CEBU AIR, INC.

AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

2016 2015 2014

ASSETS

Current Assets
Cash and cash equivalents (Note 8) 10,296,242,304 4,706,090,063 3,963,912,683
Receivables (Notes 7 and 10) 2,126,793,862 1,737,444,884 1,862,718,419
Financial assets at fair value through profit or loss (Note 441,773,905
9)
Expendable parts, fuel, materials and supplies (Note 11) 1,190,056,987 919,118,043 679,315,070
Other current assets (Note 12) 1,096,270,685 2,400,119,148 2,020,471,923
Total Current Assets 15,151,137,743 9,762,772,138 8,526,418,095

Noncurrent Assets
Property and equipment (Notes 13, 18, 30 and 31) 81,890,303,497 72,075,821,013 65,227,125,368
Investments in joint ventures (Notes 14) 805,801,372 525,623,987 591,339,486
Goodwill (Notes 7 and 15) 566,781,533 566,781,533 566,781,533
Deferred tax assets - net (Note 25) 1,073,499,679 876,296,996
Other noncurrent assets (Notes 7 and 16) 1,026,818,459 1,021,286,522 1,150,594,326
Total Noncurrent Assets 85,363,204,540 75,065,810,051 67,535,840,713

TOTAL ASSETS 100,514,342,283 84,828,582,189 76,062,258,808

LIABILITIES AND EQUITY

Current Liabilities
Accounts payable and other accrued liabilities (Notes 7 12,583,636,942 11,602,989,706 10,668,437,651
and 17)
Unearned transportation revenue (Notes 4 and 5) 8,141,752,728 6,971,754,698 6,373,744,740
Current portion of long-term debt (Notes 13 and 18) 7,040,253,460 5,423,699,184 4,712,465,291
Financial liabilities at fair value through profit or loss 2,443,495,138 2,260,559,896
(Note 9)
Due to related parties (Note 27) 37,689,554 38,115,803 39,909,503
Income tax payable 24,152,004 20,038,200 5,831,638
Total Current Liabilities 27,827,484,688 26,500,092,729 24,060,948,719

Noncurrent Liabilities
Long-term debt - net of current portion (Notes 13 and 18) 35,770,184,170 31,165,286,307 29,137,197,374
Deferred tax liabilities - net (Notes 7 and 25) 129,160,379
Pension liability (Note 24) 568,769,315 546,480,714 385,665,449
Other noncurrent liabilities (Note 19) 2,842,631,591 1,661,527,283 810,482,700
Total Noncurrent Liabilities 39,181,585,076 33,373,294,304 30,462,505,902
Total Liabilities 67,009,069,764 59,873,387,033 54,523,454,621

Equity
Common stock (Note 20) 613,236,550 613,236,550 613,236,550
Capital paid in excess of par value 8,405,568,120 8,405,568,120 8,405,568,120
Treasury stock -529,319,321 -529,319,321 -529319321.00
Other comprehensive loss (Notes 9 and 24) -186,025,376 -193,873,203 -131,968,292
Retained earnings (Note 14) 25,201,812,546 16,659,583,010 13,181,287,130
Total Equity 33,505,272,519 24,955,195,156 21,538,804,187

TOTAL LIABILITIES AND EQUITY 100,514,342,283 84,828,582,189 76,062,258,808

CEBU AIR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31

2016 2015 2014
REVENUE
Sale of air transportation services
Passenger 46,592,511,272 42,681,069,939 40,188,445,623
Cargo 3,563,752,865 3,461,136,749 3,146,083,310
Ancillary revenues (Note 21) 11,743,014,755 10,359,447,828 8,665,489,377
61,899,278,892 56,501,654,516 52,000,018,310

EXPENSES
Flying operations (Notes 11 and 22) 19,694,348,716 20,916,360,534 26,152,476,007
Aircraft and traffic servicing (Note 22) 6,577,984,803 5,847,099,305 4,805,212,489
Repairs and maintenance (Notes 11 and 22) 6,530,857,486 5,240,478,648 4,432,437,982
Depreciation and amortization (Notes 6 and 13) 5,998,695,417 5,111,543,724 4,281,525,018
Aircraft and engine lease (Note 30) 4,253,724,294 4,024,599,732 3,503,484,521
Reservation and sales (Note 22) 3,211,696,086 2,625,456,497 2,153,987,158
General and administrative (Note 23) 1,813,043,477 1,552,148,933 1,296,817,694
Passenger service 1,567,730,427 1,483,746,337 1,216,740,451
49,648,080,706 46,801,433,710 47,842,681,320
 12,251,198,186 9,700,220,806 4,157,336,990

