2
1.3
0.9
3.6
17.1
25.7
13.9
11.5
(2.2)
4.4
(0.6)
2.3
0.2
55.2
Pet
Pel
to Rev
2014
2013
0.1%
0.0%
4,247.3
150.2
(214.5)
(38.1)
374.3
(46.2)
254.0
5.0
323.4
0.1%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.1%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.1%
0.3%
Consolidated other income increased by 323.4% or P-55.3 million to P72.3 million in the first quarter of
2014 mainly due to reversal of various accruals and other liabilities, higher rebates and gains from
foreign exchange.
Income Taxes
Pet to Rev
2014
Current
Deferred
388.0
(37.71
360.3
381.0
(71.4!
24.2%
26.0%
309.6
7.0
33.7
40.7
1.8%
47.3%
13.2%
2013
1.9%
.0.2%
2.1%
-0.4%
1.7% 1.7%
Consolidated provision for income tax for 2014 increased compared to the first quarter of 2013 due to
higher operating income. See Note 24 of the accompanying Unaudited Consolidated Financial
Statements for details.
Net Income
Consolidated net income for the first quarter of 2014 was P1,098.0, 24.7% higher than same period of
last year's consolidated net income of j;l880.6 million. Net income margin (consolidated net income as a
percentage of consolidated revenues) improved, from 4.9% in the first quarter of 2013 to 5.3% in the first
quarter of 2014. Net Income Attributable to the Equity Holders of the Parent Company amounted to
P1,078.3 million, 20.5% higher than last year while Earnings per Share Basic and Diluted in the first
quarterof2014 amounted toP1.025 and P1.002, respectively.
Financial Condition
As of March 31. 2014 !Unaudited) Vs. December 31. 20131Auditedl
The Jollibee Group ended March 2014 with consolidated total assets of 5.857.4 million, 0.4% lower
than the P-46,026.6 million balance at the end of 2013. The following explain the significant movements in
the asset accounts:
Consolidated current assets decreased to P17,999.6 million, P384.6 million or 2.1% lower than the
P18,384.2 million balance at the end of 2013. The decrease was mainly due to decline in
consolidated trade receivables by P359.2 million or 11.7% resulting from the collection of receivables
from franchisees for royaHy fees and commissary purchases supposedly due on the last week of
December 2013, but were delayed due to the holidays. This was partly offset by the increase in
consolidated other current assets by P181.9 million or 9.9%. The increase was primarily due to
deposits to suppliers for imported items, higher prepaid rent and prepaid taxes, which increased by
P147.6 million.
The Company had a current ratio of 1.24:1.00 as at March 31, 2014, higher than the 1.18:1.00 as at
December31, 2013
Consolidated noncurrent assets increased slightly by P215.4 million or 0.8% due to increase in
property, plant and equipment, other noncurrent assets and deferred tax assets by P171.9 million,
P71.3 million and P27.1 million, respectively. The increase was partly offset by lower investment
properties which declined by P.72.9 million or 9.7% resulting from the sale in March 2014 of an old
office building owned by Shanghai Yonghe King.
Consolidated current liabilities amounted to P14,478.0 million, P1,140.8 million or 7.3% lower than the
2013 year-end balance of P15,618.6 million. The following explain the significant movements in current
liabilities:
Consolidated trade payables and other current liabilities decreased by P1,450.3 million or 10.2% to
P12,799.6 million from the P14,249.9 million balance at the end of 2013, mainly due to payment of
trade payables and local and other taxes. The decrease was partly offset by higher accruals for
advertising.
Consolidated income tax payable increased by P115.6 million or 74.7% to P270.3 million due to
income tax payable for the first quarter of 2014.
The consolidated current portion of long-term debt increased by P191.9 million or 17.3% to P1,298.2
million due to reclassification of loans maturing during the year to current portion.
See Note 18 of
the accompanying Unaudited Consolidated Financial Statements for details.
