Table of Contents

 

 

 

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

 

December 2018

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)

 

Avda. Miraflores 9153

Renca

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 o

 

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 o         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 o          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 o         No x

 

 

 


Table of Contents

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Interim Financial Statements

as of September 30 (unaudited), 2018, and December 31, 2017

 


Table of Contents

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Interim Financial Statements

 

INDEX

 

Consolidated Interim Statements of Financial Position as of September 30, 2018 (unaudited) and December 31, 2017

1

 

 

Consolidated Interim Statements of Income by Function for the period between January 1 and September 30, 2018 and 2017 (unaudited)

3

 

 

Consolidated Interim Statements of Comprehensive Income for the period between January 1 and September 30, 2018 and 2017 (unaudited)

4

 

 

Consolidated Interim Statements of Changes in Equity for the period between January 1 and September 30, 2018 and 2017 (unaudited)

5

 

 

Consolidated Interim Statements of Cash Flows for the period between January 1 and September 30, 2018 and 2017 (unaudited)

6

 

 

Notes to the Consolidated Interim Financial Statements (unaudited)

7

 


Table of Contents

 

Consolidated Interim Financial Statements

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

As of September 30, 2018, and December 31, 2017

 


Table of Contents

 

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Interim Statements of Financial Position

 

 

 

NOTE

 

09.30.2018

 

12.31.2017

 

 

 

 

 

ThCh$

 

ThCh$

 

 

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

4

 

73,709,086

 

136,242,116

 

Other financial assets

 

5

 

4,049,505

 

14,138,161

 

Other non-financial assets

 

6.1

 

5,996,195

 

5,611,861

 

Trade and other accounts receivable, net

 

7

 

140,023,967

 

191,284,680

 

Accounts receivable from related companies

 

11.1

 

3,189,903

 

5,370,232

 

Inventory

 

8

 

140,373,740

 

131,363,000

 

Current tax assets

 

9.2

 

3,652,393

 

 

Total Current Assets

 

 

 

370,994,789

 

484,010,050

 

 

 

 

 

 

 

 

 

Non-Current Assets:

 

 

 

 

 

 

 

Other financial assets

 

5

 

102,072,916

 

74,259,085

 

Other non-financial assets

 

6.2

 

36,679,947

 

47,394,345

 

Trade and other receivables

 

7

 

1,567,259

 

2,395,851

 

Accounts receivable from related parties

 

11.1

 

57,253

 

156,492

 

Investments accounted for under the equity method

 

13.1

 

83,447,110

 

86,809,069

 

Intangible assets other than goodwill

 

14.1

 

648,599,271

 

663,272,878

 

Goodwill

 

14.2

 

104,805,686

 

93,598,217

 

Property, plant and equipment

 

10.1

 

633,581,919

 

659,750,499

 

Deferred income tax assets

 

9.5

 

1,454,107

 

3,212,981

 

Total Non-Current Assets

 

 

 

1,612,265,468

 

1,630,849,417

 

Total Assets

 

 

 

1,983,260,257

 

2,114,859,467

 

 

The accompanying notes 1 to 30 form an integral part of these Consolidated Interim Financial Statements

 

1


Table of Contents

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Interim Statements of Financial Position

 

 

 

NOTE

 

09.30.2018

 

12.31.2017

 

 

 

 

 

ThCh$

 

ThCh$

 

 

 

 

 

(unaudited)

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Other financial liabilities

 

15

 

42,089,442

 

67,981,405

 

Trade and other accounts payable

 

16

 

176,261,193

 

257,519,477

 

Accounts payable to related parties

 

11.2

 

25,917,652

 

33,961,437

 

Provisions

 

17

 

2,365,381

 

2,676,418

 

Income taxes payable

 

9.3

 

3,791,309

 

3,184,965

 

Employee benefits current provisions

 

12

 

23,819,205

 

35,955,643

 

Other non-financial liabilities

 

18

 

25,023,356

 

27,007,977

 

Total Current Liabilities

 

 

 

299,267,538

 

428,287,322

 

 

 

 

 

 

 

 

 

Other financial liabilities

 

15

 

693,905,215

 

675,767,201

 

Trade and other payables

 

16

 

732,338

 

1,132,926

 

Provisions

 

17

 

59,388,684

 

62,947,748

 

Deferred income tax liabilities

 

9.5

 

138,081,237

 

125,204,566

 

Post-employment benefit liabilities

 

12

 

8,897,348

 

8,286,355

 

Non-Current Liabilities:

 

 

 

901,004,822

 

873,338,796

 

 

 

 

 

 

 

 

 

Equity:

 

19

 

 

 

 

 

Issued capital

 

 

 

270,737,574

 

270,737,574

 

Retained earnings

 

 

 

403,200,214

 

335,523,254

 

Other reserves

 

 

 

89,081,152

 

185,049,228

 

Equity attributable to equity holders of the parent

 

 

 

763.018.940

 

791,310,056

 

Non-controlling interests

 

 

 

19,968,957

 

21,923,293

 

Total Equity

 

 

 

782,987,897

 

813,233,349

 

Total Liabilities and Equity

 

 

 

1,983,260,257

 

2,114,859,467

 

 

The accompanying notes 1 to 30 form an integral part of these Consolidated Interim Financial Statements

 

2


Table of Contents

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Interim Statements of Income by Function

for the periods ended September 30, 2018 and 2017

 

 

 

 

 

01.01.2018

 

01.01.2017

 

07.01.2018

 

07.01.2017

 

 

 

NOTE

 

09.30.2018

 

09.30.2017

 

09.30.2018

 

09.30.2017

 

 

 

 

 

(unaudited)
ThCh$

 

(unaudited)
ThCh$

 

(unaudited)
ThCh$

 

(unaudited)
ThCh$

 

Net sales

 

 

 

1,118,863,993

 

1,324,580,914

 

345,081,649

 

417,902,268

 

Cost of sales

 

23

 

(656,735,495

)

(774,424,527

)

(205,916,993

)

(247,844,317

)