OTHER INCOME (EXPENSES)

Hedging gains (losses) - net (Note 9) 1,587,708,081 -2,931,215,906 -2,314,241,984
Equity in net income of joint ventures (Note 14) 178,308,842 35,418,498 96,326,091
Interest income (Note 8) 113,672,171 83,006,926 79,927,272
Loss on sale of aircraft (Note 13) -962,608,741 -80,267,191
Loss on sale of aircraft (Note 13) -1,170,181,141 -1,073,109,693 -1,013,241,353
Foreign exchange losses - net -2,281,932,689 -2,205,258,151 -127,471,032
-2,535,033,477 -6,171,425,517 -3,278,701,006

INCOME BEFORE INCOME TAX 9,716,164,709 3,528,795,289 878,635,984

PROVISION FOR (BENEFIT FROM) INCOME TAX (Note 25) -37,971,487 -858,430,586 25,137,768

NET INCOME 9,754,136,196 4,387,225,875 853,498,216

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX

Other comprehensive income (loss) not to be reclassified to profit or loss in subsequent periods:
Actuarial gains (losses) on pension liability (Note 24) 11,211,184 -83,002,333 301,535,342
Provision for (benefit from) income tax (Note 25) 3,363,357 -21,097,422 91,853,356
7,847,827 -61,904,911 209,681,986

TOTAL COMPREHENSIVE INCOME 9,761,984,023 4,325,320,964 1,063,180,202

Basic/Diluted Earnings Per Share (Note 26) 16.10 7.24 16.10

Financial Strengths

2016 2015 2014

Quick Ratio 0.46 0.24 0.24
Current Ratio 0.54 0.37 0.35
Long Term debt to Equity 1.17 1.34 1.41
Total Debt to Equity 2.00 2.40 2.53

FINANCIAL STRENGTHS
3.00

2.50

2.00

1.50 2016
2015
1.00
2014
0.50

0.00
· · · ·
Quick Ratio Current Ratio Long Term Total Debt to
debt to Equity Equity

EXPLANATIONS:

Quick Ratio

The quick ratio of Cebu Air Inc. is increasing from 2014 to 2016. Last 2014 &
2015, the quick ratio of the company is .24:1 which means the company has only 24
centavos of liquid assets to meet each peso of its short term obligation. In 2016, its
quick ratio increased to .46:1 which means that the company has 46 centavos to cover
up each peso of its current liabilities. The improvement in quick assets is driven by the
increased in cash and cash equivalents and receivables.

Current Ratio

The Current ratio of Cebu Air Inc. is increasing from 2014 to 2016. The current
ratio during 2014 is .35:1 and it slightly increased to .37:1 during 2015. The company’s
current ratio improved in 2016 because from .37:1, it increased to .54:1. It means that
the company’s current assets can pay back half of its current liability. The higher the
current ratio, the better for the company, it means that the company is capable of paying
its current obligation. The improvement in quick assets is driven by the increased in
cash and cash equivalents, receivables and financial assets at fair value through profit
or loss.

Long Term Debt to Equity

When the Long term debt to equity ratio is comparatively high, it implies that
a business is at greater risk of bankruptcy, since it may not be able to pay for the
interest expense on the debt if its cash flows decline. Since the Cebu Air Inc.’s Long
term debt to equity ratio is decreasing, it just means that the company’s credit
position is improving. From 1.41 in 2014, it improves to 1.17 in 2016. This
improvement is driven by the increased in equity.

Total Debt to Equity

The Debt to Equity ratio indicates how much debt a company is using to finance
its assets relative to the amount of value represented in shareholders’ equity. The debt
to equity ratio of Cebu Air Inc during 2014 is 2.53, during 2015 is 2.40 and 2.0 during
2016. This means that the company is finance by debt twice more than by its equity.
The decreased in the debt to equity ratio is driven by the increasing equity of the
company. Although the total liabilities of the company is also increasing, the percentage
increased by its equity is more than the percentage increased by its liabilities.

