-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MW2fySP+JTJYMiJytbDgsou7D1TwaYPOncZn32cq9X1NwOuFHZfHwL5XFRP+A91f VqUQZJAvUeUnTizyS5lKiQ== 0000898080-03-000008.txt : 20030106 0000898080-03-000008.hdr.sgml : 20030106 20030106155943 ACCESSION NUMBER: 0000898080-03-000008 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20030106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COCA COLA EMBONOR CO CENTRAL INDEX KEY: 0001093753 STANDARD INDUSTRIAL CLASSIFICATION: BOTTLED & CANNED SOFT DRINKS CARBONATED WATERS [2086] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-10702 FILM NUMBER: 03505134 BUSINESS ADDRESS: STREET 1: AVENIDA EL BOSQUE NORTE 0440 STREET 2: PISO 12 CITY: SANTIAGO CHILE STATE: F3 ZIP: 00000 BUSINESS PHONE: 5622035020 MAIL ADDRESS: STREET 1: CT CORP SYSTEMS STREET 2: 1633 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: ARICA BOTTLING CO SA DATE OF NAME CHANGE: 19990824 6-K 1 form6k.txt FORM 6K TOTAL NUMBER OF SEQUENTIAL PAGES 59 EXHIBIT INDEX ON SEQUENTIAL PAGE NUMBER 3 File No:333-10702 --------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 6-K Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the nine-month period ending September 30, 2002. COCA-COLA EMBONOR S.A. ---------------------- (translation of registrant's name into English) Avenida Apoquindo 3721, Piso 10 Las Condes, Santiago, Chile --------------------------- (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover of form 20-F or 40-F: Form 20-F x - Form 40-F --- --- Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g 3-2(b) under the Securities Exchange Act of 1934: Yes No --- --- FORM 6-K FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2002 -1- ITEM 1. Filing of financial results with the Superintendencia de Valores y Seguros. On November 14, 2002, Registrant filed with the Superintendencia de Valores y Seguros, Santiago, Chile, its Ficha Estadistica Codificada Uniforme containing its results of financial operations for the period ended September 30, 2002. Registrant has caused an English translation of such filing to be prepared, a copy of which is annexed hereto as Exhibit 99.1 FORM 6-K FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2002 -2- ITEM 2. Exhibits Exhibit No. Description - ----------------- ----------- Page Number - ----------- 99.1 Translation of Ficha Estadistica Codificada - -5- FORM 6-K FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2002 -3- 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. COCA-COLA EMBONOR S.A. ---------------------- (Registrant) Date: December 6, 2002. By: Roger Ford Chief Financial Officer FORM 6-K FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2002 -4- Coca-Cola Embonor S.A and Subsidiaries Consolidated General Balance Sheets as of September 30,
Assets 2002 2001 Current Assets TCH$ TCH$ Cash 3.613.715 4.273.151 Time deposits 6.543.601 4.096.097 Marketable securities (net) 11.512.897 3.932.954 Sales receivables (net) 10.600.564 9.496.404 Documents receivables (net) 4.860.864 5.670.039 Sundry receivables (net) 2.626.556 2.749.823 Documents and accounts receivable from related companies 1.019.688 734.675 Inventory (net) 11.014.071 11.899.321 Recoverable taxes 7.366.701 11.649.401 Prepaid expenses 8.760.989 7.430.027 Deferred taxes 556.458 447.750 Other current assets 4.654.163 4.807.566 ----------------- ----------------- Total current assets 73.130.267 67.187.208 ----------------- ----------------- Property, Plant and Equipment Land 14.364.479 13.808.420 Construction and infrastructure 49.205.948 47.377.984 Machinery and equipment 124.395.561 125.595.441 Other fixed assets 149.533.846 137.765.039 Higher value in technical reappraisal of property, plant and equipment 1.829.233 1.809.430 Depreciation (less) (158.887.016) (144.303.810) ----------------- ----------------- Total property, plant and equipment 180.442.051 182.052.504 ----------------- ----------------- Other assets Investment in related companies 1.499.321 1.687.153 Investment in other companies 125.688 152.442 Goodwill 296.795.701 310.168.633 Negative goodwill, net (908.920) - Long-term receivables 261.921 268.202 Intangibles 24.216.765 22.982.558 Amortization (less) (6.563.100) (5.071.138) Other 6.599.659 8.111.913 ----------------- ----------------- Total other assets 322.027.035 338.299.763 ----------------- ----------------- Total assets 575.599.353 587.539.475 ----------------- -----------------
The attached notes 1 to 38 form an integral part of these financial statements 5 Coca-Cola Embonor S.A and Subsidiaries Consolidated General Balance Sheets as of September 30,
2002 2001 Liabilities TCH$ TCH$ Current liabilities Short-term bank debt 997 5.029 Current portion of long-term bank liabilities 18.012.624 7.046.260 Bonds - short-term portion 48.003.243 1.301.345 Accounts payable 11.419.323 10.832.442 Documents payable 1.208.692 1.579.573 Sundry payable 1.802.984 3.291.200 Documents and accounts payable to related companies 2.550.746 3.727.674 Provisions 7.638.718 7.737.819 Withholdings 4.135.771 3.754.140 Other current liabilities 81.673 234.367 ----------------- ----------------- Total current liabilities 94.854.771 39.509.849 ----------------- ----------------- Long-term liabilities Bank debt 34.737.733 51.719.553 Long-term bonds 137.974.890 178.994.337 Long-term provisions 1.909.887 1.684.912 Long-term deferred taxes 11.925.410 12.831.265 Other long-term liabilities 8.691.457 8.283.487 ----------------- ----------------- Total long-term liabilities 195.239.377 253.513.554 ----------------- ----------------- Minority Interest 55.335.013 53.812.683 Equity Paid-in capital 217.054.962 215.160.205 Capital revaluation reserve 2.821.715 4.733.525 Premium on the sale of treasury stock 20.520.286 20.521.878 Other reserves 9.692.468 8.025.683 Retained earnings (19.919.239) (7.737.902) Accrued profit Accrued loss (less) (9.896.325) (1.337.141) Fiscal year profit (loss) (10.022.914) (6.400.761) ----------------- ----------------- Total equity 230.170.192 240.703.389 ----------------- ----------------- Total liabilities and equity 575.599.353 587.539.475 ----------------- -----------------
The attached notes 1 to 38 form an integral part of these financial statements 6 Coca-Cola Embonor S.A. and Subsidiaries Consolidated Statements of Income for the nine months ending September 30,
2002 2001 Operating Income (loss) TCH$ TCH$ Operating revenue 174.027.052 171.955.298 Operating costs (less) (99.712.772) (97.420.970) ----------------- ----------------- Operating margin 74.314.280 74.534.328 Selling and Administration Expenses (55.943.210) (53.099.181) ----------------- ----------------- Operating income (loss) 18.371.070 21.435.147 ----------------- ----------------- Non-operating Income (loss) Financial income 1.325.420 935.313 Other non-operating income 2.779.205 7.555.486 Loss on investment in related companies (less) (160.782) (318.876) Goodwill amortization (less) (13.542.064) (13.327.718) Financial expenses (less) (11.919.936) (13.559.818) Other non-operating expenses (less) (4.614.444) (4.751.479) Price-level restatement (582.273) (3.649.861) Exchange differentials 726.339 2.033.213 ----------------- ----------------- Non-operating profit (loss) (25.988.535) (25.083.740) ----------------- ----------------- Income before tax and extraordinary items (7.617.465) (3.648.593) Income tax (3.163.826) (5.458.323) Extraordinary items 1.171.600 2.712.069 ----------------- ----------------- Profit (loss) before minority interest (9.609.691) (6.394.847) Minority Interest (428.628) (5.914) Net Profit (loss) (10.038.319) (6.400.761) Amortization of negative goodwill 15.405 - ----------------- ----------------- Profit (loss) in the fiscal year (10.022.914) (6.400.761) ----------------- -----------------
The attached notes 1 to 38 form an integral part of these financial statements 7 Coca-Cola Embonor S.A. and Subsidiaries Statements of Consolidated Cash Flow for the nine months ending September 30,
2002 2001 Cash flow from operating activities: TCH$ TCH$ Collection of sales receivables 230.650.357 237.334.038 Financial income received 1.357.513 939.730 Dividends received Other income received 4.414.282 6.388.463 Payments to suppliers and employees (less) (179.782.483) (178.608.258) Interest paid (less) (16.116.671) (18.154.980) Income tax paid (less) (22.632) (44.772) Other expenses paid (less) (1.650.619) (2.743.738) VAT and other similar taxes paid (less) (30.830.705) (30.359.755) ----------------- --------------- Cash flow from operating activities 8.019.042 14.750.728 ----------------- --------------- Inflow from Finance Activities: Loans secured 253.060 - Other sources financing 165.501 219.544 Loan payment (less) (5.693.440) - Bond payment (less) (25.277) (203.623) Other disbursements for financing (less) (419.385) (325.340) ----------------- --------------- Cash flows from financing activities (5.719.541) (309.419) ----------------- --------------- Cashflows from Investment Activities: Sales of property, plant and equipment 296.409 1.071.646 Collection loans to related companies - 4.740.155 Collection other loans to related companies 100.650 - Other investment incomes - 16.605 Additions to property, plant and equipment (less) (8.784.178) (11.416.662) Long-term investments (871.398) (1.010.976) Other loans to related companies Other investment disbursements (less) (110.644) (93.340) ----------------- --------------- Cashflow from investment activities (9.369.161) (6.692.572) ----------------- --------------- Total net cashflows for the period (7.069.660) 7.748.737 ----------------- --------------- Effect of inflation on cash and cash equivalent 772.752 58.785 ----------------- --------------- Net change in cash and cash equivalent (6.296.908) 7.807.522 Initial balance of cash and cash equivalent 27.967.121 4.494.680 ----------------- --------------- Ending balance of cash and cash equivalent 21.670.213 12.302.202 ----------------- ---------------
The attached notes 1 to 38 form an integral part of these financial statements 8 Coca-Cola Embonor S.A. and Subsidiaries Statements of Consolidated Cash Flow for the nine months ending September 30,
2002 2001 Reconciliation of Net Inflow from Operating TCH$ TCH$ Activities to Fiscal Year Income Fiscal year profit (loss) (10.022.914) (6.400.761) Income from asset sales: (Profit) loss on sale of property, plant and equipment (108.094) (19.664) (Profit) loss on sale of investment (449) (Profit) loss on sale of other assets Debits (credits) against income not representing cash flow: Depreciation in the fiscal year 18.657.194 18.987.569 Amortization of intangibles 913.022 866.172 Write-offs and provisions 366.629 527.546 Loss accrued on investments in related companies 160.782 318.876 Amortization of goodwill 13.542.064 13.327.718 Amortization of negative goodwill (15.405) - Net price-level restatement 582.273 3.649.861 Net change differential (726.339) (2.033.213) Other credits against income not representing cash flow 1.536.135 1.416.893 Other debits against income not representing cash flow (1.291.288) (6.320.957) Variation in assets affecting cash flows: (increase) decrease in sales receivables 6.392.919 6.157.788 (Increase) decrease in inventory (95.605) (1.753.675) (Increase) decrease in other assets (1.156.143) (6.722.496) Variation in liabilities affecting cash flows: (Increase) decrease in accounts payable relating to operating income (10.971.316) (6.448.689) (Increase) decrease in interest payable (4.456.512) - Net (Increase) decrease in income tax payable (1.207.141) 920.138 Increase (decrease) in other accounts payable in relation to non-operating income (2.927.546) 566.883 VAT and other similar taxes payable (net) (1.582.301) (2.294.726) (Profit) loss on minority interest 428.628 5.914 ----------------- ----------------- Net cash flows from Operating Activities 8.019.042 14.750.728 ----------------- -----------------
The attached notes 1 to 38 form an integral part of these financial statements 9 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 1. Registration in the Securities Registry: The Parent Company, Coca-Cola Embonor S.A., is an open corporation registered under No. 622 in the Securities Registry, together with its financial statements as of December 31, 1996; therefore, it is regulated by the Superintendency of Securities and Insurance. The Company's shares were registered on September 25, 1997 and listed on the Santiago Stock Exchange on December 1, 1997, where they are currently traded. The Special Shareholders Meeting approved a change in the corporate name on April 27, 2000 from Embotelladora Arica S.A. to Coca-Cola Embonor S.A. 2. Accounting Principles: a) Accounting period: The consolidated financial statements cover the period from January 1 to September 30, 2002 and 2001. b) Basis for preparation: The financial statements of the Parent Company and its Subsidiaries were prepared as of September 30, 2002 and 2001 according to generally accepted accounting principles of Chile and instructions issued by the Superintendency of Securities and Insurance. There are no discrepancies between either. The specific provisions on corporations contained in Law 18.046 and the regulations thereto have also been taken into account. c) Basis for presentation: The financial statements and amounts indicated in the notes as of September 30, 2001 have been adjusted for comparison purposes by the percentage change of 2.2% in the Consumer Price Index. Certain reclassifications have been made to the 2002 and 2001 financial statements to conform to the current year presentation. d) Basis for consolidation: The consolidation of the financial statements includes Coca-Cola Embonor S.A. and its Subsidiaries where the shareholdings and/or interests are greater than or equal to 50% of equity, either directly or indirectly. For consolidation purposes, as of September 30, 2002, the financial statements of Inversora Los Andes S.A., Sociedad de Cartera del Pacifico S.R.L. and Embotelladora Arica Overseas have been expressed in Chilean pesos according to the rules in Technical Bulletin No. 64 of the Chilean Accountants Association, which determined that the financial statements of foreign companies must be adjusted to generally accepted accounting principles of Chile and converted into Chilean pesos. 10 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements All intercompany transactions and balances have been eliminated in the consolidation. The consolidated financial statements as of September 30, 2002 and 2001 include the following subsidiaries:
Taxpayer ID No. Company Name Percentage interest ---------------------------------------------------- 2002 2001 ---------------------------------------------------- Direct Indirect Total Total % % % % Foreign Inversora Los Andes S.A. and Subsidiaries - 99.99999 99.99999 99.99999 Foreign Embotelladoras Bolivianas Unidas S.A. - 99.99897 99.99897 99.99897 96.517.310-2 Embotelladora Iquique S.A. 99.90000 - 99.90000 99.90000 96.891.720-K Embonor S.A. 99.84188 - 99.84188 99.56729 Foreign Embotelladora Arica Overseas 45.16943 54.83057 99.99999 99.99999 Foreign Sociedad de Cartera del Pacifico S.R.L. - 79.34191 79.34191 79.34191 Foreign Embotelladora Latinoamericana S.A. - 58.72520 58.72520 57.14205 Foreign Industrial Iquitos S.A. - 43.49138 43.49138 76.11100 96.972.720-K Embonor Holdings S.A. 99.99999 - 99.99999 - 96.705.990-0 Envases Central S.A. 33.00000 - 33.00000 33.00000
e) Price-level restatement: The financial statements of the Company have been price-level restated to reflect the effects of changes in the purchasing power of the currency during each year (note 24). The restatements were calculated using the official indexes of the National Statistics Bureau that show a change of 1.3% for the period December 1, 2001 to August 31, 2002 (2.2% for the same period in the previous year). Furthermore, balances in income and expense accounts have been adjusted for inflation to express them at closing values. f) Basis for conversion: Balances in U.S. dollars and in Unidades de Fomento ("UF") are converted to pesos at the exchange rate in effect at the close of each period, as indicated below:
