-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PtghGWa32mNE8g8AU5lNT1zAymKPUWoyYkJRn3YntGlefzJvbRehXSCPlRZdiZ2o pLWu3jmpKx5N5NPI7wcegQ== 0000893750-06-000255.txt : 20060817 0000893750-06-000255.hdr.sgml : 20060817 20060817115507 ACCESSION NUMBER: 0000893750-06-000255 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20060817 FILED AS OF DATE: 20060817 DATE AS OF CHANGE: 20060817 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANDINA BOTTLING CO INC CENTRAL INDEX KEY: 0000925261 STANDARD INDUSTRIAL CLASSIFICATION: BOTTLED & CANNED SOFT DRINKS CARBONATED WATERS [2086] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13142 FILM NUMBER: 061039956 BUSINESS ADDRESS: STREET 1: CARLOS VALDOVINOS 560 STREET 2: LAS CONDES CITY: SANTIAGO CHILE STATE: F3 ZIP: 00000 BUSINESS PHONE: 5623380520 6-K 1 form6k.txt FORM 6-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 6-K ---------------- REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13a-16 OR 15b-16 OF THE SECURITIES EXCHANGE ACT OF 1934 August 17, 2006 Date of Report (Date of Earliest Event Reported) ---------------- Embotelladora Andina S.A. (Exact name of registrant as specified in its charter) Andina Bottling Company, Inc. (Translation of Registrant's name into English) Avenida Andres Bello 2687 Piso 20, Las Condes Santiago, Chile (Address of principal executive office) ---------------- Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F ___X___ Form 40-F _______ Indicate by check mark if the Registrant is submitting this Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): Yes _______ No ___X____ Indicate by check mark if the Registrant is submitting this Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): Yes _______ No ___X____ Indicate by check mark whether the registrant by furnishing the information contained in this Form 6-K is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 Yes _______ No ___X____ ---------------- EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES Consolidated financial statements June 30, 2006 (Translation of original in Spanish) CONTENTS Report of Independent Auditors Consolidated balance sheet Consolidated statement of income Consolidated statement of cash flows Notes to the consolidated financial statements Ch$ - Chilean pesos ThCh$ - Thousands of Chilean pesos US$ - United States dollars ThUS$ - Thousands of United States dollars R$ - Brazilian Reals ThR$ - Thousands of Brazilian Reals A$ - Argentine pesos ThA$ - Thousands of Argentine pesos UF - Unidades de Fomento (Chilean government inflation-indexed monetary units) EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
For the period ended June 30, 2006 2005 ---- ---- ThCh$ ThCh$ TOTAL CURRENT ASSETS 147,493,238 122,341,516 Cash 5,390,203 7,915,237 Time deposits 34,587,389 12,159,863 Marketable securities (net) 23,999,996 14,025,854 Trade accounts receivable (net) 20,668,536 20,547,113 Notes receivable (net) 5,540,011 4,919,622 Other receivables (net) 15,687,862 17,795,525 Notes and accounts receivable from related companies 1,085,679 63,377 Inventories (net) 20,722,259 22,173,782 Recoverable Taxes 8,983,614 7,763,887 Prepaid expenses 1,969,067 2,269,786 Other current assets 8,858,622 12,707,470 TOTAL PROPERTY, PLANT & EQUIPMENT 141,330,585 155,228,020 Land 13,029,428 12,665,684 Buildings & improvements 81,381,208 94,072,909 Machinery and equipment 215,561,988 224,351,770 Other property, plant & equipment 206,077,837 208,768,166 Technical reappraisal of property, plant & equipment 2,036,097 2,036,145 Depreciation (less) (376,755,973) (386,666,654) TOTAL OTHER ASSETS 220,710,382 295,970,937 Investments in related companies 21,171,549 21,112,009 Investments in other companies 56,414 57,236 Goodwill 72,069,144 86,599,086 Long-term receivables 125,830 43,674 Long-term notes and accounts receivable from related companies 34,492 37,767 Long-term Deferred Income Taxes 173,691 418,433 Intangibles 430,561 479,236 Amortization (253,180) (260,859) Others 126,901,881 187,484,355 TOTAL ASSETS 509,534,205 573,540,473
The accompanying Notes 1 to 41 are an integral part of these consolidated financial statements. 2
For the period ended June 30, 2006 2005 ---- ---- ThCh$ ThCh$ TOTAL CURRENT LIABILITIES 131,231,672 115,529,826 Short-term bank liabilities 47,860,930 38,770,696 Current portion of long-term bank liabilities 513,274 3,521,467 Current portion of bonds payable 13,802,176 13,890,815 Dividends payable 4,886,596 4,177,862 Accounts payable 30,498,203 28,928,062 Other creditors 2,925,266 3,793,452 Notes and accounts payable to related companies 6,835,499 4,461,197 Provisions 748,047 717,306 Withholdings 12,966,347 8,659,493 Income taxes payable 5,265,607 4,955,041 Unearned income 483,203 8,475 Deferred income taxes 843,321 876,585 Other current liabilities 3,603,203 2,769,375 TOTAL LONG-TERM LIABILITIES 135,751,172 191,219,632 Long-term bank liabilities 324,592 48,866,692 Bonds payable 97,602,630 111,707,849 Other creditors 185,808 180,350 Notes and accounts payable from related companies 3,701,143 0 Provisions 25,009,563 22,639,794 Other long-term liabilities 8,927,436 7,824,947 MINORITY INTEREST 1,169,626 55 TOTAL SHAREHOLDERS' EQUITY 241,381,735 266,790,960 Paid-in capital 197,904,994 198,096,021 Reserve capital revalued 2,176,955 1,980,960 Other reserves 4,912,684 19,177,236 Retained earnings 36,387,102 47,536,743 Accumulated earnings 9,908,239 26,620,265 Net income for the period 30,949,277 24,890,038 Interim dividends (less) (4,470,414) (3,973,560) TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 509,534,205 573,540,473
The accompanying Notes 1 to 41 are an integral part of these consolidated financial statements. 3 EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
For the period ended June 30 2006 2005 ---- ---- ThCh$ ThCh$ OPERATING INCOME 40,354,534 34,612,536 Gross Margin 105,745,384 92,993,718 Net Sales 255,652,507 236,689,004 Cost of sales (149,907,123) (143,695,286) Administrative and selling expenses (65,390,850) (58,381,182) NON OPERATING INCOME AND EXPENSE (3,192,579) (5,537,002) Financial Income 5,112,760 8,735,738 Equity in earnings of equity investments 344,075 923,536 Other non-operating income 444,448 3,011,000 Equity in losses of equity investments 0 (113,207) Amortization of goodwill (3,258,505) (3,628,070) Financial Expenses (10,311,202) (11,987,456) Other non-operating expenses (946,685) (7,799,405) Price level restatement (570,876) (260,052) Foreign exchange gains 5,993,406 5,060,810 Income before income taxes and extraordinary items 37,161,955 29,075,534 Income tax expense (6,173,603) (4,185,497) Income before minority interest 30,988,352 24,890,037 Minority interest (39,075) 1 NET INCOME 30,949,277 24,890,038 NET INCOME FOR THE PERIOD 30,949,277 24,890,038
The accompanying Notes 1 to 41 are an integral part of these consolidated financial statements. 4 EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW
For the period ended June 30 2006 2005 ---- ---- ThCh$ ThCh$ NET CASH PROVIDED BY OPERATING ACTIVITIES 60,405,627 45,155,248 Collection of trade receivables 387,650,772 358,475,921 Financial income received 6,487,898 7,651,626 Dividend & other distributions received 1,466,479 1,442,259 Other income received 37,455 24,942 Payments to suppliers and personnel (273,646,735) (270,434,360) Interest paid (5,812,141) (6,789,687) Income taxes paid (5,985,419) (2,975,002) VAT and other tax payments (49,792,682) (42,240,451) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (50,305,619) (53,816,340) Borrowings 33,248,317 48,491,894 Dividend distribution (61,622,286) (65,830,991) Loan payments (15,999,963) (30,448,512) Bond payments (5,931,687) (6,028,731) NET CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES (5,050,721) 4,030,078 Proceeds from sales of property, plant and equipment 1,160,724 795,922 Proceeds from sales of permanent investments 5,067,272 0 Proceeds from sales of other investments 3,032,129 37,367,825 Additions to property, plant & equipment (14,230,579) (12,977,580) Permanent investments (892) (1,747) Investments in financial instruments (79,375) (21,154,342) TOTAL NET CASH FOR THE PERIOD 5,049,287 (4,631,014) EFFECT OF INFLATION ON CASH AND CASH EQUIVALENTS (999,631) 1,639,760 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 4,049,656 (2,991,254) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 21,961,507 28,942,797 CASH AND CASH EQUIVALENTS AT END OF PERIOD 26,011,163 25,951,543
The accompanying Notes 1 to 41 are an integral part of these consolidated financial statements. 5 EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES RECONCILIATION BETWEEN NET INCOME AND NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
For the period ended June 30 2006 2005 ---- ---- ThCh$ ThCh$ NET INCOME 30,949,277 24,890,038 Income on sale of assets: -245,917 -2,061,728 Gain on sale of property, plant and equipment -245,917 -83,057 Gain on sale of investments 0 -1,977,110 Gain on sale of other assets 0 -1,561 ADJUSTMENTS TO NET INCOME THAT DO NOT REPRESENT MOVEMENTS OF CASH 12,160,419 15,459,974 Depreciation 15,135,317 15,785,362 Amortization of intangibles 146,148 164,545 Write-offs and provisions -751,808 4,628,965 Equity in earnings of equity investments -344,075 -923,536 Equity in losses of equity investments 0 113,207 Amortization of goodwill 3,258,505 3,628,070 Price-level restatement 570,876 -260,052 Foreign exchange gains, net -5,993,406 -5,060,810 Other credits to income that do not represent cash flows -16,906 -2,615,777 Other charges to income that do not represent cash flows 155,768 0 CHANGES IN OPERATING ASSETS 23,062,208 -1,349,260 (Increase) decrease in trade accounts receivable 26,499,975 17,280,784 (Increase) decrease in inventories 585,910 -99,741 (Increase) decrease in other assets -4,023,677 -18,530,303 CHANGES IN OPERATING LIABILITIES -5,559,435 8,216,225 Increase (decrease) in accounts payable related to operating income -10,167,204 -12,578,077 Increase (decrease) in interest payable 9,301,450 14,626,859 Increase (decrease) in income taxes payable -1,114,753 1,863,005 Increase (decrease) in other accounts payable related to non-operating income -259,371 3,832,455 Increase (decrease) in VAT and other similar items -3,319,557 471,983 Minority interest 39,075 -1 NET CASH PROVIDED BY OPERATING ACTIVITIES 60,405,627 45,155,248
The accompanying Notes 1 to 41 are an integral part of these consolidated financial statements. 6 NOTE 1 - INCORPORATION IN THE SECURITIES REGISTER - ------------------------------------------------- Embotelladora Andina S.A. was incorporated in the Securities Register under No. 00124 and, in conformity with Law 18,046. is subject to the supervision of the Chilean Superintendency of Securities and Insurance Companies (the "SVS"). NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - ----------------------------------------------------- a) Accounting period The consolidated financial statements cover the period January 1 to June 30, 2006 and are compared to the same period in 2005. b) Basis of preparation The consolidated financial statements have been prepared in conformity with generally accepted accounting principles issued by the Chilean Institute of Accountants, as well as rules and regulations of the SVS. In the event of discrepancy, the SVS regulations will prevail. c) Basis of presentation For comparison purposes, the figures in the prior-year financial statements have been restated by 3.7% according to CPI and minor reclassifications have been made. d) Basis of consolidation The accompanying financial statements include assets, liabilities, income and cash flows of the Parent Company and its subsidiaries. The equity and income accounts of the Parent Company and its subsidiaries have been combined, eliminating investments and current accounts between consolidated companies, transactions between them and the unrealized income from intercompany transactions. In addition, for proper presentation of consolidated net income, the participation in income by minority shareholders is shown in the consolidated statements of income under Minority interest. Holding percentages The subsidiaries included in the consolidated financial statements and Andina's direct and indirect holding percentages are as follows:
