UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 6-K
---------------------
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15b-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
June 5, 2006
Date of Report (Date of Earliest Event Reported)
---------------------
Embotelladora Andina S.A.
(Exact name of registrant as specified in its charter)
Andina Bottling Company Inc.
(Translation of Registrant's name into English)
Avenida Andres Bello 2687
Piso 20, Las Condes
Santiago, Chile
(Address of principal executive office)
---------------------
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
--- ----
Indicate by check mark if the Registrant is submitting this Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(1):
Yes No X
------- --------
Indicate by check mark if the Registrant is submitting this Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(7):
Yes No X
------- --------
Indicate by check mark whether the registrant by furnishing the information
contained in this Form 6-K is also thereby furnishing the
information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
Yes No X
------- --------
ANDINA BOTTLING COMPANY, INC. (THE "COMPANY")
REPORT ON FORM 6-K
TABLE OF CONTENTS
1. Attached is an English translation of the Consolidated Financial
Statements of the Company for the period ended March 31, 2006.
EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES
Consolidated financial statements
March 31, 2006
(Translation of original in Spanish)
CONTENTS
Report of Independent Auditors
Consolidated balance sheet
Consolidated statement 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)
EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
For the period ended March 31,
------------------------------
2006 2005
---- ----
ThCh$ ThCh$
TOTAL CURRENT ASSETS 184,588,107 164,879,767
Cash 15,041,705 16,801,161
Time deposits 64,650,807 10,203,007
Marketable securities (net) 17,470,757 45,624,915
Trade accounts receivable (net) 22,231,021 25,098,438
Notes receivable (net) 7,202,760 6,971,397
Other receivables (net) 19,557,029 18,818,047
Notes and accounts receivable from related companies 1,553,763 291,810
Inventories (net) 17,580,166 21,851,833
Recoverable Taxes 7,960,348 7,461,115
Prepaid expenses 2,193,135 2,310,135
Other current assets 9,146,616 9,447,909
TOTAL PROPERTY, PLANT & EQUIPMENT 139,707,276 157,064,776
Land 12,752,684 13,459,634
Buildings & improvements 78,986,877 91,739,321
Machinery and equipment 209,669,804 225,045,447
Other property, plant & equipment 201,069,682 207,409,467
Technical reappraisal of property, plant & equipment 2,007,945 2,007,564
Depreciation (364,779,716) (382,596,657)
TOTAL OTHER ASSETS 218,329,396 291,324,965
Investments in related companies 20,646,408 20,443,318
Investments in other companies 54,789 56,886
Goodwill 71,906,949 89,750,217
Long-term receivables 89,806 54,372
Long-term notes and accounts receivable from related companies 33,915 35,032
Long-term Deferred Income Taxes 346,855 38,845
Intangibles 419,979 486,844
Amortization (243,196) (258,338)
Others 125,073,891 180,717,789
TOTAL ASSETS 542,624,779 613,269,508
The accompanying Notes 1 to 41 are an integral part of these consolidated
financial statements.
2
For the period ended March 31,
------------------------------
2006 2005
---- ----
ThCh$ ThCh$
TOTAL CURRENT LIABILITIES 113,176,338 98,587,648
Short-term bank liabilities 28,758,755 12,690,759
Current portion of long-term bank liabilities 494,720 2,798,913
Current portion of bonds payable 17,781,147 18,787,832
Dividends payable 215,565 282,068
Accounts payable 35,374,669 33,319,955
Other creditors 3,429,871 3,305,054
Notes and accounts payable to related companies 6,247,686 6,396,399
Provisions 504,059 388,878
Witholdings 11,717,132 11,235,582
Income taxes payable 4,356,313 4,632,505
Unearned income 493,896 2,091,007
Deferred income taxes 609,399 84,059
Other current liabilities 3,193,126 2,574,637
TOTAL LONG-TERM LIABILITIES 135,841,944 191,501,173
Long-term bank liabilities 394,962 49,681,024
Bonds payable 99,065,486 113,851,831
Other creditors 176,422 184,399
Notes and accounts payable from related companies 3,737,364 0
Provisions 23,841,755 20,330,868
Other long-term liabilities 8,625,955 7,453,051
MINORITY INTEREST 1,185,764 54
TOTAL SHAREHOLDERS' EQUITY 292,420,733 323,180,633
Paid-in capital 197,904,994 198,860,133
Reserve capital revalued (593,715) (1,590,881)
Other reserves 3,553,954 23,135,494
Accumulated earnings 70,520,545 88,031,674
Net income for the period 21,034,955 14,744,213
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 542,624,779 613,269,508
The accompanying Notes 1 to 41 are an integral part of these consolidated
financial statements.
3
EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the period ended March 31
-----------------------------
2006 2005
---- ----
ThCh$ ThCh$
OPERATING INCOME 24,330,139 21,163,793
Gross Margin 57,458,483 51,017,829
Net Sales 139,393,196 130,594,117
Cost of sales (81,934,713) (79,576,288)
Administrative and selling expenses (33,128,344) (29,854,036)
NON OPERATING INCOME AND EXPENSE (120,908) (4,388,150)
Financial Income 2,435,150 4,456,242
Equity in earnings of equity investments 368,706 673,947
Other non-operating income 1,410,099 612,862
Equity in losses of equity investments (33,160) (30,082)
Amortization of goodwill (1,589,744) (1,834,050)
Financial Expenses (6,197,858) (11,164,759)
Other non-operating expenses (1,079,666) (7,343,195)
Price level restatement (190,262) 41,362
Foreign exchange gains 4,755,827 10,199,523
Income before income taxes and extraordinary items 24,209,231 16,775,643
Income tax expense (3,103,210) (2,031,431)
Income before minority interest 21,106,021 14,744,212
Minority interest (71,066) 1
NET INCOME 21,034,955 14,744,213
NET INCOME FOR THE PERIOD 21,034,955 14,744,213
The accompanying Notes 1 to 41 are an integral part of these consolidated
financial statements.
4
EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
For the period ended March 31
-----------------------------
2006 2005
---- ----
ThCh$ ThCh$
NET CASH PROVIDED BY OPERATING ACTIVITIES 42,545,965 26,592,563
Collection of trade receivables 209,216,130 190,755,437
Financial income received 3,887,372 3,548,618
Dividend & other distributions received 1,447,375 1,427,460
Other income received 0 25,066
Payments to suppliers and personnel (139,294,397) (142,781,445)
Interest paid (2,940,344) (1,492,108)
Income taxes paid (2,401,868) (1,349,122)
Other expenses paid (2,014) 0
VAT and other tax payments (27,366,289) (23,541,343)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (4,587,798) (10,665,729)
Borrowings 8,136,063 16,419,840
Dividend distribution (3,632,726) (3,569,820)
Loan payments (9,091,135) (23,502,188)
Other sources of financing 0 (13,561)
NET CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES 1,616,334 12,638,658
Proceeds from sales of property, plant and equipment 951,727 692,882
Proceeds from sales of permanent investments 4,992,385 0
Proceeds from sales of other investments 2,893,537 30,671,665
Additons to property, plant & equipment (7,189,601) (6,709,601)
Investments in financial instruments (31,714) (12,016,288)
TOTAL NET CASH FOR THE PERIOD 39,574,501 28,565,492
EFFECT OF INFLATION ON CASH AND CASH EQUIVALENTS 679,655 1,574,015
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 40,254,156 30,139,507
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 21,499,736 28,025,703
CASH AND CASH EQUIVALENTS AT END OF PERIOD 61,753,892 58,165,210
The accompanying Notes 1 to 41 are an integral part of these consolidated
financial statements.
5
EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES
RECONCILIATION BETWEEN NET INCOME AND NET CASH FLOWS
PROVIDED BY OPERATING ACTIVITIES
For the period ended March 31
-----------------------------
2006 2005
---- ----
ThCh$ ThCh$
NET INCOME 21,034,955 14,744,213
Income on sale of assets: (234,181) (54,510)
Gain on sale of property, plant and equipment (234,181) (53,528)
Gain on sale of investements 0 (982)
ADJUSTMENTS TO NET INCOME THAT DO NOT REPRESENT MOVEMENTS OF CASH 3,178,513 3,459,610
Depreciation 7,378,623 7,926,497
Amortization of intangibles 119,560 89,607
Write-offs and provisions (608,739) 4,824,942
Equity in earnings of equity investments (368,706) (673,947)
Equity in losses of equity investments 33,160 30,082
Amortization of goodwill 1,589,744 1,834,050
Price-level restatement 190,262 (41,362)
Foreign exchange gains, net (4,755,827) (10,199,523)
Other credits to income that do not represent cash flows (365,680) (330,736)
Other charges to income that do not represent cash flows (33,884) 0
CHANGES IN OPERATING ASSETS 22,018,681 (4,944,735)
(Increase) decrease in trade accounts receivable 10,552,242 7,211,976
(Increase) decrease in inventories 38,444 640,855
(Increase) decrease in other assets 11,427,995 (12,797,566)
CHANGES IN OPERATING LIABILITIES (3,523,069) 13,387,986
Increase (decrease) in accounts payable related to operating income 5,110,687 (4,727,286)
Increase (decrease) in interest payable 4,424,317 14,345,943
Increase (decrease) in income taxes payable (1,244,204) 767,110
Increase (decrease) in other accounts payable related to non-operating income (7,991,202) 2,961,786
Increase (decrease) in VAT and other similar items (3,822,667) 40,433
Minority interest 71,066 (1)
NET CASH PROVIDED BY OPERATING ACTIVITIES 42,545,965 26,592,563
The accompanying Notes 1 to 41 are an integral part of these consolidated
financial statements.
6
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 March 31,
2006 and are compared to the same period in 2005.
