UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
FORM 6-K
__________________________
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15b-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
December 2007
Date of Report (Date of Earliest Event Reported)
__________________________
Embotelladora Andina S.A.
(Exact name of registrant as specified in its charter)
Andina Bottling Company, Inc.
(Translation of Registrant´s name into English)
Avda. El Golf 40, Piso 4
Las Condes
Santiago, Chile
(Address of principal executive office)
__________________________
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F ___X___ Form 40-F _______
Indicate by check mark if the Registrant is submitting this Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1):
Yes _______ No ___X____
Indicate by check mark if the Registrant is submitting this Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7):
Yes _______ No ___X____
Indicate by check mark whether the registrant by furnishing the information contained in this Form 6-K is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
Yes _______ No ___X____
CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2007 and 2006
(Free translation of original in Spanish)
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Report of Independent Auditors
Ch$
-
Chilean pesos
ThCh$
-
Thousands of Chilean pesos
US$
-
United States dollars
UF
-
Unidades de Fomento (Chilean government inflation-indexed monetary units)
AR$
-
Argentine pesos
R$
-
Brazilian Reais
ThR$
-
Thousands Brazilian Reais
Consolidated Balance Sheets
(Figures in ThCh$ of December 31, 2007)
| For the years ended | |
ASSETS | December 31, | |
| 2007 | 2006 |
CURRENT ASSETS | ThCh$ | ThCh$ |
Cash | 24,754,142 | 17,551,601 |
Time deposits | 49,088,381 | 7,704,145 |
Marketable securities (net) | 48,533,561 | 27,970,558 |
Trade accounts receivable (net) | 44,280,949 | 38,811,661 |
Notes receivable (net) | 14,553,358 | 13,387,208 |
Other receivables (net) | 16,031,584 | 12,511,404 |
Notes and accounts receivable from related companies | 1,847,050 | 3,107,695 |
Inventories (net) | 27,298,620 | 24,370,223 |
Recoverable taxes | 9,716,707 | 8,496,968 |
Prepaid expenses | 1,904,080 | 1,729,828 |
Deferred income taxes | 5,234,679 | 956,324 |
Other current assets | 22,576,016 | 19,672,432 |
TOTAL CURRENT ASSETS | 265,819,127 | 176,270,047 |
|
|
|
PROPERTY, PLANT & EQUIPMENT |
|
|
Land | 16,751,276 | 15,475,103 |
Buildings & improvements | 98,502,738 | 91,348,992 |
Machinery and equipment | 229,584,693 | 231,550,546 |
Other property, plant & equipment | 217,489,779 | 222,663,321 |
Technical reappraisal of property, plant & equipment | 2,208,110 | 2,208,366 |
Depreciation | (395,953,016) | (410,693,053) |
TOTAL PROPERTY, PLANT & EQUIPMENT | 168,583,580 | 152,553,275 |
|
|
|
OTHER ASSETS |
|
|
Investments in related companies | 24,961,690 | 24,129,151 |
Investments in other companies | 133,944 | 60,085 |
Goodwill | 57,062,478 | 72,908,499 |
Long-term receivables | 37,511 | 55,153 |
Long-term notes and accounts receivable from related companies | 49,736 | 38,853 |
Intangibles | 417,000 | 456,380 |
Amortization | (254,522) | (276,537) |
Others | 23,617,723 | 125,410,579 |
TOTAL OTHER ASSETS | 106,025,560 | 222,782,163 |
TOTAL ASSETS | 540,428,267 | 551,605,485 |
The accompanying Notes 1 to 32 are an integral part of these consolidated financial statements.
2
Consolidated Balance Sheets
(Figures in ThCh$ of December 31, 2007)
| For the years ended | |
| December 31, | |
LIABILITIES AND SHAREHOLDERS' EQUITY | 2007 | 2006 |
| ThCh$ | ThCh$ |
CURRENT LIABILITIES |
|
|
Short-term bank liabilities | 3,950,822 | 2,674,272 |
Current portion of long-term bank liabilities | 122,361 | 471,317 |
Current portion of bonds payable | 6,914,470 | 32,190,444 |
Dividends payable | 5,810,563 | 5,061,518 |
Accounts payable | 54,585,035 | 46,040,374 |
Other creditors | 4,988,474 | 3,411,368 |
Notes and accounts payable to related companies | 19,157,342 | 11,613,224 |
Provisions | 3,475,223 | 3,098,739 |
Withholdings | 20,653,598 | 21,168,418 |
Income taxes payable | 17,206,020 | 4,330,722 |
Unearned income | 466,466 | 536,513 |
Other current liabilities | 1,335,008 | 5,014,867 |
TOTAL CURRENT LIABILITIES | 138,665,382 | 135,611,776 |
|
|
|
LONG-TERM LIABILITIES |
|
|
Long-term bank liabilities | 740,645 | 448,971 |
Bonds payable | 73,597,622 | 81,651,038 |
Other creditors | 79,559 | 143,150 |
Long-term notes and accounts payable to related companies | 3,381,883 | 3,812,304 |
Provisions | 16,927,953 | 18,363,766 |
Deferred Income Taxes | 12,375,536 | 4,433,103 |
Other long-term liabilities | 12,223,405 | 10,820,242 |
TOTAL LONG-TERM LIABILITIES | 119,326,603 | 119,672,574 |
|
|
|
MINORITY INTEREST | 1,287,144 | 1,257,528 |
|
|
|
SHAREHOLDERS’ EQUITY |
|
|
Paid-in capital | 217,013,513 | 217,013,513 |
Other reserves | (11,443,442) | 1,879,795 |
|
|
|
Retained earnings | 75,579,067 | 76,170,299 |
|
|
|
Accumulated earnings | 11,171,454 | 10,745,409 |
Net income for the period | 81,601,944 | 79,857,372 |
Interim dividends | (17,194,331) | (14,432,482) |
TOTAL SHAREHOLDERS’ EQUITY | 281,149,138 | 295,063,607 |
Total Liabilities and Shareholders' Equity | 540,428,267 | 551,605,485 |
The accompanying Notes 1 to 32 are an integral part of these consolidated financial statements.
3
Consolidated Statements of Income
(Figures in ThCh$ of December 31, 2007)
| For the years ended | |
| December 31, | |
| 2007 | 2006 |
| ThCh$ | ThCh$ |
OPERATING INCOME |
|
|
Net sales | 636,689,030 | 587,189,979 |
Cost of sales | (351,451,736) | (335,170,666) |
Gross margin | 285,237,294 | 252,019,313 |
Administrative and selling expenses | (169,742,952) | (149,778,490) |
OPERATING INCOME | 115,494,342 | 102,240,823 |
|
|
|
NON OPERATING INCOME AND EXPENSE |
|
|
Financial income | 22,935,160 | 13,459,664 |
Equity in earnings of equity investments | 946,304 | 577,853 |
Other non-operating income | 13,334,468 | 6,115,872 |
Equity in losses of equity investments | (277,806) | (201,315) |
Amortization of goodwill | (6,502,674) | (6,983,589) |
Financial expenses | (15,161,028) | (16,510,470) |
Other non-operating expenses | (7,739,178) | (7,930,321) |
Price level restatement | (4,543,047) | (293,829) |
Foreign exchange gains | (9,971,405) | 3,983,953 |
NON OPERATING INCOME AND EXPENSE | (6,979,206) | (7,782,182) |
|
|
|
Income before income taxes and extraordinary items | 108,515,136 | 94,458,641 |
Income tax expense | (26,870,391) | (14,569,482) |
Income before minority interest | 81,644,745 | 79,889,159 |
Minority interest | (42,801) | (31,787) |
NET INCOME FOR THE PERIOD | 81,601,944 | 79,857,372 |
The accompanying Notes 1 to 32 are an integral part of these consolidated financial statements.
4
Consolidated Statements of Cash Flow
(Figures in ThCh$ of December 31, 2007)
| For the years ended | |
| December 31 | |
| 2007 | 2006 |
| ThCh$ |
ThCh$ |
NET CASH PROVIDED BY OPERATING ACTIVITIES |
|
|
Collection of trade receivables | 861,758,139 | 777,119,009 |
Financial income received | 20,944,402 | 12,002,443 |
Dividends and other distributions received | 3,310,687 | 1,593,786 |
Other income received | 58,538 | 19,204 |
Payments to suppliers and personnel | (602,907,835) | (528,278,609) |
Interest paid | (17,398,601) | (13,676,988) |
Income taxes paid | (21,337,617) | (11,639,754) |
VAT and other tax payments | (107,288,665) | (100,825,152) |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 137,139,048 | 136,313,939 |
|
|
|
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
|
|
Borrowings | 52,597,852 | 47,761,041 |
Dividend distribution | (78,347,834) | (79,136,331) |
Loan payments | (51,328,372) | (76,446,381) |
Bond payments | (13,659,106) | (12,804,970) |
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | (90,737,460) | (120,626,641) |
|
|
|
NET CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES |
|
|
Proceeds from sales of property, plant and equipment | 698,325 | 2,199,027 |
Proceeds from sales of permanent investments | - | 5,495,867 |
Proceeds from sales of other investments | 108,329,808 | 39,863,022 |
Additions to property, plant & equipment | (56,024,449) | (39,742,692) |
Permanent investments | (3,651,700) | - |
Investments in financial instruments | (17,906,465) | (1,389,970) |
NET CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES | 31,445,519 | 6,425,254 |
|
|
|
TOTAL NET CASH FOR THE PERIOD | 77,847,107 | 22,112,552 |
Effect of inflation on cash and cash equivalents | (1,124,534) | (654,338) |
Net (decrease) increase in cash and cash equivalents | 76,722,573 | 21,458,214 |
Cash and cash equivalents at beginning of period | 44,649,133 | 23,190,919 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 121,371,706 | 44,649,133 |
The accompanying Notes 1 to 32 are an integral part of these consolidated financial statements.
5
Reconciliation between Net Income and Net Cash Flows
Provided by Operating Activities
(Figures in ThCh$ of December 31, 2007)
| For the years ended | |
| December 31, | |
| 2007 | 2006 |
| ThCh$ | ThCh$ |
NET INCOME | 81,601,944 | 79,857,372 |
Loss (Gain) on sale of property, plant and equipment | 146,702 | 2,285,690 |
Loss on sale of investments | 85,549 | - |
Gain on sale of other assets | 84,741 | - |
INCOME ON SALE OF ASSETS: | 316,992 | 2,285,690 |
|
|
|
Depreciation | 29,147,969 | 31,740,874 |
Amortization of intangibles | 237,000 | 210,268 |
Write-offs and provisions | 1,088,696 | 2,922,718 |
Equity in earnings of equity investments | (946,304) | (577,853) |
Equity in losses of equity investments | 277,806 | 201,315 |
Amortization of goodwill | 6,502,674 | 6,983,589 |
Price level restatement | 4,543,047 | 293,829 |
Foreign exchange gains, net | 9,971,405 | (3,983,953) |
Other credits to income that do not represent cash flows | (2,812,986) | (433,873) |
Other charges to income that do not represent cash flows | 3,533,358 | - |
ADJUSTMENTS TO NET INCOME THAT DO NOT REPRESENT MOVEMENTS OF CASH | 51,542,665 | 37,356,914 |
|
|
|
(Increase) decrease in trade accounts receivable | (280,050) | 1,722,221 |
(Increase) decrease in inventories | (5,406,713) | (5,048,033) |
(Increase) decrease in other assets | (27,189,797) | (16,285,209) |
CHANGES IN OPERATING ASSETS | (32,876,560) | (19,611,021) |
|
|
|
Increase (decrease) in accounts payable related to operating income | 2,953,033 | 10,364,880 |
Increase (decrease) in interest payable | 9,339,661 | 10,509,022 |
Increase (decrease) in income taxes payable | 11,482,335 | 8,591,816 |
Increase (decrease) in other accounts payable related to non-operating income | 7,057,325 | 4,694,966 |
Increase (decrease) in valued added tax and other similar items | 5,678,852 | 2,232,513 |
CHANGES IN OPERATING LIABILITIES | 36,511,206 | 36,393,197 |
|
|
|
Minority interest | 42,801 | 31,787 |
|
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES | 137,139,048 | 136,313,939 |
|
|
|
The accompanying Notes 1 to 32 are an integral part of these consolidated financial statements.
6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2007 and 2006 (figures expressed in ThCh$ of December 31, 2007)
Note 1 - Incorporation in the Securities Register
Embotelladora Andina S.A. was incorporated in the Securities Register under No. 00124 and, in conformity with Law 18,046 is subject to the supervision of the Chilean Superintendence of Securities and Insurance Companies (the “SVS”).
Note 2 - Summary of Significant Accounting Principles
a)
Accounting period
The consolidated financial statements cover the period January 1 to December 31, 2007 and are compared to the same period in 2006.
b)
Basis of preparation
The consolidated financial statements have been prepared in conformity with generally accepted accounting principles issued by the Chilean Institute of Accountants, as well as rules and regulations of the SVS. In the event of discrepancy, the SVS regulations will prevail.
c)
Basis of presentation
For comparison purposes, the figures in the prior-year financial statements have been restated by 7.4% according to CPI and minor reclassifications have been made.
d)
Basis of consolidation
The accompanying financial statements include assets, liabilities, income and cash flows of the Parent Company and its subsidiaries. The equity and income accounts of the Parent Company and its subsidiaries have been combined, eliminating investments and current accounts between consolidated companies, transactions between them and the unrealized income from inter-company transactions.
In addition, for proper presentation of consolidated net income, the participation in income by minority shareholders is shown in the consolidated statements of income under Minority interest.
