EX-1 3 exh1.txt CONSOLIDATED FINANCIAL STATEMENTS Exhibit 1 EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES Consolidated financial statements As of December 31, 2000 and 2001 and for each of the three years in the period ended December 31, 2001 CONTENTS Report of independent accountants Consolidated balance sheets Consolidated statements of income Consolidated statements of cash flows Notes to the consolidated financial statements Ch$ - Chilean pesos ThCh$ - Thousands of Chilean pesos US$ - United States dollars ThUS$ - Thousands of United States dollars UF - Unidad de Fomento, an inflation-indexed peso-denominated monetary unit. The UF rate is set daily in advance based on the previous month's inflation rate R$ - Brasilian reals [LOGO of PricewaterhouseCoopers] REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders of Embotelladora Andina S.A. We have audited the accompanying consolidated balance sheets of Embotelladora Andina S.A. and its subsidiaries (the "Company") as of December 31, 2000 and 2001, and the related consolidated statements of income and of cash flows for each of the three years in the period ended December 31, 2001 all expressed in thousands of constant Chilean pesos of December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We have conducted our audits in accordance with auditing standards generally accepted in both Chile and in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Embotelladora Andina S.A. and its subsidiaries as of December 31, 2000 and 2001 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in Chile. As discussed in Note 2 to the consolidated financial statements, effective January 1, 2000, the Company changed its method of accounting of deferred income taxes in accordance with Technical Bulletin No.60 of the Chilean Institute of Accountants. As described in Note 19, as of December 31, 2001 the Company maintains investments in Argentina that could be subject to adverse effects from the political and economic uncertainty in Argentina. Accounting principles generally accepted in Chile vary in certain significant respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of consolidated net income for each of the three years in the period ended December 31, 2001 and the determination of consolidated shareholders' equity as of December 31, 2000 and 2001 to the extent summarized in Note 25 to the consolidated financial statements. Santiago, February 15, 2002 F-1 EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Restated for general price-level changes and expressed in thousands of constant Chilean pesos of December 31, 2000 and thousands of U.S. dollars)
At December31, ---------------------------------------------------------------- ASSETS Note 2000 2001 2001 ------ ---- ------------- -------------- ---------------- ThCh$ ThCh$ ThUS$ (Unaudited Note 1 aa) CURRENTS ASSETS: Cash 12,530,835 13,868,565 21,180 Time deposits 3 149,771,469 18,171,362 27,752 Marketable securities 4 15,727,118 25,574,151 39,057 Receivables (net) 5 58,232,614 57,949,011 88,500 Amounts due from related companies 10 d) 25,810 1,412,981 2,158 Inventories 6 24,942,350 17,325,337 26,459 Recoverable taxes 9,381,558 5,473,501 8,359 Deferred income taxes 15 c) 874,854 503,438 769 Other current assets 7 8,536,822 8,191,160 12,510 ------------ ------------- ------------- Total current assets 280,023,430 148,469,506 226,744 ------------ ------------- ------------- PROPERTY, PLANT AND EQUIPMENT: 9 Land 14,822,116 15,496,623 23,667 Buildings and improvements 91,670,912 96,931,734 148,035 Machinery and equipment 258,799,186 232,401,564 354,925 Other property, plant and equipment 154,821,823 171,308,460 261,624 Technical reappraisal of property, plant and equipment 1,823,156 1,823,156 2,784 Less: Depreciation (272,301,816) (300,551,003) (459,004) ------------ ------------- ------------- Total property, plant and equipment 249,635,377 217,410,534 332,031 ------------ ------------- ------------- OTHER ASSETS: Investments in related companies 10 a) 7,062,828 18,404,997 28,108 Goodwill (net) 10 b) 108,729,886 111,264,249 169,924 Investments in other companies 10 376,160 671,902 1,026 Long-term receivables 899,635 1,145,606 1,750 Amounts due from related companies 10 d) 147,399 131,340 201 Intangible assets (net of accumulated amortization of 1,855,506 in 2000 and 2,339,302 in 2001) 1,158,630 975,371 1,490 Deferred income taxes 15 c) 638,382 -- -- Other long-term assets 11 27,877,500 191,241,082 292,065 ------------ ------------- ------------- Total other assets 146,890,420 323,834,547 494,564 ------------ ------------- ------------- Total assets 676,549,227 689,714,587 1,053,339 ============ ============= ============= _________________ The accompanying notes are an integral part of these consolidated financial statements.
F-2 EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Restated for general price-level changes and expressed in thousands of constant Chilean pesos of December 31, 2001 and thousands of U.S. dollars)
At December31, ----------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Note 2000 2001 2001 ------------------------------------ ---- ------------- -------------- --------------- ThCh$ ThCh$ ThUS$ (Unaudited Note 1 aa) CURRENT LIABILITIES: Short-term bank liabilities 12 a) 14,894,135 14,040,704 21,443 Current portion of long-term bank liabilities 12 b) 1,369,891 7,189,897 10,981 Current portion of bonds payable 13 a) 2,914,379 1,192,439 1,821 Dividends payable 4,042,842 3,911,365 5,974 Trade accounts payable and notes payable 40,227,345 34,776,605 53,111 Other accrued liabilities 14 12,245,137 11,967,077 18,276 Amounts payable to related companies 10 d) 11,246,836 12,133,989 18,531 Income taxes payable 2,231,103 2,513,844 3,839 Other taxes payable 14,662,156 10,862,303 16,589 Other short-term liabilities 129,757 125,855 192 -------------- -------------- -------------- Total current liabilities 103,963,581 98,714,078 150,757 -------------- ============== ============== LONG-TERM LIABILITIES: Long-term bank liabilities 12 b) 3,302,371 55,333,408 84,506 Bonds payable 13 a) 159,391,234 146,988,018 224,481 Amounts payable to related companies 10 d) 209,001 -- -- Trade accounts payable and notes payable 491,844 198,747 304 Other accrued liabilities 14 5,330,147 6,208,245 9,481 Deferred income taxes 15 c) -- 1,446,852 2,210 Other long-term liabilities 18 12,918,603 8,687,366 13,268 -------------- Total long-term liabilities 181,643,200 218,862,636 334,250 -------------- -------------- -------------- Minority interest 21 18,736 45,577 70 -------------- -------------- -------------- Contingencies and commitments 19 SHAREHOLDERS' EQUITY: 20 Paid-in capital 179,149,060 179,149,060 273,598 Other reserves 39,315,030 46,252,421 70,637 Retained earnings from previous years 151,984,192 125,211,171 191,223 Net income for the year 32,477,257 33,066,958 50,500 Interim dividends (12,001,829) (11,587,314) (17,696) -------------- -------------- -------------- Total shareholders' equity 390,923,710 372,092,296 568,262 -------------- -------------- -------------- Total liabilities and shareholders' equity 676,549,227 689,714,587 1,053,339 ============== ============== ============== ________________ The accompanying notes are an integral part of these consolidated financial statements.
F-3 EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Restated for general price-level changes and expressed in thousands of constant Chilean pesos of December 31, 2001 and thousands of U.S. dollars)
For the years ended December 31, --------------------------------------------------------------------- Note 1999 2000 2001 2001 ---- ------------ ------------- ------------ ------------- ThCh$ ThCh$ ThCh$ ThUS$ (Unaudited Note 1 aa) (OPERATING RESULTS Net sales 416,063,068 458,843,410 481,927,118 736,003 Cost of sales (259,214,226) (277,683,559) (301,613,601) (460,627) ------------ ------------ ------------ ------------ Gross profit 156,848,842 181,159,851 180,313,517 275,376 Administrative and selling expenses (116,991,105) (124,618,842) (124,487,558) (190,118) ------------ ------------ ------------ ------------ Operating income 39,857,737 56,541,009 55,825,959 85,258 ------------ ------------ ------------ ------------ NON-OPERATING INCOME AND EXPENSE: Financial income 14,573,941 24,892,095 32,477,900 49,601 Other non-operating income 22 a) 12,174,682 2,253,236 30,134,104 46,021 Financial expense (18,139,590) (20,772,964) (33,188,219) (50,685) Other non-operating expense 22 b) (11,917,632) (17,403,049) (26,153,495) (39,942) Share of income (loss) from related companies 10 a) 360,618 (1,319,207) (1,365,809) (2,086) Amortization of goodwill (4,515,483) (6,301,251) (10,713,326) (16,362) Price-level restatement (1,387,181) (8,456,045) (9,497,577) (14,505) Exchange gains, net 3,778,766 4,988,338 2,779,743 4,245 ------------ ------------ ------------ ------------ Non-operating income (expense) (5,071,879) (22,118,847) (15,526,679) (23,713) ------------ ------------ ------------ ------------ Income before income tax expense and minority interest 34,785,858 34,422,162 40,299,280 61,545 Less: Income tax expense 15 d) (5,503,255) (1,872,403) (7,211,107) (11,013) ------------ ------------ ------------ ------------ Income before minority interest 29,282,603 32,549,759 33,088,173 50,532 Less: Income attributable to minority interest 21 71,949 (72,502) (21,215) (32) ------------ ------------ ------------ ------------ Net income 29,354,552 32,477,257 33,066,958 50,500 ============ ============ ============ ============ ________________ The accompanying notes are an integral part of these consolidated financial statements.
F-4 EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Restated for general price-level changes and expressed in thousands of constant Chilean pesos of December 31, 2001 and thousands of U.S. dollars)
For the years ended December 31, ---------------------------------------------------------------- 1999 2000 2001 2001 ------------- --------------- -------------- -------------- ThCh$ ThCh$ ThCh$ ThUS$ (Unaudited Note 1 aa) CASH FLOWS FROM OPERATING ACTIVITIES: Collection of trade receivables 545,175,210 615,104,710 692,748,550 1,057,971 Financial income received 14,313,753 9,926,006 20,792,360 31,754 Dividends and other distributions received -- 174,436 -- -- Collection of other receivables 19,071,589 37,498,138 24,489,574 37,401 Payments to suppliers and personnel (403,428,670) (456,068,206) (544,189,605) (831,090) Interest paid (16,486,609) (22,652,059) (23,382,432) (35,710) Income tax payments (11,363,961) (3,326,596) (2,137,749) (3,265) Other expenses (3,153,526) (3,433,715) (3,054,820) (4,665) VAT and other similar items paid (73,517,743) (81,836,887) (75,717,642) (115,637) ------------ ------------ ------------ ------------ Net cash provided by operating activities 70,610,043 95,385,827 89,548,236 136,759 ------------ ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings from banks and others 15,231,136 18,568,472 109,882,299 167,813 Proceeds from issuance of bonds -- -- 111,245,134 169,894 Payment of bond issuance costs -- -- (1,710,381) (2,612) Other sources of financing, net -- (88,869) (3,257,486) (4,975) Payment of loans (10,836,228) (13,454,381) (108,578,638) (165,822) Repayment of bonds -- (37,379,831) (141,599,947) (216,253) Dividends paid (21,278,920) (72,631,627) (58,550,823) (89,419) ------------ ------------ ------------ ------------ Net cash (used in) provided by financing activities (16,884,012) (104,986,236) (92,569,842) (141,374) ------------ ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of property, plant and equipment and intangible assets 2,185,975 7,472,113 26,884,247 41,058 Proceeds from sales of other investments 196,990,755 459,393,387 783,626,324 1,196,760 Collection of loans to related companies -- 1,222,809 1,626,369 2,484 Proceeds from other asset sales 12,160,807 549,193 141,899 217 Investments in financial instruments (171,109,473) (379,670,567) (803,840,727) (1,227,631) Additions to property, plant and equipment (35,802,395) (27,486,611) (22,615,896) (34,539) Investments in related companies (13,226,252) (47,601,813) (15,962,133) (24,377) Loans to related companies -- (1,172,982) -- -- ------------ ------------ ------------ ------------ Net cash (used in) provided by investing activities (8,800,583) 12,705,529 (30,139,917) (46,028) ------------ ------------ ------------ ------------ Net cash flows from operating, financing and investing activities 44,925,448 3,105,120 (33,161,523) (50,643) PRICE-LEVEL RESTATEMENT OF CASH AND CASH EQUIVALENTS 4,843,345 (786,109) (7,986,764) (14,696) ------------ ------------ ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS 49,768,793 2,319,011 (41,148,287) (65,339) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 46,785,631 96,554,424 98,873,435 153,498 ------------ ------------ ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF YEAR 96,554,424 98,873,435 57,725,148 88,159 ============ ============ ============ ============ ________________ The accompanying notes are an integral part of these consolidated financial statements.
F-5 EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Restated for general price-level changes and expressed in thousands of constant Chilean pesos of December 31, 2001 and thousands of U.S. dollars)
For the years ended December 31, --------------------------------------------------------- 1999 2000 2001 2001 ------------ ----------- ------------- ------------- ThCh$ ThCh$ ThCh$ ThUS$ (Unaudited Note 1 aa) RECONCILIATION BETWEEN NET INCOME AND NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES: Net income 29,354,552 32,477,257 33,066,958 50,500 Income on sales of assets: Loss (gain) on sales of property, plant and equipment 406,412 144,042 (4,001,920) (6,112) Loss on sales of investments and other assets 117,431 (102,158) (1,818) (3) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 42,457,418 41,779,491 40,706,602 62,168 Amortization of goodwill 4,515,483 6,301,251 10,713,326 16,362 Amortization of intangibles and deferred issuance costs 519,601 2,329,138 4,430,520 6,766 Write-offs and provisions 5,250,126 10,910,267 9,851,546 15,045 Share of income (loss) from affiliate companies, net (360,618) 1,319,207 1,365,809 2,086 Price-level restatement 1,387,181 8,456,045 9,497,577 14,505 Exchange gains, net (3,778,766) (4,988,338) (2,779,743) (4,245) Other credits to income that do not represent cash flows (11,701,113) (21,157,750) (50,853,356) (77,664) Other debits to income that do not represent cash flows 12,955,335 9,652,093 37,606,943 57,434 Income (loss) attributable to minority interest (71,949) 72,502 21,215 32 Change in operating assets / liabilities: Receivables 5,621,969 (3,039,183) 6,706,919 10,243 Inventories (2,899,809) 655,218 7,524,089 11,491 Other current assets (414,471) 1,974,883 (9,809,406) (14,981) Trade accounts payable and notes payable relating to operating activities 1,366,947 3,241,403 (1,964,195) (3,000) Interest payable 1,133,503 685,555 (4,804,940) (7,338) Income taxes payable (6,594,868) 486,392 2,678,074 4,090 Trade accounts payable and notes payable relating to non-operating activities 394,419 247,799 (2,533,130) (3,869) VAT and other similar taxes (9,048,740) 3,940,713 2,127,166 3,249 ----------- ----------- ----------- ----------- Net cash provided by operating activities 70,610,043 95,385,827 89,548,236 136,759 =========== =========== =========== =========== ______________ The accompanying notes are an integral part of these consolidated financial statements.
