COVER SHEET for AUDITED FINANCIAL STATEMENTS
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COVER SHEET for AUDITED FINANCIAL STATEMENTS SEC Registration Number A 2 0 0 1 1 7 5 9 5 Company Name EMPERADORINC. ANDSUBSIDIARIES Principal Office ( No./Street/Barangay/City/Town)Province) 7TH FLOOR, 1880 EASTWOOD AVENUE,EASTWOODCITY CYBERPARK, 188 E. RODRIGUEZ JR.AVENUE,BAGUMBAYAN, QUEZONCITY,METROMANILA Form Type Department requiring the report Secondary License Type, If Applicable 1 7 - A S E C Registration of securities (For December 31, 2015) COMPANY INFORMATION Company's Email Address Company's Telephone Number/s Mobile Number [email protected] 7092038 to 41 No. of Stockholders Annual Meeting Fiscal Year Month/Day Month/Day 24 3rd Monday of May 12/31 CONTACT PERSON INFORMATION The designated contact person MUST be an Officer of the Corporation Name of Contact Person Email Address Telephone Number/s Mobile Number DINA INTING [email protected] 7092038 to 41 Contact Person's Address 7th Floor, 1880 Eastwood Avenue, Eastwood City CyberPark, 188 E. Rodriguez, Jr. Avenue, Bagumbayan, Quezon City, Metro Manila Note 1: In case of death, resgination or cessation of office of the officer designated as contact person, such incident shall be reported to the Commission within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person designated. 2: All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation's records with the Commission and/or non- receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from liability for its deficiencies. - SECURITIES AND EXCHANGE COMMISSION SEC FORM 17-A ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SECTION 141 OF THE CORPORATION CODE OF THE PHILIPPINES 1. For the fiscal year ended: December 31, 2015 2. SEC Identification Number: A200117595 3. BIR Tax Identification No. 214-815-715-000 4. Exact name of issuer as specified in its charter: EMPERADOR INC. 5. Metro Manila, Philippines 6. (SEC Use Only) Province, Country or other jurisdiction of Industry Classification Code: incorporation or organization 7. 7th Floor, 1880 Eastwood Avenue, Eastwood City CyberPark, 188 E. Rodriguez Jr. Avenue, Bagumbayan, Quezon City 1110 Address of principal office Postal Code 8. (632) 709-2038 to 41 Issuer's telephone number, including area code 9. 10/F Liberty Center, 104 H.V. dela Costa Street, Salcedo Village, Makati City 1227 Former name, former address, and former fiscal year, if changed since last report. 10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA Title of Each Class Number of Shares of Common Stock Outstanding and Amount of Debt Outstanding Common 16,120,000,000 11. Are any or all of these securities listed on a Stock Exchange. Yes [ ] No [ ] Philippine Stock Exchange 12. Check whether the issuer: (a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17.1 thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of The Corporation Code of the Philippines during the preceding twelve (12) months (or for such shorter period that the registrant was required to file such reports): Yes [ ] No [ ] (b) has been subject to such filing requirements for the past ninety (90) days. Yes [ / ] No [ ] 13. The aggregate market value of the voting stock held by non-affiliates is P24,152,175,040, based on the closing price of P8.10 per share on March 14, 2016 at the Philippine Stock Exchange. EMP 2015 17-A - 2 TABLE OF CONTENTS Page No. PART I – BUSINESS AND GENERAL INFORMATION 1. BUSINESS 3 Overview; Subsidiaries; Description of Business; Products; New Products; Marketing, Sales and Distribution; Competition; Sources and Availability of Raw Materials; Dependence on A Single or Few Customers; Transactions With And/or Dependence on Related Parties; Intellectual Property; Regulatory and Environmental Matters; Research and Development; Employees; Risks Associated with the Business; Risk Management and Business Strategy 2. PRINCIPAL PROPERTIES 29 3. LEGAL PROCEEDINGS 30 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 30 PART II - OPERATIONAL AND FINANCIAL INFORMATION 5. MARKET FOR ISSUER’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 30 Market Information; Shareholders; Dividend Policy; Recent Sales of Unregistered or Exempt Securities, Including Recent Issuance of Securities Constituting an Exempt Transaction 6. MANAGEMENT’S DISCUSSION AND ANALYSIS 33 Key Performance Indicators; Results of Operations; Financial Condition; Liquidity and Capital Resources; Prospects for the Future; Other Matters 7. FINANCIAL STATEMENTS 38 8. INFORMATION ON INDEPENDENT ACCOUNTANT AND OTHER RELATED 39 MATTERS External Audit Fees and Services; Changes In and Disagreements with Accountants on Accounting and