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 4.1% 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:
Company Name Ownership Interest
March 31, 2006 March 31, 2005
--------------------------- --------------
Direct Indirect Total Total
------ -------- ----- -----
ABISA CORP S.A. - 99.99 99.99 99.99
ANDINA BOTTLING INVESTMENTS S.A. 99.90 0.09 99.99 99.99
ANDINA INVERSIONES SOCIETARIAS S.A. 99.99 - 99.99 99.99
ANDINA BOTTLING INVESTMENTS DOS S.A. 99.90 0.09 99.99 99.99
EMBOTELLADORA DEL ATLANTICO S.A. - 99.99 99.99 99.99
ENVASES MULTIPACK LTDA. 5.00 94.99 99.99 99.99
RIO DE JANEIRO REFRESCOS LTDA. - 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. - 99.99 99.99 99.99
RJR INVESTMENTS CORP S.A. - 99.99 99.99 99.99
VITAL AGUAS S.A. 56.50 - 56.50 -
7
e) Price-level restatement
The financial statements have been restated to reflect the effect of
price-level changes on the purchasing power of the Chilean peso during the
respective periods. Restatements have been determined on the basis of the
percentage variation of the official Chilean Consumer Price Index, "CPI",
issued by the Chilean National Institute of Statistics, which amounted to
- -0.3% for the period December 1, 2005 to February 28, 2006 (-0.8% 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) 17,915.66 17,198.78
United States dollars (US$) 526.18 585.93
Argentine pesos (A$) 170.73 200.87
Brazilian Real (R$) 243.29 219.76
Euro 637.56 759.57
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.
8
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.
9
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.
10
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 March 31, 2006, was as follows:
Accounting value for the period ended March 31,
-----------------------------------------------
2006 2005
---- ----
ThCh$ ThCh$
Bonds 4,400,678 14,463,872
Mutual Funds 71,508 1,476,138
Investment Funds 12,998,571 29,684,905
Total Marketeable Securities 17,470,757 45,624,915
11
Investment Funds Balance as of
March 31, 2006
--------------
ThCh$
Citi Institutional Liquid Reserves Limited 12,998,571
Total 12,998,571
Fixed Income Date Par Value Accounting value Market Value Provision
- ------------ ---- --------- ---------------- ------------ ---------
Purchase Maturity Amount Rate
-------- -------- ------ ----
ThCh$ ThCh$ ThCh$
SUDAMERICANO 09-06-2005 03-15-2007 1,757,654 1,757,654 7,60% 1,740,245 17,409
SUDAMERICANO 11-30-2004 03-15-2007 2,660,433 2,660,433 7,60% 2,676,590 0
NOTE 5 - SHORT-AND LONG-TERM RECEIVABLES
- ----------------------------------------
Almost all these accounts correspond to the soft drink business.
Current
--------------------------------------------------------------------------------
More than 90 days
Up to 90 days up to 1 year Subtotal Total Current Net Long Term
------------------ -------------------- ---------- ----------------- ----------
up to 1 year (net)
Mar 31, Mar 31, Mar 31, Mar 31, Mar 31, Mar 31, Mar 31, Mar 31, Mar 31,
2006 2005 2006 2005 2006 2006 2005 2006 2005
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Trade receivables 22,738,644 24,991,225 833,082 2,057,052 23,571,726 22,231,021 25,098,438 0 0
Allowance for
doubtful accounts 0 0 0 0 1,340,705 0 0 0 0
Notes receivable 7,548,519 6,964,616 118,440 1,458,486 7,666,959 7,202,760 6,971,397 0 0
Allowance for
doubtful accounts 0 0 0 0 464,199 - 0 0
Other receivables 8,745,723 18,631,877 10,889,086 299,517 19,634,809 19,557,029 18,818,047 89,806 54,372
Allowance for
doubtful accounts 0 0 0 0 77,780 0 0 0 0
Total long term
receivables 89,806 54,372
12
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
------- ---------- ---------
Mar. 31, 2006 Mar. 31, 2005 Mar. 31, 2006 Mar. 31, 2005
------------- ------------- ------------- -------------
ThCh$ ThCh$ ThCh$ ThCh$
EMBONOR S.A. 899,571 0 0 0
EMBOTELLADORA COCA COLA POLAR S.A. 341,124 0 0 35,032
COCA-COLA DE CHILE S.A. 0 0 33,915 0
SPBR S.R.L. 296,137 0 0 0
CENTRALLI REFRIGERANTES S.A. 16,931 0 0 0
RECOFARMA INDUSTRIAS DO AMAZONAS LTDA. 0 291,810 0 0
TOTAL 1,553,763 291,810 33,915 35,032
b) Notes and accounts payable
Company Short Term Long Term
------- ---------- ---------
Mar. 31, 2006 Mar. 31, 2005 Mar. 31, 2006 Mar. 31, 2005
------------- ------------- ------------- -------------
ThCh$ ThCh$ ThCh$ ThCh$
ENVASES CMF S.A. 2,750,783 3,064,946 0 0
COCA-COLA DE CHILE S.A. 1,490,776 948,790 0 0
RECOFARMA INDUSTRIAS DO AMAZONAS LTDA. 1,169,664 0 0 0
ENVASES CENTRAL S.A. 547,212 835,281 0 0
ENVASES DEL PACIFICO S.A. 146,784 0 0 0
CICAN S.A. 142,467 6,039 0 0
EMBONOR S.A. 0 0 2,974,027 0
EMBOTELLADORA COCA-COLA POLAR S.A. 0 0 763,337 0
ENVASES DEL PACIFICO S.A. 0 286,971 0 0
SPBR S.R.L. 0 1,254,372 0 0
TOTAL 6,247,686 6,396,399 3,737,364 0
13
c) Transactions with related companies were as follows:
Company Relation Transaction Mar. 31, 2006 Mar. 31, 2005
------- -------- ----------- ------------- -------------
Effect on Income Effect on Income
--------------------- ------------------------
((charge)/ ((charge)/
Amount credit) Amount credit)
------ ------- ------- ------
ENVASES CENTRAL S.A. Equity investee Sales of raw materials
and supplies 264,231 (29,538) 264,767 (4,530)
- Finished product
purchases 3,371,573 0 3,640,366 0
COCA-COLA DE CHILE S.A. Shareholder
Related Concentrate purchases 8,952,407 0 9,845,990 0
- Payment of advertising
participation 408,473 (408,473) 963,175 (963,175)
- Sales of advertisement 0 0 344,887 (344,887)
- Water source rental 345,384 (345,384) 454,366 (454,366)
COCA-COLA DE ARGENTINA S.A. Shareholder
Related Sales of advertisement 768,345 (768,345) 479,225 (479,225)
ENVASES DEL PACIFICO S.A. Director in
common Purchase of raw materials 99,687 0 209,404 0
RECOFARMA INDUSTRIAS DO
AMAZONAS LTDA. Shareholder
Related Concentrate purchases 10,556,341 0 7,792,375 0
- Advertising
Participation 389,624 (389,624) 621,379 (621,379)
ENVASES CMF S.A. Equity investee Purchase of Containers 2,483,613 0 3,632,286 0
SERVICIOS Y PRODUCTOS PARA
BEBIDAS REFRESCANTES Shareholder
Related Concentrate purchases 5,865,458 0 5,653,609 0
EMBONOR S.A. Shareholder
Related Sale of Finished Products 1,881,555 0 0 0
EMBOTELLADORA COCA-COLA
POLAR S.A. Shareholder
Related Sale of Finished Products 1,236,732 0 0 0
14
NOTE 7 - INVENTORIES
- --------------------
Inventories at each year end consisted of the following:
March 31, 2006 March 31, 2005
Gross Obsolescence Net Gross Obsolescence Net
value provision Value value provision Value
----- --------- ----- ----- --------- -----
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Raw Materias 8,372,333 (59,094) 8,313,239 12,277,083 (135,858) 12,141,225
Finished Products 8,144,144 (362,529) 7,781,615 7,967,010 (47,370) 7,919,640
Products in process 888,890 0 888,890 86,274 0 86,274
Raw Materials in Transit 596,422 0 596,422 1,704,694 0 1,704,694
Total 18,001,789 (421,623) 17,580,166 22,035,061 (183,228) 21,851,833
NOTE 8 - INCOME TAXES AND DEFERRED INCOME TAXES
- -----------------------------------------------
a) At period end 2006 and 2005, 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:
March 31, 2006 March 31, 2005
-------------------------------------- ------------------------------------------------
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 118,279 47,247 0 0 453,160 125,337 0 0
Vacation provision 116,835 0 0 0 91,515 0 0 0
Production expenses 7,871 0 0 0 0 0 0 0
Depreciation of property, plant &
equipment 0 0 114,553 3,495,626 0 0 128,676 5,252,540
Severance indemnities 406,501 0 43,503 847,718 42,669 0 5,397 218,963
Provision for labor & commercial
lawsuits 0 4,919,610 0 0 0 3,843,894 0 0
Tax loss carry-forwards 1,345,157 7,484,389 0 0 687,632 13,356,760 0 0
Others 356,824 775,534 0 82,497 461,028 2,082,601 0 192,254
Local bond issue expenses 0 0 199,329 0 0 0 200,057
Social contributions 484,257 2,103,710 0 0 247,547 2,643,335 0 0
Provision for asset write off 258,074 1,248,909 0 0 189,422 1,088,898 0 0
Contingency allowance 0 1,954,565 0 0 0 1,698,565 0 0
Guarantee deposit 0 0 0 2,622,062 0 0 0 2,798,638
Accrued interests abroad 0 0 3,545,141 0 0 0 2,122,959 0
Complementary accounts, net of
amortization 0 (4,349,969) 0 (2,998,749) 0 (4,072,643) 0 (3,598,333)
Valuation allowance 0 (9,588,657) 0 (15,663,783)
Total 3,093,798 4,595,338 3,703,197 4,248,483 2,172,973 5,102,964 2,257,032 5,064,119
15
c) Income tax expense for each year was as follows:
March 31, March 31,
2006 2005
---- ----
Item ThCh$ ThCh$
Current tax expense (tax allowance) (3,127,820) (2,682,715)
Tax expense adjustment (previous period) 265,021 433,605
Deferred income tax expense/effect over assets or liabilities (2,285,816) (2,229,864)
Amortization of deferred income tax asset and liability complementary accounts (496,105) (179,099)
Deferred income tax expense/effect over assets or liabilities due to changes in the
valuation allowance 2,541,510 2,626,435
Other charges or credits 0 207
Total (3,103,210) (2,031,431)
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.
