ANNEX H
D. Management’s Discussion and Analysis or Plan of Operation
III. Profitability
1 Return on assets = Net profit
Total assets
2 Return on owner's equity = Net profit
Total equity
3 Earnings per share = Net profit Weighted average outstanding shares
FACTS (Based on Consolidated Balances):
( Amounts in Million Philippine Pesos )
March 31
2016 2015 2014 2013 FINANCIAL POSITION
Assets:
Quick assets* P 4,014.83 P 3,575.68 P 2,823.15 P 2,804.81 Current assets 4,227.41 3,804.40 3,046.21 2,946.82 Non-current asset 5,463.64 5,286.48 5,007.24 4,080.45 Total assets 9,691.05 9,090.88 8,053.45 7,027.27 Liabilities:
Current liabilities P 747.85 P 1,516.57 P 634.27 P 497.30 Non-current liabilities 722.42 55.48 880.92 865.42 Total liabilities 1,470.27 1,572.05 1,515.19 1,362.72 Equity:
Total equity P 8,220.78 P 7,518.83 P 6,538.26 P 5,664.55 • Attributable to owners of the
Parent Company 6,569.20 5,889.36 5,158.54 4,811.87 • Non-controlling interest 1,651.58 1,629.47 1,379.72 852.68 RESULTS OF OPERATIONS
Net Profit:
Operating profit P 1,151.02 P 1,005.59 P 829.30 P 905.19 Other income 232.22 222.65 201.62 158.67 Net profit before tax 1,383.24 1,228.24 1,031.93 1,063.86 Net profit after tax 1,224.90 1,078.16 902.82 890.86 • Attributable to owners of the
Parent Company 1,166.02 1,028.97 855.02 800.23 • Non-controlling interest 58.88 49.19 47.79 90.63 Other Comprehensive Income:
Other comprehensive income (P92.08) P 94.32 (P 137.61) P 96.14 Total comprehensive income 1,132.82 1,172.49 765.21 987.00
* Quick assets include Cash and Cash Equivalents, Trade and Other Receivables – net (under Current Assets), Available-for-Sale Financial Assets (under Current Assets) Financial Assets at Fair Value Through Profit or Loss and Short-term Investment which is included as part of Other Current Assets – net (see Note 13 of the Consolidated Financial Statements).
FACTS (Based on Consolidated Balances):
(Amounts in Philippine Peso and In Absolute Value Unless Otherwise Indicated )
March 31
2016 2015 2014 2013 OTHERS:
Weighted average number of
shares outstanding 16,449,038 16,468,304 16,477,023 16,477,023 Earnings per share P 70.89 P 62.48 P 51.89 P 48.57
Other Items
1. The current economic condition remains stable for both the clientele and educational institutions; however, certain economic factors are still expected to affect the sales, revenues and income from the Group’s operations.
2. There are no known events that would result in any default or acceleration of an obligation.
3. Other than those disclosed in the financial statements, there are no other known events that will trigger direct or contingent financial obligation that may be material to the Group.
4. On April 12, 2016, the FEU entered into a Share Purchase Agreement (SPA) with certain stockholders of Roosevelt College, Inc. (RCI) for the FEU’s initial acquisition of 80% of the total issued and outstanding shares of RCI, with the option for FEU to subsequently acquire up to 99.42% of RCI’s total issued and outstanding shares.
Other than the above transaction, there are no other material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Group with unconsolidated entities or other persons created during the reporting period.
5. The Group does not foresee any cash flow or liquidity problem in the next 12 months immediately following the report date. The Group and each of the component entities can easily meet all its commitments with its present reserves and expected earnings.
6. There are no significant elements of income or loss from continuing operations.
7. There are no sales of Unregistered or Exempt Securities including Recent Issuance of Securities Constituting an Exempt Transaction.
8. FEU Makati Campus, which was opened in June 2010 and strategically located in the heart of the Makati Central Business District, continues to offer undergraduate business courses. Further, FEU Makati offers graduate programs for business and also houses FEU’s Institute of Law.