Gross Profit

 

 

 

462,128,498

 

550,156,387

 

139,164,655

 

170,057,951

 

Other income

 

24

 

599,060

 

454,630

 

364,360

 

66,602

 

Distribution expenses

 

23

 

(108,020,248

)

(135,665,392

)

(34,242,181

)

(43,391,906

)

Administrative expenses

 

23

 

(217,172,921

)

(257,858,976

)

(69,945,426

)

(82,809,930

)

Other expenses

 

25

 

(11,320,499

)

(12,616,648

)

(3,042,813

)

(2,825,552

)

Other (loss) gains

 

27

 

(2,631,243

)

(2,269,661

)

(937,970

)

(780,242

)

Financial income

 

26

 

3,961,817

 

8,009,231

 

835,145

 

1,960,358

 

Financial expenses

 

26

 

(33,894,692

)

(40,771,309

)

(10,738,539

)

(13,523,167

)

Share of profit (loss) of investments in associates and joint ventures accounted for using the equity method

 

13.3

 

853,772

 

351,025

 

70,238

 

(585,530

)

Foreign exchange differences

 

 

 

(1,368,107

)

(222,160

)

(2,190,401

)

(252,105

)

Income by indexation units

 

 

 

(4,813,999

)

(2,372,322

)

44,887

 

500,289

 

Net income before income taxes

 

 

 

88,321,438

 

107,194,805

 

19,381,955

 

28,416,768

 

Income tax expense

 

9.4

 

(35,760,108

)

(32,796,938

)

(8,729,115

)

(7,193,710

)

Net income

 

 

 

52,561,330

 

74,397,867

 

10,652,840

 

21,223,058

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to

 

 

 

 

 

 

 

 

 

 

 

Equity holders of the parent

 

 

 

52,283,692

 

73,727,111

 

10,805,360

 

21,223,982

 

Non-controlling interests

 

 

 

277,638

 

670,756

 

(152,520

)

(924

)

Net income

 

 

 

52,561,330

 

74,397,867

 

10,652,840

 

21,223,058

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

$

 

$

 

$

 

Earnings per Share, basic and diluted

 

 

 

 

 

 

 

 

 

 

 

Earnings per Series A Share

 

19.5

 

52,60

 

74.18

 

10,72

 

21.35

 

Earnings per Series B Share

 

19.5

 

57,87

 

81.60

 

11,79

 

23.49

 

 

The accompanying notes 1 to 30 form an integral part of these Consolidated Interim Financial Statements

 

3


Table of Contents

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Interim Statements of Comprehensive Income

for the periods ended September 30, 2018 and 2017

 

 

 

01.01.2018

 

01.01.2017

 

07.01.2018

 

07.01.2017

 

 

 

09.30.2018

 

09.30.2017

 

09.30.2018

 

09.30.2017

 

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Net income

 

52,561,330

 

74,397,867

 

10,652,840

 

21,223,058

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income:

 

 

 

 

 

 

 

 

 

Components of other comprehensive income that will not be reclassified to net income for the period, before taxes

 

 

 

 

 

 

 

 

 

Actuarial losses from defined benefit plans

 

(845

)

(338,043

)

36,143

 

(187,915

)

Components of other comprehensive income that will be reclassified to net income for the period, before taxes

 

 

 

 

 

 

 

 

 

Gain (losses) from exchange rate translation differences

 

(94,999,968

)

(26,046,925

)

(60,498,473

)

(20,487,492

)

Gain (losses) from cash flow hedges

 

(5,352,556

)

(8,734,783

)

3,709,168

 

(3,464,745

)

Income tax related to components of other comprehensive income that will not be reclassified to net income for the period

 

 

 

 

 

 

 

 

 

Income tax benefit related to defined benefit plans

 

228

 

86,201

 

(9,759

)

47,918

 

 

 

 

 

 

 

 

 

 

 

Income tax related to components of other comprehensive income that will be reclassified to net income for the period

 

 

 

 

 

 

 

 

 

Income tax related to exchange rate translation differences

 

3,084,117

 

(479,337

)

633,581

 

(836,058

)

Income tax related to cash flow hedges

 

1,387,969

 

2,912,533

 

(1,435,490

)

(236,418

)

Total comprehensive income

 

(43,319,725

)

41,797,513

 

(46,911,990

)

(3,941,652

)

 

 

 

 

 

 

 

 

 

 

Equity holders of the parent

 

(43,684,384

)

41,338,191

 

(47,162,060

)

(3,625,504

)

Non-controlling interests

 

364,659

 

459,322

 

250,070

 

(316,148

)

Total comprehensive income

 

(43,319,725

)

41,797,513

 

(46,911,990

)

(3,941,652

)

 

The accompanying notes 1 to 30 form an integral part of these Consolidated Interim Financial Statements

 

4


Table of Contents

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

Consolidated Interim Statements of Changes in Equity as of September 30, 2018 and 2017 (unaudited)

 

 

 

 

 

Other reserves

 

 

 

 

 

 

 

 

 

 

 

Issued capital

 

Reserves for
exchange rate
differences

 

Cash flow hedge
reserve

 

Actuarial gains
or losses in
employee
benefits

 

Other reserves

 

Total other
reserves

 

Retained
earnings

 

Controlling
Equity

 

Non-Controlling
interests

 

Total Equity

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Opening balance as of 01/01/2018

 

270,737,574

 

(237,077,572

)

(3,094,671

)

(1,915,587

)

427,137,058

 

185,049,228

 

335,523,254

 

791,310,056

 

21,923,293

 

813,233,349

 

Changes in accounting policies

 

 

 

 

 

 

 

79,499,736

 

79,499,736

 

 

79,499,736

 

Restated opening balance

 

270,737,574

 

(237,077,572

)

(3,094,671

)

(1,915,587

)

427,137,058

 

185,049,228

 

415,022,990

 

870,809,792

 

21,923,293

 

917,821,847

 

Changes in Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

52,283,692

 

52,283,692

 

277,638

 

52,561,330

 

