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
For March 28, 2006
Andina Bottling Company, Inc.
-----------------------------
(Translation of registrant's name into English)
Avenida Andres Bello 2687
-----------------------------------------
Piso 20, Las Condes
--------------------------------------
Santiago
-------------------------------
Chile
---------------------------
(Address of principal executive offices)
Form 20-F X Form 40-F
--- ---
Indicate by check mark whether the registrant by furnishing the
information contained in this Form 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
--- ---
ANDINA BOTTLING COMPANY, INC. (THE "COMPANY")
REPORT ON FORM 6-K
TABLE OF CONTENTS
1. Consolidated Financial Statements of the Company for the period ended
December 31, 2005.
EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES
Consolidated financial statements
December 31, 2005
(Translation of original in Spanish)
CONTENTS
Report of Independent Auditors
Consolidated balance sheet
Consolidated vstatement of income
Consolidated statement of cash flows
Notes to the consolidated financial statements
Ch$ - Chilean pesos
ThCh$ - Thousands of Chilean pesos
US$ - United States dollars
ThUS$ - Thousands of United States dollars
R$ - Brazilian Reals
ThR$ - Thousands of Brazilian Reals
A$ - Argentine pesos
ThA$ - Thousands of Argentine pesos
UF - Unidades de Fomento (Chilean government
inflation-indexed monetary units)
REPORT OF INDEPENDENT AUDITORS
(Translation of original in Spanish)
Santiago, January 25, 2006
To the Shareholders and Directors
Embotelladora Andina S.A.
1 We have audited the accompanying consolidated balance sheets of
Embotelladora Andina S.A. and its subsidiaries (the "Company") at
December 31, 2005 and 2004, 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 Results and relevant facts attached are not part of these
financial statements, and therefore this report is not related to
them.
2 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.
3 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, 2005 and 2004, and the results of their operations and
their cash flows for the years then ended, in conformity with
accounting principles generally accepted in Chile.
Eduardo Vergara D.
Id N(degree): 6.810.153-0
EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
For the years ended December 31,
--------------------------------
2005 2004
ThCh$ ThCh$
-------------- -----------
TOTAL CURRENT ASSETS 162,015,514 137,085,610
Cash 14,412,531 14,324,761
Time deposits 25,700,571 7,833,816
Marketable securities (net) 14,003,282 16,660,657
Trade accounts receivable (net) 34,207,081 32,341,391
Notes receivable (net) 11,142,844 10,361,590
Other receivables (net) 19,777,487 16,860,558
Notes and accounts receivable from related companies 5,587,160 85,029
Inventories (net) 17,425,364 21,463,406
Recoverable Taxes 9,780,175 5,773,594
Prepaid expenses 1,607,654 1,960,736
Deferred Income Taxes 0 0
Other current assets 8,371,365 9,420,072
TOTAL PROPERTY, PLANT & EQUIPMENT 139,306,057 159,157,273
Land 12,687,024 14,791,171
Buildings & improvements 79,542,528 94,749,077
Machinery and equipment 204,303,414 213,495,853
Other property, plant & equipment 196,549,926 199,205,825
Technical reappraisal of property, plant & equipment 2,014,038 2,014,038
Depreciation (355,790,873) (365,098,691)
TOTAL OTHER ASSETS 224,728,026 304,358,641
Investments in related companies 21,386,070 20,733,308
Investments in other companies 54,570 56,202
Goodwill 71,393,139 86,832,454
Negative Goodwill 0 0
Long-term receivables 110,473 48,638
Long-term notes and accounts receivable from related
companies 22,492 34,863
Long-term Deferred Income Taxes 676,498 0
Intangibles 409,059 460,913
Amortization (233,209) (238,274)
Others 130,908,934 196,430,537
TOTAL ASSETS 526,049,597 600,601,524
The accompanying Notes 1 to 41 are an integral part of these consolidated
financial statements.
For the years ended December 31,
--------------------------------
2005 2004
ThCh$ ThCh$
-------------- ------------
TOTAL CURRENT LIABILITIES 124,761,977 110,226,023
Short-term bank liabilities 27,935,329 19,089,670
Current portion of long-term bank liabilities 484,101 1,990,097
Current portion of bonds payable 13,684,254 13,760,409
Dividends payable 3,978,869 4,600,639
Accounts payable 37,876,730 35,152,154
Notes payable 0 5,180
Other creditors 2,825,697 3,011,134
Notes and accounts payable to related companies 8,330,817 10,370,232
Provisions 631,543 330,627
Withholdings 16,345,028 14,118,908
Income taxes payable 8,691,404 5,094,059
Unearned income 249,206 0
Deferred income taxes 711,623 140,643
Other current liabilities 3,017,376 2,562,271
TOTAL LONG-TERM LIABILITIES 131,733,500 189,002,571
Long-term bank liabilities 454,501 47,183,445
Bonds payable 101,802,194 115,827,434
Other creditors 146,581 170,455
Provisions 21,115,867 17,559,882
Deferred Income Taxes 0 393,113
Other long-term liabilities 8,214,357 7,868,242
MINORITY INTEREST 1,117,529 53,749
TOTAL SHAREHOLDERS' EQUITY 268,436,591 301,319,181
Paid-in capital 197,904,994 197,904,994
Other reserves (201,145) 15,098,813
Retained earnings 70,732,742 88,315,374
Accumulated earnings 26,334,355 58,711,421
Net income for the period 56,039,346 41,604,440
Interim dividends (11,640,959) (12,000,487)
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 526,049,597 600,601,524
The accompanying Notes 1 to 41 are an integral part of these consolidated
financial statements.
EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31,
--------------------------------
2005 2004
ThCh$ ThCh$
--------------- -------------
OPERATING INCOME 77,908,047 65,149,957
Gross Margin 191,076,894 165,865,562
Net Sales 478,471,736 428,649,371
Cost of sales (287,394,842) (262,783,809)
Administrative and selling expenses (113,168,847) (100,715,605)
NON OPERATING INCOME AND EXPENSE (13,331,828) (19,455,929)
Financial Income 28,522,013 24,156,197
Equity in earnings of equity investments 1,136,341 1,023,865
Other non-operating income 7,312,986 847,771
Equity in losses of equity investments (366,805) 0
Amortization of goodwill (6,228,916) (7,186,162)
Financial Expenses (21,112,171) (19,829,540)
Other non-operating expenses (7,738,132) (6,394,577)
Price level restatement (570,051) 948,173
Foreign exchange gains (14,287,093) (13,021,656)
Income before income taxes and extraordinary
items 64,576,219 45,694,028
Income tax expense (8,549,042) (4,086,815)
Income before minority interest 56,027,177 41,607,213
Minority interest 12,169 (2,773)
NET INCOME 56,039,346 41,604,440
NET INCOME FOR THE PERIOD 56,039,346 41,604,440
The accompanying Notes 1 to 41 are an integral part of these consolidated
financial statements.
For the years ended December 31,
--------------------------------
2005 2004
-------------- --------------
ThCh$ ThCh$
CASH FLOWS FROM OPERATING ACTIVITIES 96,823,237 72,819,083
Collection of trade receivables 677,672,086 581,976,500
Financial income received 21,228,508 10,506,732
Dividend & other distributions received 1,402,429 3,562,217
Other income received 24,757 25,135
Payments to suppliers and personnel (497,206,835) (427,883,620)
Interest paid (20,010,363) (17,663,990)
Income taxes paid (4,984,176) (4,385,628)
Other expenses paid 0 (20,145)
VAT and other tax payments (81,303,169) (73,298,118)
CASH FLOWS FROM FINANCING ACTIVITIES (114,121,718) (45,375,673)
Borrowings 54,681,343 62,253,664
Other sources of financing 0 8,507
Dividend distribution (72,551,644) (47,403,265)
Loan payments (84,572,010) (48,567,022)
Bond payments (11,679,407) (11,667,557)
CASH FLOWS FROM INVESTMENT ACTIVITIES 10,907,864 (38,944,990)
Proceeds from sales of property, plant and equipment 3,390,445 886,586
Proceeds from sales of other investments 60,198,268 23,243,235
Additions to property, plant & equipment (27,395,137) (26,149,665)
Permanent investments (319,501) (9,084,491)
Investments in financial instruments (24,966,211) (27,840,655)
NET DECREASE IN CASH AND CASH EQUIVALENTS (6,390,617) (11,501,580)
PRICE LEVEL RESTATEMENT OF CASH AND CASH EQUIVALENTS (576,499) (3,964,578)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (6,967,116) (15,466,158)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,116,023 43,582,181
CASH AND CASH EQUIVALENTS AT YEAR END 21,148,907 28,116,023
The accompanying Notes 1 to 41 are an integral part of these consolidated
financial statements.
EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
RECONCILIATION BETWEEN NET INCOME AND NET CASH FLOWS
PROVIDED BY OPERATING ACTIVITIES
For the years ended December 31,
--------------------------------
2005 2004
----------- ----------
ThCh$ ThCh$
NET INCOME 56,039,346 41,604,440
Income on sale of assets: (4,141,697) 286,067
Gain on sale of property, plant and equipment (249,185) 291,511
Gain on sale of investments (3,890,351) 0
Gain on sale of other assets (2,161) (5,444)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
OEPRATING ACTIVITIES 48,398,493 55,668,866
Depreciation 29,037,017 32,581,390
Amortization of intangibles 324,396 275,711
Write-offs and provisions 1,629,259 5,031,834
Equity in earnings of equity investments (1,136,341) (1,023,865)
Equity in losses of equity investments 366,805 0
Amortization of goodwill 6,228,916 7,186,162
Price-level restatement 570,051 (948,173)
Exchange losses, net 14,287,093 13,021,656
Other credits to income that do not represent cash flows (2,908,703) (455,849)
CHANGES IN OPERATING ASSETS (28,566,576) (24,602,264)
(Increase) decrease in trade accounts receivable (2,427,314) (3,234,204)
(Increase) decrease in inventories 2,420,870 (2,186,232)
(Increase) decrease in other assets (28,560,132) (19,181,828)
CHANGES IN OPERATING LIABILITIES 25,105,840 (140,799)
Increase (decrease) in accounts payable related to operating income (5,698,674) (7,119,751)
Increase (decrease) in interest payable 12,690,895 7,507,714
Increase (decrease) in income taxes payable 5,645,867 740,066
Increase (decrease) in other accounts payable related to
non-operating income 5,397,433 3,186,888
Increase (decrease) in VAT and other similar items 7,070,319 (4,455,716)
Income attributable to Minority interest (12,169) 2,773
NET CASH PROVIDED BY OPERATING ACTIVITIES 96,823,237 72,819,083
The accompanying Notes 1 to 41 are an integral part of these consolidated
financial statements.
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 Superintendency 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, 2005 and are compared to the same period in 2004.