16
a) Principal components of property, plant and equipment at each year end
are as follows:
Balances at March 31, 2006 Balances at March 31, 2005
------------------------------------------ --------------------------------------------
Net property, Net property,
Accumulated plant & Accumulated plant &
Assets Depreciation equipment Assets Depreciation equipment
------ ------------ --------- ------ ------------ ---------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Land 12,752,684 0 12,752,684 13,459,634 0 13,459,634
Buildings and improvements 78,986,877 (30,649,338) 48,337,539 91,739,321 (37,938,366) 53,800,955
Machinery and equipment 209,669,804 (162,139,557) 47,530,247 225,045,447 (167,942,194) 57,103,253
Other property, plant and equipment 201,069,682 (171,384,839) 29,684,843 207,409,467 (176,120,221) 31,289,246
Technical reappraisal of property,
plant & equipment 2,007,945 (605,982) 1,401,963 2,007,564 (595,876) 1,411,688
Total 504,486,992 (364,779,716) 139,707,276 539,661,433 (382,596,657) 157,064,776
b) Other property, plant and equipment at each year end were as follows:
Balances at March 31,
-----------------------------------
2006 2005
---- ----
ThCh$ ThCh$
Containers 109,621,533 109,981,302
Refrigerating equipment, promotional items and other minor assets 55,386,277 58,083,122
Furniture and tools 3,982,376 3,772,250
Others 32,079,496 35,572,793
Total other property, plant and equipment 201,069,682 207,409,467
c) Gain on Technical reappraisal of property, plant and equipment at each
year end was as follows:
Balances at March 31, 2006 Balances at March 31, 2005
------------------------------------------- ---------------------------------------------
Net property, Net property,
Accumulated plant & Accumulated plant &
Assets Depreciation equipment Assets Depreciation equipment
------ ------------ --------- ------ ------------ ---------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Land 1,340,887 0 1,340,887 1,340,602 0 1,340,602
Buildings and improvements 187,783 (126,804) 60,979 187,684 (123,445) 64,239
Machinery and equipment 479,275 (479,178) 97 479,278 (472,431) 6,847
Total 2,007,945 (605,982) 1,401,963 2,007,564 (595,876) 1,411,688
d) Depreciation for the period
Depreciation for the period amounted to ThCh$7,378,623 and ThCh$6,249,957 are
included, under Operating Costs and ThCh$1,128,666 under Sales and
Administrative Expenses in the Income Statement.
NOTE 13 - SALES TRANSACTIONS UNDER LEASEBACK AGREEMENTS
- -------------------------------------------------------
The Company had no agreements of this type.
17
NOTE 14 - INVESTMENT IN RELATED COMPANIES
- -----------------------------------------
1. 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 Marisions 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 Marember
1996 for property located in Renca, because this transaction
represents unrealized income for Embotelladora Andina S.A. The amount
of the reduction is reflected in the following chart. This
transaction will be realized once the property is transferred to a
third party different from the group.
The investment in Envases CMF S.A. is presented with a 50% reduction
of the earnings generated during the sale of machinery and equipment
of our subsidiary Envases Multipack S.A. which took place in June,
2001, and will be recorded under Results during the remaining useful
life period of the goods sold to Envases CMF S.A.
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 S.A. and Embotelladora Coca-Cola
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$3,890,351 (historical Chilean pesos) (215,919
Unidades de Fomento), as of December 31, 2005.
Unrealized income corresponds to transactions between subsidiaries
and/or the parent company that have been deducted or added to the
category of the originating asset with the following effect on income
of the subsidiaries:
2006 2005
---- ----
ThCh$ ThCh$
Envases CMF S.A. Purchase of containers (222.591) (171,115)
Envases Central S.A. Purchase of finished products (12,035) (16,596)
2. No liabilities have been designated as hedging instruments for investments
abroad.
3. Income likely to be remitted by subsidiaries abroad amounts to
US$180.9 million.
18
Investments in related companies and the related direct participation in
equity and unrealized results at each year end were as follows.
Income (loss) for
Ownership Interest Equity of companies the period
-------------------------------------------------------------------
Company Country Functional Number of Mar. 31, Mar. 31, Mar. 31, Mar. 31, Mar. 31, Mar. 31,
Currency Shares 2006 2005 2005 2004 2005 2004
------- ------- ---------- --------- ------- -------- -------- -------- ------- --------
% % ThCh$ ThCh$ ThCh$ ThCh$
ENVASES CMF S.A. CHILE CH$ 28,000 50.00 50.00 34,334,771 34,460,355 1,009,312 1,144,134
ENVASES CENTRAL
S.A. CHILE CH$ 2,429,236 49.91 49.91 4,427,047 5,056,475 44,452 (26,989)
KAIK
PARTICIPACOES BRAZIL US$ 16,098,919 11.32 11.32 12,488,981 10,376,341 (292,945) 1,655,629
CENTRALLI
REFRIGERANTES BRAZIL US$ 3,005 25.00 25.00 0 0 0 0
CICAN S.A. ARGENTINA US$ 3,040 15.20 15.20 7,624,659 5,847,474 503,224 563,042
- -------------------------------------------------------------------------------------------------------------------------
TOTAL
Partic in net Unrealized income Book value of
Accrued income income (loss) (loss) investment
- ------------------ -------------- ----------------- -------------
Mar. 31, Mar. 31, Mar. 31, Mar. 31, Mar. 31, Mar. 31, Mar. 31, Mar. 31,
2005 2004 2005 2004 2005 2004 2005 2004
------- ------- ------- ------- ------- ------- ------- -------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
282,065 400,952 17,167,386 17,230,178 1,083,472 1,154,273 16,083,914 16,075,905
10,151 (30,082) 2,209,539 2,523,687 219,707 219,660 1,989,832 2,304,027
(33,160) 187,412 1,413,715 1,174,570 0 0 1,413,715 1,174,570
0 0 0 0 0 0 0 0
76,490 85,583 1,158,947 888,816 0 0 1,158,947 888,816
------ ------ --------- ------- - - --------- -------
21,949,587 21,817,251 1,303,179 1,373,933 20,646,408 20,443,318
========== ========== ========= ========= ========== ==========
19
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:
March 31, 2006 March 31, 2005
-------------- --------------
Amortization Amortization
during the period Goodwill balance during the period Goodwill balance
----------------- ---------------- ----------------- ----------------
Company ThCh$ ThCh$ ThCh$ ThCh$
-------
RIO DE JANEIRO REFRESCOS LTDA. 884,473 43,669,278 1,007,118 53,808,664
EMBOTELLADORA DEL ATLANTICO S.A. 689,174 27,609,863 798,898 35,201,219
VITAL S.A. 16,097 627,808 28,034 740,334
TOTAL 1,589,744 71,906,949 1,834,050 89,750,217
NOTE 17 - INTANGIBLES
- ---------------------
In accordance with Circular 1501, no information was reported since the
balance represents less than 10% of Other assets.
20
NOTE 18 - OTHER LONG TERM ASSETS
- --------------------------------
Other long term assets at each year end were as follows:
2006 2005
---- ----
ThCh$ ThCh$
Bonds:
Celulosa Arauco S.A. 11,975,424 13,892,448
Enap S.A. 9,387,484 11,005,366
Endesa S.A. 8,000,195 9,379,593
Chile Soberano 7,564,284 8,802,307
Petroleos Mexicanos S.A. 7,440,554 2,724,439
Compania Manufacturera de Papeles y Cartones S.A. 7,277,787 5,379,687
Telefonos de Mexico S.A. 7,034,792 8,182,993
Codelco 5,394,398 6,294,157
Mexico Soberano 4,913,306 5,762,245
Banco Scotiabank Sud Americano 0 3,100,047
Federal Home Loan Bank (FHLB) 2,637,470 0
Brasil Telecom S.A. 2,140,328 1,962,332
Raytheon Company 2,140,612 2,481,078
International Paper Company 2,104,720 2,439,813
Altria Group 1,213,347 0
Alcoa Inc. 1,075,280 1,246,231
Time Deposits Deutsche Bank AG. 0 51,005,332
CLN Enersis Euros- Deutsche Bank AG. 0 12,119,841
CLN Endesa- Deutsche Bank AG. 5,261,800 6,184,193
CLN GMAC - Deutsche Bank AG. 1,704,823 1,995,862
CLN Ford- Deutsche Bank AG. 1,578,540 1,848,302
Cross Currency Swaps 23,832,473 12,406,165
Judicial Deposits (Brazil) 4,664,187 3,795,720
Issuance Expense Bond Placement 3,125,195 3,526,798
Recoverable Taxes 0 54,694
Others 2,682,936 2,829,950
Prepaid Expenses 1,760,816 1,525,658
Non-operating Assets 163,140 772,538
Total 125,073,891 180,717,789
21
NOTE 19 - SHORT-TERM BANK LIABILITIES
- -------------------------------------
Short- term bank liabilities were as follows:
US Dollars Other foreign currencies Non-indexed Ch$
--------------------------- ------------------------- ---------------------------
Mar 31, 2006 Mar 31, 2005 Mar 31, 2006 Mar 31, 2005 Mar 31, 2006 Mar 31, 2005
------------- ------------- ------------- ------------- ------------- ------------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
BANCO CHILE 0 0 0 0 0 6.311.292
BANCO RIO 0 0 0 3.191.473 0 0
BANCO HSBC ROBERTS 0 0 0 1.060.860 0 0
BANCO BBVA FRANCES 0 0 0 2.127.134 0 0
BANCO CITIBANK N.A. NUEVA YORK 5.866.771 0 0 0 0 0
DEXIA BANK BELGIUM 21.914.603 0 0 0 0 0
BANCO ITAU 0 0 977.381 0 0 0
Total 27.781.374 0 977.381 6.379.467 0 6.311.292
Principal Due 5.866.771 0 0 6.273.087 0 6.246.000
Average annual interest rate 5.14% 8.92% 3.35%
Foreign currency liabilities
(%) 100
Local currency liabilities
(%) 0
TOTAL
Mar 31, 2006 Mar 31, 2005
- ------------- -------------
ThCh$ ThCh$
0 6.311.292
0 3.191.473
0 1.060.860
0 2.127.134
5.866.771 0
21.914.603 0
977.381 0
28.758.755 12.690.759
5.866.771 12.519.087
Long term bank liabilities current portion:
US Dollars Other foreign currencies TOTAL
---------- ------------------------ -----
Mar 31, 2006 Mar 31, 2005 Mar 31, 2006 Mar 31, 2005 Mar 31, 2006 Mar 31, 2005
------------- ------------- ------------- ------------- ------------- -------------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
BANCO BOSTON 0 0 133.367 178.113 133.367 178.113
BANCO ITAU 0 0 0 278.361 0 278.361
BANCO SANTANDER 0 0 361.353 331.435 361.353 331.435
DEXIA BANK BELGIUM 0 2.011.004 0 0 0 2.011.004
Total 0 2.011.004 494.720 787.909 494.720 2.798.913
Principal Due 0 48.796.250 488.160 775.664 488.160 49.571.914
Average annual interest rate 6,51% 12,49% 13,52%
Foreign currency liabilities (%) 100
Local currency liabilities (%) 0
22
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
More than 1 up at March 31, annual term at March
Bank or Financial Institution Currency to 2 2006 interest rate 31, 2005
----------------------------- -------- ------------- --------------- -------------- -------------
ThCh$ ThCh$ ThCh$
BANCO BOSTON Other currency 11.904 11.904 12,39% 133.163
BANCO SANTANDER Other currency 383.058 383.058 12,50% 751.611
DEXIA BANK BELGIUM US$ 0 0 48.796.250
TOTAL 394.962 394.962 49.681.024
Foreign currency liabilities (%) 100
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$75 million maturing in December 2007 and semiannual interest payments. At
the closing of the periods 2006 and 2005, all such bonds are wholly-owned by
the subsidiary Abisa Corp. Consequently, the effects of such transactions have
been eliminated from these consolidated financial statements, both in the
balance sheet and in the consolidated statement of income.