Ownership Interest June 30, 2006 June 30, 2005 Company Name Direct Indirect Total Total - ------------ ------ -------- ----- ----- ABISA CORP S.A. - 99.99 99.99 99.99 ANDINA BOTTLING INVESTMENTS S.A. 99.90 0.09 99.99 99.99 ANDINA INVERSIONES SOCIETARIAS S.A. 99.99 - 99.99 99.99 ANDINA BOTTLING INVESTMENTS DOS S.A. 99.90 0.09 99.99 99.99 EMBOTELLADORA DEL ATLANTICO S.A. - 99.99 99.99 99.99 ENVASES MULTIPACK LTDA. 5.00 94.99 99.99 99.99 RIO DE JANEIRO REFRESCOS LTDA. - 99.99 99.99 99.99 SERVICIOS MULTIVENDING LTDA. 99.90 0.09 99.99 99.99 TRANSPORTE ANDINA REFRESCOS LTDA. 99.90 0.09 99.99 99.99 VITAL S.A. - 99.99 99.99 99.99 RJR INVESTMENTS CORP S.A. - 99.99 99.99 99.99 VITAL AGUAS S.A. 56.50 - 56.50 - ANDINA INVERSIONES SOCIETARIAS DOS S.A. 99.99 - 99.99 -
7 e) Price-level restatement The financial statements have been restated to reflect the effect of price-level changes on the purchasing power of the Chilean peso during the respective periods. Restatements have been determined on the basis of the percentage variation of the official Chilean Consumer Price Index, "CPI", issued by the Chilean National Institute of Statistics, which amounted to 1.1% for the period December 1, 2005 to May 31, 2006 (1.0% for the same period of the previous year). f) Currency translation Balances in foreign currency are considered as non-monetary items and are translated at the exchange rate prevailing at year-end. UF denominated balances have been restated according to CPI changes or the agreed rate. Assets and liabilities in foreign currency and Unidades de Fomento have been translated into local currency at the following year-end exchange rates:
2006 2005 ---- ---- Ch$ Ch$ Unidades de Fomento (UF) 18.151,40 17.489,25 United States dollars (US$) 539,44 579,00 Argentine pesos (A$) 174,80 200,55 Brazilian Real (R$) 249,24 246,34 Euro 689,91 700,80
g) Marketable securities Marketable securities include investments in mutual funds and investment fund shares, valued at the redemption value for each year end. Investments in bonds with a pre-established value are valued at the adjusted cost, plus accrued interest. h) Inventories The cost of raw materials includes all disbursements made in the acquisition process and deemed necessary for them to be readily available at the Company's or it's subsidiaries' warehouse. The costs of finished products include all manufacturing costs. Raw materials and finished products are valued at the average weighted cost. Provisions are made for obsolescence on the basis of turnover of raw materials and finished products. The stated values of inventories do not exceed their estimated net realizable value. i) Allowance for doubtful accounts The allowance for doubtful accounts consists of a general provision determined on the basis of the aging of debts and on a case-by-case analysis where collection is doubtful. In the opinion of the Company's management, the allowances are reasonable and the net balances are recoverable. 8 j) Property, plant and equipment Property, plant and equipment are carried at restated cost plus price-level restatements. Technical reappraisal of property, plant and equipment, authorized by the SVS on December 31, 1979, is shown at restated value under the heading "Technical reappraisal of property, plant and equipment". Fixed assets to be disposed of for sale are valued at the lower of the net realizable value and book value. Unrealized losses are reflected in the consolidated statement of income under Other non-operating expenses. k) Depreciation Depreciation of property, plant and equipment is determined by the straight-line method based on the estimated useful lives of the revalued assets. l) Containers Inventories of containers, bottles and plastic containers at plants, warehouses, and with third parties are stated at cost plus price-level restatements and are included in Other property, plant and equipment. Broken or damaged containers at plants and warehouses are expensed in each accounting period. m) Investments in related companies Investments in shares or rights in companies in which the Company has a significant holding in the investee are accounted for using the equity method. The Company's proportionate share of net income and losses of related companies is recognized in the consolidated statements of income, after eliminating any unrealized profits or losses from transactions between related companies. Investments in foreign companies are valued in conformity with Technical Bulletin No. 64 issued by the Chilean Institute of Accountants. The United States ("US") dollar is the currency used to control investments and to translate financial statements of foreign companies. Assets and liabilities from these investments are translated into Chilean pesos at year end exchange rate, except that non-monetary assets and liabilities and shareholders' equity are first expressed at their equivalent value in historical US dollars. Income and expense items are first translated into US dollars at the average exchange rate during the month. n) Intangibles Intangibles include franchise rights and licenses that are amortized over the terms of the contracts, not in excess of 20 years. o) Goodwill Goodwill represents the difference between purchase cost of the shares acquired and the proportional equity value of investment on the purchase date. These differences are amortized based on the expected period of return of the investment, estimated at 20 years. p) Bonds payable Bonds payable includes the placement of Yankee Bonds on the US markets and placement of bonds in UF in Chile, which are carried at the issue rate. The difference in valuation as compared to the effective placement rate is recorded as a deferred asset. This asset is amortized using the straight-line method over the term of the respective obligations. 9 q) Income taxes and deferred income taxes The companies have recognized its current tax obligations in conformity with current legislation. The effects of deferred income taxes arising from temporary differences between the basis of assets and liabilities for tax and financial statement purposes are recorded on the basis of the enacted tax rate that will be in effect at the estimated date of reversal, in conformity with Technical Bulletin No. 60 issued by the Chilean Institute of Accountants. The effects of deferred income taxes existing at the time of the enforcement of the aforesaid Bulletin, i.e. January 1, 2000, and not previously recognized, are recorded as gain or loss according to their estimated reversal period. r) Staff severance indemnities The Company has recorded a liability for long-term service indemnities in accordance with the collective agreements entered into with its employees. The provision is stated at present value of the projected cost of the benefit, which is discounted at a 7.0% annual rate and a capitalization period using the staff's expected length of service to their retirement date. Since the year 2005, the Company maintains a withholding plan for some officers. A liability is recorded according to the guidelines of this plan. The plan entitles certain officers of the Company to receive a fixed payment in cash at a predetermined date once he has fulfilled years of service. s) Deposits for containers Corresponds to the liabilities constituted by cash guarantees received from clients for lending bottles to them. The amount of such inventory is determined annually through an annual inventory of containers in the possession of clients. This inventory is valued at the average weighted value of the guarantee for the last seven years, for each type of container, and the effect is recorded in the operating income of the Company for those container guarantees established through January 31, 2001. These guarantees are not adjustable and they do not have an expiration date; therefore, the liability valuation was calculated for the seven aforesaid years. For those loans for placement subsequent to January 31, 2001, an expiration date of five years as from the invoice date was established. In the event the client has not returned all or a portion of the containers and/or cases, the Company may, without delay, enforce the guarantee, in whole or in part, in cash and record that effect in operating income of the Company. This liability is presented in Other long-term liabilities, considering that the number of new containers in circulation in the market during the year is historically greater than the number of containers returned by clients during the same period. t) Revenue recognition Given the nature of its operations, the Company records revenue based on the physical delivery of finished products to its clients, based on the realization principle and in accordance with Technical Bulletin No. 70 issued by the Chilean Institute of Accountants. u) Derivative contracts Derivative contracts include forward and swap currency contracts used to cover the risk of exposure to exchange rate differences as follows: 10 These hedge instruments are recorded at their market values for existing items. Unrealized losses are recognized as a charge to income and gains are deferred and included in Other liabilities (current or long-term), depending on whether the difference is a loss or gain. Hedge contracts for forecasted transactions are recorded at market value and their changes in value are accounted for as unrealized gains or losses. Upon contract expiration, the deferred gains and losses are recorded in income. v) Computer software Software currently in use corresponds to computer packages purchased from third parties, and programs developed internally. Software purchased from third parties is capitalized and amortized over a maximum period of four years. Disbursements incurred for internally developed programs are expensed. w) Research and development costs Costs incurred by the Company in research and development are immaterial given the nature of the business and the strong support from The Coca-Cola Company to its bottlers. x) Consolidated statement of cash flows For purposes of preparation of the statement of cash flow, the Company has considered cash equivalent to be investments in fixed-income mutual funds and time deposits maturing within 90 days, repurchase agreements maturing within 90 days. Cash flows from operating activities include all business-related cash flows as well as interest paid, financial income and, in general, all cash flows not defined as from financial or investment activities. The operating concept used for this statement is broader than that in the statement of income. NOTE 3 - ACCOUNTING CHANGES - --------------------------- There are no changes in the application of generally accepted accounting principles in Chile in relation to the previous year that could significantly affect the comparability of these financial statements. NOTE 4 - MARKETABLE SECURITIES - ------------------------------ The composition of the balance at June 30, 2006, was as follows:
Accounting value for the period ended June 30, --------------------------------------------- 2006 2005 ---- ---- ThCh$ ThCh$ Bonds 4,504,950 8,149,412 Mutual Funds 6,806,561 2,499,896 Investment Funds 12,688,485 3,376,546 Total Marketable Securities 23,999,996 14,025,854
Fixed Income Date Accounting value Purchase Maturity Par Value Amount Rate Market Value Provision -------- -------- --------- ------ ---- ------------ --------- ThCh$ ThCh$ ThCh$ SUDAMERICANO 09-06-2005 03-15-2007 1,823,990 4,597,047 7,60% 1,774,677 49,313 11 SUDAMERICANO 11-30-2004 03-15-2007 2,773,057 2,773,057 7,60% 2,730,273 42,784
Mutual Funds and Investment Funds Balance as of June 30, 2006 - --------------------------------- --------------------------- ThCh$ Citi Institutional Liquid Reserves Limited 12,688,485 Fondo Mutuo BBVA 3,385,000 Fondo Mutuo BESTADO 1,985,000 Fondo Mutuo B.SCOTIABANK 673,000 Fondo Mutuo CITI CORP 763,561 Total 19,495,046
12 NOTE 5 - SHORT-AND LONG-TERM RECEIVABLES - ---------------------------------------- Almost all these accounts correspond to the soft drink business.