Financial Disclosure PART III – CONTROL AND COMPENSATION INFORMATION 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE ISSUER 39 Directors and Executive Officers; Significant Employees; Family Relationships; Involvement in Certain Legal Proceedings 10. EXECUTIVE COMPENSATION 46 Summary Compensation Table; Compensation of Directors; Employment Contracts and Termination of Employment and Change-in-Control Arrangement; Outstanding Warrants and Options 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 47 Security Ownership of Certain Record and Beneficial Owners of More Than 5% as of February 29, 2016; Security Ownership of Management as of February 29 2016; Voting Trust Holders of 5% or More; Changes in Control 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 48 PART IV – CORPORATE GOVERNANCE 13. Annual Corporate Governance Report for 2015 PART IV – EXHIBITS AND SCHEDULES 14. EXHIBITS AND REPORTS ON SEC FORM 17-C 48 SIGNATURES 49 AUDITED CONSOLIDATED FINANCIAL STATEMENTS SUPPLEMENTARY SCHEDULES TO THE FINANCIAL STATEMENTS ANNUAL CORPORATE GOVERNANCE REPORT FOR 2015 EMP 2015 17-A - 3 PART I - BUSINESS AND GENERAL INFORMATION 1. BUSINESS OVERVIEW EMPERADOR INC. (the “Company” or “EMP” or “Emperador”) is currently a holding company which operates an integrated business of manufacturing, bottling and distributing distilled spirits and other alcoholic beverages from the Philippines and Europe. Through Emperador Distillers, Inc. (“EDI”), EMP has established its identity in the Philippine alcoholic beverages business with steady growth and production of high quality liquor. EDI, the Philippines’ largest liquor company and the world’s largest brandy producer, has a product portfolio that consists of its own brands as well as licensed products. Through Whyte and Mackay Group Limited (“WMG” or “Whyte and Mackay”) of United Kingdom, EMP has entered the global Scotch whisky business. WMG has a rich heritage of a Scottish spirits company, which is the fifth largest Scotch whisky manufacturer in the world, and its products are distributed in over 50 countries. With its most recent purchase of the brandy and sherry business from Beam Spain, S.L., through its indirect wholly-owned subsidiary Bodegas Fundador S.L.U. (“Bodegas Fundador”) [such purchase completed on 29 February 2016], EMP has fortified its brandy business and sherry wine business in Spain and United Kingdom. Bodegas Fundador has the largest and oldest brandy facility in Spain. At present, the Group has a wider range of products in its portfolio - from value to super premium – and an international reach to more than 50 countries. It was in 2013 that the Company transformed into a holding company and increased its capitalization base to P20 billion. In a series of transactions in August and September 2013, Alliance Global Group, Inc. (“AGI”) acquired majority control with 87.55% [now 81.50%] ownership interest in the Company and the Company concurrently acquired 100% ownership in EDI from AGI. The Company thus became a subsidiary of AGI and the immediate parent of EDI. (See Note 1 to the Consolidated Financial Statements) The Company’s acquisition of EDI is accounted for similar to a reverse acquisition of a non-operating shell company, wherein the legal subsidiary, which is EDI, is deemed as the acquirer and the legal parent, which is the Company, is deemed as the acquired. Thus, the consolidated financial statements prior to the acquisition date have been prepared as a continuation of the consolidated financial statements of EDI and its subsidiaries (collectively referred to as “EDI Group”), except for the capital structure which represent that of the Company. (See Note 2.3(a)iii to the Consolidated Financial Statements) On August 28, September 16 and September 27, 2013, the Board of Directors (“BOD”), stockholders and Philippine Stock Exchange Commission (“SEC’’) respectively approved the change in corporate name to Emperador Inc. The Company’s shares are presently traded on the First Board of the Philippine Stock Exchange (PSE) under the symbol “EMP”. The Company was originally incorporated under the name of Touch Solutions, Inc. (TSI) in the Philippines on November 26, 2001 and first listed its shares on December 19, 2011 under the symbol “TSI”. On October 31, 2014, the Company through its indirect wholly-owned subsidiary, Emperador UK Limited (“EUK”), completed a deal signed on May 9, 2014, for the acquisition of the entire issued share capital of WMG from United Spirits (Great Britain) Limited, an indirect wholly-owned subsidiary of United Spirits Limited (“USL”), at an enterprise value of £430 million. Emperador took the reins from the world's