23
Details of bonds payable are as follows:
Term Par Value Placement
--------- ---------------- in Chile
Nominal Interest Maturity Interest Amortization Mar 31, Mar 31, or
Series Value Currency rate date paid period 2006 2005 abroad
------ ----- -------- ---- ---- ---- ------ ---- ---- -------
Current portion of
long term bonds
YANKEE BONDS October 1,
INTERESTS A 32,076,000 US$ 7% 2007 HALF YEARLY OCT.2007 0 684,771 FOREIGN
YANKEE BONDS October 1,
INTERESTS B 4,000,000 US$ 7.625% 2027 HALF YEARLY OCT.2027 0 93,018 FOREIGN
REGISTRO 254 SVS
June 13, 2001
CAPITAL AND June 1,
INTERESTS A 1,650,000 UF 6.200% 2008 HALF YEARLY JUN.2008 16,367,518 16,597,340 CHILE
REGISTRO 254 SVS
June 13, 2001
CAPITAL AND June 1,
INTERESTS B 3,700,000 UF 6.500% 2026 HALF YEARLY JUN.2026 1,413,629 1,412,703 CHILE
--------- ----------
Total 17,781,147 18,787,832
Long term bonds
October 1,
BONOS YANKEE BONDS A 32,076,000 US$ 7% 2007 HALF YEARLY OCT.2007 16,877,750 19,564,857 FOREIGN
October 1,
BONOS YANKEE BONDS B 4,000,000 US$ 7.625% 2027 HALF YEARLY OCT.2027 2,104,720 2,439,813 FOREIGN
REGISTROS 254 SVS June 1,
June 13, 2001 A 1,650,000 UF 6.200% 2008 HALF YEARLY JUN.2008 13,795,058 25,602,621 CHILE
REGISTROS 254 SVS June 1,
June 13, 2001 B 3,700,000 UF 6.500% 2026 HALF YEARLY JUN.2026 66,287,958 66,244,540 CHILE
---------- -----------
Total 99,065,486 113,851,831
24
NOTE 23 - PROVISIONS AND WRITE-OFFS
- -----------------------------------
Provisions at each year end were as follows:
Short Term Long Term
-------------------- ------------------------
2006 2005 2006 2005
---- ---- ---- ----
Provisions ThCh$ ThCh$ ThCh$ ThCh$
Staff severance indemnities 437,542 308,626 5,067,352 5,140,609
Contingencies 66,517 80,252 9,057,673 8,525,230
Taxation on banking transactions & social contribution(Brazil) 0 0 9,716,730 6,665,029
------- ------- --------- ---------
T O T A L 504,059 388,878 23,841,755 20,330,868
NOTE 24 - STAFF SEVERANCE INDEMNITIES
- -------------------------------------
Movements in the provision for staff severance indemnities were as follows:
2006 2005
--------- ---------
ThCh$ ThCh$
Beginning balance 5,473,769 2,828,624
Provision for the period 198,350 2,658,922
Payments (167,225) (38,311)
Ending balance 5,504,894 5,449,235
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
- ---------------------------
2006 2005
------ ----
LIABILITIES ThCh$ ThCh$
Vital Aguas S.A. 1,166,817 0
Embotelladora del Atlantico S.A. 18,889 0
Andina Inversiones Societarias
S.A. 58 54
1,185,764 54
INCOME STATEMENT
Vital Aguas S.A. (70,200) 0
Embotelladora del Atlantico S.A. (865) 0
Andina Inversiones Societarias S.A. (1) (1)
(71,066) (1)
25
NOTE 27 - CHANGES IN SHAREHOLDERS' EQUITY
- -----------------------------------------
Movements in shareholders' equity were as follows:
March 31, 2006
------------------------------------------------------------------------
Reserve
Paid in Capital Other Accumulated Interim
Capital Revalued Reserves Income Dividends Net Income
------- -------- -------- ------ --------- ----------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Beginning balance 197,904,994 0 (201,145) 26,334,355 (11,640,959) 56,039,346
Distribution of
prior-year income 0 0 0 44,398,387 11,640,959 (56,039,346)
Translation adjustment
reserve 0 0 3,754,495 0 0 0
Capital revalued 0 (593,715) 604 (212,197) 0 0
Income for the period 0 0 0 0 0 21,034,955
Ending balance 197,904,994 (593,715) 3,553,954 70,520,545 0 21,034,955
Price level restated
balances
March 31, 2005
-----------------------------------------------------------------------
Reserve
Paid in Capital Other Accumulated Interim
Capital Revalued Reserves Income Dividends Net Income
------- -------- -------- ------ --------- ----------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Beginning balance 191,027,986 0 14,574,144 56,671,256 (11,583,482) 40,158,726
Distribution of
prior-year income 0 0 0 28,575,244 11,583,482 (40,158,726)
Translation adjustment
reserve 0 0 7,766,748 0 0 0
Capital revalued 0 (1,528,224) (116,594) (681,972) 0 0
Income for the period 0 0 0 0 0 14,163,509
Ending balance 191,027,986 (1,528,224) 22,224,298 84,564,528 0 14,163,509
Price level restated
balances 198,860,133 (1,590,881) 23,135,494 88,031,674 0 14,744,213
26
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:
Series Subscribed Paid in
Capital Capital
------ ---------- -------
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:
2006 2005
ThCh$ ThCh$
----- -----
Reserve for cumulative translation adjustments 2,568,636 22,150,387
Reserve for technical reappraisal of property, plant and equipment 164,081 164,081
Other reserves 821,237 821,026
--------- ----------
Total 3,553,954 23,135,494
(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
Release/Realized
Balance during the period Reserve Balance
Subsidiary January 1, 2005 Investment March 31, 2006
- ---------- --------------- ---------- ---------------- --------------
ThCh$ ThCh$ ThCh$ ThCh$
Rio de Janeiro Refrescos Ltda. (2,223,461) 2,291,233 162,448 230,220
Embotelladora del Atlantico S.A. 1,037,602 1,300,814 0 2,338,416
--------- --------- ------- ---------
Total (1,185,859) 3,592,047 162,448 2,568,636
27
NOTE 28 - OTHER NON-OPERATING INCOME AND EXPENSES
- -------------------------------------------------
2006 2005
---- ----
ThCh$ ThCh$
Other non-operating income during the period was as follows:
Gain on sale of plant, property and equipment 790,264 175,197
Other income 75,583 106,929
------- -------
Sub-total 865,847 282,126
Translation of Financial Statements (1) 544,252 330,736
--------- -------
Total 1,410,099 612,862
========= =======
Other non-operating expenses during the period was as follows:
Loss on sale of property, plant and equipment (656,822) (121,669)
Translation adjustment Reserve Realized (2) (162,212) 0
Provision for labor and commercial lawsuits (124,407) (120,009)
Provision loss of investment in Centralli (9,278) (15,579)
Obsolescence and write-offs of property, plant and equipment (4,887) (4,118,569)
Staff Severance Indemnities 0 (2,844,941)
Others (122,060) (122,428)
---------- ---------
Total (1,079,666) (7,343,195)
========== ==========
(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.
(2) Corresponds to release of Translation Adjustment Reserves resulting form
capital decrease in our subsidiary Embotelladora del Atlantico S.A.
during Decemeber of 2003
28
NOTE 29 - PRICE-LEVEL RESTATEMENT
- ---------------------------------
Price-level restatement for each year end was as follows:
2006 2005
---- ----
ThCh$ ThCh$
Assets - (charges)/credits Index
Inventories CPI (239,218) 86,231
Property, plant and equipment CPI (217,220) (582,142)
Investments in related companies CPI (423,541) (1,255,963)
Cash, Time Deposits, Marketable Securities CPI (21,288) (36,126)
Trade Accounts Receivable, Notes Receivable, Other UF (9) (1,159)
Receivables
Trade Accounts Receivable, Notes Receivable, Other CPI (28) (485)
Receivables
Accounts Receivable related Companies short term CPI (110,836) (359,196)
Recoverable taxes CPI (8,694) (4,172)
Differred Taxes CPI 0 3,911
Other current assets CPI (574) 0
Other current assets UF 19,183 (11,242)
Goodwill CPI (2,403) (11,211)
Other long term assets UF 0 (15,190)
Other long term assets CPI (263,846) (1,151,733)
Other non monetary assets CPI 0 0
Costs and Expenses accounts (16,610) (83,213)
Total (charges)/credits (1,285,084) (3,421,690)
Liabilities - (charges)/credits
Shareholders' equity CPI 805,308 2,422,188
Short and long term bonds payable UF 315,256 737,590
Short and long term bonds payable CPI 55,467 216,013
Accounts Payable related Companies short term UF 2,927 0
Other current liabilities UF 537 0
Other current liabilities CPI (110,643) 8,820
Other long term liabilities CPI 4,953 (32,174)
Income accounts CPI 21,017 110,615
Total (charges) credits CPI 1,094,822 3,463,052
Price-level restatement (loss)gain (190,262) 41,362
29
NOTE 30 - FOREIGN EXCHANGE GAINS/LOSSES
- ---------------------------------------
Currency March 31, 2006 March 31, 2005
-------- -------------- --------------
Assets - (charges)/credits ThCh$ ThCh$
- --------------------------
Cash US$ 65,523 35,653
Time deposits US$ 510 0
Marketable securities US$ 512,667 (83,757)
Other receivables US$ 229,537 3,521
Short term notes and accounts receivable related US$ 1,842,910 2,595,283
companies
Inventories US$ 29,877 39,667
Other current assets US$ 76,740 85,423
Property, plant & equipment US$ 2,154 (23)
Other assets US$ 2,641,330 9,024,691
Total (charges) credits 5,401,248 11,700,458
Liabilities - (Charges)/credits
- ---------------------------------
Bonds payable US$ (108,723) (256,932)
Accounts payable US$ 7,208 (3,072)
Provisions US$ 4,141 0
Bonds payable-long term US$ (548,987) (1,238,913)
Other current liabilities US$ 940 (2,018)
Total (charges) credits (645,421) (1,500,935)
Foreign exchange gain (loss), net 4,755,827 10,199,523
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$1,172,524. Disbursements for
risk rating reports, legal and financial advisory services, printing and
placement fees are included as Debt issue costs.