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 3.6% 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 intercompany
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:
Ownership Interest
December 31,
December 31, 2005 2004
Company Name Direct Indirect Total Total
- ------------------------------------ ------ ------ ------ -------
ABISA CORP S.A. 0.00 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 0.00 99.99 99.90
ANDINA BOTTLING INVESTMENTS DOS S.A. 99.90 0.09 99.99 99.99
EMBOTELLADORA DEL ATLANTICO S.A. 0.00 99.99 99.99 99.99
ENVASES MULTIPACK S.A. 5.00 94.99 99.99 99.99
RIO DE JANEIRO REFRESCOS LTDA. 0.00 99.99 99.99 99.99
SERVICIOS MULTIVENDING LTDA. 99.90 0.09 99.99 99.99
TRANSPORTE ANDINA REFRESCOS LTDA. 99.90 0.09 99.99 99.99
VITAL S.A. 0.00 99.99 99.99 99.99
RJR INVESTMENTS CORP S.A. 0.00 99.99 99.99 99.99
VITAL AGUAS S.A. 56.50 0.00 56.50 0.00
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 3.6%
for the period December 1, 2004 to November 30, 2005 (2.5% 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. UF denominated
balances have been restated according to CPI changes or the agreed rate.
Assets and liabilities in foreign currency and Unidades de Fomento have been
translated into local currency at the following year-end exchange rates:
2005 2004
Ch$ Ch$
---------- ---------
Unidades de Fomento (UF) 17,974.81 17,317.05
United States dollars (US$) 512.5 557.4
Argentine pesos (A$) 169.03 187.11
Brazilian Real (R$) 222.37 209.99
Euro 606.08 760.13
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 with a pre-established value are valued at the adjusted
cost, plus accrued interest.
h) Inventories
The cost of raw materials includes all disbursements made in the acquisition
process and deemed necessary for them to be readily available at the Company's
or its subsidiaries' warehouse. 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 debts 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.
j) Property, plant and equipment
Property, plant and equipment are carried at restated cost plus price-level
restatements. 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 revalued
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.
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% annual rate and a capitalization period using the
staff's expected length of service to their retirement date.
s) Deposits for containers
Corresponds to the liabilities constituted by cash guarantees received from
clients for lending bottles to them. The amount of such inventory is
determined annually through an annual inventory of containers in the
possession of clients. This inventory is valued at the average weighted value
of the guarantee for the last seven years, for each type of container, and the
effect is recorded in the operating income of the Company for those container
guarantees established through January 31, 2001. These guarantees are not
adjustable and they do not have an expiration date; therefore, the liability
valuation was calculated for the seven aforesaid years.
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 forward and swap currency contracts used to cover
the risk of exposure to exchange rate differences as follows:
These hedge instruments are recorded at their market values for existing
items. Unrealized losses are recognized as a charge to income and gains are
deferred and included in Other liabilities (current or long-term), depending
on whether the difference is a loss or gain.
Hedge contracts for forecasted transactions are recorded at market value and
their changes in value are accounted for as unrealized gains or losses. Upon
contract expiration, the deferred gains and losses are recorded in income.
v) Computer software
Software currently in use corresponds to computer packages purchased from
third parties, and programs developed internally. Software purchased from
third parties is capitalized and amortized over a maximum period of four
years. Disbursements incurred for internally developed programs are expensed.
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 flow, the Company has
considered cash equivalent to be investments in fixed-income mutual funds and
time deposits maturing within 90 days, repurchase 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.
NOTE 4 - MARKETABLE SECURITIES
The composition of the balance at December 31, 2005, was as follows:
Accounting value for the period ended December 31,
--------------------------------------------------
2005 2004
ThCh$ ThCh$
------------- -----------
Bonds 11,725,444 10,703,212
Investment funds 2,277,838 5,957,445
Total Marketable Securities 14,003,282 16,660,657
Par
Fixed Income Date Value Accounting value Market Value
------------------------- --------- ---------------- ------------
Purchase Maturity Amount Rate
------------ ------------ --------- -----
ThCh$ ThCh$
BONO TELEFONOS DE MEXICO S.A. Dec 10, 2001 Jan 26, 2006 2,565,151 2,565,151 8.250% 2,658,060
CLN ENERSIS Nov 12, 2003 Nov 12, 2006 9,160,293 9,160,293 5.70% 9,251,896
Balance as of
Investment Funds December 31, 2005
-----------------
ThCh$
Citi Institutional Liquid Reserves Limited 2,277,838
Total 2,277,838
NOTE 5 - SHORT-AND LONG-TERM RECEIVABLES
95.72% of the portfolio of receivables corresponds to the soft drink business
and 4.28% to the container business. The receivables had a turnover equivalent
to 10.93 times (10.09 times in 2004).
The balance of the Other Creditors account corresponds to prepayments made to
our sugar suppliers in Chile.
Current Long Term
------------------------------------------------------------------------------ -------------------
More than 90 days up
Up to 90 days to 1 year Subtotal Total Current (net)
--------------------- -------------------- ---------- --------------------
Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31,
2005 2004 2005 2004 2005 2005 2004 2005 2004
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
---------- ---------- --------- --------- ---------- ---------- ---------- --------- --------
Trade receivables 34,347,030 30,239,238 1,256,338 2,102,153 35,603,368 34,207,081 32,341,391 0 0
Allowance for doubtful
accounts 0 0 0 0 1,396,287 0 0 0 0
Notes receivable 11,280,311 8,870,039 251,680 1,491,551 11,531,991 11,142,844 10,361,590 0 0
Allowance for doubtful
accounts 0 0 0 0 389,147 0 0
Other receivables 19,677,470 16,298,551 175,967 562,007 19,853,437 19,777,487 16,860,558 110,473 48,638
Allowance for doubtful
accounts 0 0 0 0 75,950 0 0 0 0
Total long term
receivables 110,473 48,638
NOTE 6 - BALANCES AND TRANSACTIONS WITH RELATED COMPANIES
Accounts payable and receivable with related companies correspond mainly to
product purchases and sales made at market conditions. These balances are due
within approximately 45 days.
Accounts receivable from Embonor S.A. and Embotelladora Coca-Cola Polar S.A.
correspond to sale price of Vital Aguas S.A. shares according to the operation
described under Note 14 hereto.
a) Notes and accounts receivable
Company Short Term Long Term
- ----------------------------- ---------------------------------- ---------------------------------
Dec. 31, 2005 Dec. 31, 2004 Dec. 31, 2005 Dec. 31, 2004
------------- ------------- ------------- -------------
ThCh$ ThCh$ ThCh$ ThCh$
EMBONOR S.A. 3,039,414 0 0 0
EMBOTELLADORA COCA-COLA POLAR
S.A. 1,964,473 0 0 0
COCA COLA DE CHILE S.A. 559,825 0 22,492 34,863
CENTRALLI REFRIGERANTE S.A. 23,448 85,029 0 0
TOTAL 5,587,160 85,029 22,492 34,863
b) Notes and accounts payable
Company Short Term Long Term
- ------------------------------------- -------------------------------- --------------------------------
Dec 31, 2005 Dec 31, 2004 Dec 31, 2005 Dec 31, 2004
------------ ------------ ------------ ------------
ThCh$ ThCh$ ThCh$ ThCh$
ENVASES CMF S.A. 3,834,888 4,159,172 0 0
RECOFARMA INDUSTRIAS DO AMAZONAS LTDA. 2,422,475 3,739,389 0 0
SPBR S.R.L. 895,299 0 0 0
ENVASES CENTRAL S.A. 843,981 1,102,213 0 0
ENVASES DEL PACIFICO S.A. 289,970 233,562 0 0
CICAN S.A. 44,204 0 0 0
COCA-COLA DE CHILE S.A. 0 582,513 0 0
COCA-COLA DE ARGENTINA S.A. 0 553,383 0 0
TOTAL 8,330,817 10,370,232 0 0
Transactions with related companies were as follows:
Company Relation Transaction Dec. 31, 2005 Dec. 31, 2004
- -------------------------- --------------- --------------- ---------------------------- -------------------------
Effect on Income Effect on Income
---------------------------- -------------------------
Amount ((charge)/credit) Amount ((charge)/credit)
----------- --------------- ----------- ----------------
Sales of raw
materials and
ENVASES CENTRAL S.A. Equity investee supplies 1,002,743 722,331 29,035
Finished product
- - purchases 13,791,158 12,997,297
Shareholder Concentrate
COCA-COLA DE CHILE S.A. Related purchases 40,837,885 38,072,035
Payment of
advertising
- - participation 2,846,149 (2,846,149) 1,783,636 (1,783,636)
- - Water source rental 1,505,662 (1,505,662) 1,415,233 (1,415,233)
Sales of
- - advertisement 3,190,898 2,412,111
SERVICIOS Y PRODUCTOS PARA Shareholder Concentrate
BEBIDAS REFRESCANTES Related purchases 20,094,330 17,560,546
Director in Concentrate
ENVASES DEL PACIFICO S.A. common purchases 780,356 875,698
RECOFARMA INDUSTRIAS DO Shareholder Concentrate
AMAZONAS LTDA. Related purchases 29,537,358 26,541,703
Incentive over
investment in
property, plant
- - and equipment 426,210 275,557
Advertising
- - Participation 3,128,398 (3,128,398) 3,796,172 (3,485,372)
Purchase of
ENVASES CMF S.A. Equity investee Containers 15,903,837 13,897,947
Sales of raw
- - materials 51,654
- - Services Rendered 130,390
Shareholder
EMBONOR S.A. Related Sale of Shares 3,039,414 2,363,613
EMBOTELLADORA COCA-COLA POLAR Shareholder
S.A. Related Sale of Shares 1,964,473 1,526,738
INMOBILIARIA Y CONSTRUCTORA Shareholder in
EL GOLF S.A. Common Real Estate Purchase 16,106 1,811,106
INVERSIONES CABURGA S.A. Shareholder Real Estate Sale 1,023,777
Director in
IANSAGRO S.A. common Sugar Purchase 12,181,560 10,432,092
NOTE 7 - INVENTORIES
Inventories at each year end consisted of the following:
December 31, 2005 December 31, 2004
---------------------------------------------- --------------------------------------------
Gross Obsolescence Net Gross Obsolescence Net
value provision Value value provision Value
----------- --------------- ---------- ----------- ------------- ---------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Finished products 8,268,640 (54,725) 8,213,915 7,524,649 (51,694) 7,472,955
Raw Materials 8,262,378 (95,890) 8,166,488 12,178,562 (179,125) 11,999,437
Raw Materials in Transit 905,856 0 905,856 1,914,107 0 1,914,107
Products in process 139,105 0 139,105 76,907 0 76,907
Total 17,575,979 (150,615) 17,425,364 21,694,225 (230,819) 21,463,406
NOTE 8 - INCOME TAXES AND DEFERRED INCOME TAXES
a) At year end 2005 and 2004, the Company does not present taxable profits
funds or non-taxable profits. (Short-term and long-term assets and
liabilities must be netted out to conform the general balance sheet on
deferred taxes).