Consolidated noncurrent liabilities amounted to P6,913.9 million, 1.9% or P133.2 million lower than the
December 31, 2013 balance of P7,047.1million. Consolidated long-term debt decreased by P154.6
million to P3,908.4 million due to reclassification of loans maturing during the year to current portion. See
Note 18 of the accompanying Unaudited Consolidated Financial Statements for details.
Consolidated derivative liability increased by P3.6 million or 79.8% to P8.1 million. The net movement in
the fair value of the Company's derivative liability for the periods ended March 31, 2014 and December
31, 2013 follows:
March 2014
December 2013
(Audited)
114.5
1"22.8
3.6
(20.2)
2.0
Balance
at end of
year
118.1
(Unaudited)
li4.5
Consolidated total equity
increased by P1,104.8
million or 4.7% to
P24,465.7 million
primarily due to the net
income (attributable to
equity holders of the
Parent) for the first
quarter of 2014, which
amounted to P1,078.3
million, increase in
capital stock and
additional paid in capital
arising from issuance of
new shares, partly offset
by the following:
The decline of P38.
4
million
in
cumulative
translation
adjustment,
due
mainly
to
the
appreciation of the
Philippine
Peso
versus the RMB
(March 31, 2014
versus
December
31, 2013), which
reduced the value of
the China business'
net assets at the
end of the period.
The
increase
in
comprehensive loss
on derivative liability
by P2.7 million or
79.8%
to
.
1million resulting
from the foreign
exchange
revaluation of the
hedged
loan
of
Perf
Restaurants,
Inc., a subsidiary of
the Jollibee Group.
L
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q
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i
d
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t
y
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n
d
C
a
p
i
t
a
l
R
e
s
o
u
r
c
e
s
3. Consolidated capital expenditures budget in 2014 is P-9,300.0 million, more than double the same
type of spending in 2013.
The Jollibee Group's capital expenditures budget was principally used to finance its store expansions
and major renovations, major repairs and upgrades of existing commissaries, improvements in head
office and investments in information systems.
4.
Food service operations have both peak and lean seasons. Historically, sales in the second and
fourth quarters are stronger due to the summer and the Christmas seasons, respectively. Demand
during the first and third quarters usually slackens. The material financial impact of this seasonality
has been considered in the Jollibee Group's consolidated financial forecast.
5. All of the Jollibee Group's income arose from its continuing operations.
6. Events after the Reporting Period:
Dividend Declaration
On April, 7, 2014, the BOD approved a regular cash dividend of li0.75 a share of common stock to all
stockholders of record as of May 8, 2014. Consequently, the cash dividend is expected to be paid
out by May 30, 2014. The cash dividend is 15.4% higher than the li0.65 regular dividend a share
declared in April 2013.
Loan from Bank of Philippine Islands <BPI)
On April 7, 2014, the BOD authorized the Company to apply for and secure from BPI loans or other
financial accommodations or credit facilities in the aggregate principal amount ofPSOO.O million.
Discussion of the Jollibee Group's Top Five 15) Key Performance Indicators
System Wide Sales
System Wide Sales is a measure of all sales to consumers both from company-owned and franchised stores.
Revenues
Revenues is a measure of (1) all sales made by the Jollibee Group's owned stores (both food and novelty sales);(2)
Commissary sales to franchised stores; (3) rental revenues of the Jollibee Group's property division; and (4)
revenues from services rendered by the in-house Construction and Service Groups.
1"20,913.8 million
15.2%
1"1,098.0 million
5.3%
1"1.025
20.0%
18.7%
As at March 31,2013
16.6%
'
Financial Ratios
Quarter 1
Formula
2014
2013
Current Assets
1.24
1.18
1.94
2.04
47.5%
50.1%
33.1%
36.1%
44.1
28.2
0.35
0.28
0.21
0.16
Liquidity Ratios
Current Ratio
Current Liabilities
Tota\Assets
Total Equity Attributable to Equity Holders
of the Parent Company
Debt Ratio
Total Debt"
Total Debt+ Equity Attributable to Equity
Holders of the Parent Company
Solvency Ratio
Net Income
Total Liabilities