Amortization for the period 2006 amounted to ThCh$41,679 (ThCh$41,670 in
2005).
30
NOTE 33 - CONSOLIDATED STATEMENT OF CASH FLOWS
- ----------------------------------------------
For the projection of future cash flows, there are no transactions and events
to consider which have not been revealed in these financial statements and
accompanying notes.
Below is an itemization of the movement of assets and liabilities not
affecting the cash flow in the period, but compromising future cash flows.
Cash Flow Statement
- -------------------
2006 Maturity Date 2005 Maturity Date
---- ------------- ---- -------------
ThCh$ ThCh$
Expenses
- --------
Dividend payments (5,172,908) Apr 27, 2006 (3,988,887) Apr 28, 2005
Additions to property, plant and equipment (700,510) May 15, 2006 (970,415) May 15, 2005
Additions to property, plant and equipment (146,457) June 30, 2006 (42,700) Jun 29, 2005
Additions to property, plant and equipment (82,746) Sep. 15 2006 (3,012) Jul 31, 2005
------------- ---------------
Total expenses (6,102,621) (5,005,014)
============= ===============
Income
- ------
Sale of property, plant and equipment 6,149 May 15, 2006 4,540 May 15, 2005
------------- ---------------
Total Income 6,149 4,540
============= ===============
Total Net (6,096,472) (5,000,474)
============= ===============
31
NOTE 34 - DERIVATIVE CONTRACTS
- ------------------------------
Derivative contracts at March 31, 2006 were as follows:
Position
Maturity Purchase
Derivative Contract Value Period Specific Item /sale
- ---------- -------- ----- ----------- -------------- ---------
ThCh$
SWAP CCPE 2,639,231 I QUARTER 2007 US$ Exchange Rate S
SWAP CCPE 2,640,601 III QUARTER 2007 US$ Exchange Rate S
SWAP CCPE 40,623,288 IV QUARTER 2007 US$ Exchange Rate S
SWAP CCPE 7,916,378 I QUARTER 2008 US$ Exchange Rate S
SWAP CCPE 8,197,610 II QUARTER 2008 US$ Exchange Rate S
SWAP CCPE 12,918,577 III QUARTER 2008 US$ Exchange Rate S
SWAP CCPE 5,332,805 I QUARTER 2013 US$ Exchange Rate S
FR CCTE 9,335,084 II QUARTER 2006 US$ Exchange Rate P
FR CCTE 2,636,230 II QUARTER 2006 US$ Exchange Rate S
FR CCTE 6,735,450 III QUARTER 2006 US$ Exchange Rate P
FR CCTE 2,794,318 III QUARTER 2006 US$ Exchange Rate S
FR CCTE 11,348,051 IV QUARTER 2006 US$ Exchange Rate P
FR CCTE 3,486,627 IV QUARTER 2006 US$ Exchange Rate S
Hedged item or
transaction Hedged Assets/liabilities Effect on income
---------------------- Item ------------------------------- ---------------------
Concept Amount Value Item Amount Realized Unrealized
------- ------ ----- ---- ------ -------- ----------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Long term Other current and
bonds US$ 3,718,120 2,660,433 long term assets 1,104,712 (106,137) 146,134
Long term Other current and
bonds US$ 2,747,765 2,645,450 long term assets 1,104,430 (110,173) 136,478
Long term Other current and
bonds US$ 47,599,704 40,598,076 long term assets 8,773,077 (1,094,994) 1,867,146
Long term Other current and
bonds US$ 10,456,161 7,906,192 long term assets 3,312,466 (307,968) 190,170
Long term Other current and
bonds US$ 11,100,360 8,294,470 long term assets 3,427,358 (170,444) 776,921
Long term Other current and
bonds US$ 16,620,691 12,868,345 long term assets 5,308,396 (482,255) 737,339
Long term Other current and
bonds US$ 7,260,554 5,405,985 long term assets 2,224,237 (198,120) 648,795
Suppliers
foreign Other current and
exchange 9,342,326 0 long term assets 20,387 0 20,387
Suppliers
foreign Other current and
exchange 2,430,952 0 long term assets 4,685 0 (4,685)
Suppliers
foreign Other current and
exchange 6,716,688 0 long term assets 906 0 (906)
Suppliers
foreign Other current and
exchange 20,504,617 0 long term assets 799 0 799
Suppliers
foreign Other current and
exchange 11,470,198 0 long term assets 171,565 0 171,565
Suppliers
foreign Other current and
exchange 3,304,410 0 long term assets 50,626 0 50,626
32
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$1,732,672 (ThCh$2,043,000 in 2005). 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$17,041,869 (ThCh$6,482,230 in 2005). 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$66,517 (ThCh$80,252 in
2005). In accordance with its legal counsel's opinion, the Company deems
improbable that contingencies without provisions may affect the results
or equity of the Company.
b. Restrictions
The bond issue and placement on the US market for US$ 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.
33
c. Direct guarantees
Guarantees at March 31, 2006 were as follows:
Balances pending at
Guarantee creditor Debtor Assets involved end of period
------------------- ------- --------------- --------------------
Type of Book
Name Relation guarantee Type value March 31,
------ --------- ---------- ----- ------ ---------
2006 2005
----- ------
ADUANA DE BUENOS EMBOTELLADORA DEL Subsidiary Insurance Inventories 3,443,730 0 0
AIRES ATLANTICO S.A. Guaranty
UNIAO FEDERAL RIO DE JANEIRO REFRESCOS Subsidiary Mortgage Warehouse 58,573 67,025 63,027
LTDA.
ESTADO RIO DE RIO DE JANEIRO REFRESCOS Judicial
JANEIRO LTDA. Subsidiary Mortgage Deposit 11,850,214 9,879,740 0
PODER JUDICIARIO RIO DE JANEIRO REFRESCOS Judicial Judicial
LTDA. Subsidiary Deposit Deposit 6,399,598 0 0
Main
AGAS EMBOTELLADORA ANDINA S.A Office Agreement Agreement 157,854 0 0
Main Lease of Lease of
FIDAE 2006 EMBOTELLADORA ANDINA S.A. Office Space Space 4,479 0 0
NOTE 36 - GUARANTEES FROM THIRD PARTIES
- ---------------------------------------
Guarantees from third parties at March 31, 2006 were as follows:
Type of
Guarantor Guarantee Amount Currency Transaction
--------- --------- ------ -------- -----------
Russel W. Coffin Letter of Credit 42,680,238.12 USD Purchase Nitvitgov Refrigerantes S.A.
CONFAB Mortgage 30,000,000.00 USD Purchase Rio de Janeiro Refrescos Ltda.