Other comprehensive income

 

 

(92,002,872

)

(3,094,671

)

(617

)

 

(95,968,076

)

 

(95,968,076

)

87,021

 

(95,881,055

)

Total Comprehensive income

 

 

(92,002,872

)

(3,094,671

)

(617

)

 

(95,968,076

)

52,283,692

 

(43,684,384

)

364,659

 

(43,319,725

)

Dividends

 

 

 

 

 

 

 

(64,106,468

)

(64,106,468

)

(2,3198,995

)

(66,425,463

)

Total changes in equity

 

 

(92,002,872

)

(3,094,671

)

(617

)

 

(95,968,076

)

11,822,776

 

(107,790,852

)

(1,954,336

)

(109,745,188

)

Ending balance as of 09/30/2018

 

270,737,574

 

(329,080,444

)

(7,059,258

)

(1,916,204

)

427,137,058

 

89,081,152

 

403,200,214

 

763,018,940

 

19,968,957

 

782,987,897

 

 

 

 

 

 

Other reserves

 

 

 

 

 

 

 

 

 

 

 

Issued capital

 

Reserves for
exchange rate
differences

 

Cash flow hedge
reserve

 

Actuarial gains
or losses in
employee
benefits

 

Other reserves

 

Total other
reserves

 

Retained
earnings

 

Controlling
Equity

 

Non-Controlling
interests

 

Total Equity

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Opening balance as of 01/01/2017

 

270,737,574

 

(168,744,355

)

(2,448,175

)

(1,785,032

)

427,137,058

 

254,159,496

 

295,708,512

 

820,605,582

 

21,564,445

 

842,170,027

 

Changes in Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

73,727,111

 

73,727,111

 

670,756

 

74,397,867

 

Other comprehensive income

 

 

(26,402,692

)

(5,822,250

)

(163,978

)

 

(32,388,920

)

 

(32,388,920

)

(211,434

)

(32,600,354

)

Total Comprehensive income

 

 

(26,402,692

)

(5,822,250

)

(163,978

)

 

(32,388,920

)

73,727,111

 

41,338,191

 

459,322

 

41,797,513

 

Dividends

 

 

 

 

 

 

 

(56,656,282

)

(56,656,282

)

(220,096

)

(58,876,378

)

Total changes in equity

 

 

(26,402,692

)

(5,822,250

)

(163,978

)

 

(32,388,920

)

17,070,829

 

(15,318,091

)

239,226

 

(15,078,865

)

Ending balance as of 09/30/2017

 

270,737,574

 

(195,147,047

)

(8,270,425

)

(1,949,010

)

427,137,058

 

221,770,576

 

312,779,341

 

805,287,491

 

21,803,671

 

827,091,162

 

 

The accompanying notes 1 to 30 form an integral part of these Consolidated Interim Financial Statements

 

5


Table of Contents

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Interim Statements of Direct Cash Flows

as of September 30, 2018 and 2017 (unaudited)

 

 

 

 

 

01.01.2018

 

01.01.2017

 

 

 

NOTE

 

09.30.2018

 

09.30.2017

 

 

 

 

 

ThCh$

 

ThCh$

 

Cash flows provided by (used in) Operating Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows provided by Operating Activities

 

 

 

 

 

 

 

Receipts from the sale of goods and the rendering of services (including taxes)

 

 

 

1,486,205,025

 

1,736,474,032

 

Payments for Operating Activities

 

 

 

 

 

 

 

Payments to suppliers for goods and services (including taxes)

 

 

 

(994,467,042

)

(1,079,523,501

)

Payments to and on behalf of employees

 

 

 

(138,370,529

)

(187,969,618

)

Other payments for operating activities (value-added taxes on purchases, sales and others)

 

 

 

(187,214,435

)

(246,937,595

)

Dividend received

 

 

 

300,632

 

770,045

 

Interest payments

 

 

 

(39,466,733

)

(46,721,208

)

Interest received

 

 

 

2,356,556

 

6,521,625

 

Income tax payments

 

 

 

(20,301,062

)

(31,729,775

)

Other cash movements (tax on bank debits Argentina and others)

 

 

 

(1,560,335

)

(4,936,327

)

Cash flows provided by (used in) Operating Activities

 

 

 

107,482,077

 

145,947,678

 

 

 

 

 

 

 

 

 

Cash flows provided by (used in) Investing Activities

 

 

 

 

 

 

 

Investment in associates

 

13.2

 

(1,500,000

)

(26,538,271

)

Proceeds from sale of Property, plant and equipment

 

 

 

143,431

 

97,874

 

Purchase of Property, plant and equipment

 

 

 

(86,331,506

)

(111,622,838

)

Purchase of intangible

 

 

 

 

(11,923,449

)

Proceeds from other long-term assets (term deposits over 90 days)

 

 

 

13,883,132

 

81,258,426

 

Purchase of other long-term assets (term deposits over 90 days)

 

 

 

(1,271,242

)

(43,702,935

)

Payments on forward, term, option and financial exchange agreements

 

 

 

624,288

 

877,765

 

Net cash flows used in Investing Activities

 

 

 

(74,451,897

)

(111,553,428

)

 

 

 

 

 

 

 

 

Cash Flows generated from (used in) Financing Activities

 

 

 

 

 

 

 

Proceeds from short-term loans obtained

 

 

 

23,080,777

 

36,517,608

 

Loan payments

 

 

 

(33,459,268

)

(24,502,860

)

Financial lease liability payments

 

 

 

(2,274,654

)

(2,914,554

)

Dividend payments by the reporting entity

 

 

 

(65,039,907

)

(56,659,484

)

Other inflows (outflows) of cash (Placement and payment of public obligations)

 

 

 

(9,975,184

)

(15,779,416

)

Net cash flows (used in) generated by Financing Activities

 

 

 

(87,668,236

)

(63,338,706

)

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents before exchange differences

 

 

 

(54,638,056

)

(28,944,456

)

Effects of exchange differences on cash and cash equivalents

 

 

 

476,801

 