Holding percentages
The subsidiaries included in the consolidated financial statements and Andina’s direct and indirect holding percentages are as follows:
Company Name | Ownership Interest | |||
| 2007 | 2006 | ||
| Direct | Indirect | Total | Total |
Abisa Corp S.A. | - | 99.99 | 99.99 | 99.99 |
Andina Bottling Investments S.A. | 99.90 | 0.09 | 99.99 | 99.99 |
Andina Inversiones Societarias S.A. | 99.99 | - | 99.99 | 99.99 |
Andina Bottling Investments Dos S.A. | 99.90 | 0.09 | 99.99 | 99.99 |
Embotelladora Del Atlantico S.A. | - | 99.98 | 99.98 | 99.96 |
Rio de Janeiro Refrescos Ltda. | - | 99.99 | 99.99 | 99.99 |
Servicios Multivending Ltda. | 99.90 | 0.09 | 99.99 | 99.99 |
Transportes Andina Refrescos Ltda. | 99.90 | 0.09 | 99.99 | 99.99 |
Vital S.A. | - | 99.99 | 99.99 | 99.99 |
RJR Investments Corp S.A. | - | 99.99 | 99.99 | 99.99 |
Vital Aguas S.A. | 56.50 | - | 56.50 | 56.50 |
7
e)
Price-level restatement
The financial statements have been restated to reflect the effect of price-level changes on the purchasing power of the Chilean peso during the respective periods. Restatements have been determined on the basis of the percentage variation of the official Chilean Consumer Price Index, “CPI”, issued by the Chilean National Institute of Statistics, which amounted to 7.4% for the period December 1, 2006 to November 30, 2007 (2.1% for the same period of the previous year).
f)
Currency translation
Balances in foreign currency are considered as non-monetary items and are translated at the exchange rate prevailing at year-end. Regarding balances subject to restatement, these have been restated by the corresponding restatement index or by the agreed upon rate.
Assets and liabilities in foreign currency and Unidades de Fomento have been translated into local currency at the following end of period exchange rates:
|
| 2007 | 2006 |
|
| Ch$ | Ch$ |
Unidades de Fomento | (UF) | 19,622.66 | 18,336.38 |
United States dollars | (US$) | 496.89 | 532.39 |
Argentine pesos | (AR$) | 157.79 | 173.87 |
Brazilian Real | (R$) | 280.52 | 249.01 |
Euro | (€$) | 730.94 | 702.08 |
g)
Marketable securities
Marketable securities include investments in mutual funds and investment fund shares, valued at the redemption value for each year end.
Investments in bonds are valued at the lesser of restated cost plus accrued interest and market value.
h)
Inventories
The cost of raw materials includes all disbursements made in the acquisition process and deemed necessary for them to be readily available for use. The costs of finished products include all manufacturing costs. Raw materials and finished products are valued at the average weighted cost.
Provisions are made for obsolescence on the basis of turnover of raw materials and finished products.
The stated values of inventories do not exceed their estimated net realizable value.
i)
Allowance for doubtful accounts
The allowance for doubtful accounts consists of a general provision determined on the basis of the aging of accounts receivable and on a case-by-case analysis where collection is doubtful. In the opinion of the Company’s management, the allowances are reasonable and the net balances are recoverable.
8
j)
Property, plant and equipment
For companies incorporated in Chile, Property, Plant and Equipment is carried at acquisition value plus price-level restatements. For companies incorporated abroad it has been restated in terms of the variation of the U.S. dollar according to the details described in Note 2m.
Technical reappraisal of property, plant and equipment, authorized by the SVS on December 31, 1979, is shown at restated value under the heading “Technical reappraisal of property, plant and equipment”.
Fixed assets to be disposed of for sale are valued at the lower of the net realizable value and book value. Unrealized losses are reflected in the consolidated statement of income under Other non-operating expenses.
k)
Depreciation
Depreciation of property, plant and equipment is determined by the straight-line method based on the estimated useful lives of the valued assets.
l)
Containers
Inventories of containers, bottles and plastic containers at plants, warehouses, and with third parties are stated at cost plus price-level restatements and are included in Other property, plant and equipment. Broken or damaged containers at plants and warehouses are expensed in each accounting period.
m)
Investments in related companies
Investments in shares or rights in companies in which the Company has a significant holding in the investee are accounted for using the equity method. The Company’s proportionate share of net income and losses of related companies is recognized in the consolidated statements of income, after eliminating any unrealized profits or losses from transactions between related companies.
Investments in foreign companies are valued in conformity with Technical Bulletin No. 64 issued by the Chilean Institute of Accountants. The United States (“US”) dollar is the currency used to control investments and to translate financial statements of foreign companies. Assets and liabilities from these investments are translated into Chilean pesos at year end exchange rate, except that non-monetary assets and liabilities and shareholders’ equity are first expressed at their equivalent value in historical US dollars. Income and expense items are first translated into US dollars at the average exchange rate during the month.
n)
Intangibles
Intangibles include franchise rights and licenses that are amortized over the terms of the contracts, not in excess of 20 years.
o)
Goodwill
Goodwill represents the difference between purchase cost of the shares acquired and the proportional equity value of investment on the purchase date. These differences are amortized based on the expected period of return of the investment, estimated at 20 years.
p)
Bonds payable
Bonds payable includes the placement of Yankee Bonds on the US markets and placement of bonds in UF in Chile, which are carried at the issue rate. The difference in valuation as compared to the effective placement rate is recorded as a deferred asset. This asset is amortized using the straight-line method over the term of the respective obligations, under Financial Expenses.
9
q)
Income taxes and deferred income taxes
The companies have recognized its current tax obligations in conformity with current legislation. The effects of deferred income taxes arising from temporary differences between the basis of assets and liabilities for tax and financial statement purposes are recorded on the basis of the enacted tax rate that will be in effect at the estimated date of reversal, in conformity with Technical Bulletin No. 60 issued by the Chilean Institute of Accountants. The effects of deferred income taxes existing at the time of the enforcement of the aforesaid Bulletin, i.e. January 1, 2000, and not previously recognized, are recorded as gain or loss according to their estimated reversal period.
r)
Staff severance indemnities
The Company has recorded a liability for long-term service indemnities in accordance with the collective agreements entered into with its employees. The provision is stated at present value of the projected cost of the benefit, which is discounted at a 7.0% annual rate and a capitalization period using the staff’s expected length of service to their retirement date.
Since the year 2005, the Company maintains a withholding plan for some officers. A liability is recorded according to the guidelines of this plan. The plan entitles certain officers of the Company to receive a fixed payment in cash at a predetermined date once he has fulfilled years of service.
s)
Deposits for containers
Corresponds to the liabilities constituted by cash guarantees received from clients for lending bottles to them.
For those loans for placement subsequent to January 31, 2001, an expiration date of five years as from the invoice date was established. In the event the client has not returned all or a portion of the containers and/or cases, the Company may, without delay, enforce the guarantee, in whole or in part, in cash and record that effect in operating income of the Company.
This liability is presented in Other long-term liabilities, considering that the number of new containers in circulation in the market during the year is historically greater than the number of containers returned by clients during the same period.
t)
Revenue recognition
Given the nature of its operations, the Company records revenue based on the physical delivery of finished products to its clients, based on the realization principle and in accordance with Technical Bulletin No. 70 issued by the Chilean Institute of Accountants.
u)
Derivative contracts
Derivative contracts include instruments used to hedge the risk of exposure to exchange rate differences as follows:
Derivative instruments used to hedge existing items on the balance sheet are recorded at their fair values. Unrealized losses are recognized as a charge to income and gains are deferred and included in Other liabilities (current or long-term). Hedge ineffectiveness is recognized in the income statement.
Derivative instruments used to hedge forecasted transactions are recorded at their market values and the changes in their values are accounted for as unrealized gains or losses. Upon contract expiration, the deferred gains and losses are recorded in the income statements.
v)
Computer software
Corresponds to computer packages currently in use that have a future economic benefit, and are amortized over a period equal to their useful life.
10
w)
Research and development costs
Costs incurred by the Company in research and development are immaterial given the nature of the business and the strong support from The Coca-Cola Company to its bottlers.
x)
Consolidated statement of cash flows
For purposes of preparation of the statement of cash flows, in accordance with Technical Bulletin N°50 of the Chilean Institute of Accountants and circular N°1,501 of the Superintendencia de Valores y Seguros (Chilean Securities and Exchange Commission)the Company has considered cash equivalent to be investments in fixed-income, mutual funds, time deposits and operations with sale-back agreements maturing within 90 days.
Cash flows from operating activities include all business-related cash flows as well as interest paid, financial income and, in general, all cash flows not defined as from financial or investment activities. The operating concept used for this statement is broader than that in the statement of income.
Note 3 - Accounting Changes
There are no changes in the application of generally accepted accounting principles in Chile in relation to the previous year that could significantly affect the comparability of these financial statements.
11
NOTE 4 - Marketable Securities
Type of Instrument | Accounting value for the year | |
| 2007 | 2006 |
| ThCh$ | ThCh$ |
Bonds | 1,004,378 | 6,047,016 |
Mutual funds | 2,693,828 | 6,082,448 |
Investment funds | 44,835,355 | 15,841,094 |
Total marketable securities | 48,533,561 | 27,970,558 |
Bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
Type of Instrument | Date | Par Value | Accounting Value | Market Value | ||
| Purchase | Maturity | Amount | Rate | ||
|
|
| ThCh$ | ThCh$ |
| ThCh$ |
United States Treasury Notes (Restricted) | 26-Jul-06 | 30-Jun-08 | 1,004,378 | 1,004,378 | 5.125% | 1,014,649 |
Mutual funds: |
|
|
|
Institution | ThCh$ |
|
|
Fondos Fima – Argentina | 1,799,998 |
Fondo Mutuo Larraín Vial | 654,254 |
Fondo Mutuo B.Scotiabank | 205,630 |
Fondo Mutuo Itaú | 33,946 |
Balance mutual funds | 2,693,828 |
|
|
Investment funds: |
|
|
|
Institution | ThCh$ |
|
|
Fondo Mutuo DWS Institutional USD Money Plus | 22,654,801 |
Citi Institud Liquid Reserves Limited - USA | 21,557,829 |
Fondo Mutuo Wachovia Securities - USA | 622,725 |
Balance investment funds | 44,835,355 |
Note 5 – Short and Long-Term Receivables
Almost all of said accounts correspond to the soft drinks category. The balance of other accounts receivable mainly corresponds to prepayment to our sugar suppliers.
|
| CURRENT |
|
|
|
| LONG TERM | ||
| Up to 90 days | More than 90 days up to 1 year | Subtotal | Total current (net) |
|
| |||
| 2007 | 2006 | 2007 | 2006 | 2007 | 2007 | 2006 | 2007 | 2006 |
| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Trade receivables | 44,480,440 | 37,905,991 | 680,830 | 905,670 | 45,161,270 | 44,280,949 | 38,811,661 | - | - |
Allowance for doubtful accounts | - | - | - | - | 880,321 | - | - | - | - |
Notes receivable | 14,754,484 | 12,931,135 | 287,082 | 456,073 | 15,041,566 | 14,553,358 | 13,387,208 | 5,844 | - |
Allowance for doubtful accounts | - | - | - | - | 488,208 | - | - | - | - |
Other receivables | 15,790,763 | 12,014,656 | 408,588 | 496,748 | 16,199,351 | 16,031,584 | 12,511,404 | 31,667 | 55,153 |
12
Allowance for doubtful accounts | - | - | - | - | 167,767 | - | - | - | - |
|
|
|
|
| Total long term receivables | 37,511 | 55,153 |
Note 6 - Balances and Transactions with Related Companies
Receivable and payable balances with related companies correspond to the following concepts:
1) Notes and accounts receivable.
Embonor S.A.: Sale of products
Embotelladora Coca-Cola Polar S.A.: Sale of products
Coca-Cola de Chile S.A.: Advertising agreements, net of concentrate purchases in 2006.
Company | Short Term | Long Term | ||
| 2007 | 2006 | 2007 | 2006 |
| ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Embonor S.A. | 1,298,769 | 898,596 | - | - |
Embotelladora Coca-Cola Polar S.A. | 548,281 | 580,414 | - | - |
Coca-Cola de Chile S. A. | - | 1,628,685 | 49,736 | 38,853 |
Total | 1,847,050 | 3,107,695 | 49,736 | 38,853 |
2) Notes and accounts payable:
Recofarma Indústrias do Amazonas Ltda.: Concentrate purchases
Envases CMF S.A.: Raw material purchases
Servicios y Productos para Bebidas Refrescantes S.R.L.: Concentrate purchases
Envases Central S.A.: Net balance corresponds to raw materials and finished products transactions.
Envases del Pacífico S.A.: Raw material purchases
Cican S.A.: Net balance corresponds to raw materials and finished products transactions.
Embonor S.A. and Embotelladora Coca-Cola Polar S.A.: Corresponds to unearned income due to commitments of sale of products of Vital S.A. to those companies, which will be realized in accordance with future deliveries.
Company | Short Term | Long Term | ||
| 2007 | 2006 | 2007 | 2006 |
| ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Recofarma Indústrias do Amazonas Ltda. | 7,380,961 | 4,846,471 | - | - |
Coca-Cola de Chile S.A. | 5,943,519 | - | - | - |
Envases CMF S.A. | 2,770,984 | 3,485,613 | - | - |
Servicios y Productos para Bebidas Refescantes S.R.L. | 1,785,694 | 2,136,477 | - | - |
Envases del Pacifico S.A. | 127,858 | 74,224 | - | �� - |
Envases Central S.A. | 1,148,326 | 749,203 | - | - |
Cican S.A. | - | 321,236 | - | - |
Embonor S.A. | - | - | 2,655,346 | 3,035,318 |
Embotelladora Coca-Cola Polar S.A. | - | - | 685,256 | 776,986 |
Centralli Refrigerantes S.A. | - | - | 41,281 | - |
Total | 19,157,342 | 11,613,224 | 3,381,883 | 3,812,304 |
13
3) Transactions with related companies
The following table includes the transactions with related companies that exceed ThCh$200,000.