b) Deferred income taxes at each year-end were as follows:
December 31, 2005 December 31, 2004
------------------------------------ -----------------------------------
Assets Liabilities Assets Liabilities
---------------- ---------------- ---------------- ----------------
Short Long Short Long Short Long Short Long
Term Term Term Term Term Term Term Term
------ ----- ------ ------ ------ ------ ------ ------
Temporary Differences ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
- ---------------------
Allowance for doubtful
accounts 235,152 93,456 0 0 0 0 0 0
Vacation provision 156,036 0 0 0 123,377 0 0 0
Production expenses 5,496 0 0 0 0 0 0 0
Depreciation of property,
plant & equipment 0 0 120,438 4,121,979 0 0 126,440 5,082,176
Severance indemnities 39,552 0 38,426 265,873 0 0 5,397 580,917
Other events 896,563 759,442 0 82,990 0 0 0 0
Provision for asset write off 0 828,958 0 0 166,631 1,030,617 0 0
Provision for labor &
commercial lawsuits 0 4,209,886 0 0 0 3,455,073 0 0
Tax loss carry-forwards 987,782 8,850,783 0 0 393,556 14,526,290 0 0
Guarantee deposit 0 0 0 2,618,328 0 0 0 2,753,820
Others 0 959,356 0 0 831,659 2,597,267 0 260,602
Local bond issue expenses 0 0 0 207,378 0 0 0 206,143
Contingency allowance 0 1,716,221 0 0 0 1,576,542 0 0
Social contributions 355,601 2,123,386 0 0 141,681 2,646,227 0 0
Property, plant & equipment
valuation 0 0 0 0 447,052 116,192 0 0
Accrued interests abroad 0 0 3,363,023 0 0 0 2,112,762 0
Obsolescence of inventories 134,082 0 0 0 0 0 0 0
Others
- ------
Complementary accounts, net
of amortization 0 3,914,861 0 3,093,270 0 3,889,811 0 3,748,210
Valuation allowance 0 10,746,851 0 0 0 17,316,062 0 0
Total 2,810,264 4,879,776 3,521,887 4,203,278 2,103,956 4,742,335 2,244,599 5,135,448
c) Income tax expense for each year was as follows:
December 31, 2005 December 31, 2004
----------------- -----------------
Item ThCh$ ThCh$
- -------------------------------------------------------------------------------
Current tax expense (tax allowance) (8,960,706) (4,082,771)
Tax expense adjustment (previous period) (156,763) 562,404
Deferred income tax expense/effect over assets or liabilities (2,955,521) (1,398,271)
Amortization of deferred income tax asset and liability complementary accounts (940,921) (997,810)
Deferred income tax expense/effect over assets or liabilities due to changes in
the valuation allowance 4,621,111 2,072,188
Other charges or credits (156,242) (242,555)
Total (8,549,042) (4,086,815)
NOTE 9 - SHORT AND LONG-TERM LEASING AGREEMENTS AND LEASING ASSETS
Not applicable.
NOTE 10 - OTHER CURRENT ASSETS
In accordance with Circular 1501, no information was reported since this
balance represents less than 10% of Current assets.
NOTE 11 - REPURCHASE / RESALE AGREEMENTS
The Company had no repurchase/resale agreements.
NOTE 12 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted 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
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 Frio, Nova Iguazu, Espirito
Santo and Vitoria.
a) Principal components of property, plant and equipment at each year end
are as follows:
Balances at December 31, 2005 Balances at December 31, 2004
---------------------------------------- ----------------------------------------
Net Net
property, property,
Accumulated plant & Accumulated plant &
Assets Depreciation equipment Assets Depreciation equipment
----------- ------------- ----------- ----------- ------------ -----------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Land 12,687,024 0 12,687,024 14,791,171 0 14,791,171
Buildings and improvements 79,542,528 (31,459,675) 48,082,853 94,749,077 (35,248,640) 59,500,437
Machinery and equipment 204,303,414 (156,447,928) 47,855,486 213,495,853 (169,349,661) 44,146,192
Other property, plant and equipment 196,549,926 (167,277,950) 29,271,976 199,205,825 (159,905,126) 39,300,699
Technical reappraisal of property,
plant & equipment 2,014,038 (605,320) 1,408,718 2,014,038 (595,264) 1,418,774
Total 495,096,930 (355,790,873) 139,306,057 524,255,964 (365,098,691) 159,157,273
b) Other property, plant and equipment at each year end were as follows:
Balances at
December 31,
-----------------------------
2005 2004
------------ -------------
ThCh$ ThCh$
Containers 109,020,038 109,680,495
Refrigerating equipment, promotional items
and other minor assets 54,015,575 56,006,300
Furniture and tools 3,938,744 4,460,639
Others 29,575,569 29,058,391
Total other property, plant and equipment 196,549,926 199,205,825
c) Gain on Technical reappraisal of property, plant and equipment at each
year end was as follows:
Balances at December 31, 2005 Balances at December 31, 2004
----------------------------------------------- -----------------------------------------------
Net property, Net property,
Accumulated plant & Accumulated plant &
Assets Depreciation equipment Assets Depreciation equipment
------------ --------------- ---------------- ----------- --------------- ----------------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Land 1,344,922 0 1,344,922 1,346,144 0 1,346,144
Buildings and
improvements 188,348 (127,185) 61,163 186,651 (122,796) 63,855
Machinery and
equipment 480,768 (478,135) 2,633 481,243 (472,468) 8,775
Total 2,014,038 (605,320) 1,408,718 2,014,038 (595,264) 1,418,774
d) Depreciation for the period
Depreciation for the period amounted to ThCh$29,037,017 and ThCh$22,879,079
are included, under Operating Costs and ThCh$6,157,938 under Sales and
Administrative Expenses in the Income Statement.
NOTE 13 - SALES TRANSACTIONS UNDER LEASEBACK AGREEMENTS
The Company had no agreements of this type.
NOTE 14 - INVESTMENT IN RELATED COMPANIES
Investment 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.
The main changes occurred in the reported periods are described below:
Centralli Refrigerantes S.A. records a negative equity, which has been
provisioned accordingly.
The investments in Kaik Partipacoes Ltda. (Brazil) and in Cican S.A.
(Argentina), where Embotelladora Andina S.A. holds an indirect ownership of
11.32% and 15.2% respectively, have been valued according to the equity
method, because we have presence in both companies through a Director, who
participates in the procedures for setting policies, operating and financial
decisions in accordance with the ownership structure of both companies, which
are exclusively owned by Coca-Cola bottlers in Brazil and Argentina,
respectively.
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.
At the Extraordinary Shareholders' Meeting of the closed stock corporation,
Envases Central S.A. which took place on March 30, 2004, it was agreed to
increase the company's capital to ThCh$4,606,133 (historical Chilean pesos),
through an issue of 1,743,555 shares, with no nominal value and of the same
previously existing series. Embotelladora Andina S.A. subscribed and paid
929,838 shares for a total contribution of ThCh$879,945 (historical Chilean
pesos), holding an ownership interest of 49.91%.
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. The realized amount is ThCh$71,261 for this period.
On December 22, 2005 the production and packaging business of waters, juices
and non-carbonated beverages licensed by The Coca-Cola Company ("TCCC") in
Chile was restructured. Vital Aguas S.A. is created with the purpose of
developing the de process, production and packaging business of Vital de
Chanqueahue Mineral Water and other water and products according to the terms
of the contracts and authorizations agreed upon by Vital Aguas S.A. and TCCC.
Consequently, Vital S.A. will focus on juices and non-carbonated beverages.
Accordingly, Embotelladora Andina S.A., Embonor S.A. and Embotelladora
Coca-Cola Polar S.A. have taken an interest of 56.5%, 26.4% and 17.1%,
respectively, in Vital Aguas S.A., which will conduct the business of the
processing, production and bottling of the Vital de Chanqueahue Mineral Water
and other water and products, according to the terms of the contracts and
authorizations agreed upon by Vital Aguas S.A. and TCCC.
The equity interests of Embonor and Polar in Vital Aguas S.A. were acquired by
purchase from Embotelladora Andina S.A. and its subsidiary, Andina Inversiones
Societarias S.A., at the prices equivalent to 169,306 Unidades de Fomento and
109,428 Unidades de Fomento, respectively, generating earnings of
ThCh$3,890,351 (215,919 Unidades de Fomento), and is presented under Other
Non-Operating Income.
Unrealized income corresponds to transactions between subsidiaries and/or the
parent company that have been deducted or added to the category of the
originating asset with the following effect on income of the subsidiaries:
2005 2004
---------- ---------
ThCh$ ThCh$
Envases CMF S.A. Purchase of containers (1,172,465) (893,951)
Purchase of finished
Envases Central S.A. products (15,391) (17,001)
No liabilities have been designated as hedging instruments for investments
abroad.
Income likely to be remitted by subsidiaries abroad amounts to US$186.3
million.
Investments in related companies and the related direct participation in
equity and unrealized results at each year end were as follows.
Income
Ownership Equity of (loss) for Accrued
Interest companies the period income
-------------------------------------------------------------------------------------
Number Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec.
Functional of 31, 31, 31, 31, 31, 31, 31, 31,
Company Country Currency Shares 2005 2004 2005 2004 2005 2004 2005 2004
- ------- ------- -------- ------ ---- ---- ---- ---- ---- ---- ---- ----
% % ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
ENVASES CMF S.A. CHILE CH$ 28,000 50.0000 50.0000 36,322,423 35,927,535 2,890,890 2,241,707 272,980 226,903
ENVASES CENTRAL S.A. CHILE CH$ 1,499,398 49.9100 49.9100 4,395,782 5,099,878 -704,096 207,538 -366,805 84,251
KAIK PARTIPACOES BRAZIL US$ 16,098,919 11.3197 11.3197 11,497,850 8,269,870 4,275,246 5,190,644 483,945 587,566
CICAN S.A. ARGENTINA US$ 3,040 15.2000 15.2000 6,936,290 5,002,978 2,496,160 823,321 379,416 125,145
CENTRALLI
REFRIGERANTES BRAZIL US$ 3,005 0.0000 25.0000 0 0 0 0 0 0
(continued)
Partic in net Unrealized income Book value of
income (loss) (loss) investment
- ------------------------------ ----------------------------- ------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2005 2004 2005 2004 2005 2004
- ----------- ----------- --------- ----------- ---------- ------------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
18,161,213 17,963,768 1,104,547 1,175,808 17,056,666 16,787,960
2,193,935 2,469,140 220,369 220,369 1,973,566 2,248,771
1,301,522 936,124 0 0 1,301,522 936,124
1,054,316 760,453 0 0 1,054,316 760,453
0 0 0 0 0 0
22,710,986 22,129,485 1,324,916 1,396,177 21,386,070 20,733,308
- -----------------------------------------------------------------------------------------------------
NOTE 15 - INVESTMENTS IN OTHER COMPANIES
In accordance with Circular 1501, no information was reported since this
balance represents less than 10% of Other assets.
NOTE 16 - GOODWILL AND NEGATIVE GOODWILL
Goodwill at each year end and the amortization during each year were as
follows:
December 31, 2005 December 31, 2004
-------------------------- ---------------------------
Amortization Amortization
during the Goodwill during the Goodwill
period balance period balance
------------ --------- ------------ ------------
Company ThCh$ ThCh$ ThCh$ ThCh$
RIO DE JANEIRO REFRESCOS LTDA. 3,414,723 43,183,996 3,569,011 51,974,728
EMBOTELLADORA DEL ATLANTICO S.A. 2,685,025 27,563,299 3,025,388 34,082,714
VITAL S.A. 129,168 645,844 516,675 775,012
ENVASES CENTRAL S.A. 0 0 75,088 0
TOTAL 6,228,916 71,393,139 7,186,162 86,832,454
NOTA 17 - INTANGIBLES
In accordance with Circular 1501, no information was reported since the
balance represents less than 10% of Other assets.