(1,314,724

)

Exposure to inflation results

 

 

 

(8,371,775

)

 

Net decrease in cash and cash equivalents

 

 

 

(62,533,030

)

(30,259,180

)

Cash and cash equivalents — beginning of year

 

4

 

136,242,116

 

141,263,880

 

Cash and cash equivalents - end of year

 

4

 

73,709,086

 

111,004,700

 

 

The accompanying notes 1 to 30 form an integral part of these Consolidated Interim Financial Statements

 

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EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Notes to the Consolidated Interim Financial Statements

 

NOTE 1 - CORPORATE INFORMATION

 

Embotelladora Andina S.A. RUT (Chilean Tax Id. N°) 91.144.000-8 (hereafter “Andina,” and together with its subsidiaries, the “Company”) is registered under No. 00124 of the Securities Registry and is regulated by Chile’s Financial Market Commission (previously the Superintendence of Securities and Insurance) pursuant to Law 18.046.

 

The principal activities of Embotelladora Andina S.A. are to manufacture, bottle, commercialize and/or distribute Coca-Cola products and brands registered by The Coca-Cola Company. The Company has operations and is licensed by The Coca-Cola Company in its territories Chile, Brazil, Argentina and Paraguay. In Chile, the geographic areas in which the Company has distribution franchises are regions II, III, IV, XI, XII, Metropolitan Region, Rancagua and San Antonio. In Brazil, in the states of Rio de Janeiro, Espirito Santo, Niteroi, Vitoria, Nova Iguaçu, part of Sao Paulo and part of Minas Gerais. In Argentina, in the provinces of Mendoza, Córdoba, San Luis, Entre Ríos, Santa Fe, Rosario, Santa Cruz, Neuquén, El Chubut, Tierra del Fuego, Río Negro, La Pampa and the western zone of the Province of Buenos Aires. In Paraguay, the franchised territory covers the whole country. Licenses for the territories in Chile expire in January 2019 and October 2023. In Argentina they expire in 2022; in Brazil they are in the renewal process and in Paraguay they expire in 2020. Said licenses are renewable upon the request of the licensee and at the sole discretion of The Coca-Cola Company. These licenses are expected to be renewed under similar conditions on the date of expiration.

 

As of the date of this report, regarding Andina’s principal shareholders, the Controlling Group(1) holds 55.72% of the outstanding shares with voting rights, corresponding to the Series A shares.

 

The head office of Embotelladora Andina S.A. is located on Miraflores 9153, borough of Renca, Santiago, Chile.

 


(1) Controlling Group: Inversiones SH Seis Limitada , Inversiones Cabildo SpA, Inversiones Chucao Limitada, today Inversiones Lleuque Limitada , Inversiones Nueva Delta S.A. , Inversiones Nueva Delta Dos S.A. , Inversiones Las Gaviotas Dos Limitada, today Inversiones Playa Amarilla SpA , Inversiones Playa Negra Dos Limitada, today Inversiones Playa Negra SpA , Inversiones Don Alfonso Dos Limitada, today Inversiones Don Alfonso Limitada , Inversiones El Campanario Dos Limitada, today Inversiones El Campanario Limitada , Inversiones Los Robles Dos Limitada, today Inversiones Los Robles Limitada and Inversiones Las Viñas Dos Limitada, today Inversiones Las Niñas Dos SpA . For more information on the structure of the Controlling Group please refer to page 58 of Andina’s 2017 Annual Report, available at www.koandina.com

 

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NOTE 2 - BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

2.1           Periods covered

 

These Consolidated Financial Statements encompass the following periods:

 

Statement of Financial Position: As of September 30, 2018, and December 31, 2017.

 

Income Statements by Function and Comprehensive Income: For the quarter and nine months ended September 30, 2018 and 2017.

 

Statements of Changes in Equity:  Balance and movements between January 1 and September 30, 2018 and 2017.

 

Statements of Direct Cash Flows: For the periods between January 1 and September 30, 2018 and 2017.

 

2.2                     Basis of preparation

 

The Company’s Consolidated Interim Financial Statements were prepared in accordance with the International Accounting Standard N°34 (IAS 34) incorporated in the International Financial Reporting Standards (hereinafter “IFRS”) issued by the International Accounting Standards Board (hereinafter “IASB”).

 

The Consolidated Interim Financial Statements are presented in accordance to the historic cost criteria, although amended by the revaluation of certain financial instruments and derivative financial instruments and have been prepared, based on accounting records kept by the Parent Company and by other entities forming part thereof.

 

These Consolidated Interim Financial Statements reflect the consolidated financial position of Embotelladora Andina S.A. and its subsidiaries, which were approved by the Board of Directors on November 27, 2018.

 

2.3                              Basis of consolidation

 

2.3.1                    Subsidiaries

 

These consolidated interim financial statements incorporate the financial statements of the Company and the companies controlled by the Company (its subsidiaries).  Control is obtained when the Company has power over the investee, when it has exposure or is entitled to variable returns from its involvement in the investee and when it has the ability to use its power to influence the amount of investor returns. They include assets and liabilities , results of operations , and cash flows for the periods reported . Income or losses from subsidiaries acquired or sold are included in the Consolidated Interim Financial Statements from the effective date of acquisition through the effective date of disposal, as applicable.

 

The acquisition method is used to account for the acquisition of subsidiaries. The consideration transferred for the acquisition of the subsidiary is the fair value of assets transferred, equity securities issued, liabilities incurred or assumed on the date that control is obtained. Identifiable assets acquired, and identifiable liabilities and contingencies assumed in a business combination are accounted for initially at their fair values at the acquisition date. Goodwill is initially measured as the excess of the

 

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aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If the consideration is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement.

 

The interest of non-controlling shareholders is presented in the consolidated statement of changes in equity and the consolidated statement of income by function under “Non-Controlling Interest” and “Earnings attributable to non-controlling interests”, respectively.