Company | Relation | Transaction | 2007 | 2006 | ||
|
|
| Amount | Effect on income (charge) credit | Amount | Effect on income (charge) credit |
|
|
| ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Envases Central S.A | Equity Investee | Finished product purchase | 16,866,737 | - | 16,474,307 | - |
- | - | Sales of raw materials and supplies | 1,677,076 | 39,829 | 1,580,946 | 357,927 |
Coca-Cola de Chile S.A. | Shareholder | Concentrate purchases | 49,328,091 | - | 43,630,671 | - |
- | - | Payment of advertising participation | 4,130,800 | (4,130,800) | 1,952,142 | (1,952,142) |
- | - | Sales of advertisement | 3,550,348 | - | 2,907,005 | - |
- | - | Water source rental | 1,690,491 | (1,690,491) | 1,445,155 | (1,445,155) |
Recofarma Industrias Do Amazonas Ltda. | Shareholder related | Concentrate purchases | 54,838,897 | - | 43,802,173 | - |
- | - | Reimbursements and other purchases | 518,321 | 518,321 | 579,947 | 579,958 |
- | - | Payment of advertising participation | 3,308,899 | 3,308,899 | 3,447,790 | 3,447,790 |
Envases CMF S.A. | Equity Investee | Purchase of containers | 16,121,863 | - | 17,685,751 | - |
- | - | Sale of finished products | 216,344 | - | - | - |
- | - | Dividend payment | 3,210,000 | - | 1,589,666 | - |
Servicios y Productos para Bebidas Refrescantes S.R.L. | Shareholder | Concentrate purchases | 27,115,345 | - | 24,375,249 | - |
Envases del Pacífico S.A. | Director in common | Purchase of raw materials | 225,946 | - | 457,569 | - |
Coca-Cola Embonor S.A. | Shareholder related | Purchase of products | 280,009 | - | - | - |
Embonor S.A. | Shareholder related | Sale of products | 8,711,620 | 1,994,933 | 7,455,203 | 2,696,658 |
Embotelladora Coca-Cola Polar S.A. | Shareholder related | Sale of products | 5,163,952 | 1,035,949 | 4,635,081 | 1,647,533 |
Cican S.A. | Shareholder related | Purchase of finished products | 1,456,354 | - | 1,370,471 | - |
Iansagro S.A. | Director in common | Purchase of sugar | 15,709,142 | - | 10,521,224 | - |
Vendomática S.A. | Director related company | Sale of finished products | 1,462,596 | 438,779 | 1,549,708 | 263,450 |
BBVA Administradora General de Fondos | Shareholder related | Investment in mutual funds | 44,510,881 | - | 85,011,396 | - |
BBVA Administradora de Fondos | Shareholder related | Redemption of mutual funds | 46,341,441 | �� - | 76,251,852 | - |
4) Other transactions
In 2006 the Company entered into a supply agreement with Iansagro S.A. for the purchase of sugar. This agreement will expire in January 2009.
Note 7 – Inventories
| 2007 | 2006 | ||||
| Gross Value | Obsolescence provision | Net value | Gross Value | Obsolescence provision | Net value |
| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
|
|
|
|
|
|
|
Finished products | 14,753,515 | (559,736) | 14,193,779 | 11,643,760 | (395,919) | 11,247,841 |
Raw materials | 11,624,291 | (249,308) | 11,374,983 | 11,034,986 | (180,254) | 10,854,732 |
Products in process | 1,353,429 | - | 1,353,429 | 742,244 | - | 742,244 |
Raw materials in transit | 376,429 | - | 376,429 | 1,525,406 | - | 1,525,406 |
|
|
|
|
|
|
|
Total | 28,107,664 | (809,044) | 27,298,620 | 24,946,396 | (576,173) | 24,370,223 |
14
Note 8 - Income Taxes and Deferred Income Taxes
a)
At period end 2007 and 2006, the Company did no present taxable profit or non-taxable profit funds. Short-term and long-term assets and liabilities must be netted out to compose the general balance sheet on deferred taxes.
| 2007 | 2006 | ||||||
| Assets | Liabilities | Assets | Liabilities | ||||
| Short term | Long term | Short term | Long term | Short term | Long term | Short term | Long term |
Temporary differences | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Allowance for doubtful accounts | 250,944 | 86,243 | - | - | 227,423 | 41,744 | - | - |
Vacation provision | 215,299 | - | - | - | 202,537 | - | - | - |
Production expenses | 3,375 | - | - | 98,465 | 9,533 | - | - | - |
Depreciation of property, plant & equipment | - | - | 162,024 | 5,738,902 | - | 500 | 126,135 | 4,388,999 |
Severance indemnities | 53,874 | - | 22,096 | 171,415 | 97,893 | 7,120 | 36,043 | 235,772 |
Others | 145,720 | 332,106 | 25 | - | 592,569 | 362,144 | - | - |
Provision for assets write off | 701,287 | 444,798 | - | - | 351,660 | 1,237,808 | - | - |
Provision for labor lawsuits | - | 1,346,483 | - | - | - | 1,349,682 | - | - |
Tax loss carry-forwards | 2,392,586 | 1,257,078 | - | - | 2,281,003 | 4,099,972 | - | - |
Guarantee deposit | - | - | - | - | - | - | - | 2,412,480 |
Local bond issue expenses | - | - | - | 147,028 | - | - | - | 167,565 |
Contingency allowance | - | 223,046 | - | - | - | 229,059 | - | - |
Social contributions | 861,331 | 452,548 | - | - | 821,161 | 1,348,252 | - | - |
Accrued interests abroad | - | - | - | - | - | - | 4,255,872 | - |
Obsolescence of inventories | 3,174 | - | - | - | - | - | - | - |
Income participation provision | 791,234 | - | - | - | 790,595 | - | - | - |
Exchange rate difference (FRN Debt-Brazil) | - | - | - | 12,604,169 | - | - | - | 9,213,333 |
Unrealized income | - | 251,891 | - | - | - | 297,260 | - | - |
Others |
|
|
|
|
|
|
|
|
Complementary accounts, net of amortization | - | - | - | 1,990,250 | - | - | - | 3,011,505 |
Total | 5,418,824 | 4,394,193 | 184,145 | 16,769,729 | 5,374,374 | 8,973,541 | 4,418,050 | 13,406,644 |
b)
The following table contains information on income taxes at each period-end.
15
Note 9 - Other Current Assets
| 2007 | 2006 |
| ThCh$ | ThCh$ |
Cross currency swap effects | 17,394,865 | 12,949,090 |
Supplies | 4,574,986 | 3,282,493 |
Short term bonds discount | 183,721 | 211,605 |
Accrued interest on long-term bonds | - | 1,489,870 |
Wachovia Investment Fund (restricted) | 90,964 | 271,478 |
Sale-back agreement investments | - | 1,042,106 |
Others | 331,480 | 425,790 |
Total | 22,576,016 | 19,672,432 |
Note 10 - Property, Plant and Equipment
Property, plant and equipment consist principally of land, buildings, improvements and machinery. Machinery and equipment included production lines and supporting equipment; sugar processing and liquefaction equipment; transportation machinery; and computer equipment. The Company has purchased insurance to cover its fixed assets and inventories. These assets are geographically distributed as follows:
Chile
:
Santiago, Renca, Rancagua, San Antonio and Rengo
Argentina
:
Buenos Aires, Mendoza, Cordoba, and Rosario
Brazil
:
Rio de Janeiro, Niteroi, Campos, Cabo Frío, Nova Iguaçu, Espírito Santo and Vitoria.
a) Principal components of property, plant and equipment | ||||||
|
|
|
|
|
|
|
| Balances at December 31, 2007 | Balances at December 31, 2006 | ||||
| Assets | Accumulated depreciation | Net, property, plant and equipment | Assets | Accumulated depreciation | Net, property, plant and equipment |
| ||||||
| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
|
|
|
|
|
|
|
Land | 16,751,276 | - | 16,751,276 | 15,475,103 | - | 15,475,103 |
Buildings and improvements | 98,502,738 | (36,285,064) | 62,217,674 | 91,348,992 | (35,712,197) | 55,636,795 |
Machinery and equipment | 229,584,693 | (178,948,855) | 50,635,838 | 231,550,546 | (185,724,682) | 45,825,864 |
Other property, plant and equipment | 217,489,779 | (180,048,122) | 37,441,657 | 222,663,321 | (188,586,825) | 34,076,496 |
Technical reappraisal of property, plant & equipment | 2,208,110 | (670,975) | 1,537,135 | 2,208,366 | (669,349) | 1,539,017 |
|
|
|
|
|
|
|
Total | 564,536,596 | (395,953,016) | 168,583,580 | 563,246,328 | (410,693,053) | 152,553,275 |
16
b) Other property, plant and equipment |
|
|
|
|
|
|
|
|
| 2007 | 2006 |
|
| ThCh$ | ThCh$ |
|
|
|
|
Containers |
| 125,547,798 | 126,711,610 |
Refrigerating equipment, promotional items and other minor assets | 55,369,800 | 58,042,547 | |
Furniture and tools |
| 7,841,943 | 7,962,050 |
Other |
| 28,730,238 | 29,947,114 |
|
|
|
|
Total other property, plant and equipment |
| 217,489,779 | 222,663,321 |
c) Technical reappraisal of property, plant and equipment |
|
|
|
|
|
|
|
| Balances at December 31, 2007 | Balances at December 31, 2006 | ||||
| Assets | Accumulated depreciation | Net, property, plant and equipment | Assets | Accumulated depreciation | Net, property, plant and equipment |
| ||||||
| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Land | 1,474,779 | - | 1,474,779 | 1,474,779 | - | 1,474,779 |
Buildings and improvements | 206,469 | (149,234) | 57,235 | 206,468 | (144,350) | 62,118 |
Machinery and equipment | 526,862 | (521,741) | 5,121 | 527,119 | (524,999) | 2,120 |
|
|
|
|
|
|
|
Total | 2,208,110 | (670,975) | 1,537,135 | 2,208,366 | (669,349) | 1,539,017 |
d) Depreciation for the period
Depreciation charges for the period amounted to ThCh$ 29,147,969 (ThCh$ 31,740,874 in 2006) of which ThCh$ 21,471,798 (ThCh$ 23,056,525 in 2006) are included under Operating Costs and ThCh$ 7,676,171 (ThCh$ 8,684,249 in 2006) under Sales and Administrative Expenses in the income statement.
17
Note 11 - Investment in Related Companies
1.
Investments in related companies and the corresponding direct shareholding in equity, as well as the recognition of unrealized income at year end of the respective years, are shown in the table attached.
Company | Country | Functional Currency | N° of | Ownership Interest | Equity of companies | Income (loss) for the period | Accrued income | Partic. in net | Unrealized | Accounting | |||||||
2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | ||||
|
|
|
| % | % | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Envases CMF S.A. | Chile | Ch$ | 28,000 | 50.00 | 50.00 | 37,522,543 | 40,348,964 | 3,593,579 | 3,698,796 | 740,423 | 407,617 | 18,761,269 | 20,174,482 | 1,054,912 | 1,133,054 | 17,706,357 | 19,041,428 |
Holdfab Partc. Ltda. | Brasil | US$ | - | 14.73 | - | 27,159,546 | - | 692,360 | - | 102,009 | - | 4,001,117 | - | - | - | 4,001,117 | - |
Envases Central S.A. | Chile | Ch$ | 1,499,398 | 49.91 | 49.91 | 4,791,968 | 4,782,478 | 9,490 | (37,735) | 832 | (24,147) | 2,391,671 | 2,386,935 | 241,646 | 241,646 | 2,150,025 | 2,145,289 |
Kaik Participacoes | Brazil | US$ | 16,098,919 | 11.32 | 11.32 | 9,754,597 | 14,746,398 | 910,270 | 647,816 | 103,040 | 73,331 | 1,104,191 | 1,669,248 | - | - | 1,104,191 | 1,669,248 |
Cican S.A. | Argentina | US$ | 3,040 | - | 15.30 | - | 8,376,223 | - | 637,531 | (277,806) | 96,905 | - | 1,273,186 | - |
- | - | 1,273,186 |
Andina Inversiones Societarias Dos S.A. | Chile | Ch$ | - | - | 99.99 | - | - | - | - | - | (168,562) | - | - | - | - | - | - |
Envases Multipack Ltda. | Chile | Ch$ | - | - | 99.99 | - | - | - | - | - | (8,606) | - | - | - | - | - | - |
Total |
|
|
|
|
|
|
|
|
|
|
| 26,258,248 | 25,503,851 | 1,296,558 | 1,374,700 | 24,961,690 | 24,129,151 |
The main changes occurred in the reported periods are described below:
By a public deed dated June 5, 2006, the company Andina Inversiones Societarias S.A. was divided, creating a new company, “Andina Inversiones Societarias Dos S.A.” with the same shareholders and the same ownership interest as in the first one, with a capital of ThCh$24,405,291 (historical) and that corresponds to the investment in Envases Multipack Ltda. The financial impact of this division is recorded beginning January 1, 2006.
By a public deed dated August 31, 2006 Andina Inversiones Societarias Dos S.A. changed its corporate name to Andina Inversiones Societarias Dos Ltda. (thus becoming a limited responsibility corporation).
On November 15, 2006 Embotelladora Andina S.A. acquired 0.0001% of the social rights of Andina Inversiones Societarias Dos Ltda., consequently the company has been completely merged into Embotelladora Andina since 100% ownership interest is now held by Embotelladora Andina. Likewise, Envases Multipack Ltda. is now fully merged into Embotelladora Andina since it originally held 5% and Andina Inversiones Societarias Dos Ltda. held the remaining 95%.
On October 4, 2007, our subsidiary Rio de Janeiro Refrescos Ltda, acquired a 14.732% ownership interest in Holdfab Participações Ltda., for an amount of ThR$12,831.63. In turn, Holdfab Participações Ltda. holds a 50% ownership interest in Amarantina Participações S.A.
Centralli Refrigerantes S.A. records a negative equity, which has been provisioned accordingly.
The investment in Kaik Participações Ltda. (Brazil) where Embotelladora Andina S.A. holds an indirect ownership of 11.32% has been accounted for under the equity method, since the Company has the right to designate a director.
The investment in Envases Central S.A. is presented with a 48% reduction (the percentage share on the date of transaction) of the earnings generated during the sale to Envases Central during December 1996 for property located in Renca, because this transaction represents unrealized income for Embotelladora Andina S.A. The amount of the reduction is reflected in the following chart. This transaction will be realized once the property is transferred to a third party different from the group.
The investment in Envases CMF S.A. is presented with a 50% reduction of the earnings generated during the sale of machinery and equipment of our subsidiary Envases Multipack S.A. which took place in June, 2001, and will be recorded under Results during the remaining useful life period of the goods sold to Envases CMF S.A.
Unrealized income corresponds to transactions between subsidiaries and/or the parent company that have been deducted or added to the category of the originating asset with the following effect on income of the subsidiaries:
18
Envases CMF S.A. (purchase of containers): ThCh$ -1,054,912 in 2007 (ThCh$ -1,133,054 in 2006)
Envases Central S.A. (purchase of finished products): ThCh$ -3,904 in 2007 (ThCh$ -5,313 in 2006)
2.