For the fiscal year ending March 31, 2016, FEU Makati generates total Educational and Other Income amounting to P169.36 million. Efficient operations keep operating expenses at a manageable level of P20.56 million, which eventually yielded a net income of P148.80 million.
9. In January 2013, FEU established its new subsidiary FEU Alabang, Inc. The new subsidiary will operate as an educational institution and will serve the market within its vicinity and nearby communities. In November 2015, the formal ground-breaking for the future FEU-Alabang campus was held and actual construction is expected to follow.
As of March 31, 2016, FEU Alabang, Inc. has not yet commenced its normal operations and still in its pre-operating stage.
10. In 2015, EACCI, under the trade name FEU Institute of Technology (FEU Tech), started its operations with 3,017 students for the first term of S.Y. 2014-2015.
Currently (third term of S.Y. 2015 – 2016), it has a total enrollment of 5,032 students.
FEU Tech offers various engineering and information technology courses.
11. Seasonal aspects that have material effect on financial statements:
For FEU-Manila and FEU-Cavite, there are three school terms within a fiscal year:
Summer Term (April to May), First Semester (June to October) and Second Semester (November to March). The first semester has the highest number of students enrolled.
The second semester enrollment is approximately at 90% of the first semester’s enrollment, while the summer term is the lowest at an approximate of 33%. The maximum load, in terms of subject units, of a student during the summer term is only nine units compared to 21 to 24 units during the first and second semesters.
For the FEU Institute of Technology, there are three regular terms in a fiscal year:
First Term (July to October), Second Term (October to February) and Third Term (February to June).
The tuition fee increase, if any, usually takes effect during the first semester of a particular school year. Thus, old rates are followed during the summer term while new rates are applied during the first and second semesters. Since the first quarter is from April to June, the resulting income for the first quarter is at the lowest among the four quarters of the fiscal year.
Starting S.Y. 2016 – 2017, however, the University’s academic year will start in August each year. Accordingly, fiscal will also change from April to March to June to May.
12. The K-12 program of the government is anticipated to have an adverse effect on enrollment, particularly on S.Y. 2016-2017. With the enhancement of the current 10- year basic education program, high school graduates need to undergo the senior high school program for two years starting S.Y. 2016-2017 before being able to move on to the college level. With this, college enrollment is expected to drastically decrease for the next five years especially from S.Y. 2017-2018 to S.Y. 2019-2020. Enrollment levels are expected to normalize only on S.Y. 2021-2022.
To cushion the expected impact of K-12, FEU had organized a new subsidiary to offer and conduct enhanced basic education programs, including junior and senior high school, starting on S.Y. 2016-2017. On June 2014, FEU High School, Inc. was incorporated and registered with the Philippine Securities and Exchange Commission with the primary purpose of offering pre-school, grade school and high school education programs and various technical and vocational education and training programs.
With EACCI, now in full operations as an educational institution, the Group is confident of not only maintaining the quality and high standards of its service offerings, but continuing its development for further academic excellence.
13. The Group identifies its operating segments as its three major lines of business namely education, real estate and investment activities.
Also, the Group reports geographical segments in which FEU campuses are located.