F-6 EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2000 AND 2001 NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ---------------------------------------------------------------------------- Embotelladora Andina S.A. is registered under No. 00124 in the Securities Registry and is subject to the regulations of the Chilean Superintendency of Securities and Insurance Companies (the "SVS"): The primary activity of Embotelladora Andina S.A. ("Andina", and together with its subsidiaries, the "Company") is the production and sale of Coca-Cola products and other beverages. The Company has bottling operations in Santiago, Chile and, through its subsidiaries, in Rio de Janeiro, Espiritu Santo and Minas Gerais, Brazil, and Mendoza, Cordoba, and Rosario, Argentina. The Company holds franchises from The Coca-Cola Company covering each of its Chilean, Brazilian and Argentine operations. The franchise for the Chilean territory expires in 2003 and may be extended to 2008 at the option of The Coca-Cola Company. The franchise for the Brazilian territory expires in 2003 and can be extended to 2008 at the option of The Coca-Cola Company. In Argentina, the Company holds franchises for each of Mendoza, Rosario and Cordoba, which expire in 2006 and can be extended at the option of The Coca-Cola Company. Such franchises are expected to be renewed upon expiration. The repatriation of capital and dividends from the Company's investments in Brazil is subject to certain restrictions in accordance with local Brazilian legislation. Earnings may be distributed only out of local currency retained earnings reported in the tax accounting records. At December 31, 2001, there are no distributable profits in Argentina or Brazil. There exist US$ 26 million of undistributed profits in Uruguay; it is the intention of the Company to continue to invest these funds for the foreseeable future. Legal reorganizations and joint ventures: On November 22, 2001, Sociedad Andina Bottling Investments Dos S.A. was incorporated with capital of US$ 100 million, which shall be paid up within a maximum period of three years from the incorporation date. On June 29, 2001, Embotelladora Andina S.A. and Cristalerias de Chile S.A. ("Cristalerias") entered into a number of contracts establishing a joint venture for the PET plastic container business in which these companies were involved through their respective subsidiaries, Envases Multipack S.A. and Crowpla Reicolite S.A. This joint venture was undertaken by the Company through the incorporation of its subsidiary, Andina Inversiones Societarias S.A., as shareholder of 50% of the shares of Crowpla Reicolite S.A. The remaining 50% of these shares are owned by Cristalerias. In addition, Crowpla purchased the necessary assets from Multipack to develop this joint venture. On October 16, 2001, at the General Extraordinary Shareholders Meeting of Crowpla, the shareholders agreed to change the Company's name to "ENVASES CMF S.A." ("CMF"). As a result of the previously described asset purchase, an unrealized gain of ThCh$1,328,855 was generated, which will be recorded over the remaining useful life of property, plant and equipment sold to CMF. On April 1, 2000, the Company terminated the Salucao Pet joint venture entered into with Continental Pet Technology, which resulted in the spin out of certain assets and liabilities to Continental Pet Technology, such that Solucao Pet Ltda. ("Solucao") became 100% owned by Andina Bottling Investment. F-7 In October, 2000, the subsidiaries in Brazil controlled by the operating subsidiary, Rio de Janeiro Refrescos Ltda. ("Refrescos"), were transferred and merged, resulting in the absorption of the companies Solucao and Transportes Landa Rio Ltda. Subsequently Refrescos merged with Brazilian Copa Participacoes Ltda., with Refrescos becoming the surviving company. On November 30, 1999, the Board of Directors of Andina agreed to modify the organizational structure of the Company, and subsequently, the administration of foreign subsidiaries in order to take advantage of additional operating and non-operating efficiencies. The restructuring was implemented in two phases: The first phase consisted of: 1. The merger of the Company's two Argentine subsidiaries, Inversiones del Atlantico S.A. ("IASA") and Embotelladora del Atlantico S.A. ("EDASA"), forming a single entity with the name EDASA; 2. The disolution of the Uruguayan investment subsidiary, Inversora Perlock S.A.; 3. The receipt of shares in the subsidiary, Complejo Industrial PET S.A. from IASA to liquidate a receivable due from IASA from a previously irrevocable capital contribution; and 4. The acquisition of Solucao Brazilian packing operations through the purchase of 50% of the outstanding shares of Solucao from Andina's subsidiary, Envases Multipack S.A. In the second phase, Andina transferred the ownership of the following foreign subsidiaries to Andina Bottling Investments S.A. (previously EASA Chile S.A.): 1. Andina's majority interest in EDASA and companies in which EDASA was a shareholder, i.e. Cican S.A. (Argentina); 2. The Brazilian investment company, Brazilian Copa Participacoes Ltda. ("BCP"), and companies in which BCP was a shareholder, i.e. Refrescos and its subsidiaries; 3. The Uruguayan investment subsidiary, The Sterling Pacific Corp. ("Sterling"); and 4. Andina's majority shareholder interests in overseas bottling operations, Complejo Industrial Pet S.A. in Argentina and Solucao in Brazil. The reorganization process was completed in December 1999. The unrealized gains/(losses) between Andina and its subsidiaries from transactions occurring during the reorganization have been eliminated from the Company's financial statements. Acquisitions: As discussed in Note 10, in March 2000 the indirect subsidiary Refrescos purchased through a share exchange a new franchise for the sale of carbonated drinks, beer, and mineral water throughout the northern territory of the state of Rio de Janeiro, Espiritu Santo, and the southern part of the state of Minas Gerais previously owned by Nitvitgov Refrigerantes S.A. ("Nitvitgov") for a total of US$ 75 million. Subsequently, on May 23, 2000, the shareholders authorized Refrescos to incorporate Nitvitgov, which in addition owned 25% of Centralli Refrigerantes S.A. The franchise authorizes the production, sale, and distribution of products under The Coca-Cola Company trademark in the above-mentioned territories. F-8 Accounting policies: The significant accounting policies of the Company are as follows: a) General The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in Chile ("Chilean GAAP") and regulations established by the SVS. The accompanying financial statements reflect the consolidated results of operations of Andina and its subsidiaries. All significant intercompany transactions have been eliminated. The Company consolidates the financial statements of the companies in which it controls a majority of voting shares or has the ability, direct or indirect, to direct the management and policies of the company. The Company owns, directly or indirectly in excess of 99.5% of the shares of all of its subsidiaries. The preparation of financial statements in conformity with Chilean GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. b) Constant currency restatement The financial statements of the Company have been price-level restated in order to reflect the effects of changes in the purchasing power of the Chilean currency during each year. All non-monetary assets and liabilities and all income statement accounts have been restated to reflect the changes in the Chilean consumer price index from the date of acquisition, incurrence or occurrence to the end of the year. The restatements were calculated using the official consumer price index of the National Institute of Statistics (the "CPI") and were based on the "prior month rule", pursuant to which the inflation adjustments are based on the CPI at the close of the month preceding the close of the respective period or transaction. This index is considered by the business community, the accounting profession and the Chilean government to be the index that most closely complies with the technical requirement to reflect the variation in the general level of prices in the country and, consequently, is widely used for financial reporting purposes in Chile. The values for the CPI used for price-level restatement purposes are as follows: Change over Previous Index November 30 ---------- ------------ % November 30, 1999 102.04 2.6 November 30, 2000 106.82 4.7 November 30, 2001 110.10 3.1 F-9 By way of comparison, the values for the CPI at each year end are as follows: Change over Previous Index December 31 ---------- ------------ % December 31, 1999 102.31 2.3 December 31, 2000 106.94 4.5 December 31, 2001 109.76 2.6 The above-mentioned price-level restatements do not purport to represent appraisal or replacement values and are only intended to restate all non-monetary financial statement components in terms of local currency of a single purchasing power and to include in the net result for each year the gain or loss in purchasing power arising from the holding of monetary assets and liabilities exposed to the effects of inflation. Assets and liabilities that are denominated in index-linked units of account are stated at the year-end values of the respective units of account. The principal index-linked unit used in Chile is the UF that changes daily to reflect the changes in the CPI. Many of the Company's investments are linked to the UF unit. As the Company's indexed liabilities exceed its indexed assets, the increase in the index results in a net loss on the indexation in 2001, (net loss on indexation in 2000 and a net gain on indexation 1999). Values for the UF are as follows (historical pesos per UF): Ch$ ----------- December 31, 1999 15,066.96 December 31, 2000 15,769.92 December 31, 2001 16,262.66 All amounts in the financial statements and notes are expressed in Chilean pesos of December 31, 2001 purchasing power, unless otherwise stated. For comparative purposes, the 1999 and 2000 financial statements, and the amounts disclosed in the related footnotes, have been restated in terms of Chilean pesos of December 31, 2001 purchasing power. This updating does not change the prior year's statements or information in any way except to update the amounts to Chilean pesos of similar purchasing power. c) Assets and liabilities in foreign currency Assets and liabilities denominated in foreign currencies were translated into Chilean pesos at the exchange rates reported by the Central Bank of Chile as follows: Exchange rates at December 31, -------------------------------------- Currency 2000 2001 ----------------- ---------- ---------- Ch$ Ch$ U.S. dollar 573.65 654.79 Pesos (Argentina) 573.65 385.17 Reales (Brazil) 293.37 282.19 F-10 d) Time deposits and marketable securities Time deposits are shown at cost plus price-level restatements and accrued interest, which approximates market value. Marketable securities relate to units in mutual funds which are stated at redemption value at the end of each year. Fixed income securities are valued at purchase cost plus accrued interest and price-level restatements at year-end. e) Allowance for doubtful accounts The allowance for doubtful accounts consists of a general provision determined on the basis of the aging of debts and additional allowances for specific customers where collection is doubtful. In the opinion of the Company's management, the allowances are reasonable and the net balances are recoverable. f) Inventories Inventories are stated at purchase and/or production cost, adjusted for price-level restatements and are computed under the average cost method. Provisions are made for obsolescence on the basic of turnover of raw materials and finished products. The stated values of inventories do not exceed their estimated net realizable value. g) Recoverable taxes Recoverable taxes represent a net account receivable for value-added taxes on purchases and sales. h) Income taxes and deferred income taxes The Company has recognized its current tax obligations in conformity with current legislation. The effects of deferred income taxes arising from temporary differences between the basis of assets and liabilities for tax and financial statement purposes are recorded on the basis of the enacted tax rate that is in effect and the estimated date of reversal, in conformity with Technical Bulletin Nos. 60 and 71 issued by the Chilean Institute of Accountants. Previously unrecorded deferred income taxes at January 1, 2000 are recognized in income as the temporary differences reverse. Until December 31, 1999, deferred income taxes were recorded on the basis of timing differences at year end that were not going to be offset by new timing differences, arising from the same item, between tax and financial results. i) Property, plant and equipment and depreciation Property, plant and equipment are carried at cost plus price-level restatements less accumulated depreciation. Expenditures for significant improvements, or replacement parts, which extend the useful life of an asset for more than one year are capitalized, while maintenance and repair costs are charged to operations as incurred. Gains and losses arising from normal retirement and disposal of property, plant and equipment are reflected in "Other non-operating income and expense". F-11 Property, plant and equipment to be disposed of are valued at the lower of the net realizable value and book value, based on independent appraisals. Unrealized losses are reflected in the consolidated statement of income under "Other non-operating expense". During 1979, the SVS authorized a technical appraisal of certain property, plant and equipment, which is shown under the heading "Technical reappraisal of property, plant and equipment". Depreciation expense, amounting to ThCh$ 42,457,418, ThCh$ 41,779,491 and ThCh$ 40,706,602 for 1999, 2000 and 2001, respectively, is determined by the straight-line method based on the estimated useful lives of the revalued assets, which are as follows: Years -------------- Buildings and improvements 25-60 Machinery and equipment 10 Containers 2-5 Other 1-10 j) Containers Containers kept at plants and warehouses, as well as bottles and plastic containers held by third parties, are stated at cost plus price-level restatements, net of depreciation. Broken bottles or spoiled containers at warehouses or plants are expensed in each accounting period. k) Deposits for containers The liability for deposits for containers in circulation is estimated based on the number of bottles in circulation and the weighted average deposit value per bottle. This liability is presented under "Other long-term liabilities" considering that the number of new bottles in circulation during a year is higher than the number of bottles returned during the same period. l) Computer software Software currently in use corresponds to computer packages purchased from third parties and programs developed internally. Software purchased from third parties is capitalized and amortized over a maximum period of four years. Disbursements incurred for computer system development and for the use of Company resources are charged to expense. m) Investments in related companies Investments in companies in which the Company's participation exceeds 10% but is less than 50% are accounted for using the equity method. The Company's proportionate share in net income and loss of related companies is recognized in "Other non-operating income and expense" in the consolidated statements of income, after eliminating any unrealized profits or losses from transactions between related companies. Investments in which the participation is below 10% are accounted for at cost plus price-level restatements. F-12 n) Intangibles Intangibles include franchise rights and licenses that are amortized over the terms of the contracts, not in excess of 20 years. o) Goodwill The Company has classified the cost in excess of fair value of the net assets of companies acquired in purchase transactions as goodwill. Goodwill generated on acquisitions is amortized on a straight-line basis over 20 years. Amortization of goodwill amounted to ThCh$ 4,515,483, ThCh$ 6,301,251 and ThCh$ 10,713,326 for the years ended December 31, 1999, 2000 and 2001, respectively. p) Transactions under resale agreements Purchases of securities under resale agreements are recorded at cost. Applicable interest is recorded as financial income using the straight-line method on an accrual basis. q) Issuance costs The issuance and placement costs of bonds are shown in "Other current assets" and "Other long-term assets" and are being amortized on a straight-line basis over the life of the respective instruments. Costs include legal, reports on risk classification, printing, and commissions on issuance and are presented net of accumulated amortization. r) Claims for recovery Claims for recovery represent contractual rights for recovery of contingent losses from one of the former owners of the Company's Brazilian bottling subsidiary, Refrescos. Such losses pertain to labor, tax and other matters that are the subject of legal proceedings for which the former owners have accepted responsibility, including the cost of conducting appropriate legal defenses. The claims for recovery are recognized in the full amount of the accrual for losses and contingencies, which is less than the amounts of guarantees provided by the former owners. s) Bonds payable Bonds payable includes placement of Yankee Bonds in the US markets and placement of bonds in UF in Chile, which are carried at par value. The difference in the par value and the proceeds received, the purchase discount, is recorded as a deferred asset. This asset is amortized using the straight-line method over the term of the respective obligations. t) Staff severance indemnities The Company has recorded a liability for long-term service indemnities in accordance with the collective bargaining agreements entered into with its employees in Chile. The indemnity is payable to employees at the rate of one full month's salary for every year of service with the Company. This liability is shown at the present value of the accrued benefits which was calculated by applying a real discount rate of 7% per annum to the benefit accrued as of the end of the year over an average future service period of 15 years. F-13 u) Sales recognition The Company records sales revenue based on the physical delivery of finished products to its clients, in accordance with Technical Bulletin No. 70 issued by the Chilean Institute of Accountants. v) Franchise incentives