No liabilities have been designated as hedging instruments for investments abroad.
3.
Income likely to be remitted by subsidiaries abroad amounts to US$286 million.
Note 12 - Goodwill and Negative Goodwill
Company | 2007 | 2006 | ||
Amortization during the period | Goodwill balance | Amortization during the period | Goodwill balance | |
| ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Rio de Janeiro Refrescos Ltda. | 3,361,883 | 35,545,203 | 3,846,316 | 44,585,702 |
Embotelladora del Atlántico S.A. | 2,603,243 | 21,517,275 | 2,995,633 | 27,756,235 |
Vital S.A. | 537,548 | - | 141,640 | 566,562 |
Total | 6,502,674 | 57,062,478 | 6,983,589 | 72,908,499 |
19
Note 13 - Other Long Term Assets
| 2007 | 2006 |
| ThCh$ | ThCh$ |
Bonds: |
|
|
Celulosa Arauco S.A. | - | 13,034,667 |
Enap S.A. | - |
10,114,063 |
Endesa S.A. | - | 8,646,373 |
Chile Soberano | - |
8,196,110 |
Petróleos Mexicanos S.A. | - |
6,744,087 |
Compañía Manufacturera de Papeles y Cartones S.A. | - |
7,918,651 |
Teléfonos de México S.A. | - |
7,646,302 |
Codelco S.A. | - |
5,821,395 |
México Soberano | - |
5,309,002 |
Federal Home Loan Bank (FHLB) | - |
2,865,239 |
Brasil Telecom S.A. | - |
2,276,706 |
Raytheon Company | - |
2,321,958 |
International Paper Company | - | 2,287,147 |
Altria Group | - |
1,306,844 |
United States Treasury Notes | - |
1,188,786 |
Alcoa Inc. | - |
1,165,721 |
CLN Endesa-Deutsche Bank A.G. | - |
5,900,847 |
|
|
|
Cross currency swap | - |
15,870,336 |
Judicial deposits (Brazil) | 6,949,232 |
5,354,528 |
Transfer fiscal credits (Brazil) | 5,451,956 |
- |
Bond issuance and placement expenses | 2,898,159 |
3,211,022 |
Prepaid expenses | 3,298,477 |
2,127,011 |
Non operating assets | 2,406,482 |
1,215,425 |
Spare parts | 2,556,258 |
3,225,518 |
Others | 57,159 |
1,662,841 |
|
|
|
Total | 23,617,723 |
125,410,579 |
20
Note 14 - Short-Term Bank Liabilities
a)
Short Term
| Currency or indexation adjustment |
|
| |||
Bank or Financial Institution | Other foreign currencies | Non-indexed Ch$ | TOTAL | |||
| 2007 | 2006 | 2007 | 2006 | 2007 | 2006 |
| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
BANCO GALICIA | 1,671,991 | - | - | - | 1,671,991 | - |
BANCO DO BRASIL | 1,009,882 | 2,674,260 | - | - | 1,009,882 | 2,674,260 |
BANCO BBVA | - | - | 1,268,949 | - | 1,268,949 | - |
CITIBANK N.A. | - | - | - | 12 | - | 12 |
Others | - | - | - | - | - | - |
Total | 2,681,873 | 2,674,260 | 1,268,949 | 12 | 3,950,822 | 2,674,272 |
|
|
|
|
|
|
|
Principal Due | 2,681,873 | 2,674,260 | 1,268,949 | 12 | 3,950,822 | 2,674,272 |
|
|
|
|
|
|
|
Annual average interest rate | 9.74% | 8.75% |
|
|
|
|
|
|
|
|
|
|
|
Foreign currency liabilities (%) | 67.88 |
|
|
|
|
|
Local currency liabilities (%) | 32.12 |
|
|
|
|
|
b)
Long term – Portion Short Term
Bank or Financial Institution | Other foreign currencies | TOTAL | ||
| 2007 | 2006 | 2007 | 2006 |
| ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Banco Alfa | 118,264 | 5,040 | 118,264 | 5,040 |
Bank Boston | 2,168 | 11,344 | 2,168 | 11,344 |
Banco Votoratim | 1,929 | - | 1,929 | - |
Banco Santander | - | 454,933 | - | 454,933 |
Total | 122,361 | 471,317 | 122,361 | 471,317 |
|
|
|
|
|
Principal Due | 740,646 | 388,151 | 740,646 | 388,151 |
|
|
|
|
|
|
|
|
|
|
Annual average interest rate | 11.89% | 15.66% |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency liabilities (%) | 100.00 |
|
|
|
Local currency liabilities (%) | - |
|
|
|
21
Note 15 - Long-Term Bank Liabilities
|
| Years to maturity | Total long term at year end | Annual average interest rate | Total long term at year end | ||
Bank or Financial | Currency or indexation adjustment | More than | More than | More than | 2007 | 2006 | |
|
| ThCh$ | ThCh$ | ThCh$ | ThCh$ |
| ThCh$ |
Banco Votorantim | Other currencies | 229,187 | 116,136 | 109,469 | 454,792 | 9.40% | - |
Banco Alfa | Other currencies | 236,200 | 49,653 | - | 285,853 | 10.79% | 445,894 |
Banco Boston | Other currencies |
- | - | - | - |
| 3,077 |
Total |
| 465,387 | 165,789 | 109,469 | 740,645 |
| 448,971 |
|
|
|
|
|
|
|
|
Foreign currency liabilities (%) | 100.00 |
|
|
|
|
| |
Local currency liabilities (%) | - |
|
|
|
|
|
Note 16 – Long and Short-Term Bonds Payable (Promissory Notes and Bonds)
1.
Current risk rating of bonds is as follows:
BONDS ISSUED IN THE US MARKET
A-
:
Rating according to Fitch Ratings Ltd.
BBB+
:
Rating according to Standard & Poor’s
BONDS ISSUED IN THE LOCAL MARKET
AA
:
Rating according to Fitch Chile Clasificadora de Riesgo Ltda.
AA
:
Rating according to Feller Rate Clasificadora de Riesgo Ltda.
2.
Bond repurchases.
During 2000, 2001, 2002 and 2007, Embotelladora Andina S.A. repurchased bonds issued in the U.S. market through its subsidiary, Abisa Corp S.A. for a total amount of US$316 million of the US$350 million, which are presented deducting the long term liability from the bonds payable account.
3.
Bonds issued by the subsidiary Rio de Janeiro Refrescos Ltda. (RJR).
The subsidiary RJR has liabilities corresponding to an issuance of bonds for US$75 million maturing in December 2012 and semiannual interest payments. At period end, all such bonds are wholly-owned by the subsidiary Abisa Corp. Consequently, the effects of such transactions have been eliminated from these consolidated financial statements, both in the balance sheet and in the consolidated statement of income.
22
The following table contains more information on Bonds Payable:
Instrument subscription or ID N° | Series | Current nominal value | Currency | Interest rate | Maturity date | Term | Par value | Placement in Chile or abroad | ||
Interest paid | Amortization period | 2007 | 2006 | |||||||
Current portion of bonds payable |
|
|
|
|
|
|
| ThCh$ | ThCh$ |
|
Yankee bonds | A | - | US$ | 7.00% | Oct. 1, 2007 | Half yearly | October 2007 | - | 18,661,596 | Abroad |
Yankee bonds | B | 2,000,000 | US$ | 7.63% | Oct. 1, 2027 | Half yearly | October 2027 | 18,944 | 43,600 | Abroad |
Register 254 SVS June 13, 2001 | A | 330,000 | UF | 6.20% | June 1, 2008 | Half yearly | June 2008 | 6,508,446 | 13,096,776 | Chile |
Register 254 SVS June 13, 2001 | B | 3,700,000 | UF | 6.50% | June 1, 2026 | Half yearly | December 2009 | 387,080 | 388,472 | Chile |
Total current maturities |
|
|
|
|
|
|
| 6,914,470 | 32,190,444 |
|
|
|
|
|
|
|
|
|
|
|
|
Long term portion of bonds payable |
|
|
|
|
|
|
|
|
|
|
Yankee bonds | B | 2,000,000 | US$ | 7.63% | Oct. 1, 2007 | Half yearly | October 2027 | 993,780 | 2,287,152 | Abroad |
Register 254 SVS June 13, 2001 | A | 330,000 | UF | 6.20% | June 1, 2027 | Half yearly | June 2008 | - | 6,498,779 | Chile |
Register 254 SVS June 13, 2001 | B | 3,700,000 | UF | 6.50% | June 1, 2026 | Half yearly | December 2009 | 72,603,842 | 72,865,107 | Chile |
Total long term |
|
|
|
|
|
|
| 73,597,622 | 81,651,038 |
|
Note 17 - Provisions and Write-Offs
| Short term | Long term | ||
Provisions | ||||
| 2007 | 2006 | 2007 | 2006 |
| ThCh$ | ThCh$ | ThCh$ | ThCh$ |
|
|
|
|
|
Taxation on banking transactions and social contributions (Brazil) | 2,718,815 | 2,331,401 | 8,022,638 | 9,370,035 |
Staff severance indemnities | 708,748 | 681,047 | 6,425,121 | 6,007,790 |
Contingencies | 47,660 | 86,291 | 2,480,194 | 2,985,941 |
Total | 3,475,223 | 3,098,739 | 16,927,953 | 18,363,766 |
Note 18 - Staff Severance Indemnities
| 2007 | 2006 |
| ThCh$ | ThCh$ |
Beginning balance | 6,227,968 | 5,874,385 |
Provision for the period | 1,074,404 | 1,001,129 |
Payments | ( 168,503) | ( 186,677) |
Ending balance | 7,133,869 | 6,688,837 |
23
Note 19 - Minority Interest
| 2007 | 2006 |
Liabilities | ThCh$ | ThCh$ |
|
|
|
Vital Aguas S.A. | 1,278,073 | 1,236,030 |
Embotelladora del Atlántico S.A. | 9,055 | 21,458 |
Andina Inversiones Societarias S.A. | 16 | 40 |
Total | 1,287,144 | 1,257,528 |
|
|
|
|
|
|
| 2007 | 2006 |
Income Statement | ThCh$ | ThCh$ |
|
|
|
Vital Aguas S.A. | (42,044) | (29,911) |
Embotelladora del Atlántico S.A. | (751) | (1,873) |
Andina Inversiones Societarias S.A. | (6) | (3) |
Total | ( 42,801) | (31,787) |
Note 20 - Changes in Shareholders’ Equity
The activity in Shareholders’ Equity, Dividend Distribution and Other Reserves is detailed in the following tables:
| December 31, 2007 | December 31, 2006 | ||||||||
| Paid in Capital | Other | Accumulated | Interim | Net Income | Paid in Capital | Other | Accumulated | Interim | Net Income |
| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Beginning balance | 202,060,999 | 1,750,275 | 10,005,036 | (13,438,065) | 74,355,094 | 197,904,994 | (201,145) | 26,334,355 | (11,640,959) | 56,039,346 |
Distribution of prior year income | - | - | 60,917,029 | 13,438,065 | (74,355,094) | - | - | 44,398,387 | 11,640,959 | (56,039,346) |
Final dividend prior year | - | - | (8,876,966) | - | - | - | - | (5,172,908) | - | - |
Translation adjustment reserve | - | (13,323,239) | - | - | - | - | 1,955,644 | - | - | - |
Extraordinary dividend charged | - | - | (52,040,412) | - | - | - | - | (55,880,179) | - | - |
Capital revalued | 14,952,514 | 129,522 | 1,166,767 | (430,277) | - | 4,156,005 | (4,224) | 325,381 | (26,822) | - |
Income for the period | - | - | - | - | 81,601,944 | - | - | - | - | 74,355,094 |
Interim dividends | - | - | - | (16,764,054) | - | - | - | - | (13,411,243) | - |
Ending balance | 217,013,513 | (11,443,442) | 11,171,454 | (17,194,331) | 81,601,944 | 202,060,999 | 1,750,275 | 10,005,036 | (13,438,065) | 74,355,094 |
Price level restated balances |
|
|
|
|
| 217,013,513 | 1,879,795 | 10,745,409 | (14,432,482) | 79,857,372 |
24
Number of shares |
|
| |
Series | Subscribed shares | Paid in shares | Number of shares with voting rights |
A | 380,137,271 | 380,137,271 | 380,137,271 |
B | 380,137,271 | 380,137,271 | 380,137,271 |
Capital |
|
|
Series | Subscribed capital | Paid in capital |
| ThCh$ | ThCh$ |
A | 108,506,756 | 108,506,756 |
B | 108,506,757 | 108,506,757 |
Other Reserves |
|
|
|
Balance of Other Reserves is composed as follows: |
|
|
|
|
| December 31, | |
|
| 2007 | 2006 |
|
| ThCh$ | ThCh$ |
|
|
|
|
Reserve for cumulative translation adjustments(1) |
| ( 12,527,145) | 796,092 |
Reserve for technical reappraisal of property, plant and equipment | 67,287 | 182,566 | |
Other |
| 1,016,416 | 901,137 |
Total |
| ( 11,443,442) | 1,879,795 |
(1)The Reserve for cumulative translation adjustments was established in accordance with Technical Bulletin No. 64 issued by the Chilean Institute of Accountants and regulations specified under Circular letter No. 5,294 from the SVS.
The activity in the Reserve for cumulative translation adjustments was as follows:
| |||||||
|
|
|
| Foreign Exchange rate generated during the period | Release/ transfers of reserve(*) | Balance December 31, 2007 | |
|
| Balance |
|
|
| ||
Company |
| January 1, 2007 | Investment | Liabilities | |||
|
| ThCh$ | ThCh$ | ThCh$ |
| M$ | |
Rio de Janeiro Refrescos Ltda. |
| (840,477) | (9,366,852) | - | 2,632,526 | (7,574,803) | |
Embotelladora del Atlántico S. A. | 1,636,569 | (7,533,072) | - | 944,161 | (4,952,342) | ||
Total |
| 796,092 | (16,899,924) | - | 3,576,687 | (12,527,145) | |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
(*) During 2007, the Company received dividends paid by our subsidiary Río de Janeiro Refrescos Ltda. and capital remittances from our subsidiary Embotelladora del Atlántico S.A.
