Tanduay Distillers, Inc. and Subsidiaries Index to Financial Statements and Supplementary Schedules Sec Form 17-A
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COVER SHEET 1 5 1 0 9 6 SEC Registration Number T A N D U A Y D I S T I L L E R S , I N C . ( A W h o l l y O w n e d S u b s i d i a r y o f L T G r o u p , I n c . ) A N D S U B S I D I A R I E S (Company‘s Full Name) 3 4 8 J . N e p o m u c e n o S t . , S a n M i g u e l D i s t r i c t , M a n i l a (Business Address: No. Street City/Town/Province) NESTOR MENDONES 519-7981 (Contact Person) (Company Telephone Number) 1 2 3 1 17-A 0 5 0 4 Month Day (Form Type) Month Day (Calendar Year) (Annual Meeting) (Secondary License Type, If Applicable) SEC Dept. Requiring this Doc. Amended /Section Total Amount of Borrowings 8 Total No. of Stockholders Domestic Foreign To be accomplished by SEC Personnel concerned File Number LCU Document ID Cashier S T A M P S Remarks: Please use BLACK ink for scanning purposes. 1 SECURITIES AND EXCHANGE COMMISSION SEC FORM 17-A ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SECTION 141 OF CORPORATION CODE OF THE PHILIPPINES 1. For the calendar year ended December 31, 2013 2. SEC Identification Number 151096 3. BIR Tax Identification No. 000-086-108-000 4. Exact name of registrant as specified in its charter Tanduay Distillers, Inc. 5. Philippines 6. (SEC Use Only) Province, Country or other jurisdiction of Industry Classification Code: incorporation or organization 7. 348 J. Nepomuceno St. San Miguel District, Manila 1001 Address of principal office Postal Code 8. (632) 7339301 Registrant's telephone number, including area code 9. Not Applicable Former name, former address, and former fiscal year, if changed since last report. 10. Securities registered pursuant to Sections 8 and 12 of the SRC, or 4 and 8 of the RSA Number of Shares of Common Stock Title of Each Class Outstanding and Amount of Debt Outstanding Common shares, P1.00 par value 1,180,765,620 11. Are any or all of these securities listed on a Stock Exchange? Yes [ ] No [] 12. Check whether the registrant: (a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17 thereunder or Section 11 of the Revised Securities Act (RSA) and RSA Rule 11(a)-1 thereunder and Sections 26 and 141 of The Corporation Code of the Philippines during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); Yes [] No [ ] (b) has been subject to such filing requirements for the past 90 days. 2 Yes [] No [ ] 13. Not applicable 14. Not applicable DOCUMENTS INCORPORATED BY REFERENCE 3 PART I – BUSINESS AND GENERAL INFORMATION Item 1. Business Corporate History Tanduay Distillers, Inc. (the Company) was incorporated in the Philippines as Twin Ace Holdings, Inc. (Twin Ace) on May 10, 1988. The Company is a wholly owned subsidiary of LT Group, Inc. (LTG) formerly Tanduay Holdings, Inc. (THI). The Company is primarily engaged in, operates, conducts and maintains the business of manufacturing, compounding, bottling, importing, exporting, buying, selling or otherwise dealing in, at wholesale and retail such goods as rhum, brandy, whiskey,gin and other liquor products; and any and all equipment, materials, supplies used and/or employed in or related to the manufacture of such finished goods. The Company sells its products in the domestic market mainly through major distributors. On July 8, 1999, LTG acquired 100% ownership of Twin Ace via share swap with Twin Ace‘s existing shareholders, Tangent Holdings Corporation (THC). On July 30, 1999, the Philippine Securities and Exchange Commission (SEC) approved the change in the corporate name of Twin Ace to Tanduay Distillers Inc. (TDI) and its authorized capital increased from P= 2.0 million to P= 2.0 billion at a par value of P= 1.00 per share. TDI produces distilled spirits consisting of rum, wine, gin, vodka and brandy. Total sales in 2013 amounted to P= 10.5 billion while reported sales for 2012 was P= 12.9 billion. Five Year Rum brand continued to lead all brands capturing 74% of total sales in 2013. On June 30, 2005, TDI acquired controlling interests in Asian Alcohol Corporation (AAC) and Absolut Distillers, Incorporated (ADI), formerly known as Absolut Chemicals, Inc. (ACI). AAC and ADI are domestic corporations registered with the Philippine SEC which are the suppliers of TDI‘s alcohol requirements. In December 2006, TDI converted certain advances to AAC and ADI amounting to P=200 million and P185 million, respectively, into equity in the subsidiaries thereby resulting in the increase in ownership by TDI over AAC and ADI to 93% and 96% respectively. In October 2007, the Philippine SEC approved ADI‘s equity restructuring. On the