Clientes Diversos Deposits 1,196,801.10 USD Container Guaranty
Soc. Com. Champfer Mortgage 626,253.66 USD Distributor Credit
AGA S.A. Policy 600,000.00 USD Supplier Agreement
Mac Coke Dist. Beb. Mortgage 416,115.39 USD Distributor Credit
Tigresa Com. Beb. Mortgage 278,797.31 USD Distributor Credit
Franciscana Dist. Mortgage 239,266.35 USD Distributor Credit
ASXT Fluminense
Distrib.Bebidas Mortgage 233,024.62 USD Distributor Credit
Dist. Real Cola
(Apucarana) Mortgage 228,863.46 USD Distributor Credit
Dist Uniao De Itaperuna Mortgage 215,797.44 USD Distributor Credit
Rosas de Casimiro Mortgage 178,929.62 USD Distributor Credit
Aguiar Distrib.de Bebidas
Ltda Mortgage 166,862.27 USD Distributor Credit
MBM Distribuidora de Beb Mortgage 154,794.92 USD Distributor Credit
Guaranty
Ledesma SAAI Insurance 133,533.97 USD Supplier
Guaranty
Ledesma SAAI Insurance 132,688.82 USD Supplier
Guaranty
Ledesma SAAI Insurance 132,688.82 USD Supplier
Guaranty
Ledesma SAAI Insurance 132,688.82 USD Supplier
Guaranty
Ledesma SAAI Insurance 132,688.82 USD Supplier
Deposit
Iansagro S.A. Certificate 4,735,875.00 ThCh$ Warrants
Deposit
Iansagro S.A. Certificate 3,788,700.00 ThCh$ Warrants
Deposit
Iansagro S.A. Certificate 2,841,525.00 ThCh$ Warrants
Soc. Las Nipas Policy 6,971.45 U.F. Advertising Agreement
34
NOTE 37 - LOCAL AND FOREIGN CURRENCY
- ------------------------------------
Assets at each year end were composed of local and foreign currencies as
follows:
March 31, March 31,
2006 2005
Currency Amount Amount
-------- ------ ------
Current Assets ThCh$ ThCh$
- --------------
Cash Non-Indexed Ch$ 2,938,572 3,144,316
- US$ 6,492,203 8,040,636
- AR$ 1,609,976 2,857,744
- R$ 4,000,954 2,758,465
Time Deposits AR$ 0 149
- R$ 3,757,905 8,518,898
- Non-Indexed Ch$ 28,968,456 1,637,758
- US$ 22,152,086 46,202
EURO 9,772,360 0
Marketeable Securities Non-Indexed Ch$ 10,689,473 1,476,138
- US$ 4,500,107 44,148,777
R$ 2,281,177 0
Trade accounts receivable Non-Indexed Ch$ 12,190,028 14,545,621
- US$ 746,067 8,639
- AR$ 1,219,727 3,205,803
- R$ 8,075,199 7,338,375
Notes receivable Non-Indexed Ch$ 4,986,497 5,223,415
- AR$ 308,887 356,443
- R$ 1,907,376 1,391,539
Other receivables Non-Indexed Ch$ 2,246,067 12,337,218
- US$ 9,984,489 573,185
- AR$ 614,756 1,098,520
- R$ 6,711,717 4,809,124
Notes receivable from related AR$
companies 0 291,810
- Non-Indexed Ch$ 1,240,695 0
- R$ 313,068 0
Inventories Non-Indexed Ch$ 1,879,436 4,581,215
- Indexed Ch$ 2,913,785 0
- US$ 2,128,640 333,743
- AR$ 3,063,487 10,933,970
- R$ 7,594,818 6,002,905
Recoverable Taxes Non-Indexed Ch$ 353,562 619,283
- AR$ 1,231,438 1,233,199
- R$ 5,642,166 5,608,633
- US$ 733,182 0
Prepaid Expenses Non-Indexed Ch$ 1,629,345 1,744,557
- US$ 122,420 200,768
- AR$ 189,247 49,109
- R$ 252,123 315,701
Other Current Assets Non-Indexed Ch$ 1,407,552 1,667,590
- US$ 3,112,223 5,495,549
- AR$ 1,756,586 1,275,979
- R$ 1,724,353 1,008,791
- Indexed Ch$ 1,145,902 0
Property Plant and Equipment
Property Plant and Equipment Non-Indexed Ch$ 62,405,091 67,981,723
- US$ 77,302,185 89,083,053
Other Assets
Investment in related companies Indexed Ch$ 18,073,747 18,306,012
- US$ 1,158,948 888,816
- R$ 1,413,713 1,248,490
Investment in other companies US$ 13,225 56,886
- Non-Indexed Ch$ 41,564 0
Goodwill Non-Indexed Ch$ 627,808 740,333
- US$ 71,279,141 89,009,884
Long term debtors AR$ 29,840 54,372
- Indexed Ch$ 59,966 0
Notes receivable related Indexed Ch$
companies 33,915 35,032
INTANGIBLES US$ 419,979 486,844
AMORTIZACION US$ (243,196) (258,338)
Others Non-Indexed Ch$ 4,863,072 4,879,680
- US$ 86,066,252 145,292,411
- AR$ 2,496,952 0
- R$ 31,595,620 18,425,857
- Indexed Ch$ 51,995 0
- EURO 12,119,841
Deferred Taxes AR$ 346,855 38,845
Total Assets
Non-Indexed Ch$ 136,467,218 120,578,847
US$ 285,967,951 383,407,055
AR$ 12,867,751 21,395,943
R$ 75,270,189 57,426,778
Euro 9,772,360 12,119,841
Indexed Ch$ 22,279,310 18,341,044
35
b. Current liabilities at year end denominated in local and foreign
currencies were as follows:
Up to 90 Days From 90 Days up to 1 year
March 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005
--------------- --------------- --------------- ---------------
Int. Int. Int. Int.
Currency Amount Rate Amount Rate Amount Rate Amount Rate
-------- ------ ---- ------ ---- ------ ----- ------ -----
Short term bank liabilities Non-indexed
Ch$ 5,866,771 7.00% 6,311,292 3.36% 0 0
- US$ - 0 21,914,603 6.51% 0
- AR$ - 0 0 6,379,467 8.90%
- R$ 977,381 0 0 0
Current portion of long term bank Non-indexed
liabilities Ch$ - 0 0 0
- Indexed Ch$ - 0 0 0
-
- US$ - 0 0 2,011,004 6.50%
- R$ - 0 494,720 12.49% 787,909 13.51%
Current portion of bonds payable Indexed Ch$ 11,868,979 7.00% 18,010,043 6.40% 5,912,168 0
- US$ - 777,789 7.10% 0
Dividends payable Non-indexed
Ch$ 215,565 282,068 0 0
Accounts payable Non-indexed
Ch$ 17,947,785 17,533,747 0 0
- US$ 660,110 1,787,472 0 0
- AR$ 6,177,831 5,977,089 0 11,733
- R$ 10,574,144 7,860,387 0 149,279
- Other
Currencies 14,799 248 0 0
Other creditors US$ - 372,068 0 0
- AR$ 53,149 56,548 46,634 30,618
- R$ 3,330,088 2,845,820 0 0
Notes and accounts payable related Non-indexed
companies Ch$ 4,935,555 5,135,988 0 0
- US$ 142,467 1,260,411 0 0
- AR$ - 0 0 0
- R$ 1,169,664 0 0 0
Provisions Non-indexed
Ch$ 504,059 388,710 0 0
- Indexed Ch$ 0 0 0
- AR$ - 168 0 0
Withholdings Non-indexed
Ch$ 5,071,416 5,840,897 0 0
- US$ - 178,438 0 0
- AR$ 3,025,049 2,753,681 0 0
- R$ - 0 3,540,849 2,462,566
Other
Currencies 79,818 0 0 0
Income Tax Non-indexed
Ch$ 2,619,071 3,993,641 0 0
- AR$ - 0 203,252 0
- R$ - 0 1,533,990 638,864
Unearned Income Non-indexed 0 0
Ch$ 493,896 9,007
- US$ - 2,082,000 0 0
Deferred Taxes AR$ - 0 114,553 84,059
Non-indexed
Ch$ 494,846 0 0 0
Other current liabilities Non-indexed
Ch$ 3,193,126 2,574,637 0 0
Total Current Liabilities Non-indexed
Ch$ 41,342,090 42,069,987 0 0
US$ 802,577 6,458,178 21,914,603 2,011,004
AR$ 9,256,029 8,787,486 364,439 6,505,877
R$ 16,051,277 10,706,207 5,569,559 4,038,618
Indexed Ch$ 11,868,979 18,010,043 5,912,168 0
Other
Currencies 94,617 248 0 0
36
c.1) Long-term liabilities at March 31, 2006 were composed of local and
foreign currencies as follows:
Currency 1 to 3 years 3 to 5 years 5 to 10 years Over 10 years
-------- ------------------ ------------------ ----------------- ----------------
Average Average Average Average
int int int int
Amount rate Amount rate Amount rate Amount rate
------ ---- ------ ---- ------ ---- ------ ----
ThCh$ ThCh$ ThCh$ ThCh$
Long Term Bank
Liabilities $R 394,962 12.49% 0 0 0
Bonds payable US$ 16,877,750 7.0% 0 0 2,104,720
Indexed Ch$ 13,795,075 6.2% 5,848,936 6.5% 19,496,453 6.5% 40,942,552 6.5%
-
Other Creditors $AR 101,097 0 0 0
$R 0 75,325 0 0
Notes and Accounts
Receivable Related Non-Indexed
Companies Ch$ 3,737,364 0 0 0
Provisions Indexed Ch$ 0 0 0 5,020,696
Non-Indexed
- Ch$ 46,656 0 0 0
- $AR 1,732,534 0 0 0
- $R 17,041,869 0 0 0
Non-Indexed
Other Liabilities Ch$ 0 4,580,594 0 0
$AR 0 203,665 1,832,988 0
$R 2,008,708 0 0 0
Total Long Term
Liabilities
$R 19,445,539 75,325 0 0
US$ 16,877,750 0 0 2,104,720
Indexed Ch$ 13,795,075 5,848,936 19,496,453 40,942,552
$AR 1,833,631 203,665 1,832,988 0
Non-Indexed
Ch$ 3,784,020 4,580,594 0 0
Indexed Ch$ 0 0 0 5,020,696
37
c.2) Long - term liabilities at March 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 rate Amount int rate Amount int rate Amount int rate
------ -------- ------ -------- ------ -------- ------ --------
ThCh$ ThCh$ ThCh$ ThCh$
Long term bank
liabilities US$ 48,796,250 6.51% 0 0 0
- R$ 884,774 13.52% 0 0 0
Bonds payable UF 19,694,325 6.20% 5,908,296 6.20% 21,432,057 6.50% 44,812,483 6.50%
- US$ 19,564,857 7.00% 0 0 2,439,813 7.63%
Other creditors AR$ 77,128 0 0 0
- R$ 0 71,514 35,757 0
Provisions Non-Indexed 519,284 0 0 44,627
CH$
- AR$ 3,310,267 0 0 0
- R$ 0 11,879,992 0 4,576,698
Other Non-Indexed
Liabilities Ch$ 0 0 4,327,441 0
- AR$ 0 200,280 1,802,519 0
- R$ 1,122,811 0 0 0
Total Long
Term Liabilities
US$ 68,361,107 0 0 2,439,813
R$ 2,007,585 11,951,506 35,757 4,576,698
UF 19,694,325 5,908,296 21,432,057 44,812,483
AR$ 3,387,395 200,280 1,802,519 0
Non-Indexed
Ch$ 519,284 0 4,327,441 44,627
38
NOTE 38 - PENALTIES
- -------------------
The Company has not been subject to penalties by the SVS or any other
administrative authority.
NOTE 39 - SUBSEQUENT EVENTS
- ---------------------------
At the Regular General Shareholders Meeting of Embotelladora Andina S.A., held
yesterday, April 19, 2006 (hereinafter the "Meeting"), among other matters,
the following was resolved:
1. The distribution of the following amounts as Final Dividend No. 150,
on account of the fiscal year ending December 31, 2005: (a) Ch$6.48 (six pesos
and forty-eight cents) per Series A share; and b) Ch$7.128 (seven pesos and
one hundred and twenty eight cents) per Series B share. This dividend will be
available to shareholders beginning April 27, 2006. Regarding payment of this
dividend, the Shareholders Registry will close on April 21, 2006.
2. The distribution of an additional Dividend No. 151 on account of
retained earnings: (a)Ch$70.00 (seventy pesos) per Series A share; and
(b)Ch$77.00 (seventy seven pesos) per Series B share. This dividend will be
available to shareholders beginning June 1, 2006. Regarding payment of this
dividend, the Shareholders Registry will close on May 26, 2006.
