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: August 31, 2013
2. SEC Identification Number: PW-364 3. BIR Tax Identification No.: 000-270-220-000
4. Exact name of Issuer as specified in its charter: VICTORIAS MILLING COMPANY, INC.
5. Plant site: Victorias City, Negros Occidental2020 6. (SEC Use Only)
Province, Country or other jurisdiction of Industry Classification Code: incorporation or organization 7. VMC Compound Victorias City, Negros Occidental 6119 Address of office Postal Code
8. (034) 399-33-78; (034) 399-35-88 Issuer's telephone number, including area code
9. Not Applicable a Former name, former address, and former fiscal year, if changed since last report.
10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA
Title of Each Class Number of Shares of Common Stock Outstanding and Amount of Debt Outstanding
(a) Common Stock (Par Value of P1.00 per share)
Authorized Capital Stock 2,563,035,708 shares Subscribed and Paid-up 2,297,474,418 shares Amount of Debt Outstanding as of August 31, 2013: 2,544,632,633
11. Are any or all of these securities listed on a Stock Exchange.
Yes [ X ] No [ ]
If yes, state the name of such stock exchange and the classes of securities listed therein:
Philippine Stock Exchange, - Common Stocks
12. Check whether the issuer:
(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 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);
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Yes [ X ] No [ ]
(b) has been subject to such filing requirements for the past ninety (90) days.
Yes [ X ] No [ ]
13. Aggregate market value of the voting stock held by non-affiliates: P2,018,792,134 (at P1.00 par value)
APPLICABLE ONLY TO ISSUERS INVOLVED IN INSOLVENCY/SUSPENSION OF PAYMENTS PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
14. Check whether the issuer has filed all documents and reports required to be filed by Section 17 of the Code subsequent to the distribution of securities under a plan confirmed by a court or the Commission.
Yes [ X ] No [ ]
DOCUMENTS INCORPORATED BY REFERENCE
15. Briefly describe the documents incorporated by reference and identify the part of the SEC Form 17-A into which the document is incorporated:
2012-2013 Consolidated Financial Statements (Incorporated as reference for Item 7 of SEC Form 17- A)
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TABLE OF CONTENTS
PART I - BUSINESS AND GENERAL INFORMATION Page Item 1. Business 4 Item 2. Property 18 Item 3. Legal Proceedings 19 Item 4. Submission of Matters to a Vote of Security Holders 20
PART II - OPERATIONAL AND FINANCIAL INFORMATION
Item 5. Market for Registrant's Common Equity and Related 20 Stockholder Matters Item 6. Management's Discussion and Analysis or Plan of 20 Operation. Item 7. Financial Statements 30 Item 8. Changes in and Disagreements With Accountants on 30 Accounting and Financial Disclosure
PART III - CONTROL AND COMPENSATION INFORMATION
Item 9. Directors and Executive Officers of the Issuer 31 Item 10. Executive Compensation 34 Item 11. Security Ownership of Certain Beneficial Owners and 35 Management Item 12. Certain Relationships and Related Transactions 36
PART IV- EXHIBITS AND SCHEDULES
(a) Exhibits 36 (b) Reports on SEC Form 17-C 36
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PART I- BUSINESS AND GENERAL INFORMATION
ITEM 1 - BUSINESS
DESCRIPTION OF BUSINESS
Victorias Milling Company, Inc. (VMC) is a domestic corporation located in Victorias City, Negros Occidental. Since its incorporation on May 7, 1919, VMC has engaged in integrated raw and refined sugar manufacturing. It also operates engineering services and the following subsidiaries:
DATE OF REGISTRATION % Ownership Description of Business Victorias Foods Corporation February 24, 1993 100% produces and sells canned sardines, hot (VFC) bangus, mackerel, luncheon meat, lechon paksiw, ham, bacon and other meat products Canetown Development February 9, 1979 88% develops and sells real estate properties; Corporation (CDC) develops, operates and sells memorial lots Victorias Quality Packaging July 4, 1990 55% sells special packaging products such as Corporation (VQPC) polyethylene and polyprophelene bags Victorias Golf and Country May 5, 1994 81% operates a golf club Club, Inc. (VGCCI) Victorias Agricultural Land June 30, 1987 100% acquires and owns agricultural lands and Corporation (VALCO) properties
BUSINESS DEVELOPMENT DURING THE PAST THREE (3) YEARS
VMC is serious in its efforts to further improve its efficiency as well as product quality and the same is manifested in its zeal to engage in major expansion programs for the past three (3) years. Its unprecedented expansion programs resulted to high milling efficiency rates for Crop Years 2009-2010 and 2010-2011 by milling 2,552,299 MT and 3,115,914 MT, respectively. For Crop Year 2011-2012 VMC was able to mill 3,100,509 tonnes cane, producing 6,400,064 Lkg. raw sugar. For Crop Year 2011-2012, VMC milled 3,100,509 MT, slightly lower by 15,405 tonnes cane from last crop year’s 3,115,914 tonnes cane, lower by 99,491 tonnes cane or three (3%) percent from the projection of 3.2 million tonnes cane. Although this production is lower than the previous crop year, VMC has retained its leadership when it comes to tons cane milled in the province with 25.82% share.
CURRENT STATUS OF REHABILITATION PROGRAM
In 1997, VMC filed with the Securities and Exchange Commission (SEC) a Petition for the Declaration of Suspension of Payments, and for the Approval of a Rehabilitation Plan. VMC’s total principal obligations and interest at that time stood at P7.9 Billion.
Part of the rehabilitation plan was the restructuring of P4.4 Billion of debt over a period of fifteen (15) years beginning on 1 September 2003.
Over the years, VMC has continued to pay its creditors in accordance with the scheduled amortization payments of its restructured debts. In fiscal year 2013, VMC paid in full the remaining restructured loans to its secured and unsecured creditors.
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Another component of the rehabilitation plan was the conversion of P2.4 Billion of debt into convertible notes in accordance with the conversion schedules as provided for in the Debt Restructuring Agreement (DRA). As of FY 2013, VMC has converted a total of P702 Million convertible notes into common shares at the ratio of P1 convertible note to 1 common share. P273 Million worth of debts were converted in 2013, while P429 Million convertible notes were converted in previous years.
The conversion of the notes into equity contributed significantly to the reversal of the previous negative Net Worth to a positive equity position. As of August 31, 2013, VMC’s Net Worth stood at P2.6 Billion.
The continuous improvement in operations resulting to healthier bottom lines contributed to the significant reduction of the deficit for the past eight years by a total of P3.38 Billion from 2005, to only P421 million in 2013.
VMC’s shares of stock (“VMC”) are listed in the Philippine Stock Exchange (PSE) and has resumed being traded in the Exchange on May 21, 2012 following the lifting by the Securities and Exchange Commission and the PSE of the temporary suspension of its trading.
Victorias Milling Company, Inc. and Subsidiaries Schedule of Equity Conversion As of August 31, 2013
For the year ended 8/31/2010 310,046,219.00 For the year ended 8/31/2011 118,628,250.00 For the year ended 8/31/2012 272,857,966.00 As of August 31, 2013 701,532,435.00
Schedule of Debt Outstanding (Long-term Debt) As of August 31, 2013
1 - A u g - 1 3 3 1 - A u g - 1 2 3
u c u
R e s t r t r e d l o a n s :
Foreign currency denominated 331,513,741 Philippine peso denominated 2,000,909,766
- 2,332,423,507
Convertible notes 1,504,328,206 1,520,878,389 Accrued interest on convertible notes 1,203,462,565 1,202,171,488 2,707,790,771 5,055,473,385
Less unamortized interest and discounts 163,158,138 228,566,018
2 , 5 4 4 , 6 3 2 , 6 3 3 4 , 8 2 6 , 9 0 7 , 3 6 6
Less current portion of debt - 358,834,386 2,544,632,633 4,468,072,981
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MILL PERFORMANCE
The following table and figures show the comparative performance of the mills between the present and previous crop years. The recent crop year had been more productive and efficient in the operations, which are apparent in the increase in sucrose extraction and reduction in bagasse percent pol and moisture.
These results were made possible due to improvements made in the operations. Reduction of downtimes due to Adjusted Milling Rate or AMR was noted. Increased imbibition was a result of the improvements in the Boiling House Area. One significant improvement made in the Mills is the upgrading of C- Mill No. 6 by installation of semi-independent hydraulic drives resulting to an outstanding efficiency of C-Mill.
PARAMETER CROP YEAR 2011-2012 CROP YEAR 2012-2013 Pol % Bagasse 2.35 2.27 Moisture % Bagasse 51.22 50.46 Act. Sucrose Extraction 93.77 94.33 Red. Sucrose Extraction 94.84 95.26 Total Cane Milled, Tons 3,100,508.98 3,208,588.54 Start of Operation Sept. 26, 2011 @ 1505H Sept. 10, 2012 @ 1100H End of Operation June 11, 2012 @ 0210H May 26, 2013 @ 2025H
Comparison of Mill Parameters
Comparative of stoppages between CY 2011-12 vs CY 2012-13
VMC Historical Raw and Refined Sugar Production
Total raw sugar produced this crop year was 7,021,820 Lkg which is 521,820 Lkg more than the projected raw sugar production of 6,500,000 Lkg. This was due to high quality of canes with higher Lkg/TC than the projected and good factory performance. The actual production of raw sugar was higher than the projected production. Out of the 37 weeks of milling operation; only 5 weeks did not reach the projected production that occurred on the remaining weeks of operation.
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A V E R A G E R A W S U G A R P R O D U C E D P E R W E E K
135,609 169,281 158,350 165,410 158,247 141,342 148,748 139,252 172,975 189,779
8000000 43 43 44
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O 6000000 40 40
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I
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5000000 E
W
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4000000 37 37 38 O
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36 O A
3000000 N
G 36
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W 2000000
A 34 R 1000000
0 5831173 6094106 6492338 6616383 6804634 5795009 5652429 5709334 6400064 7021820 32
03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13
R O P Y E A R Raw Sugar Weeks C
Crop year 2012-2013 refined sugar operation in VMC started October 1, 2012. For two days after start- up, the factory was able to produce good sugar. Early production of good sugar was charged to the good preparation, wherein, equipment were cleaned and serviced rigidly ahead of the scheduled operation. Total net production for refined sugar is 6,269,597 Lkg, in which, 206,325 Lkg of it is premium grade and 6,063,272 Lkg standard grade refined sugar. Premium grade production for this crop year decreased by 72.05% from last crop year’s production of 738,189 Lkg. The actual net production is higher by 269,597 Lkg compared to the projection of 6,000,000 Lkg. Production this crop year increased by 237,788 Lkg compared to last year’s production with the same 34- week refining period.