25
Note 21 - Other Non-Operating Income and Expenses
Other non-operating income during the period was as follows: |
| |
| For the years ended December 31, | |
| 2007 | 2006 |
| ThCh$ | ThCh$ |
Reverse provision devaluation fixed assets | 5,800,834 | - |
Recovery of prior year taxes | 2,712,775 | - |
Reverse Pis/Coffins | 1,371,898 | 4,488,874 |
Realization of deposits in guaranty over containers | 351,022 | 526,341 |
Other income | 299,723 | 666,784 |
Sub-total | 10,536,252 | 5,681,999 |
Translation of financial statements(1) | 2,798,216 | 433,873 |
Total | 13,334,468 | 6,115,872 |
|
|
|
|
|
|
Other non-operating expenses during the period was as follows: |
|
|
|
|
|
|
|
|
Cumulative translation reserve realized(2) | (3,580,267) | (143,378) |
Obsolescence and write-offs of property, plant and equipment | (2,374,214) | (3,989,887) |
Loss on sale of property, plant and equipment | (703,079) | (803,070) |
Lawsuit fees | (146,702) | (2,285,690) |
Provision for labor and commercial lawsuits | - | (470,261) |
Provision loss of investment in Centralli | - | (69,228) |
Others | (934,916) | (168,807) |
|
|
|
Total | (7,739,178) | (7,930,321) |
|
|
|
(1)This refers to the effects of the translation of the financial statements corresponding to investment in foreign companies (translation of local currency to US dollars), in accordance with Technical Bulletin N°64 issued by the Chilean Institute of Accountants, which are presented as Other Non Operating Income and/or expenses accordingly. | ||
(2)During 2007 and 2006, the Company received dividend payments from our subsidiary Rio de Janeiro Refrescos Ltda. and the Capital remittances from Embotelladora del Atlántico S.A. This triggered a pro-rata recognition in income of the cumulative translation reserve. |
26
Note 22 - Price-Level Restatement
| Adjustment index | 2007 | 2006 |
Assets - (charges)/credits |
| ThCh$ | ThCh$ |
Inventories | CPI | (8,401) | (151,923) |
Property, plant and equipment | CPI | 6,122,335 | 1,600,049 |
Investments in related companies | CPI | 10,493,221 | 3,761,249 |
Cash, Time Deposits, Marketable Securities | CPI | 1,361,119 | 52,281 |
Trade Accounts Receivable, Notes Receivable, Other Receivables | UF | - | 5 |
Trade Accounts Receivable, Notes Receivable, Other Receivables | CPI | 206 | (56) |
Accounts receivable related companies - short term | CPI | 746,747 | 729,172 |
Recoverable taxes | CPI | (34,393) | 71,679 |
Other current assets | UF | 1,030,045 | 42,620 |
Other current assets | CPI | 133,735 | 94,473 |
Other long term assets | CPI | 3,366,831 | 2,219,535 |
Other long term assets | UF | 14,614 | 2,366 |
Cost and expense accounts | CPI | 7,474,658 | 1,570,172 |
Accounts receivable related companies – long term | CPI | 9,980 | - |
Total (charges) credits |
| 30,710,697 | 9,991,622 |
|
|
|
|
Liabilities - (charges)/credits |
|
|
|
Shareholders’ equity | CPI | (15,818,526) | (4,779,665) |
Short and long term bank liabilities | CPI | - | (293,574) |
Short and long term bonds payable | UF | (5,065,915) | (1,993,982) |
Short and long term bonds payable | CPI | (268,357) | (409,660) |
Accounts payable related companies - short term | UF | (996,080) | (130,645) |
Accounts payable related companies - short term | CPI | (944,021) | - |
Other current liabilities | UF | (679,065) | (38,195) |
Other current liabilities | CPI | (644,974) | (269,544) |
Accounts payable related companies - long term | CPI | (1,036,614) | - |
Other long term liabilities | CPI | (214,736) | (250,193) |
Income accounts | CPI | (9,585,456) | (2,119,993) |
Total (charges) credits |
| (35,253,744) | (10,285,451) |
Price-level restatement (loss) gain |
| (4,543,047) | (293,829) |
27
Note 23 - Foreign Exchange Gains/Losses
| Currency | 2007 | 2006 |
Assets - (charges)/credits |
| ThCh$ | ThCh$ |
Cash | US$ | (99,256) | (522,295) |
Time deposits | US$ | (3,394) | 371 |
Marketable securities (net) | US$ | (4,033,833) | 24,057 |
Sales receivable | US$ | (456) | - |
Other debtors (net) | US$ | (4,445) | 195,699 |
Accounts receivable related companies | US$ | - | 1,776,913 |
Inventories (net) | US$ | - | 23,872 |
Prepaid expenses | US$ | (4,367) | - |
Other current assets | US$ | 322,448 | 2,016,468 |
Property, plant and equipment | US$ | - | 1,978 |
Others | US$ | - | 1,891,904 |
Expense account | US$ | (6,389,598) | - |
Total (charges)/credits |
| (10,212,901) | 5,408,967 |
|
|
|
|
Liabilities - (Charges) / credits |
|
|
|
Short term liabilities with banks and financial institutions | US$ | - | (113,075) |
Bonds payable | US$ | 310,736 | (159,875) |
Accounts payable | US$ | 62,339 | (46,664) |
Provisions | US$ | 23,260 | (4,244) |
Prepaid income | US$ | 33,532 | - |
Other current liabilities | US$ | (409,164) | (747,507) |
Withholdings | US$ | - | 2 |
Bonds payable long term | US$ | 220,793 | (353,651) |
Total (charges) credits |
| 241,496 | (1,425,014) |
Foreign exchange gain (loss) on income |
| (9,971,405) | 3,983,953 |
Note 24 - Share and Debt Security Issue and Placement Expenses
Bond issue and placement expenses are presented in Other current assets and Other long-term assets and are amortized on a straight-line basis over the term of the debt issued. Amortization is presented as financial expenses.
Bonds issued in the US market:
Debt issue costs and discounts have all been amortized, as a result of the repurchase of Bonds reported in note 16.
Bonds issued in the local market:
Debt issue costs and interest rate differences net of amortization as of the end of the period amounted to ThCh$3,265,243 and ThCh$3,578,776 in 2006. Disbursements for risk rating reports, legal and financial advisory services, printing and placement fees are included as Debt issue costs.
Amortization for the period 2007 amounted to ThCh$394,209 and ThCh$422,237 in 2006.
28
Note 25 - Consolidated Statement of Cash Flows
For the projection of future cash flows, there are no transactions and events to consider which have not been revealed in these financial statements and accompanying notes.
The following table presents an itemization of the movement of assets and liabilities not affecting the cash flow in the period, but compromising future cash flows.
| 2007 | Maturity date | 2006 | Maturity date |
| ThCh$ | ThCh$ | ||
|
|
|
|
|
Expected cash outflow |
|
|
|
|
Expenses |
|
|
|
|
Dividend payment | (5,588,018) | 24-Jan-08 | ( 4,801,225) | 31-Jan-07 |
Addition to property, plant and equipment | (605,463) | 31-Jan-08 | ( 600,245) | 31-Jan-07 |
Addition to property, plant and equipment | (5,367,451) | 28-Feb-08 | ( 4,613,400) | 28-Feb-07 |
Addition to property, plant and equipment | (10,027) | 31-Mar-08 | ( 158,064) | 30-Mar-07 |
Total expenses | ( 11,570,959) |
| ( 10,172,934) |
|
|
|
|
|
|
Expected cash inflow |
|
|
|
|
Income |
|
|
|
|
Sale of property, plant and equipment | 3,015 | 31-Jan-08 | 14,368 | 31-Jan-07 |
Total income | 3,015 |
| 14,368 |
|
|
|
|
|
|
|
|
|
|
|
Total net | ( 11,567,944) |
| ( 10,158,566) |
|
29
Note 26 - Derivative Contracts
Derivative contracts at December 31, 2007 were as follows:
|
|
|
|
| Position Purchase / Sale | HEDGED ITEM OR TRANSACTION |
| Assets/liabilities | Effect on income | ||||||||
|
|
|
|
|
|
|
| ||||||||||
Derivative | Contract | Value | Maturity period | Specific item | Concept | Amount | Hedged item value | Item | Amount | Realized | Unrealized | ||||||
|
| ThCh$ |
|
|
|
| ThCh$ | ThCh$ |
| ThCh$ | ThCh$ | ThCh$ | |||||
SWAP | CCPE | 7,608,380 | 1st quarter 2008 | US$ Exchange rate | S | US$ Financial investments | 10,574,850 | 7,453,350 | Other current and long term assets | 4,909,213 | 1,195,125 | - | |||||
SWAP | CCPE | 7,566,539 | 2nd quarter 2008 | US$ Exchange rate | S | US$ Financial investments | 10,574,850 | 7,453,350 | Other current assets | 4,879,183 | 1,254,820 | - | |||||
SWAP | CCPE | 12,425,471 | 3rd quarter 2008 | US$ Exchange rate | S | US$ Financial investments | 16,979,441 | 12,029,707 | Other current assets | 7,886,760 | 2,207,289 | 13,042 | |||||
FR | CCTE | 12,666,001 | 1st quarter 2008 | US$ Exchange rate | P | Suppliers foreign currency | 12,621,006 | - | Other current assets and liabilities | 128,244 | - | (128,244) | |||||
FR | CCTE | 3,005,408 | 1st quarter 2008 | US$ Exchange rate | S | Suppliers foreign currency | 3,001,712 | - | Other current assets and liabilities | 38,737 | - | 38,737 | |||||
FR | CCTE | 13,397,954 | 2nd quarter 2008 | US$ Exchange rate | P | Suppliers foreign currency | 13,366,341 | - | Other current assets and liabilities | 160,944 | - | (160,944) | |||||
FR | CCTE | 2,193,500 | 2nd quarter 2008 | US$ Exchange rate | S | Suppliers foreign currency | 2,186,316 | - | Other current assets and liabilities | 29,887 | - | 29,887 | |||||
FR | CCTE | 9,433,307 | 3rd quarter 2008 | US$ Exchange rate | P | Suppliers foreign currency | 9,281,905 | - | Other current assets and liabilities | 20,400 | - | (20,400) | |||||
FR | CCTE | 2,119,035 | 3rd quarter 2008 | US$ Exchange rate | S | Suppliers foreign currency | 2,106,317 | - | Other current assets and liabilities | 635 | - | 635 | |||||
FR | CCTE | 10,708,599 | 4th quarter 2008 | US$ Exchange rate | P | Suppliers foreign currency | 10,509,724 | - | Other current assets and liabilities | 61,432 | - | (61,432) | |||||
FR | CCTE | 3,167,502 | 4th quarter 2008 | US$ Exchange rate | S | Suppliers foreign currency | 3,140,345 | - | Other current assets and liabilities | 4,450 | - | 4,450 | |||||
FR | CCTE | 1,303,974 | 1st quarter 2009 | US$ Exchange rate | P | Suppliers foreign currency | 1,242,225 | - | Other current assets and liabilities | 19,953 | - | (19,953) | |||||
FU | CCPE | 459,621 | 1st quarter 2008 | Raw material prices | S | Future purchases of raw materials | 474,932 | 474,932 | Other current assets | 140,019 | - | 140,019 | |||||
FU | CI | 388,514 | 1st quarter 2008 | Raw material prices | S | - | - | - | Other current assets | 90,964 | 90,964 | - |
Note 27 - Contingencies and Restrictions
a.
Litigation and other legal actions:
There are variuos judicial actions and other out-of-court claims pending against the Company incidental to its business and operations. Management believes, based on the opinion of its legal counsel, that none of these proceedings will have a material adverse effect on the Company’s financial position or result of operations.
Current lawsuits and other legal actions are described below.
1)
Embotelladora del Atlántico S.A. faces labor and other lawsuits. Accounting provisions to back any probable loss contingency stemming from these lawsuits, amounts to ThCh$1,538,745 (ThCh$1,814,288 in 2006). In accordance with its legal counsel’s opinion, the Company deems improbable that unstipulated contingencies may affect the results or equity of the Company.
2)
Rio de Janeiro Refrescos Ltda. faces labor, tax and other lawsuits. Accounting provisions to back any probable loss contingency arising from these lawsuits, amounts to ThCh$941,439 (ThCh$1,203,382 in 2006). In accordance with its legal counsel’s opinion, the Company deems improbable that unstipulated contingencies may affect the results or equity of the Company.
3)
Embotelladora Andina S.A. faces, labor, tax, commercial and other lawsuits. Accounting provisions to back any probable loss contingency stemming from these lawsuits, amounts to ThCh$20,424 (ThCh$54,563 in 2006). In accordance with its legal counsel’s opinion, the Company deems improbable that contingencies without provisions may affect the results or equity of the Company.
b.
Restrictions
The bond issue and placement on the US market for US$ 350 million is subject to certain restrictions against preventive attachments, sale and leaseback transactions, sale of assets, subsidiary debt and certain conditions in the event of a merger or consolidation.
The bond issue and placement in the Chilean market for UF 7,000,000 is subject to the following restrictions:
Leverage ratio, defined as the total financial debt/shareholder’s equity plus minority interest should be less than 1.20 times.
30
Financial debt shall be deemed Consolidated Finance Liabilities which include: (i) short-term bank liabilities, (ii) short-term portion of long-term bank liabilities, (iii) short-term bonds payable-promissory notes, (iv) short-term portion of bonds payable, (v) long-term bank liabilities, and (vi) long-term bonds payable. Consolidated equity means Total equity plus Minority Interest.
Consolidated assets are to be free of any pledge, mortgage or other encumbrance for an amount equal to at least 1.30 times the consolidated liabilities that are not guaranteed by the investee.
Andina must retain and, in no way, lose, sell, assign or dispose of to a third party the geographical zone denominated “Región Metropolitana”, as a franchised territory in Chile by The Coca-Cola Company for the preparation, production, sale and distribution of the products and brands in accordance with the respective Bottling agreement, renewable from time to time.
Andina shall not lose, sell, assign or dispose of to a third party any other territory in Brazil or Argentina that is currently franchised to Andina by The Coca-Cola Company for the preparation, production, sale and distribution of the products and brands of the franchisor, as long as the referred territory represents more than forty percent of the Company’s Consolidated Operating Cash Flows.
c.