other hand, the increase in authorized capital stock of AAC was approved on January 10, 2008. In June 2008, TDI bought additional shares in AAC amounting to P=150 million, which increased TDI‘s ownership from 93% to 95%. For purposes of consolidation as of December 31, 2012, the Company‘s ownership over AAC and ADI was 95% and 96% respectively. In December 2011, LTG undertook a capital raising exercise to complete the financing of the capital expenditure requirements of TDI and the latter‘s subsidiaries, ADI and AAC and to improve operational efficiencies and rationalize operations. This involved a public share offering from which the net proceeds amounting to P=1,627 million was invested in TDI and recognized in the Company‘s consolidated balance sheet and consolidated statement of changes in equity as ―Deposit for future subscription.‖ In June 2012, TDI converted the deposit for future subscription into 220,765,620 common shares which resulted to additional paid in capital amounting to P=1,406.3 million. Description of Subsidiaries/Investments The following companies are majority owned by TDI: Asian Alcohol Corporation (AAC) – 95% AAC is a distillery located in Pulupandan, Negros Occidental with a daily rated capacity of 130,000 liters of fine quality ethyl alcohol. AAC has a distillation process that uses molasses, yeast, water and other ingredients. It has a ten-hectare plant in Negros, which is the center of the country‘s 4 sugar industry. Plant facilities include aging facilities and a modern wastewater treatment plant, which converts distillery waste into biogas energy for its power requirements. AAC also has a methane gas capture system that enables it to use the methane generated from distillation as power to fire up its boilers. Absolut Distillers, Inc. (ADI) – 96% ADI has a daily rated capacity of 175,000 inclusive of the ongoing expansion project that will increase daily capacity by 100,000 liters of fine ethyl alcohol located in a nine-hectare distilling plant in Lian, Batangas. The plant site also houses a water treatment facility, which converts distillery wastes into environment-friendly form. ADI sells majority of its output to TDI. ADI and Aseagas Corporation sealed a partnership and formed the country‘s first venture in a technology that will convert the distillery‘s organic effluent into an alternative fuel named LBM or liquid biomethane. This unique technology was developed by Aseagas Corporation wherein distillery slops or effluent is converted into a purer form of methane that can provide a clean and easily controlled source of energy to supplant the use of fossil fuels as a ‗greener alternative‘ that is both sustainable and carbon neutral. ADI, in a joint venture with Mitsubishi Corporation of Japan, installed a high-rate thermophilic anaerobic digester and lagoon system that will capture methane from the distillation process and use it for the plant‘s power requirements. This will enable ADI to reduce its power cost by an estimate of 50% of current consumption levels. The project with Mitsubishi is being undertaken under the Clean Development Mechanism (CDM) Project of the 1997 Kyoto Protocol – a UN sponsored program that aims to reduce the emissions into the atmosphere of harmful gases like methane which emissions are the primary cause of global warming. Under the Protocol, developed countries are mandated to reduce their carbon emission levels by 2012. As an alternative compliance mechanism, developed countries may invest in CDM projects in developing countries like the Philippines. Mitsubishi provided the funding for the project in exchange for the certified emission reduction (CER) credits to be generated from the project. The CERs are the alternative compliance mechanisms under the Kyoto Protocol. The Company, AAC and ADI are collectively referred to hereinafter as the ―Group‖. Products The Company has brands in all major liquor categories – rum, gin, brandy, vodka, whiskey and wine. The Company‘s primary products consist of the following: Tanduay Five Years Fine Dark Rhum - 80 proof - 250ml, 375ml, 750ml, 1 liter This rhum reflects the hallmark of Tanduay‘s rich and lively heritage. The ageing process of this extra special blend is extended for five long years. As a result, the aged rum reveals a lush shade of mahogany and a lasting aroma of sweet nutty smoked flavor. The brand accounts for 74% of TDI‘s total sales by volume and 76% by revenues. Tanduay Rhum 65 Fine Dark Rhum 65 proof - 375ml, 750ml Exuding a well-rounded character with a smooth mellow finish, this exciting dark rum exhibits a grand array of flavors that is full-bodied yet with an edge of sweetness on the tail.