VMC Refined Sugar Operational Weeks and Production
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Cane and Sugar Production Comparative (CY 10-11, 11-12 vs 12-13) and Leadership in share of sugar production
The Philippines' raw sugar production for this crop year increased by 9.86% from 44,877,524 Lkg of last crop year to 49,302,331 Lkg. Negros Occidental still leads all areas in the whole country with a share of 52.37% with a corresponding increase of 1.73% from crop year 2011-2012. Other than Negros Occidental only Panay has an increase in the share of production of 0.14%. The areas of Luzon, Eastern Visayas, Negros Oriental and Mindanao had a loss of 0.88%, 0.09%, 0.47% and 0.44% in the share of production respectively.
A W S U G A U C E g )
R R P R O D D ( L k
S T C T
D I R I
C Y 2 0 1 0 - 1 1 % S h C Y 2 0 1 1 - 1 2 % S h C Y 2 0 1 2 - 1 3 % S h
a r e a r e a r e
Luzon 6,100,540 12.70% 6,125,514 13.65% 6,294,377 12.77%
Eastern Visayas 1,662,660 3.46% 1,336,144 2.98% 1,426,386 2.89%
g c c i
e r o s O d e n t a l N 23,588,341 49.12% 22,724,116 50.64% 25,819,179 52.37% Negros Oriental 2,978,220 6.20% 2,873,023 6.40% 2,926,065 5.93% Panay 2,848,100 5.93% 2,548,936 5.68% 2,866,986 5.82% Mindanao 10,839,900 22.57% 9,269,791 20.66% 9,969,339 20.22% TOTAL 48,017,761 100% 44,877,524 100% 49,302,331 100% (Source: Philippine Sugar Millers Association) * as of Aug. 25, 2013 SRA Bulletin Philippines Three-Year Raw Sugar Production
VMC continues to lead all sugar centrals with 7,021,820 Lkg of raw sugar production which comprises 27.20% of production share in Negros Occidental Province. Compared to last crop year VMC’s raw sugar production has increased by 621,756 Lkg or 9.71%, but VMC shows a 0.96% drop in provincial share of production. Meanwhile the total production of the province is 25,819,179 Lkg or a 13.62% increase.
A W S U G A U C E g )
R R P R O D D ( L k
S U G A C E T A
R N R L
C Y 2 0 1 0 - 1 1 % S h C Y 2 0 1 1 - 1 2 % S h C Y 2 0 1 2 - 1 3 % S h
a r e a r e a r e
Biscom 3,967,162 16.82% 3,414,202 15.02% 3,841,121 14.88% First Farmers 1,392,297 5.90% 1,218,810 5.36% 1,360,612 5.27% HPCo 2,115,906 8.97% 1,758,625 7.74% 2,097,127 8.12% La Carlota 3,333,593 14.14% 3,518,604 15.48% 4,118,801 15.95% Lopez 3,081,461 13.07% 2,434,546 10.71% 2,880,822 11.16% Sagay 1,423,920 6.04% 1,478,677 6.51% 1,533,174 5.94%
SONEDCO 2,480,213 10.52% 2,456,845 10.81% 2,893,311 11.21%
C 5 , 7 0 9 , 3 3 4 2 4 . 1 8 % 6 , 4 0 0 , 0 6 4 2 8 . 1 6 % 7 , 0 2 1 , 8 2 0 M V 27.20%
Option MPC 84,955 0.36% 43,744 0.19% 72,391 0.28%
T T A 2 3 , 5 8 8 , 8 4 1 1 0 0 . 0 0 % 2 2 , 7 2 4 , 1 1 6 1 0 0 . 0 0 % 2 5 , 8 1 9 , 1 7 9 1 0 0 . 0 0 %
O L
(Source: Philippine Sugar Millers Association) * as of Aug. 25, 2013 SRA Bulletin Negros Occidental Three-Year Raw Sugar Production
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This crop year’s final molasses production increased by 5.01% compared to last crop year. The increase in molasses production is directly proportional to the increase in cane milled. The final molasses produced is higher compared to Crop Year 2011-12 but lower than Crop Year 2010-11. The Apparent Purity or AP of this year’s molasses increased from 32.40 of Crop Year 2011-12 to 32.77, but still lower than the minimum standard of 34.00 AP.
Final Molasses Production
In Negros, VMC still holds the biggest share in the production of refined sugar with 45.09%, followed by LOPEZ with 23.87%, and SONEDCO in third biggest share with 13.43%. In the country, VMC also holds the biggest share of refined sugar production with 29.72%, followed by LOPEZ with 15.73%, and BUSCO on third with 12.63%.
Area Refinery 2012-2013 Percentage National Batangas 169,830 4.17% 0.81% Carsumco 238,659 5.86% 1.13% Luzon Don Pedro 2,395,273 58.86% 11.35% Luisita 1,265,629 31.10% 6.00% TOTAL 4,069,391 100.00% 19.29% First Farmers 308,702 2.22% 1.46% Lopez 3,318,562 23.87% 15.73% Ursumco 1,032,894 7.43% 4.90% Negros Victorias 6,269,597 45.09% 29.72% Sonedco 1,867,230 13.43% 8.85% Biscom 1,107,818 7.97% 5.25% TOTAL 13,904,803 100.00% 65.91% Hideco 125,739 100.00% 0.60% Eastern Visayas TOTAL 125,739 100.00% 0.60% Busco 2,664,121 88.91% 12.63% Davao 320,606 10.70% 1.52% Mindanao Cotabato 11,811 0.39% 0.06% TOTAL 2,996,538 100.00% 14.20% Philippines GRAND TOTAL 21,096,471 100.00% 100.00% Refined Sugar Production and Share in National Production
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RISKS
The risks of the company can be classified into four general categories: (i) Operational risks; (ii) financial risks; (iii) strategic risks, and (iv) hazard risks.
One of the major elements in the operational risks of the company is its raw materials supply chain. VMC currently gets its cane supply from district and non-district planters all over the Negros province. This yearly exercise has proven to be tests of skills in enticing planters to deliver canes to VMC through various incentives and programs as well as providing superior services and factory efficiencies. But this is not without stiff competition from other sugar mills and refineries.
Another key element in the company’s operational risks is its compliance to environmental regulatory requirements. One of the longest running environmental issues is the Cease and Desist order issued to VMC in 1989 due to air pollution concerns. This was exacerbated with VMC being under rehabilitation, having financial constraints to invest on anti-pollution equipment. To date however, VMC has installed five (5) scrubbers on its smoke stacks and expects to be fully compliant with the air emission standards of the DENR.
VMC continues to have financial risks with the fluctuations of sugar prices both locally and globally. Being under rehabilitation until 2018 and debt-ridden, its break-even costs are expectedly higher. Additional loans are not allowed. As such, factory expansion must be funded from internally-generated funds. It constraints fund usage and competes with the debt servicing to creditors.
Another imminent risk that the industry as a whole is facing is the gradual tariff reduction on imported sugar, which, by 2015, will go down to only 5%. This exposes the sugar industry as a whole to global competition that if not prepared for, will drastically change the financial viability of the company, in particular.
Competition and industry changes form part of strategic risks to which VMC is exposed. The sugar industry has been threatened by the ethanol industry, which also uses sugarcane as raw material. Fortunately, the ethanol business has yet to stabilize as a new industry under threats from world oil prices. Change in customer demand is something that VMC should also be concerned of to ensure that its product specifications suit the dynamics of its customers.
VMC is also fully exposed to the risks of the extreme weather conditions. The recent typhoon Yolanda is expected to cause damage to cane crops and thereby reduce tonnage. Since its business is agriculturally-based, weather is a very critical factor for a successful crop year. Low farm inputs from planters will translate to low production that will trigger stiff cane competition among sugar millers in the region and will affect the price following supply and demand forces.
The numerous legal cases is likewise a source of risk for the company. Collection cases versus the company are currently under suspension, with VMC being under corporate rehabilitation. The potential impact of these cases on the company once the suspension is lifted is continually being assessed.
COMPETITION
Crop Year 2009-2010 was VMC’s lowest production within a ten-year period. Cane productivity was generally poor as affected by the low price of sugar and rising costs of farm inputs, especially chemical fertilizers. Better sugar prices and good weather condition in Crop Year 2011-2012 resulted to a better farm productivity in terms of tonnage thus, the increase in volume of canes milled. Cane and sugar production continued to improve in Crop Year 2011-2012 however sugar price was declining. VMC’s leadership in factory sugar recovery or efficiency continues until crop year 2012-2013.
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GOVERNMENT LICENSES REQUIRED
The following are the permits/licenses secured by the Company with the different government agencies/entities, which are needed in its operations:
NAME OF LICENSE DESCRIPTION DATE SECURED EXPIRY DATE
1. CERTIFICATE OF Electrical inspection certificate EEDL No. VI-01-2012 issued Nov. 8, 2012 Nov. 7, 2013 ELECTRICAL INSPECTION by DOLE for the VMC Sugar Factory.
2. PERMIT TO OPERATE Permit to operate DLST No. VI-03-2012. Permit to operate our Nov. 8, 2012 Nov. 7, 2013 STEAM TURBINE GE Turbine Generator
3. PERMIT TO OPERATE Permit to operate DLST VI-04-2014. Permit to operate our Nov. 8, 2012 Nov. 7, 2013 STEAM TURBINE Siemens Turbine Generator
4. PERMIT TO OPERATE Permit to operate DLST No. VI-01-2012. Permit to operate our Nov. 8. 2012 Nov. 7, 2013 STEAM TURBINE Kawasaki Turbine Generator
5. PERMIT TO OPERATE Permit to operate DLST No. VI-02-2012. Permit to operate our Nov. 8, 2012 Nov. 7, 2013 STEAM TURBINE Shin Nippon Turbine Generator.
6. PERMIT TO OPERATE Permit to operate DLST No. VI-01-2012. Permit to operate our Nov. 8, 2012 Nov. 7, 2013 INTERNAL COMBUSTION CATERPILLAR Diesel Engine Generator. ENGINE
7. CERTIFICATE OF Certificate of Registration issued by the Department of May 18, 2011 REGISTRATION Energy (DOE). Certificate of Registration shall serve as the basis of entitlement to incentives of VMCI under R.A. No. 9513, otherwise known as the Renewable Energy Act of 2008, subject to performance of its obligations under the Contract and compliance with the provisions of the Act, its implementing Rules and Regulations (IRR) and applicable DOE directives, circulars, and other issuances which may be promulgated from time to time by the DOE in pursuance of its power under the Act.