(Amounts in Thousand Philippine Peso) Operating Segments by Line of Business:
Real Estate
Education Rental
Sale of
Properties Investment Total Revenues P 2,918,585 P 230,524 P - P 171,950 P3,321,059 Costs and operating
expenses 1,877,190 77,307 - 705 1,955,202
Operating income P 1,041,395 P 153,217 P - P 171,245 P1,365,857
Assets P 3,854,737 P 2,543,006 P 124,476 P 3,522,186 P 10,044,405
Liabilities 1,482,130 35,839 - 2,479 1,520,448
Operating Segments by Geographical Location:
Manila Makati Cavite Total Revenues P 3,059,359 P 169,362 P 92,338 P3,321,059 Costs and operating
expenses 1,880,909 20,558 53,735 1,955,202
Operating income P 1,178,450 P 148,804 P 38,603 P 1,365,857
Assets P 9,844,762 P 97,484 P 102,159 P 10,044,405
Liabilities 1,442,718 67,161 10,569 1,520,448
(Amounts in Thousand Philippine Peso)
Reconciliation of Segment Information to Financial Information in the Consolidated Financial Statements:
Amounts per Segment
Reconciling Items
Amounts per Consolidated Financial Statements
Revenues P 3,321,059 (P 254,715) P 3,066,344
Costs and operating expenses 1,955,202 (39,873) 1,915,329
Operating income P 1,365,857 (P 214,842) P 1,151,015
Assets P 10,044,405 (P 353,357) P 9,691,048
Liabilities 1,520,448 (50,181) 1,470,267
PROPERTY LEASED BY FEU FROM FRC:
Annual Rental Contract Date
Gymnasium Two (2) storey building made of concrete materials located at 8,575,884.48 April 1, 2015 to
R. Papa St., Sampaloc, Manila plus applicable VAT March 31, 2025
subject to 5%
escalation yearly
Athletes' Quarters Ground floor (234.44 sq. meters) of a five (5) storey building 620,328.24 April 4, 2015 to made of concrete materials located at P. Paredes corner plus applicable VAT November 30, 2019
S.H. Loyola Streets, Sampaloc, Manila subject to 5%
escalation yearly
Athletes' Quarters Portion of 2nd floor (790 sq. meters) of a five (5) storey building 1,896,000.00 December , 2009 to made of concrete materials located at P. Paredes corner plus applicable VAT November 30, 2019
S.H. Loyola Streets, Sampaloc, Manila subject to 5%
escalation yearly
FEU Makati Campus Parcel of land (2,186 sq. meters) located at the Makati Central 8,133,969.48 December 1, 2015 to Business District bounded by Sen. Gil Puyat Avenue, plus applicable VAT May 31, 2041
Malugay Street and Geronimo Street Makati City. subject to 5%
escalation yearly
FEU Fern Bookstore Portion of Ground floor (48 sq. meters) of a five (5) storey building 99,504.00 February 11, 2015 to made of concrete materials located at Sampaguita Avenue, plus applicable VAT January 10, 2017
Barangay Pason Tamo, Quezon City. subject to 5%
escalation yearly
Computer Laboratory Portion of Ground floor (292.74 sq. meters) of Nursing Building 1,756,440.00 June 1, 2010 to made of concrete materials located at FEU Manila Campus plus applicable VAT May 31, 2010
subject to 5%
escalation yearly
FEU Manila Buildings:
Education Building Eight (8) storey building made of concrete materials located at 56,506,555.68 July 1, 2015 to FEU Manila Campus, Nicanor Reyest St., Manila plus applicable VAT December 31, 2015 Nursing Building Eight (8) storey building made of concrete materials located at 56,283,425.88 January 1, 2016 to
FEU Manila Campus, Nicanor Reyest St., Manila plus applicable VAT June 30, 2016 Law Building Four (4) storey building made of concrete materials located at subject to 5% July 1, 2016 to
FEU Manila Campus, Nicanor Reyest St., Manila escalation yearly June 30, 2025
Administration Building Four (4) storey building made of concrete materials located at FEU Manila Campus, Nicanor Reyest St., Manila
PROPERTY LEASED BY FRC FROM FEU:
FEU Foodcourt Mezzanine of the Technology Building with an area of 693 sq. meters 1,433,013.12 February 1, 2015 to plus applicable VAT August 31, 2015
Yearly rates to be September 1, 2015 to determined annually August 31, 2016
PROPERTY LEASED BY FECSI FROM FEU:
FEU - Cavite Buildings Two (2) concrete buildings located as Silang, Cavite 600,000.00 August 1, 2012 to plus applicable VAT July 31, 2022
on initial year, yearly rates to be determined annually
- or - the amount equivalent
to 5% of its gross annual revenues, whichever is higher
PROPERTY LEASED BY EAST ASIA EDUCATIONAL FOUNDATION, INC. FROM FEU:
Portions of Technology Building 4th to 8th floors and three (3) rooms of the 9th floor of the 30,140,980.20 May 1, 2015 to
Technology Building plus applicable VAT April 30, 2025
on initial year, yearly rates to be determined annually
The lease contract shall not be deemed extended by implication beyond the contract period for any cause or reason whatsoever, but only by negotiation and written agreement of the LESSOR and the LESSEE.