2002 2001 $ $ United States Dollar (US$1) 748.73 695.02 Unidades de Fomento (U.F.1) 16,455.03 16,094.96
g) Time deposits: Time deposits are presented at investment values plus interest accrued through the close of the period, which have been credited against income. h) Marketable securities: Marketable securities consist of investments in mutual funds, which are shown at their redemption value at the close of the period. 11 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements i) Allowance for doubtful accounts: As of September 30, 2002 and 2001, the Parent Company and its Subsidiaries established provisions for estimated uncollectible accounts which encompass all debt more than 360 days past-due and are shown deducted from the balance of sales receivable, documents receivable and miscellaneous receivables. They total TCH$ 2.878.564 (TCH$ 2.818.239 in 2001). j) Inventory: Inventories of raw materials and finished products are recorded at the purchase price or at the production cost, and are price-level restated. Inventories do not exceed their estimated net realizable value. k) Other current assets: Other current assets include materials and spare parts at their adjusted cost. l) Property, Plant and Equipment: Property, plant and equipment are stated at their acquisition cost plus legal revaluations accumulated as of September 30, 2002 and 2001. The higher value on the technical revaluation of fixed assets recorded in 1979 and 1994 is shown adjusted at the closing date. Depreciation is calculated on the adjusted value in terms of the useful life remaining of the revalued goods, using the straight-line method. m) Depreciation of property, plant and equipment: The depreciation of machinery and transport equipment has been calculated according to the real times of use of the assets. The debit due to depreciation for the fiscal year was determined by multiplying the rate in pesos, for each hour of use, by the real hours during the exercise. Depreciation of all other assets was calculated according to the straight-line method, based on the useful life of goods. The debit against income for depreciation was TCH$18.657.194 in 2002 (TCH$18.987.569 in 2001). n) Bottles and cases: Glass bottles and refillable plastic bottles and cases held in plants, warehouses and in the possession of third parties are presented in other fixed assets at cost plus price-level restatement at their cost price. The corresponding depreciation is shown under accumulated depreciation. Bottles and cases that are broken or obsolete at the plants and warehouses are charged to expenses during the period, forming part of the fiscal year depreciation. Depreciation of the bottles and cases has been calculated under the straight-line method, based on their estimated useful life. 12 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements o) Deposits for bottles and cases: The estimated liability for returnable bottles and cases deposits is assessed on an annual stock basis of bottles and cases in the possession of customers. They are valued at the average value of deposits received during the last five years for each type of bottle or case. This liability is shown under the heading "Other long-term liabilities", considering that the bottles and cases placed in the market during a given operating period have historically exceeded the bottles and cases returned by customers during the same period. p) Investments in Other Companies: Investments in shares of other companies in which the Company does not have significant influence have been stated at cost plus price-level restatement. q) Investments in related companies: This balance includes the investments in Envases Central S.A. and Comptec S.A., valued in accordance with the proportional equity method. The share in results of these related companies is included in the line "loss on investment in related companies." r) Goodwill and negative goodwill: The lower value resulting from differences between the proportional equity value of investment and the value paid on the investment acquisition date has been charged to the goodwill account and is shown under the line other assets, net of the related amortization. Goodwill is amortized over twenty years, as provided by Circular No. 1358 of the SVS. The Company has classified the proportion of the net equity of companies acquired in purchase transactions in excess of the acquisition cost as negative goodwill, which is presented net of amortization. Negative goodwill generated on acquisitions is amortized on a straight-line basis over five years, in accordance with Circular N(degree) 368 of de Superintendency of Securities and Insurance. s) Intangibles: Intangibles refer to trademarks that have been acquired, which are shown at the adjusted cost, net of amortization, determined using the straight-line method on the basis of a useful life of 20 years. t) Income Taxes and Deferred Taxes: Income taxes are charged to results in the same period in which the income and expenses are recorded, and are calculated in accordance with current tax laws. 13 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements Pursuant to Technical Bulletins No. 71 and 60 of the Chilean Accountants Association and Circular No. 1466 of the Superintendency of Securities and Insurance, the Company records the effects of deferred taxes originating in temporary differences, tax losses that imply a tax benefit and other events that create differences between the financial accounting and the tax basis. Deferred taxes originating in these temporary differences that had accumulated at the beginning of the fiscal year were recorded as assets and liabilities with a credit or debit, respectively, in complementary accounts. These latter are amortized against expenses for the year's income tax in a weighted average term for reversing. Such complementary accounts are presented deducting the corresponding assets and liabilities generated by such deferred taxes. u) Bonds: Bonds correspond to bonds to the order on the U.S. and Chilean markets that are appraised at the actual issue rate. The difference between the actual issue rate and the actual placement rate is recorded as a deferred asset and higher obligation. This asset is being amortized on a straight-line basis over the term of the obligation. v) Staff Severance Indemnities: The Parent Company and its subsidiary Embotelladora Iquique S.A. have not recorded any provision for severance indemnities because they have not stipulated all-events severance payment with their employees. However, in those cases where such payments have been made to employees, they are charged to results in the year the payment is made. As of September 30, 2002 and 2001, Inversora Los Andes S.A. and Embonor S.A. established a provision for severance indemnities in accordance with their collective agreements with their employees. This liability is recorded at the present value of the accrued benefits, which were calculated by applying an annual rate of 11.5% (Inversora Los Andes) and 7.0% (Embonor S.A.) over an average remaining service period of 15 years. Sociedad de Cartera del Pacifico S.R.L. and its subsidiary and Industrial Iquitos S.A. make advance severance indemnity payments every 6 months according to the laws of Peru. The provision is recorded against income as it accrues for the amount payable if the employee were to resign as of the date of the Financial Statements. w) Operating income Income is recognized when products are delivered and invoiced to customers. Costs and expenses are recognized as they accrue, regardless of the time of payment, and are registered in the periods to which they relate. 14 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements x) Vacation Provision: The Parent Company and its subsidiaries provide for vacation benefits on an accrual basis. y) Statement of cash flow: For purposes of preparation of the statement of cash flow, the Parent Company and Subsidiaries consider investments in time deposits and in fixed-income mutual fund units which expire within 90 days to be cash equivalent. The cash flows relating to the business of the Company, interest paid, interest income received, dividends received and all others not defined as investment or finance are recorded under "inflow originating in operating activities." z) Financial risk hedging: The financial risk hedging transactions conform with the stipulations in Technical Bulletin N(degree) 57 of the Chilean Accountants Associations. 3. Changes in Accounting Principles There were no changes in the accounting principles applied for the nine months ending September 30, 2002. 15 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 4. Time Deposits This line includes deposits in the following financial institutions, appraised as described in Note 2(g), as follows:
Investment Expiration Interest 2002 2001 Institution Country Currency Date Date Rate TCH$ TCH$ % Citibank N.Y. Dollars 30.09.2002 01.10.2002 5.75 2.697.972 - Banco de Credito e Inversiones Chile Dollars 11.09.2002 31.10.2002 1.80 1.377.477 - Banco de Credito del Peru Peru Dollars 01.06.2002 01.10.2002 1.50 1.010.508 - BBVA Banco Continental Peru New Soles 01.06.2002 01.10.2002 3.75 825.986 - BankBoston N.A. Peru New Soles 01.06.2002 01.10.2002 4.20 90.508 - Banco Santander Central Hispano Peru New Soles 01.06.2002 01.10.2002 5.00 121.228 - Citibank Peru Dollars 01.06.2002 01.10.2002 1.50 419.173 - Banco de Credito de Bolivia Bolivia Dollars 28.09.2002 27.10.2002 5.70 749 - Banco de Credito e Inversiones Chile Dollars 12.09.2001 11.12.2001 3.16 - 964.552 Banco de Credito e Inversiones Chile Dollars 28.09.2001 05.10.2001 3.25 - 284.124 Banco de Credito e Inversiones Chile Dollars 07.09.2001 05.10.2001 3.25 - 710.310 Banco de Credito del Peru Peru New Soles 28.09.2001 01.10.2001 6.00 - 130.912 Banco de Credito del Peru Peru Dollars 24.09.2001 01.10.2001 2.13 - 153.605 Banco Continental Peru Dollars 25.09.2001 05.10.2001 2.60 - 103.705 Banco Santander Central Hispano Peru Dollars 31.08.2001 05.10.2001 3.60 - 204.569 Banco Santander Central Hispano Peru Dollars 07.09.2001 09.10.2001 3.40 - 426.186 Banco Santander Central Hispano Peru Dollars 18.09.2001 18.10.2001 3.15 - 426.186 Banco Santander Central Hispano Peru Dollars 19.09.2001 19.10.2001 2.50 - 213.093 Banco Santander Central Hispano Peru Dollars 20.09.2001 19.10.2001 2.75 - 106.547 Banco Santander Central Hispano Peru Dollars 21.09.2001 19.10.2001 2.50 - 163.372 Banco Santander Central Hispano Peru Dollars 24.09.2001 19.10.2001 2.55 - 163.372 Banco Santander Central Hispano Peru Dollars 26.09.2001 03.10.2001 3.70 - 44.854 Banco de Credito de Bolivia Bolivia Dollars 28.09.2001 27.10.2001 5.70 - 710 -------------------------- Totals 6.543.601 4.096.097 --------------------------
5. Marketable Securities Marketable securities are valued as described in Note 2(h) and are as follows: Instruments Account value 2002 2001 TCH$ TCH$ Mutual fund units 11.512.897 3.932.954 ---------------------------------- Totals 11.512.897 3.932.954 ---------------------------------- 16 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements Breakdown of mutual fund units as of September 30 is as follows:
Entity Unit value Amount in units Amount Amount $ TCH$ TCH$ 2002 2001 Corp Banca Mutual Funds 1,160.42 344,872.48 400.196 - BCI Mutual Funds 16,744.3045 56,508.0850 950.251 - BCI Mutual Funds 16,805.2777 18,684.6064 314.204 - BCI Mutual Funds 458,192.4209 436,4978 200.107 - Citibank Mutual Funds 750.244 12,860,000 9.648.139 - BCI Mutual Funds Conveniencia 3,265.3922 228,968.44 - 747.672 BCI Mutual Funds Competitivo 16,370.02 179,888.73 - 2.944.781 BCI Mutual Funds 553.84 434.238.11 - 240.501 ---------------------------- Total 11.512.897 3.932.954 ----------------------------
6. Short- and long-term receivables Short- and long-term receivables are broken down as follows, including estimates of uncollectibles: In thousands chilean pesos
- ------------------------- ------------------------------------------------------------------------------------ ----------------- Short-term receivables Total Long-term Receivables - ------------------------- ------------------------- ----------------------- ------------ --------------------- ----------------- Line Out to 90 days More than 90 days and Subtotal Total short-term out to 1 year receivables (net) - ------------------------- ------------- ----------- ----------- ----------- ------------ ---------- ---------- --------- --------- 2002 2001 2002 2001 2002 2002 2001 2002 2001 - ------------------------- ------------- ----------- ----------- ----------- ------------ ---------- ---------- --------- --------- Sales receivables 9.836.548 9.167.596 1.696.121 1.305.943 11.532.669 10.600.564 9.496.404 - - - ------------------------- ------------- ----------- ----------- ----------- ------------ ---------- ---------- --------- --------- Estimated uncollectibles (53.261) (175.694) (878.844) (801.441) (932.105) - ------------------------- ------------- ----------- ----------- ----------- ------------ ---------- ---------- --------- --------- Documents receivable 4.577.594 5.371.307 1.750.932 1.598.476 6.328.526 4.860.864 5.670.039 - - - ------------------------- ------------- ----------- ----------- ----------- ------------ ---------- ---------- --------- --------- Estimated uncollectibles (19.907) (26.440) (1.447.755) (1.273.304) (1.467.662) - ------------------------- ------------- ----------- ----------- ----------- ------------ ---------- ---------- --------- --------- Sundry receivables 2.485.016 2.527.063 620.337 764.120 3.105.353 2.626.556 2.749.823 261.921 268.202 - ------------------------- ------------- ----------- ----------- ----------- ------------ ---------- ---------- --------- --------- Estimated uncollectibles (45.232) (143.472) (433.565) (397.888) (478.797) - ---------------------------------------------------------------------------------------- ---------- ---------- --------- --------- Total 18.087.984 17.916.266 261.921 268.202 - ---------------------------------------------------------------------------------------- ---------- ---------- --------- ---------
17 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 7. Balances and transactions with related companies: The intercompany receivable and payable balances as of September 30, 2002 and 2001 are summarized below: a) Documents and accounts receivable: Taxpayer ID No. Company Short-Term Long-Term 2002 2001 2002 2001 TCH$ TCH$ TCH$ TCH$ 96.714.870-9 Coca Cola de Chile S.A. 774.043 92.954 - - 96.648.500-0 Vital S.A. 3.496 8.182 - - 78.826.600-6 Inversiones Eudocia - 2.890 - - Foreign Coca Cola Peru 71.963 242.816 - - 81.752.100-2 Distribuidora Direnor 43.976 - - - Foreign Comptec S.A. 126.210 148.337 - - 96.705.990-0 Envases Central S.A. - 239.496 ----------------------------- ---------------------------- Totals 1.019.688 734.675 - - ----------------------------- ----------------------------
b) Documents and accounts payable:
Taxpayer ID No. Company Short-Term Long-Term ---------------------------- -------------------------- 2002 2001 2002 2001 TCH$ TCH$ TCH$ TCH$ 96.714.870-9 Coca- Cola de Chile S.A. 1.595.907 2.842.419 - - 96.648.500-0 Vital S.A. 589.124 828.943 - - 96.705.990-0 Envases Central S.A. 365.715 38.172 - - Foreign Coca Cola Peru - 4.833 - - 81.752.100-2 Direnor S.A. - 13.307 - - ----------------------------- ---------------------------- Totals 2.550.746 3.727.674 - - ----------------------------- ----------------------------