The Coca-Cola Company, at its sole discretion, provides the Company with various benefits and incentives, including advertising and promotional support. The amounts received from The Coca-Cola Company for such support are included within the captions that compose operating income, depending on the nature of the support given. w) Derivative transactions The Company enters into forward and swap contracts to cover the risk of exposure to exchange rate differences on liabilities denominated in United States dollars. These hedge instruments are recorded at their market values at the closing date of the financial statements. Unrealized losses are recognized as a charge to income and gains are deferred and included in other liabilities (current or long-term) until realized. Hedge contracts for anticipated transactions are recorded at market value and their changes in value are accounted for as unrealized gains or losses. Upon contract expiration, the deferred gains and losses are recorded in income. x) Translation of financial statements in foreign currencies The financial statements of the non-Chilean subsidiaries of Andina have been converted to Chilean pesos in accordance with Technical Bulletin No. 64, "Accounting for Investments Abroad", of the Chilean Institute of Accountants for the years ended December 31, 1999, 2000 and 2001. Assets and liabilities from these investments are translated into Chilean pesos at the year end exchange rate, except that non-monetary assets and liabilities and shareholders' equity are first expressed at their equivalent value in historical US dollars. Income and expense items are first translated into US dollars at the average exchange rate during the month. y) Cash flows For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with a remaining maturity of less than three months at the closing date of the financial statements, including securities purchased under resale agreements, to be cash equivalents. Cash flows from operating activities include all business-related cash flows as well as interest paid, financial income and, in general, all cash flows not defined as from financing or investing activities. The operating concept used in this statement is broader than that in the consolidated statement of income. z) Reclassifications Certain balances from prior years have been reclassified to conform with current year presentation. F-14 aa) Translation to U.S. dollars (Unaudited) The Company maintains its accounting records and prepares its financial statements in Chilean pesos. The U.S. dollar amounts disclosed in the accompanying financial statements are presented solely for the convenience of the foreign reader at the December 31, 2001 closing exchange rate of Ch$ 654.79 per US$ 1.00. No representation is made that the Chilean peso amounts could have been, or could be, converted into U.S. dollars at that rate or at any other rate. NOTE 2 - CHANGES IN ACCOUNTING PRINCIPLES ----------------------------------------- Effective January 1, 2000, the Company began applying Technical Bulletin No. 60 of the Chilean Institute of Accounts concerning deferred income taxes. This bulletin requires the recognition of deferred income taxes for all temporary differences, whether recurring or not, using an asset and liability approach. This change resulted in a net credit to income of ThCh$ 3,685,320 during the year ended December 31, 2000. The cumulative effect of this accounting change for years prior to 2000 resulted in the recognition of a net deferred tax asset and an offsetting liability of ThCh$ 1,788,172 at January 1, 2000. The liability and the asset are being offset over the projected period of reversal of such temporary differences without affecting net income. However, there will be an effect on future results arising from the recognition of the reversal of the temporary differences in the current income tax provisions of such periods. NOTE 3 - TIME DEPOSITS ---------------------- Time deposits, at each year-end were as follows: At December 31 ----------------------------------------------- 2000 2001 ----------------- ------------------ ThCh$ ThCh$ Foreign currency deposits 149,771,469 18,171,362 ----------- ---------- Total 149,771,469 18,171,362 =========== ========== NOTE 4 - MARKETABLE SECURITIES ------------------------------ Marketable securities at each year-end were as follows: At December 31 ----------------------------------------------- 2000 2001 ----------------- ------------------ ThCh$ ThCh$ Units in mutual funds 15,727,118 25,574,151 ----------- ---------- Total 15,727,118 25,574,151 =========== ========== F-15 NOTE 5 - RECEIVABLES -------------------- Receivables (net) at each year-end consisted of the following: At December 31 --------------------------------------- 2000 2001 -------------- ---------------- ThCh$ ThCh$ Trade accounts receivables 40,328,312 30,151,179 Notes receivables 16,204,892 14,428,072 Miscellaneous accounts receivables 7,000,876 16,662,107 Allowance for doubtful accounts (5,301,466) (3,352,347) ---------- ---------- Accounts receivable (net) 58,232,614 57,949,011 ========== ========== Notes receivable consisted primarily of post-dated checks. Miscellaneous accounts receivable consisted primarily of advance payments made to suppliers and amounts due from employees. Gross balances oustanding for more than 90 days but less than one year were ThCh$ 8,279,720 and ThCh$ 5,203,105 at December 31, 2000 and 2001, respectively. The Company's bad debt expense totaled ThCh$ 1,458,001 in 1999, ThCh$ 506,163 in 2000, and ThCh$ 1,114,908 in 2001. NOTE 6 - INVENTORIES -------------------- Inventories at each year-end consisted of the following: At December 31 --------------------------------------- 2000 2001 -------------- ---------------- ThCh$ ThCh$ Finished products 10,325,101 9,331,754 Products-in-process 1,396,766 56,889 Raw materials 12,719,308 7,225,199 Raw materials in-transit 501,175 711,495 ---------- ---------- Total 24,942,350 17,325,337 ========== ========== Provisions for obsolescence totaled ThCh$ 573,480 and ThCh$ 318,328 at December 31, 2000 and 2001, respectively. F-16 NOTE 7 - OTHER CURRENT ASSETS ----------------------------- Other current assets at each year-end were as follows: At December 31 --------------------------------------- 2000 2001 -------------- ---------------- ThCh$ ThCh$ Supplies 3,663,608 2,404,680 Financial instruments subject to repurchase agreements (*) 1,155,968 1,596,065 Prepaid expenses 2,579,112 2,830,587 Other 1,138,134 1,359,828 ---------- ---------- Total 8,536,822 8,191,160 ========== ========== ______________ (*) Represents interest bearing time deposits with remaining maturities of less than 30 days. F-17 NOTE 8 - DERIVATIVES -------------------- There were no forward contracts outstanding as of December 31, 2000. The Company had the following foreign currency forward purchase contracts at December 31, 2001:
Fair value at Purchase Notional Maturity December 31, Bank date Currency amount date Currency 2001 ------------------------ --------- -------- ------------- ---------- -------- -------------- ThCh$ ThCh$ Deutsche Bank 11/26/2001 US$ 3,249,216 01/15/2002 Ch$ (106,224) Deutsche Bank 11/26/2001 US$ 3,384,600 02/14/2002 Ch$ (110,650) Deutsche Bank 11/27/2001 US$ 4,099,749 03/14/2002 Ch$ (105,530) Deutsche Bank 11/27/2001 US$ 2,889,987 04/16/2002 Ch$ (74,390) Deutsche Bank 11/27/2001 US$ 2,688,360 05/15/2002 Ch$ (69,200) Deutsche Bank 11/27/2001 US$ 2,486,733 06/13/2002 Ch$ (64,010) Deutsche Bank 12/04/2001 US$ 2,523,807 07/16/2002 Ch$ (101,084) Deutsche Bank 12/04/2001 US$ 3,205,917 08/13/2002 Ch$ (128,404) Deutsche Bank 12/04/2001 US$ 2,455,596 09/17/2002 Ch$ (98,352) Deutsche Bank 12/10/2001 US$ 1,140,088 09/17/2002 Ch$ (26,945) Pactual Bank 08/03/2001 US$ 1,834,145 01-02-2002 R$ (251,749) Pactual Bank 08/15/2001 US$ 2,617,067 06/27/2002 R$ (344,656) Citibank 11/08/2001 US$ 1,086,951 02-01-2002 R$ -- Citibank 11/08/2001 US$ 2,903,339 03-01-2002 R$ -- Santander Bank 11/09/2001 US$ 2,830,002 04-01-2002 R$ (346,282) Bank Boston 11/19/2001 US$ 2,643,387 05-02-2002 R$ (273,159) Bradesco Bank 11/19/2001 US$ 2,403,079 06-03-2002 R$ (245,372) Bradesco Bank 11/19/2001 US$ 2,122,829 07-01-2002 R$ (216,211) Bradesco Bank 11/27/2001 US$ 1,566,258 08-01-2002 R$ (120,663) Itau Bank 11/27/2001 US$ 1,666,441 09-02-2002 R$ (136,083) Itau Bank 12/04/2001 US$ 1,765,314 10-01-2002 R$ (143,507) Pactual Bank 12/04/2001 US$ 1,890,379 11-01-2002 R$ (103,430) Citibank 12/04/2001 US$ 1,965,680 12-02-2002 R$ (107,343) Pactual Bank 12/04/2001 US$ 2,627,017 01-02-2003 R$ (142,887) Pactual Bank 12/19/2001 US$ 2,823,464 12/27/2002 R$ 32,310 ------------ ----------- Total 60,869,405 (3,283,821) ============ ===========
Under Chilean GAAP, in accordance with Technical Bulletin No. 57, "Accounting for Derivative Contracts", certain of these forward contracts have been designated as hedges of forecasted transactions. The fair value of these contracts represent a loss of ThCh$ 884,789 that has been deferred until the contracts are settled as allowed by Chilean GAAP. The remaining contracts that are not designated as hedges of forecasted transactions have been valued at fair value with changes in fair value totaling ThCh$ 2,399,032 being recognized in the income statement under the "Financial Expense" caption. F-18 NOTE 9 - PROPERTY, PLANT AND EQUIPMENT -------------------------------------- a) Land, buildings and improvements and machinery and equipment at each year-end were as follows: At December 31 ---------------------------------------- 2000 2001 ThCh$ ThCh$ Land 14,822,116 15,496,623 Buildings and improvements 91,670,912 96,931,734 Machinery and equipment 258,799,186 232,401,564 ----------- ----------- Total 365,292,214 344,829,921 =========== =========== Accumulated depreciation 156,263,333 164,012,196 =========== =========== b) Other property, plant and equipment at each year-end were as follows: At December 31 ---------------------------------------- 2000 2001 ThCh$ ThCh$ Containers 82,785,139 93,169,224 Furniture, tools and implements 26,079,307 25,503,436 Marketing and displays 33,904,262 38,643,325 Vehicles and other fixed assets 12,053,115 13,992,475 ----------- ----------- Total 154,821,823 171,308,460 =========== =========== Accumulated depreciation 115,536,188 136,027,984 =========== =========== c) Technical reappraisal of property, plant and equipment: This item represents the increase in value of property, plant and equipment resulting from a technical reappraisal made by the Company in 1979 under SVS regulations. Technical reappraisal at each year-end was as follows: At December 31 --------------------------------------- 2000 2001 ThCh$ ThCh$ Land 1,218,566 1,218,566 Buildings and improvements 168,963 168,963 Machinery and equipment 435,627 435,627 ---------- ---------- Total 1,823,156 1,823,156 ========== ========== Accumulated depreciation 502,295 510,823 ========== ========== F-19 NOTE 10 - INVESTMENTS IN RELATED COMPANIES, GOODWILL AND INVESTMENTS IN OTHER COMPANIES At December 31 ------------------------------- 2000 2001 ThCh$ ThCh$ Investments in equity of related companies 7,062,828 18,404,997 =========== =========== Goodwill (net) 108,729,886 111,264,249 =========== =========== Investments in other companies 376,160 671,902 =========== =========== a) Investments in related companies: Information concerning investments in related companies was as follows:
Ownership percentage at Investment value at December 31, December 31, Participation in net income ----------------------- ---------------------- --------------------------------------- 2000 2001 2000 2001 1999 2000 2001 ---- ---- ---- ---- ---- ---- ---- % % ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Envases CMF S.A. (1) -- 50.00 -- 12,981,295 -- -- 29,373 Cican S.A. 15.20 15.20 2,734,640 2,728,939 252,458 92,320 (298,648) Kaik Participacoes S/C Ltda. 11.31 11.31 2,144,532 1,461,808 298,984 (835,753) (489,572) Envases Central S.A. 48.00 48.00 1,624,152 1,232,955 (190,824) (182,627) (384,414) Agromax S.A. (2) 48.62 48.62 499,890 -- -- -- (13,783) Centralli Refrigerante S.A. (3) 25.00 25.00 59,614 -- -- (328,679) (208,765) Ruscor Refrigerantes S.A. (4) 50.00 -- -- -- -- (64,468) -- --------- ---------- -------- ---------- ---------- Total 7,062,828 18,404,997 360,618 (1,319,207) (1,365,809) ========= ========== ======== ========== ========== _______________ (1) As discussed in Note 1), this corresponds to the joint venture between the Company and Cristalarias de Chile that was formed on June 29, 2001. (2) At December 31, 1999 and 2000, this investment was shown at cost plus price-level restatement. The effect of not recognizing the participation in net income for 1999 and 2000 was considered to be immaterial by the Company's management. In 2001, the Company was valued using the equity method. Agromax S.A. had negative equity in 2001. (3) Centralli Refrigerante S.A. had negative equity in 2001. (4) On February 29, 2000, Refrescos made a cash investment for 50% of the shares of Ruscor Refrigerantes S.A., which owned 100% of the shares of Nitvitgov. On March 30, 2000, 50% of the shares of Ruscor Refrigerante S.A. owned by Refrescos were exchanged for all of the shares of Nitvitgov, as a result of which Refrescos became the direct owner of Nitvitgov. In addition, Nitvitgov has a 25% interest in Centralli Refrigerante S.A.
F-20 b) Goodwill: The detail of goodwill at each year-end was as follows:
At December 31 ------------------------------------------- 2000 2001 ---- ---- ThCh$ ThCh$ Rio de Janeiro Refrescos Ltda. 19,594,691 19,891,378 Complejo Industrial Pet S.A. (1) 1,538,835 -- Nitivitgov Refrigerantes 39,263,015 41,213,938 Embotelladora del Atlantico 47,301,277 48,937,918 Sociedad de Inversiones Libertador Bernardo O'Higgins 1,032,068 1,221,015 ------------- ------------- Total 108,729,886 111,264,249 ============= ============= ________________ (1) In 2001, the total balance of Goodwill generated from the purchase of Complejo Industrial Pet S.A was charged to income.
As outlined in Note 1, the investment in Envases CMF S.A. generated goodwill which was fully amortized, considering the income generated by Envases Multipack S.A. from the sale of property, plant and equipment to the former company. Accumulated amortization was ThCh$ 40,345,760 and ThCh$ 51,059,086 at December 31, 2000 and 2001, respectively. c) Transactions with related companies: F-21
Amount of transaction for the Type of year ended December 31, Company Relation transaction 1999 2000 2001 --------------------- --------------------- --------------------- ------------- ------------ ------------ ThCh$ ThCh$ ThCh$ Envases Central S.A. Equity investee Sales ----- Raw materials 1,627,746 1,232,853 1,062,554 Services and other 3,142 1,896 2,548 Purchases --------- Finished products 9,276,541 8,650,982 8,371,814 Services and other 2,254 3,901 34,743 Commercial accounts ------------------- Loans given -- 1,162,865 801,720 Loans received -- 1,165,620 827,218 Interest received -- 57,188 -- Coca-Cola de Chile S.A. Related company (1) through shareholders Sales ----- Advertising 4,902,628 4,431,037 2,242,974 Other 395 3,327 -- Purchases --------- Concentrate 32,219,863 30,769,724 36,651,974 Advertising 975,616 2,796,964 285,322 Coca-Cola de Argentina Related company S.A. (1) through shareholders Purchases --------- Concentrate 29,618,664 19,266,972 13,698,844 Advertising 205,474 115,564 -- Coca-Cola Industrias Related company Ltda. CCIL (Brazil) through shareholders Purchases --------- Concentrate 13,370,664 18,761,624 -- Advertising -- -- 13,288,400 Recofarma industrias do Related company Amazonas Ltda. (Brazil) through shareholders Purchases --------- Concentrate -- -- 25,081,921 Cervejarias Kaiser S.A. Equity investee (Brazil) Sales ----- Finished products 2,590,729 4,479,814 4,614,844 Advertising -- -- 1,668,374 Centralli refrigerantes Equity investee S.A. (Brazil) Purchases --------- Finished products -- -- 2,638,416 Cican S.A. (Argentina) Equity investee Purchases --------- Finished products 9,215,075 6,784,494 6,492,260 F-22 Amount of transaction for the Type of year ended December 31, Company Relation transaction 1999 2000 2001 --------------------- --------------------- --------------------- ------------- ------------ ------------ ThCh$ ThCh$ ThCh$ Envases CMF S.A. Equity investee Sales ----- Services rendered -- -- 264,591 Purchases --------- Raw materials -- -- 8,456,971 Services received -- -- 170,991 Envases Italprint S.A. Director in common Purchases --------- Raw materials 701,408 868,373 989,046 Fixed assets -- 2,729 -- Envases del Pacifico S.A Director in common Purchases --------- Raw materials -- 11,710 -- Labels -- 712,598 301,160 Other -- 722 1,663 Parque Arauco S.A. Director of Andina, owns 10% or more of Publicity space the capital rentals 37,706 48,934 34,571 Asesorias e Inversiones Director in common Rupanco Ltda. Financial adviser 241,866 79,079 -- Claudio Cabrera B. Subsidiary manager Consulting 20,268 18,949 Inversiones Freire Ltda. Majority shareholder Expense reimbursement -- 10,117
F-23 d) Amounts receivable and amounts payable with related companies:
Short Term At December 31, 2000 At December 31, 2000 Company Receivable Payable Receivable Payable ------------------------------------ ------------ ------------- ------------- ------------- ThCh$ ThCh$ ThCh$ ThCh$ Coca-Cola de Chile S.A. (1) -- 3,684,497 -- 2,756,520 Inversiones Freire Ltda. 25,810 -- -- -- Envases Central S.A. (2) -- 247,010 -- 709,577 Kaiser (2) -- 166,052 48,524 -- Recofarma Industrias -- -- 720,643 -- Do Amazonas Ltda.(2) -- 2,766,153 -- 2,320,405 Coca-Cola (Argentina) (2) -- 1,541,873 -- 3,724,786 Coca-Cola (Brazil) (2) -- 1,036,788 -- 1,526,442 Centralli Refrigerante S.A. (2) -- 181,827 -- 218,399 Envases del Pacifico S.A. (2) -- 199,972 -- 18,236 Envases Italprint S.A. -- 382,258 -- 273,368 Envases CMF S.A. -- -- 632,928 -- ECPG Net Inc -- -- 10,886 -- Cican S.A. (Argentina) (2) -- 1,040,406 -- 586,256 ----------- ----------- ----------- ----------- Total 25,810 11,246,836 1,412,981 12,133,989 =========== =========== =========== ===========
Long Term Company At December 31, 2000 At December 31, 2000 Company Receivable Payable Receivable Payable --------------------------------------- ------------ ------------- ------------- ------------- ThCh$ ThCh$ ThCh$ ThCh$ Coca Cola (Chile) 26,415 -- 55,713 -- Centralli Refrigerante S.A. (2) 120,984 -- 75,627 -- Coca Cola (Brazil) (2) -- 209,001 -- -- ----------- ----------- ----------- ----------- Total 147,399 209,001 131,340 -- =========== =========== =========== =========== _______________ (1) Reflects shared advertising expenses with Coca-Cola. (2) Payable resulting from purchase of finished products.