 

The consolidated interim financial statements include all assets, liabilities, income, expenses, and cash flows after eliminating and adjusting intercompany transactions of the following entities:

 

 

 

 

 

Holding control (percentage)

 

 

 

 

 

09-30-2018

 

12-31-2017

 

Taxpayer ID

 

Name of the Company

 

Direct

 

Indirect

 

Total

 

Direct

 

Indirect

 

Total

 

59.144.140-K

 

Abisa Corp S.A.

 

 

99.99

 

99.99

 

 

99.99

 

99.99

 

Foreign

 

Aconcagua Investing Ltda.

 

0.71

 

99.28

 

99.99

 

0.71

 

99.28

 

99.99

 

96.842.970-1

 

Andina Bottling Investments S.A.

 

99.90

 

0.09

 

99.99

 

99.90

 

0.09

 

99.99

 

96.972.760-9

 

Andina Bottling Investments Dos S.A.

 

99.90

 

0.09

 

99.99

 

99.90

 

0.09

 

99.99

 

Foreign

 

Andina Empaques Argentina S.A.

 

 

99.98

 

99.98

 

 

99.98

 

99.98

 

96.836.750-1

 

Andina Inversiones Societarias S.A.

 

99.98

 

0.01

 

99.99

 

99.98

 

0.01

 

99.99

 

76.070.406-7

 

Embotelladora Andina Chile S.A.

 

99.99

 

 

99.99

 

99.99

 

 

99.99

 

Foreign

 

Embotelladora del Atlántico S.A.

 

0.92

 

99.07

 

99.99

 

0.92

 

99.07

 

99.99

 

96.705.990-0

 

Envases Central S.A.

 

59.27

 

 

59.27

 

59.27

 

 

59.27

 

96.971.280-6

 

Inversiones Los Andes Ltda.

 

99.99

 

 

99.99

 

99.99

 

 

99.99

 

Foreign

 

Paraguay Refrescos S.A.

 

0.08

 

97.75

 

97.83

 

0.08

 

97.75

 

97.83

 

76.276.604-3

 

Red de Transportes Comerciales Ltda.

 

99.90

 

0.09

 

99.99

 

99.90

 

0.09

 

99.99

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

 

99.99

 

99.99

 

 

99.99

 

99.99

 

78.536.950-5

 

Servicios Multivending Ltda.

 

99.90

 

0.09

 

99.99

 

99.90

 

0.09

 

99.99

 

78.861.790-9

 

Transportes Andina Refrescos Ltda.

 

99.90

 

0.09

 

99.99

 

99.90

 

0.09

 

99.99

 

96.928.520-7

 

Transportes Polar S.A.

 

99.99

 

 

99.99

 

99.99

 

 

99.99

 

76.389.720-6

 

Vital Aguas S.A.

 

66.50

 

 

66.50

 

66.50

 

 

66.50

 

93.899.000-k

 

Vital Jugos S.A.

 

15.00

 

50.00

 

65.00

 

15.00

 

50.00

 

65.00

 

 

2.3.2                    Investments in associates

 

Associates are all entities over which the Group exercises significant influence but does not have control, the results of these associates are accounted for using the equity method .

 

Accounting policies of the associates are changed, where necessary, to ensure conformity with the policies adopted by the Company and unrealized gains are eliminated.

 

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2.4                                Financial reporting by operating segment

 

IFRS 8 requires that entities disclose information on the results of operating segments. In general, this is information that Management and the Board of Directors use internally to assess performance of segments and allocate resources to them. Therefore, the following operating segments have been determined based on geographic location:

 

·                 Chilean operations

·                 Brazilian operations

·                 Argentine operations

·                  Paraguayan operations

 

2.5                                Functional currency and presentation currency

 

2.5.1                      Functional currency

 

Items included in the financial statements of each of the entities in the Company are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The functional currency of each of the Operations is the following:

 

Company

 

Functional currency

 

 

 

Andina Empaques Argentina

 

Argentine Peso

Embotelladora del Atlántico

 

Argentine Peso

Embotelladora Andina

 

Chilean Peso

Paraguay Refrescos

 

Guaraní

Rio de Janeiro Refrescos

 

Reales

 

Foreign currency transactions are translated into the functional currency using the foreign exchange rates prevailing on the dates of the transactions. Losses and gains in foreign currency resulting from the liquidation of these transactions and the translation at the closing exchange rate of monetary assets and liabilities denominated in foreign currency are recognized in the income statements under foreign exchange rate differences, except when they correspond to cash flow hedges; in which case they are presented in the statement of comprehensive income.

 

Functional currency in hyperinflationary economies

 

As of July 2018, accumulated inflation in Argentina for the last three years exceeded 100%, and pursuant to IAS 29, Argentina’s economy should be considered as a hyperinflationary economy.  According to IAS, financial statements of entities whose functional currency corresponds to a hyperinflationary economy should be restated to the current currency as of the date of the balance sheet.

 

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Set forth below is the main criteria used:

 

·                  Statement of financial position (balance sheet):  Non-monetary items are stated at the current currency as of the date of the balance sheet.  Gains and losses are included in net gains (net income for the period).

 

·                  First fiscal year: The losses and gains produced by the restatement of current non-monetary items from the previous year are recorded in the cumulative results as of January 1, 2018. The impact of this record was an increase of Th$79,499,736

 

·                  Statement of Income: Income Statement items are expressed in the current currency unit at the end of the reporting period, using the variation of the general price index from the date on which the expenses and revenues were accrued.

 

·                  Cash Flow Statement: Cash flow statement items are expressed in the current currency unit at the end of the reporting period.

 

·                  Inflation for the period January through September 2018 reached 29.5%

 

2.5.2                    Presentation currency

 

The presentation currency is the Chilean peso, which is the functional currency of the parent company, for such purposes, the financial statements of subsidiaries are translated from the functional currency to the presentation currency as indicated below:

 

a.              Translation of financial statements whose functional currency does not correspond to hyperinflationary economies (Brazil and Paraguay)

 

Financial statements measured as indicated are translated to the presentation currency as follows:

 

·                  The balance sheet is translated to the closing exchange rate at the balance sheet date and the income statement is translated at the average monthly exchange rates, the differences that result are recognized in equity under other comprehensive income.