8. MILLING LICENSE To operate a sugar mill and to have the centrifugal sugar Aug. 23, 2012 Aug. 31, 2013 stored in its millsite/ subsidiary warehouses. The withdrawal of sugar from the millsite/ subsidiary warehouses should be in accordance with SRA Sugar Order No. 8 dated 23 July 1992 and related rules and regulations issued by this office.
9. REFINING LICENSE To operate a sugar refinery and to have the refined sugar Aug. 23, 2012 Aug. 31, 2013 manufactured stored in its warehouse. Non- observance or violation of any SRA rules and regulations, sugar order, circular letter, memorandum, etc., pertinent to the manufacture and withdrawal of refined sugar, understatement of production, non-quedanning of refined sugar or non-payment of monitoring fees shall be a cause for the suspension or cancellation/ revocation of the license. 10. SUGAR TRADER Authority to withdraw purchased sugar from the warehouse Aug. 17, 2012 Aug. 31, 2013 CERTIFICATE OF of any sugar mill refinery. VMC should submit a continuous REGISTRATION monthly report of its trading activities and for failure to submit the same shall be subject to par. 7, SRA Sugar Order No. 2 dated 16 July 1987.
11. MOLASSES TRADER Authority to withdraw molasses from the storage tanks of any Jan. 9, 2012 Dec. 31, 2012 CERTIFICATE OF sugar mill or refinery. VMC should submit a continuous REGISTRATION monthly report of its trading activities and for failure to submit the same shall be subject to par. 7. SRA Sugar Order No. 2 dated 16 July 1987.
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12. USFDA REGISTRATION Registration subject to biennial audit and renewal. Jan. 25, 2013 Jan. 25, 2015
13. ISO CERTIFICATION Certification subject to annual surveillance and three-year Nov. 25, 2012 Nov. 24, 2015 renewal audit. 14. HALAL Certification subject to annual renewal. Nov. 24, 2012 Nov.23, 2013 CERTIFICATION
15.HACCP CERTIFICATION Certification subject to annual surveillance/inspection audit. Mar. 5, 2012 Mar. 5, 2013
16. GMP Certification subject to annual surveillance/audit. Feb. 1, 2012 Feb. 1, 2013
17. PDEA LICENSE Permit to use controlled chemicals for Refinery and Manapla Nov. 9, 2011 Nov. 9, 2012 Distillery Plant.
Hydrochloric Acid- for use in the rejuvenation of IER in refined sugar process.
Sulfuric Acid- for use in the fermentation of molasses by yeast culture in Manapla Distillery.
18. PERMIT TO OPERATE Pursuant to Article 165, Chapter II, Book IV of the Labor Code July 11, 2012 July 11, 2013 BOILER STEAM (RILEY #1) of the Philippines (LCP), as amended and its implementing rules and regulations, Rule 1160 of the Occupational Safety and Health (OSHS), as amended.
19. PERMIT TO OPERATE Pursuant to Article 165, Chapter II, Book IV of the Labor Code July 27. 2012 July 27, 2013 BOILER STEAM (RILEY #2) of the Philippines (LCP), as amended and its implementing rules and regulations, Rule 1160 of the Occupational Safety and Health (OSHS), as amended.
20. PERMIT TO OPERATE Pursuant to Article 165, Chapter II, Book IV of the Labor Code July 20, 2012 July 20, 2013 BOILER STEAM (RILEY #3) of the Philippines (LCP), as amended and its implementing rules and regulations, Rule 1160 of the Occupational Safety and Health (OSHS), as amended.
21. PERMIT TO OPERATE Pursuant to Article 165, Chapter II, B ook IV of the Labor Code July 11, 2012 July 11, 2013 BOILER STEAM (RILEY #4) of the Philippines (LCP), as amended and its implementing rules and regulations, Rule 1160 of the Occupational Safety and Health (OSHS), as amended.
22. PERMIT TO OPERATE Pursua nt to Article 165, Chapter II, Book IV of the Labor Code Aug. 22, 2012 Aug. 22,2013 BOILER STEAM (JTA #1) of the Philippines (LCP), as amended and its implementing rules and regulations, Rule 1160 of the Occupational Safety and Health (OSHS), as amended.
23. PERMIT TO OPERATE Pursuant to Article 165, Chapter II, Book IV of the Labor Code Aug. 22, 2012 Aug. 22,2013 BOILER STEAM (JTA #2) of the Philippines (LCP), as amended and its implementing rules and regulations, Rule 1160 of the Occupational Safety and Health (OSHS), as amended.
24. PERMIT TO OPERATE Pursuant to Article 165, Chapter II, Book IV of the Labor Code July 20, 2012 July 20, 2013 BOILER STEAM of the Philippines (LCP), as amended and its implementing (YOSHIMINE #1) rules and regulations, Rule 1160 of the Occupational Safety and Health (OSHS), as amended.
25. PERMIT TO OPERATE Pursuant to Article 165, Chapter II, Book IV of the Labor Code July 27, 2012 July 27, 2013 BOILER STEAM of the Philippines (LCP), as amended and its implementing (YOSHIMINE #2) rules and regulations, Rule 1160 of the Occupational Safety and Health (OSHS), as amended.
26. ENVIRONMENTAL Certify that VMCI is granted Environmental Compliance Nov. 6, 2012 COMPLIANCE Certificate (ECC) for the consolidation of four (4) ECCs and CERTIFICATE inclusion of six (6) existing production wells and four (4) monitoring wells of the Sugar Mill and Refinery Plant Project subject only to the conditions and restrictions set-out in this 12
subject only to the conditions and restrictions set-out in this certificate.
27. REGISTERED MARK Registered Mark No. 4-2008-500038 and 4-2008-500039 Sept. 22, 2008 Sept. 22, 2018 -for refined sugar in Class 30
Registered Mark No. 4-2008-012796 May 25, 2009 May 25, 2019 -for meat, fish, poultry and game; preserved dried and cooked fruits and vegetables; preserves and pickles; edible oils and fats, squid in Class 29
Registered Mark No. 4-2007-500803 Oct. 23, 2009 Oct. 23, 2019 -in Class 29 and 30
Registered Mark No. 4-2010-501552 June 2, 2011 June 2, 2021 -for meat, fish, poultry and game; preserved, dried and cooked fruits and vegetables; preserves and pickles, edible oils and fats, squid in Class 29 -for sugar, vinegar, salt, pepper, mustard, sauces, spices in Class 30
28. DTI ACCREDITATION Certifies that shop has reached highest level as 5-star Jan. 22, 2013 Dec. 31, 2013 MACHINE SHOP Engineering Machine Shop and has complied with Government Regulations to serve internal clients.
29. BUSINESS PERMIT VMC- Raw Sugar Jan. 4, 2012 Dec. 31, 2013 May be revoked or cancelled on ground of public health, sanitation, safety, welfare, misrepresentation of the nature of the permit applied for or for cause as provided by law.
30. BUSINESS PERMIT Sale of Refined Sugar & Refined Sugar- Tolled Jan. 4, 2012 Dec. 31, 2013 May be revoked or cancelled on ground of public health, sanitation, safety, welfare, misrepresentation of the nature of the permit applied for or for cause as provided by law.
31. BUSINESS PERMIT VMC- Molasses Jan. 4, 2012 Dec. 31, 2013 May be revoked or cancelled on ground of public health, sanitation, safety, welfare, misrepresentation of the nature of the permit applied for or for cause as provided by law.
32. BUSINESS PERMIT VMC- Distillery Jan. 4, 2012 Dec. 31, 2013 May be revoked or cancelled on ground of public health, sanitation, safety, welfare, misrepresentation of the nature of the permit applied for or for cause as provided by law.
33. BUSINESS PERMIT Machine Shop Jan. 4, 2012 Dec. 31, 2013 May be revoked or cancelled on ground of public health, sanitation, safety, welfare, misrepresentation of the nature of the permit applied for or for cause as provided by law.
34. BUSINESS PERMIT Foundry Jan. 4, 2012 Dec. 31, 2013 May be revoked or cancelled on ground of public health, sanitation, safety, welfare, misrepresentation of the nature of the permit applied for or for cause as provided by law.
35. BUSINESS PERMIT Clinic Pharmacy Jan. 4, 2012 Dec. 31, 2013 May be revoked or cancelled on ground of public health, sanitation, safety, welfare, misrepresentation of the nature of the permit applied for or for cause as provided by law.
36. FIRE SAFETY Certificate of Safety and Protection of VMC’s Business Jan. 22, 2013 Dec. 31, 2013 INSPECTION CERTIFICATE Establishment. May be revoked or cancelled on ground of public health, sanitation, safety, welfare, misrepresentation of the nature of the permit applied for or for cause as provided by law.
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37. CERTIFICATE OF Registration of Business Name of Victorias Milling Co., Inc. Sept. 10, 2008 Sept. 10, 2013 BUSINESS NAME issued by the Department of Trade and Industry. REGISTRATION Subject to continuing compliance with Act 3883 as amended by Act 4147 and R.A. No. 863, and in compliance with the applicable rules and regulations prescribed by the Department of Trade and Industry.
38. LICENSE TO OPERATE License to Operate as a Food Manufacturer of Sugar issued by March 21, 2012 April 24, 2015 the Department of Health Bureau of Food and Drugs. Pursuant to Section 4(e) Chapter III of Republic Act No. 3720, otherwise known as the Foods, Drugs, and Devices and Cosmetics Act.
39. CERTIFICATE OF Certificate of Eligibility issued by the Department of Oct. 9, 2013 Oct. 9, 2014 ELIGIBILITY Agriculture. Certifies that VMC is an agricultural enterprise company engaged in Sugarcane Milling and therefore eligible for tariff- exempt importation of agricultural inputs, machinery and equipment listed under Annex “B” as provided in Executive Order No. 376 to implement Section 1 of Republic Act No. 9281, “Reinstating the Effectivity of Tax incentives for Section 109 of R.A. 8435- the Agriculture and Fisheries Modernization Act of 1997.
40. ICARE CERTIFICATE OF Certificate of Accreditation as Importer issued by the Bureau Sept. 6, 2013 Sept. 6, 2014 REGISTRATION of Customs. Certifies that VMC is an accredited importer in accordance with Customs Memorandum Order No. 47-2010 subject however to suspension or cancellation prior to the expiration thereof pursuant to applicable laws, customs, rules and regulations.