F-24 NOTE 11 - OTHER LONG-TERM ASSETS: -------------------------------- Other assets at each year-end were as follows:
At December 31 ------------------------------------------- 2000 2001 -------------- -------------- ThCh$ ThCh$ Yankee bonds: Endesa 12,191,819 16,864,519 Compania Manufacturera de Papeles y Cartones S.A. -- 6,859,099 Compania de Telefonos de Chile -- 14,725,308 Celulosa Arauco Constitucion -- 16,596,915 Chilgener S.A. -- 16,248,970 Banco Santiago S.A. -- 9,668,491 Enersis S.A. -- 10,085,690 Bundes Bank -- 9,275,668 Banco Sudamericano -- 3,469,427 Petroleos Mexicanos -- 7,182,366 Telefonos de Mexico S.A. -- 3,568,189 Cemex S.A. -- 4,199,679 Bono soberano Argentina -- 667,886 Empresa Electrica Pehuenche S.A. -- 6,730,847 Time deposit - Deutsche Bank AG. -- 53,935,238 Deferred bond issuance costs and bond discounts 3,497,329 4,362,857 Deferred charges 3,040,927 2,377,889 Non-operating fixed assets 2,402,573 1,507,841 VAT (Argentina) 1,572,169 1,217,995 Claims for recovery and others (*) 5,172,683 1,696,208 ----------- ------------- Total 27,877,500 191,241,082 =========== ============= _______________ (*) Includes claims for recovery for the acquisition of Refrescos amounting to ThCh$ 3,105,025 and ThCh$ 834,857 at December 31, 2000 and 2001, respectively. These claims for recovery relate to the terms of the purchase of Refrescos by the Company under which the Company has guarantees in an aggregate amount of approximately US$ 50.0 million (ThCh$ 32,739,500) from Confab S.A. ("Confab"), one of the prior owners of Refrescos in connection with the accrual for losses and contingencies shown in Note 19. At December 31, 2000 and 2001, these guarantees consist of letters of credit from a major Brazilian commercial bank in the amount of US$ 6.3 million and US$ 1.3 million, respectively, subject to being increased up to US$20 million at the request of the Company, and a mortgage on real estate of Confab valued at approximately US$ 30.0 million by a recognized independent appraiser. As of the date of acquisition of Refrescos in 1994, the loss accruals for the contingencies amounted to a total of ThCh$ 12,298,004, all of which were recorded as claims for recovery under the terms of such purchase. See Note 19.
F-23 NOTE 12 - BANK LIABILITIES -------------------------- a) Short-term bank liabilities: The weighted-average annual interest rates on short-term borrowings (including short-term lines of credit) outstanding at December 31, 2000 and 2001 were 10.09% and 3.95%, respectively. At December 31, 2000 and 2001, the Company had approximately Ch$ 115,743 million and Ch$ 102,686 million, respectively, available through short-term lines of credit. The aggregate used portion of the lines of credit at December 31, 2000 and 2001 was approximately Ch$ 8,094 million and Ch$ 9,472 million, respectively. b) Long-term bank liabilities consist of loans in Brazilian reales and U.S. dollars, the terms of which were as follows: Terms ----------------------------- Lenders Various banks Payments of interest Semiannually in arrears Weighted average interest rate 6.88% per annum The long-term bank liabilities outstanding at each year-end were as follows: At December 31 ------------------------------------------ 2000 2001 -------------- -------------- ThCh$ ThCh$ Long-term bank loans. 4,672,262 62,523,305 Less: Current portion (1,369,891) (7,189,897) ----------- ------------- Total long-term portion 3,302,371 55,333,408 =========== ============= Scheduled maturities of the long-term bank liabilities at December 31, 2001 were as follows: Maturing during the year ending December 31, 2001 ---------------------------- ---------------- ThCh$ 2003 462,173 2004 202,202 2005 1,557,942 2006 53,111,091 ----------- Total 55,333,408 =========== F-26 NOTE 13 - BONDS PAYABLE ----------------------- a) At December 31, 2000 and 2001, the balance of bonds payable, amounting to ThCh$ 162,305,613 and ThCh$ 148,180,457, respectively, was recorded at par value and was classified as follows:
At December 31 ----------------------------------------- 2000 2001 ------------- ------------- ThCh$ ThCh$ Current portion of bonds payable: Bonds payable in foreign countries 2,914,379 598,530 Bonds payable in local market -- 593,909 ----------- ------------- Total current portion of bonds payable 2,914,379 1,192,439 =========== ============= Long-term bonds payable: Bonds payable in foreign countries 159,391,234 33,149,398 Bonds payable in local market -- 113,838,620 ----------- ------------- Total long-term bonds payable 159,391,234 146,988,018 =========== ============= Total bonds portion 162,305,613 148,180,457 =========== =============
The deferred bond issuance costs and bond discounts are included in "Other assets" and are amortized on a straight-line-basis over the life of the respective bond. Amortization is presented as a financial expense. Accrued interest amounted to ThCh$ 2,914,379 and ThCh$ 1,192,439 at December 31, 2000 and 2001 and represents the current portion payable. b) The terms and conditions of the bonds outstanding at December 31, 2001 were as follows: Bonds payable in foreign countries ----------------------------------
Series A Series B Series C ---------------------- -------------------- ---------------------- Issue date October 3, 1997 October 3, 1997 October 3, 1997 Amount of issuance US$ 150,000,000 US$ 100,000,000 US$ 100,000,000 Basis of readjustment No adjustment No adjustment No adjustment Amortization term 10 years 30 years 100 years Principal payments Due October 1, 2027 Due October 1, 2027 Due October 1, 2097 Annual interest rate 7.000% 7.625% 7.875% Interest payments Semiannually Semiannually Semiannually Covenants applicable to the issue None None None
In 2000 and 2001, the indirect subsidiary of Andina located in Uruguay, The Sterling Pacific Corp S.A., repurchased series C bonds in the market for US$ 29,500,000 (US$ 60,500,000 in 2000), series B bonds for US$ 76,000,000 (US$ 20,000,000 in 2000) and series A bonds for US$ 113,374,000, which are shown net of the long-term liabilitiy under Bonds payable. F-27 As a result of the favorable difference of bond purchase rates, a net non-operating income was generated of ThCh$ 3,658,988 (ThCh$ 8,168,539 in 2000), net of the proportional issuance expenses amounting to ThCh$ 3,824,215 (US$ 2,061,999 in 2000). Bonds payable in local market ----------------------------- Series A Series B ------------------- ------------------ Issue date June 1, 2001 June 1, 2001 Amount of issuance UF 3,300,000 UF 3,700,000 Basis of readjustment No adjustment No adjustment Amortization term 7 years 25 years Principal payments Due June 1, 2008 Due June 1, 2026 Annual interest rate 6.200% 6.500% Interest payments Semiannually Semiannually Covenants applicable to the issue See Note 19 c) See Note 19 c) NOTE 14 - OTHER ACCRUED LIABILITIES ----------------------------------- Other accrued liabilities at each year-end are as follows: At December 31 ---------------------------------- 2000 2001 -------------- -------------- ThCh$ ThCh$ Other accrued liabilities-short term: Accrued obligations at year-end (1) 8,306,944 8,380,711 Publicity contracts 963,685 1,031,910 Vacation accrual 2,538,132 2,152,330 Staff severance indemnities (2) 436,376 402,126 ----------- ----------- Total 12,245,137 11,967,077 =========== =========== Other accrued liabilities-long term: Staff severance indemnities (2) 1,648,109 2,185,765 Banking taxes 1,096,979 2,072,534 Accrual for labor contingencies 1,704,175 996,344 Others 880,884 953,602 ----------- ----------- Total 5,330,147 6,208,245 =========== =========== _______________ (1) Accrued obligations at year-end include obligations under, bonuses payable to staff, accruals for project expenses and miscellaneous accrued expenses. (2) Amounts charged to the income statements in 1999, 2000 and 2001 were ThCh$ 1,034,238, ThCh$ 1,029,837 and ThCh$ 792,636, respectively. F-28 NOTE 15 - INCOME TAXES ---------------------- a) Tax obligations At December 31, 2001, the Company recorded a provision for income taxes in conformity with current tax regulations amounting to ThCh$ 3,903,459 (ThCh$ 6,092,646 in 2000 and ThCh$ 4,077,952 in 1999). b) Retained profits The balance of the Company's retained tax profits and respective shareholder credit at December 31, 2001 was as follows: Retained profits Tax rate Credit ---------------- -------- --------- ThCh$ % ThCh$ 39,999,525 15 5,999,929 c) Deferred income taxes Deferred income tax balances at December 31, 2000 and 2001 were as follows:
2000 2001 ---------------------------------------------- --------------------------------------------- Assets Liabilities Assets Liabilities ----------------------- --------------------- ----------------------- -------------------- Short Long- Short- Long- Short- Long- Short- Long- Temporary differences -term term term term term term term term --------------------- ----- ---- ---- ---- ---- ---- ---- ---- Allowance for doubtful accounts 722,470 51,050 -- -- 253,677 357,921 -- -- Vacation accrual 147,783 -- -- -- 155,811 -- -- -- Amortization of intangibles -- 108,981 -- -- -- 101,677 -- -- Depreciation of property, plant and equipment -- 921,447 281,772 7,230,158 -- 859,685 221,978 6,509,095 Staff severance indemnities -- -- -- 540,982 -- 766,222 4,597 492,371 Other 91,915 687,757 126,454 -- 458,532 -- 7,884 129,170 Provision for assets written-off 504,083 1,874,289 -- -- -- 3,506,988 -- -- Provision for labor and trade lawsuits -- -- -- -- -- 195,122 -- -- Guarantees on bottles (*) -- -- -- 1,671,900 -- -- -- 2,809,168 Tax loss carry-forwards -- 5,215,397 -- -- -- 17,849,811 -- -- Complementary accounts, net of amortization (183,171) (5,550,372) -- (6,772,873) (130,123) (5,631,558) -- (5,851,538) Valuation allowance -- -- -- -- (15,364,454) -- --------- --------- -------- --------- -------- ---------- -------- --------- Total 1,283,080 3,308,549 408,226 2,670,167 737,897 2,641,414 234,459 4,088,266 ========= ========= ======== ========= ======== ========== ======== ========= ______________ (*) Corresponds to net income recognized on the amortization of liability for deposits in guarantee, in accordance with Official Letter No. 06017 dated October 15, 1999 issued by the SVS.
As described in Note 1 h), the balances of deferred income taxes and related complementary accounts have been adjusted to record the effect of rate changes introduced by the tax reform published in September 2001. This adjustment generated no significant effects on income for the year. As a result of the amortization charge to income for deposits in guarantee in 1999 of ThCh$ 10,327,699, a deferred tax liability amounting to ThCh$ 1,886,507 was also recognized in 1999. F-29 The unamortized offsetting accounts correspond to the accumulated effect of deferred income taxes which were not recorded until January 1, 2000 when Technical Bulletin No. 60 was adopted. These offsetting asset and liability accounts are amortized over the weighted average terms of reversal of the corresponding temporary differences, which are estimated at 5 and 18 years, respectively. d) Effect on income
Year ended December 31, -------------------------------------------------------- 1999 2000 2001 -------------- -------------- --------------- ThCh$ ThCh$ ThCh$ Current income tax expense (4,077,952) (6,092,646) (3,903,459) Deferred income tax (expense) benefit (1,451,859) 3,314,930 12,907,804 Recoverable tax losses 90,674 1,162,472 - Change in valuation allowance - (15,364,454) Other (64,118) (257,159) (850,998) ----------- ------------- -------------- Total income tax expense (5,503,255) (1,872,403) (7,211,107) =========== ============= =============
e) Total income before income taxes and minority interest arising from different geographic sources is as follows:
The Company Year ended December 31, Chile and other Brazil Argentina (Consolidated) ----------------------- --------------- ------------- -------------- ---------------- ThCh$ ThCh$ ThCh$ ThCh$ 1999 42,714,479 (7,548,083) (380,538) 34,785,858 2000 48,630,827 (12,893,103) (1,315,562) 34,422,162 2001 60,820,121 (13,741,203) (6,779,638) 40,299,280
NOTE 16 - DIRECTORS' REMUNERATION --------------------------------- The Board of Directors of the Company received fees of ThCh$ 581,990, ThCh$ 504,813 and ThCh$ 523,081 during the years ended December 31, 1999, 2000 and 2001, respectively. F-30 NOTE 17 - FOREIGN CURRENCY -------------------------- At each year-end, the Company had the following assets and liabilities denominated in US dollars, Brazilian reales, and Argentine pesos, which have been translated into Chilean pesos in accordance with Note 1 c):
2000 2001 ------------------------------------- --------------------------------------- Brazilian Argentine Brazilian Argentine Assets US dollars reales pesos US dollars reales pesos ----------- ----------- ---------- ----------- ------------ ------------ (in thousands) (in thousands) Cash 495 12,519 5,261 704 6,631 15,216 Time deposits 270,321 11,172 -- 27,751 -- -- Marketable securities (net) 22,719 -- -- 26,476 -- -- Receivables (net) 3,700 53,323 26,494 3,374 75,493 20,334 Amounts due from related companies -- -- -- 17 172 1,871 Inventories 55 17,108 15,518 3,861 21,830 7,856 Other current assets 35,500 22,108 24,475 2,418 7,756 9,490 Property, plant and equipment 260,208 -- -- 228,251 -- -- Investments in related companies -- 7,290 5,469 -- 5,180 7,085 Investments in other companies 672 -- -- 1,026 -- -- Goodwill (net) 176,536 -- -- 165,587 -- -- Other long-term assets 33,886 10,751 6,302 277,510 4,328 10,958 ------- ------- ------- ------- ------- ------- Total assets 804,092 134,271 83,519 736,975 121,390 72,810 ======= ======= ======= ======= =======
2000 2001 -------------------------------------- --------------------------------------- Brazilian Argentine Brazilian Argentine Liabilities US dollars reales pesos US dollars reales pesos ------------ ---------- ---------- ------------ ----------- ----------- (in thousands) (in thousands) Obligations with banks and financial institutions 8,757 22,147 3,169 85,498 19,400 27,136 Accounts payable 6,657 38,515 23,790 8,281 40,237 12,559 Provisions 1,135 22,332 8,023 598 26,817 2,410 Bonds 274,428 -- -- 51,540 -- -- Other 5,512 9,392 12,582 3,736 20,289 25,849 -------- -------- -------- -------- -------- -------- Total liabilities 296,489 92,386 47,564 149,653 106,743 67,954 ======== ======== ======== ======== ======== ======== Total net assets 507,603 41,885 35,955 587,322 14,647 4,856 ======== ======== ======== ======== ======== ========
F-31 NOTE 18 - OTHER LONG-TERM LIABILITIES ------------------------------------- Other long-term liabilities are comprised primarily of deposits received for containers, which are accounted for as described in Note 1 k), and accruals for losses of Refrescos arising from contingent liabilities. The amounts outstanding at each year-end were as follows. At December 31, ------------------------------------- 2000 2001 ------------- -------------- ThCh$ ThCh$ Deposits for bottles and cases (a) 8,791,910 7,113,824 Accrual for losses (Refrescos) (b) 3,105,025 834,857 Other long-term liabilities 1,021,668 738,685 ----------- ---------- Total 12,918,603 8,687,366 =========== ========== ______________ a) During 1999, the Company changed its estimate of the liability for guarantees on bottles. Previously, the Company's best estimate of the liability was represented by the historical value of cash received in guarantee for the bottles. In 1999 and in future years, the liability for guarantees on bottles is recorded based on the estimated number of bottles in circulation, determined by way of regular inventories of bottles and by applying a weighted average deposit value per bottle. The revised estimate reflects the reduction in the guarantees corresponding to bottles destroyed in the market or transferred by clients to third parties. The effect of this change was to reduce the liability for guarantees on bottles and to increase "Other non-operating income" in 1999 by ThCh$ 10,327,699 and to recognize a deferred income tax charge of ThCh$ 1,886,507. See Note 22. b) See Note 19 b) NOTE 19 - CONTINGENCIES AND COMMITMENTS --------------------------------------- a) Guarantees Direct guarantees: -----------------
Debtor Assets pledged as collateral --------------------------------------- ---------------------------------------- Balances pending at year end Guarantee creditor Name Relation Guarantee Type Book value 2001 ------------------ ------------------------- ----------- ------------- ------------- ----------- ----------- Uniao Federal Rio de Janeiro Refrescos Subsidiary Warehouse Warehouse 45,827 77,743 Ltda. Estado Rio de Rio de Janeiro Refrescos Subsidiary Letter of Letter of -- 1,140,803 Janeiro Ltda. credit credit Estado Rio de Rio de Janeiro Refrescos Subsidiary Letter of Letter of -- 235,486 Janeiro Ltda. credit credit Judicial Authority Rio de Janeiro Refrescos Subsidiary Judicial Cash 3,624,256 -- Ltda. deposit Banco Galicia Embotelladom del Atlantico Subsidiary Letter of Industrial 539,238 539,238 S.A. credit pledge Scotiabank Sud Embotelladora Andina S.A. Parent Performance -- -- 134,248 Americano Company bond Scotiabank Sud Embotelladora Andina S.A. Parent Performance -- -- 4,879 Americano Company bond
F-32 Indirect guarantees: -------------------
Guarantor Type of Guarantee Amount Currency Transaction ----------------------- ----------------- ------------- ---------------- ---------------------------------------- Various clients Mortgage 555,000 Argentine pesos Credit to distributors Van Derdonkt W. y Cia. Pledge 80,000 Argentine pesos Credit to distributors Various clients Policy 11,001.30 U.F. Advertising contract Gebo Producci6n Policy 7,359.84 US$ Change in mechanical work Unimicro S.A. Policy 28,560.00 US$ Computer Project Contract Conelse ingenieria S.A. Policy 102.00 U.F. Electronica work contract Various clients Mortgage 6,931,000 Brazilian reales Credit to distributors Transporters Pledge 1,581,000 Brazilian reales Credit to transporters CONFAB Letter of credit 1,275,000 US$ Purchase of Rio de Janeiro Refrescos Ltda. CONFAB Mortgage 30,000,000 US$ Purchase of Rio de Janeiro Refrescos Ltda. Russel W. Coffin Letter of credit 59,000,000 US$ Purchase of Nitvitgov Refrigerantes S.A.