Current ------------------------------------------------------------------------------------------ More than 90 days Up to 90 days up to 1 year Subtotal Total Current (net) Long Term -------------- ------------------ -------- ------------------- --------- Jun 30, Jun 30, Jun 30, June 30, Jun 30, June 30, Jun 30, June 30, June 30, 2006 2005 2006 2005 2006 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- ---- ---- ---- ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Trade receivables 20,749,769 18,770,638 1,223,892 1,776,475 21,973,661 20,668,536 20,547,113 0 0 Allowance for doubtful accounts 1,305,125 Notes receivable 5,701,912 3,993,921 380,717 925,701 6,082,629 5,540,011 4,919,622 46,937 0 Allowance for doubtful accounts 542,618 Other receivables 15,271,112 17,536,134 500,578 259,391 15,771,690 15,687,862 17,795,525 78,893 43,674 Allowance for doubtful accounts 83,828 Total long term receivables 125,830 43,674
13 NOTE 6 - BALANCES AND TRANSACTIONS WITH RELATED COMPANIES - --------------------------------------------------------- Accounts payable and receivable with related companies correspond mainly to product purchases and sales made at market conditions. These balances are due within approximately 45 days. Accounts receivable from Embonor S.A. and Embotelladora Coca-Cola Polar S.A. correspond to sale price of Vital Aguas S.A. shares according to the operation described under Note 14 hereto. a) Notes and accounts receivable
Company Short Term Long Term Jun. 30, 2006 Jun. 30, 2005 Jun. 30, 2006 Jun. 30, 2005 ------- ------------- ------------- ------------- ------------- ThCh$ ThCh$ ThCh$ ThCh$ CENTRALLI REFRIGERANTE 0 63,377 0 0 COCA-COLA DE CHILE S.A. 446,691 0 34,492 37,767 EMBONOR S.A. 296,438 0 0 0 EMBOTELLADORA COCA-COLA POLAR S.A. 342,550 0 0 0 TOTAL 1,085,679 63,377 34,492 37,767
b) Notes and accounts payable
Short Term Long Term Company Jun. 30, 2006 Jun. 30, 2005 Jun. 30, 2006 Jun. 30, 2005 ------- ------------- ------------- ------------- ------------- ThCh$ ThCh$ ThCh$ ThCh$ COCA-COLA DE ARGENTINA S.A. 0 1,863,883 0 0 ENVASES CMF S.A. 2,076,838 1,472,743 0 0 ENVASES CENTRAL S.A. 823,686 481,015 0 0 COCA-COLA DE CHILE S.A. 0 275,936 0 0 ENVASES DEL PACIFICO S.A. 200,701 220,941 0 0 RECOFARMA INDUSTRIAS DO AMAZONAS LTDA. 2,137,118 129,633 0 0 CICAN S.A. 147,468 17,046 0 0 SPBR S.R.L. 1,449,688 0 0 0 EMBONOR S.A. 0 0 2,947,463 0 EMBOTELLADORA COCA COLA POLAR S.A. 0 0 753,680 0 TOTAL 6,835,499 4,461,197 3,701,143 0
14 c) Transactions with related companies were as follows:
Company Relation Transaction Jun. 30, 2006 Jun. 30, 2005 Effect on Income Effect on Income ------------------------- ------------------------ Company Relation Transaction Amount ((charge)/credit) Amount ((charge)/credit) - ------- --------- ----------- ------ ---------------- ------ ----------------- ENVASES CENTRAL S.A Equity Investee Sales of raw materials and 525,774 468,248 8,437 supplies - - Finished Product purchases 6,867,754 6,353,204 COCA-COLA DE CHILE S.A. Shareholder Collection of advertising 610,075 715,803 related participation - - Concentrate purchase 18,251,657 18,066,034 - - Payment of advertising 630,196 ( 630,196) 1,266,738 ( 1,266,738) participation - - Water source rental 772,691 ( 772,691) 931,368 ( 931,368) COCA-COLA DE ARGENTINA Shareholder Payment of advertising 1,189,070 ( 1,189,070) 1,140,543 ( 1,140,543) S.A. related participation ENVASES DEL PACIFICO Director in Purchase of raw materials 324,588 410,118 common RECOFARMA INDUSTRIAS DO Shareholder Concentrate purchase 19,876,448 16,807,142 related - - Payment of advertising 1,598,513 (1,598,513) 1,308,951 ( 1,308,951) participation ENVASES CMF Equity Investee Purchase of containers 1,308,562 1,955,901 - - Purchase of raw materials 5,585,501 5,062,409 - - Dividend Payment 1,465,581 1,265,555 SPBR S.R.L. (ARGENTINA) Shareholder Concentrate purchase 10,255,671 9,849,561 related EMBONOR S.A. Shareholder Sale of finished products 1,541,447 related EMBOTELLADORA COCA-COLA Shareholder Sale of finished products 1,112,636 POLAR S.A. related
15 NOTE 7 - INVENTORIES Inventories at each year end consisted of the following:
June 30, 2006 June 30, 2005 Gross Obsolescence Net Gross Obsolescence Net value provision Value value provision Value ----- --------- ----- ----- --------- ----- ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Finished Products 8,683,027 (343,597) 8,339,430 9,216,731 (51,118) 9,165,613 Products in process 1,392,233 0 1,392,233 171,935 0 171,935 Raw Materials 9,447,066 (49,347) 9,397,719 11,985,006 (152,906) 11,832,100 Raw Materials in Transit 1,645,563 (52,686) 1,592,877 1,004,134 0 1,004,134 Total 21,167,889 (445,630) 20,722,259 22,377,806 (204,024) 22,173,782
NOTE 8 - INCOME TAXES AND DEFERRED INCOME TAXES a) At period end 2006 and 2005, the Company does not present taxable profits funds or non-taxable profits. (Short-term and long-term assets and liabilities must be netted out to conform the general balance sheet on deferred taxes). b) Deferred income taxes at each year-end were as follows:
June 30, 2006 June 30, 2005 ----------------------------------------- ----------------------------------------- Assets Liabilities Assets Liabilities ------------------ ------------------- ------------------ ------------------- Short Long Short Long Short Long Short Long Term Term Term Term Term Term Term Term ---- ---- ---- ---- ---- ---- ---- ---- Temporary Differences ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ - --------------------- Allowance for doubtful accounts 298,636 34,624 0 0 484,151 102,264 0 0 Vacation provision 136,671 0 0 0 121,409 0 0 0 Production expenses 14,411 0 0 0 0 0 0 0 Depreciation of property, plant & 0 0 108,234 3,961,239 0 0 134,581 4,735,947 equipment Severance indemnities 0 168 46,060 319,153 47,845 0 0 295,053 Allowance for asset write off 258,877 1,460,068 0 0 212,249 1,200,771 0 0 Allowance for labor lawsuits 0 5,324,000 0 0 0 4,483,751 0 0 Tax loss carry forwards 1,072,663 7,340,411 0 0 679,914 13,956,586 0 0 Guarantee Deposit 0 0 0 2,631,033 0 0 0 2,787,167 Others 845,653 678,498 0 82,497 628,722 1,333,996 89,821 251,722 Local bonds issue expenses 0 0 0 221,748 0 0 0 191,976 Contingency allowance 0 1,998,233 0 0 0 1,942,228 0 0 Social Contribution 386,158 2,207,463 0 0 244,769 2,866,327 0 0 Accrued interests 0 0 3,702,096 0 0 0 3,071,242 0 Others Complementary accounts-net of 0 4,456,500 2,915,482 0 4,567,555 0 3,463,284 amortization Valuation allowance 0 10,113,086 0 16,101,354 Total 3,013,069 4,473,879 3,856,390 4,300,188 2,419,059 5,217,014 3,295,644 4,798,581
16 d) Income tax expense for each year was as follows:
Item June 30, 2006 June 30, 2005 - ---- ------------- ------------- ThCh$ ThCh$ Current tax expense (tax allowance) ( 5,188,756) ( 4,454,147) Tax expense adjustment (previous period) (164,544) 488,775 Deferred income tax expense/effect over assets or liabilities (1,562,867) ( 1,436,426) Amortization of deferred income tax asset and liability complementary accounts (558,332) ( 740,819) Deferred income tax expense/effect over assets or liabilities due to changes 1,198,682 2,033,625 in the valuation allowance Other charges or credits 102,214 ( 76,505) Total ( 6,173,603) ( 4,185,497)
NOTE 9 - SHORT AND LONG-TERM LEASING AGREEMENTS AND LEASING ASSETS Not applicable. NOTE 10 - OTHER CURRENT ASSETS
2006 2005 ThCh$ ThCh$ ----- ----- Materials and supplies 5,058,078 4,999,086 Accrued interests long term bonds 1,567,558 4,454,830 Advertising Agreements 153,601 373,998 Bond issue expenses and par value difference 376,856 399,355 Cross Currency Swap Effect 1,448,840 2,367,879 Others 253,689 112,322 Total 8,858,622 12,707,470
NOTE 11 - REPURCHASE / RESALE AGREEMENTS The Company had no repurchase/resale agreements. NOTE 12 - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist principally of land, buildings, improvements and machinery. Machinery and equipment included production lines and supporting equipment; sugar processing and liquefaction equipment; transportation machinery; and computer equipment. The Company has purchased insurance to cover its fixed assets and inventories. These assets are distributed as follows: Chile : Santiago, Renca, Rancagua, San Antonio and Rengo Argentina : Buenos Aires, Mendoza, Cordoba, and Rosario Brazil : Rio de Janeiro, Niteroi, Campos, Cabo Frio, Nova Iguazu, Espirito Santo and Vitoria. 17 a) Principal components of property, plant and equipment at each year end are as follows:
Balances at June 30, 2006 Balances at June 30, 2005 -------------------------------------- ------------------------------------- Net Net property, property, Accumulated plant & Accumulated plant & Assets Depreciation equipment Assets Depreciation equipment ------ ------------ --------- ------ ------------ --------- ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Land 13,029,428 0 13,029,428 12,665,684 12,665,684 Buildings and improvements 81,381,208 ( 32,010,184) 49,371,024 94,072,909 ( 38,615,003) 55,457,906 Machinery and equipment 215,561,988 ( 168,651,778) 46,910,210 224,351,770 ( 170,080,579) 54,271,191 Other property, plant and equipment 206,077,837 ( 175,477,450) 30,600,387 208,768,166 ( 177,364,152) 31,404,014 Technical reappraisal of property, plant & equipment 2,036,097 ( 616,561) 1,419,536 2,036,145 ( 606,920) 1,429,225 Totals 518,086,558 (376,755,973) 141,330,585 541,894,674 ( 386,666,654) 155,228,020
b) Other property, plant and equipment at each year end were as follows:
Balances at June 30, 2006 2005 ---- ---- ThCh$ ThCh$ Containers 113,099,693 112,522,741 Refrigerating equipment, promotional items and other minor assets 56,254,943 58,792,943 Furniture and tools 3,938,270 3,972,192 Other 32,784,931 33,480,290 Total other property, plant and equipment 206,077,837 208,768,166
c) Gain on Technical reappraisal of property, plant and equipment at each year end was as follows:
Balances at June 30, 2006 Balances at June 30, 2005 ------------------------------------------ -------------------------------------------- Net property, Net property, Accumulated plant & Accumulated plant & Assets Depreciation equipment Assets Depreciation equipment ----------- ------------ ----------- ---------- ------------ -------------- Land 1,359,716 0 1,359,716 1,359,682 0 1,359,682 Buildings and improvements 190,360 ( 130,835) 59,525 190,355 ( 126,328) 64,027 Machinery and equipment 486,021 ( 485,726) 295 486,108 ( 480,592) 5,516 Totals 2,036,097 ( 616,561) 1,419,536 2,036,145 ( 606,920) 1,429,225
d) Depreciation for the period 18 Depreciation for the period amounted to ThCh$15,135,317 and ThCh$11,050,073 are included, under Operating Costs and ThCh$4,085,244 under Sales and Administrative Expenses in the Income Statement. NOTE 13 - SALES TRANSACTIONS UNDER LEASEBACK AGREEMENTS The Company had no agreements of this type. NOTE 14 - INVESTMENT IN RELATED COMPANIES 1. Investment in related companies and the corresponding direct shareholding in equity, as well as the recognition of unrealized income at year end of the respective years, are shown in the table attached. The main changes occurred in the reported periods are described below: Centralli Refrigerantes S.A. records a negative equity, which has been provisioned accordingly. The investments in Kaik Partipacoes Ltda. (Brazil) and in Cican S.A. (Argentina), where Embotelladora Andina S.A. holds an indirect ownership of 11.32% and 15.2% respectively, have been valued according to the equity method, because we have presence in both companies through a Director, who participates in the procedures for setting policies, operating and financial decisions in accordance with the ownership structure of both companies, which are exclusively owned by Coca-Cola bottlers in Brazil and Argentina, respectively. The investment in Envases Central S.A. is presented with a 48% reduction (the percentage share on the date of transaction) of the earnings generated during the sale to Envases Central during December 1996 for property located in Renca, because this transaction represents unrealized income for Embotelladora Andina S.A. The amount of the reduction is reflected in the following chart. This transaction will be realized once the property is transferred to a third party different from the group. The investment in Envases CMF S.A. is presented with a 50% reduction of the earnings generated during the sale of machinery and equipment of our subsidiary Envases Multipack S.A. which took place in June, 2001, and will be recorded under Results during the remaining useful life period of the goods sold to Envases CMF S.A. On December 22, 2005 the production and packaging business of waters, juices and non-carbonated beverages licensed by The Coca-Cola Company ("TCCC") in Chile was restructured. Vital Aguas S.A. is created with the purpose of developing the de process, production and packaging business of Vital de Chanqueahue Mineral Water and other water and products according to the terms of the contracts and authorizations agreed upon by Vital Aguas S.A. and TCCC. Consequently, Vital S.A. will focus on juices and non-carbonated beverages. Accordingly, Embotelladora Andina S.A., Embonor S.A. and Embotelladora Coca-Cola Polar S.A. have taken an interest of 56.5%, 26.4% and 17.1%, respectively, in Vital Aguas S.A., which will conduct the business of the processing, production and bottling of the Vital de Chanqueahue Mineral Water and other water and products, according to the terms of the contracts and authorizations agreed upon by Vital Aguas S.A. and TCCC. 19 The equity interests of Embonor S.A. and Embotelladora Coca-Cola Polar in Vital Aguas S.A. were acquired by purchase from Embotelladora Andina S.A. and its subsidiary, Andina Inversiones Societarias S.A., at the prices equivalent to 169,306 Unidades de Fomento and 109,428 Unidades de Fomento, respectively, generating earnings of ThCh$3,890,351 (historical Chilean pesos) (215,919 Unidades de Fomento), as of December 31, 2005. Unrealized income corresponds to transactions between subsidiaries and/or the parent company that have been deducted or added to the category of the originating asset with the following effect on income of the subsidiaries: 2006 2005 ------- --------- ThCh$ ThCh$ Envases CMF S.A. Purchase of containers (422.864) (454.270) Envases Central S.A. Purchase of finished products (4.726) (12.058) 2. No liabilities have been designated as hedging instruments for investments abroad. 3. Income likely to be remitted by subsidiaries abroad amounts to US$179 million. 20 Investments in related companies and the related direct participation in equity and unrealized results at each year end were as follows.