NOTE 18 - OTHER LONG TERM ASSETS
Other long term assets at each year end were as follows:
2005 2004
ThCh$ ThCh$
---------- -----------
Bonds:
Celulosa Arauco S.A. 11.667.149 13.128.102
Enap S.A. 9.168.967 10.447.993
Endesa S.A. 7.806.071 8.858.910
Chile Soberano 7.374.607 8.341.357
Petroleos Mexicanos S.A. 7.281.238 13.480.595
Compania Manufacturera de Papeles y
Cartones S.A. 7.085.623 5.090.039
Telefonos de Mexico S.A. 6.852.357 8.450.532
Codelco S.A. 5.265.521 5.972.364
Mexico Soberano 4.794.416 11.254.319
Banco Scotiabank Sud Americano 4.305.747 2.940.937
Federal Home Loan Bank (FHLB) 2.569.144 0
Brasil Telecom S.A. 2.097.851 0
Raytheon Company 2.085.723 0
International Paper Company 2.050.000 0
Altria Group 1.185.225 0
Alcoa Inc. 1.047.797 0
Banco Santander Santiago S.A. 0 8.143.208
Time Deposit Deutsche Bank AG. 0 47.574.012
CLN Enersis Euros Deutsche Bank AG. 0 11.902.195
CLN Endesa Deutsche Bank AG. 5.125.000 5.958.347
CLN GMAC Deutsche Bank AG. 1.660.500 1.870.991
CLN Ford Deutsche Bank AG. 1.537.500 1.732.399
Cross Currency Swap 27.315.999 18.580.627
Judicial Deposits (Brazil) 4.150.826 3.796.170
Issuance Expense Bond Placement 3.276.948 3.639.114
Recoverable taxes 44.212 50.703
Prepaid expenses 1.697.462 1.620.514
Non operating assets 910.783 947.556
Others 2.552.268 2.649.553
Total 130.908.934 196.430.537
NOTE 19 - SHORT-TERM BANK LIABILITIES
Short-term bank liabilities were as follows:
Other foreign
US Dollars currencies Non-indexed Ch$ TOTAL
------------------ ------------------ -------------------- --------------------
Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31,
2005 2004 2005 2004 2005 2004 2005 2004
------ ------- ------- ------- ------- ------- ------- -------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
DEXIA BANK BELGIUM 21,011,358 0 0 0 0 0 21,011,358
BANCO RIO 0 0 2,751,805 0 0 0 2,751,805 0
BANCO BBVA FRANCES 0 0 1,834,122 0 0 0 1,834,122 0
BANCO CHILE 0 0 0 0 1,426,355 12,310,682 1,426,355 12,310,682
BANCO HSBC ROBERTS 0 0 911,689 0 0 0 911,689 0
BANCO ESTADO 0 0 0 0 0 6,643,772 0 6,643,772
BANKBOSTON 0 0 0 135,160 0 0 0 135,160
BANCO ITAU 0 0 0 56 0 0 0 56
Others 0 0 0 0 0 0 0 0
Total 21,011,358 0 5,497,616 135,216 1,426,355 18,954,454 27,935,329 19,089,670
Principal Due 20,500,000 0 5,070,910 135,216 0 18,917,360 25,570,910 19,052,576
Other foreign
US Dollars currencies Non-indexed Ch$ TOTAL
------------------ ---------------- ------------------- -------------------
Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31,
2005 2004 2005 2004 2005 2004 2005 2004
------- ------- ------- ------- ------- ------- ------- -------
Average annual interest
rate 6.51% 8.92% 3.3%
Foreign currency
liabilities (%) 94.8900
Local currency
liabilities (%) 5.1100
Long term bank liabilities current portion:
Currency or Indexation Adjustment
Bank or Financial
Institution US Dollars Other foreign currencies TOTAL
- ----------------- ------------------------------ ------------------------------ -------------------------------
December 31, December 31, December 31, December 31, December 31, December 31,
-------------- -------------- ------------- ------------- -------------- ------------
2005 2004 2005 2004 2005 2004
----- ----- ----- ----- ----- -----
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
BANCO BOSTON 0 0 160,682 168,078 160,682 168,078
BANCO BRADESCO 0 0 0 0 0 0
BANCO ITAU 0 0 0 359,944 0 359,944
BANCO SANTANDER 0 0 323,419 309,717 323,419 309,717
DEXIA BANK BELGIUM 0 1,152,358 0 0 0 1,152,358
Total 0 1,152,358 484,101 837,739 484,101 1,990,097
Principal Due 0 46,197,312 478,275 741,063 478,275 46,938,375
Annual average interest rate 6.51% 13.26% 13.52%
Foreign currency liabilities 100,00
(%)
Local currency liabilities 0,00
(%)
NOTE 20 - OTHER CURRENT LIABILITIES
In accordance with Circular 1501, no information was reported since this
balance represents less than 10% of current liabilities.
NOTE 21-LONG-TERM BANK LIABILITIES
Long-term bank liabilities were as follows:
Years to Maturity
----------------- Total long term Average Total long term
More than 1 up at December 31, annual at December 31,
Bank or Financial Institution Currency to 2 2005 interest rate 2004
- ----------------------------- -------- ----------------- --------------- ------------- ---------------
ThCh$ ThCh$ ThCh$
Other
BANCO ITAU currency 0 0 14,935
Other
BANCO BOSTON currency 13,112 13,112 13.68% 167,596
Other
BANCO SANTANDER currency 441,389 441,389 13.27% 803,602
DEXIA BANK BELGIUM US$ 0 0 46,197,312
TOTAL 454,501 454,501 47,183,445
Foreign currency liabilities (%) 100.00
NOTE 22 - LONG-AND SHORT-TERM BONDS PAYABLE (PROMISSORY NOTES AND BONDS)
Risk classification of current bonds is as follows:
BONDS ISSUED IN THE US MARKET
A- : Rating according to Fitch Ratings Ltda.
BBB+ : Rating according to Standard & Poor's
BONDS ISSUED IN THE LOCAL MARKET
AA : Rating according to Fitch Ratings Ltda.
AA : Rating according to Feller & Rate Ltda.
Bond repurchases.
During 2000, 2001 and 2002, 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$314 million of the US$350 million, which are presented deducting the
long term liability from the bonds payable account.
Bonds issued by the subsidiary Rio de Janeiro Refrescos Ltda. (RJR).
The subsidiary RJR has liabilities corresponding to an issuance of bonds for
US$75 million maturing in December 2007 and semiannual interest payments. At
the closing of 2005 and 2004, all such bonds are wholly-owned by the
subsidiary Abisa Corp. Consequently, the effects of such transactions have
been eliminated from these consolidated financial statements, both in the
balance sheet and in the consolidated statement of income.
Details of bonds payable are as follows:
Term Par Value Placement
Nominal Interest Maturity Interest Amortization Dec 31, Dec 31, in Chile
Series Value Currency rate date paid period 2005 2004 or abroad
------ ------- -------- -------- -------- -------- ------------ --------- ----------- ------------
Current portion of
long term bonds
YANKEE BONDS October 1, HALF
INTERESTS A 32,076,000 US$ 7% 2007 YEARLY OCT. 2007 287,682 324,149 FOREIGN
YANKEE BONDS October 1, HALF
INTERESTS B 4,000,000 US$ 7.625% 2027 YEARLY OCT. 2027 39,078 44,032 FOREIGN
REGISTRO 254 SVS
June 13, 2001
CAPITAL AND June 1, HALF
INTERESTS A 1,650,000 UF 6.200% 2008 YEARLY JUN. 2008 13,002,920 13,038,331 CHILE
REGISTRO 254 SVS
June 13, 2001
CAPITAL AND June 1, HALF
INTERESTS B 3,700,000 UF 6.500% 2026 YEARLY JUN. 2026 354,574 353,897 CHILE
Total 13,684,254 13,760,409
Long term bonds
October 1, HALF
BONOS YANKEE BONDS A 32,076,000 US$ 7% 2007 YEARLY OCT. 2007 16,438,950 18,522,812 FOREIGN
October 1, HALF
BONOS YANKEE BONDS B 4,000,000 US$ 7.625% 2027 YEARLY OCT. 2027 2,050,000 2,309,866 FOREIGN
REGISTROS 254 SVS June 1, HALF
June 13, 2001 A 1,650,000 UF 6.200% 2008 YEARLY JUN. 2008 16,806,447 28,615,040 CHILE
REGISTROS 254 SVS June 1, HALF
June 13, 2001 B 3,700,000 UF 6.500% 2026 YEARLY JUN. 2026 66,506,797 66,379,716 CHILE
Total 101,802,194 115,827,434
NOTE 23 - PROVISIONS AND WRITE-OFFS
Provisions at each year end were as follows:
Short Term Long Term
------------------------- ---------------------------
2005 2004 2005 2004
Provisions ThCh$ ThCh$ ThCh$ ThCh$
- -------------------------------------------------------------- ----------- ---------- ----------- -----------
Staff severance indemnities 557,061 187,893 4,912,572 2,627,145
Contingencies 74,347 79,652 8,218,899 7,835,125
Taxation on banking transactions & social contribution (Brazil) 0 0 7,984,396 5,836,432
Other Provisions 135 63,082 0 1,261,180
T O T A L 631,543 330,627 21,115,867 17,559,882
Write-offs for the period amounted to ThCh$825,652.
NOTE 24 - STAFF SEVERANCE INDEMNITIES
Movements in the provision for staff severance indemnities were as follows:
2005 2004
--------- ---------
ThCh$ ThCh$
Beginning balance 2,717,423 2,561,084
Provision for the
period 2,988,269 491,204
Payments (236,059) (237,250)
Ending balance 5,469,633 2,815,038
NOTE 25 - OTHER LONG-TERM LIABILITIES
In accordance with Circular 1501, no information was reported since this
balance represents less than 10% of Long-term liabilities.