41. CERTIFICATE OF Certificate of Registration issued by the Bureau of Customs Sept. 6, 2013 Sept. 6, 2014 REGISTRATION (BOC) Certifies that VMC is duly registered with BOC subject to compliance to CMO subsequent issuance governing Client Registration Application Processing, non-repudiation of any declaration filed through the Value-Added Service Providers (VASP) and recognition of TWM system information duly certified by its Administrator as valid and/or correct.
42. NATIONAL WATER Permit to use water from various water sources pursuant to May 2012 May 2013 RESOURCES BOARD Resolution No. 74-4 of the National Water Resources Council, (NWRB) PERMIT promulgated by authority of the Presidential Decree No. 424 dated March 28, 1974.
All obligations of VMC pertinent to the abovementioned licenses and permits are religiously followed by the Company.
CANE SUPPLY
Crop Year 2012-2013 was truly a bountiful year for our mill surpassing both targets and the previous crop year’s cane and sugar production. Canes milled reached 3,208,588.54 tons, over and above our target volume of 3.2 million tons and 3% higher than last crop year’s volume of 3,100,508.98 tons. Sugar produced was all-time high, the biggest in VMC’s milling history at 7,021,818.87 Lkg. This sugar production surpassed our target of 6.5 million Lkg by 8% and higher by 10% compared to last year’s 6,400,063.73 Lkg.
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Factory efficiency was very remarkable with a record breaking Lkg/TC of 2.19, higher by 8% and 6% against the target at 2.03 and last year’s 2.06. Apart from the good factory efficiency, good weather also played an important role favoring growth and maturity of the crop.
SEGMENTATION OF CANE SOURCES
A slight increase in canes milled from planters in nearby areas (0-50 kms.) was observed at 2,125,365 tonnes this year, from 2,094,017 tons last crop year. Despite this increase however, overall contribution of nearby planters dropped by 2 percentage (2%) points at sixty-six percentage (66%) only compared to sixty-eight percentage (68%) last crop year. This was due to aggressive cane campaign instituted by our competitor mills.
The volume of canes contributed by medium distance (50-100 kms.) areas maintained at eighteen percentage (18%), same as last year, but actual volume delivered was slightly higher at 564,836 tons compared to 556,455 tons of last year.
Those from far distance (100 kms. and beyond) improved in its contribution to the overall cane supply by 2 percentage points, from fourteen percentage (14%) last year to sixteen percentage (16%) this year. Actual cane volume delivered was 518,387 tons against last year’s 450,037 tons. The increase in volume contribution is attributed to the Selective Marketing Program (SMP) that assisted southern planters in their out-of-pocket expense in bringing their canes to the VMC mill site.
Relating to the province, VMC shared 25.72% on total cane of 12,476,635 million tonnes, a slight decrease of 0.8 percentage points from 26.52% of the previous year. The decrease in VMC’s share of the province is attributed to the early closure of the mill due to declining cane supply on the 4 th quarter of the milling season that is below the mill’s daily rated capacity.
SERVICES TO PLANTERS
This Crop Year 2012-2013, we maintained a status quo on TA & Incentive Rates as of Crop Year 2011- 2012. This year we implemented the Selective Marketing Program (SMP) as part of our cane campaign strategy throughout the crop year. Also later, we granted Drivers’ Incentives (DI) to selected transloading stations in the north to counter the offer of Lopez Sugar Central and Sagay Central, Inc.
a) Selective Marketing Program (SMP)
Starting in the 1 st quarter of our milling season a Selective Marketing Program (SMP) was implemented, which was directed to planters traditionally not milling with VMC. Planters already milling with VMC but are wooed and offered good package by other mills, and planters milling with multiple mills to increase VMC’s market share. The rates are based on the out-of-pocket expense absorbed by planter-beneficiaries in bringing their canes to VMC mill site.
b) Drivers’ Incentive (DI)
Later in the 3 rd quarter of our milling season, cane deliveries from selected transloading stations in the north were given Drivers’ Incentive of P100/trip. This was given to improve competitiveness of our affiliated transloading stations by matching what our competitor mills gave.
c) Farm Road Repair and Maintenance
This crop year, twenty-seven thousand (27,000 cu.m.) cubic meters of aggregates for Victorias, E. B. Magalona, Manapla and Cadiz City were given as assistance for the repair of sixty-five (65) kilometers, more or less, of hacienda roadways.
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Seven hundred thirty-five (735) pieces of various sizes of Reinforced Concrete pipes were also released for repair of hacienda roadways including overflow bridges. Work done include repair of overflow-type bridges and rip rapping and grading of communal roads and hacienda feeder roads to make them passable to cane trucks.
OVER-ALL CANE SUPPLY TREND AND COMPETITION - CY 2010-2011 to CY 2012-2013
Cane supply trend in the last three years (C. Y. 2010-2011 to 2012-2013) was very impressive. Total canes milled yearly, was above the 3 million mark. This was due to favorable weather and better sugar prices particularly in C. Y. 2010-2011 enabling sugarcane planters to put in the necessary farm inputs that resulted to higher farm productivity and greatly improved overall cane supply of the Negros Province. More so, the good factory efficiency made it possible for VMC to maintain its leadership in the province’s sugar industry.
VMC’S ENGINEERING SERVICES
The Maintenance and Engineering Services, the company division composed of shops which serves our factory and planters, has provided the following products and services, among others, for Crop Year 2012-2013: There are six (6) Departments under the MESD, namely: (a) General Engineering; (b) Civil Engineering; (c) Foundry and Machine Shop; (d) Motor Pool; (e) Mills and Boilers Maintenance; and (f) Planning, Design and QC.
For Crop Year 2012-2013 the total job requests from various Engineering Shops that were accomplished: (1) Installation of one (1) unit 250 cubic meter capacity Continuous Vacuum Pan; (2) Upgrading of C-Mill No. 6 - Phase 4; (3) Installation of one (1) Unit Economizer; (4) C-Mill MCC Cane Carrier Chain ; (5) Mills Cooling Tower; (6) Malihao 32"Ø Injection Waterline; (7) Molasses Pipeline from Tank #1 & #5 to Tank #7; (8) Canal Water System going to Hot Water Basin; (9) Manapla Alcohol Storage Tank (500cu.m. Capacity); (10) Installation of 12 Units Bag Filter.
SALE OF SUGAR AND BY-PRODUCTS
The Company’s major source of cash is from sales of raw sugar millshare, tolling fees from refinery operations, and sales of by-products like molasses. The major buyers of VMC’s sugar products (sugar & molasses) are the sugar traders.
Raw sugar mill share refers to the Company’s share (30.5%) of raw sugar produced from canes supplied by the planters. The Company conducts a weekly sugar and molasses bidding in Bacolod City. As a service to its planters, VMC likewise includes the planters’ share in raw sugar and molasses in the bidding. Single price auction for both mill’s and planters’ share of the sugar is practiced by VMC, that is, the highest bid price will cover all sugar sold during the day. For Crop Year 2012-2013, VMC raw sugar volume was at 2,167,671 Lkg. with an average price of P1,277.32 totalling to P2.77B sales.
Refined Sugar is also called the “white sugar” while the raw sugar is commonly called as the “brown sugar.” The raw sugar goes through a process of refining and the result is the refined sugar. VMC produces two different types of refined sugar– premium and standard. These varieties differ mainly in color, moisture content, ash content, and final use. The premium type, for example, is mainly for industrial users such as beverage manufacturers. The standard type is both for industrial and household consumption.
Molasses is the by-product of both raw sugar and refined sugar operations. The amount of molasses received by the Company at its raw sugar operations follows the same production sharing formula of raw sugar, i.e. 30.5% to VMC and the balance, to planters. The major buyers of VMC’s molasses are Asian Alcohol, Distilleria de Bago, International Pharmaceutical Inc. and Balayan Distillers. For Crop Year 2012-2013, VMC Molasses volume was at 37,683.93 with an average price of P5,462.10 totalling to sales.
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VMC’s Breakdown of Revenues (Amounts in Thousand Pesos) August 31, 2013 August 31, 2012 August 31, 2011 To Date To Date To Date REVENUES Raw Sugar 2,746,646 3,057,389 3,069,440 Tolling Fee 1,366,154 1,371,477 818,057 Refined Sugar Sale -- -- 5,380 Molasses 205,834 127,960 257,070 Alcohol Sales 57,149 59,411 -- Engineering -- 12,259 27,759 Others 38,607 35,511 39,911 4,414,390 4,664,007 4,217,617
Aging of Accounts Receivable
As of August 31, 2013, below is the aging of accounts receivables for trade and other receivables:
VICTORIAS MILLING COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED RECEIVABLE - AGING CROP YEAR 2012-2013 0-30 31-60 61-90 Over 90 Account Current Days Days Days Days Total
Accounts receivables- trade 435,124,518 435,124,518 Accounts receivables- nontrade 142,089 301,034 27,272 2,175,647 2,646,042 Advances to planters association 1,200,995 1,200,995
Advances to suppliers 734,000 918,442 237,604 2,926,478 4,816,524
Cash advances 112,298 120,210 11,800 190,819 435,127
VMC 437,313,901 1,339,686 39,072 237,604 5,292,944 444,223,207
VQPC -
VFC 127,550 266,905 61,672 80,303 2,737,929 3,274,359
VALCO - 191,645 191,645
CDC 36,775 - - 26,185 17,473,340 17,536,300
CONSOLIDATED RECEIVABLE - AGING 437,478,226 1,606,591 100,744 344,092 25,695,858 465,225,511
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AGE AMOUNTS PERCENTAGE Current 437,478,226 0.940 0-30 Days 1,606,591 0.003 31-60 Days 100,744 0.000 61-90 Days 344,092 0.001 Over 90 Days 25,695,858 0.055 465,225,511 1.000
EFFECTS OF EXISTING ENVIRONMENTAL LAWS & REGULATIONS AND THE COSTS AND EFFECTS OF COMPLIANCE WITH THE SAID ENVIRONMENTAL LAWS & REGULATIONS
Aware of its corporate social responsibility to protect the environment, VMC had successfully installed its anti- pollution control equipment notwithstanding its dismal financial situation, not to mention being under Corporate Rehabilitation. VMC had already spent more than Two Hundred Million Pesos (P200,000,000) for its Anti-Pollution Control Equipments (APCE), plus Ten Million Pesos (P10,000,000) for their yearly maintenance.
Thus, while it is paramount for VMC to religiously undertake its rehabilitation endeavors by dedicating the biggest bulk of its resources to paying its creditors pursuant to the schedules mandated by its Approved Rehabilitation Plan, it also humbly acknowledges the importance of a healthy environment in the community.