b) Contingencies Andina and its subsidiaries are not involved in any material judicial or out-of-court litigation that could result in significant gains or losses. Andina and its subsidiaries have recorded the necessary provisions for the likely losses arising from current and potential labor, trade or other lawsuits. Current lawsuits are described below. Embotelladora Andina S.A. ------------------------- Andina has filed a tax lawsuit for assessments made by the Internal Revenue Service for the concept of VAT and non-allowable tax expenses amounting to ThCh$ 57,905, plus price-level restatements and interest. The Tax Court issued a favorable judgement for a partial amount of ThCh$ 23,609, plus price-level restatement and interest. The Company presented an appeal to the Court of Appeal in San Miguel on July 3, 2001. Refrescos --------- Refrescos is liable for labor lawsuits, government taxes, and other contingencies incurred by the former owners of the Refrescos, amounting to ThCh$ 834,857 (ThCh$ 3,105,025 in 2000), however, the Company has received guarantees to this effect as shown in a) above. Refrescos was subject to administrative and legal proceedings regarding tax and other related issues, amounting to ThUS$ 1,521 at December 31, 2001. The Company has fully accrued this liability. At December 31, 2001, Refrescos was also subject to administrative and legal proceedings regarding tax and other related issues, amounting to ThCh$ 6,794,476 (ThCh$ 5,092,241 in 2000). However no reserve was established because external legal advisors to Refrescos are of the opinion that the likelihood of loss is remote. Refrescos is subject to inspections and potential legal proceedings, particularly with regard to regulatory requirements governing tax and labor issues. Until the outcome of inspections, legal and administrative proceedings is determined, the Company and its legal advisors believe no significant payments will be made in the resolution of these matters, including those discussed in the paragraphs above. Complejo Industrial Pet S.A. ---------------------------- The Company was subject to labor lawsuits and other related matters for a maximum amount of ThUS$ 440. The Company has fully accrued this liability. F-33 Embotelladora del Atlantico S.A. -------------------------------- The Company was subject to labor lawsuits and other related matters for a maximum amount of ThUS$ 1,513. The Company has fully accrued this liability. Argentine economic condition ---------------------------- At December 31, 2001, assets in Argentina account for 23% of consolidated assets (22% at December 31, 2000). In addition, investments in Argentina accounted for 17.8% of equity at December 31, 2001. It is difficult to forecast the future developments of the Argentine economy and the consequences on the economic and financial position of Andina's subsidiaries in that country. Therefore, these financial statements do not include all the adjustments that could result from such adverse conditions, and consequently shall be read considering these circumstances. From the point of view of the Company's management, the consequences of these uncertainties would not have a significant effect on the financial position of Embotelladora Andina S.A. Environmental ------------- Andina and its subsidiaries have disbursed ThCh$ 648,414 in 2001 for improvements to industrial processes, industrial waste flow measurement equipment, laboratory analysis, environmental impact consulting and other studies. Future commitments, principally short term commitments, for the same types of expenditures amount to ThCh$ 104,048. c) Commitments Refrescos --------- Refrescos is committed to pay for advertising contracts amounting to ThCh$ 856,951, expiring between 2002 and 2007. d) Restrictions The bond issue and placement in the US market for US$350 million is not subject to covenants or financial ratios and limit restrictions. The bond issue and placement in the Chilean market for UF 7,000,000 is subject to the following restrictions: o Leverage ratio, defined as the Total debt/shareholders' equity plus minority interest, should be less than 1.20. o Consolidated assets are to be free of any pledge, mortgage or other encumbrance for an amount equal to at least 1.30 times Current Consolidated Liabilities (as defined) that not guaranteed by the investee. F-34 o Andina must retain and, in no way, sell, assign or dispose of to a third party the geographical zone denominated "Region Metropolitana", as a franchised territory in Chile of The Coca-Cola Company for the preparation, production, sale and distribution of the products and brands in accordance with the respective Bottling, Agreement, renewable from time to time. o Andina must retain and, in no way, sell, assign or dispose of to a third party any other territory in Argentina or Brazil which is currently franchised to Andina by The Coca-Cola Company for the preparation, production, sale, and distribution of the products and brands of The Coca-Cola Company as long as the referred territory represents more than forty percent of the Company's Consolidated Operating Cash Flows (as defined). F-35 NOTE 20 - SHAREHOLDERS' EQUITY ------------------------------ The movements in the capital and reserves of the Company during each of the three years ended December 31, 2001 were as follows:
Retained Paid-in earnings capital Other from prior Net income Interim (1)(2)(3)(4) reserves (7) years for the year dividends Total -------------- ------------ ------------- ------------- ------------- ------------- ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ At January 1, 1999 161,756,532 7,022,195 151,489,739 44,547,818 (15,476,575) 349,339,709 Prior year income allocation -- -- 29,071,243 (44,547,818) 15,476,575 -- Dividends paid -- -- (3,831,784) -- (11,495,352) (15,327,136) Price-level restatement of equity 4,205,670 170,153 4,629,446 -- (65,139) 8,940,130 Accumulated translation adjustment of foreign investments -- 21,764,987 -- -- -- 21,764,987 Net income for the year -- -- -- 27,193,812 -- 27,193,812 ----------- ---------- ----------- ---------- ----------- ----------- At December 31,1999 165,962,202 28,957,335 181,358,644 27,193,812 (11,560,491) 391,911,502 =========== ========== =========== ========== =========== =========== Balance at December 31, 1999 restated in constant Chilean pesos of December 31, 2001 179,149,060 31,258,198 195,768,858 29,354,552 (12,479,054) 423,051,614 =========== ========== =========== ========== =========== =========== At January 1, 2000 165,962,202 28,957,335 181,358,644 27,193,812 (11,560,491) 391,911,502 Prior year income allocation -- -- 15,633,321 (27,193,812) 11,560,491 -- Dividends paid -- -- (57,476,756) -- (11,495,352) (68,972,108) Price-level restatement of equity 7,800,223 1,360,994 7,899,138 -- (145,607) 16,914,748 Accumulated translation adjustment of foreign investments -- 7,814,581 -- -- -- 7,814,581 Net income for the year -- -- -- 31,500,734 -- 31,500,734 ----------- ---------- ----------- ---------- ----------- ----------- At December 31, 2000 173,762,425 38,132,910 147,414,347 31,500,734 (11,640,959) 379,169,457 =========== ========== =========== ========== =========== =========== Balance at December 31, 2000 restated in constant Chilean pesos of December 31,2001 179,149,060 39,315,030 151,984,192 32,477,257 (12,001,829) 390,923,710 =========== ========== =========== ========== =========== =========== At January 1, 2001 173,762,425 38,132,910 147,414,347 31,500,734 (11,640,959) 379,169,457 Prior year income allocation -- -- 19,859,775 (31,500,734) 11,640,959 -- Dividends paid (5)(6) -- -- (46,141,062) -- (11,495,351) (57,636,413) Price-level restatement of equity 5,386,635 1,182,120 4,078,111 -- (91,963) 10,554,903 Accumulated translation adjustment of foreign investments -- 6,937,391 -- -- -- 6,937,391 Net income for the year -- -- -- 33,066,958 -- 33,066,958 ----------- ---------- ----------- ---------- ----------- ----------- At December 31, 2001 179,149,060 46,252,421 125,211,171 33,066,958 (11,587,314) 372,092,296 =========== ========== =========== ========== =========== =========== __________________ (1) In accordance with Chilean Law No. 18,046, the amount corresponding to the revaluation of paid-in capital has been incorporated in such capital at each year-end. (2) During 1999, 2000 and 2001, no new shares were offered. (3) As of December 31, 2000 and 2001, significant the shareholders were as follows:
F-36
2000 --------------------------------------------------------------------- Number of shares Ownership Series A Series B Total percentage ------------- ----------------- -------------- ------------- Inversiones Freire Ltda. (*) 185,706,603 -- 185,706,603 24.43 Citibank N.A. (1) 77,863,164 85,877,982 163,741,146 21.54 Coca-Cola Interamerican Corp. 40,552,802 40,552,802 81,105,604 10.67 AFPs as a group 23,066,906 17,441,217 40,508,123 5.33 Inversiones Hydra (Chile) Ltda. (*) -- 23,206,484 23,206,484 3.05 Inversiones Santa Virginia Ltda. (*) -- 23,120,484 23,120,484 3.04 Inversiones Multiples Ltda. (*) -- 22,906,484 22,906,484 3.01 Inversiones Maxus Lida. (*) -- 21,394,616 21,394,616 2.81 Inversiones Glouchester Ltda. (*) -- 21,394,616 21,394,616 2.81 Inversiones APM Ltda. (*) -- 21,308,616 21,308,616 2.80 Inversiones Freire Dos Ltda. (*) 14,300,000 -- 14,300,000 1.88 Inversiones Puerto Sofia Ltda. (*) -- 13,601,132 13,601,132 1.79 Inversiones Teval S.A. (*) -- 11,983,646 11,983,646 1.58 Inversiones San Andrds Ltda. (*) -- 8,927,688 8,927,688 1.17 ----------- -------------- ----------- ------- Total shares of majority shareholders 341,489,475 311,715,767 653,205,242 85.91 =========== ============== =========== ======= Total number of shareholders 1,240 1,276 1,352 ----------- -------------- ----------- Total shares outstanding 380,137,271 380,137,271 760,274,542 ----------- -------------- -----------
2001 -------------------------------------------------------------------- Number of shares Ownership Series A Series B Total percentage ------------- ------------------- ------------- -------------- Inversiones Freire Ltda. (*) 185,706,603 -- 185,706,603 24.43 The Bank of New York (1) 64,853,022 82,947,194 147,800,166 19.44 Coca-Cola Interamerican Corp. 40,552,802 40,552,802 81,105,604 10.67 Inversiones Mar Adentro Ltda. (*) -- 38,978,263 38,978,263 5.13 Genesis Chile Fund Limited 13,035,083 14,328,283 27,363,366 3.60 Inversiones Delfin S.A (*) -- 26,301,100 26,301,100 3.46 Inversiones Caburga S.A. -- 23,349,763 23,349,763 3.07 Inversiones Santa Virginia Ltda. (*) -- 23,120,484 23,120,484 3.04 Inversiones Glouchester Ltda. (*) -- 21,394,616 21,394,616 2.81 AFP Provida S.A 10,542,583 6,328,531 16,871,114 2.22 Inversiones Freire Dos Ltda. (*) 14,300,000 -- 14,300,000 1.88 Inversiones Puerto Sofia Ltda. (*) -- 13,601,132 13,601,132 1.79 ----------- -------------- ----------- ------- Total shares of majority shareholders 328,990,093 290,902,118 619,892,211 81.54 =========== ============== =========== ======= Total number of shareholders 1,240 1,276 1,352 ----------- -------------- ----------- Total shares outstanding 380,137,271 380,137,271 760,274,542 ----------- -------------- ----------- (1) Acting as depository for the ADRs (*) Company related to controlling shareholder
The preferential rights of each series of shares are as follows: Series A: The right to elect 6 of the 7 directors and their respective alternates. Series B: The right to receive 10% more of all dividend distributions than Series A shareholders. F-37 (4) American Depository Receipts At December 31, 2001, The Bank of New York, in its capacity as the "Depositary Bank", has been consigned 64,853,022 series A shares and 82,947,144 series B shares in the form of American Depository Receipts which correspond to investments maintained by foreign investors. (5) Dividends paid during the year ended December 31, 1999 were as follows: Number Dividend per Share ------ ------------------ 114 Ch$ 4.80 Series A Ch$ 5.28 Series B 115 Ch$ 4.80 Series A Ch$ 5.28 Series B 116 Ch$ 4.80 Series A Ch$ 5.28 Series B 117 Ch$ 4.80 Series A Ch$ 5.28 Series B Dividends paid during the year ended December 31, 2000 were as follows: Number Dividend per Share ------ ------------------ 118 Ch$ 4.80 Series A Ch$ 5.28 Series B 119 Ch$ 4.80 Series A Ch$ 5.28 Series B 120 Ch$ 12.20 Series A Ch$ 13.42 Series B 121 Ch$ 55.00 Series A Ch$ 60.50 Series B 122 Ch$ 4.80 Series A Ch$ 5.28 Series B 123 Ch$ 4.80 Series A Ch$ 5.28 Series B Dividends paid during the year ended December 31, 2001 were as follows: Number Dividend per Share ------ ------------------ 124 Ch$ 4.80 Series A Ch$ 5.28 Series B 125 Ch$ 4.80 Series A Ch$ 5.28 Series B 126 Ch$ 53.00 Series A Ch$ 58.30 Series B 127 Ch$ 4.80 Series A Ch$ 5.28 Series B 128 Ch$ 4.80 Series A Ch$ 5.28 Series B (6) Dividends declared and scheduled to be paid subsequent to the end of fiscal year 2001 include the following: Number Dividend per Share ------ ------------------ 129 Ch$ 4.80 Series A Ch$ 5.28 Series B F-38 (7) The balance of Other reserves amounted to ThCh$ 39,315,030 in 2000 and ThCh$ 46,252,421 in 2001, and consisted of the following:
1999 2000 2001 ------------- -------------- -------------- ThCh$ ThCh$ ThCh$ Cumulative translation adjustment 30,363,564 38,420,396 45,357,787 Reserve for technical reappraisal of property, plant and equipment 159,322 159,322 159,322 Other reserves 735,312 735,312 735,312 ----------- ----------- ---------- Total reserves 31,258,198 39,315,030 46,252,421 =========== =========== ==========
The reserve for cumulative translation adjustment complies with Technical Bulletin No. 64 of the Chilean Institute of Accountants and Official Letter No. 5,294 issued by the SVS. The composition of this reserve was as follows:
Exchange differences during the period --------------------------- Balance Transfers of Balance Subsidiary January 1, 1999 Investment Liability reserve December 31, 1999 ---------- --------------- ---------- ---------- ------------ ----------------- ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Rio de Janeiro Refrescos Ltda. 2,614,951 9,553,967 -- -- 12,168,918 Solucao Pet Ltda. 301,812 791,370 -- -- 1,093,182 Embotelladora del Atlantico S.A. 2,656,035 8,899,717 -- -- 11,555,752 Complejo Industrial Pet S.A. 1,296,398 4,249,314 -- -- 5,545,712 ---------- ---------- ---------- ---------- ---------- Total 6,869,196 23,494,368 -- -- 30,363,564 ========== ========== ========== ========== ==========
Exchange differences during the period --------------------------- Balance Transfers of Balance Subsidiary January 1, 2000 Investment Liability reserve December 31, 2000 ---------- --------------- ---------- ---------- ------------ ----------------- ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Rio de Janeiro Refrescos Ltda. 12,168,918 3,284,920 -- 1,411,760 16,865,598 Solucao Pet Ltda. 1,093,182 318,578 -- (1,411,760) -- Embotelladora del Atlantico S.A. 11,555,752 3,104,627 -- -- 14,660,379 Complejo Industrial Pet S.A. 5,545,712 1,348,707 -- -- 6,894,419 ---------- ---------- ---------- ---------- ---------- Total 30,363,564 8,056,832 -- 38,420,396 ========== ========== ========== ========== ==========
Exchange differences during the period --------------------------- Balance Transfers of Balance Subsidiary January 1, 2001 Investment Liability reserve December 31, 2001 ---------- --------------- ---------- ---------- ------------ ----------------- ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Rio de Janeiro Refrescos Ltda. 16,865,598 10,813,426 -- -- 27,679,024 Embotelladora del Atlantico S.A. 14,660,379 14,464,402 -- (17,041,037) 12,083,744 Complejo Industrial Pet S.A. 6,894,419 5,380,972 -- (6,680,372) 5,595,019 ---------- ---------- ---------- ----------- ---------- Total 38,420,396 30,658,800 -- (23,721,409) 45,357,787 ========== ========== ========== =========== ==========
The reduction in the reserve amounting to ThCh$ 23,721,409 results from capital decreases in Embotelladora del Atlantico S.A. for US$ 100.0 million and in Complejo Industrial Pet S.A. for US$ 30.0 million. F-39 NOTE 21 - MINORITY INTEREST --------------------------- The proportional equity value which corresponds to minority shareholders in each affiliate for each year-end was as follows: At December 31, ---------------------------------- 2000 2001 ---------- ----------- ThCh$ ThCh$ Equity of minority shareholders of: Andina Inversiones Societarias S.A. 18,736 45,577 ------ ------ Total 18,736 45,577 ====== ====== The proportional participation in the consolidated results which corresponds to the minority shareholders was ThCh$ 71,949, ThCh$ (72,502) and ThCh$ (21,215) in 1999, 2000 and 2001, respectively. NOTE 22 - OTHER NON-OPERATING INCOME AND EXPENSES: -------------------------------------------------- Other non-operating income and expenses included the following items: a) Other non-operating income:
Year end December 31, --------------------------------------------------- 1999 2000 2001 ------------- ----------- ------------ ThCh$ ThCh$ ThCh$ Gain on sale of property, plant and equipment to Envases CMF S.A. -- -- 5,779,626 Gain on sale of North Fulton Bancshares Inc., shares -- 981,805 -- Profit on dissolution of Brazilian package business -- 562,979 -- Realization of reserve for cumulative translation adjustment (1) -- -- 23,723,781 Change in estimate for guarantees on bottles (2) 10,327,699 -- -- Other miscellaneous income 1,846,983 708,452 630,697 ------------ ------------ ------------ Total 12,174,682 2,253,236 30,134,104 ============ ============ ============ (1) See Note 20 (Shareholders' equity) for more information. (2) See Note 18.