Number Functional of Ownership Equity of Income (loss) Company Country Currency shares interest companies for the period Accrued Income - -------------- ------- ---------- -------- ---------------- ------------------- ------------------ ------------------- Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2006 2005 2006 2005 2006 2005 2006 2005 ------- ------- ---------- ---------- --------- --------- ------- --------- ENVASES CMF CHILE Ch$ 28,000 50.0000 50.0000 35,037,546 35,158,575 1,246,937 1,360,381 200,605 225,921 S.A. CICAN S.A. ARGENTINA US$ 3,040 15.2000 15.2000 8,085,490 6,485,316 784,589 1,283,471 119,258 195,088 KAIK BRASIL US$ 16,098,919 11.3197 11.3197 13,077,493 12,865,187 792 4,439,403 90 502,527 PARTIPACOES ENVASES CENTRAL CHILE Ch$ 1,499,398 49.9100 49.9100 4,501,936 4,953,185 57,800 (202,664) 24,122 (113,207) S.A. TOTAL
(Table Cont'd) Partic in net Unrealized Book Value of Company income (loss) income (loss) Investment - -------------- ----------------------- --------------------- ---------------------- Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, 2006 2005 2006 2005 2006 2005 ----------- ---------- --------- --------- ----------- ---------- ENVASES CMF 17,518,773 17,579,287 1,080,675 1,158,694 16,438,098 16,420,593 S.A. CICAN S.A. 1,228,994 985,768 1,228,994 985,768 KAIK 1,480,333 1,456,301 1,480,333 1,456,301 PARTIPACOES ENVASES CENTRAL 2,246,916 2,472,134 222,792 222,787 2,024,124 2,249,347 S.A. TOTAL 22,475,016 22,493,490 1,303,467 1,381,481 21,171,549 21,112,009
21 NOTE 15 - INVESTMENTS IN OTHER COMPANIES In accordance with Circular 1501, no information was reported since this balance represents less than 10% of Other assets. NOTE 16 - GOODWILL AND NEGATIVE GOODWILL Goodwill at each year end and the amortization during each year were as follows:
June 30, 2006 June 30, 2005 --------------------------------- -------------------------------- Amortization during the Goodwill Amortization Goodwill Company period balance during the period balance ------- -------------- ------------- ----------------- ---------- Company ThCh$ ThCh$ ThCh$ ThCh$ RIO DE JANEIRO REFRESCOS LTDA. 1,812,775 43,849,740 1,984,774 52,016,054 EMBOTELLADORA DEL ATLANTICO S.A. 1,413,083 27,599,104 1,572,830 33,864,808 VITAL S. A. 32,647 620,300 70,466 718,224 -------------- ------------- ------------ ---------- TOTAL 3,258,505 72,069,144 3,628,070 86,599,086 ============== ============= ============ ==========
NOTE 17 - INTANGIBLES In accordance with Circular 1501, no information was reported since the balance represents less than 10% of Other assets. 22 NOTE 18 - OTHER LONG TERM ASSETS Other long term assets at each year end were as follows:
2006 2005 ---------- ---------- ThCh$ ThCh$ Bonds Celulosa Arauco S.A. 12,288,790 13,779,255 Enap S.A. 9,596,866 10,935,320 Endesa S.A. 8,187,056 9,195,142 Chile Soberano 7,747,474 8,736,824 Petroleos Mexicanos S.A. 7,585,450 8,610,756 Compania Manufacturera de Papeles y Cartones S.A. 7,464,331 8,323,574 Telefonos de Mexico S.A. 7,212,624 8,047,404 Codelco S.A. 5,517,675 6,204,886 Mexico Soberano 5,027,706 5,666,890 Banco Scotiabank Sud Americano 0 3,060,639 Federal Home Loan Bank (FHLB) 2,703,675 0 Brasil Telecom S.A. 2,178,926 2,460,598 Raytheon Company 2,193,248 2,440,878 International Paper Company 2,157,760 2,401,692 Altria Group 1,240,281 0 Alcoa Inc. 1,101,516 1,225,812 Time Deposits Deutsche Bank AG. 0 48,334,052 CLN Enersis Euros - Deutsche Bank AG. 0 10,983,791 CLN Endesa - Deutsche Bank AG. 5,394,400 6,004,230 CLN GMAC - Deutsche Bank AG. 1,747,786 1,945,371 CLN Ford - Deutsche Bank AG. 1,618,320 1,801,269 Cross Currency Swap 23,232,301 15,129,750 Judicial Deposits (Brazil) 4,913,615 4,598,782 Issuance Expense Bond Placement 3,132,134 3,488,238 Recoverable Taxes 45,721 54,400 Others 1,637,706 1,638,381 Prepaid Expenses 1,720,484 1,522,771 Non-operating Assets 1,256,036 893,650 Total 126,901,881 187,484,355
23 NOTE 19 - SHORT-TERM BANK LIABILITIES Short- term bank liabilities were as follows:
US Dollars Other foreign currencies TOTAL Jun 31, 2006 Jun 31, 2005 Jun 31, 2006 Jun 31, 2005 Jun 31, 2006 Jun 31, 2005 ------------ ------------ ------------ ------------ ----------- ------------ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ DEXIA BANK 22.821.787 0 0 0 22.821.787 0 BANCO JP MORGAN 22.612.025 0 0 0 22.612.025 0 BBVA BANCO 0 0 0 2.162.308 0 2.162.308 BANCO HSBC 0 32.286.991 0 1.077.165 0 33.364.156 BANCO RIO 0 0 0 3.244.232 0 3.244.232 CITIBANK N.A. 0 0 1.429.613 0 1.429.613 0 BANCO ITAU 0 0 997.505 0 997.505 0 Total 45.433.812 32.286.991 2.427.118 6.483.705 47.860.930 38.770.696 Principal Due 44.083.037 32.122.631 2.427.118 6.239.241 46.510.155 38.361.872 Average annual interest rate 5,99% 4,10% Foreign currency liabilities (%) 100.00 Local currency liabilities (%)
Long term bank liabilities current portion:
US Dollars Other foreign currencies TOTAL Jun 31, 2006 Jun 31, 2005 Jun 31, 2006 Jun 31, 2005 Jun 31, 2006 Jun 31, 2005 ------------ ------------ ------------ ------------ ------------ ------------ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ DEXIA BANK BELGIUM 0 2.769.681 0 0 0 2.769.681 BANCO ITAU 0 0 0 179.139 0 179.139 BANCO SANTANDER 0 0 423.016 372.279 423.016 372.279 BANCO BOSTON 0 0 90.258 200.368 90.258 200.368 Others 0 0 0 0 0 0 Total 0 2.769.681 513.274 751.786 513.274 3.521.467 Principal Due 0 48.033.840 506.863 739.233 506.863 48.773.073 Average annual interest rate 6,51% 11,61% 13,26% Foreign currency liabilities (%) 100.00 Local currency liabilities (%)
24 NOTE 20 - OTHER CURRENT LIABILITIES In accordance with Circular 1501, no information was reported since this balance represents less than 10% of current liabilities. NOTE 21 - LONG-TERM BANK LIABILITIES Long - term bank liabilities were as follows:
Years to Maturity ---------------------------------------- Total long Average Total long Bank or More than 1 More than 2 More than 3 term at annual term at Financial Institution Currency up to 2 up to 3 up to 5 June 30, 2006 interest rate June 30, 2005 - ----------------------- -------- ------- ------- ------- ------------- ------------- ------------- DEXIA BANK BELGIUM US$ 0 0 0 0 48.033.840 BANCO SANTANDER Other currency 228.347 0 0 228.347 11.62% 733.107 BANCO ALFA Other currency 43.766 41.737 2.187 87.690 0 BANCO BOSTON Other currency 8.555 0 0 8.555 12.03% 99.745 TOTAL 280.668 41.737 2.187 324.592 48.866.692 Foreign currency liabilities (%) 100.00 Local currency liabilities (%)
NOTE 22 - LONG-AND SHORT-TERM BONDS PAYABLE (PROMISSORY NOTES AND BONDS) Risk classification of current bonds is as follows: BONDS ISSUED IN THE US MARKET A- : Rating according to Fitch Ratings Ltda. BBB+ : Rating according to Standard & Poor's BONDS ISSUED IN THE LOCAL MARKET AA : Rating according to Fitch Ratings Ltda. AA : Rating according to Feller & Rate Ltda. Bond repurchases. During 2000, 2001 and 2002, Embotelladora Andina S.A. repurchased bonds issued in the U.S. market through its subsidiary, Abisa Corp S.A. for a total amount of US$314 million of the US$350 million, which are presented deducting the long term liability from the bonds payable account. 25 Bonds issued by the subsidiary Rio de Janeiro Refrescos Ltda. (RJR). The subsidiary RJR has liabilities corresponding to an issuance of bonds for US$75 million maturing in December 2012 and semiannual interest payments. At the closing of the periods 2006 and 2005, all such bonds are wholly-owned by the subsidiary Abisa Corp. Consequently, the effects of such transactions have been eliminated from these consolidated financial statements, both in the balance sheet and in the consolidated statement of income.Details of bonds payable are as follows:
Term Nominal Interest Maturity Interest Series Value Currency rate date Paid ------ ----- -------- ---- ---- ---- Current portion of long term bonds YANKEE BONDS INTERESTS A 17.303.077 US$ /Exchange rate 7% October 1, 2007 HALF YEARLY YANKEE BONDS INTERESTS B 2.157.760 US$ /Exchange rate 7,625% October 1, 2007 HALF YEARLY REGISTRO 254 SVS June 13, 2001 A 23.959.848 UF 6,2% June 1, 2008 HALF YEARLY CAPITAL AND INTERESTS REGISTRO 254 SVS June 13, 2001 B 67.160.180 UF 6,5% June 1, 2006 HALF YEARLY CAPITAL AND INTERESTS Total Long term bonds BONOS YANKEE BONDS A 17.303.077 US$ /Exchange rate 7% October 1, 2007 HALF YEARLY BONOS YANKEE BONDS B 2.157.780 US$ /Exchange rate 7,625% October 1, 2007 HALF YEARLY REGISTROS 254 SVS June 13, 2001 A 23.959.848 UF 6,2% June 1, 2008 HALF YEARLY REGISTROS 254 SVS June 13, 2001 B 67.160.180 UF 6,5% June 1, 2026 HALF YEARLY Total
Amortization Placement in period Par Value Chile or abroad ------------ ----------------------------- --------------- Jun 30, 2006 Jun 30, 2005 Current portion of long term bonds YANKEE BONDS INTERESTS 10 Years 302.804 337.035 FOREIGN YANKEE BONDS INTERESTS 30 Years 41.132 45.783 FOREIGN REGISTRO 254 SVS June 13, 2001 CAPITAL AND INTERESTS JUN 2007 13.100.183 13.150.237 CHILE REGISTRO 254 SVS June 13, 2001 CAPITAL AND INTERESTS DEC 2009 358.057 357.760 CHILE Total 13.802.176 13.890.815 Long term bonds BONOS YANKEE BONDS 10 Years 17.303.077 19.259.168 FOREIGN BONOS YANKEE BONDS 30 Years 2.157.760 2.401.692 FOREIGN REGISTROS 254 SVS June 13, 2001 JUN 2007 10.981.613 22.942.485 CHILE REGISTROS 254 SVS June 13, 2001 DEC 2009 67.160.180 67.104.504 CHILE Total 97.602.630 111.707.849
26 NOTE 23 - PROVISIONS AND WRITE-OFFS Provisions at each year end were as follows:
Short Term Long Term Provisions 2006 2005 2006 2005 - ---------- ---- ---- ---- ---- Th Ch$ Th Ch$ Th Ch$ Th Ch$ Staff Severance Indemnities 683,743 635,592 5,039,493 5,232,122 Contingencies 64,164 77,419 9,291,063 9,384,846 Taxation on banking transactions & social contributions (Brazil) 0 0 10,679,007 8,022,826 Others 140 4,295 0 0 T O T A L 748,047 717,306 25,009,563 22,639,794
NOTE 24 - STAFF SEVERANCE INDEMNITIES Movements in the provision for staff severance indemnities were as follows:
2006 2005 ---- ---- ThCh$ ThCh$ Beginning balance 5,469,632 2,806,474 Provision for the period 367,037 3,131,393 Payments ( 113,433) ( 70,153) Ending balance 5,723,236 5,867,714
NOTE 25 - OTHER LONG-TERM LIABILITIES In accordance with Circular 1501, no information was reported since this balance represents less than 10% of Long-term liabilities. NOTE 26 - MINORITY INTEREST
Liabilities 2006 2005 - ----------- ---- ---- ThCh$ ThCh$ Vital Aguas S. A. 1,150,346 0 Embotelladora del Atlantico S. A. 19,221 0 Andina Inversiones Societarias S.A. 59 55 1,169,626 55 2006 2005 ---- ---- Income Statement Th Ch$ Th Ch$ Vital Aguas S. A. (38,330) 0 Embotelladora del Atlantico S. A. (744) 0 Andina Inversiones Societarias S.A. (1) 1 (39,075) 1
27 NOTE 27 - CHANGES IN SHAREHOLDERS' EQUITY Movements in shareholders' equity were as follows:
June 30, 2006 ------------------------------------------------------------------------------- Reserve Paid in Capital Other Accumulated Interim Capital Revalued Reserves Income Dividends Net Income ------- -------- -------- ------ --------- ---------- Beginning balance 197,904,994 0 (201,145) 26,334,355 (11,640,959) 56,039,346 Distribution of prior-year income 0 0 0 44,398,387 11,640,959 (56,039,346) Final dividend prior year 0 0 0 (5,172,908) 0 0 Translation adjustment reserve 0 0 5,116,042 0 0 0 Extraordinary dividend charge to 0 0 0 (55,880,179) 0 0 accumulated earnings Capital revalued 0 2,176,955 (2,213) 228,584 0 0 Income for the period 0 0 0 0 0 30,949,277 Interim dividends 0 0 0 0 (4,470,414) 0 Ending balance 197,904,994 2,176,955 4,912,684 9,908,239 (4,470,414) 30,949,277 Price level restated balances
(Table Cont'd) June 30, 2005
------------------------------------------------------------------------------- Reserve Paid in Capital Other Accumulated Interim Capital Revalued Reserves Income Dividends Net Income ------- -------- -------- ------ --------- ---------- Beginning balance 191,027,986 0 14,574,144 56,671,256 (11,583,482) 40,158,726 Distribution of prior-year income 0 0 0 28,575,244 11,583,482 (40,158,726) Final dividend prior year 0 0 0 (3,831,784) 0 0 Translation adjustment reserve 0 0 3,773,110 0 0 0 Extraordinary dividend charge to 0 0 0 (55,880,179) 0 0 accumulated earnings Capital revalued 0 1,910,280 145,741 135,921 0 0 Income for the period 0 0 0 0 0 24,001,965 Interim dividends 0 0 0 0 (3,831,784) 0 Ending balance 0 1,910,280 18,492,995 25,670,458 (3,831,784) 24,001,965 Price level restated balances 191,027,986 1,980,960 19,177,236 26,620,265 (3,973,560) 24,890,038 198,096,021
28 b) Number of shares: Series Subscribed Paid in Number of shares Shares shares with voting rights ------ ------ ------ ------------------ A 380,137,271 380,137,271 380,137,271 B 380,137,271 380,137,271 380,137,271 c) Capital: Series Subscribed Paid in Capital Capital ThCh$ ThCh$ ------ ----- ----- A 98,952,497 98,952,497 B 98,952,497 98,952,497 d) Other reserves: Other reserves at each year end were as follows:
2006 2005 --------- ------------- ThCh$ ThCh$ Reserve for cumulative translation adjustments 3,913,532 18,178,108 Reserve for technical reappraisal of property, plant and equipment 65,219 75,020 Other reserves 933,933 924,108 Total 4,912,684 19,177,236
(1) The Reserve for cumulative translation adjustments was established in accordance with Technical Bulletin No. 64 issued by the Chilean Institute of Accountants and regulations specified under Circular letter No. 5,294 from the SVS. The activity in the Reserve for cumulative translation adjustments was as follows:
Foreign exchange gains generated Balance during the period Release/Realized Balance Subsidiary January 1, 2005 Investment Reserve June 30, 2006 - ---------- --------------- ---------- ------- ------------- ThCh$ ThCh$ ThCh$ ThCh$ Rio de Janeiro Refrescos Ltda. (2,254,683) 3,139,312 155,768 1,040,397 Embotelladora del Atlantico S. A. 1,052,172 1,820,963 0 2,873,135 Total (1,202,511) 4,960,275 155,768 3,913,532
29 NOTE 28 - OTHER NON-OPERATING INCOME AND EXPENSES
2006 2005 ---- ---- ThCh$ ThCh$ Other non-operating income during the period was as follows: Gain on sale of plant, property and equipment 263,501 215,056 Other income 164,041 180,167 ------------ ------------ Sub-total 427,542 395,223 Translation of Financial Statements (1) 16,906 2,615,777 ------------ ------------ Total 444,448 3,011,000 ============ ============ Other non-operating expenses during the period was as follows: Loss on sale of property, plant and equipment (17,584) (131,999) Translation adjustment Reserve Realized (2) (155,768) 0 Provision for labor and commercial lawsuits (305,638) (427,121) Provision loss of investment in Centralli (25,713) (34,248) Obsolescence and write-offs of property, plant and equipment (22,154) (3,986,121) Staff Severance Indemnities 0 (2,885,021) Others (419,828) (334,895) ------------ ------------- Total (946,685) (7,799,405) ============ =============
(1) This refers to the effects of the translation of the financial statements corresponding to investment in foreign companies (translation of local currency to US dollars), in accordance with Technical Bulletin No. 64 issued by the Chilean Institute of Accountants, presented as Other Non-Operating Income and Expenses. (2) Corresponds to release of Translation Adjustment Reserves resulting from dividend payments at our subsidiary Rio de Janeiro Refrescos Ltda. during March and June 2006. 30 NOTE 29 - PRICE-LEVEL RESTATEMENT Price-level restatement for each year end was as follows:
Assets - (charges)/credits Index 2006 2005 - --------------------------- ----- ----------- ------------ ThCh$ ThCh$ Inventories CPI (297,678) 103,601 Property, plant and equipment CPI 804,121 808,884 Investments in related companies CPI 1,501,601 1,563,918 Cash, Time Deposits, Marketable Securities CPI 109,904 25,025 Trade Accounts Receivable, Notes Receivable, Other Receivables UF 13 27 Trade Accounts Receivable, Notes Receivable, Other Receivables CPI (37) 678 Accounts Receivable related Companies short term CPI 276,853 375,807 Recoverable taxes CPI 31,334 47,064 Other current assets UF 6,729 0,000 Other current assets CPI 106,130 54,877 Goodwill CPI 0,000 34,427 Other long term assets UF 0,000 1,586 Other long term assets CPI 1,029,026 1,335,797 Costs and Expenses accounts CPI 976,234 1,197,025 Total (charges)/credits 4,544,230 5,548,716 Shareholders' equity CPI (2,403,325) (2,273,044) Short and long term bank liabilities CPI (44,387) (97,199) Short and long term bonds payable UF (868,261) (994,083) Short and long term bonds payable CPI (201,414) (246,390) Other current liabilities UF (103,398) (48,794) Other current liabilities CPI (217,343) (101,395) Other long term liabilities CPI (21,226) (35,335) Accounts Payable related Companies long term CPI (11,090) 0,000 Income accounts CPI (1,244,662) (1,492,424) Total (charges) credits (5,115,106) (5,288,664) Price-level restatement (loss ) gain (570,876) 260,052
31 NOTE 30 - FOREIGN EXCHANGE GAINS/LOSSES
Assets - (Charges)/Credits Currency Jun 30, 2006 Jun 30, 2005 - -------------------------- -------- ------------ ------------ Cash US$ (362,684) (99,157) Marketeable Securities US$ (88,796) (64,345) Other receivables US$ 229,545 1,862 Accounts receivable related companies US$ 2,896,364 1,428,432 Inventories US$ 27,863 43,212 Other assets US$ 4,993 299,001 Property, Plant & Equipment US$ 5,588 (428) Other assets US$ 3,615,467 4,361,430 Other assets EUROS$ 0 921,076 Time deposits EUROS$ 1,175,756 0 Time deposits US$ 685 0 Trade receivables US$ (982) 0 Total (charges) credits 7,503,799 6,891,083 - -------- Liabilities (Charges)/Credits Short term bank liabilities US$ (525,557) 11,583 Bonds payable US$ (151,139) (166,569) Accounts payable US$ (42,478) 4,295 Provisions US$ 9,950 (826) Other current liabilities US$ (32,658) (1,087,291) Long term bonds payable US$ (768,509) (591,465) Withholdings US$ (2) 0 Total (Charges) Credits (1,510,393) (1,830,273) Foreign exchange gain (loss) net 5,993,406 5,060,810
NOTE 31 - EXTRAORDINARY ITEMS There were no extraordinary items in 2006 and 2005. NOTE 32 - SHARE AND DEBT SECURITY ISSUE AND PLACEMENT EXPENSES Bond issue and placement expenses are presented in Other current assets and Other long-term assets and are amortized on a straight-line basis over the term of the debt issued. Amortization is presented as financial expenses. Bonds issued in the US market: Debt issue costs and discount have all been amortized, as a result of the repurchase of Bonds reported in note 22. Bonds issued in the local market: Debt issue costs and discounts amounted to ThCh$3,508,991 Disbursements for risk rating reports, legal and financial advisory services, printing and placement fees are included as Debt issue costs. 32 Amortization for the period 2006 amounted to ThCh$315,227 (ThCh$339,393 in 2005). NOTE 33 - CONSOLIDATED STATEMENT OF CASH FLOWS For the projection of future cash flows, there are no transactions and events to consider which have not been revealed in these financial statements and accompanying notes. Below is an itemization of the movement of assets and liabilities not affecting the cash flow in the period, but compromising future cash flows. Cash Flow Statement - -------------------
2006 Maturity Date 2005 Maturity Date ---- ------------- ---- ------------- ThCh$ ThCh$ Expenses - -------- Dividend payments (4,470,414) Jul 26, 2006 (3,973,560) Jul 28, 2005 Additions to property, plant and equipment (1,448,353) Aug 31, 2006 (673,793) Jul 31, 2005 Additions to property, plant and equipment (248,556) Jul 31, 2006 (715,403) Sep 30, 2005 Total expenses (6,167,323) (5,362,756) Income - ------ Sale of property, plant and equipment 4,304 Aug 15, 2006 1,073 Aug 15, 2005 Total Income 4,304 1,073 Total Net (6,163,019) (5,361,683)
33 NOTE 34 - DERIVATIVE CONTRACTS Derivative contracts at June 30, 2006 were as follows:
Description of the Agreements ----------------------------- Position Hedged Item -------- ----------- Type Type of of Maturity or Purchase or Derivative Agreement Value expiration Specific Item Sale Name Amount - ---------- --------- ----- ---------- ------------- ---- ---- ------ SWAP CCPE 2,757,557 I QUARTER 2007 US$ Exchange Rate S Long term bonds in US$ 3,718,120 SWAP CCPE 2,767,485 III TRIMESTE 2007 US$ Exchange Rate S Long term bonds in US$ 2,747,765 SWAP CCPE 40,470,924 IV QUARTER 2007 US$ Exchange Rate S Long term bonds in US$ 47,599,704 SWAP CCPE 8,263,142 I QUARTER 2008 US$ Exchange Rate S Long term bonds in US$ 10,456,161 SWAP CCPE 8,215,849 II QUARTER 2008 US$ Exchange Rate S Long term bonds in US$ 11,100,360 SWAP CCPE 13,481,666 III QUARTER 2008 US$ Exchange Rate S Long term bonds in US$ 16,620,691 SWAP CCPE 5,552,018 I QUARTER 2013 US$ Exchange Rate S Long term bonds in US$ 7,260,554 FR CCTE 6,735,450 III QUARTER 2006 US$ Exchange Rate P Foreign Currency Suppliers 6,885,952 FR CCTE 2,794,318 III QUARTER 2006 US$ Exchange Rate S Foreign Currency Suppliers 2,567,734 FR CCTE 11,348,051 IV QUARTER 2006 US$ Exchange Rate P Foreign Currency Suppliers 11,759,253 FR CCTE 3,486,627 IV QUARTER 2006 US$ Exchange Rate S Foreign Currency Suppliers 3,387,683
Value of Effect on hedged item Asset/Liability income/(loss) - ------------ -------------------------------------------- -------------------- Name Amount Realized Unrealized ---- ------ -------- ---------- 2,773,057 Other Long Term and Current Assets 1,110,769 (100,080) 178,154 2,746,920 Other Long Term and Current Assets 1,114,156 (100,447) 4,994 40,458,000 Other Long Term and Current Assets 8,320,221 (1,547,850) 1,634,504 8,211,709 Other Long Term and Current Assets 3,320,462 (299,973) (18,557) 8,548,769 Other Long Term and Current Assets 3,298,617 (299,185) 761,609 13,329,452 Other Long Term and Current Assets 5,297,311 (493,339) 601,104 5,564,589 Other Long Term and Current Assets 2,219,607 (202,749) 517,234 - Other current assets and liabilities 149,604 - 149,604 - Other current assets and liabilities 61,608 - (61,608) - Other current assets and liabilities 404,750 - 404,750 - Other current assets and liabilities 122,101 - (122,101)
34 NOTE 35 - CONTINGENCIES AND RESTRICTIONS a. Litigation and other legal actions: Andina and its subsidiaries are not involved or likely to be involved in any material judicial or out-of-court litigation that could result in gains or losses. Current lawsuits are described below. 1) The Chilean Internal Revenue Service has commenced a penal lawsuit against our subsidiary Vital S.A. and against those ultimately responsible for the application of tax losses. At the same time, a lawsuit has been filed for the recovery of income tax and the application of accumulated losses. The company's legal advisors believe there is a remote or slight likelihood of a negative outcome in both procedures. 2) Embotelladora del Atlantico S.A. faces labor and other lawsuits. Accounting provisions to back any probable loss contingency stemming from these lawsuits, amounts to ThCh$1,809,276 (ThCh$2,044,969 in 2005). In accordance with its legal counsel's opinion, the Company deems improbable that unstipulated contingencies may affect the results or equity of the Company. 3) Rio de Janeiro Refrescos Ltda. faces labor, tax and other lawsuits. Accounting provisions to back any probable loss contingency arising from these lawsuits, amounts to ThCh$18,160,794 (ThCh$12,704,174 in 2005). In accordance with its legal counsel's opinion, the Company deems improbable that unstipulated contingencies may affect the results or equity of the Company. 4) Embotelladora Andina S.A. faces, labor, tax, commercial and other lawsuits. Accounting provisions to back any probable loss contingency stemming from these lawsuits, amounts to ThCh$64,292 (ThCh$77,419 in 2005). In accordance with its legal counsel's opinion, the Company deems improbable that contingencies without provisions may affect the results or equity of the Company. b. Restrictions The bond issue and placement on the US market for US$ 350 million is subject to certain restrictions against preventive attachments, sale and leaseback transactions, sale of assets, subsidiary debt and certain conditions in the event of a merger or consolidation. The bond issue and placement in the Chilean market for UF 7,000,000 is subject to the following restrictions: Leverage ratio, defined as the total financial debt/shareholder's equity plus minority interest should be less than 1.20 times. Financial debt shall be deemed Consolidated Finance Liabilities which include: (i) short-term bank liabilities, (ii) short-term portion of long-term bank liabilities, (iii) short-term liabilities-promissory notes, (iv) short-term portion of bonds payable, v) long-term bank liabilities, and (vi) long-term bonds payable. Consolidated equity means Total equity plus Minority Interest. Consolidated assets are to be free of any pledge, mortgage or other encumbrance for an amount equal to at least 1.30 times the consolidated liabilities that are not guaranteed by the investee. Andina must retain and, in no way, lose, sell, assign or dispose of to a third party the geographical zone denominated "Region Metropolitana", as a franchised territory in Chile by The Coca-Cola Company for the 35 preparation, production, sale and distribution of the products and brands in accordance with the respective Bottling agreement, renewable from time to time. Andina shall not lose, sell, assign or dispose of to a third party any other territory in Brazil or Argentina that is currently franchised to Andina by The Coca-Cola Company for the preparation, production, sale and distribution of the products and brands of the franchisor, as long as the referred territory represents more than forty percent of the Company's Consolidated Operating Cash Flows. 36 c. Direct guarantees Guarantees at June 30, 2006 were as follows