INDUSTRY

2016 Industry
Quick Ratio 0.46 1.18
Current Ratio 0.54 1.26
Long Term debt to Equity 116.94% 73.99%
Total Debt to Equity 200.00% 99.17%
 FINANCIAL PERFORMANCE
2.00
1.80
1.60
1.40
1.20
1.00
0.80 2016
0.60
0.40 Industry
0.20
0.00
· · · ·
Quick Ratio Current Long Term Total Debt to
Ratio debt to Equity
Equity

 Quick Ratio - Undervalued

 Current Ratio - Undervalued
 Long Term debt to Equity - Overvalued
 Total Debt to Equity - Overvalued
PROFITABILITY

2016 2015 2014

Gross Margin 0.20 0.17 0.08
EBITDA 0.16 0.06 0.02
Operating Margin 0.16 0.08 0.02
Net Operating Margin 0.16 0.08 0.02

Profitability
0.20
0.18
0.16
0.14
0.12
0.10 2016
0.08
0.06 2015
0.04
0.02 2014
0.00
· · · ·
Gross Margin EBITDA Operating Net
Margin Operating
Margin

EXPLANATIONS:

Gross Margin

Gross profit margin is a financial metric used to assess a company's financial

health and business model by revealing the proportion of money left over
from revenues after accounting for the cost of goods sold (COGS). The Cebu Air Inc.’s
gross margins are .08 during 2014, .17 during 2015 and .20 during 2016. The Gross
margin of the company is increasing and it means that the company is improving and
more income if left to cover up other expenses.

EBITDA

The EBITDA to sales ratio is a financial metric used to assess a company's

profitability by comparing its revenue with earnings. More specifically, since EBITDA is
derived from revenue, this metric indicates the percentage of a company's earnings
remaining after operating expenses. The company’s EBITDA ratio is increasing, from
.02 during 2014 to .16 during 2016. This means that the company is improving because
the higher the EBITDA ratio, the better for that company. It indicates the company is
able to keep its earnings at a good level via efficient processes that have kept certain
expenses low.

Operating Margin & Net Operating Margin

Operating margin gives an idea of how much a company make on each peso of
sales. Generally speaking, the higher a company’s operating margin is, the better off the
company is. Cebu Air Inc.’s profit margins from 2014 to 2016 are .02, .08 and .16
respectively. The company’s profit margin is increasing and it means that it is earning
more per peso of sales.

INDUSTRY

2016 Industry
Gross Margin 19.79% 42.17%
\EBITDA 15.70% 32.51%
Operating Margin 15.76% -3.04%
Net Operating Margin 15.77% 11.20%
 PROFITABILITY
45.00%
40.00%
35.00%
30.00%
25.00%
20.00% 2016
15.00% Industry
10.00%
5.00%
0.00%
-5.00% Gross \EBITDA Operating Net
Margin Margin Operating
Margin

 Gross Margin - Undervalued

 EBITDA - Undervalued
 Operating Margin - Overvalued
 Net Operating Margin – Overvalued
DIVIDEND

2016 2015 2015

Dividend yield 0.008 0.006 0.006
Payout ratio 0.06 0.09 0.32

DIVIDEND

0.350
0.300
0.250
2016
0.200
2015
0.150
2015
0.100
0.050
0.000
Dividend yield Payout ratio

EXPLANATION:

Dividend Yield

Dividend yield is a financial ratio that indicates how much a company pays out
in dividends each year relative to its share price. The dividend yield of Cebu Air Inc is
increasing from 2014 to 2016. The dividend yields are .006 during 2014, .006 during
2015 and .008 during 2016. This means that the investors are receiving more dividends
per share compared to previous years.

Payout ratio

Payout ratio is the proportion of earnings paid out as dividends to shareholders.

The payout ratio is a key financial metric used to determine the sustainability of a
company’s dividend payments. The payout ratio of the company is decreasing from
2014 to 2016. The payout ratios are .32 during 2014, .09 during 2015 and .06 during
2016. This means that as the earning per share increases, the dividend received by the
investors is decreasing.