3. The Meeting elected a new company board of directors in separate voting by
each series of shares, as follows :
Regular Alternate
Juan Claro Gonzalez Ernesto Bertelsen Repetto
Jose Antonio Garces Silva (junior) Patricio Parodi Gil
James Robert Quincey Blakstad Jorge Hurtado Garreton
Arturo Majlis Albala Jose Miguel Barros Van Hovell tot Westerflier
Gonzalo Said Handal Jose Maria Eyzaguirre Baeza
Salvador Said Somavia Jose Domingo Eluchans Urenda
Heriberto Urzua Sanchez Pedro Arturo Vicente Molina
For purposes of Article 50-bis, subparagraph 6 of the Chilean Corporation Law,
is it stipulated that Mr. Heriberto Urzua Sancheza and his alternate, Mr.
Pedro Arturo Vicente Molina, were elected by the Chilean Pension Funds and
thus, fulfill the definition of "independent" from the Controlling Shareholder
of the Company for Chilean legal purposes.
Appointments of the Board of Directors
- ---------------------------------------
The following resolutions were adopted at a regular Board Meeting held April
25, 2006:
1. Juan Claro Gonzalez was appointed Chairman of the Board of the Company and
Jose Antonio Garces Silva Vice-Chairman.
2. The Executive Committee was elected, comprised of regular directors Jose
Antonio Garces Silva, Arturo Majlis Albala, Gonzalo Said Handal and Salvador
Said Somavia.
In addition, the Chairman of the Board, Juan Claro Gonzalez, and the Chief
Executive Officer of the Company, Jaime Garcia Rioseco, are members of this
Committee by virtue of their office.
3. Also elected was the Director's Committee in accordance with Article 50-bis
of Chilean Corporate Law, comprised of the regular directors Juan Claro
Gonzalez, Jose Antonio Garces Silva and Heriberto Urzua Sanchez. If any of
them should be unable to attend, they can be replaced by their respective
alternates director. Mr. Heriberto Urzua Sanchez is considered an independent
director under Chilean law. It was resolved that Mr. Juan Claro Gonzalez will
be the Chairman of this Committee.
39
4. Juan Claro Gonzalez, Jose Antonio Garces Silva and Heriberto Urzua Sanchez
were appointed members of the U.S. Sarbanes-Oxley Audit Committee.
At a Committee meeting held April 25, 2006, it was decided that Mr. Juan Claro
Gonzalez also be Chairman of this Audit Committee. Juan Claro Gonzalez and
Heriberto Urzua Sanchez are considered independent directors under U.S. law
and have voting rights in this Committee.
5. Mr. Pedro Pellegrini Ripamonti, Corporate Legal Manager, was appointed
representative or authorized person to receive notifications in absence of Mr.
Renato Ramirez Fernandez, General Manager.
No other significant events of a financial or any other nature have occurred
between March 31, 2006 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$255,241 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$553,438.
40
I. ANALYSIS OF THE FINANCIAL RESULTS FOR THE FIRST QUARTER ENDED MARCH 31,
2006.
Highlights
Consolidated Operating income reached US$46.2 million during the first quarter
of 2006, a strong 15% gowth compared to the first quarter of 2005. Operating
margin was 17.5%.
Consolidated sales volume grew 6% during the quarter, reaching 107.3 million
unit cases.
During this quarter consolidated EBITDA totaled US$60.3 million, representing
an increase of 9 % compared to the first quarter of 2005. EBITDA margin was
22.7%.
Net Income for the period reached US$40 million, which is 42.7% higher than
the first quarter of 2005.
Comments from the Chief Executive Officer, Mr. Jaime Garcia R.
"We began 2006 with very good results. This has been a consequence of hard
work performed in the three countries, where we continue facing different
scenarios, but obtaining the best of each one."
CONSOLIDATED SUMMARY
1st Quarter 2006 vs. First Quarter 2005
We achieved good results during the first quarter of 2006, with volume growth,
cost control and positive macroeconomic environments. In this last subject,
the 9.3% average appreciation of the Chilean peso and the 17.3% of the
Brazilian real, had a positive impact over our dollar-denominated costs and
have compensated the sugar price increases. On the other hand, the Argentine
peso recorded a 3.8% average depreciation.
Consolidated sales volume for the first quarter of 2006 reached 107.3 million
unit cases, which represents an increase of 6%. As for the same period of
2005, our three franchises contributed to this growth through different rates:
Chile 4%; Brazil 11.6% and Argentina 0.9%.
As a result of higher volumes, price adjustments, and favorable exchange rates
upon figures translation, Net Sales amounted to US$264.9 million, representing
a 6.7% improvement regarding the first three months of 2005.
Cost of Sales per unit case decreased 2.9%, mainly due to effective
negotiations and the reevaluation of the Chilean peso and the Brazilian real.
SG&A's increased 10.9% as a result of higher volumes and increased freight
fees due to increasing oil prices.
Consolidated Operating Income amounted to US$46.2 million, a 15% increase
compared to the US$40.2 million of the same period of 2005. Operating margin
was 17.5%, an increase of 125 basis points.
Finally, consolidated EBITDA amounted to US$60.3 million, a 9% improvement
compared to the same period of the previous year. EBITDA margin was 22.7%, an
increase of 47 basis points.
Chilean Operations
1st Quarter 2006 vs. First Quarter 2005
41
During the first quarter of the year 2006, Sales Volume amounted to 36.9
million unit cases reflecting a 4% growth. Soft drinks increased 1.5%, Juices
6% and Waters 25.7%. Our product Dasani, launched during the second haft of
2005, significantly contributed to the increase experienced in the waters
segment. During this first quarter we have launched several products aimed
towards strengthening categories with strong growth potential, such as: the
Light segment: by launching Quatro Light, the waters category: Tangerine
flavored Dasani, sport drinks: Powerade, and juices: Tutti-Fruti flavored
Andina Nectar and Andina Juice with calcium and vitamin D.
Net sales amounted to US$110.1 million, which is a 1.4% growth. This increase
resulted from higher volumes partially offset by a negative product mix impact
over juices and waters income per unit case, subsequently compensated at the
operating level (as a result of the organizational structure of Vital S.A. and
VASA).
Cost of Sales per unit case decreased 1.9%. This lower cost is basically
explained by: (1) the appreciation of the Chilean exchange rate, that during
the period recorded an average increase of 9.3%, resulting in a positive
impact over our dollar denominated costs, and (2) anticipated sugar purchases,
which allowed us to compensate it's price increase.
Operating income amounted to US$25.2 million, a decrease of 0.6% regarding the
previous year. Operating margin was 22.9%.
EBITDA amounted to US$ 31.6 million; this is 0.7% lower than the US$ 31.8
million recorded the previous year.
Brazilian Operations
1st Quarter 2006 vs. First Quarter 2005
Sales volume for the first quarter of 2006 amounted to 42.3 million unit
cases, representing an 11.6% increase regarding the first three months of the
year 2005. To this improvement contributed the Light category (+15 %).
Net sales reached US$102.8 million, representing a 23.8% increase, a 10.9%
increase in terms of unit case. This growth is explained by price adjustments
performed during February, and by the exchange rates that benefited the
translations of our results from local currency to Chilean pesos.
Cost of Sales per unit case recorded a 3% growth, explained by the effect on
figures conversion (which negatively affects our costs), because in local
currency cost of sales per unit case experienced a slight decrease even though
we observed price increases on certain raw materials, which was offset by the
17.3% average strengthen of the Brazilian real during the period.
Operating Income reached US$16.1 million, which is an improvement of 83.1% and
Operating Margin was 15.7%, an improvement of 509 basis points.
Finally, EBITDA amounted to US$20.6 million, a 48.8% improvement compared to
the US$13.8 million of the first quarter of 2005. EBITDA Margin was 20%, an
increase of 336 basis points regarding the previous period.
Argentine Operations
1st Quarter 2006 vs. First Quarter 2005
Sales Volume for the quarter reached 28.1 million unit cases, a slight
improvement from 2005 (+0.9%). It is important to mention that as in Chile, we
launched Dasani in Argentina during the quarter, searching for higher variety
of offerings in growing segments.
Net Sales reached US$54.4 million, representing a decrease of 7% regarding the
US$58.5 million of the first quarter of 2005. The drop in net sales is
explained by the effect in figures translation of the weakness of the
argentine peso (3.8% average for the period), and the
42
appreciation of the Chilean peso (-10.2% end of period). This was compensated
by a 6% increase in net sales per unit case in nominal local currency.
Cost of sales per unit case decreased 11.5%, mainly explained by the
fluctuations of the exchange rates upon figures translation.
Operating Income amounted to US$ 7.1 million, an 11.4% decrease. This was
consequence of SG&A's increase, resulting from higher labor, freight and
advertising costs. Operating Margin was 13.1%.
EBITDA reached US$10.4 million, a decrease of 11.1%. EBITDA margin amounted to
19.1%.
NON-OPERATING RESULTS
1st Quarter 2006 vs. First Quarter 2005
Non-operating Results totaled a loss of (US$0.2) million, which compares
favorably to an accumulated loss of (US$8.3) million recorded for the same
period of the previous year.
This loss reduction in the Non Operating Result line is explained by:
Financial Expense/Income (Net): Reflecting a positive variation due to a lower
strengthen of the Chilean exchange rate for the December 2005-March 2006
period, when compared to the December 2004-March 2005 period, that led to a
lower impact over Cross Currency Swap Agreements.
Other Non Operating Income/(Expense): Reflecting a positive variation as a
result of lower expenses regarding severance indemnities and a provision to
adjust to market value a Company's Real estate available for sale during 2005.
Finally Net Income amounted to US$40.0 million, an increase of 42.7% compared
to the Net Income recorded during the first quarter of 2005.
ANALYSIS OF THE BALANCE SHEET
As of March 31, 2006, the Company's financial assets amounted to US$ 404.1
million. These represent cash, investments in mutual funds, deposits,
structured notes, corporate bonds and sovereign bonds. 82.6% of the total
financial investments are U.S. dollar-denominated. Nevertheless, through
"Cross-Currency Swaps" agreements executed in July and August 2003 and April
2004, part of the portfolio has been converted to Chilean pesos (UF - Chilean
Inflation Indexed Currency), thereby decreasing the amount denominated in US
dollars to 25.6%.