VMC MANPOWER
As of August 31, 2013, VMC has five (5) executive officers and one (1) creditor-appointed controller, with 2,187 workers who are being deployed by service providers or contractors.
ITEM 2 – PROPERTY
The VMC main office, mill operations, and related facilities constitute the “heart” of the Company where the industrial complex in producing sugar and the residential community co-exist in a relatively harmonious environment. The total landholdings of the Company aggregate to 7,824,892 square meters. The main plant is situated in a 3,502,432 square meters of land within Victorias City. The Company landholdings include a 3,639,679 square meters land in Manapla, Negros Occidental, 664,520 square meters in Cadiz City, 1,000 square meters in Bacolod City, 159 square meters in Talisay City, 4,089 square meters in Iloilo and 13,013 square meters property in Antipolo, Rizal.
However, practically all of the land holdings, including some plant and equipments of the Company are under a Mortgage Trust Indenture (MTI) with a fair market value of almost P2.0 Billion, as collateral to VMC loans in the past.
The following are the major operational machineries and equipment owned by VMC and located within its compound in Victorias City, Negros Occidental: a) A & C Mills; b) Various Boilers; c) Boiling House equipment; d) Refinery; e) Powerhouse; and f) other Engineering equipment and machineries.
These properties were mortgaged to VMC’s creditor banks. They are fully owned by VMC.
The following are the VMC Subsidiaries’ respective principal properties, machineries and equipment:
1) VICTORIAS GOLF & COUNTRY CLUB, INC. (VGCCI) - Clubhouse, 18-hole Golf Course, Office Room, Locker & Shower Room, Canteen & Kitchen, Pavilion, Basement, Green Mowers 22”, Five Gang Fairway Mower.
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2) VICTORIAS FOODS CORPORATION (VFC) - Cold Storage 2 compressor 9 cooling PL-EVAP with motor, Steamer Vacuum Automatic Shin-1 for can size 211 x 300, Fish Processing Plant Building, Coldroom/Cold Storage, Blast Freezer, Refrigeration Equipment System, Boiler House, Tank & equipment, Waste Water Treatment Plant.
3) VICTORIAS QUALITY PACKAGING CORPORATION (VQPC) - Warehouse, Canteen, Guardhouse, Extruder Machines (2 units), Circular Weaving Machines (28 units), Film Blowing Machines (2 units), High Sewing Machines (10 units), Bagging & Sealing Machines (3 units), Pelletizing Machine.
4) CANETOWN DEVELOPMENT CORPORATION (CDC) - Subdivision lots at Manapla and Victorias, Memorial Garden, Agricultural Land, VMC Engineering Complex Land Area.
5) VICTORIAS AGRICULTURAL LAND CORPORATION (VALCO) - Total of 3,058,178 square meters landholdings.
Other VMC Properties:
1. 202.02 hectares of cane field located in Manapla and Cadiz City, Negros Occidental, which is being cultivated by MIGAN Corporation for five (5) crop years starting from September 1, 2011 up to August 31, 2016. MIGAN Corporation guarantees and pay to VMC, 20 Lkg. per hectare per year as the latter’s share for the cultivation at first picul milled basis in sugar quedan(s).
2. 113.5015 hectares of cane field located in Victorias City, Negros Occidental which is being cultivated by MIGAN Corporation for five (5) crop years or from CY 2009-2010 up to CY 2013-2014 as duly approved by VMC’s Executive Committee during its meeting on October 10, 2008. MIGAN guaranteed to pay VMC 26 Lkg. per hectare for one year, as the latter’s share for the arrangement, at first picul milled in sugar quedan.
3. A parcel of land located at Bacolod City, Negros Occidental covered by TCT No. 183131 (Lot No. 26-B) and TCT No. 183132 (Lot No. 26-A) is being utilized by Enting’s Restaurant for two years commencing from May 1, 2011 up to May 1, 2013.
4. 3.537 hectares of land located in Manapla, Negros Occidental is being utilized by VMC for its distillery. Principal properties located therein are its distillery plant, distillation machineries and equipments, and powerhouse. The distillery is currently on full operation.
5. A part of a parcel of land located at Brgy. XVIII, Hda. Florencia, VMC Compound, Victorias City, Negros Occidental covered by TCT No. RT-105-75 is being utilized by Globe Telecom under a Contract of ten (10) years from January 16, 2006 up to January 16, 2016 at Php 15, 000.00 as monthly rental exclusive of VAT but inclusive of withholding tax, and Smart Communications, Inc. for ten (10) years contract from November 15, 2007 up to November 15, 2017 at Php12.000.00 as monthly rental. Further, another portion of the same parcel of land is also being utilized by KEYLARGO Commodities Trading under the Contract for three (3) years from February 1, 2012 up to January 31, 2015 at P100,000 as monthly rental inclusive of VAT.
ITEM 3 – LEGAL PROCEEDINGS
Cases filed for and against VMC are being handled by the Company’s In-house Counsels and by its External Counsels.
The External Counsels are Hilado Hagad & Hilado Law Offices, Gabionza De Santos & Partners, Mirano Mirano Mirano & Mirano Law Offices, Hechanova Bugay & Vilchez, Quiason Makalintal Barot Torres Ibarra & Sison, Zambrano & Gruba Law Offices, Manuel Lao Ong & Linus Abaquin Law Firm, Torres & Sy Law Office and Puyat Jacinto & Santos Law Firm.
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ITEM 4 – SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
Except for the matters taken up during the Annual Stockholders’ Meeting, there was no other matter submitted to a vote of security holders during the period covered by this report.
PART II – OPERATION AND FINANCIAL INFORMATION
ITEM 5 – MARKET FOR ISSUER’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Trading of VMC’s shares with the Philippine Stock Exchange (PSE) resumed on May 21, 2012 pursuant to the Order of the Securities and Exchange Commission (SEC) dated March 2, 2012 lifting the Order of Suspension of Trading of the shares of VMC.
The number of Stockholders on record and common shares outstanding as of August 31, 2013 stood at 5,480 and 2,297,414,418, respectively.
VMC has neither declared cash nor stock dividend for the three most recent crop years.
Top 20 Stockholders as of August 31, 2013
Top Name Citizenship No. of Shares Percentage (%) 1 PCD Nominee Corporation Filipino/Other Alien 1,481,447,973 64.4815% 2 Tanduay Holdings, Inc. Filipino 170,133,159 7.4052% 3 Narra Capital Investment Corporation Filipino 144,213,392 6,2770% 4 Global Business Bank, Inc. Filipino 67,458,871 2.9362% 5 Development Bank of the Philippines Filipino 63,156,612 2.7489% 6 Metropolitan Bank and Trust Company Filipino 56,925,724 2.4777% 7 Philippine Savings Bank Filipino 43,821,503 1.9073% 8 FEBTC TA #401-00012 Filipino 27,360,373 1.1908% 9 China Banking Corporation Filipino 19,392,096 0.8440% 10 Philippine Veterans Bank Filipino 18,268,442 0.7951% 11 AB Capital & Invest. Corp.-Trust & Invest Div. Filipino 11,712,681 0.5098% 12 North Negros Marketing Co., Inc. Filipino 10,173,459 0.4428% 13 East Asia Capital Corproation Filipino 9,408,853 0.4095% 14 Bank of the Philippine Islands Filipino 5,658,157 0.2462% 15 Bank of Commerce Filipino 5,219,555 0.2271% 16 Liberty Trading/Navigation Co. Filipino 4,772,380 0.2077% 17 FEBTC TA #401-00008 Filipino 4,159,990 0.1810% 18 ALRAC Filipino 4,050,208 0.1762% 19 First E-Bank Corproation Filipino 3,832,214 0.1668% 20 Victorias Insurance Factors Corporation Filipino 3,456,975 0.1504%
ITEM 6 – MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF ACTION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
FINANCIAL CONDITION as of August 31, 2013 in comparison with August 31, 2012
1. Cash and cash equivalent. The reduction by P223 million (20%) is due to decrease in cash provided by operating activities by P904 million, increase in cash provided by investing activities by P 2.4 billion and increase in cash used in financing activities by P 1.9 billion.
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2. Trade and other current receivable increased by P313 Million (235%) mainly due to increase in receivables coming from trade by P322 million (242%), decrease in advances to suppliers by P3 million (35%) and decrease in other receivables by P5 million (62%), respectively.
3. Inventories increased by P40 million (11%) mainly due to increase in raw sugar inventory by P73 million (121%) attributed to the decrease in volume sold for the year ended August 31, 2013. Unbilled tolling cost increased by P9 million (12%). However, alcohol inventory and materials and supplies decreased by P23 million (92.5%) and P7 million (4%), respectively. Additional allowance to reduce materials and supplies to NRV amounting to P22 million was provided during the year.
4. Prepayment and Other Current Assets decreased by P11 million (27%), which pertains to the decrease in input taxes from purchases of goods and services.
5. Property Plant and Equipment . New additions for the period ending August 31, 2013 represent additions to machinery and equipment and projects under construction of P6 million and P316 million, respectively.
Certain projects under construction were completed during the period ending August 31, 2013 totaling to P434 million and were appropriately transferred to machinery and equipment (P411 million), land and improvement (P11 million) and buildings and structures (P12 million).
6. Investment Properties increased by P436 million mainly due to fair value change as a result of appraisal conducted by independent appraiser per appraisal report dated August 31, 2013.
7. Other Noncurrent Asse ts decreased by P1.7 billion (97%) mainly due to settlement of the remaining restructured loans.
8. Trade and other current payables decreased by P20 million (5%) mainly due to decrease in interests on bank loans of P55 million (100%) as a result of settlement of remaining restructured loans.
9. Income tax payable for the period ending August 31, 2013 amounted to P64 million from P89 million of the year ending August 31, 2012.
10. Long-term debts - net of current portion decreased by P2 billion due to settlement of the remaining restructured loans.
11. Deferred Tax Liabilities - net went up to P569 million (by P35 million, 6%) mainly due to the 30% tax effect of increase in unrealized fair value gain on investment properties and additional provision on sugar liabilities.
12. Retirement benefit obligation went down to P9 million (by P80 million, 90%) due mainly to the lump-sum and one-time payment of the pension availed by the pensioners in lieu of the regular monthly pensions.
13. Total Stockholder’s Equity has now a balance of P2.804 billion, the increase amounting to P986 million (54%) is due to the net income for the period ending August 31, 2013 of P719 million. Also, equity increased as a result of additional conversion of Convertible Notes and transfer to equity of accrued interest on convertible notes of transferee holders and revaluation increment on property, plant and equipment amounting to P136 million and P 130 million, respectively, during the current year.