Guarantee creditor Debtor ------------------- ------ Type of Name Relation guarantee ------ --------- ---------- UNIAO FEDERAL RIO DE JANEIRO REFRESCOS LTDA. Subsidiary Mortgage ESTADO RIO DE JANEIR0 RIO DE JANEIRO REFRESCOS LTDA. Subsidiary Mortgage PODER JUDICIARIO RIO DE JANEIRO REFRESCOS LTFA. Subsidiary Judicial Deposit ADUANA DE BUENOS AIRES (Customs) EMBOTELLADORA DEL ATLANTICO S.A. Subsidiary Guaranty Insurance
Balances pending at Release of Assets involved end of period Guaranty --------------- ------------- -------- Book Type value June 30, June 30, ----- ------ -------------------------- ---------- 2006 2005 2007 --------- -------- --------- Judicial deposit over real estate 60,049 68,667 70,378 - Judicial deposit over real estate 12,148,846 10,121,695 - - Judicial Deposit 6,772,942 - - - Inventories 3,770,523 3,942,680 - -
37 NOTE 36 - GUARANTEES FROM THIRD PARTIES Guarantees from third parties at June 30, 2006 were as follows:
Guarantor Relation Type of Guaranty Amount Currency Transaction Iansagro S.A. Main Office Deposit Certificate 3,788,700 ThCh$ Warrants Iansagro S.A. Main Office Deposit Certificate 4,735,875 ThCh$ Warrants Iansagro S.A. Main Office Deposit Certificate 2,841,525 ThCh$ Warrants AGA S.A. Main Office Receipt 600,000 US$ Supply agreement Soc. Las Nipas Main Office Policy 6,971 U.F. Advertising Agreement Several Clients Deposits 1,334,896 USD Container Guarantees CONFAB Mortgage 30,000,000 USD Purchase of Rio de Janeiro Refrescos Russel W. Coffin Letter of Credit 42,650,658 USD Purchase of Nitvigov Mac Coke Dist. Beb. Mortgage 300,328 USD Distributor Credit Tigresa Com. Beb. Mortgage 300,328 USD Distributor Credit Dist. Real Cola (Apucarana) Mortgage 277,226 USD Distributor Credit Soc. Com. Champfer Mortgage 600,656 USD Distributor Credit Franciscana Dist. Mortgage 265,675 USD Distributor Credit Dibejon Dist Beb. Joao Neiva Mortgage 96,567 USD Distributor Credit Aguiar Distrib.de Bebidas Ltda Mortgage 185,279 USD Distributor Credit Dist Uniao De Itaperuna Mortgage 247,008 USD Distributor Credit Rosas de Casimiro Mortgage 161,715 USD Distributor Credit ASXT Fluminense Distrib.Bebidas Mortgage 258,744 USD Distributor Credit
38 NOTE 37 - LOCAL AND FOREIGN CURRENCY Assets at each year end were composed of local and foreign currencies as follows:
Amount Amount Currency June 30, 2006 June 30, 2005 -------- ------------- ------------- Current Assets ThC$ ThC$ Cash and equivalents Non-indexed Ch$ 3.482.916 3.093.320 - - US$ 55.569 2.954.529 - - $AR 494.122 911.604 - - $R 1.357.596 955.784 Time Deposits EUROS 10.427.300 0 - - US$ 23.049.965 2.431 - - $AR 541.880 0 - - $R 568.244 12.157.432 Marketable Securities Non-indexed Ch$ 6.767.699 2.095 - - US$ 14.733.634 13.626.649 - - $R 2.498.663 397.110 Trade Accounts Receivable Non-indexed Ch$ 10.608.423 10.936.393 - - US$ 603.785 1.021.017 - - $AR 1.091.137 1.282.172 - - $R 8.365.191 7.307.531 Notes receivable Non-indexed Ch$ 3.749.999 3.252.821 - - $AR 280.971 317.466 - - $R 1.509.041 1.349.335 Other debtors Non-indexed Ch$ 2.459.193 2.360.122 - - US$ 7.604.575 7.062.512 - - $AR 1.015.586 698.989 - - $R 4.608.508 7.673.902 Notes receivable related companies Non-indexed Ch$ 1.085.679 0 - - $R 0 63.377 Inventories (Net) Non-indexed Ch$ 4.592.460 4.337.054 - - US$ 3.169.273 6.909.312 - - $AR 3.353.455 3.217.127 - - $R 9.607.071 7.710.289 Recoverable Taxes Non-indexed Ch$ 293.472 192.506 - - US$ 822.564 0 - - $AR 963.116 1.307.145 - - $R 6.904.462 6.264.236 Prepaid expenses Indexed Ch$ 0 0 - - Non-indexed Ch$ 1.310.654 1.681.732 - - US$ 70.460 159.995 - - $AR 182.413 37.288 - - $R 405.540 390.771 Other current assets Indexed Ch$ 40.413 0 - - Non-indexed Ch$ 1.628.392 1.569.825 - - US$ 3.792.174 7.587.593 - - $AR 2.006.050 2.214.094 - - $R 1.391.593 1.335.958 Property, plant and equipment Property, plant and equipment Indexed Ch$ 61.816.660 68.376.818 - - US$ 79.513.925 86.851.202 Other assets Investment in related companies Indexed Ch$ 18.462.224 18.669.937 - - US$ 1.228.995 985.771 $R 1.480.330 1.456.301 Investment in other companies US$ 14.267 15.090 - - Indexed Ch$ 42.147 42.146 Goodwill Indexed Ch$ 620.300 718.224 - - US$ 71.448.844 85.880.862 Long term debtors Indexed Ch$ 50.629 0 - - $R 46.937 0 - - $AR 28.264 43.674 Documents receivable related companies Indexed Ch$ 34.492 37.767 Deferred taxes Non-indexed Ch$ 168 99.363 - - $AR 173.523 319.070 Intangibles US$ 0 479.236 - - $AR 430.561 0 Amortization US$ -253.180 -260.859 Others Indexed Ch$ 2.145.062 0 - - Non-indexed Ch$ 5.881.553 4.965.519 - - EUROS 0 10.983.791 - - US$ 111.020.075 150.930.562 - - $AR 2.557.294 2.711.457 $R 5.297.897 17.893.026 Total Assets Non-indexed Ch$ 41.860.608 32.490.750 US$ 316.874.925 364.205.902 $AR 13.118.372 13.060.086 $R 44.041.073 64.955.052 EUROS 10.427.300 10.983.791 Indexed Ch$ 83.211.927 87.844.892
39 b. Current liabilities at year end denominated in local and foreign currencies were as follows:
Currency Up to 90 days From 90 days Up to 1 year -------- ---------------------------------------- ---------------------------------------- June 30, 2006 Jun 30, 2005 Jun 30, 2006 Jun 30, 2005 ------------------- ------------------- ------------------- ------------------- Average Average Average Average annual annual annual annual Amount int. Amount int. Amount int. Amount int. ThCh$ Rate ThCh$ Rate ThCh$ Rate ThCh Rate ---------- ------- ---------- ------- ---------- ------- ---------- ------- Current portion of long term bank Non-indexed liabilities Ch$ 0 0 0 0 - - US$ 45.433.812 6,51% 32.286.990 4,1% 0 0 - - $AR 0 0 0 0 - - $R 2.427.118 0 0 6.483.706 8,92% Long term bank liabilities US$ 0 2.769.681 6,51% 0 0 - - $R 0 0 513.274 751.786 13,26% Current portion of bonds payable Indexed Ch$ 13.458.240 7,0% 13.507.997 6,2% 0 0 - - US$ 343.936 6,2% 382.818 7,25% 0 0 Non-indexed Dividends payable Ch$ 4.886.596 4.177.862 0 0 Accounts payable Indexed Ch$ 0 0 0 0 Non-indexed - - Ch$ 14.775.094 14.656.444 0 0 - - US$ 1.179.560 3.024.428 0 0 - - $AR 6.426.403 3.460.884 0 0 - - $R 8.117.146 7.786.306 0 0 Other - - currencies 0 0 0 0 Other Creditors $AR 44.731 56.565 41.955 0 - - $R 2.838.580 2.626.646 0 0 - - US$ 0 1.110.241 0 0 Notes payable related companies Indexed Ch$ 0 0 0 0 Non-indexed Ch$ 3.101.825 2.450.636 0 0 - - US$ 920.153 1.880.928 0 0 - - $AR 676.403 0 0 0 - - $R 2.137.118 129.633 0 0 Non-indexed Provisions Ch$ 747.907 717.140 0 0 - - US$ 0 0 0 0 - - $AR 140 166 0 0 - - $R 0 0 0 0 Other - - currencies 0 0 0 0 Withholdings Indexed Ch$ 0 0 0 0 Non-indexed - - Ch$ 7.158.875 3.962.257 0 0 - - $AR 2.677.132 2.093.004 0 0 - - $R 0 0 3.130.340 2.604.232 Other - - currencies 0 0 0 0 Income tax Non-indexed withholding provision Ch$ 2.420.540 3.770.771 0 0 Other - - currencies 0 0 0 0 - - $AR 0 0 191.490 1.159.078 - - $R 0 0 2.653.577 25.192 Non-indexed Unrealized income Ch$ 483.203 8.475 0 0 Non-indexed Deferred taxes Ch$ 735.087 742.005 0 0 - - $AR 0 134.580 108.234 0 Other current Non-indexed liabilities Ch$ 3.603.203 2.769.375 0 0 Total current liabilities Non-indexed Ch$ 37.912.330 33.254.965 0 0 US$ 47.877.461 41.455.086 0 0 $AR 9.824.809 5.745.199 341.679 1.159.078 $R 15.519.962 10.542.585 6.297.191 9.864.916 Indexed Ch$ 13.458.240 13.507.997 0 0 Other currencies 0 0 0 0
40 c.1) Long - term liabilities at June 30, 2006 were composed of local and foreign currencies as follows:
Currency 1 up to 3 years 3 up to 5 years 5 up to 10 years More than 10 years --------------- -------------------- -------------------- -------------------- ------------------- Amount Average Amount Average Amount Average Amount Average annual annual annual annual int int int int ThCh$ rate ThCh$ rate ThCh$ rate ThCh$ rate ---------- ------- ---------- -------- --------- -------- ---------- ------ Long term bank liabilities $R 324.592 0 0 0 Bonds payable US$ 17.303.077 7,0% 0 0 2.157.760 7,625% - - Indexed Ch$ 10.981.597 6,2% 7.901.214 6,50% 16.752.994 6,50% 42.505.988 6,50% Other creditors $AR 138.579 0 0 0 - - $R 0 47.229 0 0 Notes and accounts payable related companies Non-indexed Ch$ 3.701.143 0 0 0 Provisions Indexed Ch$ 0 0 0 4.438.322 - - Non-indexed Ch$ 601.171 0 0 0 - - $AR 1.809.276 0 0 0 - - $R 18.160.794 0 0 0 Other liabilities Non-indexed Ch$ 86.922 4.609.026 0 0 - - $AR 0 218.558 0 1.967.020 - - $R 2.045.910 0 0 0 Total long term liabilities $R 20.531.296 47.229 0 0 US$ 17.303.077 0 0 2.157.760 Indexed Ch$ 10.981.597 7.901.214 16.752.994 46.944.310 $AR 1.947.855 218.558 0 1.967.020 Non-indexed Ch$ 4.389.236 4.609.026 0 0
41 c.2) Long - term liabilities at June 30, 2005 were composed of local and foreign currencies as follows:
Currency 1 up to 3 years 3 up to 5 years 5 up to 10 years More than 10 years --------------- -------------------- -------------------- -------------------- ------------------- Amount Average Amount Average Amount Average Amount Average annual annual annual annual int int int int ThCh$ rate ThCh$ rate ThCh$ rate ThCh$ rate ---------- ------- ---------- -------- --------- -------- ---------- ------ Long term bank liabilities US$ 48.033.840 6,51% 0 0 0 - - $R 832.852 13,27% 0 0 0 Bonds payable UF 22.942.485 6,2% 3.947.324 6,50% 19.736.619 6,50% 43.420.561 6,50% - - US$ 19.259.168 7,0% 0 0 2.401.692 7,63% Other creditors $AR 100.332 0 0 0 - - $R 0 71.127 8.891 0 Provisions Non-indexed Ch$ 5.232.121 0 0 0 $AR 2.044.968 0 0 0 $R 15.362.705 0 0 0 Other liabilities Non-indexed Ch$ 4.398.023 0 0 0 - - $AR 0 207.341 1.866.065 0 - - $R 1.353.518 0 0 0 Total long term liabilities US$ 67.293.008 0 0 2.401.692 $R 17.549.075 71.127 8.891 0 UF 22.942.485 3.947.324 19.736.619 43.420.561 $AR 2.145.300 207.341 1.866.065 0 Non-indexed Ch$ 9.630.144 0 0 0
42 NOTE 38 - PENALTIES The Company has not been subject to penalties by the SVS or any other administrative authority. NOTE 39 - SUBSEQUENT EVENTS In accordance with the agreement reached at the Regular General Shareholders Meeting of Embotelladora Andina S.A., held April 19, 2006 (hereinafter the "Meeting"), the following interim dividend No. 152 was distributed on July 26, 2006: a) Ch$5.60 (five porn sixty pesos) for each Series A share; and b) Ch$6.16 (six point sixteen pesos) for each Series B share. NOTE 40 - COMPANIES SUBJECT TO SPECIAL REGULATIONS Andina and its subsidiaries are not subject to special regulations. NOTE 41 - ENVIRONMENT The Company has disbursed ThCh$696,656 to improve its industrial process, industrial waste metering equipment, laboratory analyses, environmental impact consultancy and other studies. Future commitments, which are all short-term and for the same concepts, amount to ThCh$327,861. 