18 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements c) Transactions with related companies: The commercial account corresponds to the purchase and sale of raw materials, products, bottles and cases, which were made at market prices and relate to the business of the related companies. Purchases are debited against operating costs and sales are credited to income. The terms of payment and collection of these transactions are similar to those stipulated with suppliers or customers in the business. The principal transactions with related parties were as follows during the 2002 and 2001 fiscal years:
2002 2001 --------------------------------------------------- Company Taxpayer ID Relationship Transaction Amount Effect on Amount Effect on results results (debit) (debit) credit credit TCH$ TCH$ TCH$ TCH$ Coca Cola de Chile 96.714.870-9 Shareholder Purchase of raw 22.117.579 - 26.871.372 - S.A. materials Sale of raw materials 4.230 - - - Sale of services 160 - 911.419 - Sale of advertising 293.534 - 256 - Coca Cola Peru Foreign Indirect Purchase of 2.891.387 - 139.343 - advertising Purchase of services 123.202 - 54.831 - Purchase of raw 2.513.485 - 1.123.958 - materials Sales of raw materials - - 452.907 - Sales of advertising 668.760 - 563.808 - Sales of services 3.804 - 21.063 - Sales of products 15.794 5.164 - - Vital S.A. 96.648.500-0 Common Purchase of products 3.450.501 - 5.099.986 - Director Sales of services - - 323 - Envases Central S.A. 96.705.990-0 Affiliate Purchase of products 4.246.035 - 2.048.227 - Purchase of services - - - - Direnor S.A. 81.752.100-2 Common Purchase of products 46.918 - 113.548 - Director Purchase of services - - 2.375 2.375
19 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 8. Inventories Inventories, as described in Note 2(j), break down as follows as of September 30, 2002 and 2001:
2002 2001 TCH$ TCH$ Finished products 2.647.840 2.282.290 Raw materials 5.997.589 5.654.903 Raw materials in transit 1.612.048 2.989.018 Promotional and other products 756.594 973.110 ----------------- --------------- Total 11.014.071 11.899.321 ----------------- ---------------
9. Income tax and deferred taxes: In accordance with Circular No. 1466 of the SVS related to income taxes and deferred taxes, the Parent Company and its subsidiaries have recorded the following information as of September 30, 2002 and 2001: a) Income tax provision: The Parent Company did not establish a income tax provision as it reported a loss for tax purposes. The balance of recoverable taxes, in the Parent Company and its subsidiaries amounting to TCH$7.366.701 in 2002 (TCH$11.649.401 in 2001) corresponds to provisional monthly payments made in excess of income tax, training expenses and tax benefits due to tax losses. The Parent Company did not have taxable retained earnings from previous fiscal years pending distribution with respect to which it had not provisioned for the respective income tax. The balance of recoverable taxes amounting to TCH$5.452 in 2002 (TCH$5.412 in 2001) corresponds to fiscal credits and training expenses. The subsidiary Embonor S.A. did not establish a first category income tax provision. The balance of recoverable taxes amounting to TCH$4.728.117 in 2002 (TCH$9.046.956 in 2001) corresponds to tax benefits for tax losses and training expenses. The subsidiary Embotelladora Iquique did not establish a income tax provision as it reported a loss for tax purposes. The balance of recoverable taxes in the amount of TCH$48.971 in 2002 (TCH$6.557 in 2001) corresponds to provisional monthly payments made in excess of income tax and training expenses. 20 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements For Inversora Los Andes S.A. and its subsidiary, according to Bolivian Law, the corporate profit tax is considered payment on account of transaction tax (calculated on net revenue) for the following fiscal year. In the case of Inversora Los Andes S.A. and its subsidiary, the transaction tax exceeds the profit tax, so no deferred tax must be recorded for the temporary differences existing between the book base and the tax base. The subsidiaries Sociedad de Cartera del Pacifico S.R.L. and its subsidiary, and Industrial Iquitos S.A., have not established any first-category income tax provision since they recorded a negative net taxable income for the period. The recoverable taxes of these subsidiaries amount to TCH$2.584.161 in 2002 (TCH$2.590.476 in 2001) and correspond to fiscal credits. b) Taxable retained earnings: The Parent Company has negative taxable retained earnings as of September 30, 2002 in the amount of TCH$38.645.449 that break down as follows: 2002 TCH$ Without a credit (38.933.938) With a 15% credit 288.489 ------------------ Total (38.645.449) ------------------ c) Deferred Taxes: Pursuant to Circular No. 1450 of the Superintendency of Securities and Insurance, as of September 30, 2002 and 2001 deferred taxes shall be recorded in the manner established in Technical Bulletins No. 60 and No. 71 of the Chilean Accountants Association (except for differences already recorded according to Technical Bulletin No. 41). As stipulated in Law No. 19,753 of September 28, 2001, an increase in the first category income tax was established from the current rate of 15% to 16% for 2002, 16.5% for 2003 and 17% as from 2004. As of September 30, 2002 and 2001, the accumulated balances of the temporary differences caused by deferred taxes are as follows: 21 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements
Concept 2002 2001 --------------------------------------------------- ----------------------------------------------- Deferred Asset Deferred Liability Deferred Asset Deferred Liability Temporary Differences Short-Term Long-Term Short-Term Long-Term Short-Term Long-Term Short-Term Long-Term TCH$ TCH$ TCH$ TCH$ TCH$ TCH$ TCH$ TCH$ Uncollectibles provision 224.923 372.381 - - 203.371 402.334 - - Inventories 872.888 - - - 955.870 - - - Vacation provision 166.754 - - - 175.826 - - - Amortization of intangibles - - - 5.697.372 - - - 6.042.225 Leasing assets - - - 658.768 - - - 728.249 Depreciation of fixed assets - - - 7.092.046 6.941 - - 3.365.020 Severance - - - 629.344 - - - 692.779 Revaluation of fixed assets - - - 3.642.788 - - - 4.154.788 Obsolescence provision 6.153 121.224 - - 7.807 74.306 - - Tax losses - 1.259.901 - 1.602.385 - 2.745.700 - - Other events 204.884 - - - 621.510 - - - --------------------------------------------------------------------------------------------------- Sub-total 1.475.602 1.753.506 - 19.322.703 1.971.325 3.222.340 - 14.983.061 --------------------------------------------------------------------------------------------------- Net complementary accounts - (919.144) - - (5.643.787) (1.523.575) (1.070.544) - - net of amortization Valuation provision - - - - - - - - --------------------------------------------------------------------------------------------------- Total 556.458 1.753.506 - 13.678.916 447.750 2.151.796 - 14.983.061 ---------------------------------------------------------------------------------------------------
d) Neither the Parent Company nor its subsidiaries have made a provision for the recorded value of deferred tax assets and liabilities as of December 31, 1999, except for the severance indemnities provision of Embonor S.A. Deferred taxes began to be recorded beginning January 1, 2000. e) The income tax account as of September 30, 2002 and 2001 and the effect on fiscal year income due to the recognition of deferred taxes and income tax are broken down as follows:
ITEM 2002 2001 TCH$ TCH$ Current tax expense (tax provision) (817.250) (928.940) Adjustment of tax expenses (previous fiscal year) - 21.052 Effect of deferred tax assets and liabilities in the fiscal year (7.405.165) (7.831.913) Effect of amortization of deferred asset and liability complementary accounts 5.058.589 3.281.478 Other charges - - ------------------------------ Total (3.163.826) (5.458.323) ------------------------------
22 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 10. Other Current Assets Other current assets as of September 30, 2002 and 2001, as valued according to Note 2(k), include the following: 2002 2001 TCH$ TCH$ Spare parts and supplies 4.654.163 4.807.566 ------------- ------------ Total other current assets 4.654.163 4.807.566 ------------- ------------ 11. Property, plant and equipment a) Principal Concepts Included in Property, Plant and Equipment Property, plant and equipment are composed principally of land, buildings and infrastructure, machinery and equipment, bottles and cases, advertising equipment and furniture and fixtures located at plants in Chile, Bolivia and Peru. The machinery and equipment are comprised principally of production lines, carbonators, mixers, fillers, and sugar blending and treatment equipment, transportation vehicles, and computer equipment and systems. Other fixed assets include furniture and fixtures, tools and advertising equipment and bottles and cases. These latter include returnable glass and plastic bottles and plastic cases. 23 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements b) Property, plant and equipment as of September 30, 2002 and 2001 are as follows:
2002 2001 Gross Value Accumulated Gross Value Accumulated Depreciation Depreciation TCH$ TCH$ TCH$ TCH$ Land: 14.364.479 - 13.808.420 - Buildings and Infrastructure: Buildings and Constructions 48.551.971 11.042.770 45.953.930 9.588.317 Works underway 653.977 - 1.424.054 - --------------------------------- -------------------------------- Subtotal 49.205.948 11.042.770 47.377.984 9.588.317 --------------------------------- -------------------------------- Machinery and Equipment: Machines and Equipment 109.945.265 52.969.633 110.661.651 53.502.811 Transportation Equipment 14.450.296 13.219.058 14.933.790 13.356.552 -------------------------------- --------------------------------- Subtotal 124.395.561 66.188.691 125.595.441 66.859.363 --------------------------------- -------------------------------- Other fixed assets: Office furniture and fixtures 23.529.959 19.465.234 24.677.606 19.269.312 Advertising equipment 54.049.038 30.451.614 47.486.780 20.590.972 Bottles and cases 69.534.528 31.028.979 63.535.780 27.518.047 Other 2.420.321 328.215 2.064.873 142.913 --------------------------------- -------------------------------- Subtotal 149.533.846 81.274.042 137.765.039 67.521.244 --------------------------------- -------------------------------- Higher value resulting from 1.829.233 381.513 1.809.430 334.886 technical reappraisal of property, plant and equipment --------------------------------- -------------------------------- Total property, plant and equipment 339.329.067 158.887.016 326.356.314 144.303.810 --------------------------------- --------------------------------
c) The balance in "higher value resulting from technical reappraisal of property, plant and equipment pertains to the following:
Net Value 2002 2001 TCH$ TCH$ Land 1.052.302 1.055.010 Buildings and constructions 394.857 418.458 Machinery and equipment 561 1.076 ------------------------------ Total higher value of technical reappraisal 1.447.720 1.474.544 ------------------------------
d) The debit against income for fiscal year depreciation amounted to TCH$18.657.194 (TCH$18.987.569 in 2001). TCH$14.263.302 (TCH$14.515.872 in 2001) of this amount is recorded in operating costs and TCH$4.393.892 (TCH$4.471.697 in 2001) in selling and administration expenses. 24 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 12. Investments in Related Companies Investments in related companies and the corresponding interest in equity and profits recorded as described in Note 2(q), are as follows: a) As of September 30, 2002:
Fiscal Propor- year Accrued tional Book Country Currency in Number of Issuer's Profit Profit Equity Unrealizd Value Of Which Invest. Shares Interest Equity (Loss) (Loss) Value Earnings of Invest Taxpayer ID Company Origin is Recorded % TCH$ TCH$ TCH$ TCH$ TCH$ -ment TCH$ 96.705.990-0 Envases Central Chile Pesos 3.123.745 33.00 2.541.792 (487.218) (160.782) 838.791 - 838.791 S.A. Foreign Comptec S.A. Colombia Dollar 130.000 20.00 3.302.648 - - 660.530 - 660.530 ---------------------------------------- Total (160.782) 1.499.321 - 1.499.321 ----------------------------------------
b) As of September 30, 2001:
Fiscal Propor- year Accrued tional Book Country Currency in Number of Issuer's Profit Profit Equity Unrealizd Value Of Which Invest. Shares Interest Equity (Loss) (Loss) Value Earnings of Invest Taxpayer ID Company Origin is Recorded % TCH$ TCH$ TCH$ TCH$ TCH$ -ment TCH$ 96.705.990-0 Envases Central Chile Pesos 3.123.745 33,00 3.160.739 (688.191) (227.103) 1.043.044 - 1.043.044 S.A. Foreign Comptec S.A. Colombia Dollar 130.000 20,00 3.220.548 (458.863) (91.773) 644.109 - 644.109 ---------------------------------------- Total (318.876) 1.687.153 - 1.687.153 ----------------------------------------
13. Goodwill and negative goodwill A. Goodwill: Goodwill as of September 30, 2002 and 2001, amounting to TCH$296.795.701 and TCH$310.168.633, respectively, is valued according to the accounting criteria described in Note 2(r) and was generated by the acquisition of operations in Bolivia, Chile and Peru. The charge to consolidated income for amortization totaled TCH$13.542.064 in 2002 and TCH$13.327.718 in 2001. Goodwill and the effect on income is broken down as follows:
2002 2001 --------------------------- ------------------------- Taxpayer ID Amortization Goodwill Amortization Goodwill in the period in the period TCH$ TCH$ TCH$ TCH$ Foreign Industrial Iquitos S.A. 86.694 1.890.261 75.730 1.902.927 96.891.720-K Embonor S.A. 9.477.502 210.611.152 9.478.237 223.265.136 Foreign Sociedad de Cartera del Pacifico S.R.L. 2.568.987 57.431.581 2.437.163 57.734.148 Foreign Industrial Tisco y Cia. de Transporte Cural S.A. 104.751 2.074.166 99.376 2.100.236 Foreign Merger of North-South Division on January 1,1998 424.624 8.459.910 402.836 8.562.923 Foreign Inansa S.A. 879.506 16.328.631 834.376 16.603.263 ----------------------------------------------------- Total 13.542.064 296.795.701 13.327.718 310.168.633 -----------------------------------------------------