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FINANCIAL RATIOS Financial Ratios August 31, 2013 August 31, 2012
Current Ratio 4.23 2.00 Debt to Equity Ratio 1.56 3.56 Asset to Equity Ratio 2.56 4.56 Interest Coverage Ratio 4.74 3.28 Return on Equity 25.65% 30.59%
Current Ratio: Total current assets divided by total current liabilities.
This ratio is a rough indication of a company's ability to service its current obligations. Generally, the higher the current ratio is, the greater the "cushion" between current obligations and a company's ability to pay them.
Debt Equity Ratio: Total liabilities divided by total stockholders’ equity.
This ratio expresses the relationship between capital contributed by creditors and that contributed by owners. It expresses the degree of protection provided by the owners for the creditors. The higher the ratio, the greater the risk being assumed by creditors. A lower ratio generally indicates greater long- term financial safety.
Asset-to-Equity Ratio: Total assets divided by total stockholder’s equity.
The asset-to-equity ratio shows the relationship of the total assets of the company to the portion owned by shareholders, also known as owners’ equity. The asset-to-equity ratio indicates a company's leverage, the amount of debt used to finance the company.
Interest coverage ratio: The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period.
A ratio used to determine how easily a company could pay interest on outstanding debt.
Return on Equity: Net income divided by total stockholders’ equity.
This ratio reveals how much profit a company earned in comparison to the total amount of shareholders equity found on the balance sheet. A business that has a high return on equity is more likely to be one that is capable of generating cash internally. For the most part, the higher a company’s return on equity compared to its industry, the better.
RESULTS OF OPERATION FOR THE PERIOD ENDING AUGUST 31, 2013
Total consolidated revenues of P4.4 billion for the period ending August 31, 2013 is lower by P249 million (5%) compared to comparative period of previous year. The reasons for the decrease are as follows:
VICTORIAS MILLING CO., INC. (Parent Company)
• REVENUES
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1. Raw sugar revenues decreased for the period ending August 31, 2013 by P311 million (10%) against comparative period last year.
The decrease in raw sugar revenue resulted from the decrease on raw sugar sold by 331,400 lkg (14%) for the period ending August 31, 2013 against the same period last year.
Average raw sugar price to date for the period ending August 31, 2013 and August 31, 2012 is P1,260 per lkg and P1,284 per lkg, respectively.
2. Tolling revenues for the periods ending August 31, 2013 and 2012 remain the same at P1.4 billion.
Average tolling fee for the period ending August 31, 2013 is P215.79 per lkg which is slightly lower than the average tolling fee of P216.06 per lkg for the period ending August 31, 2012.
3. Molasses revenues increased by P78 million (61%) for the period ending August 31, 2013.
Molasses sold for the period ending August 31, 2013 totaled to 37,684 MT with an average price of P5,462 per MT compared to period ending August 31, 2012 of 40,834 MT with average price of P3,134 per MT.
4. Distillery operations revenues decreased by P2 million for the period ending August 31, 2013 against comparative period last year.
VMC distillery started its testing operation last November 2011. The reduction in revenues is mainly due to delayed start-up during the year to give way to the upgrading of its facilities that would improve quality of alcohol produced and meet the required quality standard of the customers.
5. Engineering operations pertaining to outside jobs, however operations were discontinued early last year thereby no revenues were recognized for the period ending August 31, 2013.
VICTORIAS MILLING COMPANY, INC. AND SUBSIDIARIES
BREAKDOWN OF REVENUES For the period ended August 31, 2013 and 2012 and 2011 (Amounts in Thousands)
August 31, 2013 August 31, 2012 August 31, 2010 To Date To Date To Date REVENUES
Raw Sugar P 2,746,646 P 3,057,389 P 3,069,440 Tolling Fee 1,366,154 1,371,477 818,057 Molasses 205,834 127,960 257,070 Alcohol Sales 57,149 59,411 - Engineering contracts - 12,259 27,759 Refined Sugar Sale - - 5,380 Others 38,607 35,511 39,911
P 4,414,390 P 4,664,007 P 4,217,617
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OTHER INCOME
Other income for the period ending August 31, 2013 increased by P693 million (743%) compared to last year. This is mainly due to recognition in the current year of fair value gain on investment property and gain on extinguishments of a liability by P427 million and P279 million, respectively.
COST OF GOODS SOLD AND MANUFACTURED
Total Cost of Goods Sold decreased by P405 million (13%) for the period ending August 31, 2013 against comparative period last year. The decrease is due to the following reasons:
1. On the raw sugar operations for the period ending August 31, 2013, cost of raw sugar manufactured and sold decreased by P389 million (18%) compared to the same period of last year. To-date average cost per lkg of raw sugar manufactured and sold for the period ending August 31, 2013 is down by 10% against comparative period last year.
The refining cost of sugar decreased by P11 million (1%) for the period ending August 31, 2013 against comparative period last year. The average refining cost per lkg for the period ending August 31, 2013 is down by 3% against comparative period last year.
The decrease in average cost of production is attributed to increased efficiency of the manufacturing plant.
2. Engineering operations pertaining to outside jobs were discontinued by the management last year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
1. Selling and marketing expenses for the period ending August 31, 2013 increased by P6 million (12%). This has resulted from the increase in rental by P7 million, taxes and licenses by P2 million, repairs and maintenance by P1 million, other selling expenses by P5 million and the decrease in freight and handling by P10 million.
2. General and administrative expenses for the period ending August 31, 2013 increased by P652 million. This is mainly due to the increase in provision for sugar claims and recognition of impairment loss by P528 million and P100 million, respectively.
OTHER EXPENSES For the period ending August 31, 2013, other expenses decreased by P4 million. This is mainly due to decreased amortization of discount on provisions by P6 million and increased trust fees by P2 million.
NET INCOME
Net income for the period ending August 31, 2013 increased by P165 million (30%) compared to the same period last year. The said increase is mostly attributed to higher performance from sugar operations due to increased efficiency in the manufacturing plant, fair value gain on investment property and gain on extinguishments of sugar claims.
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Operating Performance
Years Ended August 31 (in Millions) Major Production Parameters 2013 2012 2011 Tons Cane Milled 3.209M 3.100 M 3.116 M Raw Sugar Production (LKg) 7.022M 6.400 M 5.709 M Refined Sugar Production (LKg) 6.032M 6.032 M 4.382 M Milling Recovery 2.19 2.06 1.83 (LKG/TC)
For CY 2012-2013, VMC milled a total of 3,208,589 tons cane for 37 weeks of operation, exceeding last year’s volume by 3.5%. This year’s cane volume milled is the highest for the last five years. Raw sugar production rose to 7,021,819 Lkg, 9.7% higher than the previous year’s volume and the highest recorded annual production. This can be attributed to better quality of canes, which the Company’s continually upgraded manufacturing facility has translated to an annual average LKG/TC of 2.19, the highest raw sugar recovery in the province.
Refined sugar production of 6,269,597 Lkg surpassed target of 6.0 Million Lkg and last year’s volume of 6.032 Million Lkg. Lesser stoppages due equipment breakdown and various improvements made on Refinery’s process equipment contributed in the efficient and productive Refining operations.
PLANS, COMMITMENTS, AND EVENTS THAT HAVE MATERIAL IMPACT ON THE ISSUER’S LIQUIDITY
There are no: • Known trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the Company’s material liquidity problem; • Known trends, events or uncertainties that have had or that are reasonably expected to have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations; • Significant elements of income or loss that arose from continuing operations; and • Seasonal aspects that had material effect on the financial condition or results of operations.
COMMITMENTS FOR CAPITAL EXPENDITURES THAT WOULD ADDRESS PAST PROBLEMS AND HAVE AN IMPACT ON FUTURE OPERATIONS:
For crop year 2012-2013, the Company has allocated a total capital expenditure budget of P571.5 Million, covering major upgrading and modernization projects for raw sugar production budgeted at P 240 Million, plus new projects estimated at P231.5 Million intended to upgrade equipment and facilities, and replacement of defective machineries and equipment to further enhance operational performance and efficiencies. It also includes the budget for the installation of three (3) air pollution control devices (APCD) this crop year on the remaining three (3) boilers with no APCDs estimated at P100.0 Million, in response to the Company’s commitment on environmental compliance with government standards.
The major upgrading and modernization projects for raw sugar production are intended to strengthen the Company’s competitiveness in the sugar industry and as part of our preparation for the full implementation of the ASEAN Free Trade Agreement on sugar tariffs on 2015.
All of the aforementioned capital expenditure requirements are sourced out from the funds generated from operations.
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VICTORIAS MILLING CO., INC. MAJORITY-OWNED SUBSIDIARIES
VICTORIAS FOODS CORPORATION (VFC)
1. Sales Growth - August 2013 – 8% and August 2012 – (9%)
Sales for the year ended August 31, 2013 amounting to P33,449,757 is higher than previous period sales amounting to P30,958,735 (with comparative figure for the year ended August 2011 amounting to P33,859,217). The increase in sales was significantly attributed to increase in sales of canned fish and processed meat due to good marketing effort and established supply. Sale of canned fish reached to 632,735 cans as compared with previous period of 599,600 cans. Sale of processed meat reached to 25,315 kilos as compared with previous period of 24,269 kilos.
2. Net Loss for the fiscal year
Net loss reported from September 2012 to August 2013 amounting to (P5,514,550) is higher than the net loss of comparative period ending August 31, 2012 amounting to (P4,395,984). The is largely the impact of increase in operating expenses by P3,036,041resulting from from increase in retirement charges and professional fees arising from quarterly examination of financial statements and legal assistance for tax cases.
3. Net Loss Rate - August 2013 – (16%) and August 2012 – (14%)
For the year ended August 2013, total sales of P33,449,757 generated a net loss amounting to P5,514,550 compared to previous year total sales of P30,958,735 which generated a net loss of P4,395,984.
4. Return on Investment - August 2013 – (6%) and Feb 2012 – (6%)
Total assets for the year ended August 2013 amounting to P91,016,621 incurred a net loss of (P5,514,550) while for the year ended August 2012 total assets is P76,323,552 incurred a net loss of (P4,395,984).
5. Current Ratio – August 2013 – 12.12 and August 2012 – 20.14
Current assets for the year ended August 2013 amounted to P52,282,292 and current liabilities amounted to P4,312,489. For the previous period on the year ended August 2012 current assets is reported at P49,404,491 and current liabilities is reported at P2,452,659. This decline in the current ratio is attributed to decrease in cash and cash equivalents with payment on severance pay to previous general manager and other increases in cost incurred particularly audit fees and employees benefits.
