formerly GMCR, Inc. - Globe

8.7% to P=2,085 million in 2001 from P=2,284 million for the same period last year. However,
consolidated balances only include Islacom’s depreciation and amortization figures for the
six months ended 31 December 2001 which amounted to P=1,105 million. Islacom’s
depreciation expense in 2000 included various adjustments which arose from the clean-up of
fixed asset accounts and the alignment of Islacom’s depreciation policy with Globe.
The Group’s provision for doubtful accounts which consist of provisions for trade
receivables from subscribers, net traffic settlement accounts and other non-trade receivables
stood at P=1,295 million for 2001, translating to 4% of consolidated net revenues. Globe’s
provisions increased to P=1,265 million in 2001, or 4% of net revenues.
Of the consolidated provision for doubtful accounts, provision for bad debts from traffic
settlement receivables for 2001 increased to P=327 million. The increase is due to the take-up
of provisions for traffic settlement receivables from primarily other local carriers based on
the Group’s bad debt provisioning policy.
Consolidated provision for bad debts arising from subscriber receivables, on the other hand,
amounted to P=916 million in 2001. Consolidated net subscriber days receivable stood at 55
days as of 31 December 2001. Globe and Isla maintain an allowance for doubtful accounts at
a level considered adequate to provide for potential uncollectibility of its receivables. For
subscriber receivables, allowance is calculated using the policy of providing full allowance
for receivables from permanently disconnected subscribers. Permanent disconnections are
made after a series of collection steps following non-payment by wireless subscribers. Such
permanent disconnections, generally occur within 90 days. Full allowance is provided for
wireline residential and business subscribers with outstanding receivables that are past due
by 90 and 150 days, respectively. For traffic settlement receivables, a policy of providing full
allowance is adopted for net international and national traffic settlement accounts which are
not settled within 10 months from transaction date and after a review of the status of
settlement with other carriers. Additional provisions are made for accounts specifically
identified to be doubtful of collection.
Inventories and supplies are stated at the lower of cost or net realizable value, with cost
determined using the moving-average method. An allowance for market decline is provided
equivalent to the difference between the cost and the net realizable value of inventories.
When inventories are sold, the related allowance is reversed in the same period, with the
appropriate sales (revenues) and cost of sales (expenses) recognition. An allowance is also
provided for obsolescence and possible losses. Full obsolescence allowance is provided
when the inventory is not moving for more than a year. A 50% allowance is provided for
slow moving items. For 2001, the Group recognized recovery of inventory losses,
obsolescence and market decline of P=18 million.
Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA),
before other income (expense) posted in 2001 were P=15,811 million. Consolidated EBITDA
margin for the period was 53% compared to 54% for Globe only. EBITDA margin was
computed on the basis of net service revenues.
Consolidated earnings before interest and taxes (EBIT) of the Group in 2001 was P=9,611
million. Consolidated net interest expense was P=2,413 million for 2001, translating to 7% of
consolidated net operating revenues.
Phil SEC 17A 2002 50