On the other hand, the Company's total debt was US$ 278.4 million, with an
average annual rate of 6.77% on U.S. dollar debt, and an average real annual
rate of 6.40% on Chilean peso-denominated debt. The U.S. dollar-denominated
debt represents 27.6% of total debt.
Thus, the Company holds a positive net cash position of US$ 125.7 million.
43
Main Indicators
MAIN INDICATORS
INDICATORS Unit Mar-06 Dic-05 Mar-05 Variance
---------- ---- ------ ------ ------ --------
LIQUIDITY
Current Ratio Times 1.63 1.30 1.67 -0.04
Acid Tests Times 1.48 1.16 1.45 0.02
Working Capital MCh$ 45,748 36,022 38,194 7,554
ACTIVITY
Investments MCh$ 7,190 27,369 6,710 480
Inventory turnover Times 4.69 14.78 3.68 1.01
Days of inventory on hand Days 76.79 24.36 97.82 -21.03
INDEBTEDNESS
Debt to equity ratio % 85.57% 95.97% 89.76% -4.19%
Short-term liabilities to total liabilities % 45.45% 48.64% 33.99% 11.47%
Long-term liabilities to total liabilities % 54.55% 51.36% 66.01% -11.47%
Interest charges coverage ratio Times 15.70 18.68 15.83 -0.13
PROFITABILITY
Return over equity % 7.51% 19.67% 4.73% 2.78%
Return over total assets % 3.94% 9.95% 2.43% 1.51%
Return over operating assets % 8.36% 21.25% 5.22% 3.13%
Operating income MCh$ 24,330 77,674 21,164 3,166
Operating margin % 17.45% 16.28% 16.21% 1.25%
EBITDA (1) MCh$ 34,825 103,185 27,668 7,157
EBITDA margin % 24.98% 21.63% 21.19% 3.80%
Dividends payout ratio - Serie A shares % 7.25% 7.76% 4.81% 2.44%
Dividends payout ratio - Serie B shares % 7.55% 8.04% 4.97% 2.57%
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 are in line regarding the previous period, reflecting a
reclassification of certain financial instruments with maturity in less than a
one year period (amounting to MUS$40).
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 amortizations of the local bond for an approximate
amount of MUS$23 carried out during June and December of the year 2005, and
which 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$1,647 million and earnings before interests
and taxes amounted to Ch$25,856 million, achieving an interest coverage of
15.70 times, in line with the figure achieved during the previous period.
44
Operating profitability indicators benefited from the reasons mentioned in
paragraph I. Profitability over equity basically benefited from the reasons
stated in paragraph I along with the effect of the decrease in equity already
explained.
III. Analysis of Book Values and Present Value of Assets
With respect to the Company's main assets the following should be noted:
Given the high rotation of the items that compose working capital, book values
of current assets are considered to represent market values.
Fixed asset values in the Chilean companies are presented at restated
acquisition cost. In the foreign companies, fixed assets are valued in
accordance with Technical Bulletin No. 64 issued by the Chilean
Institute of Accountants. (controlled in historical dollars)
Depreciation is estimated over the restated value of assets along with the
remaining useful economic life of each asset.
All fixed assets that are considered available for sale are held at their
respective market values.
Investments in shares, in situations where the Company has a significant
influence on the issuing company, are presented following the equity method.
The Company's participation in the results of the issuing company for each
year has been recognized on an accrual basis, and unrealized results on
transactions between related companies have been eliminated.
In summary, assets are valued in accordance with generally accepted accounting
standards in Chile and the instructions provided by the Chilean Securities
Commission, as shown in Note 2 of the Financial Statements.
IV. Analysis of the Main Components of Cash Flow
Cash Flow (MCH$) March 2006 March 2005 Variation Variation
---------------- ---------- ---------- --------- ---------
MCh$ MCh$ Ch$ %
Operating 42,546 26,593 15,953 60%
Financing (4,588) (10,666) 6,078 57%
Investment 1,616 12,639 (11,023) 87%
Net cash flow for the Period 39,574 28,566 11,008 -39%
The Company generated a positive net cash flow of MCh$39,574 during the
quarter, analyzed as follows:
Operating activities generated a positive net cash flow of MCh$42,546
representing a positive variation regarding the previous year which amounted
to Ch$15,953 million. Principally explained by increased collections from
clients, which were partially offset by increased payment of value added
taxes.
Financing activities generated a negative cash flow of MCh$4,588 representing
a positive variation of MCh$6,078 mainly explained by lower bank loan
payments.
Investment activities generated a positive cash flow of MCh$1,616; with a
negative variation of MCh$11,023 regarding the previous year, mainly explained
by idecreased sales of investments in financial instruments, and partially
offset by increased income from the sale of permanent investments.
45
V. Analysis of Market Risk
-----------------------
Interest Rate Risk
- ------------------
As of March 31, 2005 and 2006, 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: 41%
Brazilian real: 39%
Argentine peso: 20%
Since the Company's sales are not linked to the United States dollar, the
policy adopted for managing foreign exchange risk, this is the mismatch
between assets and liabilities denominated in a given currency, has been to
maintain financial investments in dollar-denominated instruments, for an
amount at least equivalent to the dollar-denominated liabilities.
Additionally, it is Company policy to maintain foreign currency hedge
agreements to lessen the effects of exchange risk in cash expenditures
expressed in US dollars which mainly correspond to payment to suppliers for
raw materials.
Accounting exposure of foreign subsidiaries (Brazil and Argentina) for the
difference between monetary assets and liabilities, those denominated in local
currency, and therefore, exposed to risks upon translation to the US dollar,
are only covered when it is foreseen that it will result in significant
negative differences and when the associated cost of said coverage is deemed
reasonable by management.
Commodity Risks
- ---------------
The Company faces the risk of price changes in the international markets for
sugar, aluminum and PET resin, all of which are necessary raw materials for
preparing beverages, and that altogether represent between 25% and 30% of our
operating costs. In order to minimize and/or stabilize such risk, supply
contracts and advanced purchases are negotiated when market conditions are
favorable. Likewise commodity coverage instruments have also been utilized.
This document may contain 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.
MATERIAL EVENTS
During the period January-April 2006 the following relevant events were
recorded:
CONVENE REGULAR SHAREHOLDERS MEETING FOR THE YEAR 2006
The following was resolved, among other matters, at the re Board of Directors'
Meeting of the Company held February 28, 2006:
46
I. To convene a Regular Shareholders Meeting for April 11, 2006, at 10:30
a.m., at the Company's offices located at Av. Carlos Valdovinos No. 560,
Borough of San Joaquin.
II. The following matters will be discussed at the Regular Shareholders
Meeting:
1. The Annual Report, Balance and Financial Statements for the year 2005; as
well as the Report of Independent Auditors with respect to the Financial
Statements;
2. Earnings distribution and dividend payments;
3. Present Company dividend distribution policy and inform about the
distribution and payment procedures utilized;
4. Determine the compensation for directors and committee members pursuant
to Law No. 19,705; and the Audit Committee establish by the
Sarbanes Oxley Act.
5. Appoint the Company's independent auditors for the year 2006;
6. Appoint the Company's rating agencies;
7. Report on Board agreements which took place after that last Shareholders
Meeting, relating to operations referred to by Article 44 of Law
No. 18,046; and
8. In general, to resolve every other matter under its competency and any
other matter of Company interest.
III Propose to the Meeting, the distribution of a definitive dividend, on
account of the fiscal year ending December 31, 2005.
a) CH$6.48 (six pesos and 48/100) per Series A Shares and;
b) CH$7.128 (seven pesos and 128/100) per Series B Shares
CHANGE OF DATE OF THE REGULAR SHAREHOLDERS MEETING AND AGREEMENT ON PROPOSALS
The following was discussed at a special meeting of the Company's Board of
Directors held March 14, 2006:
I. It was resolved to propose to the Shareholders Meeting the payment of an
Additional Dividend on account of the Retained Earnings Fund, additional
to the Final Dividend for the 2005 fiscal year (approved and disclosed
last February), for the following amounts:
a) CH$70 (seventy pesos) per Series A share; and
b) CH$77 (seventy-seven pesos) per Series B share.
If approved by the Shareholders Meeting, this Additional Dividend would be
paid starting May 30, 2006 and the Shareholders Registry would be closed May
24, 2006 for the determination of the recipients of payment.
II. The recent resignations of Glenn Jordan Schoenbohm and his alternate,
Jorge Hurtado Garreton, from their seats in the board of the Company were
reported. Accordingly, pursuant to article 32 of Law 18,046, it was
decided that the Regular Shareholders Meeting of the Company this year
(reported opportunely to the Superintendency) must elect a new Board of
Directors. The election of the entire Board of Directors will therefore
be added to the agenda for that Meeting.
III. In view of the foregoing resolutions, for the purpose of having
sufficient time to disclose the foregoing to the market and give notice
of the Regular Shareholders Meeting, it was finally resolved to postpone
the Regular Shareholders Meeting (the "Meeting") from Tuesday, April 11,
2006 (already reported opportunely to the Superintendency) to Wednesday,
April 19, 2006 at 10:30 a.m., at the Company's offices located at Av.
Carlos Valdovinos 560, Borough of San Joaquin.
The agenda for the Meeting will therefore be the following:
47
1) The Annual Report, General Balance Sheet and Financial Statements for the
2005 fiscal year and the report by the external auditors on such
Financial Statements;
2) The distribution of profits and payment of dividends;
3) An explanation of the Company's dividend policy and information on the
procedures used in distributing and paying dividends;
4) The election of the entire Board of Directors in application of article
32 of the Companies Law;
5) The determination of the compensation for the members of Directors
Committee, stablish by Law 19705 and members of the Audit Committee
required by the Sarbanes-Oxley Act of the U.S.A.
6) The appointment of external auditors for the 2006 fiscal year;
7) The appointment of risk rating agencies;
8) A report on Board resolutions regarding transactions indicated in Article
44 of Law 18,046 since the last Shareholders Meeting; and
9) Generally, all other matters within the purview of this meeting and any
other matter of corporate interest.
No other significant events of a financial or any other nature have occurred
between March 31, 2006 and the issuance date of these financial statements
that affect or may affect the assets, liabilities and/or income of the
Company.
48
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Santiago, Chile.
EMBOTELLADORA ANDINA S.A.
By: /s/ Osvaldo Garay
-----------------------
Name: Osvaldo Garay
Title: Chief Financial Officer
Santiago, June 5, 2006