NOTE 26 - MINORITY INTEREST
2005 2004
--------- --------
LIABILITIES ThCh$ ThCh$
Vital Aguas S.A. 1,099,917 0
Embotelladora del Atlantico S.A. 17,555 0
Andina Inversiones Societarias
S.A. 57 53,749
1,117,529 53,749
INCOME STATEMENT
Vital Aguas S.A. 13,629 0
Embotelladora del Atlantico S.A. (1,458) 0
Andina Inversiones Societarias
S.A. (2) (2,773)
12,169 (2,773)
NOTE 27 - CHANGES IN SHAREHOLDERS' EQUITY
Movements in shareholders' equity were as follows:
December 31, 2005
--------------------------------------------------------------------
Paid in Other Accumulated Interim Net
Capital Reserves Income Dividends Income
----------- ----------- ------------ ----------- ------------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Beginning balance 191.027.986 14.574.144 56.671.256 -11.583.482 40.158.726
Distribution of 0 0 28.575.244 11.583.482 -40.158.726
prior-year income
Final dividend 0 0 -3.831.785 0 0
prior-year income
Translation 0 -15.299.958 0 0 0
adjustment reserve
Extraordinary 0 0 -55.880.179 0 0
dividend against
accumulated income
Capital revalued 6.877.008 524.669 799.819 -145.608 0
Income for the 0 0 0 0 56.039.346
period
Interim dividends 0 0 0 -11.495.351 0
Ending balance 197.904.994 -201.145 26.334.355 -11.640.959 56.039.346
Price level
restated balances
(continued)
December 31, 2004
- ----------------------------------------------------------------------------
Paid in Other Accumulated Interim Net
Capital Reserves Income Dividends Income
- ----------- ----------- ----------- ----------- -----------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
186.368.767 25.478.595 86.808.880 -11.476.192 15.754.549
0 0 4.278.357 11.476.192 -15.754.549
0 0 -3.831.784 0 0
0 -11.541.416 0 0 0
0 0 -31.931.532 0 0
4.659.219 636.965 1.347.335 -88.131 0
0 0 0 0 40.158.726
0 0 0 -11.495.351 0
191.027.986 14.574.144 56.671.256 -11.583.482 40.158.726
197.904.994 15.098.813 58.711.421 -12.000.487 41.604.440
b) Number of shares:
Series Subscribed Paid in Number of shares
Shares shares with voting rights
- ---------- ------------ ----------- -------------------
A 380,137,271 380,137,271 380,137,271
B 380,137,271 380,137,271 380,137,271
c) Capital:
Subscribed Paid in
Capital Capital
Series ThCh$ ThCh$
- ------ ---------- ----------
A 98,952,497 98,952,497
B 98,952,497 98,952,497
d) Other reserves:
Other reserves at each year end were as follows:
2005 2004
ThCh$ ThCh$
----------- ----------
Reserve for cumulative translation adjustments(1) (1,189,427) 14,110,531
Reserve for technical reappraisal of property, plant and
equipment 166,491 166,491
Other reserves 821,791 821,791
Total (201,145) 15,098,813
(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
gains generated
Balance during the period Balance
Subsidiary January 1, 2005 Investment December 31, 2005
- ------------------------------ --------------- ----------------- -----------------
ThCh$ ThCh$ ThCh$
Rio de Janeiro Refrescos Ltda. 7,975,590 (10,205,741) (2,230,151)
Embotelladora del Atlantico S.A.
6,134,941 (5,094,217) 1,040,724
Total 14,110,531 (15,299,958) (1,189,427)
NOTE 28 - OTHER NON-OPERATING INCOME AND EXPENSES
2005 2004
ThCh$ ThCh$
--------- -------
Other non-operating income during the period was as follows:
Gain on sale of Vital Aguas S.A. shares 3,890,351 0
Gain on sale of plant, property and equipment 267,834 0
Office Lease 0 29,115
Other income 246,098 362,807
Sub-total 4,404,283 391,922
Translation of Financial Statements (1) 2,908,703 455,849
Total 7,312,986 847,771
Other non-operating expenses during the period was as follows:
Staff severance indemnities (2,404,004) (2,384)
PIS Cofins (2,280,217) 0
Obsolescence and write-offs of property, plant and
equipment (1,113,431) (128,137)
Provision for labor and commercial lawsuits (544,448) (1,716,919)
Lawsuit fees (502,906) 0
Provision loss of investment in Centralli (60,817) (82,053)
Loss on sale of property, plant and equipment 0 (291,510)
Provision property plant and equipment Itaoca 0 (2,995,708)
Provision loss of investment in Transora 0 (635,240)
Others (832,309) (542,626)
Sub-total (7,738,132) (6,394,577)
Translation of financial statements(1) 0 0
Total (7,738,132) (6,394,577)
(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(degree)64 issued by the Chilean Institute of Accountants, presented as
Other Non-Operating Income and Expenses.
NOTE 29 - PRICE-LEVEL RESTATEMENT
Price-level restatement for each year end was as follows:
December 31, 2005 December 31, 2004
----------------- -----------------
ThCh$ ThCh$
Assets - (charges)/credits Index
- --------------------------- -----
Inventories CPI 308,716 (185,070)
Property, plant and equipment CPI 2,698,524 2,021,047
Investments in related companies CPI 5,368,618 3,935,171
Cash, Time Deposits, Marketable Securities CPI 38,685 36,714
Trade Accounts Receivable, Notes Receivable, Other
Receivables UF 918 1,072
Trade Accounts Receivable, Notes Receivable, Other
Receivables CPI 2,064 0
Accounts Receivable related Companies short term UF 0 2,811
Accounts Receivable related Companies short term CPI 1,422,067 859,597
Recoverable taxes CPI 108,676 995
Other current assets UF 153,351 67,386
Other current assets CPI 520,721 866,240
Other long term assets CPI 4,349,047 4,367,376
Costs and Expenses accounts CPI 5,161,567 3,175,556
Goodwill CPI (17,955) 0
Total (charges)/credits 20,114,999 15,148,895
Liabilities - (charges)/credits
- -------------------------------
Shareholders' equity CPI (8,055,888) (6,791,383)
Short and long term bank liabilities CPI (867,771) (386,400)
Short and long term bonds payable UF (3,448,063) (2,613,592)
Short and long term bonds payable CPI (758,589) (580,008)
Accounts Payable related Companies short term UF (78,713) 0
Other current liabilities UF (328,605) (69,614)
Other current liabilities CPI (114,842) (35,491)
Other long term liabilities CPI (258,312) (51,578)
Income accounts CPI (6,774,267) (3,672,656)
Total (charges) credits (20,685,050) (14,200,722)
Price-level restatement (loss) gain (570,051) 948,173
NOTE 30 - FOREIGN EXCHANGE GAINS/LOSSES
Currency December 31, 2005 December 31, 2004
-------- ----------------- -----------------
Assets - (charges)/credits ThCh$ ThCh$
- --------------------------
Cash US$ (185,297) 6,956
Time deposits US$ (1,676) 0
Marketable securities US$ (3,144,282) (2,035,361)
Other receivables US$ (3,801) (32,953)
Short term notes and accounts receivable related
companies US$ (5,205,730) (1,092,834)
Inventories US$ (20,126) 33,210
Other current assets US$ 267,521 462,708
Property, plant & equipment US$ 3,509 397
Other assets US$ (12,630,660) (13,734,343)
Expense account exchange difference US$ ( 214,747) 0
Total (charges) credits (21,135,289) (16,392,220)
Liabilities - (Charges)/credits
Short term liabilities banks and financial institutions US$ 4,258,529 1,850,517
Bonds payable US$ 260,419 230,680
Accounts payable US$ 65,810 12,934
Provisions US$ 48,246 44,797
Other current liabilities US$ ( 351,638) (683,632)
Bonds payable-long term US$ 2,343,727 1,915,268
Income account exchange difference US$ 223,103 0
Total (charges) credits 6,848,196 3,370,564
Foreign exchange gain (loss), net ( 14,287,093) 13,021,656)
NOTE 31 - EXTRAORDINARY ITEMS
There were no extraordinary items in 2005 and 2004.
NOTE 32 - 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 discount have all been amortized, as a result of the
repurchase of Bonds reported in note 22.
Bonds issued in the local market:
Debt issue costs and discounts amounted to ThCh$1,219,871. Disbursements for
risk rating reports, legal and financial advisory services, printing and
placement fees are included as Debt issue costs.
Amortization for the period 2005 amounted to ThCh$167,218 (ThCh$167,218 in
2004).
NOTE 33 - CONSOLIDATED STATEMENT OF CASH FLOWS
For the projection of future cash flows, there are no transactions and events
to consider which have not been revealed in these financial statements and
accompanying notes.
Below is an itemization of the movement of assets and liabilities not
affecting the cash flow in the period, but compromising future cash flows.
Cash Flow Statement
- -------------------
2005 Maturity Date 2004 Maturity Date
------------- --------------- ------------- -------------
ThCh$ ThCh$
Expenses
- --------
Dividend payments (3.831.784) 01-26-2006 (3.969.728) 01-27-2005
Additions to property, plant and equipment (2.438.678) 02-15-2006 (2.495.699) 02-15-2005
Additions to property, plant and equipment (488.268) 01-30-2006 (269.006) 01-31-2005
Additions to property, plant and equipment (50.647) 03-31-2006 (19.401) 02-28-2005
Additions to property, plant and equipment (70.664) 05-20-2005
Additions to property, plant and equipment (167.152) 11-25-2005
Total expenses (6.809.377) (6.991.650)
Income
Sale of property, plant and equipment 65.910 02-15-2006 43.406 02-15-2005
Total Income 65.910 43.406
Total Net (6.743.467) (6.948.244)
NOTE 34 - DERIVATIVE CONTRACTS
Derivative contracts at December 31, 2005 were as follows:
Position
Purchase Hedged item or transaction Hedged
---------- -------------------------- Item
Derivative Contract Value Maturity Period Specific Item /sale Concept Amount Value
- ---------- -------- --------- --------------- -------------- ----- ------------------- --------- ---------
ThCh$ ThCh$ ThCh$
I QUARTER US$ Exchange
SWAP CCPE 2.654.697 2006 Rate S Long term bonds US$ 3.609.383 2.565.151
I QUARTER US$ Exchange
SWAP CCPE 2.619.843 2007 Rate S Long term bonds US$ 3.718.120 2.645.278
III QUARTER US$ Exchange
SWAP CCPE 2.629.274 2007 Rate S Long term bonds US$ 2.747.765 2.610.970
IV QUARTER US$ Exchange
SWAP CCPE 38.462.057 2007 Rate S Long term bonds US$ 47.599.704 38.437.500
I QUARTER US$ Exchange
SWAP CCPE 7.850.476 2008 Rate S Long term bonds US$ 10.456.161 7.797.786
II QUARTER US$ Exchange
SWAP CCPE 7.807.510 2008 Rate S Long term bonds US$ 11.100.360 8.145.570
III QUARTER US$ Exchange
SWAP CCPE 12.815.823 2008 Rate S Long term bonds US$ 16.620.691 12.680.996
I QUARTER US$ Exchange
SWAP CCPE 5.277.469 2013 Rate S Long term bonds US$ 7.260.554 5.290.567
I QUARTER US$ Exchange Suppliers foreign
FR CCTE 8.871.939 2006 Rate P exchange 8.660.225 0
I QUARTER US$ Exchange Suppliers foreign
FR CCTE 1.575.869 2006 Rate S exchange 1.537.700 0
II QUARTER US$ Exchange Suppliers foreign
FR CCTE 8.615.815 2006 Rate P exchange 8.395.263 0
II QUARTER US$ Exchange Suppliers foreign
FR CCTE 1.217.784 2006 Rate S exchange 1.186.006 0
III QUARTER US$ Exchange Suppliers foreign
FR CCTE 6.066.846 2006 Rate P exchange 5.888.625 0
III QUARTER US$ Exchange Suppliers foreign
FR CCTE 1.259.113 2006 Rate S exchange 1.221.946 0
IV QUARTER US$ Exchange Suppliers foreign
FR CCTE 10.679.646 2006 Rate P exchange 10.520.088 0
IV QUARTER US$ Exchange Suppliers foreign
FR CCTE 1.637.708 2006 Rate S exchange 1.612.147 0
(continued)
Assets/liabilities Effect on income
- -------------------------------------- -------------------------------------
Item Amount Realized Unrealized
- -------------------------------------- --------- --------- -----------
ThCh$ ThCh$ ThCh$
Other current and long term assets 1.218.665 374.162 3.785
Other current and long term assets 1.210.849 369.503 144.316
Other current and long term assets 1.214.602 370.780 55.006
Other current and long term assets 9.868.071 5.138.394 1.249.962
Other current and long term assets 3.620.434 1.107.040 341.413
Other current and long term assets 3.597.802 1.100.979 961.350
Other current and long term assets 5.790.650 1.803.484 894.039
Other current and long term assets 2.422.356 744.121 631.018
Other Current assets and liabilities 197.390 0 (197.390)
Other Current assets and liabilities 35.462 0 35.462
Other Current assets and liabilities 190.275 0 (190.275)
Other Current assets and liabilities 27.353 0 27.353
Other Current assets and liabilities 138.450 0 (138.450)
Other Current assets and liabilities 28.982 0 28.982
Other Current assets and liabilities 82.939 0 (82.939)
Other Current assets and liabilities 13.538 0 13.538
NOTE 35 - CONTINGENCIES AND RESTRICTIONS
a. Litigation and other legal actions:
Andina and its subsidiaries are not involved or likely to be involved in any
material judicial or out-of-court litigation that could result in gains or
losses. Current lawsuits are described below.