Direct guarantees
Guarantees at December 31, 2007 are presented on the following table:
31
Note 28 - Guarantees from Third Parties
Guarantees from Third Parties at December 31, 2007 were as follows:
Guarantor | Relationship | Type of Guarantee | Amount ThCh$ | Currency | Transaction |
|
|
|
|
|
|
Russel W. Coffin | Subsidiary | Letter of credit | 52,113,600 | US$ | Purchase of Nitvitgov Refrigerantes S.A. |
Confab | Subsidiary | Mortgage | 30,000,000 | US$ | Purchase of Rio de Janeiro Refrescos Ltda. |
Other Clients | Subsidiary | Deposits | 3,223,190 | US$ | Guaranty over containers |
Compañía Azucarera Concepción | Subsidiary | Guaranty insurance | 2,940,314 | US$ | Supplier |
Soc. Com. Champfer | Subsidiary | Mortgage | 1,677,103 | US$ | Distributor credit |
Mac Coke Dist. Beb. | Subsidiary | Mortgage | 1,179,924 | US$ | Distributor credit |
Franciscana Dist. | Subsidiary | Mortgage | 824,253 | US$ | Distributor credit |
Dist Real Cola -229628 | Subsidiary | Mortgage | 796,026 | US$ | Distributor credit |
Zulemar Comercio de Bebidas | Subsidiary | Mortgage | 663,355 | US$ | Distributor credit |
Asxt Fluminense Dist. Bebidas | Subsidiary | Mortgage | 660,532 | US$ | Distributor credit |
Aga S.A. | Parent Company | Receipt | 600,000 | US$ | Supplier agreement |
Rosas de Casimiro | Subsidiary | Mortgage | 491,165 | US$ | Distributor credit |
Motta Distribuidora de Bebidas | Subsidiary | Mortgage | 479,874 | US$ | Distributor credit |
Aguiar Dist. de Bebidas | Subsidiary | Mortgage | 462,937 | US$ | Distributor credit |
Atanor - - S.C.A | Subsidiary | Guaranty insurance | 330,785 | US$ | Supplier |
Ledesma – S.A.A.I. | Subsidiary | Guaranty insurance | 632,837 | US$ | Supplier |
Soberana De Carmo Dist Beb | Subsidiary | Mortgage | 282,279 | US$ | Distributor credit |
Catering Argentina S.A. | Subsidiary | Guaranty insurance | 116,769 | US$ | Supplier |
32
Note 29 - Local and Foreign Currency
Assets at each year end were composed of local and foreign currencies as follows:
|
| December 31, 2007 | December 31, 2006 |
| Currency | Amount | Amount |
|
| ThCh$ | ThCh$ |
Cash | Non-indexed Ch$ | 7,501,387 | 5,540,119 |
- | US$ | 2,540,787 | 594,930 |
- | AR$ | 1,950,458 | 1,443,104 |
- | R$ | 12,761,510 | 9,973,448 |
Time Deposits | US$ | 18,078 | 3,589,106 |
- | AR$ | - | 1,120,405 |
- | R$ | 98,911 | 2,994,634 |
- | Non-indexed Ch$ | 48,971,392 | - |
Marketable Securities (Net) | US$ | 43,739,603 | 21,888,111 |
- | AR$ | 1,797,464 | - |
- | Non-indexed Ch$ | 2,996,494 | 6,082,447 |
Trade Accounts Receivable (Net) | Non-indexed Ch$ | 19,225,841 | 17,902,036 |
- | US$ | 28,800 | 1,149,233 |
- | AR$ | 3,475,481 | 2,477,917 |
- | R$ | 21,550,827 | 17,282,475 |
Notes Receivable | Non-indexed Ch$ | 9,829,494 | 9,119,425 |
- | AR$ | 733,888 | 317,359 |
- | R$ | 3,989,976 | 3,950,424 |
Other Debtors (Net) | Non-indexed Ch$ | 4,805,605 | 3,087,861 |
- | US$ | 96,846 | 1,421,487 |
- | AR$ | 2,226,650 | 919,083 |
- | R$ | 8,902,483 | 7,082,973 |
Notes Receivable Related Companies | Non-indexed Ch$ | 1,847,050 | 3,107,695 |
Inventories (Net) | Indexed Ch$ | 7,572,176 | 3,442,326 |
- | Non-indexed Ch$ | 590,689 | 2,172,774 |
- | US$ | 1,020,454 | 1,514,614 |
- | AR$ | 5,497,529 | 6,375,959 |
- | R$ | 12,617,772 | 10,864,550 |
Recoverable Taxes | US$ | - | 1,380,022 |
- | Non-indexed Ch$ | 419,230 | 411,463 |
- | AR$ | 376,603 | 925,163 |
- | R$ | 7,277,840 | 5,780,320 |
- | Indexed Ch$ | 1,643,034 | - |
Prepaid Expenses | Non-indexed Ch$ | 1,038,607 | 1,202,300 |
- | US$ | 5,421 | 3,805 |
- | AR$ | 197,704 | 230,564 |
- | R$ | 662,348 | 293,159 |
Deferred Taxes | Non-indexed Ch$ | 762,692 | 94,830 |
- | AR$ | - | 320,702 |
- | R$ | 4,471,987 | 540,792 |
Other Current Assets | Indexed Ch$ | 334,689 | - |
- | Non-indexed Ch$ | 882,878 | 2,470,767 |
- | US$ | 17,980,007 | 14,631,946 |
- | AR$ | 733,184 | 700,590 |
- | R$ | 2,645,258 | 1,869,129 |
|
|
|
|
Property, Plant and Equipment |
|
|
|
Property, Plant and Equipment | Non-indexed Ch$ | 87,005,421 | 66,148,487 |
- | US$ | 81,578,159 | 86,404,788 |
|
|
|
|
Other Assets |
|
|
|
Investments in Related Companies | Indexed Ch$ | 19,856,386 | 21,186,717 |
- | US$ | - | 1,273,186 |
- | R$ | 5,105,304 | 1,669,248 |
Investments in Other Companies | Indexed Ch$ | 45,714 | 45,714 |
- | US$ | 88,230 | 14,371 |
Goodwill | Non-indexed Ch$ | 1,085,320 | 566,562 |
33
- | US$ | 55,977,158 | 72,341,937 |
Long Term Debtors | Indexed Ch$ | 14,980 | 32,958 |
- | AR$ | 16,687 | 22,195 |
- | R$ | 5,844 | - |
Notes Receivable Related Companies | Non-indexed Ch$ | 49,736 | 38,853 |
Intangibles | US$ | 396,600 | 456,380 |
- | Indexed Ch$ | 20,400 | - |
Amortization | US$ | (254,522) | (276,537) |
Others | Indexed Ch$ | 3,645,216 | 2,224,986 |
- | Non-indexed Ch$ | 1,700,966 | 3,426,324 |
- | US$ | 397,595 | 92,653,136 |
- | AR$ | 2,963,569 | 4,274,039 |
- | R$ | 14,910,377 | 22,832,094 |
Total Assets | Non-indexed Ch$ | 188,712,802 | 121,371,943 |
| US$ | 203,613,216 | 299,040,515 |
| AR$ | 19,969,217 | 19,127,080 |
| R$ | 95,000,437 | 85,133,246 |
| Indexed Ch$ | 33,132,595 | 26,932,701 |
Current liabilities at year end denominated in local and foreign currencies were as follows:
|
| Up to 90 days | 90 days to 1 year | ||||||
|
| 2007 | 2006 | 2007 | 2006 | ||||
| Currency | Amount | Annual average interest rate | Amount | Annual average interest rate | Amount | Annual average interest rate | Amount | Annual average interest rate |
|
| ThCh$ | % | ThCh$ | % | ThCh$ | % | ThCh$ | % |
Short term bank liabilities | Non-indexed Ch$ | 1,268,949 | - | 12 | - | - | - | - | - |
| AR$ | 1,671,991 | 11.55% | - | - | - | - | - | - |
| R$ | - | - | 2,674,260 | 8.75% | 1,009,882 | 6.75% | - | - |
Long term bank liabilities | R$ | - | - | - | - | 122,361 | 11.89% | 471,317 | 15.66% |
Bonds payable | Indexed Ch$ | - | - | 13,485,249 | 6.20% | 6,895,526 | 6.20% | - | - |
| US$ | 18,944 | 7.63% | 18,705,195 | 7.00% | - | - | - | - |
Dividends payable | Non-indexed Ch$ | 5,806,255 | - | 5,061,518 | - | - | - | - | - |
| AR$ | 4,308 | - | - | - | - | - | - | - |
Accounts payable | Non-indexed Ch$ | 24,406,553 | - | 19,873,033 | - | - | - | - | - |
| US$ | 2,555,613 | - | 1,763,246 | - | - | - | - | - |
| AR$ | 11,598,334 | - | 8,672,424 | - | - | - | - | - |
| R$ | 16,009,626 | - | 15,731,671 | - | - | - | - | - |
| EURO$ | 14,909 | - | - | - | - | - | - | - |
Other creditors | US$ | 89,032 | - | 77,560 | - | - | - | - | - |
| AR$ | 55,133 | - | 43,239 | - | 95,493 | - | 66,025 | - |
| R$ | 4,748,816 | - | 3,224,544 | - | - | - | - | - |
Notes and accounts payable related companies | Non-indexed Ch$ | 8,842,361 | - | 4,309,041 | - | - | - | - | - |
| AR$ | 3,011,877 | - | 2,457,713 | - | - | - | - | - |
| R$ | 7,303,104 | - | 4,846,470 | - | - | - | - | - |
Provisions | Non-indexed Ch$ | 756,408 | - | 735,610 | - | - | - | - | - |
| R$ | - | - | - | - | 2,718,815 | - | 2,363,129
| - |
Withholdings | Indexed Ch$ | - | - | - | - | - | - | - | - |
| Non-indexed Ch$ | 7,992,939 | - | 9,352,946 | - | - | - | - | - |
| US$ | - | - | 498,451 | - | - | - | - | - |
| AR$ | 5,966,642 | - | 5,211,078 | - | - | - | - | - |
| R$ | - | - | - | - | 6,694,017 | - | 6,105,943
| - |
Income tax provision | Non-indexed Ch$ | 7,616,471 | - | 4,126,158 | - | - | - | - | - |
| Indexed Ch$ | 339,536 | - | - | - | -
| - | - | - |
| AR$ | 1,465,138 | - | 204,564 | - | - | - | - | - |
| R$ | - | - | - | - | 7,784,875 | - | - | - |
Unearned income | Non-indexed Ch$ | 466,466 | - | 536,513 | - | - | - | - | - |
Other current liabilities | Non-indexed Ch$ | 1,335,008 | - | 5,014,867 | - | - | - | - | - |
Total current liabilities | Non-indexed Ch$ | 58,491,410 |
| 49,009,698 |
| - |
| - |
|
| AR$ | 23,773,423 |
| 16,589,018 |
| 95,493 |
| 66,025 |
|
| R$ | 28,061,546 |
| 26,476,945 |
| 18,329,950 |
| 8,940,389 |
|
| US$ | 2,663,589 |
| 21,044,452 |
| - |
| - |
|
| Indexed Ch$ | 339,536 |
| 13,485,249 |
| 6,895,526 |
| - |
|
| EURO$ | 14,909 |
| - |
| - |
| - |
|
34
Note 29 - Local and Foreign Currency (continuation)
Long term liabilities at December 31, 2007 were composed of local and foreign currencies as follows:
| Currency | 1 to 3 years | 3 to 5 years | 5 to 10 years | Over 10 years | ||||
| Amount | Annual average interest rate | Amount | Annual average interest rate | Amount | Annual average interest rate | Amount | Annual average interest rate | |
|
| ThCh$ | % | ThCh$ | % | ThCh$ | % | ThCh$ | % |
Long term bank liabilities | R$ | 740,645 | 9.94 | - | - | - | - | - | - |
Long term bonds payable | US$ | - | - | - | - | - | - | 993,780 | 7.63 |
- | Indexed Ch$ | 6,406,221 | 6,50 | 8,541,628 | 6.50 | 21,354,085 | 6.50 | 36,301,908 | 6.50 |
Other creditors | AR$ | 79,559 | - | - | - | - | - | - | - |
Notes and accounts payable related companies | Non-indexed Ch$ | 3,340,602 | - | - | - | - | - | - | - |
- | R$ | 41,281 | - | - | - | - | - | - | - |
Provisions | Indexed Ch$ | - | - | - | - | - | - | 5,662,619 | - |
- | Non-indexed Ch$ | 762,502 | - | - | - | - | - | - | - |
- | AR$ | 1,538,744 | - | - | - | - | - | - | - |
- | R$ | 8,964,088 | - | - | - | - | - | - | - |
Deferred taxes | Non-indexed Ch$ | 521,504 | - | - | - | - | - | - | - |
- | R$ | 11,415,202 | - | - | - | - | - | - | - |
- | AR$ |
438,830 | - | - | - | - | - | - | - |
Other liabilities | Non-indexed Ch$ | - | - | - | - | 5,523,976 | - | - | - |
- | AR$ | - | - | 221,569 | - | 1,994,116 | - | - | - |
- | R$ | 4,483,744 | - | - | - | - | - | - | - |
Total long term liabilities | R$ | 25,644,960 |
| - |
| - |
| - |
|
| US$ | - |
| - |
| - |
| 993,780 |
|
| Indexed Ch$ | 6,406,221 |
| 8,541,628 |
| 21,354,085 |
| 41,964,527 |
|
| AR$ | 2,057,133 |
| 221,569 |
| 1,994,116 |
| - |
|
| Non-indexed Ch$ | 4,624,608 |
| - |
| 5,523,976 |
| - |
|
35
Note 29 - Local and Foreign Currency (continuation)
Long term liabilities at December 31, 2006 were composed of local and foreign currencies as follows:
|
|
|
|
|
|
|
|
|
|
| Currency | 1 to 3 years | 3 to 5 years | 5 to 10 years | Over 10 years | ||||
|
| Amount | Annual average interest rate | Amount | Annual average interest rate | Amount | Annual average interest rate | Amount | Annual average interest rate |
|
| ThCh$ | % | ThCh$ | % | ThCh$ | % | ThCh$ | % |
Long term bank liabilities | R$ | 448,971 | 15.59 | - | - | - | - | - | - |
Long term portion of bonds payable | Indexed Ch$ | 8,641,876 | 6.20 | 8,572,365 | 6.50 | 21,430,914 | 6.50 | 40,718,737 | 6.50 |
- | US$ | - | - | - | - | - | - | 2,287,146 | 7.63 |
Other creditors | AR$ | 111,218 | - | - | - | - | - | - | - |
- | R$ | - | - | 31,932 | - | - | - | - | - |
Notes and accounts payable related companies | Non-indexed Ch$ | 3,812,304 | - | - | - | - | - | - | - |
Provisions | Indexed Ch$ | - | - | - | - | - | - | 5,311,941 | - |
- | Non-indexed Ch$ | 695,848 | - | - | - | - | - | - | - |
- | AR$ | 1,814,288 | - | - | - | - | - | - | - |
- | R$ | 10,541,689 | - | - | - | - | - | - | - |
Deferred taxes | Non-indexed Ch$ | - | - | - | - | - | - | 2,606,142 | - |
- | AR$ | - | - | 484,363 | - | - | - | - | - |
- | R$ | 1,342,598 | - | - | - | - | - | - | - |
Other liabilities | Non-indexed Ch$ | - | - | - | - | 6,148,310 | - | - | - |
- | AR$ | - | - | 222,140 | - | 1,999,247 | - | - | - |
- | R$ | 2,450,545 | - | - | - | - | - | - | - |
Total long term liabilities | R$ | 14,783,803 |
| 31,932 |
| - |
| - |
|
| Indexed Ch$ | 8,641,876 |
| 8,572,365 |
| 21,430,914 |
| 46,030,678 |
|
| US$ | - |
| - |
| - |
| 2,287,146 |
|
| AR$ | 1,925,506 |
| 706,503 |
| 1,999,247 |
| - |
|
| Non-indexed Ch$ | 4,508,152 |
| - |
| 6,148,310 |
| 2,606,142 |
|
36
Note 30 – Penalties
The Company has not been subject to penalties by the SVS or any other administrative authority.