INDUSTRY

2016 Industry
Dividend yield 0.0081 1.65
Payout ratio 5.62% 13.52%

DIVIDEND

1.8000
1.6000
1.4000
1.2000
1.0000 Dividend yield
0.8000 Payout ratio
0.6000
0.4000
0.2000
0.0000
2016 Industry

 Dividend yield - Undervalued

 Payout Ratio - Overvalued
EFFICIENCY RATIO

2016 2015 2014

RTO 32.04 31.39 27.92
NUMBER OF DAYS 11 12 13
ATO 0.62 0.67 0.68
NUMBER OF DAYS 593 548 534

EFFICIENCY RATIO
600.00

500.00

400.00
2016
300.00
2015
200.00
2014
100.00

0.00
· NUMBER OF · NUMBER OF
RTO DAYS ATO DAYS

EXPLANATIONS:

Receivable Turnover

The receivables turnover ratio indicates the efficiency with which a firm manages
the credit it issues to customers and collects on that credit. The company is efficient in
collecting receivables because for the past years, the company is able to collect
receivables for only 11-13 days. This means that they can collect their receivables
before it matures.

Assets Turnover

The asset turnover ratio is an efficiency ratio that measures a company's ability
to generate sales from its assets by comparing net sales with average total assets. The
ratio shows how efficiently a company can use its assets to generate sales. The Assets
Turnover ratio of Cebu Air Inc. is less than 1. The ATO are .62 during 2014, .67 during
2015 and .68 during 2016. This only means that for every 1 peso assets, there is 68
centavos revenue generated.

INDUSTRY

2016 Industry
RTO 32.04 4.56
ATO 0.62 0.15

EFFICIENCY

35.00
30.00
25.00
20.00 RTO

15.00 ATO

10.00
5.00
0.00
2016 Industry

 RTO –Overvalued
 ATO - Overvalued
VALUATION

2016 2015 2014

P/E 6.97 14.50 52.13
Price to Sales 2.43 2.49 1.89
Price to Bookvalue 4.49 5.64 4.57
Price to Cashflow 14.60 29.90 24.85

VALUATION
60.00

50.00

40.00
2016
30.00
2015
20.00
2014
10.00

0.00
P/E Price to Sales Price to Price to
Bookvalue Cashflow

EXPLANATION

Price Earnings Ratio

The price-earnings ratio (P/E ratio) is the ratio for valuing a company that
measures its current share price relative to its per-share earnings. The price-earnings
ratio indicates the peso amount an investor can expect to invest in a company in order
to receive one dollar of that company’s earnings. The company’s P/E ratio is
decreasing from 2014 to 2016, this means that investors are willing to pay less for each
peso income during 2016 than the previous years .

Price to Sales
 The price to sales ratio is a financial metric that measures the value investors put
on a company for each dollar of revenue generated by the firm by comparing the stock
price with total revenue. The company’s price to sales is increasing. It means that the
investor is willing to pay more for each peso sales.

Price to Bookvalue

The P/B ratio reflects the value that market participants attach to a company's
equity relative to its book value of equity. The price to book value during 2014 is 4.57,
5.64 during 2015 and 4.49 during 2016. From 2014 to 2015, the price to book value
increased but from 2015 to 2016, it decreased.

Price to Cashflow

The price-to-cash-flow ratio is the ratio of a stock’s price to its cash flow per
share. The price to cashflow is in decreasing pattern. From 24.85 during 2014 to 14.60
during 2016.

INDUSTRY

2016 Industry
P/E 6.97 12.47
Price to Sales 2.43 91.98
Price to Bookvalue 4.49 0.53
Price to Cashflow 14.60 6.51
 VALUATION
100.00
90.00
80.00
70.00
60.00
50.00 2016
40.00 Industry
30.00
20.00
10.00
0.00
P/E Price to Price to Price to
Sales Bookvalue Cashflow

 P/E - Undervalued
 Price to Sales - Undervalued
 Price to Bookvalue - Overvalued
 Price to Cashflow - Overvalued
MANAGEMENT EFFECTIVENESS

2016 2015 2014

ROA 9.71% 5.10% 1.40%
ROE 29.14% 17.33% 4.94%

MANAGEMENT EFFECTIVENESS

30.00%

25.00%

20.00% 2016

15.00% 2015
2014
10.00%

5.00%

0.00%
ROA ROE

EXPLANATION

Return on Assets

Return on assets is an indicator of how profitable a company is relative to its

total assets. ROA gives an idea as to how efficient management is at using its assets to
generate earnings. From 2014 to 2016, the return on assets is in an increasing pattern.
During 2014, the return on assets was only 1.40% and it increased to 9.71% during
2016. This means that the company is improving in using its assets to generate income.