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VICTORIAS FOODS CORPORATION (VFC)
Account description Status Location Cold Storage, Bandsaw and Packing Tables Operating Victorias Fish Cutter and Fish Washing System Operating Victorias Primary Exhauster and Can Washer Operating Victorias Can Vacuum Seaming Machine Operating Victorias Retort and Labeling Machine Operating Victorias Walk-in Chillers Operating Victorias Electric Hoist and Hog trolleys Operating Victorias Laboratory equipment Operating Victorias Deepwell water supply system Operating Victorias Steam generator Operating Victorias Bank house/control panel Operating Victorias Food processing plant/bodega Operating Victorias
VICTORIAS AGRICULTURAL LAND CORPORATION (VALCO)
1. Sales Growth - August 2013 – 5% and August 2012 – (23%)
Sales for the year ended August 31, 2013 amounting to P1,523,675 is higher than the P1,450,145 sales of comparative period last year (with comparative figure for the year ended August 2011 amounting to P1,888,057). Sales growth for this year is due to the increase in interest income received.
2. Net Loss for the fiscal year
Net loss reported from September 2012 to August 2013 amounting to (P6,446,711) shows a drop in income compared with previous period net income amounting to P509,145. This is largely the impact of loss arising from the change of the Fair Value of Investment Properties amounting to P10,250,450.
3. Net Income Rate - August 2013 – (423)% and August 2012 – 35%
For the year ended August 2013, total sales of P1,523,675 generated a net loss amounting to (P6,446,711) compared to previous year total sales of P1,450,145 which generated a net income amounting to P509,145.
4. Return on Investment - August 2013 – (6)% and August 2012 – 1%
Total assets for the year ended August 2013 amounting to P108,687,255 incurred a net loss of (P6,446,711) while for the year ended August 2012 total assets is P118,001,210 incurred a net income of P509,145.
5. Current Ratio – August 2013 – 13.50 and August 2012 – 14.44
Current assets for the year ended August 2013 amounted to P28,099,705 and current liabilities amounted to P2,080,968. For the previous period on the year ended August 2012 current assets is reported at P27,047,315 and current liabilities is reported at P1,873,077. This decline in the current ratio is attributed to the increase of related party transactions worth P111,717 in which previously it was P12,682.
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VICTORIAS AGRICULTURAL LAND CORPORATION (VALCO)
LOT no. Status Location 5 Operating Victorias City 42-B Operating Victorias City 42-D Operating Victorias City 64 Operating Victorias City 65 Operating Victorias City 66 Operating Victorias City
VICTORIAS GOLF AND COUNTRY CLUB, INC. (VGCCI)
1. Sales Growth - August 2013 – (54)% and August 2012 – 4%
Sales for the year ended August 31, 2013 amounting to P4,915,120 is lower than previous period sales amounting to P10,844,981 (with comparative figure for the year ended August 2011 amounting to P10,436,253). Sales decline for this year is due to decrease in playing fees by P2,979,509 or 91% that resulted mainly from one-time purchase of coupons by Koreans last 2012.
2. Net Loss for the fiscal year
Net loss reported from September 2012 to August 2013 amounting to (P3,903,965) shows a drop in income compared with previous period net income amounting to P236,112 (with comparative figure of net loss amounting to (P3,005,467) incurred for the year ended August 2011). Net income decreased due to increase of tournament expenses and depreciation of machineries that were purchased this year.
3. Net Income Rate - August 2013 – (79)% and August 2012 – 2%
For the year ended August 2013, total sales of P4,915,120 generated a net loss amounting to (P3,903,965) compared to previous year total sales of P10,844,981 which generated a net income amounting to P236,112.
4. Return on Investment - August 2013 – (4)% and August 2012 – 1%
Total assets for the year ended August 2013 amounting to P99,881,670 incurred a net loss of (P3,903,965) while for the year ended August 2012 total assets is P103,806,835 incurred a net income of P236,112.
5. Current Ratio – August 2013 – 32.80 and August 2012 – 31.37
Current assets for the year ended August 2013 amounted to P9,481,329 and current liabilities amounted to P28,902,948. For the previous period on the year ended August 2012 current assets is reported at P9,050,293 and current liabilities is reported at P 28,847,784. The increase in current ratio is due to increase of other assets (input taxes) as the company purchased machineries. Also, due to decrease of advances from related party transactions.
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VICTORIAS GOLF & Country Club, Inc.
Account Description Status Location
Tractor Ford Operating Victorias City Gang Mowers Operating Victorias City Land-TCT178442 Operating Victorias City Shed (Gazebo) Operating Victorias City Clubhouse Pavilion Operating Victorias City Bag Room Operating Victorias City Golf Course Operating Victorias City Bridges Operating Victorias City
VICTORIAS QUALITY PACKAGING CORPORATION (VQPC)
The Company ceased its business operations on July 16, 2012 and is in the process of liquidation. Consequently, it incurred net losses amounting to P 2,393,891 and P7,038,921 for the periods ended August 31, 2013 and 2012. Expenses for the current year decreased by P9 million (69%) as compared to last year and mainly pertain to impairment losses on the Company’s property, plant and equipment and other assets.
As of August 31, 2013, the Company had a total assets of P3,023,078, 47% lower than last year while the Company’s capital deficiency as of August 2013 is P17,889,864, which increased by 17% as against its capital deficiency as of August 2012 of P15,345,973.
CANETOWN DEVELOPMENT CORPORATION (CDC)
1. Sales Growth - For the years ended August 2013 – (5%) and August 2012 –5%
Sales for the period ended August 2013 amounted to P5,045,220 as compared to the P5,318,961 sales of prior year. The decrease in sales is mainly due to decreased sale of memorial and subdivision lots in the current year.
2. Net income growth - For the years ended August 2013 – 123% and August 2012 –(87%) Operations for the current year reported a net income of P26,808,472 which is 123% higher as compared with last year’s net income. The increase is mainly due to the fair value gain on investment property as a result of appraisal of the Company’s property in the current year.
3. Net income rate - For the years ended August 2013 – 531% and August 2012 –4% For the current year, total sales of P 5,045,200 generate a total income of P 26,808,472 as compared to previous period’s total sales of P 5,318,961 that generated a net income of P 216,004. Total expenses and other income for the years ended 2013 and 2012 are P4,291,166, P39,050,087 and P4,238,075, P561,497, respectively.
4. Return on Investment - For the years ended August 2013 – 11% and August 2012 –.11%
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As of August 31, 2013, total assets of the Company is P 246,805,935 and generated a net income of P26,808,472. In the preceding year, the Company’s total assets is at P203,998,345 with net income of P 216,004.
5. Current Ratio - For the years ended August 2013 – .70 and August 2012 – .69 Current assets for the period ended August 2013 amounted to P43,843,281 and current liabilities amounted to P62,834,077. For the previous period ended August 2012 current assets is reported at P39,607,679 and current liabilities is reported at P58,417,644. The increase in current ratio is due to the increased cash provided by the Company’s financing activities and increase in real estate held-for-sale.
ITEM 7 – FINANCIAL STATEMENTS
(Please see attached duly signed Company’s Consolidated Financial Statements as of August 31, 2013, together with the notarized Statement of Management’s Responsibility, which was prepared by Manabat Sanagustin & Co. (KPMG), the Company’s external auditor for crop year 2012-2013, as Exhibit “A“ .
ITEM 8 – CHANGES IN & DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no disagreement with the external auditor on accounting, financial concerns, and disclosures in the Financial Statements, which is attached hereto as Exhibit “A”.
INFORMATION ON INDEPENDENT ACCOUNTANT
For Crop Year 2012-2013, the services of the accounting firm Manabat Sanagustin & Co. (KPMG), with office address at 9 th Floor, KPMG Center, Ayala Avenue, Makati City, 6787, Philippines, was engaged to be the Company’s External Auditors, in compliance with the Company’s Code of Corporate Governance that provides that the Company’s External Auditor shall be rotated or the handling partner shall be changed every five (5) years or earlier.
EXTERNAL AUDIT FEES
Audit and Audit-Related Fees
The aggregate fees billed for each of the last two (2) fiscal years for professional services rendered by the external auditor for the audit of the Company’s annual financial statements or services that are normally provided by the external auditor in connection with statutory and regulatory filings or engagement for those fiscal years were:
CY 11-12 – P1,870,000.00 - net of VAT CY 12-13 – P2,840,000.00 – net of VAT
Tax Fees
There has been no fee billed for the last two (2) fiscal years for professional services rendered by the external auditor for tax accounting, compliance, advice, planning and any other form of tax services.
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Audit Committee’s Approval Policies and Procedures for the Above Services
The Audit Committee’s approval policies and procedures for the above services are as follows:
1. The Audit committee invites bidders for the external audit engagement for preliminary evaluation. 2. The Committee then presents to the bidders, the corporate profiles of the companies to be covered by the audit. 3. The Committee likewise presents its expectations on the deadline for the completion of the Audit and filing of the audited financial statement. 4. The bidders are required to make its corporate profiles, list of experiences, and proposed audit engagement fee. 5. The Committee evaluates the proposals and makes a choice. 6. The choice is announced during the Stockholder’s meeting.
PART III – CONTROL AND COMPENSATION INFORMATION
ITEM 9 – DIRECTORS AND EXECUTIVE OFFICERS OF THE ISSUER
VMC BOARD OF DIRECTORS
During VMC’s Annual Stockholder’s Meeting held on February 5, 2013, the following were elected as members of the VMC Board of Directors to serve as such from February 5, 2013 and until their successors shall have been duly elected and qualified-
1. Wilson T. Young , age 57, Filipino, is currently the Chairman of the Board of Directors of VMC, the Director of L.T. Group, Inc., Eton Properties Philippines, Inc. and University of the East; Chief Operating Officer of Tanduay Distillers, Inc. and Flor De Caña Shipping, Inc.; Director & COO of Asian Alcohol Corporation and Absolut Distillers, Inc. Currently, he is also the Trustee of the Philippine Airlines Foundation, Mithing Pangarap Foundation, Inc. and North Foundation Inc. He is also the Project Director of Tan Yan Kee Foundation, Inc., the founding member of the Center for Alcohol Research and Development and member of the Makati Business Club and the Chairman and Incorporator of the Total Credit Cooperative.
2. Jose M. Chan, Jr. , age 56, Filipino, is the Vice Chair of VMC’s Board of Directors. He is likewise currently the Senior Vice President – Deputy Head of Metropolitan Bank and Trust Company (Metrobank), which position he has maintained since 2002. He is also the Director of Orix Metro Leasing.