b) Other non-operating expense:
Year end December 31, --------------------------------------------------- 1999 2000 2001 ------------- ----------- ------------ ThCh$ ThCh$ ThCh$ Impairment of property, plant and equipment (1) 2,857,610 8,272,754 9,841,758 Staff severance indemnities (2) 1,081,434 4,868,900 1,359,220 Write-off of property, plant and equipment 2,073,094 2,046,111 539,657 Loss on sale of property, plant and equipment 406,412 144,042 1,777,706 Litigation -- -- 708,461 Translation adjustment (3) 4,193,313 (428,424) 10,036,107 Liquidation of container business -- -- 328,585 Other miscellaneous expenses 1,305,769 2,499,666 1,562,001 ------------ ------------ ------------ Total 11,917,632 17,403,049 26,153,495 ============ ============ ============ F-40 (1) In 2001, the indirect subsidiaries, Vital S.A., Envases Mutlipack S.A., Complejo Industrial Pet S.A., Refrescos and Embotelladora del Atlantico S.A., wrote off property, plant and equipment and established provisions to reflect potential losses on assets held for sale amounting to ThCh$ 335,818 and ThCh$ 9,505,940, respectively. In 2000, Refrescos and Embotelladora del Atlantico S.A. had write-offs and provisions amounting to ThCh$ 5,814,063 and ThCh$ 2,458,692, respectively. (2) Corresponds to losses originated from a number of internal reorganizations by Embotelladora Andina and its subsidiaries abroad. (3) Corresponds to translation into United States dollars of assets and liabilities in Argentine pesos and Brazilian reales of the subsidiaries in Argentina and Brazil using the method outlined under Technical Bulletin No. 64 issued by the Chilean Institute of Accountants.
NOTE 23 - NON-CASH INVESTING AND FINANCING ACTIVITIES ----------------------------------------------------- The following investing and financing activities did not generate cash flows during the period, but will generate future cash flows.
Expiration Expiration Expiration Concept 1999 date 2000 date 2001 date ------------ ---------- ------------ ----------- ------------- ------------- ThCh$ ThCh$ ThCh$ Expenses Yankee bond interest -- -- (7,688,631) 10-01-01 (8,512,270) 10-01-02 Yankee bond interest (7,438,441) 04-01-00 (7,688,631) 04-01-01 (8,512,270) 04-01-02 Dividend payment (4,136,246) 01-26-00 (3,950,570) 01-23-01 (3,831,784) 01-30-02 Fixed asset additions (2,817,844) -- (3,808,421) 02-04-01 (59,045) 01-30-02 Fixed asset additions (262,009) -- -- -- (3,988,645) 03-03-02 Fixed asset additions (187,503) 2000 -- -- -- -- Fixed asset additions (20,940) 2000 -- -- (304,512) 03-28-02 Local bond interest -- -- -- -- (593,909) 06-01-02 ----------- ----------- ----------- Total expenses (14,862,983) (23,136,253) (25,802,435) =========== =========== =========== Income Sale of fixed assets 648 02-29-00 59,797 02-04-01 28,814 02-04-02 Income tax 3,251,008 05-31-00 1,859,482 05-31-01 1,496,421 05-31-02 ----------- ----------- ----------- Total income 3,251,656 1,919,279 1,525,235 ----------- ----------- ----------- Total net (11,611,327) (21,216,974) (24,277,200) =========== =========== ===========
NOTE 24 - SUBSEQUENT EVENTS --------------------------- On January 30, 2002, interim dividend number 129 was paid in the following amounts: Ch$ 4.80 per Series A share, and Ch$5.28 per Series B share. The dividends relate to income for the year 2001. There have been no other subsequent events between December 31, 2001 and the date on which these financial statements were issued that could significantly affect their balances or interpretation. F-41 NOTE 25 - DIFFERENCE CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ----------------------------------------------------------------- Chilean GAAP varies in certain important respects from the accounting principles generally accepted in the United States ("U.S. GAAP"). Such differences involve methods for measuring the amounts shown in the financial statements as well as additional disclosures required by U.S. GAAP. The principal methods applied in the preparation of the accompanying financial statements which have resulted in amounts that differ from those that would have otherwise been determined under U.S. GAAP are as follows: I Differences in measurement methods: a) Inflation accounting The cumulative inflation rate in Chile as measured by the CPI for the three-year period ended December 31, 2001 was approximately 10.4%. Chilean GAAP requires that the financial statements be restated to reflect the full effects of the loss in the purchasing power of the Chilean peso on the financial position and results of operations of reporting entities. The method, described in Note 1, is based on a model which enables calculation of net inflation gains or losses caused by monetary assets and liabilities exposed to changes in the purchasing power of local currency. The model prescribes that the historical cost of all non-monetary accounts be restated for general price-level changes between the date of origin of each item and the year-end. The inclusion of price-level adjustments in the accompanying financial statements is considered appropriate under the prolonged inflationary conditions affecting the Chilean economy even though the cumulative inflation rate for the last three years does not exceed 100%. Accordingly, the effect of price-level changes is not eliminated in the reconciliation to U.S. GAAP included under paragraph (l) below. The price-level restatement was determined under Chilean GAAP by restating the following non-monetary assets and liabilities as follows:
Year end December 31 --------------------------------------------- 1999 2000 2001 ---- ---- ---- ThCh$ ThCh$ ThCh$ Shareholders' equity (9,650,486) (17,439,105) (10,554,903) Liabilities (355,119) (5,120,482) (8,385,019) Property, plant, and equipment 2,890,756 4,234,560 2,736,742 Current assets 473,694 282,126 148,554 Other assets 5,929,886 10,934,764 7,505,226 ---------- ---------- ---------- Adjustment of balance sheet accounts (711,269) (7,108,137) (8,549,400) Adjustment of income statement accounts (675,912) (1,347,908) (948,177) Foreign exchange gain 3,778,766 4,988,338 2,779,743 ---------- ---------- ---------- Price-level restatement income (expense) 2,391,585 (3,467,707) (6,717,834) ========== ========== ==========
F-42 b) Translation of financial statements of non-Chilean operations In accordance with Technical Bulletin No. 64, the financial statements of foreign subsidiaries whose activities do not constitute an extension of the Chilean Company's operations, or which operate in countries that are exposed to significant risks, restrictions or inflation/exchange fluctuations must be remeasured into US dollars and translated into Chilean pesos at the year end exchange rate. Accordingly, the financial statements of the Company's subsidiaries in Argentina, Brazil and Uruguay were considered to be operating in countries that are exposed to significant risks, restrictions and exchange fluctuations and were prepared in accordance with Chilean GAAP, with the exception of monetary correction, and then were remeasured into U.S. dollars as follows: - Monetary assets and liabilities were translated at year-end rates of exchange between the U.S. dollar and the local currency. - All non-monetary assets and liabilities and shareholders' equity were translated at historical rates of exchange between the U.S. dollar and the local currency. - Income and expense accounts were translated at average rates of exchange between the U.S. dollar and the local currency. - Any exchange differences were included in the results of operations for the period. Price-level restatement based on Chilean inflation is applied to the beginning investment value in the Company's books and participation in income is recorded as described above. The Company compared this value to its participation in the equity of the investee as remeasured into U.S. dollars and translated into Chilean pesos. The difference is recorded as an adjustment to the investment balance and a direct adjustment to shareholders' equity to the account "Accumulated translation adjustment of foreign investments". Under this standard, the beginning balances were remeasured into U.S. dollars and translated into Chilean pesos using the exchange rate at the opening of the period January 1, 1998 (U.S.$ 1.00=Chilean pesos 439.18). In the opinion of the management of the Company, the Chilean GAAP procedures described above are part of the comprehensive basis of preparation of price-level adjusted financial statements required by Chilean GAAP. Inclusion of inflation and translation effects in the financial statements is considered appropriate under the inflationary conditions that have historically affected the Chilean economy and, accordingly, are not eliminated in the reconciliation to U.S. GAAP. c) Revaluation of property, plant and equipment As described in Note 1 i), certain property, plant and equipment has been reported in the financial statements at amounts determined in accordance with a technical appraisal. The revaluation of property, plant and equipment is an accounting principle not generally accepted under U.S. GAAP. The effects of the reversal of this revaluation as well as the related accumulated depreciation and depreciation expense for the year is shown below under paragraph (n). F-43 d) Income taxes Under Chilean GAAP, as discussed in Note 2, effective January 1, 2000, the Company began applying Technical Bulletin No. 60 of the Chilean Institute of Accountants concerning deferred income taxes. Technical Bulletin No. 60 requires the recognition of deferred income taxes for all temporary differences, whether recurring or not, using an asset and liability approach. For U.S. GAAP purposes, in prior years the Company applied SFAS No. 109, "Accounting for Income Taxes", whereby income taxes are also recognized using substantially the same asset and liability approach, with deferred income tax assets and liabilities established for temporary differences between the financial reporting basis and tax basis of the Company's asset and liabilities at enacted rates expected to be in effect when such amounts will be realized. Deferred tax assets must be reduced by a valuation allowance when it is more likely than not such assets will not be realized. After the year ended December 31, 1999, Chilean GAAP and U.S. GAAP differ due to the recognition for U.S. GAAP purposes of the reversal of deferred income taxes included in the U.S. GAAP reconciliation in prior years. Prior to the implementation of Technical Bulletin No. 60, no deferred income taxes were recorded if the related timing differences were expected to be offset in the year that they were projected to reverse by new timing differences of a similar nature. The effect of providing for deferred income taxes for the differences between the amounts shown for assets and liabilities in the balance sheet and the tax bases of the those assets and liabilities is included in paragraph (n) below and certain disclosures required under SFAS No. 109 are set forth under paragraph II a) below. e) Accounting for investments in related companies As shown in Note 10 a), the Company acquired a 15.2% ownership in Cican S.A. in December 1996. Under Chilean GAAP, this investment has been accounted for under the equity method. Effective January 1, 1998, the Company also began accounting for its investment in Cican S.A. on the equity method for U.S. GAAP purposes. The Company has one of seven board of director positions; is the second largest shareholder; no single shareholder owns more than 50% of the Company; and the Company's subsidiary in Argentina transacts a significant amount of business with Cican S.A. The Company believes that it has the ability to influence the policies of its investee. The amount of income recognized under the equity method of accounting for the years ended December 31, 1999, 2000 and 2001, was ThCh$ 252,458, ThCh$ 92,320 and ThCh$ (298,648), respectively. Prior to 1998, the Company accounted for this investment at cost less any impairment in value that is other than temporary. The Company began accounting for its 11.31% interest in Kaik Participacoes S/C Ltda. under the equity method in 1999 as described in Note 10 a). In prior years, as appropriate financial information was not available, the Company accounted for this investment under the cost method. Under U.S. GAAP, as the Company only holds 11.31% interest and the investee's shares do not trade on any exchange, the cost method has been applied for all years presented. The effects are included under paragraph (n) below. f) Goodwill i) In accordance with Chilean GAAP, goodwill arising from the Refrescos acquisition was amortized over a period of 10 years as from July 1, 1994. Beginning in 1999, in accordance with new rules issued by the SVS, the Company is amortizing the remaining goodwill balance over an original term of 20 years. Under U.S. GAAP, this amortization was over a period of 9 years until the year ended December 31, 1997. For the year ended December 31, 1999, the Company conformed its goodwill life to the life used for Chilean GAAP. The effects of differences in goodwill amortization are included under paragraph (n) below. F-44 ii) Under Chilean GAAP no deferred tax asset was recognized for the tax loss carryforward related to the acquisition of the former subsidiary, Rosario Refrescos S.A. in 1995. Under U.S. GAAP, a deferred tax asset would be recognized for the amount of the tax loss carry forward which is more-likely-than-not to be recoverable. The deferred tax asset calculated at the date of acquisition would be accounted for us a reduction of the goodwill calculated under Chilean GAAP. The effects of the reduced amortization which has arisen as a result of this adjustment to goodwill is included in paragraph (n) below. iii) In accordance with Chilean GAAP, goodwill arising from the acquisition of Nitvitgov was amortized over a period of 20 years as from April 1, 2000. For U.S. GAAP purposes as required by SFAS No. 109, the Company evaluated the recoverabiliy of its deferred tax asset for the net operating loss carryforwards of Refrescos, which was fully reserved for U.S. GAAP purposes in prior years, as part of the allocation of the purchase price paid. The Company concluded that its planned merger of Nitvitgov into Refrescos would allow Refrescos to recover the deferred tax asset and, accordingly, goodwill was reduced by the amount of the valuation allowance related to the deferred tax asset that was no longer required. For Chilean GAAP purposes, no deferred tax asset or valuation allowance was recorded in prior years. However, a deferred tax asset and a related complementary account were recognized effective January 1, 2000 upon adoption of Technical Bulletin No. 60, see Notes 1 h) and 2. The effects of reduced amortization and recognition of the reversal of the valuation allowance and recognition of a deferred tax asset are included under paragraph (n) below. g) Acquisition through the issuance of shares In December 1996, the Company acquired 78.7% of the capital stock of Inti S.A. Industrial y Comercial ("INTI") from a subsidiary of The Coca-Cola Company, resulting in the ownership of substantially all of INTI's shares, and 100% of the capital stock of Complejo Industrial PET S.A. ("Cipet"), both of which are located in Argentina. INTI is the Coca-Cola bottler in the province of Cordoba, Argentina. Cipet is a packaging company in the city of Buenos Aires that produces containers for the various Coca-Cola bottlers in Argentina. These acquisitions were recorded at ThCh$ 62,381,287 and were accounted for in accordance with the purchase method under Chilean GAAP, resulting in goodwill of ThCh$ 20,850,049 (in pesos of December 1996). Also, in December, 1996, 24,006,926 shares were offered, in accordance with the capital increase of Andina approved at the Company's Extraordinary Shareholder's Meeting held in September 1996; 24,000,000 shares were subscribed and paid up by Bottling Investment Limited at Ch$ 2,264 (in pesos of December 31, 1996) each, amounting to ThCh$ 54,336,000 (in pesos of December 1996). Additionally, Coca-Cola purchased; through its subsidiaries Coca-Cola Interamerican Corporation and Coca-Cola Argentina S.A., 100% of Bottling Investment Limited, and consequently, its investment in Andina. The remaining shares were subscribed and paid for by local investors, for a total investment of ThCh$ 15,680 (in pesos of December 31, 1996). Under Chilean GAAP, these transactions were accounted separately. Under U.S. GAAP, both transactions would be accounted for as an acquisition through the issuance of shares and recorded as a purchase under Accounting Principles Board Opinion No. 16 "Business Combinations", whereby the purchase price of the companies would be determined based on the market price of the Company's shares. The fair value of the Company's shares issued to The Coca-Cola Company on the date of the acquisitions was less than the ThCh$ 64,003,200 recorded by the Company as the purchase price for INTI and Cipet. Under U.S. GAAP, the difference is accounted for as a reduction of the goodwill and equity calculated under Chilean GAAP. The effect is included in paragraph (n) below. F-45 h) Joint venture accounting In accordance with Chilean GAAP, the Company recognized a gain of ThCh$ 5,779,626 on the sale of properly, plant and equipment to CMF upon the formation of this joint venture with Cristalerias. In addition, the Company charged off the basis difference of ThCh$ 1,708,729 between its investment in and its share of the net equity of the joint venture. Accordingly, the Company recognized a net gain before income taxes of ThCh$ 4,070,897 under Chilean GAAP. Under US GAAP, a gain can be recognized only if appreciated assets (excluding land) are contributed to a venture, cash or near-cash assets are received, and no other factors exist that could impact realization of the gain (such as guarantees of debt, puts or calls that may result in acquisition of the venture, etc.) Additionally, the gain would be limited to the proportion of the assets deemed sold and any basis difference would be