 

·                  Cash flow income statement are also translated at average exchange rates for each transaction.

 

·                  When an account receivable from related companies is designated as hedge investment, translation differences are recorded under comprehensive income, net of deferred taxes.  On disposal of the investment, such translation differences are recognized in the income statement as part of the gain or loss on the disposal of the investment.

 

b.              Conversion of financial statements whose functional currency corresponds to hyperinflationary economies (Argentina)

 

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Financial statements measured in their functional currency, with inflation adjustments since they correspond to a hyperinflationary economy, are translated to the presentation currency as follows:

 

·                  The balance sheet is translated at the closing exchange rate at the balance sheet date;

 

·                  Results are translated at the closing exchange rate at the balance sheet date

 

·                  When an account receivable from related companies is designated as hedge investment, translation differences are recorded under comprehensive income, net of deferred taxes.  On disposal of the investment, such translation differences are recognized in the income statement as part of the gain or loss on the disposal of the investment.

 

c.               Comparative figures

 

According to the IAS, figures of previous years are not adjusted or re-expressed when the presentation currency is that of a non-hyperinflationary economy, as is the case of the Chilean peso, thus, financial statements of previous years are not amended.

 

2.5.3                      Exchange rates and value of the UF

 

 

 

Exchange rate to the Chilean Peso

 

Date

 

US$
dollar

 

R$ Brazilian
Real

 

A$ Argentine
Peso

 

UF Unidad
de Fomento

 

G$ Paraguayan
Guaraní

 


Euro

 

09.30.2018

 

660.42

 

164.94

 

16.01

 

27,357.45

 

0.112

 

767.22

 

12.31.2017

 

614.75

 

185.84

 

32.96

 

26,798.14

 

0.110

 

739.15

 

09.30.2017

 

637.93

 

201.37

 

36.85

 

26,656.79.

 

0.113

 

752.99

 

 

2.6                              Property, plant, and equipment

 

Assets included in Property, plant and equipment are recognized at their historical cost or fair value on the IFRS transition date, less depreciation and cumulative impairment losses.

 

Historical cost of Property, plant and equipment includes expenditures that are directly attributable to the acquisition of the items less government subsidies resulting from the difference between the valuation of liabilities at fair value and the government´s preferential credit rates. Historical cost also includes revaluations and price-level restatements of opening balances (attributable cost) at January 1, 2009, in accordance with the exemptions in IFRS 1.

 

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset only when it is probable that future economic benefits associated with the items of Property, plant and equipment will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. Repairs and maintenance are charged to the income statement in the reporting period in which they are incurred.

 

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives.

 

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The estimated useful lives by asset category are:

 

Assets

 

Range in years

 

Buildings

 

30-50

 

Plant and equipment

 

10-20

 

Warehouse installations and accessories

 

10-30

 

Furniture and supplies

 

4-5

 

Motor vehicles

 

5-7

 

Other Property, plant and equipment

 

3-8

 

Bottles and containers

 

2-8

 

 

The residual value and useful lives of assets are reviewed and adjusted at the end of each financial statement-reporting period, if appropriate.

 

When the value of an asset is greater than its estimated recoverable amount, the value is written down immediately to its recoverable amount.

 

Gains and losses on disposals of property, plant, and equipment are calculated by comparing the proceeds to the carrying amount and are charged to other expenses by function.

 

If there are items available for sale and comply with the conditions of IFRS 5 “Non-current assets held for sale and discontinued operations” are separated from Property, plant and equipment and are presented within current assets at the lower value between the book value and its fair value less selling costs.

 

2.7                                     Intangible assets and Goodwill

 

2.7.1                             Goodwill

 

Goodwill represents the excess of the consideration transferred over the Company’s interest in the net fair value of the net identifiable assets of the subsidiary and the fair value of the non-controlling interest in the subsidiary on the acquisition date. Since goodwill is an intangible asset with indefinite useful life, it is recognized separately and tested annually for impairment. Goodwill is carried at cost less accumulated impairment losses.

 

Gains and losses on the sale of an entity include the carrying amount of goodwill related to that entity.

 

Goodwill is assigned to each cash generating unit (CGU) or group of cash-generating units, from where it is expected to benefit from the synergies arising from the business combination. Such CGUs or groups of CGUs represent the lowest level in the organization at which goodwill is monitored for internal management purposes.

 

2.7.2                           Distribution rights

 

Distribution rights are contractual rights to produce and/or distribute products under the Coca-Cola brand and other brands in certain territories in Argentina, Brazil, Chile and Paraguay that were acquired during Business Combination.  Distribution rights are born from the process of valuation at fair value of the assets and liabilities of companies acquired in business combinations. Distribution rights have an

 

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indefinite useful life and are not amortized, as the Company believes that the agreements will be renewed indefinitely by the Coca-Cola Company with similar terms and conditions.  They are subject to impairment tests on an annual basis.

 

2.7.3                              Software

 

Carrying amounts correspond to internal and external software development costs, which are capitalized once the recognition criteria in IAS 38, Intangible Assets, have been met. Software is amortized in administrative expenses in the consolidated income statement over a period of four years.

 

2.8                              Impairments of non-financial assets

 

Assets that have an indefinite useful life, such as intangibles related to distribution rights and goodwill, are not amortized and are tested annually for impairment or more frequently if events or changes in circumstances indicate a potential impairment. Assets that are subject to amortization are tested for impairment whenever there is an event or change in circumstances indicating that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying value of the asset exceeds its recoverable amount. The recoverable amount is the greater of an asset’s fair value less costs to sell or its value in use.

 

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

 

2.9                              Financial assets

 

Pursuant to IFRS 9, except for certain trade accounts receivable, the Group initially measures a financial asset at its fair value plus transaction costs, in the case of a financial asset that is not at fair value, reflecting changes in P&L.