43 I. ANALYSIS OF THE FINANCIAL RESULTS FOR THE FIRST QUARTER ENDED JUNE 30, 2006. Highlights o Operating Income reached US$28.8 million during the second quarter of 2006, increasing 15.8% compared to the same period of the previous year. Operating Margin was 13.3%. o Sales volume amounted to 90.5 million unit cases, an increase of 7.5% during the quarter. o Second quarter EBITDA totaled US$42.9 million, representing an increase of 8.7% compared to the second quarter of 2005. EBITDA Margin was 19.8%. o Consolidated Operating Income reached US$74.8 million during the first half of 2006, 16.6% higher than the first half of the previous year. Operating Margin was 15.8%. o Consolidated Sales Volume totaled 197.8 million unit cases, an increase of 6.7% compared to the first half of 2005. o Consolidated EBITDA for the first half of 2006 amounted to US$102.9 million, an increase of 10.1%. EBITDA Margin was 21.7%. o Net Income for the first half of 2006 reached US$57.4 million, 24.3% higher than the first half of 2005. Comments from Chief Executive Officer, Mr. Jaime Garcia R. "We have reported positive results in the three countries where we operate. We've continue to develop new product categories, which will provide us an additional base for growth in soft drinks. Innovative products and appropriate cost management has enabled Andina to grow in an industry with increased costs and increasingly demanding consumers." CONSOLIDATED SUMMARY First Half 2006 vs. First Half 2005 At the close of June 2006, the Company remains on a path of continuous growth. The Chilean Peso and Brazilian Real have continued to strengthen, enabling Andina to partially offset the increases in important dollar-denominated raw material prices, such as sugar and resin. Upon comparing the exchange rate of the first half of 2006 to the same period of the previous year, we can see that the Chilean Peso and the Brazilian Real appreciated on average 9.4% and 15.1%, respectively. One the other hand, the Argentine Peso has depreciated an average of 4.8%. Consolidated Sales Volume amounted to 197.8 million unit cases, an increase of 6.7%. Soft drinks increased 5.6%, while waters grew 23.2% and juices 12.1%. These increases are a result of the higher consumption of our main products (soft drinks) in the three countries where we operate, in addition to the consolidation of growth 44 opportunities via non-carbonated products (Water and Juices), which clearly reflects an opportunity through a change in consumers' behavior. Net Sales amounted US$473.9 million, 8% higher than the first half of 2005. This was a result of both higher volumes and price adjustments. Despite cost pressures, particularly with regards to sugar, Cost of Sales per unit case decreased 2.2% compared to the first half of 2005, mainly due to effective negotiations, more favorable resin prices and the revaluation of the Chilean Peso and the Brazilian Real. SG&A increased 5.2% per unit case as a result of increased freight fees due to increasing oil prices and currency revaluations. Consolidated Operating Income amounted to US$74.8 million, a 16.6% increase compared to the first half of 2005. Operating Margin was 15.8%, an increase of 120 basis points. Finally, Consolidated EBITDA amounted to US$102.9 million, an increase of 10.1%. EBITDA Margin was 21.7%. Second Quarter 2006 vs. Second Quarter 2005 Consolidated Sales Volume for the second quarter 2006 reached 90.5 million unit cases, a 7.5% increase compared to the same period of the previous year. Net Sales amounted to US$216.5 million, representing a 6.7% improvement compared to the second quarter of 2005, mainly due to increased volumes. Cost of Sales per unit case decreased 3.8%, achieved through effective negotiations, the lower price of resin and the reevaluations of the Chilean Peso and the Brazilian Real. SG&A increased 2.7% per unit case, mainly as a result of increased freight fees due to higher oil prices and the currency revaluations. Consolidated Operating Income amounted to US$28.8 million, a 15.8% increase compared to the second quarter of 2005. Operating Margin was 13.3%, an increase of 100 basis points. Finally, Consolidated EBITDA amounted to US$42.9 million, an 8.7% improvement compared to the same period of the previous year. EBITDA Margin was 19.8%. SUMMARY BY COUNTRY Chile First Half 2006 vs. First Half 2005 During the first half of 2006, Sales Volume amounted to 68.4 million unit cases reflecting growth of 7.8% compared to the figure reported in the first half of 2005. This significant increase was a result of increased soft drink volumes (+5.3%), in addition to the significant contribution of the Waters and Juices (+30.3% and +12.1%, respectively). We can clearly observe the relevance of these products in a new healthy lifestyle concept, whereby the significant growth of the Waters and Juices segment, accompanies that of the Light product 45 segment, representing close to 15% of the total soft drinks portfolio, with a year-over-year growth rates above 10%. Net Sales amounted to US$190.2 million, a 3.5% improvement compared to the previous year. Operating Income was 3.2% higher than that of the first half of 2005, amounting to US$43.3 million. Operating Margin was 22.8%, remaining flat compared to the previous year. EBITDA amounted to US$55.7 million, 2.4% higher than the EBITDA figure recorded in 2005. EBITDA Margin was 29.3%. Second Quarter 2006 vs. Second Quarter 2005 During the second quarter of 2006, Sales Volume amounted to 31.5 million unit cases, 12.5% growth compared to the same period of the previous year. Soft drinks increased by 10.2%, reflecting the highest quarterly growth in the soft drink segment since 2003. The Waters and Juices segment continued to grow at the rate of 40.1% and 17.9%, respectively. In order to continue expanding our non-carbonated product portfolio, we launched Kapo Nurisha during the second quarter. Net Sales amounted to US$87.5 million, reflecting 6.9% growth. This increase resulted from the growth in volumes and was partially offset by the mix effect of Net Sales per unit case in Juices and Waters, and a stable nominal price for soft drinks. Cost of Sales per unit case decreased by 5%. This offset the decrease of Average Net Sales per unit case, reflecting management's ability to manage costs. These lower costs were mainly a result of the lower price of resin and the anticipated purchase of sugar realized in November of 2005 to cover the requirements for the full-year 2006. Operating Income amounted to US$18.3 million, an 8.9% improvement compared to the second quarter of 2005. Operating Margin was 20.9%. EBITDA amounted to US$24.5 million, 6.5% higher than the EBITDA recorded during the same period of the previous year. EBITDA Margin was 28%. Brazil First Half 2006 vs. First Half 2005 Sales Volume amounted to 79.1 million unit cases, 7.3% growth for the first half of 2006. Net Sales reached US$192.1 million, increasing 20.2% compared to the previous year. This significant increase was a result of volume growth, price adjustments and the favorable exchange rate upon translation of figures from local currency to Chilean Pesos. Cost of Sales increased 13.2%. That, along with improved SG&A efficiencies, resulted in growth of 64.2% in Operating Income compared to the first half of 2005, reaching US$26.6 million. Operating Margin was 13.9%, an improvement of 370 basis points. 46 EBITDA amounted to US$35.7 million, an increase of 38.1%, with an EBITDA Margin of 18.6%, increasing 240 basis points compared to the previous period. Second Quarter 2006 vs. Second Quarter 2005 Sales volume for the second quarter of 2006 amounted to 36.7 million unit cases, representing a 2.7% increase compared to the second quarter of 2005. This was more moderate growth than that observed during the first quarter of this year. Furthermore, due to the substantial growth reported in the second quarter of 2005, comparisons for the second quarter of 2006 are difficult. Net Sales reached US$89.2 million, representing an 11.5% increase. This is best explained by price adjustments realized in February 2006, as well as the exchange rates, which benefited the translation of figures. Cost of Sales per unit case grew 3.9%, best explained by the effect of figure conversion, which have a negative impact on our costs. The appreciation of the Brazilian Real in the domestic market has helped Andina offset the increase in the price of sugar, as well as additional measures that have enabled the Company to maintain our costs in local currency. Operating Income reached US$10.5 million, an improvement of 35.3% and Operating Margin was 11.8%, an improvement of 210 basis points. Finally, EBITDA amounted to US$15.1 million, a 20.3% improvement compared to the US$12.6 million reported in the second quarter of 2005. EBITDA Margin was 17%, an increase of 130 basis points compared to the previous period. Argentina First Half 2006 vs. First Half 2005 Sales Volume for the quarter reached 50.3 million unit cases, a 4.4% improvement compared to the sales volume for the same period of the previous year. The Light (diet) segment has continued expanding, posting close to 13% growth, as well as the non-returnable future consumption format. Net Sales reached US$96.2 million, representing a decrease of 3.6%. Nevertheless, Andina has adjusted its sales per unit case in nominal local currency by 17%. This decrease is explained by the negative impact of the exchange rates upon translating figures, offsetting the increase in volumes and prices realized during the period, together with a change in the sales condition of the packaging division, which went from product sales to a raw material conversion service (this did not affect the division's contribution upon Argentinean consolidation). Operating Income amounted to US$9.3 million, an 8.3% decrease, best explained by the previously mentioned currency effect in the translation of figures. Operating Margin was 9.6%, 50 basis points lower than the previous year. This was a consequence of increased SG&A, mainly from higher labor, freight and advertising costs. EBITDA reached US$15.8 million, and EBITDA Margin amounted to 16.4%. Second Quarter 2006 vs. Second Quarter 2005 Sales Volume for the second quarter of 2006 increased 9.1% reaching 22.3 million unit cases. This increase was a result of higher sales of Sprite (+15%), Coca-Cola (+8.5%) and the Light category (+18.6%). 47 Net Sales reached US$41.8 million, representing a decrease of 4.2% compared to the second quarter of 2005, and is best explained by the effect of figure translation from the devaluation of the Argentine Peso, which averaged 4.3% for the period, and the appreciation of the Chilean peso, -9.5% at the end of the period. This was offset by a 14% increase in Net Sales per unit case in nominal local currency. Cost of Sales per unit case decreased 17%, best explained by the fluctuations of the exchange rates upon the translation of figures, as well as lower resin prices. Operating Income amounted to US$ 2.2 million, a 10.2% decrease. This was a result of increased SG&A, higher labor, freight and advertising costs. Operating Margin was 5.1%. EBITDA reached US$5.4 million, a decrease of 9.3%. EBITDA Margin was 13%. NON-OPERATING RESULTS First Half 2005 vs. First Half 2005 Non-Operating Results totaled a loss of (US$5.9) million, which compares favorably to an accumulated loss of (US$10.3) million recorded during the first half of 2005. This loss reduction in the Non-Operating Result line is best explained by: o Other Non Operating Income/(Expense): Reflecting a positive variation as a result of lower expenses regarding severance indemnities and a provision to adjust to market value the Company's Real State available for sale during 2005. o Price Level Restatement: Lower income as a consequence of a lower exchange rate (Ch$539.44 per USD in 2006 vs. Ch$579.00 per USD in 2005) over our positive U.S. dollar asset position. o Financial Expense/Income (Net): The loss in this item was higher and offset the positive effect previously explained. The lower income was a result of a one-time profit generated by the sale of bonds during the first half of 2005. Finally, Net Income amounted to US$57.4 million, an increase of 24.3% compared to the Net Income reported during the first half of 2005. ANALYSIS OF THE BALANCE SHEET As of June 30, 2006, the Company's financial assets amounted to US$336.1 million. These represent cash, investments in mutual funds, deposits, structured notes, corporate bonds and sovereign bonds. 87% of the total financial investments are U.S. dollar-denominated and 5.8% are Euro-denominated. Nevertheless, through "Cross-Currency Swaps" agreements executed in July and August 2003 and April 2004, part of the portfolio has been converted to Chilean pesos (UF - Chilean Inflation Indexed Currency), thereby decreasing the amount denominated in U.S. dollars to 27.4%. On the other hand, the Company's total debt was US$296.8 million, with an average annual rate of 6.33% on U.S. dollar debt, and an average real annual rate of 6.40% on Chilean peso-denominated debt. The U.S. dollar-denominated debt represents 40.7% of total debt. 48 Thus, the Company holds a positive net cash position of US$39.3 million. Main Indicators
Main Indicators --------------- INDICATORS Unit Jun-06 Dic-05 Jun-05 Variance ---------- ---- ------ ------ ------ -------- LIQUIDITY Current Ratio Times 1.12 1.30 1.06 0.06 Acid Tests Times 0.97 1.16 0.87 0.10 Working Capital MCh$ 2,613 36,528 33,732 -31,118 ACTIVITY Investments MCh$ 14,231 27,753 12,978 1,253 Inventory turnover Times 7.82 14.15 6.55 1.27 Days of inventory on hand Days 46.04 25.44 54.97 -8.94 INDEBTEDNESS Debt to equity ratio % 111.09% 95.97% 114.98% -3.89% Short-term liabilities to total liabilities % 48.94% 48.64% 37.66% 11.28% Long-term liabilities to total liabilities % 51.06% 51.36% 62.34% -11.28% Interest charges coverage ratio Times 13.95 18.68 12.02 1.94 PROFITABILITY Return over equity % 12.07% 19.67% 8.71% 3.36% Return over total assets % 5.94% 9.95% 4.22% 1.72% Return over operating assets % 13.30% 21.25% 8.90% 4.39% Operating income MCh$ 40,355 78,765 34,613 5,742 Operating margin % 15.78% 16.28% 14.62% 1.16% EBITDA (1) MCh$ 58,491 104,634 51,128 7,362 EBITDA margin % 22.88% 21.63% 21.12% 1.76% Dividends payout ratio - Series A shares % 7.51% 7.76% 7.37% 0.14% Dividends payout ratio - Series B shares % 7.66% 8.04% 7.38% 0.28% EBITDA (1) Earnings before income taxes, interests, depreciation, amortization and extraordinary items.