1) The Chilean Internal Revenue Service has commenced a penal lawsuit against
our subsidiary Vital S.A. and against those ultimately responsible for the
application of tax losses. At the same time, a lawsuit has been filed for the
recovery of income tax and the application of accumulated losses. The
company's legal advisors believe there is a remote or slight likelihood of a
negative outcome in both procedures.
2) Embotelladora del Atlantico S.A. faces labor and other lawsuits. Accounting
provisions to back any probable loss contingency stemming from these lawsuits,
amounts to ThCh$1,752,274 (ThCh$1,906,300 in 2004). 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) 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$6,614,257 (ThCh$5,928,827 in 2004). In accordance
with its legal counsel's opinion, the Company deems improbable that
unstipulated contingencies may affect the results or equity of the Company.
4) 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$74,314 (ThCh$79,652 in 2004). In accordance
with its legal counsel's opinion, the Company deems improbable that
contingencies without provisions may affect the results or equity of the
Company.
b. Restrictions
The bond issue and placement on the US market for US$ 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.
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 liabilities-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 "Region 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, 2005 were as follows:
Guarantee creditor Debtor Assets involved
- --------------------- ------------------------------ ------------------------
Balances pending
Type of Book at year end Guaranty
Name Relation guarantee Type value December 31 Redemption
----------------- ---------- --------- ----------- ---------- ------------------ ----------
2005 2004 2006
--------- ------ ----------
ADUANA DE BUENOS EMBOTELLADORA DEL Subsidiary Insurance Inventories 2,793,734
AIRES/CUSTOMS ATLANTIVO Guaranty
UNIAO FEDERAL RIO DE JANEIRO Subsidiary Mortgage Warehouse 57,050 60,321 58,261
REFRESCOS LTDA.
ESTADO RIO DE JANEIRO RIO DE JANEIRO Subsidiary Mortgage Judicial 11,542,124 8,891,513
REFRESCOS LTDA. Deposit
PODER JUDICIARIO RIO DE JANEIRO Subsidiary Judicial Judicial 7,795,553
REFRESCOS LTDA. Deposit Deposit
SERV. NAC. DE EMBOTELLADORA - Guaranty - 92,250 92,250
ADUANAS/Customs ANDINA S.A. Receipt
NOTE 36 - GUARANTEES FROM THIRD PARTIES
Guarantees from third parties at December 31, 2005 were as follows:
Guarantor Type of Guarantee Amount Currency Transaction
- ---------------------------------------- ------------------- ------------- -------- ---------------------------------------
Soc. Las Nipas Policy 6.971,45 U.F. Advertising Agreement
Soc. Com. Itahue Ltda. Policy 5.000,00 U.F. Advertising Agreement
Distribuidora Monserrat S.A. Policy 3.920,00 U.F. Advertising Agreement
Soc. Administradora Plaza Cent. Policy 3.076,00 U.F. Advertising Agreement
Iansagro S.A. Deposit Certificate 4.735.875 ThCh$ Warrants
Iansagro S.A. Deposit Certificate 3.788.700 ThCh$ Warrants
Iansagro S.A. Deposit Certificate 2.841.525 ThCh$ Warrants
Penaloza Ballero Limitada Receipt 50.000 ThCh$ Purchase Order
Russel W. Coffin Letter of Credit 39.436.416,03 USD Purchase Nitvitgov Refrigerantes S.A.
CONFAB Mortgage 30.000.000,00 USD Purchase Rio de Janeiro Refrescos Ltda.
Several Clients Deposits 966.179,73 USD Container Guaranty
Soc. Com. Champfer Mortgage 642.970,05 USD Distributor Credit
Mac Coke Dist. Beb. Mortgage 427.222,63 USD Distributor Credit
Tigresa Com. Beb. Mortgage 286.239,16 USD Distributor Credit
Franciscana Dist. Mortgage 245.653,01 USD Distributor Credit
ASXT Fluminense Distrib.Bebidas Mortgage 239.244,67 USD Distributor Credit
Dist. Real Cola (Apucarana) Mortgage 234.972,44 USD Distributor Credit
Dist Uniao De Itaperuna Mortgage 221.557,65 USD Distributor Credit
Rosas de Casimiro Mortgage 183.705,73 USD Distributor Credit
Aguiar Distrib.de Bebidas Ltda/Softdrink
Distributor Mortgage 171.316,27 USD Distributor Credit
MBM Distribuidora de Beb/Softdrink
Distributor Mortgage 158.926,82 USD Distributor Credit
Ledesma SAAI Guaranty 133.533,97 USD Supplier
Ledesma SAAI Guaranty 132.688,82 USD Supplier
Ledesma SAAI Guaranty 132.688,82 USD Supplier
Ledesma SAAI Guaranty 132.688,82 USD Supplier
Ledesma SAAI Guaranty 132.688,82 USD Supplier
Dibejon Softdrink DIstributor Joao Neiva Mortgage 121.758,45 USD Distributor Credit
NOTE 37 - LOCAL AND FOREIGN CURRENCY
Assets at each year end were composed of local and foreign currencies as
follows:
December 31, 2005 December 31, 2004
Currency Amount Amount
Current Assets ThCh$ ThCh$
- -------------- --------------- ----------------- -----------------
Cash Other currency 0 15.560
Non-Indexed Ch$ 3.929.414 4.687.093
US$ 2.846.644 2.923.432
AR$ 3.047.433 1.030.715
R$ 4.589.040 5.667.961
Time Deposits US$ 21.257.745 2.414
AR$ 0 138
R$ 4.442.826 7.831.264
Marketable Securities EUROS 9.160.293 0
US$ 3.992.954 16.660.657
R$ 850.035 0
Trade accounts receivable Non-Indexed Ch$ 17.976.484 17.784.701
US$ 1.557.633 17.608
AR$ 2.452.727 4.020.319
R$ 12.220.237 10.518.763
Notes receivable Non-Indexed Ch$ 7.833.988 7.710.121
AR$ 380.042 376.279
R$ 2.928.814 2.275.190
Other receivables Non-Indexed Ch$ 2.668.514 14.512.542
US$ 11.940.372 72.418
AR$ 891.378 855.114
R$ 4.277.223 1.420.484
Inventories Indexed Ch$ 3.918.785 3.465.543
Non-Indexed Ch$ 1.775.186 1.980.480
US$ 3.123.615 1.262.061
AR$ 3.140.050 8.241.753
R$ 5.467.728 6.513.569
Notes receivable from related companies R$ 23.448 85.029
- Non-Indexed Ch$ 5.563.712 0
Recoverable Taxes US$ 214.817 0
Indexed Ch$ 0 333.802
Non-Indexed Ch$ 1.194.973 670.956
AR$ 699.981 1.097.730
R$ 7.670.404 3.671.106
Prepaid Expenses Indexed Ch$ 0
Non-Indexed Ch$ 1.179.636 1.427.433
US$ 52.328 123.112
AR$ 134.810 34.731
R$ 240.880 375.460
Other current assets Indexed Ch$ 1.061.673 0
Non-Indexed Ch$ 408.222 1.513.055
US$ 3.625.002 5.793.673
AR$ 1.710.866 1.149.565
R$ 1.565.602 963.779
Property, Plant and equipment
- -------------------------------
Property, Plant and equipment Non-Indexed Ch$ 63.952.815 69.802.181
US$ 75.353.242 89.355.092
Other assets
- ------------
Investment in related companies Indexed Ch$ 19.030.233 19.036.731
US$ 1.054.315 760.454
R$ 1.301.522 936.123
Investment in other companies Indexed Ch$ 41.689 0
US$ 12.881 56.202
Goodwill Non-Indexed Ch$ 645.844 775.012
US$ 70.747.295 86.057.442
Long term debtors Non-Indexed Ch$ 80.218
AR$ 30.255 48.638
Notes receivable related companies Non-Indexed Ch$ 22.492 34.863
Intangibles US$ 409.059 460.913
Amortization US$ -233.209 -238.274
Deferred taxes AR$ 676.498 0
Others Indexed Ch$ 146.369 0
Non-Indexed Ch$ 4.918.265 17.181.567
US$ 123.517.798 156.547.254
AR$ 2.326.502 2.456.998
R$ 0 8.342.523
EUROS 0 11.902.195
Total Assets
Other Currency 0 15.560
Non-Indexed Ch$ 112.149.763 138.080.004
US$ 319.472.491 359.854.458
AR$ 15.490.542 19.311.980
R$ 45.577.759 48.601.251
EURO 9.160.293 11.902.195
Indexed Ch$ 24.198.749 22.836.076
b. Current liabilities at year end denominated in local and foreign currencies
were as follows:
Up to 90 days 90 days to 1 year
---------------------------------------- ----------------------------------------
December 31, 2005 December 31, 2004 December 31, 2005 December 31, 2004
------------------- ------------------- ------------------- -------------------
Amount Int. Amount Int. Amount Int. Amount Int.