 

According to IFRS 9, financial assets are subsequently measured at fair value with changes in P&L (FVPL), amortized cost or fair value through other comprehensive income (FVOCI). The classification is based on two criteria: The Group’s business model for managing assets; and if the contractual cash flows of financial instruments represent “solely payments of principal and interest” on the outstanding principal amount (the “SPPI criterion”).

 

The new classification and measurement of the Group’s financial assets are:

 

·                  Financial asset at amortized cost for financial instruments that are maintained within a business model with the objective of maintaining the financial assets to collect contractual cash flows that meet the SPPI criterion. This category includes the Group’s trade and other accounts receivable.

 

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·                  Financial assets measured at fair value with changes in other comprehensive income (FVOCI), with gains or losses recognized in P&L at the time of liquidation. Financial assets in this category correspond to the Group’s instruments that meet the SPPI criterion and are kept within a business model both to collect cash flows and to sell.

 

Other financial assets are classified and subsequently measures as follows:

 

·                  Equity instruments at fair value with changes in other comprehensive income (FVOCI) without recognizing earnings or losses in P&L at the time of liquidation.  This category only includes equity instruments that the Group intends to keep in the foreseeable future and that the Group has irrevocably chosen to classify in this category in the initial recognition or transition.

 

·                  Financial assets at fair value with changes in P&L (FVPL) include derivative instruments and equity instruments quoted that the Group had not irrevocably chosen to classify at FVOCI in the initial recognition or transition. This category also includes debt instruments whose cash flow characteristics do not comply with the SPPI criterion or are not kept within a business model whose objective is to recognize contractual cash flows or sale.

 

The Group’s financial liabilities accounting, to a large extent continues to be same as the one set forth in IAS 39.  Similar to the requirements of IAS 39, IFRS 9 requires that assets for contingent services be treated as financial instruments measured at fair value, with changes in fair value recognized in P&L.

 

Pursuant to IFRS 9, implicit derivatives are no longer separated from a principal financial asset.  Financial assets, however, are classified according to contractual terms and the Group’s business model.

 

2.10                                Derivatives financial instruments and hedging activities

 

The Company and its subsidiaries use derivative financial instruments to mitigate risks relating to changes in foreign currency and exchange rates associated with raw materials, and loan obligations.

 

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

 

2.10.1                       Derivative financial instruments designated as cash flow hedges

 

At the inception of the transaction, the group documents the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.

 

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The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the consolidated income statement within “other gains (losses)”

 

Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example, when foreign currency denominated financial liabilities are translated into their functional currencies). The gain or loss relating to the effective portion of cross currency swaps hedging the effects of changes in foreign exchange rates are recognized in the consolidated income statement within “foreign exchange differences”.  When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the consolidated income statement.

 

2.10.2        Derivative financial instruments not designated for hedging

 

The fair value of derivative financial instruments that do not qualify for hedge accounting pursuant to IFRS are immediately recognized in the consolidated income statement under “Other income and losses”.  The fair value of these derivatives is recorded under “other current financial assets” or “other current financial liabilities” in the statement of financial position.”

 

The Company does not use hedge accounting for its foreign investments.

 

The Company also evaluates the existence of derivatives implicitly in contracts and financial instruments as stipulated by IFRS 9 and classifies them pursuant to their contractual terms and the business model of the group.. As of  September 30, 2018, and December 31, 2017, the Company had no implicit derivatives.

 

Fair value hierarchy

 

The Company maintains assets related to foreign currency derivative contracts which were classified as Other current and non-current financial assets and Other current and non-current financial liabilities, respectively, and are accounted at fair value within the statement of financial position. The Company uses the following hierarchy to determine and disclose the fair value of financial instruments with assessment techniques:

 

Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.

 

Level 2: Inputs other than quoted prices included in Level 1 that are observable for the assets and liabilities, either directly (that is, as prices) or indirectly (that is, derived from prices).

 

Level 3: Inputs for the assets or liabilities that are not based on observable market data information.

 

During the reporting periods there were no transfers of items between fair value measurement categories. All of which were valued during the period using Level 2.

 

2.11                                Inventories

 

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted average cost method. The cost of finished goods and work in progress includes raw materials, direct

 

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labor, other direct costs and manufacturing overhead (based on operating capacity) to bring the goods to marketable condition, but it excludes interest expense. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Spare parts and production materials are stated at the lower of cost or net realizable value.

 

Estimates are also made for obsolescence of raw materials and finished products based on turnover and age of the related goods.

 

2.12                                Trade receivables

 

Trade accounts receivables and other accounts receivable are recognized initially at fair value and subsequently measured at amortized cost less provision for impairment, given their short-term nature. A provision for impairment is made when there is objective evidence that the Company may not be able to collect the full amount according to the original terms of the receivable, based either on individual or on global aging analyses. The carrying amount of the asset is reduced by the provision amount and the loss is recognized in administrative expenses in the consolidated income statement by function.

 

2.13                                Cash and cash equivalents

 

Cash and cash equivalents include cash on hand, bank balances, time deposits and other short-term highly liquid and low risk of change in value investments and mutual funds with original short-term maturities equal to or less than three months.

 

2.14                                Other financial liabilities

 

Resources obtained from financial institutions as well as the issuance of debt securities are initially recognized at fair value, net of costs incurred during the transaction. Then, liabilities are valued by accruing interests in order to equal the current value with the future value of liabilities payable, using the effective interest rate method.

 

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualified assets, considered as those that require a substantial period of time in order to get ready for their forecasted use or sale, are added to the cost of those assets until the period in which the assets are substantially ready to be used or sold.

 

2.15                                Income tax

 

The Company and its subsidiaries in Chile account for income tax according to the net taxable income calculated based on the rules in the Income Tax Law. Subsidiaries in other countries account for income taxes according to the tax regulations of the country in which they operate.

 

Deferred income taxes are calculated using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements, using the tax rates that have been enacted or substantively enacted on the balance sheet date and are expected to apply when the deferred income tax asset is realized, or the deferred income tax liability is settled.

 

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized.