25 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements Goodwill is comprised mainly as follows: BOLIVIA a) On July 3, 1995, the subsidiary, Inversora Los Andes S.A., acquired 99.9% of the shares in Embotelladoras Bolivianas Unidas S.A., a productive company. This transaction generated goodwill of TCH$8.244.542 before amortization as compared to the proportional equity value of the investment. The amortization period pending at the close of the financial statements is 12.75 years. b) On January 8, 1996, Embotelladoras Bolivianas Unidas S.A. took over assets of Sociedad Boliviana Cotoca S.A., which gave Inversora Los Andes S.A. control of 81.7% of the shares in Embotelladoras Bolivianas Unidas S.A. The valuation of this additional investment generated goodwill of TCH$7.160.586 before amortization. The amortization period pending at the close of financial statements is 13.25 years. c) On December 24 and 30, 1997, Inversora Los Andes S.A. acquired 18.3% of the shares in Embotelladoras Bolivianas Unidas S.A. and took over control of 99.99% of the shares in the latter company. The valuation of the additional investment resulted in goodwill of TCH$10.065.320, which corresponds to the difference between the value paid and the proportional equity value. The amortization period pending at the close of the financial statements is 15.25 years. Goodwill also includes trademark royalties, which correspond to the following: - - The right to use the fame, prestige and clientele of Vascal S.A. and Embotelladora Cotoca S.A. in relation to the operation of the industrial plants in La Paz, Oruro, Cochabamba, Santa Cruz, Sucre and Tarija and their products for a period of 50 years. - - The definitive rights to the "Mineragua", "Vital" and "Cotoca" trademarks. The goodwill is amortized over a period of 20 years in accordance with Circular No. 1358 of the Superintendency of Securities and Insurance. The debit against fiscal year income amounted to TCH$879.506 in 2002 (TCH$834.376 in 2001). 26 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements PERU (a) Embotelladora Latinoamericana S.A. The goodwill as of September 30, 2002, amounting to TCH$12.424.337 (TCH$12.566.086 in 2001), corresponds to firstly the unamortized balance generated by the takeover of the subsidiaries Industrial Tisco S.A. and Compania de Transporte Cural S.A. (January 1997) amounting to TCH$2.074.066 in 2002 (TCH$2.100.236 in 2001), and secondly to the merger of operations as of January 1, 1998 with: Negociacion Sur Peruana S.A., Compania Industrial Nor Peruana S.A., Empresa Productora de Plasticos S.A., Transportadora and Comercializadora Lambayeque S.A. and Costos y Margenes S.A. (January 1998) amounting to TCH$8.459.910 in 2002 (TCH$8.562.923 in 2001); as well as the acquisition of Industrial Iquitos S.A. (April 11, 2001) from its parent company for the price of TCH$1.890.261 in 2002 (TCH$1.902.927 in 2001). The debit against fiscal year income amounted to TCH$616.069 (TCH$557.042 in 2001). (b) Sociedad de Cartera del Pacifico S.R.L. The goodwill as of September 30, 2002, amounting to TCH$57.431.581 (TCH$57.734.148 in 2001), corresponds to the unamortized balance generated in the acquisition of Embotelladora Latinoamericana S.A. from Inchcape Bottling, which occurred in June 1999. The debit against fiscal year income was TCH$2.568.987 in 2002 (TCH$2.437.163 in 2001). CHILE (a) Embonor S.A. The goodwill as of September 30, 2002 amounting to TCH$210.611.152 (TCH$223.265.136 in 2001), corresponds to the unamortized balance generated by the acquisition of the Chilean bottling operations of Inchcape Bottling Chile S.A. which occurred in May 1999. The debit against fiscal year income was TCH$9.477.502 in 2002 (TCH$9.478.237 in 2001). (b) Coca-Cola Embonor S.A. The debit against fiscal year income amounted to TCH$0 in 2002 (TCH$20.900 in 2001). This debit corresponds to the amortization of its investment in Industrial Iquitos S.A. through the date of its sale. This subsidiary was sold on April 11, 2001 to its subsidiary Embotelladora Latinoamericana S.A.. 27 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements B. Negative goodwill: The negative goodwill as of September 30, 2002, amounting to ThCH$908.920 (TCH$ 0 in 2001), corresponds to the unamortized balance generated in the acquisition of 13.424.542 shares of Embotelladora Latinoamericana S.A. that occurred in May 2002. The credit against fiscal year income was ThCh$15.405 for this concept. The Negative Goodwill and the effect on income is broken down as follows:
2002 2001 ------------------------------- --------------------------- Taxpayer ID Amortization Goodwill Amortization Goodwill in the period in the period TCH$ TCH$ TCH$ TCH$ Foreign Embotelladora Latinoamericana S.A. 15.405 908.920 - - ----------------------------------------------------------- Total 15.405 908.920 - - -----------------------------------------------------------
14. Intangibles Intangibles held by the Company as of September 30, 2002 and 2001 are as follows:
2002 2001 Trademarks Gross Value Accumulated Net value Gross Value Accumulated Net value TCH$ amortization amortization TCH$ TCH$ TCH$ TCH$ TCH$ San Luis 17.314.415 (4.698.074) 12.616.341 16.425.960 (3.629.628) 12.796.332 Kola Inglesa 6.863.927 (1.862.215) 5.001.712 6.511.719 (1.439.135) 5.072.584 Other 38.423 (2.811) 35.612 44.879 (2.375) 42.504 -------------------------------------------------------------------------------------------- Total 24.216.765 (6.563.100) 17.653.665 22.982.558 (5.071.138) 17.911.420 --------------------------------------------------------------------------------------------
As of September 30, 2002 and 2001, the trademarks are being amortized over a period of 20 years. The debit due to amortization in the fiscal year amounts to TCH$913.022 (TCH$866.172 in 2001). 15. Other Assets: Other assets, totaling TCH$6.599.659 as of September 30, 2002 (TCH$8.111.913 in 2001) corresponds to the following:
2002 2001 TCH$ TCH$ Deferred expenses in the U.S. bond issue 1.903.548 2.561.906 Deferred expenses in Chilean bond issue 3.415.165 4.041.287 Deferred expenses of syndicated UF credit facility 460.019 700.344 Other 820.927 808.376 --------------- -------------- Total 6.599.659 8.111.913 --------------- --------------
28 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 16. Short-term bank debt Short-term bank debt was as follows as at September 30, 2002 and 2001:
Taxpayer Bank or ID Financial Institution TYPE OF CURRENCY AND ADJUSTMENT INDEX Other foreign Dollar currencies UF Non-adjustable Total 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 TCH$ TCH$ TCH$ TCH$ TCH$ TCH$ TCH$ TCH$ TCH$ TCH$ Short - term Foreign Banco Continental - 4.593 997 - - - - - 997 4.593 Foreign Banco de Credito del Peru - 36 - - - - - - - 36 Foreign Interbank - 400 - - - - - - - 400 ------------------------------------------------------------------------------------------- Totals - 5.029 997 - - - - - 997 5.029 ------------------------------------------------------------------------------------------- Principal owed - 5.029 997 - - - - - 997 5.029 Annual average interest rate - 28.0% 9.0% - - - - - 9.0% 28.0% Long - term 97008000-7 Chilean syndicated banks - - - - 17.891.419 6.972.404 - - 17.891.419 6.972.404 Foreign Banco de Credito del Peru 43.109 38.791 - - - - - - 43.109 38.791 Foreign Banco Santander del Peru 78.096 - - - - - - - 78.096 - Foreign Banco Weise Sudameris - - - 35.065 - - - - - 35.065 ------------------------------------------------------------------------------------------- Totals 121.205 38.791 - 35.065 17.891.419 6.972.404 - - 18.012.624 7.046.260 ------------------------------------------------------------------------------------------- Principal owed 121.205 38.791 - 35.065 51.240.963 5.691.371 - - 51.362.168 5.765.227 Annual average interest rate 13.0% 13.0% - 28.0% TAB+1.4% TAB+1.4% - - Percentage in foreign currency (%) 0.67 Percentage in domestic currency (%) 99.33
29 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 17. Long-term bank debt: Long-term bank debt as of September 30, 2002 and 2001 is broken down as follows:
Years to Maturity Closing Date of Closing Actual Period Date of Previous Period Tax Ident. Bank or Currency More than More than More More More Total as Annual Total as Number Financial Or 1 up to 2 2 up to 3 than 3 than 5 than 10 of 2002 Interest of 2001 Index of up to 5 up to 10 Rate Adjustment Institution TCH$ TCH$ TCH$ TCH$ TCH$ TCH$ % TCH$ 97008000-7 Chilean syndicated banks U.F. 17.080.321 17.080.321 - - - 34.160.642 TAB+1.4% 51.719.553 Foreign Banco de Credito del Peru Dollar 249.577 184.060 15.598 - - 449.235 13.00% - Foreign Banco Santander Dollar 95.478 32.378 - - - 127.856 7.00% - --------------------------------------------------------------------------------------- Total 17.425.376 17.296.759 15.598 - - 34.737.733 - 51.719.553 --------------------------------------------------------------------------------------- % in domestic currency 99.00% 100.00% --------------------------------------------------------------------------------------- % in foreign currency 1.00% 0.00% ---------------------------------------------------------------------------------------
30 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 18. Notes and Bonds payable At the period end, long-term debt from the bonds to the order issued by the Parent company amounted to TCH$184.789.451 in 2002 (TCH$178.994.337 in 2001), with accrued interest of TCH$1.188.682 in 2002 (TCH$1.301.345 in 2001), and is detailed below:
Frequency Par Value Placement Listing No. Series Face amount Bond Interest Maturity Interest Amortization in Chile placed and unit rate payment or abroad outstanding of adjust 2002 2001 -ment TCH$ TCH$ Long-term bonds--short-term portion: New York Unique 160.000.000 US$ 9,875% 15-03-2006 Semiannual At maturity 340.755 467.621 Foreign 224 A1 645.000 UF 7,000% 01-08-2003 Semiannual At maturity 10.739.360 133.761 Domestic 224 A2 2.200.000 UF 7,000% 01-08-2003 Semiannual At maturity 36.630.377 456.240 Domestic 224 B1 155.000 UF 6,750% 01-02-2020 Semiannual As from 2004 29.181 24.294 Domestic 224 B2 1.400.000 UF 6,750% 01-02-2020 Semiannual As from 2004 263.570 219.429 Domestic -------------------------- Total short-term portion 48.003.243 1.301.345 -------------------------- Long-term Bonds: New York Unique 160.000.000 US$ 9,875% 15-03-2006 Semiannual At maturity 112.387.318 106.618.521 Foreign 224 A1 645.000 UF 7,000% 01-08-2003 Semiannual At maturity - 10.609.636 Domestic 224 A2 2.200.000 UF 7,000% 01-08-2003 Semiannual At maturity - 36.187.908 Domestic 224 B1 155.000 UF 6,750% 01-02-2020 Semiannual As from 2004 2.550.530 2.549.603 Domestic 224 B2 1.400.000 UF 6,750% 01-02-2020 Semiannual As from 2004 23.037.042 23.028.669 Domestic -------------------------- Total- Long-term portion: 137.974.890 178.994.337 --------------------------
19. Provisions and write-offs Short-term and long-term provisions were comprised as follows as at September 30, 2002 and 2001: a) Current liabilities
2002 2001 TCH$ TCH$ Provision for invoices to be received and other payments 1.845.013 1.831.502 Provision for fiscal year expenses 1.144.358 1.005.303 Provision for bonuses 1.637.558 1.895.456 Vacation provision 2.112.404 2.414.337 Severance indemnities provision 615.333 509.609 Other 284.052 81.612 ---------------- -------------- Total 7.638.718 7.737.819 ---------------- --------------
b) Long-term liabilities
2002 2001 TCH$ TCH$ Severance indemnities provision 1.909.887 1.684.912 ---------------- -------------- Total 1.909.887 1.684.912 ---------------- --------------
31 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 20. Other long-term liabilities This line includes the following liabilities without any specific expiration date:
2002 2001 TCH$ TCH$ Bottle and case deposits in guarantee 5.813.276 5.538.094 Leasing 1.856.073 2.109.300 Others 1.022.108 636.093 ---------------- -------------- Total 8.691.457 8.283.487 ---------------- --------------
21. Minority Interest As of September 30, 2002 the effect of minority interest on liabilities and income is as follows:
Taxpayer ID Company Minority Company Fiscal Year Passive Profit (loss) Interest Equity Profit (loss) Minority for Minority Interest Interest % TCH$ TCH$ TCH$ TCH$ 96.517.310-7 Embotelladora Iquique S.A. 0,10000 11.408.081 305.882 11.408 (306) 96.891.720-K Embonor S.A. 0,06675 199.046.185 3.995.899 132.855 (2.667) Foreign Elsa S.A. 26,39689 114.648.792 3.242.425 30.263.713 (855.904) Foreign Socap SRL 20,65809 121.961.403 (2.111.143) 25.194.892 436.122 Foreign Industrial Iquitos S.A. 23,88900 (1.121.766) 24.575 (267.979) (5.871) Foreign Inansa S.A. 0,00013 59.196.400 562.801 75 (1) Foreign Embol S.A. 0,00010 50.866.761 944.140 48 (1) 96.972.720-K Embonor Holdings S.A. 0,00000 230.404.132 (810.467) 1 - -------------------------- Total 55.335.013 (428.628) --------------------------
32 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 22. Changes in equity: The following were the changes in equity accounts from January 1 to September 30, 2002 and 2001, in currency as of each date:
- ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------- Concept Paid-In Reserve for Premium on Other Accumulated Fiscal year Total Capital revaluation the sale of reserves Results profit of treasury (loss) shareholder stock equity - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ TCH$ TCH$ TCH$ TCH$ TCH$ TCH$ TCH$ - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ Balances at 01.01.2001 210.528.576 - 19.647.862 970.039 11.707.793 (12.987.987) 229.866.283 - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ Profit distribution - - - - (12.987.987) 12.987.987 - - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------- Final dividend paid - - - - - - - - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ Capital decrease - - - - - - - - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ Revaluation of shareholders' 4.631.629 equity - 432.253 - (28.163) - 5.035.719 - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ Interim dividend paid - - - - - - - - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ Cumulative adjustment for - exchange differential - - 6.882.880 - - 6.882.880 - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ Fiscal year profit (loss) - - - - - (6.262.976) (6.262.976) - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ Balances at 09.30.2001 210.528.576 4.631.629 20.080.115 7.852.919 (1.308.357) (6.262.976) 235.521.906 - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ Balances at 09.30.2001 adjusted by 2.2% 215.160.205 4.733.525 20.521.878 8.025.683 (1.337.141) (6.400.761) 240.703.389 - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ Balances at 01.01.2002 217.054.962 - 20.256.945 4.308.479 (1.319.879) (8.449.445) 231.851.062 - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ Income distribution - - - - (8.449.445) 8.449.445 - - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ Capital decrease - - - - - - - - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ Revaluation of shareholders' 2.821.715 equity - 263.341 - (127.001) - 2.958.055 - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ Cumulative adjustment for exchange differential - - - 5.383.989 - - 5.383.989 - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ Fiscal year profit (loss) - - - - - (10.022.914) (10.22.914) - ----------------------------- ----------- ----------- ------------ ---------- ------------ ------------ ------------ Balances at 09.30.2002 217.054.962 2.821.715 20.520.286 9.692.468 (9.896.325) (10.022.914) 230.170.192 ============================= =========== =========== ============ ========== ============ ============ ============
According to Law 18,046, the revaluation of paid-in capital must be added to paid-in capital at the annual close of the respective fiscal years. The capital is represented by 244,420,704 Series A shares and 266,432,526 Series B shares at a paid-in value of $424.89 each. The Company's shares have no par value. 33 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements a) Number of shares No. of No. of paid-in No. of voting Series subscribed shares shares shares A 244.420.704 244.420.704 244.420.704 B 266.432.526 266.432.526 266.432.526 ----------------------------------------------------- Total 510.853.230 510.853.230 510.853.230 ----------------------------------------------------- b) Capital Series Subscribed capital Paid-in capital TCH$ TCH$ A 105.922.821 105.922.821 B 111.132.141 111.132.141 --------------------------------------- Total 217.054.962 217.054.962 --------------------------------------- c) Other reserves: According to Official Circular No. 5294 of October 20, 1998 and Technical Bulletin No. 64 on the registration of permanent investments abroad, the following can be reported as of September 30, 2002: 1) Liabilities of Coca-Cola Embonor S.A. abroad amounted to TCH$119.796.800 (US$160.000.000) and correspond to the bonds issued on the US market. This liability is allocated as follows: Acquisition Amount US$ Embotelladoras Bolivianas Unidas S.A. 10.000.000 Embotelladora Latinoamericana S.A. 150.000.000 ------------ Total 160.000.000 ------------ 2) The reserve account called "Cumulative adjustment for exchange differential", due to the conversion of investments abroad, is comprised as follows:
ITEMIZATION Embonor Holdings Inansa S.A. Socap S.R.L. TOTAL TCH$ TCH$ TCH$ TCH$ 2001 Balances 14.087.878 4.195.269 (13.974.668) 4.308.479 Liability hedging - (871.383) (13.036.402) (13.907.785) Proportional equity value per 19.291.774 - - 19.291.774 Technical Bulletin No. 64 ------------------------------------------------------------------ TOTALS 33.379.652 3.323.886 (27.011.070) 9.692.468 ------------------------------------------------------------------