ThCh$ Rate ThCh$ Rate ThCh$ Rate ThCh$ Rate
---------- ------ ---------- ------ ---------- ------ ---------- ------
Short term
bank liabilities Non-indexed Ch$ 1.426.355 18.954.454 3,30% 0 0
$AR 5.497.616 8,92% 0 0 0
$R 0 135.216 0 0
US$ 0 0 21.011.358 6,51% 0
Current portion
of long term
bank liabilities US$ 0 0 0 1.152.358 6,51%
$R 0 0 484.101 13,26% 837.739 13,52%
Current portion
of bonds payable Indexed Ch$ 13.357.494 13.392.228 7,0% 0 0
US$ 326.760 368.181 6,20% 0 0
Dividends payable Non-indexed Ch$ 3.978.869 4.045.885 0 0
$R 0 0 0 554.754
Accounts payable Non-indexed Ch$ 17.999.013 18.968.622 2.706.095 0
US$ 2.353.415 2.272.202 0 0
$AR 5.957.476 5.458.882 0 3.589
$R 8.860.731 8.447.061 0 0
Other currencies 0 1.798 0 0
Other creditors US$ 176.570 811.582 0 0
$AR 19.931 41.085 0 15.502
$R 2.629.196 2.142.965 0 0
Notes Payable Non-indexed Ch$ 0 5.180 0 0
Notes and accounts
payable related
companies Non-indexed Ch$ 5.013.043 5.771.173 0 0
US$ 0 553.383 0 0
$AR 895.299 0 0 0
$R 2.422.475 0 0 4.045.676
Provisions Non-indexed Ch$ 631.543 330.627 0 0
Withholdings Indexed Ch$ 0 412.794 0 0
Non-indexed Ch$ 4.822.891 7.144.790 583.580 0
US$ 0 423.905 0 0
$AR 3.606.978 2.959.134 0 0
$R 0 0 7.331.579 3.178.285
Income Tax Non-indexed Ch$ 3.806.699 2.528.218 0 0
$AR 0 0 1.589.078 1.080.326
$R 0 0 3.295.627 1.485.515
Unearned Income Non-indexed Ch$ 249.206 0 0 0
Deferred Taxes $R 0 0 0 140.643
Non-indexed Ch$ 616.932 0 0 0
$AR 94.691 0 0 0
Other current
liabilities Non-indexed Ch$ 3.007.376 10.360 10.000 0
US$ 0 2.551.911 0 0
Total Current
Liabilities
Non-indexed Ch$ 41.551.927 57.759.309 3.299.675 0
$AR 16.071.991 8.459.101 1.589.078 1.099.417
$R 13.912.402 10.725.242 11.111.307 10.242.612
US$ 2.856.745 6.981.164 21.011.358 1.152.358
Indexed Ch$ 13.357.494 13.805.022 0 0
Other currencies 0 1.798 0 0
c.1) Long-term liabilities at December 31, 2005 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
------------ ------------------- ------------------- ------------------- -------------------
Average Average Average Average
Amount int Amount int Amount int Amount int
ThCh$ rate ThCh$ rate ThCh$ rate ThCh$ rate
---------- ------ ---------- ------ ---------- ------ ---------- ------
Long Term Bank
Liabilities R$ 454.501 0 0 0
Bonds payable US$ 16.438.950 7,0% 0 0 2.050.000 7,625%
Indexed Ch$ 16.806.447 6,2% 5.868.246 6,5% 19.560.823 6,50% 41.077.728 6,50%
Other creditors AR$ 81.547 0 0 0
R$ 0 57.808 7.226 0
Provisions Indexed Ch$ 0 0 0 4.330.239
Non-Indexed Ch$ 582.332 0 0 0
AR$ 1.752.274 0 0 0
R$ 14.451.022 0 0 0
Other Liabilities Non-Indexed Ch$ 0 0 4.899.464 0
AR$ 0 193.005 1.737.049 0
R$ 1.384.839 0 0 0
0 0 0 0
Total Long Term
Liabilities
R$ 16.290.362 57.808 7.226 0
US$ 16.438.950 0 0 2.050.000
Indexed Ch$ 16.806.447 5.868.246 19.560.823 41.077.728
AR$ 1.833.821 193.005 1.737.049 0
Indexed Ch$ 0 0 0 4.330.239
Non-Indexed Ch$ 582.332 0 4.899.464 0
c.2) Long-term liabilities at December 31, 2004 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
------------ ------------------- ------------------- ------------------- -------------------
Average Average Average Average
Amount int Amount int Amount int Amount int
ThCh$ rate ThCh$ rate ThCh$ rate ThCh$ rate
---------- ------ ---------- ------ ---------- ------ ---------- ------
Long term bank
liabilities US$ 46.197.312 0 0 0
- - R$ 986.133 0 0 0
Bonds payable US$ 0 18.522.812 7% 0 2.309.866 7,63%
- - Indexed Ch$ 23.681.412 6,20% 4.933.628 6,2% 25.380.479 6,50% 40.999.237 6,50%
Other creditors R$ 104.160 66.295 0 0
Provisions Indexed Ch$ 0 0 0 2.080.864
- - Non-Indexed Ch$ 1.790.257 0 40.664 0
- - AR$ 3.167.478 0 0 0
- - R$ 10.480.619 0 0 0
Deferred Income
taxes AR$ 0 393.113 0 0
Other Liabilities Non-Indexed Ch$ 0 0 5.284.955 0
- - AR$ 0 175.937 1.583.432 0
- - R$ 823.918 0 0 0
Total Long Term
Liabilities
US$ 46.197.312 18.522.812 0 2.309.866
R$ 12.394.830 66.295 0 0
Indexed Ch$ 23.681.412 4.933.628 25.380.479 43.080.101
Non-Indexed Ch$ 1.790.257 0 5.325.619 0
AR$ 3.167.478 569.050 1.583.432 0
NOTE 38 - PENALTIES
The Company has not been subject to penalties by the SVS or any other
administrative authority.
NOTE 39 - SUBSEQUENT EVENTS
Dividend Payments
On January 26, 2006, the following interim dividend No. 148 was paid against
2005 income:
a) Ch$4.80 (four point eighty Chilean pesos) per Series A share; and
b) Ch$5.28 (five point twenty-eight Chilean pesos) per Series B share.
No other significant events of a financial or any other nature have occurred
between December 31, 2005 and the issuance date of these financial statements
that affect or may affect the assets, liabilities and/or income of the
Company.
NOTE 40 - COMPANIES SUBJECT TO SPECIAL REGULATIONS
Andina and its subsidiaries are not subject to special regulations.
NOTE 41 - ENVIRONMENT
The Company has disbursed ThCh$822,428 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$27,934.
I. ANALYSIS OF THE FINANCIAL RESULTS FOR THE FOURTH QUARTER AND FULL YEAR
ENDED DECEMBER 31, 2005.
Highlights
- ----------
Fourth Quarter 2005 Consolidated Operating Income reached US$60.1 million, an
increase of 18.1% compared to the same period last year. Operating Margin was
20.7%.
Consolidated Sales Volume increased 5.3% during the quarter, reaching 116.5
million unit cases.
During the Fourth Quarter 2005, EBITDA totaled US$74.4 million, a 12.5%
improvement compared to the Fourth Quarter 2004. EBITDA Margin was 25.6%.
Consolidated Operating Income for the twelve months ended December 31, 2005
was US$152 million, an increase of 19.6% when compared to 2004. Operating
Margin was 16.3%.
Consolidated Sales Volume for the twelve months ended December 31, 2005
totaled 389.8 million unit cases, a 7.1% improvement compared to 2004.
Consolidated EBITDA was US$208.7 million for the twelve months ended December
31, 2005, representing growth of 9.4%. EBITDA Margin was 22.4%.
Net Income for the twelve months ended December 31, 2005 reached US$109.3
million, a 34.7% increase compared to the comparable period of 2004.
Comments from the Chief Executive Officer, Mr. Jaime Garcia R.
- --------------------------------------------------------------
Andina had a great 2005 in the three countries where we operate. We are
confident to continue on this path, as we foresee stable perspectives in those
markets.
Full Year 2005 vs. Full Year 2004
- ---------------------------------
The results obtained during 2005 reflect excellent surpluses from most of the
measured operational parameters. In the three countries where we operate, we
achieved important goals. First, growth in Chile, an already mature soft drink
market; Secondly, continued growth in Brazil, the market with the greatest
potential when considering the relatively low per capita soft drink
consumption; Finally, our ability to maintain strong operational results in
Argentina, where we not only faced cost increases but also labor union
pressures.
On average, exchange rates appreciated in the three countries where we operate
as follows: the Chilean peso 7.9%, the Brazilian real 16.1% and the Argentine
peso 0.5%. These currency fluctuations partially compensated price increases
of relevant raw materials (sugar and resin).
As of December 31, 2005, Consolidated Sales Volume reached 389.8 million unit
cases, an increase of 7.1%. The Company's three franchises increased total
volume as follows: Chile 4.7%, Brazil 10.2% and Argentina 5.7%.
Net Sales amounted to US$933.6 million, an 11.6% improvement compared to 2004.
This was due to higher volumes and price adjustments.
Cost of Sales per unit case increased 2.2% in spite of cost pressures
(particularly resin and sugar), partially compensated by effective
negotiations, and the appreciation of the Chilean peso and the Brazilian real.
SG&A increased 13.1% due to higher volumes and increased freight costs as a
result of higher oil prices.
Consolidated Operating Income amounted to US$152 million, a 19.6% improvement
over the US$127.1 million reported as of December 31, 2004. Operating Margin
was 16.3%, an increase of 110 basis points.
Finally, Consolidated EBITDA amounted to US$208.7 million, a 9.4% increase
from the same period of last year. EBITDA Margin was 22.4% of Net Sales.
Fourth Quarter 2005 vs. Fourth Quarter 2004
- -------------------------------------------
During Fourth Quarter 2005, Consolidated Sales Volume reached 116.5 million
unit cases, a 5.3% increase with respect to the same period of last year.
Net Sales totaled US$290.2 million, an 11.9% increase over the Fourth Quarter
2004. This was a result of higher volumes and price adjustments.
Operating Income was US$60.1 million, an 18.1% increase when compared to the
US$50.9 million reported during the same period of the previous year.
Operating Margin was 20.7% of Net Sales, an improvement of 110 basis points.
Consolidated EBITDA for the Fourth Quarter reached US$74.4 million, an
increase of 12.5%. This represented 25.6% of Net Sales, consistent with the
figure reported in the Fourth Quarter of 2004.
Chile
- -----
Full Year 2005 vs. Full Year 2004
- ---------------------------------
Sales Volume increased 4.7%, reaching 135.5 million unit cases for the year
ended December 31, 2005. During 2005 we successfully launched Dasani, leading
to a record 17.8% growth in the water segment. In addition, the Company has
maintained returnable formats at nearly two-thirds of the total Sales Volume
allowing us to continue with its competitive strategy. Our average soft drink
market share amounted to 68.5% in volume and 70.9% in sales.
Net Sales totaled US$429 million, representing a 5.2% increase compared to the
same period of the previous year. The increase in accumulated Net Sales is
best explained by higher volumes.
During 2005, we've faced price increases in U.S Dollar-denominated raw
materials, which have been compensated by the appreciation of exchange rate
(7.9% on average). This resulted in a 3.8% increase in cost of sales,
representing 0.8% savings in unitary costs.
Operating Income was US$99.9 million, a 9.5% improvement compared to last
year. Operating Margin reached 23.3%, representing an improvement of 90 basis
points.
EBITDA amounted to US$126 million, a 5.3% increase over the US$119.7 million
reached in the previous year. EBITDA margin was 29.4% of Net Sales, remaining
flat compared to the same period in 2004.
Fourth Quarter 2005 vs. Fourth Quarter 2004
- -------------------------------------------
During the Fourth Quarter 2005, and in spite of adverse and unusual weather
conditions, volumes grew 5.7%. Sales Volume amounted to 41.7 million unit
cases. November 2005 was the month with major volume increase for the year,
which compensated a drop in October. Once again, the water category was
noteworthy thanks to the introduction of Dasani, recording 24.5% growth.
Net Sales reached US$130.6 million, a 7% improvement over the Fourth Quarter
2004. This increase is due to higher volumes, in addition to the price
increase which took place during the second quarter of 2005.
Cost of Sales per unit case decreased 0.8% resulting in a Gross Margin of
43.9%, a 110 basis point improvement compared to the Fourth Quarter of the
previous year.
Operating Income totaled US$35.5 million, increasing 12.4%. Operating Margin
was 27.2%, an improvement of 130 basis points.