Note 31 - Subsequent Events
On January 1, 2008 Embotelladora Andina S.A. (“Andina”) signed a new Bottler Agreement for its Chilean operations for a 5 year-term. The new agreement, called NEWBA, does not significantly differ from other similar agreements signed in the countries where Andina has operations.
There are no financial or other matters to be reported which have occurred between the closing period of December 31, 2007 and the date of preparation of these financial statements that may have an impact over Company assets, liabilities and/or results.
Note 32 – Environment
The Company has disbursed ThCh$4,748,328 to improve its industrial process, industrial waste metering equipment, laboratory analyses, environmental impact consultancy and other studies. Future commitments, which are all short-term and for the same concepts, amount to ThCh$125,988.
37
REPORT OF INDEPENDENT AUDITORS
(Translation of original in Spanish)
Santiago, February 7, 2008
To the Shareholders and Directors
Embotelladora Andina S.A.
We have audited the accompanying consolidated balance sheets of Embotelladora Andina S.A. and its subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the related consolidated statements of income and of cash flows for the years then ended. These financial statements (including the corresponding notes) are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The analysis of the financial results and relevant facts attached are not part of these financial statements, and therefore this report is not related to them.
We conducted our audits in accordance with auditing standards generally accepted in Chile. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Embotelladora Andina S.A. and its subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in Chile.
Juan Carlos Pitta De C.
Id N°: 14.709.125-7
38
Material Events
During the period between January 1, 2007 and December 31, 2007, the following material events were filed:
Shareholders’ Meeting Resolutions
At the Regular General Shareholders’ Meeting of Embotelladora Andina S.A., held yesterday, April 17, 2007 (hereinafter the “Meeting”), among other matters, the following was resolved:
1.
The distribution of the following amounts as Final Dividend N° 155, on account of the fiscal year ending December 31, 2006: (a) Ch$11.120 (eleven pesos and one hundred and twenty cents) per Series A shares; and (b) Ch$12.232 (twelve pesos and two hundred and thirty two cents) per Series B shares. This dividend will be available to shareholders beginning April 26, 2007. Regarding payment of this dividend, the Shareholders’ Registry will close on April 20, 2007.
2.
The distribution of an Additional Dividend N° 156 on account of retained earnings: (a) Ch$65.190 (sixty five pesos and one hundred and ninety cents) per Series A shares; and (b) Ch$71.709 (seventy one pesos and seven hundred and nine cents) per Series B shares. This dividend will be available to shareholders beginning July 5, 2007. Regarding payment of this dividend, the Shareholders Registry will close on June 28, 2007.
3.
The Meeting acknowledged and approved the amendment of the Company’s dividend safeguard and payment procedures that will be in full force and effect beginning with the previously mentioned Final Dividend N° 155. Current payment procedures, consisting of the payment of dividends within the first seven days at the Company’s corporate domicile and the following days at the offices of DCV, will no longer continue. The payment of dividends will now solely take place at the offices of DCV, located at Huérfanos 770, 22nd floor, Santiago, in coordination with Banco de Crédito e Inversiones S.A. (“BCI”). Hence, the new dividend payment procedure considers the participation of DCV Registros S.A., BCI and our Company.
Board Appointments and Committees
The following resolutions were adopted at the Regular Board of Directors Meeting held April 24, 2007:
1.
Mr. Juan Claro was ratified in his position of Chairman of the Board of the Company.
2.
Mr. Salvador Said Somavía was appointed new Vice-Chairman of the Board of the Company.
3.
The Executive Committee was elected, comprised of regular directors José Antonio Garcés Silva, Arturo Majlis Albala, Gonzalo Said Handal and Salvador Said Somavía.
This Committee is also comprised, by virtue of office, by Mr. Juan Claro González, Chairman of the Board, and Mr. Jaime García Rioseco, Chief Executive Officer of the Company.
4.
The current composition of the Article 50-bis Directors Committee (pursuant to the Companies Law) was ratified, which will continue to be comprised of Regular Directors Juan Claro González, José Antonio Garcés Silva and Heriberto Urzúa Sánchez. Mr. Claro will continue to be the Chairman of this Committee.
5.
The current composition of the Audit Committee under the U.S. Sarbanes–Oxley Act was ratified, which will continue to be comprised of regular directors Juan Claro González, José Antonio Garcés Silva and Heriberto Urzúa Sánchez. Mr. Claro will continue to be the Chairman of this Committee.
6.
Mr. Pedro Pellegrini Ripamonti, Corporate Legal Manager, was appointed representative or person authorized to receive notifications in absence of Mr. Renato Ramírez Fernández, General Manager.
Legal Strike – Chilean Operations
Embotelladora Andina S.A. informs that Workers’ Union N° of our Company’s Chilean Operations has entered into a legal strike on this date, Wednesday June 6, 2007, within the framework of renewing the Collective Bargaining Agreement. The strike involves 222 workers affiliated to Workers’ Union N°1 of a total of 886 who work at the Company’s Chilean Bottling facility. The Collective Bargaining Agreements of the other Unions of the Company’s Chilean operations are in full force and effect and the remaining employees are working normally.
The Company has implemented timely measures to maintain all commercial and production activities in order to supply the market accordingly.
End of Legal Strike – Chilean Operations
Embotelladora Andina S.A. informs that the strike that had been called on June 6, 2007, by its Union No. 1 (comprised of 223 workers out of a total of 886 who work for the company) has ended on June 26, 2007. With this, the Company and all of its workers have resumed their job functions under complete normality.
39
Review of Concentrate Price – Chilean Operations
At a special board meeting held August 20, 2007, it was disclosed thatThe Coca-Cola Company (TCCC) advised its intent to revise the "concentrate price" in Chile. This price is a percentage rate applied on beverage sales revenues under the franchise agreement. TCCC intends to increase that concentrate price as of January 1, 2008 in respect of revenues from the incremental sales over the 2007 sales value. The prevailing concentrate price would thus be applied to the amount of the Andina Chilean franchise's total sales for as much as the equivalent to the 2007 sales revenues. Since the effect of this potential measure cannot yet be determined nor the way in which it will ultimately be applied, Andina will disclose the outcome of these conversations once the negotiation process has concluded.
Joint Venture Agreement of our Brazilian subsidiary Rio de Janeiro Refrescos Ltda.
On October 4, 2007, a Joint Venture Agreement (hereinafter, "JV") was signed in Brazil whereby our subsidiary, Rio de Janeiro Refrescos Ltda. ("RJR") has associated to all Coca-Cola bottlers in Brazil in a company whose purpose is to exploit the juice market in such country, called "MAIS INDUSTRIA DE ALIMENTOS S.A." ("Sucos Mais"). The JV in Sucos Mais will be made up as follows: 50% by the 18 Coca-Cola bottlers in Brazil and 50% by the company representing Coca-Cola in such country (called "Recofarma Indústria do Amazonas Ltda."). The contribution of RJR to the JV in the company Sucos Mais will amount to R$12,816,851 (twelve million eight hundred and sixteen thousand eight hundred and fifty one reales), which was invested on October 4, 2007 and will enable obtaining an interest of 7.35% in the corporate capital of Sucos Mais in 2008.
Dividends distributed during the 2007 period | |||
|
|
|
|
Number | Payment Date | Ch$ per Series A shares | Ch$ per Series B shares |
154 | January 31, 2007 | 5.60 | 6.16 |
155 | April 26, 2007 | 11.120 | 12.232 |
156 | July 5, 2007 | 65.190 | 71.709 |
157 | July 26, 2007 | 7.00 | 7.70 |
158 | October 24, 2007 | 7.00 | 7.70 |
No other significant events of a financial or any other nature have occurred between December 31, 2007 and the issuance date of these financial statements that affect or may affect the assets, liabilities and/or income of the Company.
40
Analysis of Results for the Fourth Quarter of 2007 and the Year Ended December 31, 2007
Highlights
-
Operating Income reached US$87.3 million during the fourth quarter 2007, increasing 11.5% compared to the same period of 2006. Operating Margin was 21.8%.
-
Consolidated Sales Volume for the fourth quarter amounted to 132.6 million unit cases, an increase of 8.0% during the quarter.
-
Fourth quarter EBITDA totaled US$102.2 million, representing an increase of 8.8% compared to the fourth quarter 2006. EBITDA Margin was 25.6%.
-
Consolidated Operating Income reached US$232.4 million during the full year ended December 31, 2007, 13.0% higher than the figure for the full year ended December 31, 2006. Operating Margin was 18.1%.
-
Consolidated Sales Volume for the full year ended December 31, 2007 totaled 441.3 million unit cases, an increase of 6.3% compared to 2006.
-
Consolidated EBITDA for the full year ended December 31, 2007 amounted to US$291.1 million, an increase of 8.0%. EBITDA Margin was 22.7%.
-
Net Income for the full year ended December 31, 2007 reached US$164.2 million, 2.2% growth with respect to 2006.
Comments from the Chief Executive Officer, Mr. Jaime Garcia R.
“In an extremely challenging year, consolidated volumes of Andina’s products exceeded 6% growth, while the company’s operating income also improved, led once again by the excellent results obtained in the company’s Brazilian operations. It is especially rewarding to see how everybody’s efforts with regards to Andina’s progress have rendered positive results. Once again, the company reaffirms its commitment to continuously seek value added opportunities.”
CONSOLIDATED SUMMARY
Full Year ended December 31, 2007 vs. Full Year ended December 31, 2006
During the full year ended December 31, 2007, the Company reported solid results due to growth in volume, increases in real prices and positive macro-economic surroundings. The average 10.3% appreciation of the Brazilian real had a positive impact over Andina’s dollar-denominated costs and the translation of figures. On average, the Chilean peso appreciated 1.2%, while the Argentine peso posted 1.4% depreciation.
Consolidated Sales Volume amounted to 441.3 million unit cases, an increase of 6.3%. Soft Drinks increased 5.4%, while the Juices, Waters and Beer categories together increased 16.9%.
Net Sales amounted to US$1,281.3 million, 8.4% higher than 2006. This was a result of higher volumes and price adjustments along with a favorable exchange rate in Brazil upon the translation of figures.
Cost of Sales per unit case decreased 1.3% compared to 2006, mainly due to the decrease of PET resin costs and the positive effect of currency revaluations, partially offset by an increase in the costs of sugar and labor.
On the other hand, SG&A expenses increased 13.4% as a result of higher volumes, increases in advertising expenses, and freight fees, which rose due to higher labor costs and fuel prices.
Consolidated Operating Income amounted to US$232.4 million, a 13.0% increase compared to 2006. Operating Margin was 18.1%, an increase of 70 basis points.
Consolidated EBITDA amounted to US$291.1 million, an increase of 8.0%. EBITDA Margin was 22.7%.
41
Fourth Quarter 2007 vs. Fourth Quarter 2006
Consolidated Sales Volume for the fourth quarter 2007 reached 132.6 million unit cases, an 8.0% increase compared to the same period of 2006.
Net Sales amounted to US$399.5 million, representing a 10.8% improvement compared to the fourth quarter 2006, mainly due to increased volumes and a significant increase in average income in Brazil.
Cost of Sales per unit case increased 3.2%, best explained by the previously-mentioned circumstances of 2007.
SG&A expenses increased 25%, as a result of increased volumes, higher freight fees and the increase in advertising expenses, particularly in Brazil.
Consolidated Operating Income amounted to US$87.3 million, an 11.5% increase compared to the fourth quarter 2006. Operating Margin was 21.8%.
Finally, consolidated EBITDA amounted to US$102.2 million, an 8.8% improvement compared to the same period of 2006. EBITDA Margin was 25.6%.
SUMMARY BY COUNTRY
CHILE
Full Year ended December 31, 2007 vs. Full Year ended December 31, 2006
During 2007, Sales Volume amounted to 151.3 million unit cases, 5.3% growth best explained by the significant launch ofCoca-Cola Zero (already representing over 7% of the soft drinks portfolio in Chile) and the growth of the Juice category (+18%, other launches in 2007 wereNestea andAndina Gold 100%), also impacted by the severe winter of 2007. The increase of Soft Drink volumes was 4.1%, while the Juices and Waters segment was 10.7%.