34 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements e) Shareholder Distribution Shareholders in the Parent Company were as follows at the close of the financial statements, according to Circular No. 792 of the Superintendency of Securities and Insurance:
Type of Shareholder Equity Interest (%) Number of Shareholders 2002 2001 2002 2001 Interest of 10% or more 70.82 70.81 02 02 Interest of less than 10% with an investment greater than or equal to 28.77 29.00 85 169 UF 200 Interest of less than 10% with an 0.41 0.19 339 266 investment of less than UF 200 ---------------------------------------------------------------------- Total 100 100 426 437 ---------------------------------------------------------------------- Company controller 25.32 25.32 01 01
f) Dividends The Company has not distributed dividends to its shareholders during the 2002 and 2001 fiscal years. 35 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 23. Other Non-Operating Income and Disbursements: As of September 30, 2002 and 2001 the details are as follows:
a) Other non-operating income: 2002 2001 TCH$ TCH$ Profit on asset sales 150.585 141.935 Profit on sale of other products 480.498 744.532 Reversal restructuring provision (1) - 2.400.009 Profit on the sale of broken glass 62.109 57.011 Conversion adjustments 1.233.930 3.885.037 Other miscellaneous income 852.083 326.962 -------------- ------------- Total 2.779.205 7.555.486 -------------- -------------
b) Other non-operating disbursements: 2002 2001 TCH$ TCH$ Miscellaneous expenses and fees 294.660 286.417 Loss on asset sales 145.902 205.735 Bottles and cases write-off 235.921 301.960 Amortization of prepaid expenses 1.378.549 1.348.325 Amortization of intangibles 913.022 866.172 Amortization expenses investment sales - 456.127 Payment of patent 114.208 - Other miscellaneous disbursements 1.532.182 1.286.743 -------------- ------------ Total 4.614.444 4.751.479 -------------- ------------
(1) As of December 31, 2000, a provision was recorded in the accounts of Embonor S.A. for the adjustment of its administrative structure as well as changes to the computer systems and other items in order to adapt it to its new reality and to the requirements of information from The Coca-Cola Company. Within the provisioned items, the most important amount referred to the implementation of the SAP computer information and management system, at a cost to the Company fluctuating from ThUS$3.500 to ThUS$ 4.000. As a result of the world recession that was predicted and considering that the growth of the bottling companies was lower than projected, the application of SAP in the short term was postponed and it was decided to reverse the restructuring provision in order to credit other non-operating income in the amount of TCH$2.400.009 as of September 30, 2001. 36 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 24. Price-level Restatement Application of price-level restatement as described in Note 2e) caused a net debit of TCH$582.273 against income in 2002 (a net debit of TCH$3.649.861 in 2001), as follows:
Assets - (debits) and credits Adjustment Index 2002 2001 TCH$ TCH$ Inventories CPI 20.227 5.347 Property, plant and equipment CPI 1.998.199 1.483.750 Investment in related companies CPI 20.906 41.204 Other non-monetary assets CPI 4.753.072 6.114.122 Expense and cost accounts CPI 611.413 971.921 ---------------------------------- Total 7.403.817 8.616.344 ---------------------------------- Liabilities and equity - (debits) and Adjustment Index 2002 2001 credits TCH$ TCH$ Equity CPI (2.958.055) (5.146.505) Bank debt UF (610.714) (1.163.420) Bonds U.F. (1.900.857) (3.239.810) Other non-monetary liabilities CPI-U.F. (1.793.178) (1.566.952) Income accounts CPI (723.286) (1.149.518) ---------------------------------- Total (7.986.090) (12.266.205) ---------------------------------- Profit (loss) due to price-level restatement (582.273) (3.649.861) ----------------------------------
25. Exchange Differential The application of price-level restatement as described in Note 2e) and f) caused a net credit of TCH$726.339 in 2002 for the exchange differential (a net credit of TCH$2.033.213 in 2001), as follows:
Line Currency Amount 2002 2001 TCH$ TCH$ Accounts and documents receivable Dollar 728.571 1.293.844 Inventory Dollar 604.409 801.856 Other non-monetary assets Dollar 2.818.091 6.179.571 -------------------------------- Total (Debits) Credits 4.151.071 8.275.271 -------------------------------- Bonds Dollar (300.044) - Documents and accounts payable Dollar (2.292.454) (2.819.442) Other non-monetary liabilities Dollar (832.234) (3.422.616) -------------------------------- Total (Debits) Credits (3.424.732) (6.242.058) -------------------------------- Profit (loss) on exchange differential 726.339 2.033.213 --------------------------------
37 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 26. Extraordinary Items As of September 30, 2002, the subsidiary Embonor S.A. accounted for TCH$1.171.600 (TCH$2.712.069 in 2001) as tax refund due to tax losses, from the Internal Revenue Service. 27. Expenses of issuance and placement of bonds: The expenses of issuance and placement of Bonds in the U.S. and Chilean market are as follows: 2002 Deferred Expenses Increase Amortization Balance TCH$ TCH$ TCH$ TCH$ U.S. Bonds 3.088.017 - (530.125) 2.557.892 Chile Bonds 4.713.446 - (581.163) 4.132.283 --------------------------------------------------------------- Total 7.801.463 - (1.111.288) 6.690.175 --------------------------------------------------------------- 2001 Deferred Expenses Increase Amortization Balance TCH$ TCH$ TCH$ TCH$ U.S. Bonds 3.812.482 - (547.468) 3.265.014 Chile Bonds 4.737.127 615.417 (543.936) 4.808.608 --------------------------------------------------------------- Total 8.549.609 615.417 (1.091.404) 8.073.622 --------------------------------------------------------------- 28. Cash flow statement (a) Composition of cash and cash equivalent: As of September 30, 2002 and 2001, the Company has considered the following items as cash and cash equivalent: 2002 2001 TCH$ TCH$ Cash and Bank balances 3.613.715 4.273.151 Time Deposits 6.543.601 4.096.097 Marketable securities 11.512.897 3.932.954 ------------------------------- Total 21.670.213 12.302.202 ------------------------------- (b) Investment activities relating to future cash flows are as follows: Amount Remaining TCH$ Months Incorporation of assets in leasing 2.154.210 107 ------------------------------ Total 2.154.210 107 ------------------------------ 38 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements (c) Other income received breaks down as follows: 2002 2001 TCH$ TCH$ Net collection of guarantee deposits 216.329 1.176.399 Sale of broken glass and others not in use 76.537 148.883 Share in advertising 1.764.641 2.258.188 Recovery of other income 280.399 - Sale of promotional articles 587.691 605.767 Miscellaneous services (processing) 468.746 257.931 Sale of investments 73.325 432.662 Sales of assets and other products 415.387 1.099.833 Other 531.227 408.800 --------------------------- Total 4.414.282 6.388.463 --------------------------- (d) Other paid-in expenses as follows: 2002 2001 TCH$ TCH$ Repurchase of bottles and cases - 775.950 Investors commissions - 615.417 Remuneration of Board of Directors 236.504 255.217 Tax previous years 136.484 230.445 Previous years expenses 260.785 - Central administration expenses 407.336 355.417 Other miscellaneous 609.510 511.292 --------------------------- Total 1.650.619 2.743.738 --------------------------- (e) Other funding disbursements as follows: 2002 2001 TCH$ TCH$ Dividends - 295.063 Return of received guarantees 183.333 - Other disbursements 236.052 30.277 --------------------------- Total 419.385 325.340 --------------------------- 39 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 29. Derivative Agreements: On June 20, 2002, the Company signed an interest rate swap agreement with a foreign bank with a notional principal amount of US$ 160,000,000 to hedge the interest rate of the 144-A bonds issued on the U.S. market. On August 7, 2002, the Subsidiary, Embotelladora Latinoamericana S.A., entered into a forward contract to hedge cash flow risk involved in the payment of foreign currency denominated raw materials and supplies. The details are as follows:
- ----------------------------------------------------------------------------------------------------------------------------------- Description of the contracts Value of Accounts that affects - ---------------------------------------------------------------------------------- the ---------------------------------------- Type of Type of Value of Expiration Specific Position Transaction guarantee Assets/Liabilities Effect on results derivative agreement agreement date Item buys protected protected Name Amount Fact Not Fact sale Name Amount - ----------------------------------------------------------------------------------------------------------------------------------- US$ TCH$ TCH$ TCH$ TCH$ TCH$ - ----------------------------------------------------------------------------------------------------------------------------------- S CCPE 160.000.000 I USD- B U.S. 109.604.800 119.604.800 Notes and - - 594.880 quarter LIBOR- Bonds Bonds 2006 BBA payable - ----------------------------------------------------------------------------------------------------------------------------------- II USD FR CCPE 24.000.000 quarter USD B Accounts 16.793.259 16.793.259 Accounts - 30.921 128.039 2003 payable payable - -----------------------------------------------------------------------------------------------------------------------------------
30. Contingencies and commitments As of September 30, 2002 and 2001, there were no liens or guarantees of the Parent Company or subsidiaries nor mortgages nor were their assets given in guarantee, except as shown in Note 30 c). (a) Direct commitments As of September 30, 2002 and 2001, there were no direct commitments. (b) Indirect commitments: As of September 30, 2002 and 2001, there were no indirect commitments. (c) Lawsuits or other legal actions Sociedad de Cartera del Pacifico S.R.L. and Embotelladora Latinoamericana S.A. (ELSA) are parties to various legal, labor and tax lawsuits relating to their operations in Peru. In the opinion of the Management and legal counsel, the outcome of these processes will not result in significant expense for the Company. 40 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements The principal processes in relation to these matters are: i) The tax authorities have required that ELSA pay a General Sales Tax (IGV) on the value of the Kola Inglesa and San Luis trademarks acquired in March 1997 by Porvent S.A. According to Peruvian tax laws, intangible assets are assessable by the IGV only if they are contained on tangible objects and, in the case of imports, if the seller is a Peruvian entity. The Management of the Company and its legal counsel consider that the above requirements do not apply to this transaction. The IGV and the fines set by the tax authorities total approximately TCH$ 11.170.827. If the Company must pay the IGV, it could be used as a credit against future payments of that tax. As of May 31, 2002, Embotelladora Latinoamericana S.A. invoked the Law for Reactivation through Exoneration of Tax Debt (RESIT) with regard to the fines. This invocation was formalized on July 12, 2002. ii) The Company did not pay the Minimum Income Tax (IMR) for the year ending December 31, 1996 based on a resolution issued by the Constitutional Court of Peru in October 1996 in favor of two other entities, which provided that the IMR did not apply to those companies because they had tax losses during that period. The tax totaled TCH$1.118.694 as of September 30, 2002. The Company has filed legal actions to prevent any attempt by the tax authorities to demand that tax. In the opinion of the Company's Management and its legal counsel, those actions will be adjudged in favor of the Company. iii) The tax authorities have made comments to the fiscal credit used in the period from April 1997 to March 1998. Those comments relate to the write-off of returnable plastic and glass bottles that was made, in their opinion, before two years had passed since the date of acquisition. According to governing law, the General Sales Tax used as a fiscal credit that is assessed on purchases of those bottles must be reimbursed if the related assets have been sold or written-off before two years have passed since the date of their acquisition. The amount claimed by the tax authorities in relation to this period of audit totals approximately TCH$ 2.003.479. There would also be an unquantified contingent liability related to this matter for the years open to fiscal audit (1997 to 2001). As to fines, the subsidiary invoked the Law for Reactivation through Exoneration of Tax Debt (RESIT) as of May 31, 2002. That invocation was formalized on July 12, 2002. ELSA is at this time gathering supporting documentation to show that the bottles written-off related to purchases made more than two years earlier. In the opinion of Management and its legal counsel, the resolution of this issue will not be of significant expense to the Company. 41 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements iv) The tax authorities have audited the 1999 period. That work was done between October 18, 2000 and March 20, 2001. As a result of this audit, it noted 737 voided invoices, not exhibited to the tax auditors, for which ISC (Selective Excise Tax) and the IGV (General Sales Tax) were due. The Company invoked the Law for Reactivation through the Exoneration of Tax Debt (RESIT) effective May 31, 2002, in regard to these taxes and paid the sum of TCH$ 136.684. d) Restrictions: U.S. Bonds The placement of Bonds for US$160.000.000 by Coca-Cola Embonor S.A. on the U.S. market is not subject to obligations, limitations and prohibitions. Chile Bonds The placement of Bonds for UF 4.400.000 by Coca-Cola Embonor S.A. on the Chilean market is subject to the following obligations, limitations and prohibitions: (i) The debt/equity ratio in its individual and consolidated quarterly financial statements must be no more than 1.20 at all times. (ii) The ebitda/financial expense ratio in consolidated quarterly financial statements must be no less than 2.1 as of December 31, 2000, 2.2 through March 30, 2001 and 2.5 from December 31, 2001 onward. This ratio must be calculated for the last twelve months as of the date of the corresponding Uniform Codified Statistical Record (FECU). Chilean Syndicated Loan The Syndicated Loan received by Coca-Cola Embonor S.A. on the Chilean market amounting to UF 3.460.000 is subject to the following obligations, limitations and prohibitions: (i) The debt/equity ratio in its consolidated quarterly financial statements must be no more than 1.20 at all times. (ii) The ebitda/financial expense ratio as measured in consolidated quarterly financial statements must be no less than 2.5 times. This ratio must be calculated for the last twelve months as of the date of the corresponding Uniform Codified Statistical Record (FECU). (iii) Equity must be no less than UF 14.233.000 at December 31 each year. 42 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 31. Third-party guarantees There are no guarantees or securities received from third parties in favor of the Parent Company and its subsidiaries as of September 30, 2002 and 2001. 32. Local and Foreign Currency: Balances of assets and liabilities in foreign currency, included in the financial statements as of September 30, 2002 and 2001, are summarized as follows: a) Assets:
---------------------------------------------------------------------------------------------------- Line Currency Amount Amount ==================================================================================================== 2002 2001 ---------------------------------------------------------------------------------------------------- TCH$ TCH$ ----------------------------------------------------------- Cash Non-adjustable pesos 2.599.442 2.374.989 ----------------------------------------------------------- Dollars 206.468 205.541 ----------------------------------------------------------- Bolivianos 41.177 759.813 ----------------------------------------------------------- New Soles 766.028 932.808 ---------------------------------------------------------------------------------------------------- Time deposits Dollars 5.506.272 3.920.332 ----------------------------------------------------------- Non-adjustable pesos - - ----------------------------------------------------------- New Soles 1.037.329 175.765 ---------------------------------------------------------------------------------------------------- Marketable securities Non-adjustable pesos 1.864.758 3.932.954 ----------------------------------------------------------- Dollars 9.648.139 - ---------------------------------------------------------------------------------------------------- Sales receivables Non-adjustable pesos 6.217.837 5.368.656 ----------------------------------------------------------- Dollars 44.064 85.850 ----------------------------------------------------------- Bolivianos 1.191.250 910.271 ----------------------------------------------------------- New Soles 3.147.413 3.131.627 ---------------------------------------------------------------------------------------------------- Documents receivable Non-adjustable pesos 4.336.990 5.035.805 ----------------------------------------------------------- Dollars 8.671 5.710 ----------------------------------------------------------- Bolivianos 384.607 457.313 ----------------------------------------------------------- New Soles 130.596 171.211 ---------------------------------------------------------------------------------------------------- Sundry receivables Non-adjustable pesos 1.108.472 848.403 ----------------------------------------------------------- Dollars 472.551 220.101 ----------------------------------------------------------- Bolivianos 58.912 917.462 ----------------------------------------------------------- New Soles 986.621 763.857 ---------------------------------------------------------------------------------------------------- 43 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements ---------------------------------------------------------------------------------------------------- Line Currency Amount Amount ---------------------------------------------------------------------------------------------------- 2002 2001 ---------------------------------------------------------------------------------------------------- TCH$ TCH$ ----------------------------------------------------------- Accounts and documents related companies Adjustable pesos - 239.495 ----------------------------------------------------------- Non-adjustable pesos 191.721 104.027 ----------------------------------------------------------- Dollars 827.967 391.153 ----------------------------------------------------------- New Soles - - ---------------------------------------------------------------------------------------------------- Inventories Non-adjustable pesos 3.260.511 3.160.742 ----------------------------------------------------------- Dollars 4.743.474 4.279.498 ----------------------------------------------------------- Bolivianos 1.367.822 1.383.033 ----------------------------------------------------------- New Soles 1.642.264 3.076.048 ---------------------------------------------------------------------------------------------------- Recoverable taxes Non-adjustable pesos 4.782.540 9.058.925 ----------------------------------------------------------- New Soles 2.584.161 2.590.476 ----------------------------------------------------------- Bolivianos - - ---------------------------------------------------------------------------------------------------- Prepaid expenses Non-adjustable pesos 2.592.777 2.647.840 Dollars 3.886.353 3.587.865 ----------------------------------------------------------- Bolivianos 1.741.808 151.817 ----------------------------------------------------------- New Soles 540.051 1.042.505 ---------------------------------------------------------------------------------------------------- Deferred taxes Non-adjustable pesos 556.458 447.750 ---------------------------------------------------------------------------------------------------- Other current assets Non-adjustable pesos 940.873 1.051.153 ----------------------------------------------------------- Dollars 1.437.859 2.105.644 ----------------------------------------------------------- New Soles 2.275.431 1.650.769 ----------------------------------------------------------- Bolivianos - - ---------------------------------------------------------------------------------------------------- Total current assets 73.130.267 67.187.208 ---------------------------------------------------------------------------------------------------- Land Non-adjustable pesos 3.600.859 3.598.178 ----------------------------------------------------------- Dollars 3.032.961 2.875.231 ----------------------------------------------------------- New Soles 7.730.659 7.335.011 ---------------------------------------------------------------------------------------------------- Buildings and Infrastructure Non-adjustable pesos 24.261.649 24.016.222 ----------------------------------------------------------- Dollars 5.210.956 4.943.250 ----------------------------------------------------------- New Soles 19.733.343 18.418.512 ---------------------------------------------------------------------------------------------------- Machinery and equipment Non-adjustable pesos 37.960.438 36.660.370 ----------------------------------------------------------- Dollars 28.077.395 26.453.950 ----------------------------------------------------------- New Soles 58.357.728 62.481.121 ---------------------------------------------------------------------------------------------------- Other fixed assets Non-adjustable 53.599.654 52.020.668 pesos ----------------------------------------------------------- Dollars 29.794.905 26.901.427 ----------------------------------------------------------- New Soles 66.139.287 58.842.944 ---------------------------------------------------------------------------------------------------- Higher value in technical reappraisal Non-adjustable pesos 1.829.233 1.809.430 of property, plant and equipment ---------------------------------------------------------------------------------------------------- Accumulated Depreciation Non-adjustable pesos (56.926.775) (50.913.589) ----------------------------------------------------------- Dollars (19.007.737) (15.292.631) ----------------------------------------------------------- New Soles (82.952.504) (78.097.590) ---------------------------------------------------------------------------------------------------- Total property, plant and equipment 180.442.051 182.052.504 ---------------------------------------------------------------------------------------------------- 44 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements ---------------------------------------------------------------------------------------------------- Line Currency Amount Amount ---------------------------------------------------------------------------------------------------- 2002 2001 ---------------------------------------------------------------------------------------------------- TCH$ TCH$ ----------------------------------------------------------- Investment in related companies Non-adjustable pesos 838.791 1.043.044 ----------------------------------------------------------- Dollars 660.530 644.109 ---------------------------------------------------------------------------------------------------- Investment in other companies Non-adjustable pesos 962 33.330 ----------------------------------------------------------- Dollars 82.449 79.044 ----------------------------------------------------------- New Soles 42.277 40.068 ---------------------------------------------------------------------------------------------------- Goodwill Non-adjustable pesos 210.611.152 223.265.136 ----------------------------------------------------------- Dollars 73.760.212 16.603.263 ----------------------------------------------------------- New Soles 12.424.337 70.300.234 ---------------------------------------------------------------------------------------------------- Long-term receivables Dollars 43.789 268.202 ----------------------------------------------------------- New Soles 218.132 - ---------------------------------------------------------------------------------------------------- Intangibles Non-adjustable pesos 19.222 19.273 ----------------------------------------------------------- Dollars - - ----------------------------------------------------------- New Soles 24.197.543 22.963.285 ---------------------------------------------------------------------------------------------------- Amortization Non-adjustable pesos (2.811) (2.375) ----------------------------------------------------------- Dollars - - ----------------------------------------------------------- New Soles (6.560.289) (5.068.763) ---------------------------------------------------------------------------------------------------- Other Non-adjustable pesos 6.599.659 7.629.010 ----------------------------------------------------------- Dollars - 482.903 ---------------------------------------------------------------------------------------------------- Negative goodwill Dollars (908.920) - ---------------------------------------------------------------------------------------------------- Total other assets 322.027.035 338.299.763 ---------------------------------------------------------------------------------------------------- Total assets ---------------------------------------------------------------------------------------------------- Adjustable pesos - 239.495 ---------------------------------------------------------------------------------------------------- Non-adjustable pesos 310.844.412 333.209.941 ---------------------------------------------------------------------------------------------------- Dollars 147.528.358 78.760.442 ---------------------------------------------------------------------------------------------------- New Soles 112.440.407 170.749.888 ---------------------------------------------------------------------------------------------------- Bolivianos 4.786.176 4.579.709 ----------------------------------------------------------------------------------------------------
45 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements b) Liabilities:
- ------------------------------------------------------------------------------------------------------------------------------------ Line Currency Out to 90 days From 90 days to 1 year ------------------------------------------------------------------------------------------------- 2002 2001 2002 2001 ------------------------------------------------------------------------------------------------- Amount Annual Amount Annual Amount Annual Amount Annual TCH$ average TCH$ average TCH$ average TCH$ average interest interest interest interest rate rate rate rate - ------------------------------------------------------------------------------------------------------------------------------------ CURRENT LIABILITIES - ------------------------------------------------------------------------------------------------------------------------------------ Short-term Adjustable - - - - - - - - bank debt pesos -------------------------------------------------------------------------------------------------------------------- New Soles 997 9.00% 5.029 9.0% - - - - -------------------------------------------------------------------------------------------------------------------- Dollars - - - - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Long-term bank Adjustable pesos - - 1.281.033 TAB+1.4% 17.891.419 TAB+1.4% 5.691.371 TAB+1.4% debt - short-term portion -------------------------------------------------------------------------------------------------------------------- New Soles - - - - - - 35.065 - -------------------------------------------------------------------------------------------------------------------- Dollars 10.505 13.00% - - 110.700 13.00% 38.791 - - ------------------------------------------------------------------------------------------------------------------------------------ Bonds - Adjustable pesos - - - - 47.662.488 7.00% 833.724 7.00% short-term portion -------------------------------------------------------------------------------------------------------------------- Dollars 340.755 9.875% - - - - 467.621 9.875% - ------------------------------------------------------------------------------------------------------------------------------------ Accounts Dollars 4.433.188 - 4.075.552 - - - - - payable -------------------------------------------------------------------------------------------------------------------- New Soles 145.196 - - - - - - - -------------------------------------------------------------------------------------------------------------------- Non-adjustable $ 4.616.651 - 4.981.239 - - - 213.823 - -------------------------------------------------------------------------------------------------------------------- Bolivianos 2.224.288 - 1.561.828 - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Documents Dollars 1.067.123 - 1.095.371 - - - 354.437 - payable -------------------------------------------------------------------------------------------------------------------- New Soles 141.569 - 129.765 - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Sundry payables Non-adjustable $ 1.072.289 - 2.104.693 - - - - - -------------------------------------------------------------------------------------------------------------------- Dollars - - 1.066.465 - - - - - -------------------------------------------------------------------------------------------------------------------- New Soles 730.695 - - - - - - - -------------------------------------------------------------------------------------------------------------------- Bolivianos - - 120.042 - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Intercompany Non-adjustable $ 1.470.706 - 1.604.849 - - - 880.422 - documents and accounts payable -------------------------------------------------------------------------------------------------------------------- Dollars 1.080.040 - 1.242.403 - - - - - -------------------------------------------------------------------------------------------------------------------- New Soles - - - - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ 46 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------------------------------------------------------------ Line Currency Out to 90 days From 90 days to 1 year - ------------------------------------------------------------------------------------------------------------------------------------ 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------------ Amount Annual Amount Annual Amount Annual Amount Annual TCH$ average TCH$ average TCH$ average TCH$ average interest interest interest interest rate rate rate rate - ------------------------------------------------------------------------------------------------------------------------------------ CURRENT LIABILITIES - ------------------------------------------------------------------------------------------------------------------------------------ Provisions Adjustable $ - - - - - - - - -------------------------------------------------------------------------------------------------------------------- Non-adjustable $ 1.129.401 - 1.544.081 - 1.516.768 - 1.566.490 - -------------------------------------------------------------------------------------------------------------------- New Soles 733.637 - 3.397.037 - - - - - -------------------------------------------------------------------------------------------------------------------- Bolivianos 3.703.614 - 1.230.211 - 537.066 - - - -------------------------------------------------------------------------------------------------------------------- Dollars 18.232 - - - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Withholdings Non-adjustable $ 1.664.988 - 1.738.281 - - - - - -------------------------------------------------------------------------------------------------------------------- New Soles 1.536.138 - 1.127.730 - - - - - -------------------------------------------------------------------------------------------------------------------- Bolivianos 934.645 - 888.129 - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Long-term Dollars - - - - - - - - liabilities - short-term portion -------------------------------------------------------------------------------------------------------------------- New Soles - - - - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Other current Non-adjustable $ - - 58.591 - - - 175.776 - liabilities - ------------------------------------------------------------------------------------------------------------------------------------ Total current Non-adjustable $ 10.035.708 - 11.973.142 - 1.516.768 - 2.660.735 - liabilitie s -------------------------------------------------------------------------------------------------------------------- Adjustable $ - - 1.339.624 - 65.553.907 - 6.700.872 - -------------------------------------------------------------------------------------------------------------------- Dollars 6.949.843 - 6.413.327 - 110.700 - 860.849 - -------------------------------------------------------------------------------------------------------------------- New Soles 8.337.301 - 7.287.853 - - - 35.065 - -------------------------------------------------------------------------------------------------------------------- Bolivianos 1.813.478 - 2.238.382 - 537.066 - - - - ------------------------------------------------------------------------------------------------------------------------------------ 47 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements As of September 30, 2002: - ------------------------------------------------------------------------------------------------------------------------------------ Line Currency 1 to 3 years 3 to 5 years 5 to 10 years More than 10 years - ------------------------------------------------------------------------------------------------------------------------------------ Amount Annual Amount Annual Amount Annual Amount Annual TCH$ average TCH$ average TCH$ average TCH$ average interest interest interest interest rate rate rate rate - ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM LIABILITIES - ------------------------------------------------------------------------------------------------------------------------------------ Bank debt Adjustable $ 34.160.642 TAB+1.4% - - - - - - ----------------------------------------------------------------------------------------------------------------- Dollars 529.114 13.00% 47.977 13.00% - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Bonds Adjustable $ - - - - - - 25.587.572 6,75% ----------------------------------------------------------------------------------------------------------------- Dollars - - 112.387.318 9.875% - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Long-term Non-adjustable $ 740.077 - 53.026 - 71.401 - 61.769 - provisions ----------------------------------------------------------------------------------------------------------------- New Soles - - - - - - - - ----------------------------------------------------------------------------------------------------------------- Bolivianos - - 983.614 - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Long-term Non-adjustable $ 360.766 - 243.077 - 122.023 - 490.018 - deferred tax ----------------------------------------------------------------------------------------------------------------- New Soles 10.709.526 - - - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Other long-term Adjustable $ 618.691 - 412.460 - 824.742 - - - liabilities ----------------------------------------------------------------------------------------------------------------- Non-adjustable $ 417.565 - 5.463 - 784.600 - 2.730.070 - ----------------------------------------------------------------------------------------------------------------- Dollars - - - - - - - - ----------------------------------------------------------------------------------------------------------------- New Soles 1.482.213 - 36.744 - 50.471 - - - ----------------------------------------------------------------------------------------------------------------- Bolivianos - - 1.328.438 - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Total long-term Adjustable $ 34.779.333 - 412.460 - 824.742 - 25.587.572 - liabilities ----------------------------------------------------------------------------------------------------------------- Non-adjustable $ 1.518.408 - 301.566 - 978.024 - 3.281.857 - ----------------------------------------------------------------------------------------------------------------- Dollars 529.114 - 112.435.295 - - - - - ----------------------------------------------------------------------------------------------------------------- New Soles 12.191.739 - 36.744 - 50.471 - - - ----------------------------------------------------------------------------------------------------------------- Bolivianos - - 2.312.052 - - - - - ----------------------------------------------------------------------------------------------------------------- 48 As of September 30, 2001: - ------------------------------------------------------------------------------------------------------------------------------------ Line Currency 1 to 3 years 3 to 5 years 5 to 10 years More than 10 years ------------------------------------------------------------------------------------------------- Amount Annual Amount Annual Amount Annual Amount Annual TCH$ average TCH$ average TCH$ average TCH$ average interest interest interest interest rate rate rate rate - ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM LIABILITIES - ------------------------------------------------------------------------------------------------------------------------------------ Bank debt Adjustable $ 34.148.226 TAB+1.4% 17.074.112 TAB+1.4% - - - - ----------------------------------------------------------------------------------------------------------------- Dollars 177.578 13.00% 319.637 7.00% - - - - ----------------------------------------------------------------------------------------------------------------- New Soles - - - - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Bonds Adjustable $ 46.797.545 7.00% - - - - 25.578.272 6,75% - ------------------------------------------------------------------------------------------------------------------------------------ Dollars - - - - 106.618.520 9.875% - - - ------------------------------------------------------------------------------------------------------------------------------------ Long-term Non-adjustable $ 828.592 - 405.251 - 810.045 - 645.771 - deferred tax ----------------------------------------------------------------------------------------------------------------- New Soles 10.141.606 - - - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Long-term Non-adjustable $ 309.797 - 141.622 - 212.432 - 221.284 - provisions ----------------------------------------------------------------------------------------------------------------- New Soles - - - - - - - - ----------------------------------------------------------------------------------------------------------------- Bolivianos - - 799.777 - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Long-term sundry New Soles - - - - - - - - payable - ------------------------------------------------------------------------------------------------------------------------------------ Other long-term Non-adjustable $ 1.421.480 - 3.831 - 85.997 - 1.412.708 - liabilities ----------------------------------------------------------------------------------------------------------------- Adjustable $ 632.790 - 421.860 - 1.054.650 - - - ----------------------------------------------------------------------------------------------------------------- New Soles 1.637.760 - - - - - - - ----------------------------------------------------------------------------------------------------------------- Bolivianos - - 1.612.411 - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Total long-term Adjustable $ 81.578.561 - 17.495.972 - 1.054.650 - 25.578.273 - liabilities ----------------------------------------------------------------------------------------------------------------- Non-adjustable $ 2.559.869 - 550.703 - 1.108.474 - 2.279.763 - ----------------------------------------------------------------------------------------------------------------- Dollars 177.578 - 319.637 - 106.618.520 - - - ----------------------------------------------------------------------------------------------------------------- New Soles 11.779.366 - - - - - - - ----------------------------------------------------------------------------------------------------------------- Bolivianos - - 2.412.188 - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
49 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 33. Sanctions: No sanctions have been applied to the Parent Company, its subsidiaries, their directors or managers by the Superintendency of Securities and Insurance or other administrative authorities. 34. Research and Development Expenses: As of September 30, 2002 and 2001, neither the Parent Company nor its Subsidiaries had made disbursements for research and development as defined in Circular No. 981 of the Superintendency of Securities and Insurance. 35. Board Compensation: The Parent Company and its subsidiaries made payments of allowances and compensation to Directors amounting to TCH$236.504 for the 2002 fiscal year and TCH$255.217 for the 2001 fiscal year. 36. Material Events 1. Regular General Shareholders Meeting A Regular General Shareholders Meeting was held of Coca-Cola Embonor S.A. on April 29, 2002. The purpose was: a) to approve the Annual Report, General Balance Sheet and Financial Statements for the fiscal year running from January 1, 2001 to December 31, 2001; b) to discuss the results in the 2001 fiscal year; c) to appoint the external auditors for the 2002 fiscal year; d) to decide on the compensation of the Board of Directors for the 2002 fiscal year; e) to report on Board resolutions relative to the transactions listed in Article 44 of the Companies Law occurring after the last Shareholders Meeting; f) to decide on the newspaper in which notices will be published of upcoming Regular or Special General Shareholders Meetings, if pertinent; g) to decide on the 2002 dividend policy; h) to set the compensation of the Directors Committee and its expense budget; i) to hear and analyze, in general, any matter relating to the management and administration of the corporate business and to adopt the resolutions deemed convenient that are within the purview of the Regular General Shareholders Meeting according to the By-Laws and Governing Law. 50 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements 37. Subsequent events The Chilean Syndicated Loan Agreement was amended October 21, 2002 as follows: a) The minimum required Equity of the Company was reduced from UF 14.233.000 to UF 11.000.000. b) A new obligation was established where the Company undertook to maintain a ratio of funded debt to EBITDA below 5.5 times as of December 2003. There are no other material subsequent events as of September 30, 2002 to the date of preparation of these financial statements that affect or will affect the assets, liabilities and/or results of the Parent Company and its Subsidiaries. 38. The Environment The Parent Company and its Subsidiaries have developed the following environmental protection projects. The expenses of those projects are shown below: Concept Budgeted Spent TCH$ TCH$ Effluent Treatment 221.759 198.956 Operating Cost 140.422 - ---------------- -------------- Total 362.181 198.956 ---------------- -------------- 51 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements EXPLANATORY ANALYSIS I) Third Quarter 2002 vs. 2001 The consolidated sales volume was 125.7 million unit cases, which represents a 1.9% increase compared to the previous year. Broken down by country, the sales volume decreased 0.4% in Chile, increased 4.2% in Peru and 1.3% in Bolivia. Operating revenue rose 1.2% on a consolidated level to a total of TCH$174.027.052 (MUS$232.429,6). Operating profit declined 14.3% to a total of TCH$18.371.070 on a consolidated level (MUS$24.536,3), which represents 10.6% of revenues compared to 12.5% in the previous year. During the nine months ending September 2002, the operating cash flow was TCH$37.028.264 (MUS$49.454,8) (operating profit (loss) + depreciation), a decrease of 8.4% compared to the previous year, which accounts for 21.2% of consolidated revenues. There was a non-operating loss of TCH$25.988.535 (MUS$34.710,2) compared to a loss of TCH$25.083.740 in the previous year. The increase in the non-operating loss is due primarily to the decline in other non-operating income compared to the previous year. The non-operating loss in 2002 included a goodwill amortization of TCH$13.542.064, which represents no cash flow. There was a net loss of TCH$10.022.914, which compares to the net loss of TCH$6.400.761 in the first semester of 2001. Chilean Operation In Chile, the physical sales volume decreased by 0.4%. This impact was also transferred to sales revenue, which totaled TCH$80.039.744 (MUS$106.900,7), or a decline of 3.3% compared to the previous year. Operating profit totaled TCH$9.518.631 (MUS$12.713,0), which is a decrease of 16.1% compared to the previous year. The operating profit accounts for 11.89% of revenues from this operation. Operating cash flow (operating profit + depreciation) in the Chilean operation totaled TCH$15.186.288 (MUS$20.282,7), which represents 18.9% of revenues compared to 22.5% in the previous year. Peruvian Operation In Peru, physical sales rose 4.2% compared to the previous year. Net revenues totaled TCH$69.153.432 (MUS$92.361,0), which represents a 10.4% increase in relation to 2001. The operating profit was TCH$6.289.712 (MUS$8.400,5) and the operating cash flow (operating profit + depreciation) was TCH$16.063.754 (MUS$21.454,7), which accounts for 23.2% of revenues compared to 25.5% in the previous year. 52 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements Bolivian Operation In Bolivia, physical sales rose 1.3% with respect to the previous year. Net revenues totaled TCH$24.833.876 (MUS$33.168,1), which represents a 6.7% decrease in relation to 2001. Operating profit totaled TCH$2.562.727 (MUS$3.422,8) and the operating cash flow (operating profit + depreciation) was TCH$5.778.222 (MUS$7.717,4), which accounts for 23.3% of revenues in comparison to 22.1% in the previous year. Financial economic indicators The principal financial-economic indicators related to the consolidated financial statements as of September 30, 2002 and 2001 are shown below:
- ---------------------------------------------------------- ---------------- ---------------- Concepts 2002 2001 - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Liquidity - ---------------------------------------------------------- ---------------- ---------------- Current assets 73.130.267 67.187.208 - ---------------------------------------------------------- ---------------- ---------------- Current liabilities 94.854.771 39.509.849 - ---------------------------------------------------------- ---------------- ---------------- Liquidity 0.77 1.70 - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Acid ratio - ---------------------------------------------------------- ---------------- ---------------- Current assets - Inventories 62.116.196 55.287.887 - ---------------------------------------------------------- ---------------- ---------------- Current liabilities 94.854.771 39.509.849 - ---------------------------------------------------------- ---------------- ---------------- Acid ratio 0.65 1.40 - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Debt ratio - ---------------------------------------------------------- ---------------- ---------------- Current liabilities + Long-term liabilities 290.094.148 293.023.403 - ---------------------------------------------------------- ---------------- ---------------- Equity + Minority interest 285.505.205 294.516.072 - ---------------------------------------------------------- ---------------- ---------------- Debt ratio 1.02 0.99 - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Current liabilities/Total debt 32.70% 13.48% - ---------------------------------------------------------- ---------------- ---------------- Long-term debt/Total debt 67.30% 86.52% - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Financial expenses coverage - ---------------------------------------------------------- ---------------- ---------------- EBIT+FE-FI+A+D+OIE+PLR-Loss in Related Companies 39.807.469 43.226.723 - ---------------------------------------------------------- ---------------- ---------------- Net financial expenses 10.594.516 12.624.505 - ---------------------------------------------------------- ---------------- ---------------- Coverage 3.76 3.42 - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- ACTIVITY - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Total assets 575.599.353 587.539.475 - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Inventories rotation - ---------------------------------------------------------- ---------------- ---------------- Cost of sales 99.712.772 97.420.970 - ---------------------------------------------------------- ---------------- ---------------- Average inventories 10.670.244 11.008.747 - ---------------------------------------------------------- ---------------- ---------------- Inventories rotation 9.34 8.85 - ---------------------------------------------------------- ---------------- ---------------- 53 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements Concepts 2002 2001 - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Inventory turnover in days - ---------------------------------------------------------- ---------------- ---------------- Average inventories 10.670.244 11.008.747 - ---------------------------------------------------------- ---------------- ---------------- Cost of sales 99.712.772 97.420.970 - ---------------------------------------------------------- ---------------- ---------------- Inventory turnover in days 28.89 30.51 - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Net sales - ---------------------------------------------------------- ---------------- ---------------- Chile 80.039.744 82.737.892 - ---------------------------------------------------------- ---------------- ---------------- Peru 69.153.432 62.614.439 - ---------------------------------------------------------- ---------------- ---------------- Bolivia 24.833.876 26.602.968 - ---------------------------------------------------------- ---------------- ---------------- Consolidated 174.027.052 171.955.298 - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Sales in thousand unit cases - ---------------------------------------------------------- ---------------- ---------------- Chile 49.510 49.730 - ---------------------------------------------------------- ---------------- ---------------- Peru 56.840 54.565 - ---------------------------------------------------------- ---------------- ---------------- Bolivia 19.341 19.086 - ---------------------------------------------------------- ---------------- ---------------- Consolidated 125.691 123.381 - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Cost of sales - ---------------------------------------------------------- ---------------- ---------------- Chile (49.896.328) (50.611.726) - ---------------------------------------------------------- ---------------- ---------------- Peru (35.832.751) (31.764.517) - ---------------------------------------------------------- ---------------- ---------------- Bolivia (13.983.693) (15.044.727) - ---------------------------------------------------------- ---------------- ---------------- Consolidated (99.712.772) (97.420.970) - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Operating Income 18.371.070 21.435.147 - ---------------------------------------------------------- ---------------- ---------------- Financial expenses (11.919.936) (13.559.818) - ---------------------------------------------------------- ---------------- ---------------- Non-operating income (25.988.535) (25.083.740) - ---------------------------------------------------------- ---------------- ---------------- EBITDA 39.807.469 43.226.723 - ---------------------------------------------------------- ---------------- ---------------- Income (loss) before income taxes (7.617.465) (3.648.593) - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Profitability - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Return on Equity - ---------------------------------------------------------- ---------------- ---------------- Income (loss) net (10.022.914) (6.400.761) - ---------------------------------------------------------- ---------------- ---------------- Average equity 235.436.932 237.784.257 - ---------------------------------------------------------- ---------------- ---------------- Return on equity (4.26%) (2.69%) - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Return on Assets - ---------------------------------------------------------- ---------------- ---------------- Income (loss) net (10.022.914) (6.400.761) - ---------------------------------------------------------- ---------------- ---------------- Average assets 581.569.555 565.316.809 - ---------------------------------------------------------- ---------------- ---------------- Return on Assets (1.72%) (1.13%) - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- 54 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements Concepts 2002 2001 - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Average operating assets 210.706.240 204.590.159 - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Return on average operating assets (4.76%) (3.13%) - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Income (loss) per share - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Income (loss) net (10.022.914) (6.400.761) - ---------------------------------------------------------- ---------------- ---------------- Number of subscribed and paid-in shares 510.853.230 510.853.230 - ---------------------------------------------------------- ---------------- ---------------- Income (loss) per share (19.62) (12.53) - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Dividend return: - ---------------------------------------------------------- ---------------- ---------------- Series A - ---------------------------------------------------------- ---------------- ---------------- Dividends paid in year/No. of shares in series 0.00 0.00 - ---------------------------------------------------------- ---------------- ---------------- Closing price of share 158 320 - ---------------------------------------------------------- ---------------- ---------------- Dividend return 0.00% 0.00% - ---------------------------------------------------------- ---------------- ---------------- - ---------------------------------------------------------- ---------------- ---------------- Series B - ---------------------------------------------------------- ---------------- ---------------- Dividends paid in year/No. of shares in series 0.00 0.00 - ---------------------------------------------------------- ---------------- ---------------- Closing price of share 135 376 - ---------------------------------------------------------- ---------------- ---------------- Dividend return 0.00% 0.00% - ---------------------------------------------------------- ---------------- ----------------
55 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements II. Analysis of Balance Sheet As of December 31,
2002 2001 Variations Variations% TCH$ TCH$ TCH$ Current assets 73.130.267 67.187.208 5.943.059 8.85% Property, plant and equipment 180.442.051 182.052.504 (1.610.453) (0.88%) Other assets 322.027.035 338.299.763 (16.272.728) (4.81%) --------------- --------------- ---------------- ------------- Total Assets 575.599.353 587.539.475 (11.940.122) (2.03%) --------------- --------------- ---------------- ------------- Current liabilities 94.854.771 39.509.849 55.344.922 140.08% Long-term liabilities 195.239.377 253.513.554 (58.274.177) (22.099%) Minoritary interest 55.335.013 53.812.683 1.522.330 2.83% Equity 230.170.192 240.703.389 (10.533.197) (4.38%) --------------- --------------- ---------------- ------------- Total liabilities and equity 575.599.353 587.539.475 (11.940.122) (2.03%) --------------- --------------- ---------------- -------------
Current assets increased by TCH$5.943.059 due mainly to the increase in time deposits and marketable securities. Moreover, there was a rise of TCH$55.344.922 in current liabilities. This increase in current liabilities is explained by the transfer to short term of part of the principal under the syndicated loan and Chilean bonds serie A owed by the Company, which must be paid during 2002 and 2003. This change results in a decrease in the Company's liquidity ratio, which went from 1.70 to 0.77. There was also an improvement in operating ratios. Inventory turnover went from 8.85 to 9.34 and there was a drop in days in inventory from 31 to 29. The ratio of consolidated existing US debt to equity plus minority interest rose from 0.99 to 1.02 given the increase, in pesos, of dollar debt and the drop in equity due to the fiscal year loss. 56 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements III. Analysis of Book Values and the Economic Value of Assets The following is noted regarding the principal assets of the company and its subsidiaries: (a) Given the high turnover of items, the book values of working capital represent their market prices. (b) The fixed assets of domestic companies are shown at their acquisition price, after price-level restatement. The book values of the property plant and equipment of Embonor S.A. (formerly Embotelladoras Williamson Balfour S.A.) which were acquired during 1999 do not differ from their market values. The property plant and equipment of foreign companies are appraised according to the provisions in Technical Bulletin No. 64 of the Chilean Accountants Association. It was determined at the time of acquisition that the book values were distorted in comparison to a reasonable market price, so the property plant and equipment were adjusted to their market price based on external appraisals. The book values do not at this time differ from market prices. All property plant and equipment considered dispensable are valued at the respective sale prices. The capacity of these fixed assets to generate flows has also been evaluated, and cover the cost of depreciation during their remaining useful life. (c) The stock investments by the Company in companies in which it has a significant influence have been valued according to the proportional equity value method (VPP). The Company's equity income was recognized on an accrual basis. Unrealized income on transactions between related companies was eliminated. (d) The goodwill arising from the differences between the proportional equity value of the investment and the value paid on the date of purchase of the investments is shown at the acquisition price, after price-level restatement, and amortized in a period of 20 years according to Circular No. 1.358 of the Superintendency of Securities and Insurance. In summary, the assets are shown according to generally accepted accounting principles and instructions issued by the Superintendency of Securities and Insurance. Therefore, these amounts do not exceed their net market values. 57 Coca-Cola Embonor S.A. and Subsidiaries Notes to Consolidated Financial Statements IV. Analysis of the Principal Components of Cash Flow. Summary Consolidated Statements of Cash Flow For the nine months ending September 30,
2002 2001 Variations Variations TCH$ TCH$ TCH$ % Net Cash flow from operating activities 8.109.042 14.750.728 (6.731.686) (45.64%) Net Cash flow from finance activities (5.719.541) (309.419) (5.410.122) (1,748.48%) Net Cash flow from investment activities (9.369.161) (6.692.572) (2.676.589) (39.99%) --------------- --------------- -------------- ------------ Total Net cash flow for the period (7.069.660) 7.748.737 (14.818.397) (191.24%) --------------- --------------- -------------- ------------
The Company and its subsidiaries reported a negative net cash flow of TCH$7.069.660 during the first nine months of 2002, which implied a negative variation of TCH$14.818.397 compared to the previous year. This net cash flow can be broken down as follows: Operating activities generated a positive flow of TCH$8.019.042, which is lower by TCH$6.731.686 than the one generated in the same period in the previous year. The difference is due mainly to increased payments to suppliers and employees and taxes. Financing generated a negative flow of TCH$5.719.541, which meant a negative change of TCH$5.410.122 compared to the previous year. The difference stems principally from the payment of bank loans. Investment activities resulted in a negative flow of TCH$9.369.161, which is TCH$2.676.589 greater than the investment flow in 2001. This variation is principally the result of recording collection of loans to related companies in 2001. 58 V. Analysis of Market Risk (a) Debt Risk Interest-bearing debt dropped during 2001, to the equivalent to US$365 million as of September 30. There was a significant restructuring of interest-bearing liabilities through the issue of long-and short-term bonds on the Chilean market for a total of UF 4.400.000 and a syndicated loan for close to UF 3.460.000. The principal benefits from this restructuring were the significant reduction in exposure to exchange rate fluctuations since approximately 60% of the consolidated debt is in UF. The interest rate on interest-bearing debt was also reduced. As of September 30, 2002, US$160 million was owed to third parties, recognized in foreign currency. The exchange rate risk has been minimized for this debt because these monies are invested in assets abroad which are controlled in dollars. Therefore, there is a natural hedging according to Technical Bulletin No. 64 of the Chilean Accountants Association. 50% of total operating revenue of the company and its subsidiaries corresponds to sales in Chilean pesos and 50% to income that is treated according to Technical Bulletin No. 64 of the Chilean Accountants Association because the sales are made abroad. (b) Commodities Risk The Company faces the risk of price fluctuations on the international sugar, carbonic gas, plastic bottles and other markets. Significant progress was made at the level of centralized purchasing through medium-term contracts in order to minimize and/or stabilize this risk during 2002. The company did not use any hedging instruments for commodities. 59 -----END PRIVACY-ENHANCED MESSAGE-----