Amount
Properties inteded to be acquired in the next 12 months: NONE NOT APPLICABLE
SCHEDULE OF PROPERTY AND EQUIPMENT / INVESTMENT PROPERTIES
Gross Book Value
Accumulated
Depreciation Net Book Value Location Condition
FAR EASTERN UNIVERSITY, INCORPORATED (FEU) I. PROPERTY AND EQUIPMENT:
- LAND
Land - FEU Manila 98,457,565 - 98,457,565 Manila Very Good
Land - EAC Buildings 53,394,726 - 53,394,726 Manila Very Good
Land - Biluso, Silang 41,733,212 - 41,733,212 Cavite Very Good
193,585,503
- 193,585,503 BUILDINGS AND LAND IMPROVEMENTS
Technology Building 339,579,622 144,304,883 195,274,739 Manila Very Good
Alfredo Reyes Hall 128,929,088 65,628,523 63,300,565 Manila Very Good
Leasehold Improvements 586,934,995 105,363,065 481,571,930 Manila Very Good
Science Building (SB) 293,530,249 57,820,667 235,709,582 Manila Very Good
Arts Building 38,803,988 14,328,215 24,475,773 Manila Very Good
Nicanor Reyes Hall 196,668,991 37,012,087 159,656,904 Manila Very Good
EAC - Annex Building 126,229,514 52,005,826 74,223,688 Manila Very Good
EAC - Main Building 212,561,064 97,923,197 114,637,867 Manila Very Good
Land Improvement - Law Building to SB Covered Walk 617,737 617,737 - Manila Very Good Building - Law Building to SB Covered Walk 3,202,126 1,446,079 1,756,047 Manila Very Good
Perimeter Fence 715,360 715,360 - Manila Very Good
Campus Pavilion 1,661,650 762,373 899,277 Manila Very Good
Pavilion 2 and Pergola 310,000 310,000 - Manila Very Good
Electrical Rooms 296,196 296,196 - Manila Very Good
Chapel 5,263,611 - 5,263,611 Manila Very Good
Grandstand 1,562,113 496,855 1,065,258 Manila Very Good
FEU Makati Building 178,943,087 47,162,111 131,780,976 Makati Very Good
Construction in Progress 4,351,802 - 4,351,802 Manila Very Good
Other Land Improvements 12,473,877 4,056,743 8,417,134 Manila Very Good
2,132,635,070
630,249,917 1,502,385,153 EQUIPMENTS
Furnitures and Fixtures 92,378,283 52,440,753 39,937,530 Manila Very Good
Electrical and Mechanical 123,938,117 95,787,100 28,151,017 Manila Very Good
Information Technology 155,164,553 106,839,038 48,325,515 Manila Very Good
Transportation 38,103,922 33,761,615 4,342,307 Manila Very Good
Miscellaneous Fixed Assets 103,703,682 99,339,845 4,363,837 Manila Very Good
Tools 1,462,367 1,372,573 89,794 Manila Very Good
Museum Collection 9,073,199 - 9,073,199 Manila Very Good
Laboratory 42,492,025 17,889,187 24,602,838 Manila Very Good
Athletic and Sports 1,624,227 746,753 877,474 Manila Very Good
Musical Instrument 3,204,113 1,344,680 1,859,433 Manila Very Good
571,144,488
409,521,544 161,622,944
TOTAL PROPERTY AND EQUIPMENT 2,897,365,061 1,039,771,461 1,857,593,600
Gross Book Value
Accumulated