The main indicators contained in the table reflect for both periods the solid financial position and profitability of Embotelladora Andina S.A. Liquidity indicators are slightly better than the previous period, reflecting a reclassification of certain financial instruments with maturity in less than a one year period (amounting to MUS$40 for liabilities and MUS$58 for assets). Indicators of indebtedness improve mainly due to the prepayment of US$40 million carried out by our Argentine subsidiary of its external debt in December of 2005, and amortizations of the local bond for an approximate 49 amount of MUS$23 carried out during June 2006 and December 2005, and which are partially offset by a decrease in equity as a result of an extraordinary dividend payment carried out in May of 2006. Financial debt during the period amounted to Ch$2,869 million and earnings before interests and taxes amounted to Ch$40,097 million, achieving an interest coverage of 13.95 times, an improvement of 16% compared to the previous period. Operating profitability indicators benefited from the reasons mentioned in paragraph I. Profitability over equity basically benefited from the reasons stated in paragraph I along with the effect of the decrease in equity already explained. III. Analysis of Book Values and Present Value of Assets With respect to the Company's main assets the following should be noted: Given the high rotation of the items that compose working capital, book values of current assets are considered to represent market values. Fixed asset values in the Chilean companies are presented at restated acquisition cost. In the foreign companies, fixed assets are valued in accordance with Technical Bulletin No. 64 issued by the Chilean Institute of Accountants. (controlled in historical dollars) Depreciation is estimated over the restated value of assets along with the remaining useful economic life of each asset. All fixed assets that are considered available for sale are held at their respective market values. Investments in shares, in situations where the Company has a significant influence on the issuing company, are presented following the equity method. The Company's participation in the results of the issuing company for each year has been recognized on an accrual basis, and unrealized results on transactions between related companies have been eliminated. In summary, assets are valued in accordance with generally accepted accounting standards in Chile and the instructions provided by the Chilean Securities Commission, as shown in Note 2 of the Financial Statements. IV. Analysis of the Main Components of Cash Flow
June 2006 June 2005 Variation Variation Cash Flow (MCH$) MCh$ MCh$ Ch$ % ---------------- --------- --------- ------------ --------- Operating 60.406 45.155 15.250 34% Financing (50.306) (53.816) 3.511 7% Investment (5.051) 4.030 (9.081) 225% Net cash flow for the Period 5.049 (4.631) 9.680 209%
The Company generated a positive net cash flow of MCh$5.049 during the quarter, analyzed as follows: 50 Operating activities generated a positive net cash flow of MCh$60.406 representing a positive variation regarding the previous year which amounted to Ch$15,250 million. Principally explained by increased collections from clients, which were partially offset by increased payment of value added taxes. Financing activities generated a negative cash flow of MCh$50,306 representing a positive variation of MCh$3,511 mainly explained by lower bank loan payments. Investment activities generated a positive cash flow of MCh$5,051; with a negative variation of MCh$9,081 regarding the previous year, mainly explained by decreased sales of investments in financial instruments, and partially offset by increased income from the sale of permanent investments. V. Analysis of Market Risk Interest Rate Risk As of June 30, 2005 and 2006, the Company held 100% of its debt obligations at fixed-rates. Consequently, the risk fluctuation of market interest rates regarding the Company's cash flow remains low. Foreign Currency Risk Income generated by the Company is linked to the currencies of the markets in which it operates. For the period the breakdown for each is the following: Chilean peso: 40% Brazilian real: 40% Argentine peso: 20% Since the Company's sales are not linked to the United States dollar, the policy adopted for managing foreign exchange risk, this is the mismatch between assets and liabilities denominated in a given currency, has been to maintain financial investments in dollar-denominated instruments, for an amount at least equivalent to the dollar-denominated liabilities. Additionally, it is Company policy to maintain foreign currency hedge agreements to lessen the effects of exchange risk in cash expenditures expressed in US dollars which mainly correspond to payment to suppliers for raw materials. Accounting exposure of foreign subsidiaries (Brazil and Argentina) for the difference between monetary assets and liabilities, those denominated in local currency, and therefore, exposed to risks upon translation to the US dollar, are only covered when it is foreseen that it will result in significant negative differences and when the associated cost of said coverage is deemed reasonable by management. Commodity Risks The Company faces the risk of price changes in the international markets for sugar, aluminum and PET resin, all of which are necessary raw materials for preparing beverages, and that altogether represent between 25% and 30% of our operating costs. In order to minimize and/or stabilize such risk, supply contracts and advanced purchases are negotiated when market conditions are favorable. Likewise commodity coverage instruments have also been utilized. 51 This document may contain estimates that reflect a good faith expectation of Embotelladora Andina S.A. and are based on information currently available. It should be noted that the results finally obtained are subject to various variables, many of which are beyond the Company's control and which could have a significant impact on the current performance. Amongst the factors that may cause a change in the performance are: the effects of political and economic conditions on mass- consumption; price pressures resulting from competitive discounts by other bottlers; weather conditions in the Southern Cone and other risk factors that are applicable from time to time and that are periodically informed in the reports to the relevant regulatory authorities. MATERIAL EVENTS During the period April-June 2006, the following material events were filed: REGULAR SHAREHOLDERS MEETING At the Regular General Shareholders Meeting of Embotelladora Andina S.A., held yesterday, April 19, 2006 (hereinafter the "Meeting"), among other matters, the following was resolved: 1. The distribution of the following amounts as Final Dividend No. 150, on account of the fiscal year ending December 31, 2005: (a) Ch$6.48 (six pesos and forty-eight cents) per Series A share; and b) Ch$7.128 (seven pesos and one hundred and twenty eight cents) per Series B share. This dividend will be available to shareholders beginning April 27, 2006. Regarding payment of this dividend, the Shareholders Registry will close on April 21, 2006. 2. The distribution of an additional Dividend No. 151 on account of retained earnings: (a)Ch$70.00 (seventy pesos) per Series A share; and (b)Ch$77.00 (seventy seven pesos) per Series B share. This dividend will be available to shareholders beginning June 1, 2006. Regarding payment of this dividend, the Shareholders Registry will close on May 26, 2006. 3. The Meeting elected a new company board of directors in separate voting by each series of shares, as follows :
Regular Alternate ------- --------- Juan Claro Gonzalez Ernesto Bertelsen Repetto Jose Antonio Garces Silva (junior) Patricio Parodi Gil Arturo Majlis Albala Jose Miguel Barros Van Hovell tot Westerflier James Robert Quincey Blakstad Jorge Hurtado Garreton Gonzalo Said Handal Jose Maria Eyzaguirre Baeza Salvador Said Somavia Jose Domingo Eluchans Urenda Heriberto Urzua Sanchez Pedro Arturo Vicente Molina
For purposes of Article 50-bis, subparagraph 6 of the Chilean Corporation Law, is it stipulated that Mr. Heriberto Urzua Sanchez and his alternate, Mr. Pedro Arturo Vicente Molina, were elected by the Chilean Pension Funds and thus, fulfill the definition of "independent" from the Controlling Shareholder of the Company for Chilean legal purposes. APPOINTMENTS OF THE BOARD OF DIRECTORS The following resolutions were adopted at a regular Board Meeting held April 25, 2006: 52 1. Juan Claro Gonzalez was appointed Chairman of the Board of the Company and Jose Antonio Garces Silva Vice-Chairman. 2. The Executive Committee was elected, comprised of regular directors Jose Antonio Garces Silva, Arturo Majlis Albala, Gonzalo Said Handal and Salvador Said Somavia. In addition, the Chairman of the Board, Juan Claro Gonzalez, and the Chief Executive Officer of the Company, Jaime Garcia Rioseco, are members of this Committee by virtue of their office. 3. Also elected was the Director's Committee in accordance with Article 50-bis of Chilean Corporate Law, comprised of the regular directors Juan Claro Gonzalez, Jose Antonio Garces Silva and Heriberto Urzua Sanchez. If any of them should be unable to attend, they can be replaced by their respective alternate director. Mr. Heriberto Urzua Sanchez is considered an independent director under Chilean law. It was resolved that Mr. Juan Claro Gonzalez will be the Chairman of this Committee. 4. Juan Claro Gonzalez, Jose Antonio Garces Silva and Heriberto Urzua Sanchez were appointed members of the U.S. Sarbanes-Oxley Audit Committee. At a Committee meeting held April 25, 2006, it was decided that Mr. Juan Claro Gonzalez also be Chairman of this Audit Committee. Juan Claro Gonzalez and Heriberto Urzua Sanchez are considered independent directors under U.S. law and have voting rights in this Committee. 5. Mr. Pedro Pellegrini Ripamonti, Corporate Legal Manager, was appointed representative or authorized person to receive notifications in absence of Mr. Renato Ramirez Fernandez, General Manager. No other significant events of a financial or any other nature have occurred between June 30, 2006 and the issuance date of these financial statements that affect or may affect the assets, liabilities and/or income of the Company. 53 REPORT OF INDEPENDENT AUDITORS (Translation of original in Spanish) Santiago, July 25, 2006 To the Shareholders and Directors Embotelladora Andina S.A. We have reviewed the accompanying consolidated balance sheets of Embotelladora Andina S.A. and its subsidiaries (the "Company") at June 30, 2006 and 2005, and the related consolidated statements of income and of cash flows for the six month period then ended. These financial statements (including the corresponding notes) are the responsibility of the Company's management. The Analysis of Results and relevant facts attached are not part of these financial statements, and therefore this report is not related to them. We have conducted our review according to auditing standards established in Chile. A review of interim financial information includes basically applying analytic review procedures to the financial statements and querying the personnel in charge of the financial and accounting issues. The scope of these reviews is substantially less than that of an audit performed according to auditing standards generally accepted, whose aim is to express an opinion on the financial statements as a whole. Accordingly, the interim consolidated financial statements as of June 30, 2006 and 2005 have not been audited and, therefore, we cannot, nor do we, express such an opinion. Based on our review of the interim consolidated financial statements as if June 30, 2006 and 2005 we are not aware of significant adjustments that should performed over same in order for the to be in accordance with generally accepted accounting principles in Chile. Juan Carlos Pitta de Clemente Id No.: 14.709.125-7 54 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Santiago, Chile. EMBOTELLADORA ANDINA S.A. By: /s/ Osvaldo Garay Name: Osvaldo Garay Title: Chief Financial Officer Santiago, August 17, 2006 -----END PRIVACY-ENHANCED MESSAGE-----