Return on Equity

Return on equity is the amount of net income returned as a percentage

of shareholders equity. Return on equity measures a corporation's profitability by
revealing how much profit a company generates with the money shareholders have
invested. The company’s ROE is in increasing manner, from 4.94% during 2014 to
29.14% during 2016. As the company’s equity is increasing, the income it generates
also increased. This just means that the company is efficient in using the money
invested by the investors.

INDUSTRY

2016 Industry
ROA 9.71% 4.35%
ROE 29.14% 15.86%

MANAGEMENT EFFECTIVENESS

30.00%

25.00%

20.00%
ROA
15.00% ROE
10.00%

5.00%

0.00%
2016 Industry

 ROA - Undervalued
 ROE - Undervalued
 VERTICAL AND HORIZONTAL ANALYSIS

CEBU AIR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
VERTICAL ANALYSIS HORIZONTAL
ANALYSIS
Dec-31
2016 2015 2014 2016 2015
ASSETS

Current Assets
Cash and cash equivalents (Note 8) 10.24% 5.55% 5.21% 118.79% 18.72%
Receivables (Notes 7 and 10) 2.12% 2.05% 2.45% 22.41% -6.73%
Financial assets at fair value through profit or 0.44% 0.00% 100.00%
loss (Note 9)
Expendable parts, fuel, materials and supplies 1.18% 1.08% 0.89% 29.48% 35.30%
(Note 11)
Other current assets (Note 12) 1.09% 2.83% 2.66% -54.32% 18.79%
Total Current Assets 15.07% 11.51% 11.21% 55.19% 14.50%

Noncurrent Assets
Property and equipment (Notes 13, 18, 30 and 81.47% 84.97% 85.75% 13.62% 10.50%
31)
Investments in joint ventures (Notes 14) 0.80% 0.62% 0.78% 53.30% -11.11%
Goodwill (Notes 7 and 15) 0.56% 0.67% 0.75% 0.00% 0.00%
Deferred tax assets - net (Note 25) 1.07% 1.03% 22.50% 0.00%
Other noncurrent assets (Notes 7 and 16) 1.02% 1.20% 1.51% 0.54% -11.24%
Total Noncurrent Assets 84.93% 88.49% 88.79% 13.72% 11.15%

TOTAL ASSETS 100.00% 100.00% 100.00% 18.49% 11.53%

LIABILITIES AND EQUITY

Current Liabilities
Accounts payable and other accrued liabilities 12.52% 13.68% 14.03% 8.45% 8.76%
(Notes 7 and 17)
Unearned transportation revenue (Notes 4 and 8.10% 8.22% 8.38% 16.78% 9.38%
5)
Current portion of long-term debt (Notes 13 7.00% 6.39% 6.20% 29.81% 15.09%
and 18)
Financial liabilities at fair value through profit 0.00% 2.88% 2.97% -100.00% 8.09%
or loss (Note 9)
Due to related parties (Note 27) 0.04% 0.04% 0.05% -1.12% -4.49%
Income tax payable 0.02% 0.02% 0.01% 20.53% 243.61%
Total Current Liabilities 27.69% 31.24% 31.63% 5.01% 10.14%

Noncurrent Liabilities
Long-term debt - net of current portion (Notes 35.59% 36.74% 38.31% 14.78% 6.96%
13 and 18)
Deferred tax liabilities - net (Notes 7 and 25) 0.17% 0.00% -100.00%
Pension liability (Note 24) 0.57% 0.64% 0.51% 4.08% 41.70%
Other noncurrent liabilities (Note 19) 2.83% 1.96% 1.07% 71.09% 105.00%
Total Noncurrent Liabilities 38.98% 39.34% 40.05% 17.40% 9.56%
Total Liabilities 66.67% 70.58% 71.68% 11.92% 9.81%