Depreciation Net Book Value Location Condition
II. INVESTMENT PROPERTIES:
LAND
Filinvest 1,072,882,532 - 1,072,882,532 Muntinlupa Very Good
BUILDINGS
FEU Silang I 204,550,000 38,124,375 166,425,625 Cavite Very Good
FEU Silang II 222,826,542 40,622,996 182,203,546 Cavite Very Good
427,376,542
78,747,371 348,629,171 CONTRUCTION IN PROGRESS
FEU Alabang Campus 10,879,908 - 10,879,908 Muntinlupa Very Good
TOTAL INVESTMENT PROPERTIES 1,511,138,982 78,747,371 1,432,391,611 TOTAL FIXED ASSETS OF FEU 4,408,504,043 1,118,518,832 3,289,985,211
FERN REALTY CORPORATION (FRC) I. INVESTMENT PROPERTIES:
Land 461,064,932 - 461,064,932 Manila/Makati/Cavite Very Good
Land Improvements 4,705,220 3,212,773 1,492,447 Manila/Makati/Cavite Very Good
Buildings and Improvements 218,964,640 61,049,471 157,915,169 Various Very Good
Construction in Progress 100,051,451 - 100,051,451 Makati / Taguig Very Good
TOTAL INVESTMENT PROPERTIES 784,786,243 64,262,244 720,523,999 II. TRANSPORTATION AND OTHER EQUIPMENT
Transportation Equipment 6,260,713 3,619,077 2,641,636 Manila Very Good
Office Furniture and Other Equipment 2,562,199 1,074,734 1,487,465 Manila Very Good TOTAL TRANSPORTATION AND OTHER EQUIPMENT 8,822,912 4,693,811 4,129,101
TOTAL FIXED ASSETS OF FRC 793,609,155 68,956,055 724,653,100
Gross Book Value
Accumulated
Depreciation Net Book Value Location Condition
EAST ASIA COMPUTER CENTER, INC. (EACCI) I. PROPERTY AND EQUIPMENT:
Building 572,074,632 44,021,072 528,053,560 Manila Very Good
Tools and Equipment 73,783,965 23,750,648 50,033,317 Manila Very Good
Furniture and Fixtures 16,791,719 4,357,858 12,433,861 Manila Very Good
Construction in Progress 193,156 - 193,156 Manila Very Good
TOTAL PROPERTY AND EQUIPMENT 662,843,472 72,129,578 590,713,894 II. INVESTMENT PROPERTIES:
Building 405,742,746 37,193,085 368,549,661 Manila Very Good
TOTAL FIXED ASSETS OF EACCI 1,068,586,218 109,322,663 959,263,555
FAR EASTERN COLLEGE - SILANG, INC. (FECSI) PROPERTY AND EQUIPMENT
Furnitures & Fixtures 6,855,741 6,125,632 730,109 Cavite Very Good
Tools and Equipment 8,241,264 6,606,325 1,634,939 Cavite Very Good
Library Books 4,970,916 3,459,778 1,511,138 Cavite Very Good
Leasehold Improvements 5,058,498 2,790,060 2,268,438 Cavite Very Good
Computer Equipment 17,243,817 12,491,781 4,752,036 Cavite Very Good
Transportation Equipment 279,210 77,943 201,267 Cavite Very Good
TOTAL FIXED ASSETS OF FECSI 42,649,446 31,551,519 11,097,927
FEU HIGH SCHOOL, INC. (FEU High) PROPERTY AND EQUIPMENT
Furnitures and equipment 1,946,722 62,877 1,883,845 Manila Very Good
TOTAL FIXED ASSETS OF FEU High 1,946,722 62,877 1,883,845
TOTAL FIXED ASSETS OF THE GROUP 6,315,295,584 1,328,411,946 4,986,883,638