Net Sales amounted to US$492.4 million, a 3.6% improvement compared to 2006, as a result of higher volumes along with slightly lower prices in real terms compared to 2006.
Operating Income was 2.8% higher than the figure reported in 2006, amounting to US$114.9 million. Operating Margin was 23.3%.
EBITDA amounted to US$140 million, similar to that of the previous year. EBITDA Margin was 28.5%.
Fourth Quarter 2007 vs. Fourth Quarter 2006
During the fourth quarter 2007, Sales Volume amounted to 46.6 million unit cases, 7.8% growth compared to the same period of 2006. Soft Drinks increased by 5.5% (highlighted by the Light/Diet category), while Juices and Waters increased 19.0%. Additionally, the trial period of the New Distribution Centers in Maipú and Puente Alto began during the quarter. In the long term, these distribution centers should add cost efficiencies in product distribution.
Net Sales amounted to US$148.4 million, growth of 2.4%, explained by increased volumes, partially offset by a decrease in average real income, mainly due to the unusually high inflation recorded for this period, totaling 2.2% for the fourth quarter (compared to historically negative, or very low figures for the fourth quarter).
Cost of Sales per unit case decreased 5.6%. This lower cost is best explained by the decrease in the cost of PET resin and the positive effect of the revaluation of the Chilean peso, partially offset by the increase in the cost of sugar and labor.
42
Operating Income amounted to US$40.8 million, remaining stable compared to the fourth quarter 2006. Operating Margin was 27.5%.
EBITDA amounted to US$47.4 million, equivalent to that of the same period of 2006. EBITDA Margin was 32%.
BRAZIL
Full Year ended December 31, 2007 vs. Full Year ended December 31, 2006
Sales Volume amounted to 174.7 million unit cases, representing 7.5% growth for the period ended December 31, 2007. In part, this significant growth is mainly due to the launch ofCoca-Cola Zero (already representing 5% of the Soft Drinks portfolio in Brazil), as well as 32.5% growth of other categories (Juices, Waters and Beer). Other significant launches during the period wereAquarius Fresh,Fanta Mundo andLaranja Caseira juice (homemade style).
Net Sales reached US$543.4 million, increasing 14.8% compared to 2006. This significant increase was a result of volume growth, price adjustments and the favorable exchange rate upon the translation of figures.
Cost of Sales per unit case increased 0.5%, principally due to the translation of figures as there was a decrease in the costs of main raw materials (sugar and PET resin). Higher freight fees and revaluation of the Brazilianreal led to an increase in SG&A of 19.6%.
Operating Income increased 30.7%, amounting to US$96.6 million. Operating Margin was 17.8%, an improvement of 220 basis points.
EBITDA amounted to US$116.6 million, an increase of 22.7%, with an EBITDA Margin of 21.5%, increasing 140 basis points compared to the comparable period.
Fourth Quarter 2007 vs. Fourth Quarter 2006
Sales Volume for the fourth quarter 2007 amounted to 50.7 million unit cases, 9.3% higher compared to the volume reported in the fourth quarter 2006. TheMais Indústria de Alimentos S.A. joint venture was created during this quarter between Brazilian bottlers and The Coca-Cola Company for the purpose of producing non-carbonated beverages for the entire system in Brazil. This agreement will leverage economies of scale and increased competitiveness in a category that represents an important part of Andina’s future growth.
Net Sales reached US$172.4 million, representing a significant increase of 22.1%. This growth along with higher volumes is explained by price adjustments during the period, as well as the appreciation of the Brazilian exchange rate, which had a positive impact upon translating figures into U.S. dollars.
Cost of Sales per unit case grew 1.3% best explained by the figure conversion effect (negatively impacting costs), along with the increase in concentrate (resulting from price adjustments) and the cost of labor. These factors were partially offset by the decrease in the cost of sugar and PET resin.
Operating Income reached US$39.4 million, an improvement of 30.7%, while Operating Margin was 22.9%, an improvement of 160 basis points.
Finally, EBITDA amounted to US$44.5 million, a 25.3% improvement compared to the US$35.5 million recorded in the fourth quarter 2006. EBITDA Margin was 25.8%, an increase of 70 basis points compared to the same period in 2006.
ARGENTINA
43
Full Year ended December 31, 2007 vs. Full Year ended December 31, 2006
Sales Volume reached 115.3 million unit cases, a 5.9% improvement compared to the Sales Volume reported in 2006. This increase was supported by the launch ofCoca-Cola Zero in theLight(Diet) segment, (representing 3.5% of the Soft Drinks portfolio), as well as an increase in salaries.
Net Sales reached US$252.1 million, representing an increase of 4.2%. This increase is explained by higher volumes and price adjustments that took place during the period, partially offset by the effect of figure translation due the devaluation of the Argentine peso (1.4% on average for the period).
Cost of Sales per unit case decreased 5.6% due to the restatement of 2006 figures in accordance to the CPI. However in local currency, there was an increase in the price of sugar, partially offset by lower PET resin costs. SG&A increased 13.8% mainly due to volumes and higher salaries.
Operating Income amounted to US$26.6 million, representing a 5.4% increase. Operating Margin was 10.4%, 10 basis points higher than 2006.
EBITDA reached US$39.3 million. EBITDA Margin amounted to 15.6%.
Fourth Quarter 2007 vs. Fourth Quarter 2006
Sales Volume for the fourth quarter 2007 increased 6.6%, reaching 35.2 million unit cases.
Net Sales reached US$80.3 million, representing an increase of 5.7% compared to the fourth quarter 2006. This improvement is explained by increased volumes, partially offset by the figure translation effect due to the devaluation of the Argentine peso.
Cost of Sales for the quarter was similar to the figure for 2006.
Operating Income amounted to US$9.8 million. Operating Margin was 12.2%, 60 basis points lower than the fourth quarter 2006.
Finally, EBITDA reached US$13.0 million, remaining stable compared to the fourth quarter 2006. EBITDA Margin was 16.2%, a decrease of 110 basis points compared to the fourth quarter 2006.
NON-OPERATING RESULTS
Full Year ended December 31, 2007 vs. Full Year ended December 31, 2006
Non-Operating Results totaled a loss of (US$14.0) million, a 10.3% decrease compared to the accumulated loss of (US$15.7) million recorded in 2006.
Income Tax increased significantly, mainly due to Brazil and Argentina having exhausted their tax loss carry forwards, as well as increased earnings growth contributed by those countries.
Net income amounted to US$164.2 million, an increase of 2.2% compared to the figure recorded in 2006.
ANALYSIS OF THE BALANCE SHEET
As of December 31, 2007, the Company’s financial assets amounted to US$280.0 million. These represent cash, investments in mutual funds, time deposits, and U.S. Treasury bonds. With the“Cross-Currency Swap”
44
agreements currently in full force, and effect 67.3% of our financial assets are denominated inUFs (Chilean Inflation Indexed Currency), while 15.3% is denominated in U.S. dollars.
On the other hand, the Company’s total debt was US$169.5 million, with an average annual rate of 6.48% on Chileanpeso-denominated (UF) debt, and an average real annual rate of 7.63% on U.S. dollar-denominated debt. TheUF-denominated debt represents 94.4% of total debt, while U.S. dollar-denominated debt represents 1.2%.
As a result, the Company holds a positive net cash position of US$110.5 million.
45
II.
Main Indicators
The main indicators contained in the table reflect for both periods the solid financial position and profitability of Embotelladora Andina S.A.
Indicators | Unit | Dec-07 | Dec-06 | Dec 07 vs. | |
Liquidity |
|
|
|
| |
| Current Ratio | Times | 1.92 | 1.30 | 0.62 |
| Acid Tests | Times | 1.72 | 1.12 | 0.60 |
| Working Capital | MCh$ | 27,405 | 23,827 | 3,578 |
Activity |
|
|
|
| |
| Investments | MCh$ | 56,024 | 39,743 | 16,282 |
| Inventory turnover | Times | 13.60 | 15.42 | -1.81 |
| Days of inventory on hand | Days | 26.46 | 23.35 | 3.11 |
Indebtedness |
|
|
|
| |
| Debt to equity ratio | % | 92.22% | 86.94% | 5.28% |
| Short-term liabilities to total liabilities | % | 53.48% | 52.86% | 0.62% |
| Long-term liabilities to total liabilities | % | 46.52% | 47.14% | -0.62% |
| Interest charges coverage ratio | Times | 23.73 | 23.50 | 0.23 |
Profitability |
|
|
|
| |
| Return over equity | % | 28.32% | 27.10% | 1.23% |
| Return over total assets | % | 14.94% | 14.15% | 0.79% |
| Return over operating assets | % | 32.80% | 30.72% | 2.08% |
| Operating income | MCh$ | 115,494 | 102,241 | 13,254 |
| Operating margin | % | 18.14% | 17.41% | 0.73% |
| EBITDA1 | MCh$ | 148,941 | 137,382 | 11,559 |
| EBITDA margin | % | 23.39% | 23.40% | 0.00% |
| Dividends payout ratio - Series A shares | % | 7.16% | 6.61% | 0.55% |
| Dividends payout ratio - Series B shares | % | 7.33% | 6.72% | 0.60% |
1Earnings before income taxes, interests, depreciation, amortization and extraordinary items.
Liquidity indicators improve due to an increase of short term assets during the period, resulting from reclassifying long term financial assets to short term, due to the sale of long term corporate bonds which where reinvested in marketable securities and short term time deposits.
Indicators of indebtedness reflect a slight improvement mainly due to a decrease in shareholders’ equity resulting from the payment of an additional dividend during July 2007. During the period net financial expenses amounted to Ch$4,775 million and earnings before interests and taxes amounted to Ch$113,290 million, achieving an interest coverage of 23.3 times, significantly higher than the previous period.
At year end 2007, operating profitability indicators and profitability over equity benefited from the reasons mentioned in paragraph I, along with a decrease in shareholders’ equity resulting from the extraordinary dividend payment during July 2007.
46
III.
Analysis of Book Values and Present Value of Assets
With respect to the Company’s main assets the following should be noted:
Given the high rotation of the items that compose working capital, book values of current assets are considered to represent market values.
Fixed asset values in the Chilean companies are presented at restated acquisition cost. In the foreign companies, fixed assets are valued in accordance with Technical Bulletin N° 64 issued by the Chilean Institute of Accountants (controlled in historical dollars).
Depreciation is estimated over the restated value of assets along with the remaining useful economic life of each asset.
All fixed assets that are considered available for sale are held at their respective market values.
Investments in shares, in situations where the Company has a significant influence on the issuing company, are presented following the equity method. The Company’s participation in the results of the issuing company for each year has been recognized on an accrual basis, and unrealized results on transactions between related companies have been eliminated.
In summary, assets are valued in accordance with generally accepted accounting standards in Chile and the instructions provided by the Chilean Securities Commission, as shown in Note 2 of the Financial Statements.
IV.
Analysis Of The Main Components Of Cash Flow
Cash Flow (MCh$) | Dec-07 | Dec-06 | Variation MCh$ | Variation |
Operating | 137,139 | 136,314 | 825 | 1% |
Financing | -90,737 | -120,627 | 29,890 | 25% |
Investment | 31,446 | 6,425 | 25,021 | -389% |
Net cash flow for the Period | 77,848 | 22,112 | 55,736 | -252% |
The Company generated positive net cash flow of MCh$77,848 during the quarter, analyzed as follows:
Operating activities generated a positive cash flow of MCh$137,139 representing a positive variation of MCh$825 mainly explained by increased collections from clients and partially compensated by higher income taxes and other taxes due to better results obtained regarding the previous year.
Financing activities generated a negative cash flow of MCh$90,737; with a positive variation of MCh$29,890 regarding the previous year, mainly because of lower net payments of bank liabilities compared to the same period of 2006.
Investment activities generated a positive cash flow of MCh$31,446 with a positive variation of MCh$25,021 regarding the previous year, mainly explained by higher sales of investments in financial instruments during the current year, and which was partially offset by higher investments in property, plant and equipment, and higher permanent investments during 2007.
V.
Analysis Of Market Risk
Interest Rate Risk
47
As of December 31, 2006 and 2007, the Company held 100% of its debt obligations at fixed-rates. Consequently, the risk fluctuation of market interest rates regarding the Company’s cash flow remains low.
Foreign Currency Risk
Income generated by the Company is linked to the currencies of the markets in which it operates. For the period the breakdown for each is the following:
Chilean peso:
38%
Brazilian real:
42%
Argentine peso:
20%
Since the Company’s sales are not linked to the United States dollar, the policy adopted for managing foreign exchange risk, this is the mismatch between assets and liabilities denominated in a given currency, has been to maintain financial investments in dollar-denominated instruments, for an amount at least equivalent to the dollar-denominated liabilities.
Additionally, it is Company policy to maintain foreign currency hedge agreements to lessen the effects of exchange risk in cash expenditures expressed in US dollars which mainly correspond to payment to suppliers for raw materials.
Accounting exposure of foreign subsidiaries (Brazil and Argentina) for the difference between monetary assets and liabilities, those denominated in local currency, and therefore, exposed to risks upon translation to the US dollar, are only covered when it is foreseen that it will result in significant negative differences and when the associated cost of said coverage is deemed reasonable by management.
Commodity Risks
The Company faces the risk of price changes in the international markets for sugar, aluminum and PET resin, all of which are necessary raw materials for preparing beverages, and that altogether represent between 25% and 30% of our operating costs. In order to minimize and/or stabilize such risk, supply contracts and advanced purchases are negotiated when market conditions are favorable. Likewise commodity coverage instruments have also been utilized.
This document may contain forward-looking statements reflecting Embotelladora Andina SA’s good faith expectations and are based upon currently available data; however, actual results are subject to numerous uncertainties, many of which are beyond the control of the Company and any one or more of which could materially impact actual performance. Among the factors that can cause performance to differ materially are: political and economic conditions on consumer spending, pricing pressure resulting from competitive discounting by other bottlers, climatic conditions in the Southern Cone, and other risk factors applicable from time to time and listed in Andina’s periodic reports filed with relevant regulatory institutions.
48
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Santiago, Chile.
EMBOTELLADORA ANDINA S.A.
By:/s/ Osvaldo Garay
Name: Osvaldo Garay
Title: Chief Financial Officer
Santiago, April 8, 2008