EBITDA totaled US$41.7 million, representing an increase of 10.3% compared to
the US$37.9 million reported in the Fourth Quarter 2004. EBITDA Margin was 32%
of Net Sales, an increase of 100 basis points.
Brazil
- ------
Full Year 2005 vs. Full Year 2004
- ---------------------------------
Sales Volume in 2005 reached 153.7 million unit cases, a 10.2% increase
compared to the previous year. Throughout 2005, the Company undertook several
market initiatives such as launches of individual and family servings formats
and a special focus on returnable formats (already representing 12% of total
volume).
Net Sales amounted to US$317.1 million, a 22.6% improvement, led by higher
volumes and price increases, which took place during the year, and a favorable
effect on figure translations from exchange rates fluctuations.
Cost of Sales totaled US$1.23 per unit case, an increase of 7.2%. This higher
cost is best explained by: (i) the Brazilian Real, which affects the figures
translation and (ii) price increases of raw materials (such as sugar and
resin), but those were partially offset by the 16.1% appreciation of the
Brazilian Real.
Operating Income amounted to US$40 million, a 49.1% increase from the same
period of last year, with an Operating Margin of 12.6%, representing an
improvement of 220 basis points.
EBITDA totaled US$57.5 million, a 21.3% increase, with an EBITDA margin of
18.1%, slightly lower than that of the previous year.
Fourth Quarter 2005 vs. Fourth Quarter 2004
- -------------------------------------------
Sales Volume during the Fourth Quarter 2005 was led by immediate consumption
distributions channels, returnable formats (16% growth) and core brands
(Coca-Cola and Kuat Guarana). Thus, Sales Volume reached 45.3 million unit
cases, reflecting significant growth of 5.7%, especially noteworthy
considering that in the Fourth Quarter 2004 the Company improved by 8.8%.
Net Sales totaled US$100.7 million, an improvement of 20% with respect to the
US$83.9 million reported in the Fourth Quarter 2004. This was a result of
higher volumes and a more favorable exchange rate that positively affects the
translation of the figures.
Operating Income totaled US$18.7 million, a 39.2% improvement compared to the
same period of 2005. Operating Margin was 18.5% an improvement of 250 basis
points when compared to the Fourth Quarter 2004.
EBITDA totaled US$23.1 million, a 26.3% increase with respect to the US$18.3
million obtained in the comparable period. EBITDA represented 23% of Net
Sales, a 120 basis point improvement.
Argentina
- ---------
Full Year 2005 vs. Full Year 2004
- ---------------------------------
2005 Sales Volume reached 100.6 million unit cases, exceeding the 95.2 million
unit cases reached in 2004, which is a figure that had already broken the
historical record in Sales Volume for our Argentine franchise. The 5.7%
improvement was driven by the returnable formats (that already represents over
50% of Sales), the traditional channel and our core brands, reflecting the
Company's fundamental strategic pillars.
Net Sales totaled US$197 million, a 10.8% increase when compared to 2004,
principally due to the aforementioned increase in volumes and price increases
implemented throughout the year.
Operating Income totaled US$21.3 million, an increase of 15.7% over 2004, with
an Operating Margin of 10.8%, a slight increase with regard to the figure
obtained in the comparable period.
EBITDA was US$34.4 million, a 4.1% increase, with an EBITDA Margin of 17.4%.
Fourth Quarter 2005 vs. Fourth Quarter 2004
- -------------------------------------------
Sales Volume for the Fourth Quarter 2005 totaled 29.6 million unit cases, a
4.1% increase with respect to the same period last year. This was achieved due
to a strategic focus on the immediate consumption and returnable formats.
Net Sales reached US$61.4 million, a 10.6% improvement compared to the Fourth
Quarter 2004. This improvement resulted from an increase in volumes and price
increases.
Operating Income totaled US$8.6 million, representing an increase of 3.8% with
regards to the Fourth Quarter 2004. Operating Income represented 14% of Net
Sales. SG&A increased 23.6% (18.8% per unit case), which is mainly explained
by higher expenses from salary adjustments carried out by government decrees
and strong labor unions pressures.
EBITDA was US$12.2 million, and EBITDA margin was 19.8%.
Full Year 2005 vs. Full Year 2004
- ---------------------------------
Non-Operating Results totaled a loss of (US$26 million), which compares
favorably to an accumulated loss of (US$38 million) reported as of December
2004.
This reduction in the Non Operating Result line is explained by:
o Financial Expenses/Income (Net): Reflects a positive
variation as a consequence of extraordinary income from bond
sales, together with improved results from Cross Currency
Swap Agreements.
o Other non operating income and expense: Reflects a positive
variation as a consequence of extraordinary income from
stock sales.
Finally, Net Income amounted to US$109.3 million, an increase of 34.7% versus
the Net Income reported as of December 31, 2004.
ANALYSIS OF THE BALANCE SHEET
As of December 31, 2005, the Company's financial assets amounted to US$343
million. These represent cash, investments in mutual funds, deposits,
structured notes, corporate bonds and sovereign bonds. 82.6% of the Company's
total financial assets are U.S. Dollar-denominated. However, through
"Cross-Currency Swaps" carried out in July 2003, August 2003 and April 2004,
part of the portfolio has been converted to Chilean pesos (UF - Chilean
Inflation Indexed Currency), thereby decreasing to 25.6% the amount
denominated in US dollars.
The Company's total debt was US$281.7 million, with an average annual rate of
6.77% on U.S. Dollar debt, and an average real rate of 6.4% on Chilean
Peso-denominated debt. The U.S. Dollar-denominated debt represents 27.6% of
total debt.
Therefore, even though the Company paid an extraordinary dividend totaling
US$109 million in May 2005, the Company continues to hold a positive net cash
position of US$61.3 million.
Main Indicators
INDICATORS Unit Dec-05 Dec-04 Variance
- --------------------------------------- ----- ------- ------ --------
LIQUIDITY
Current Ratio Times 1,30 1,24 0,05
Acid Tests Times 1,16 1,05 0,11
Working Capital MCh$ 36.131 34.670 1.460
ACTIVITY
Investments MCh$ 27.452 26.150 1.302
Inventory turnover Times 14,78 12,40 2,38
Days of inventory on hand Days 24,36 29,02 -4,67
INDEBTEDNESS
Debt to equity ratio % 95,97% 99,32% -3,36%
Short-term liabilities to total
liabilities % 48,64% 36,84% 11,80%
Long-term liabilities to total
liabilities % 51,36% 63,16% -11,80%
Interest charges coverage ratio Times 18,68 9,58 9,09
PROFITABILITY
Return over equity % 19,67% 13,36% 6,32%
Return over total assets % 9,95% 6,81% 3,14%
Return over operating assets % 21,25% 14,63% 6,62%
Operating income MCh$ 77.908 65.150 12.758
Operating margin % 16,28% 15,20% 1,08%
EBITDA (1) MCh$ 103.496 90.784 12.711
EBITDA margin % 21,63% 21,18% 0,45%
Dividends payout ratio - Series A
shares % 7,76% 4,81% 2,94%
Dividends payout ratio - Series B
shares % 8,04% 5,23% 2,81%
EBITDA (1) Earnings before income taxes, interests, depreciation,
amortization and extraordinary items.
The main indicators contained in the table reflect for both periods the solid
financial position and profitability of Embotelladora Andina S.A.
Liquidity indicators show a slight increase regarding the previous period.
This is basically due to the reclassification of certain financial instruments
with maturity in less than a one year period (amounting to MUS$59.5), which
was partially offset by the reclassification to short term of the bank debt of
our Argentine subsidiary.
Indicators of indebtedness improve mainly due to the prepayment of US$40
million carried out by our Argentine subsidiary of its external debt in
December of 2005, and are partially offset by a decrease in equity as a result
of an extraordinary dividend payment carried out in May of 2005. Financial
debt during the period amounted to Ch$3,653 million and earnings before
interests and taxes amounted to Ch$68,230 million, achieving an interest
coverage of 18.68 times, which is well above the figure achieved during the
previous period.
Operating profitability indicators benefited from the reasons mentioned in
paragraph I. Profitability over equity basically benefited from the reasons
stated in paragraph I along with the effect of the decrease in equity already
explained.
III. Analysis of Book Values and Present Value of Assets
With respect to the Company's main assets the following should be noted:
Given the high rotation of the items that compose working capital, book values
of current assets are considered to represent market values.
Fixed asset values in the Chilean companies are presented at restated
acquisition cost. In the foreign companies, fixed assets are valued in
accordance with Technical Bulletin N(degree) 64 issued by the Chilean
Institute of Accountants. (controlled in historical dollars)
Depreciation is estimated over the restated value of assets along with the
remaining useful economic life of each asset.
All fixed assets that are considered available for sale are held at their
respective market values.
Investments in shares, in situations where the Company has a significant
influence on the issuing company, are presented following the equity method.
The Company's participation in the results of the issuing company for each
year has been recognized on an accrual basis, and unrealized results on
transactions between related companies have been eliminated.
In summary, assets are valued in accordance with generally accepted accounting
standards in Chile and the instructions provided by the Chilean Securities
Commission, as shown in Note 2 of the Financial Statements.
IV. Analysis of the Main Components of Cash Flow
December December
2005 2004 Variation Variation
Cash Flow (MCH$) MCh$ MCh$ Ch$ %
- ------------------------------- --------- -------- --------- ---------
Operating 96,823 72,819 24,004 33
Financing (114,122) (45,376) (68,746) -152
Investment 10,908 (38,945) 49,853 128
Net cash flow for the Period (6,391) (11,502) 5,111 44
The Company generated a positive net cash flow of MCh$6,391 during the
quarter, analyzed as follows:
Operating activities generated a positive net cash flow of MCh$96,823
representing a positive variation regarding the previous year which amounted
to Ch$24,004 million. Principally explained by increased collections from
clients, which were partially offset by increased payment to suppliers. This
in turn is explained by an increase in the Company's sales volume decrease of
MCh$1,305 regarding last year and is mainly explained by an increase in
payments of interest, which was offset by increased collections from clients
and a decrease in payments to suppliers.
Financing activities generated a negative cash flow of MCh$114,122
representing a negative variation of MCh$68,746 mainly explained by dividend
payments higher than the ones recorded during the previous year, and bank
liabilities higher than those of the previous year.
Investment activities generated a positive cash flow of MCh$10,908; with a
positive variation of MCh$49,853 regarding the previous year, mainly explained
by increased sales of investments in financial instruments.
V. Analysis of Market Risk
Interest Rate Risk
- ------------------
As of December 31, 2005 and 2004, 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: 45%
Brazilian real: 34%
Argentine peso: 21%
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 estimates that reflect a good faith expectation of
Embotelladora Andina S.A. and are based on information currently available. It
should be noted that the results finally obtained are subject to various
variables, many of which are beyond the
Company's control and which could have a significant impact on the current
performance. Amongst the factors that may cause a change in the performance
are: the effects of political and economic conditions on mass-consumption;
price pressures resulting from competitive discounts by other bottlers;
weather conditions in the Southern Cone and other risk factors that are
applicable from time to time and that are periodically informed in the reports
to the relevant regulatory authorities.
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
-------------------
Osvaldo Garay
Chief Financial Officer
Dated: March 28, 2005