3. Hubert D. Tubio , age 59, Filipino, is currently the President and Chief Operating Officer of VMC. He is the President of the Philippine Sugar Research Institute Foundation, Inc. (PHILSURIN).
4. Enrique T. Chua , age 67, Filipino, and connected with Fortune Tobacco Corporation since 1969. He is currently a member of the Board of Directors of A Plus Credit Corp. and Creditline Financing Company.
5. Brian Keith F. Hosaka , age 42, is one of the founding partners of Paner Hosaka & Ypil Attorneys-at-Law. He is presently the Corporate Secretary and Director of VMC.
6. Anna Rosario V. Paner , age 42, is VMC’s Chair of the Legal Committee. She has been a private law practitioner since 1996 and is one of the founding partners of Paner Hosaka & Ypil Attorneys-at-Law. She currently chairs Victorias Foods Corporation (VFC), Canetown Development Corporation (CDC), Victorias
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Executive Officers of VMC
1. Atty. Anna Rosario V. Paner, age 42, Filipino, a Bachelor of Laws degree holder and presently the Managing Director and CEO of the company.
2. Hubert D. Tubio, age 59, Filipino, a professional Certified Public Accountant and is currently the President and Chief Operating Officer of VMC. He is the President of the Philippine Sugar Research Institute Foundation, Inc. (PHILSURIN).
3. Arcadio S. Lozada, Jr. , age 59, Filipino, is currently occupying the position of Vice President for Manufacturing. A licensed mechanical engineer with a wide background in sugar manufacturing and management, he started his career with VMC in 1977 and, thereafter, occupied various positions in companies, particularly Ramu Sugar Ltd in Papua New Guinea as its Shift Engineer, ARCAM and Co. as the latter’s Chief Engineer, Central Azucarera de Tarlac as the Engineering Manager and Bronzeoak Philippines, Inc. as its Technical Manager. He returned to VMC and has been serving VMC since August of 2010.
4. Teresita V. Ilagan , age 54, Filipino, is the Creditor-Appointed-Controller of VMC. She is concurrently Director and Treasurer of various VMC subsidiaries, particularly Canetown Development Corporation and Victorias Agricultural Land Corporation, Victorias Food Corporation and Victorias Golf & Country Club Inc. as the Assistant Treasurer and the Liquidator of Victorias Quality Packaging Company, Inc. She is a Certified Public Accountant and a Masters in Business Administration degree holder.
5. Atty. Jerry T. Opinion, age 60, Filipino, a Certified Public Accountant, is the Chief Finance Officer of VMC. He has been connected with the Southeast Asian Fisheries Development Center as the Head for Administration and Finance, Panay Electric Company as the Vice President for Finance, Commission on Audit (Philsucom-Nasutra) as Auditor V.
To the knowledge and/or information of the Corporation, the above elected members of the Board of Directors or Corporate Officers are not, presently or during the last (5) years, involved or have been involved in any legal proceedings affecting/involving themselves and/or their property before any court of law or administrative body in the Philippines or elsewhere and have not been convicted by final judgment of any offense. The said persons mentioned above are not related to each other in any way.
There is no person who is not a corporate officer of the Company who is expected to make a significant contribution to the business. The Company, however, engages the services of consultants. As of August 31, 2013, the Company had 52 consultants and none under special contract.
There were no transactions during the last two years or any proposed transactions, to which the Company was or is to be a party, in which any director or officers, any nominee for election as a director, any security holder or any member of the immediate family of any of the person mentioned had or is to have a direct or indirect material interest.
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Mr. Arcadio S. Lozada, Jr. was appointed as Vice-President for Manufacturing on August 1, 2010 to oversee the manufacturing operations and to ensure efficiency of the same. Ms. Judy Anne G. Tiongco was hired as Corporate Communications Director on October 15, 2012 and Executive Assistant to the Chairman on May 5, 2013. As Corporate Communications Director, Ms. Tiongco is responsible for investor relations, public relations, corporate social responsibility and brand management. She is also responsible for the coordination of activities between the office of the Chairman and VMC’s internal departments; as well as monitoring of the progress and follow through of matters taken up in the VMC Executive Committee Meetings and Board of Directors’ Meetings being an Executive Assistant to the Chairman.
Change in Control
The conversion into equity of P1,528,674,469 worth of debt of VMC to creditor banks pursuant to the Approved Rehabilitation Plan resulted to change in control effective October 9, 2002, whereby the creditor banks acquired 69% of the ownership of VMC while the ownership of the existing stockholders prior to the conversion was reduced to 31%. As of June 30, 2013, the following are VMC’s principal stockholders: Premier Network International, Ltd - 27.95%; Tanduay Holdings, Inc. – 7.405%; Philippine National Bank – 7.050%; and Narra Capital Investments Corp. – 6.277%.
ITEM 11 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Record and Beneficial Owners and Management
The following are known to VMC to be directly or indirectly the record or beneficial owner of more than five (5) percent of registrant’s voting securities (VMC has only one class of voting security, i.e. common shares) as of August 31, 2013:
TITLE of CLASS Name & Address of Record Owner and Relationship Citizenship Number of Percentage with Issuer Shares Held (%) Common PCD Nominee Corporation – Stockholders (The Filipino/Other 1,481,447,973 64.4815% Premier Network International, Ltd owns 642,173,474 Alien shares or 27.951% of the issuer’s total outstanding capital stock as of August 31, 2013. Common Tanduay Holdings, Inc. – Stockholder Filipino 170,133,159 7.405% Common Philippine National Bank Filipino 161,978,995 7.050% Common Narra Capital Investment Corporation - Stockholder Filipino 144,213,392 6.277%
Security Ownership of Management as of August 31, 2013
TITLE of Class Name Citizenship No. of Shares Percentage (%) Common Anna Rosario V. Paner–Managing Director & CEO Filipino 1,003 0.000% Common Hubert D. Tubio - President and COO Filipino 1,631 0.000% Common Arcadio S. Lozada, Jr. - VP for Manufacturing Filipino 2,182 0.000%
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ITEM 12 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Atty. Brian Keith F. Hosaka is the nephew of the wife of Dr. Emmanuel T. Velasco.
ITEM 13 – EXHIBITS
1. EXHIBIT “A” – Consolidated Audited Financial Statement as of August 31, 2013 2. EXHIBIT “B” – Reports on SEC Form 17-C
ITEM 14 – REPORTS ON SEC FORM 17-C (EXHIBIT”B”)
1. Reported on July 4, 2013, VMC received a copy of the Certificate of Filing of Amended of Articles of Incorporation dated July 3, 2013 issued by the Securities and Exchange Commission.
2. Reported on May 24, 2013, the Board of Directors of VMC in its regular meeting on May 24, 2013, has approved the changes in the names of certain Board Committees.
3. Reported on April 19, 2013, the Board of Directors in its meeting on April 19, 2013 approved to pre-pay on May 31, 2013, the Corporation’s restructured loans in the amount of Seven Hundred Nine Million Four Hundred Forty Seven Thousand Fifty Nine Pesos and Thirty One Centavos (Php709,447,059.31), and Three Million Two Hundred Forty Thousand Six Hundred Sixty Five Dollars and Forty Six Cents (USD3,240,665.46) in accordance with the Debt Restructuring Agreement (DRA), leaving a debt balance (convertible notes) in the amount of Two Billion Six Hundred Eighty Seven Million Seven Hundred Thirty Three Thousand Sixty One Pesos (Php2,687,733,061.00), inclusive of interest as of June 1, 2013.
4. Reported on February 5, 2013, VMC’s Annual Stockholders’ Meeting held at the New Function Room, Manila Golf and Country Club, Harvard Road, Forbes Park, Makati City, where Members of the Board were elected.
5. Reported on January 28, 2013, the withdrawal of Director Norberto B. Capay of his acceptance of his nomination as a member of the Board of Directors for the February 5, 2013 Annual Stockholders’ Meeting to represent the existing stockholders.
6. Reported on January 25, 2013, the withdrawal of Mr. Abelardo E. Bugay of his acceptance of his nomination as a member of the Board of Directors for the February 5, 2013 Annual Stockholders’ Meeting to represent the existing stockholders.
7. Reported on January 16, 2013, the disclosure on the outstanding shares of VMC before issuance of the certificates which was 2,024,616,452 and after issuance which was 2,297,474,418. 8. Reported on January 15, 2013, the disclosure relative to December 14, 2012 outstanding shares which was 2,024,616,452 before issuance and after issuance which was 2,297,474,418.
9. Reported on December 19, 2012, the Annual Stockholders’ Meeting of Victorias Milling Company, Inc. is on February 8, 2013, 8:00 o’clock in the morning, at the New Function Room, Manila Golf Club, Harvard Road, Forbes Park, Makati City.
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10. Reported on December 14, 2012, the Board of Directors in its meeting approved the conversion of P272,857,966 Convertible Notes into equity equivalent to 272,857,966 shares out of the Corporation’s P2,098,907,452 total Convertible Notes as of November 30, 2010, pursuant to the Debt Restructuring Agreement (DRA). The prepayment on January 15, 2013 of the Corporation’s restructured loans in the amount of One Billion Pesos (P1,000,000,000) in accordance with the DRA was approved. The Adoption of the Election Manual and the creation of the Election Committee for the 2013 Stockholders’ Meeting was likewise approved. Lastly, the approval of the nomination of members of the Board for the 2013 Annual Stockholders’ Meeting was made.
11. Reported on November 15, 2012, disclosure on Manifestation and Motion relative to the amendment of the Alternative Rehabilitation Plan (ARP) Section 21 of the Debt Restructuring Agreement (DRA) on the composition of the Board of Directors by allocating the Board seat previously reserved to the Joint Venture Partner as an additional Board seat for Creditors with Debt Conversion. (not in 17C format)
12. Reported on October 19, 2012, the Board of Directors during its regular meeting on even date designated Atty. Anna Rosario V. Paner as the Managing Director of VMC.
13. Reported on October 4, 2012, pursuant to Memorandum Circular No. 4, Series of 2012, the Audit Committee conducted an assessment of the Corporation’s performance for Crop Year 2011-2012 with a rating of 97.91%.
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------Forwarded message ------From:
Dear Sir/Madam:
We would like to inform you that as of DEC 17, 2013 07:54:02 AM today,
Reference Number: WLIST__2013000039154 Company Name: Victorias Milling Company, Inc. Disclosure Subject: Annual Report for fiscal year ended August 31, 2013 Status: APPROVED
Should you need further assistance, please e-mail us at [email protected].