Equity
Common stock (Note 20) 0.61% 0.72% 0.81% 0.00% 0.00%
Capital paid in excess of par value 8.36% 9.91% 11.05% 0.00% 0.00%
Treasury stock -0.53% -0.62% -0.70% 0.00% 0.00%
Other comprehensive loss (Notes 9 and 24) -0.19% -0.23% -0.17% -4.05% 46.91%
Retained earnings (Note 14) 25.07% 19.64% 17.33% 51.28% 26.39%
Total Equity 33.33% 29.42% 28.32% 34.26% 15.86%

TOTAL LIABILITIES AND EQUITY 100.00% 100.00% 100.00% 18.49% 11.53%

CEBU AIR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
VERTICAL ANALYSIS HORIZONTAL
ANALYSIS
Years Ended December 31
2016 2015 2014
REVENUE
Sale of air transportation services
Passenger 75.27% 75.54% 77.29% 9.16% 6.20%
Cargo 5.76% 6.13% 6.05% 2.96% 10.01%
Ancillary revenues (Note 21) 18.97% 18.33% 16.66% 13.36% 19.55%
100.00% 100.00% 100.00% 9.55% 8.66%

EXPENSES
Flying operations (Notes 11 and 22) 31.82% 37.02% 50.29% -5.84% -20.02%
Aircraft and traffic servicing (Note 22) 10.63% 10.35% 9.24% 12.50% 21.68%
Repairs and maintenance (Notes 11 and 22) 10.55% 9.27% 8.52% 24.62% 18.23%
Depreciation and amortization (Notes 6 and 13) 9.69% 9.05% 8.23% 17.36% 19.39%
Aircraft and engine lease (Note 30) 6.87% 7.12% 6.74% 5.69% 14.87%
Reservation and sales (Note 22) 5.19% 4.65% 4.14% 22.33% 21.89%
General and administrative (Note 23) 2.93% 2.75% 2.49% 16.81% 19.69%
Passenger service 2.53% 2.63% 2.34% 5.66% 21.94%
80.21% 82.83% 92.01% 6.08% -2.18%

19.79% 17.17% 7.99% 26.30% 133.33%

OTHER INCOME (EXPENSES)

Hedging gains (losses) - net (Note 9) 2.56% -5.19% -4.45% -154.17% 26.66%
Equity in net income of joint ventures (Note 14) 0.29% 0.06% 0.19% 403.43% -63.23%
Interest income (Note 8) 0.18% 0.15% 0.15% 36.94% 3.85%
Loss on sale of aircraft (Note 13) -1.56% -0.14% 0.00% 1099.26% 100.00%
Loss on sale of aircraft (Note 13) -1.89% -1.90% -1.95% 9.05% 5.91%
Foreign exchange losses - net -3.69% -3.90% -0.25% 3.48% 1630.01%
-4.10% -10.92% -6.31% -58.92% 88.23%

INCOME BEFORE INCOME TAX 15.70% 6.25% 1.69% 175.34% 301.62%

PROVISION FOR (BENEFIT FROM) INCOME TAX -0.06% -1.52% 0.05% -95.58% -3514.90%
(Note 25)

NET INCOME 15.76% 7.76% 1.64% 122.33% 414.03%

OTHER COMPREHENSIVE INCOME (LOSS), NET

OF TAX
Other comprehensive income (loss) not to be reclassified to profit or loss
in subsequent periods:
Actuarial gains (losses) on pension liability 0.02% -0.15% 0.58% -113.51% -127.53%
(Note 24)
Provision for (benefit from) income tax 0.01% -0.04% 0.18% -115.94% -122.97%
(Note 25)
0.01% -0.11% 0.40% -112.68% -129.52%

TOTAL COMPREHENSIVE INCOME 15.77% 7.66% 2.04% 125.69% 306.83%

CEBU AIR INC.

Submitted by:

Sherry Mae S. Hatakeyama

4-AFM

Submitted to:

Prof. Camille A. Bagadiong

Date:

October 23, 2017