amortized based on the lives of the assets that gave rise to the difference. Finally, all contributions of appreciated assets to the venture would generally be recorded at the venturer's carrying value. The shareholders' agreement for CMF that establishes joint control of the venture also contains provisions that could require the Company to purchase Cristalerias' shares of CMF. Accordingly, the gain recognized for Chilean GAAP is not considered realized under US GAAP. The effects of reversing the gain and charge-off of the basis difference in the investment, amortizing the basis difference in accordance with US GAAP and adjusting the results of CMF for the Company's share of the amortization of excess value assigned to the assets of CMF under Chilean GAAP are included in paragraph (n) below. i) Investment securities Under Chilean GAAP, debt securities which are not classified as trading securities are carried at cost plus price-level restatement. Under U.S. GAAP, debt securities that are not classified as trading securities (nor as held-to-maturity securities) are reported at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. The effect is included in paragraph (l) below. j) Staff severance indemnities Pursuant to collective bargaining agreements between the Company and certain of its employees, the Company is committed to provide a payment to each of these employees based upon total years of service. See Note 1 t). Under Chilean GAAP, the financial statements include a liability which is the current monthly salary times the years of services at the closing date, discounted at a 7% annual rate, over the expected remaining years of service for all employees covered by such agreements. Under US GAAP, this arrangement is considered to be a pension plan, and the liability would be measured by projecting future expected severance payments using an assumed salary progression rate and discounting the resulting amounts to their present value. In practice the Company believes that the salary progression rate will not differ significantly from the general inflation rate. In the opinion of the management of the Company, the application of US GAAP would not have produced results materially different from the acceptable method under Chilean GAAP. F-46 k) Accumulated translation adjustment of foreign investments As described in Notes 20 and 22 a), the Company recognized a gain upon the realization of a portion of its Accumulated translation adjustment of foreign investments account in accordance with Technical Bulletin No. 64. Under Chilean GAAP, a partial liquidation of an investment in a foreign entity is deemed to have occurred upon the repatriation of capital or of earnings in excess of net income for the year. In the case of a partial liquidation, the proportionate share of the Accumulated translation adjustment of foreign investments account related to the foreign investment should be reversed and recorded in the results of the period. During 2001, the Company repatriated US$ 130 million of capital from its foreign investments in Argentina representing over 50% of the capital invested. Accordingly, the Company reversed a proportionate amount of its Accumulated translation adjustment of foreign investments account and recognized a gain of ThCh$ 23,723,781 in accordance with Chilean GAAP. Under US GAAP as set forth in SFAS No. 52, "Foreign Currency Translation", the Accumulated translation adjustment of foreign investments account is realized in the results of the period only upon the sale or upon the complete or substantially complete liquidation of an investment in a foreign entity. The effect of reversing this gain for US GAAP is included in paragraph (n) below. l) Derivative financial instruments At December 31, 2001, the Company has derivative contracts consisting of forward contracts to purchase US dollars. These forward contracts were obtained principally to protect the Company from foreign exchange risk with respect to future purchases of raw materials denominated in US dollars in Chile and Brazil. Under Chilean GAAP in accordance with Technical Bulletin No. 57, "Accounting for Derivative Contracts", certain of these forward contract have been designated as hedges of forecasted transaction. The fair value of these contracts represent a loss of ThCh$ 884,789 that has been deferred until the contracts are settled as allowed by Chilean GAAP. The remaining contracts that are not designated as hedges of forecasted transactions have been valued at fair value with changes in fair value totaling ThCh$ 2,399,032, being recognized in the income statement. Under US GAAP, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" effective January 1, 2001. SFAS No. 133 requires that all derivative instruments be recognized on the balance sheet at fair value and that changes in the fair value be recognized in income when they occur, the only exception being derivatives that qualify as hedges. To qualify as the derivative instrument as a hedge the Company must meet strict hedge effectiveness and contemporaneous documentation requirements at the initiation of the hedge and assess the hedge effectiveness on an ongoing (quarterly) basis over the life of the hedge. Since the Company did not have any derivative instruments at December 31, 2000, there was no impact on the US GAAP results upon adoption of the standard. At December 31, 2001, the Company has recorded all derivative instruments on the balance sheet at fair value. However, the Company has not undertaken to qualify the forward contracts designated as hedges for Chilean GAAP purposes, as hedges for US GAAP purposes. Accordingly, the losses deferred under Chilean GAAP of ThCh$ 884,789 represent a difference from US GAAP that is included in paragraph (n) below. F-47 m) Comprehensive income In accordance with U.S. GAAP, the Company is required to report and display all comprehensive income in a separate financial statement. Comprehensive income includes net income and other comprehensive income (revenues, expenses, gains and losses) that are excluded from net income under generally accepted accounting principles. The effect of this standard is shown in paragraph (n) below. n) Effects of conforming to U.S. GAAP The adjustments to reported net income required to conform with U.S. GAAP are as follows:
Year end December 31, ----------------------------------------------- 1999 2000 2001 ---- ---- ---- ThCh$ ThCh$ ThCh$ Net income as shown in the Chilean GAAP financial statements 29,354,552 32,477,257 33,066,958 Reversal of additional depreciation on revaluation of property, plant and equipment (paragraph c) 10,962 8,877 8,528 Adjustment to deferred income tax provision (paragraph d) (2,768,0339) 654,823 2,290,633 Difference in accounting for investments in related companies (paragraph e) (156,974) 659,575 1,108,755 Amortization of goodwill (paragraph f) 782,253 426,246 1,396,971 Acquisition through the issuance of shares (paragraph g) 757,146 757,146 757,146 Joint venture accounting (paragraph h) -- -- (3,801,019) Accumulated translation adjustment of foreign investments (paragraph k) -- -- (23,723,781) Derivative financial instruments (paragraph 1) -- -- (884,789) ----------- ----------- ----------- Net income in accordance with U.S. GAAP 27,979,900 34,983,924 10,219,402 =========== =========== =========== Income before extraordinary gain 27,979,900 28,040,666 7,109,262 Extraordinary gain on repurchase of series A, B and C bonds, net of tax -- 6,943,258 3,110,140 ----------- ----------- ----------- Net income 27,979,900 34,983,924 10,219,402 =========== =========== =========== Components of other comprehensive income: Accumulated translation adjustment for foreign investments 23,494,367 8,056,833 30,661,172 Unrealized gain on investment securities, net of applicable income tax of ThCh$ 71,270 in 1999, ThCh$ 41,802 in 2000 and ThCh$ 87,174 in 2001 (paragraph h) 403,863 236,875 493,985 ----------- ----------- ----------- Comprehensive income in accordance with U.S. GAAP (paragraph i) 51,878,130 43,277,632 41,374,559 =========== =========== =========== F-48
The Company's earnings per share is as follows:
Year end December 31, --------------------------------------------------------------------- 1999 2000 2001 ---- ---- ---- ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Series A Series B Series A Series B Series A Series B Income before extraordinary gain 34.96 38.46 35.13 38.64 8.91 9.80 Extraordinary gain on repurchase of Series A, B and C bonds, net of tax -- -- 8.70 9.57 3.90 4.29 ------- ------- ------- ------- ------- ------- Net income 34.96 38.46 43.83 48.21 12.81 14.09 ======= ======= ======= ======= ======= ======= Weighted average number of common stock outstanding (thousands of shares) 380,137 380,137 380,137 380,137 380,137 380,137 ======= ======= ======= ======= ======= =======
The adjustments required to conform shareholders' equity to U.S. GAAP are as follows:
At December 31, --------------- 2000 2001 ---- ---- ThCh$ ThCh$ Shareholders' equity as shown in the Chilean GAAP financial statements 390,923,710 372,092,296 Reversal of revaluation of property, plant and equipment (paragraph c) (1,320,860) (1,312,332) Adjustment to deferred income taxes (paragraph d) (994,031) 1,209,428 Difference in accounting for investments in related companies (paragraph e) (207,450) 901,305 Amortization of goodwill (paragraph f) (9,471,334) (8,074,363) Acquisition through the issuance of shares (paragraph g) (4,542,874) (3,785,728) Joint venture accounting (paragraph h) -- (3,801,019) Unrealized (loss) gain on investment securities (paragraph i) (301,992) 279,166 Derivative financial instruments (paragraph 1) -- (884,789) ----------- ----------- Shareholders' equity in accordance with U.S. GAAP 374,085,169 356,623,964 =========== ===========
F-49 The changes in shareholders' equity determined under U.S. GAAP were as follows (all amounts are expressed in thousands of Chilean pesos at December 31, 2001):
ThCh$ ----- BALANCE AT DECEMBER 31, 1998 368,290,427 Distribution of dividends (16,699,027) Increase in accumulated translation adjustment of foreign investments 23,494,367 Decrease in net unrealized losses on investment securities 403,863 Net income for the year 27,979,900 ------------- BALANCE AT DECEMBER 31, 1999 403,469,530 Distribution of dividends (72,661,993) Increase in accumulated translation adjustment of foreign investments 8,056,833 Decrease in net unrealized losses on investment securities 236,875 Net income for the year 34,983,924 ------------- BALANCE AT DECEMBER 31, 2000 374,085,169 Distribution of dividends (58,835,764) Increase in accumulated translation adjustment of foreign investments 30,661,172 Decrease in net unrealized losses on investment securities 493,985 Net income for the year 10,219,402 ------------- BALANCE AT DECEMBER 31, 2001 356,623,964 =============
F-50 II Additional Disclosure Requirements: a) Income taxes The accounting for income taxes under Chilean GAAP and U.S. GAAP differs for deferred income taxes. Under U.S. GAAP, as set forth in SFAS No. 109, "Accounting for Income Taxes", all temporary differences arising as a result of transactions that have different accounting and tax treatments are recognized as deferred tax assets and liabilities as of the balance sheet date. A valuation allowance is provided against deferred tax assets that are not recoverable on a more-likely-than-not basis. Under Chilean GAAP, as discussed in Note 2, effective January 1, 2000, the Company began applying Technical Bulletin No. 60 of the Chilean Institute of Accountants concerning deferred income taxes. Prior to the implementation of Technical Bulletin No. 60, only deferred tax assets and liabilities that were expected to materialize in the future were recognized in the financial statements. The provisions for income taxes included in the consolidated statement of income were as follows:
Year end December 31, ---------------------------------------------------- 1999 2000 2001 ---- ---- ---- ThCh$ ThCh$ ThCh$ Current tax expense as per tax returns (4,051,396) (5,187,333) (4,754,457) Deferred tax expense as previously calculated under Chilean GAAP (1,451,859) 3,314,930 (2,456,650) ------------ ------------ ------------ Charge for the year under Chilean GAAP (5,503,255) (1,872,403) (7,211,107) U.S. GAAP adjustments: Deferred tax effect of applying SFAS 109 to Chilean GAAP results (2,768,039) 654,823 2,290,633 ------------ ------------ ------------ Charge for the year under U.S. GAAP (8,271,294) (1,217,580) (4,920,474) ============ ============ ============
The above table can be broken down into geographic sources as follows:
Chilean and The Company 1999 others Brazil Argentina (Consolidated) ---- ------ ------ --------- -------------- Current tax expense as per tax return (4,114,989) (3,859) 67,452 (4,051,396) Deferred tax (expense) benefit as previously calculated under Chilean GAAP (1,033,743) (436,468) 18,352 (1,451,859) ---------- ---------- ---------- ---------- Charge for the year under Chilean GAAP (5,148,732) (440,327) 85,804 (5,503,255) U.S. GAAP adjustments: Deferred tax effect of applying SFAS 109 (1,099,433) -- (1,668,606) (2,768,039) ---------- ---------- ---------- ---------- Charge for the year under U.S. GAAP (6,248,165) (440,327) (1,582,802) (8,271,294) ========== ========== ========== ========== F-51 Chilean and The Company 2000 others Brazil Argentina (Consolidated) ---- ------ ------ --------- -------------- Current tax expense as per tax return (3,045,416) (219,759) (1,922,158) (5,187,333) Deferred tax (expense) benefit as previously calculated under Chilean GAAP (1,103,154) 3,016,624 1,401,460 3,314,930 ---------- ---------- ---------- ---------- Charge for the year under Chilean GAAP (4,148,570) 2,796,865 (520,698) (1,872,403) U.S. GAAP adjustments: Deferred tax effect of applying SFAS 109 84,302 111,073 459,448 654,823 ---------- ---------- ---------- ---------- (Charge) benefit for the year under U.S. GAAP (4,064,268) 2,907,938 (61,250) (1,217,580) ========== ========== ========== ========== Chilean and The Company 2001 others Brazil Argentina (Consolidated) ---- ------ ------ --------- -------------- Current tax expense as per tax return (5,083,044) -- 328,587 (4,754,457) Deferred tax (expense) benefit as previously calculated under Chilean GAAP (978,028) (2,056,603) 577,981 (2,456,650) ---------- ---------- ---------- ---------- Charge for the year under Chilean GAAP (6,061,072) (2,056,603) 906,568 (7,211,107) U.S. GAAP adjustments: Deferred tax effect of applying SFAS 109 2,165,239 142,353 (16,959) 2,290,633 ---------- ---------- ----------- ---------- (Charge) benefit for the year under U.S. GAAP (3,895,833) (1,914,250) 889,609 (4,920,474) ========== ========== ========== ==========
F-52 Deferred tax assets (liabilities) as of balance sheet dates are summarized as follows:
2000 2001 ---- ---- ThCh$ ThCh$ Deferred tax assets: Tax loss carryforwards 5,215,397 17,849,811 Vacation accrual 147,783 155,811 Allowance for doubtful accounts 773,520 611,598 Depreciation 921,447 859,685 Joint venture accounting -- 1,208,442 Provision for assets written-off 2,378,372 3,506,988 Amortization of intangibles 108,981 101,677 Provision for labor and trade lawsuits -- 195,122 Staff severance indemnities -- 766,222 Other 824,971 549,375 Less: Valuation allowance -- (15,364,454) ------------- ------------- Total deferred tax assets 10,370,471 10,440,277 ------------- ------------- Deferred tax liabilities: Depreciation (7,511,930) (6,731,073) Staff severance indemnities (540,982) (496,968) Guarantees on bottles (1,671,900) (2,809,168) Other (126,454) (137,054) ------------- ------------- Total deferred tax liabilities (9,851,266) (10,174,263) ------------- ------------- Net deferred tax (liabilities) assets under U.S. GAAP 519,205 266,014 ============= ============= Net deferred tax (liabilities) assets under Chilean GAAP 1,513,236 (943,414) ============= ============= Effect of U.S. GAAP adjustments on deferred income taxes (994,031) 1,209,428 ============= =============
F-53 The provision for income taxes differs from amount of income tax determined by applying the applicable Chilean statutory income tax rate to pretax income calculated according to U.S. GAAP as a result of the following:
Year end December 31, ------------------------------------------------ 1999 2000 2001 ---- ---- ---- ThCh$ ThCh$ ThCh$ Income tax provision at statutory Chilean tax rates 5,482,526 5,430,225 2,270,981 Increase (decrease) in provision resulting from: Tax effects resulting from foreign operations (1,094,748) 290,106 714,394 Permanent differences 1,855,852 (3,748,735) (15,611,501) Effect of remeasurement to U.S. dollars (Brazil and Argentina) 1,551,525 (145,664) 3,461,616 Change in valuation allowance 445,759 (465,647) 15,364,454 Adjustments in prior year income taxes -- -- (295,754) Other 30,380 (142,705) (983,716) ---------- ---------- ---------- Effective tax provision 8,271,294 1,217,580 4,920,474 ========== ========== ==========
The Chilean statutory first category (corporate) income tax rate was 15% for 1999, 2000 and 2001. In accordance with Chilean law, Andina and each of its subsidiaries computes and pays income taxes on a separate basis. The Brazilian federal statutory income tax rate was approximately 25% for 1999, 2000 and 2001. Ordinarily, an additional surtax of 12% for 1999 and 9% for 2000 and 9% for 2001 by way of Social Contribution (CS), similar in nature to income tax, is charged on net income. In view of tax losses for the years ended December 31, 1999, 2000 and 2001, no such levy was due by the Company for such periods. The Argentine income tax rate was 35% for 1999, 2000 and 2001, in accordance with currently enacted tax legislation. The Company had net operating tax loss carryforwards related to the Brazilian subsidiaries of approximately ThCh$ 56,092,151 at December 31, 2001 that can be carried forward indefinitely. The Chilean tax loss carryforwards, totaling ThCh$ 54,093,027, can also be carried forward indefinitely. F-54 b) Statement of cash flows: For the purpose of the statement of cash flows using U.S. GAAP classifications, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. In accordance with the Company's policy, certain cash equivalents that are managed as part of the Company's investment portfolio are excluded from the amount shown as cash and cash equivalents in the statement of cash flows. The detail of cash and cash equivalents is as follows:
Year end December 31, ------------------------------------------------ 1999 2000 2001 ---- ---- ---- ThCh$ ThCh$ ThCh$ Cash 8,255,294 12,530,835 13,868,565 Time deposits 77,182,811 69,564,985 18,171,362 Marketable securities 10,508,543 15,621,647 24,089,156 Repurchase agreements 607,776 1,155,968 1,596,065 ------------ ------------ ------------ Total cash and cash equivalents 96,554,424 98,873,435 57,725,148 ============ ============ ============
Additional cash flow disclosure required by U.S. GAAP that are shown net in Chilean GAAP are as follows:
Year end December 31, ------------------------------------------------- 1999 2000 2001 ---- ---- ---- ThCh$ ThCh$ ThCh$ Short-term borrowings with bank and financial institutions 14,599,896 17,804,757 57,499,099 Long-term borrowings with banks and financial institutions 631,240 763,715 52,383,200 Repayment of long-term bank borrowings (10,836,228) (13,454,381) (108,578,638) ------------- ------------- ------------- Net bank borrowings 4,394,908 5,114,091 1,303,661 ============= ============= =============
c) Segment information The Company operates principally in three segments which comprise the production and sales of goods for (i) Coca-Cola soft drinks, (ii) Other beverages (juices, mineral water and beer), and (iii) Packaging. Total revenues by segment include sales to unaffiliated customers, as reported in the Company's consolidated income statement, and intersegment sales, which are accounted for at invoice price. The Coca-Cola soft drink segment comprises the production and sales of Coca-Cola, Sprite, Fanta and other Coca-Cola soft drinks. The Other beverages segment includes the sales of mineral water, fruit juices and, in Brazil, beer. The Packaging segment consists of the production of PET containers. The accounting policies for the segments are the same as those described in "Nature of operations and summary of significant accounting policies". Operating income is total revenue less operating expenses under Chilean GAAP. In computing operating income, none of the following items has been added or deducted: Financial income, Financial expense, Price-level restatement, Other non-operating income, Other non-operating expense and Income tax expense. The Company defines identifiable assets by product segment as receivable balances less specified payables, plus goodwill and fixed assets. Identifiable long-lived assets by geographic area include all long-term assets, less long-term deferred income taxes and claims for recovery in Brazil. F-55 A summary of the Company's operations by segment calculated under Chilean GAAP is as follows:
At and for the year end December 31, --------------------------------------------------------- 1999 2000 2001 ---- ---- ---- ThCh$ ThCh$ ThCh$ Revenue: Sales to unaffiliated customers: Soft drinks 350,666,236 401,333,184 419,088,787 Other beverages 41,161,746 36,792,102 43,921,712 Packaging 24,235,086 20,718,124 18,916,619 ------------- ------------- ------------- Subtotal 416,063,068 458,843,410 481,927,118 ------------- ------------- ------------- Intersegment sales: Soft drinks 176,178 394,517 -- Other beverages 17,237,415 17,560,044 15,267,770 Packaging 25,405,979 20,516,086 15,951,883 Eliminations (42,819,572) (38,470,647) (31,219,653) ------------- ------------- ------------- Subtotal -- -- -- ------------- ------------- ------------- Total revenue 416,063,068 458,843,410 481,927,118 ============= ============= ============= Operating income: Soft drink 31,525,050 50,007,312 48,995,042 Other beverages 6,231,055 6,042,150 6,394,049 Packaging 2,101,632 491,547 436,868 ------------- ------------- ------------- Total operating income 39,857,737 56,541,009 55,825,959 ------------- ------------- ------------- Depreciation: Soft drinks 31,865,178 32,874,675 34,791,462 Other beverages 1,576,560 1,399,423 1,371,181 Packaging 9,015,680 7,505,393 4,543,959 ------------- ------------- ------------- Total depreciation 42,457,418 41,779,491 40,706,602 ------------- ------------- ------------- Segment assets: Soft drinks 317,866,856 362,789,074 527,123,383 Other beverages 15,136,689 13,914,809 12,230,824 Packaging 73,406,766 44,339,912 17,472,834 ------------- ------------- ------------- Total segment assets 406,410,311 421,043,795 556,827,041 ------------- ------------- ------------- Capital expenditures: Soft drinks 30,933,460 19,935,893 19,512,396 Other beverages 559,154 952,838 863,903 Packaging 3,338,715 1,362,154 1,173,706 ------------- ------------- ------------- Total capital expenditures 34,831,329 22,250,885 21,550,005 ------------- ------------- -------------
F-56 A geographical summary of the Company's operations by segment calculated under Chilean GAAP is as follows:
At and for the year end December 31, --------------------------------------------------------- 1999 2000 2001 ---- ---- ---- ThCh$ ThCh$ ThCh$ Revenue: Sales to unaffiliated customers: Chile 194,795,345 193,638,007 190,452,996 Brazil 76,215,259 129,905,577 140,759,266 Argentina 145,052,464 135,299,826 150,714,856 -------------- -------------- -------------- Total revenue 416,063,068 458,843,410 481,927,118 -------------- -------------- -------------- Operating income: Chile 39,402,540 43,034,859 39,295,704 Brazil (1,555,415) 5,588,145 5,369,127 Argentina 2,010,612 7,918,005 11,161,128 -------------- -------------- Total operating income 39,857,737 56,541,009 55,825,959 -------------- -------------- Identifiable long-lived assets: Chile 127,726,925 118,926,144 271,390,927 Brazil 111,537,428 138,951,416 141,877,224 Argentina 141,787,813 134,904,829 127,142,073 -------------- -------------- -------------- Total identifiable long-lived assets 381,052,166 392,782,389 540,410,224 -------------- -------------- --------------
A reconciliation of total segment assets by product, and long-lived assets by country, to total consolidated assets for the years ended December 31, 1999, 2000 and 2001 is as follows:
At December 31, --------------------------------------------------------- 1999 2000 2001 ---- ---- ---- Industry ThCh$ ThCh$ ThCh$ -------- Total segment assets 406,410,311 421,043,795 556,827,041 Cash 8,255,294 12,530,835 13,868,565 Financial instruments 247,737,091 165,498,587 43,745,513 Amounts due from related parties 1,878,917 173,209 1,544,321 Recoverable taxes 12,790,538 9,381,558 5,473,501 Deferred income taxes 881,967 1,513,236 503,438 Investments in related companies 7,936,485 7,062,828 18,404,997 Investment in other companies 397,487 376,161 671,902 Intangible assets (net) 1,384,790 1,158,630 975,371 Liabilities deducted from segment assets 57,989,175 57,810,388 47,699,938 -------------- -------------- -------------- Total assets 745,662,055 676,549,227 689,714,587 -------------- -------------- -------------- Identifiable long-lived assets 381,052,166 392,782,389 540,410,224 Current assets 360,627,647 280,023,430 148,469,506 Deferred taxes-long term 377,459 638,383 -- Claims for recovery-Brazil 3,604,783 3,105,025 834,857 -------------- -------------- -------------- Total assets 745,662,055 676,549,227 689,714,587 -------------- -------------- --------------
F-57 d) Derivative financial instruments Derivative financial instruments are used by the Company principally in the management of its interest rate and foreign currency exposures. The Company does not hold or issue derivative financial instruments for trading purposes. Prior to January 1, 2001, deferral (hedge) accounting was applied only if the derivative reduced the risk of the underlying hedged item and was designated at inception as a hedge with respect to the hedged item. Additionally, the derivative was required to achieve results that were expected to be inversely correlated to those of the hedged item. If a derivative instrument ceased to meet the criteria for deferral accounting, any subsequent gains and losses were currently recognized in income. If a hedging instrument was sold or terminated prior to maturity, gains and losses continued to be deferred until the hedged item was recognized in income. Under US GAAP, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" effective January 1, 2001. SFAS No. 133 requires that all derivative instruments be recognized on the balance sheet at fair value and that changes in the fair value be recognized in income when they occur, the only exception being derivatives that qualify as hedges. To qualify the derivative instrument as a hedge the Company must meet strict hedge effectiveness and contemporaneous documentation requirements at the initiation of the hedge and assess the hedge effectiveness on an ongoing (quarterly) basis over the life of the hedge. The Company had no derivative financial instruments outstanding at December 31, 2000. At December 31, 2001 the Company had derivative financial instruments outstanding consisting of forwards to purchase US dollars with a notional amount of ThCh$ 60,869,405, all of which mature by the end of 2002. None of these derivative financial instruments were designed as hedges in accordance with USGAAP. During 2000 and 2001 the Company entered into forward contracts in its Chilean and Brazilian operations to manage its exposure associated with respect to foreign currency commitments in US dollars, which were primarily for raw materials purchases. The financial instruments described above involve elements of market risk and credit risk. Market risk is the possibility that future changes in foreign exchange or interest rates may make the financial instruments more or less valuable. Credit risk is the possibility of default by the counterparties. The loss that the Company would incur if a counterparty defaulted is significantly less than the instruments' notional value and the loss exposure is the fair value of the instrument. The Company does not require collateral or other security for the instruments. F-58 e) Operating income Under Chilean GAAP, the following income and expenses arising during the years ended 1999, 2000 and 2001 are classified as "Non-operating income and expense" whereas under US GAAP they would be included within "Operating income":
1999 2000 2001 ---- ---- ---- ThCh$ ThCh$ ThCh$ Operating income as reported under Chilean GAAP 39,857,737 56,541,009 55,825,959 Gain on sale of property, plant and equipment to Envases CMF S.A. -- -- 5,779,626 Impairment of property, plant and equipment (2,857,610) (8,272,754) (9,841,758) Loss on sale of property, plant and equipment (406,412) (144,042) (1,777,706) Staff severances indemnities (1,081,434) (4,868,900) (1,359,220) Litigation -- -- (708,461) Write-off of property, plant and equipment (2,073,094) (2,046,111) (539,657) Liquidation of container business -- -- (328,585) Change in estimate for guarantees on bottles 10,327,699 -- -- Other miscellaneous income 1,043,464 -- -- Profit on dissolution of Brazilian packgage business -- 562,979 -- ----------- ----------- ----------- Operating income under US GAAP format 44,810,350 41,772,181 47,050,198 =========== =========== ===========
f) Concentrations of credit risk The assets of the Company that are potentially subject to significant concentrations of credit risk are deposits held with banks and financial institutions and trade accounts receivable. The Company holds accounts with a variety of banks and does not hold significant deposits with any single bank. The Company has a wide customer base and trades with a large number of small customers. Consequently, the Company does not believe that it has any significant concentrations of credit risk at December 31, 2001. g) Disclosures regarding the fair values of financial instruments The estimated fair values of the Company's financial instruments were as follows:
At December 31, ------------------------------------------------------------------ 2000 2001 ---- ---- Carrying Fair Carrying Fair value value value value ----- ----- ----- ----- ThCh$ ThCh$ ThCh$ ThCh$ Long-term investment in bonds 12,191,819 11,889,827 126,143,054 126,422,220 Bonds payable (162,305,613) (146,321,623) (148,180,457) (144,550,567) Foreign currency contracts (net) -- -- (2,399,032) (3,283,821)
Long-term investment: The fair value of the investment in bonds was determined based on quoted market prices. F-59 Bonds payable: The fair value of bonds payable, including current portion, is estimated based on the quoted market price of the Company's U.S. dollar denominated bonds payable. Foreign currency contracts: The estimated fair values of the forward contracts are based on quoted market prices at year end. Management believes that the fair value of the Company's other financial instruments is not materially different from their respective book values, and therefore does not believe that the non-disclosure of such information would have a material effect on a reader's understanding of these financial statements. h) Concentrations of other risks The majority of the Company's net sales are derived from the distribution of Coca-Cola soft drinks. The Company produces, markets and distributes Coca-Cola soft drinks through standard bottler agreements between the Company's individual bottler subsidiaries and The Coca-Cola Company. Under the Bottler Agreements, The Coca-Cola Company unilaterally sets the prices for Coca-Cola soft drink concentrates sold to the Company. The Company is dependent on The Coca-Cola Company to renew such bottler agreements. The bottler agreements are subject to termination by The Coca-Cola Company in the event of default by the Company or upon expiration in accordance with their respective terms. No assurance can be given that the bottler agreements will be renewed upon their expiration. Termination or non-renewal of the bottler agreements would have a material adverse effect on the Company's business. The soft drink and non-alcoholic beverage business are highly competitive in each of the Company's franchise territories. In each of its franchise territories, the Company competes with bottlers of PepsiCo Inc. as well as bottlers of regional brands. The Company's soft drink products also compete generally with other non-alcoholic beverages. i) Recent accounting pronouncements In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations". SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001; the use of the pooling-of-interests method of accounting is prohibited after this date. This Statement does not fundamentally change the guidance for determining the cost of an acquired entity and allocating that cost to the assets acquired and liabilities assumed. It does establish specific criteria for the recognition of intangible assets separately from goodwill and requires unallocated negative goodwill to be written off immediately as an extraordinary gain (instead of being deferred and amortized). The Company did not complete any significant acquisitions between July 1, 2001 and December 31, 2001. Accordingly adoption of SFAS No. 141 had no impact on the US GAAP results at December 31, 2001. In July 2001, the FASB also issued SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 142 eliminates the amortization of goodwill and instead requires a periodic review of any goodwill balance for possible impairment. SFAS No. 142 also requires that goodwill be allocated at the reporting unit level. SFAS No. 142 is effective for years beginning after December 15, 2001. The Company has not yet completed the transitional impairment test required by SFAS No. 142 as of January 1, 2002. The Company is evaluating the effect of this statement on its financial position and results of operations F-60 In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, the entity either settles the obligation for the amount recorded or incurs a gain or loss. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The Company is evaluating the effect of this Statement on its financial position and results of operations. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 superseded FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of", and the accounting and reporting provisions of Accounting Principles Board Opinion ("APB") No. 30, "Reporting the Results of Operations - Reporting on the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" for the disposal of a segment of a business (as previously defined in APB No. 30). The FASB issued SFAS No. 144 to establish a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale. SFAS No. 144 broadens the presentation of discontinued operations in the income statement to include a component of an entity (rather than a segment of business). A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. SFAS No. 144 also requires that discontinued operations be measured at the lower of the carrying amount or fair value less cost to sell. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001 and should be applied prospectively. The Company is evaluating the effect of this Statement on its financial position and results of operations. j) Pro Forma Condensed Income Statement APB No. 16 "Business Combinations", requires the disclosure of certain pro forma information concerning to results of operations of the Company as though its acquisition of Nitvitgov Refrigerantes S.A. had occurred as of the beginning of 1999. The following unaudited pro forma information has been prepared for comparative purposes only and does not purpot to be indicative of the results of operations which actually would have been resulted had the acquisition occurred on the date indicated, or which may result in the future:
Year end December 31, --------------------- (In millions of constant pesos) 1999 2000 ---- ---- Net sales 460,215 473,288 Chilean GAAP net income 26,428 29,870 Basic and diluted earnings per share Series A under Chilean GAAP (1) 33.11 37.41 Basic and diluted earnings per share Series B under Chilean GAAP (1) 36.42 41.16 (1) (In millions of constant pesos)
F-61