 

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The Company does not recognize deferred income taxes for temporary differences from investments in subsidiaries in which the Company can control the timing of the reversal of the temporary differences and it is probable that they will not be reversed in the near future.

 

2.16                                Employee benefits

 

The Company has a provision to cover indemnities for years of service that will be paid to employees in accordance with individual and collective agreements subscribed with employees, which is recorded at actuarial value in accordance with IAS 19.

 

Results from updated of actuarial variables are recorded within other comprehensive income in accordance with IAS 19.

 

Additionally, the Company has retention plans for some officers, which have a provision pursuant to the guidelines of each plan. These plans grant the right to certain officers to receive a cash payment on a certain date once they have fulfilled with the required years of service.

 

The Company and its subsidiaries have recorded a provision to account for the cost of vacations and other employee benefits on an accrual basis. These liabilities are recorded under current non-financial liabilities.

 

2.17                                Provisions

 

Provisions for litigation and other contingencies are recognized when the Company has a present legal or constructive obligation as a result of past event, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated.

 

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.

 

2.18           Leases

 

a)        Operating leases

 

Operating lease payments are recognized as an expense on a straight-line basis over the term of the lease.

 

b)        Finance leases

 

Leases of Property, plant and equipment where the Company has substantially all the risks and rewards of ownership are classified as finance leases that are capitalized at the inception of the lease of the item of Property, plant and equipment at the lower of the fair value of the leased assets and the present value of the minimum lease payments.

 

Each lease payment is allocated between the liability and finance charges. The interest element is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

 

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2.19           Deposits for returnable containers

 

This liability comprises cash collateral, or deposit, received from customers for bottles and other returnable containers made available to them.

 

This liability pertains to the deposit amount that is reimbursed when the customer or distributor returns the bottles and containers in good condition, together with the original invoice. The liability is estimated based on the number of bottles given to clients and distributors, the estimated number of bottles in circulation, and a historical average weighted value per bottle or containers. Deposits for returnable containers are presented as a current liability in other financial liabilities because the Company does not have legal rights to defer settlement for a period in excess of one year.  However, the Company does not anticipate any material cash settlements for such amounts during the upcoming year.

 

2.20                                Revenue recognition

 

Pursuant to IFRS 15, Revenues are recognized on the physical delivery of products to customers and no kind of contract exists granting additional rights to clients that can be unilaterally enforced.

 

Revenues from regular activities include fair value of the consideration received or to be received for goods sold during the regular course of the Company’s activities. These revenues are transferred and are presented net of VAT, reimbursements, deductions and discounts.

 

The Company recognizes said Revenues when they can be reliably valued, and when it is probable that the future economic benefits will flow to the Company.

 

2.21        Contributions of The Coca-Cola Company

 

The Company receives certain discretionary contributions from The Coca-Cola Company (TCCC) mainly related to the financing of advertising and promotional programs for its products in the territories where the Company has distribution licenses. The contribution received from TCCC are recognized in net income after the conditions agreed with TCCC in order to become a creditor to such incentive have been fulfilled, they are recorded as a reduction in the marketing expenses included in the Administration Expenses account. Given its discretionary nature, the portion of contributions received in one period does not imply it will be repeated in the following period.

 

2.22                                Dividend payments

 

Dividend distribution to Company shareholders is recorded as a liability in the Company’s Consolidated Financial Statements, considering the 30% minimum dividend of the period’s earnings established by Chilean Corporate Law.

 

2.23                       Critical accounting estimates and judgments

 

The Company makes estimates and judgments concerning the future. Actual results may differ from previously estimated amounts. The estimates and judgments that might have a material impact on future financial statements.

 

2.23.1 Impairment of goodwill and intangible assets with indefinite useful lives

 

The Company test annually whether goodwill and intangible assets with indefinite useful life (such as distribution rights) have suffered any impairment. The recoverable amounts of cash generating units are generating units are determined based on value in use calculations. The key variables used in the

 

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calculations include sales volumes and prices, discount rates, marketing expenses and other economic factors including inflation.  The estimation of these variables requires a use of estimates and judgments as they are subject to inherent uncertainties; however, the assumptions are consistent with the Company’s internal planning end past results. Therefore, management evaluates, and updates estimates according to the conditions affecting the variables.  If these assets are considered to have been impaired, they will be written off at their estimated fair value or future recovery value according to the discounted cash flows analysis. Discounted cash flows in the Company’s cash generating units in Chile, Brazil, Argentina and Paraguay generated a higher value than the carrying values of the respective net assets, including goodwill of the Brazilian, Argentinian and Paraguayan subsidiaries.

 

2.23.2 Fair Value of Assets and Liabilities

 

IFRS requires in certain cases that assets and liabilities be recorded at their fair value. Fair value is the price that would be received for selling an asset or paid to transfer a liability in a transaction ordered between market participants at the date of measurement.

 

The basis for measuring assets and liabilities at fair value are their current prices in an active market.  For those that are not traded in an active market, the Company determines fair value based on the best information available by using valuation techniques.

 

In the case of the valuation of intangibles recognized as a result of acquisitions from business combinations, the Company estimates the fair value based on the “multi-period excess earning method”, which involves the estimation of future cash flows generated by the intangible assets, adjusted by cash flows that do not come from these, but from other assets. The Company also applies estimations over the period during which the intangible assets will generate cash flows, cash flows from other assets, and a discount rate.

 

Other assets acquired, and liabilities assumed in a business combination are carried at fair value using valuation methods that are considered appropriate under the circumstances. Assumptions include the depreciated cost of recovery and recent transaction values for comparable assets, among others. These valuation techniques require certain inputs to be estimated, including the estimation of future cash flows.

 

2.23.3       Allowances for doubtful accounts

 

The Company evaluates the collectability of trade receivables using several factors. When the Company becomes aware of a specific inability of a customer to fulfill its financial commitments, a specific provision for doubtful accounts is estimated and recorded, which reduces the recognized receivable to the amount that the Company estimates to be able to collect. In addition to specific provisions, allowances for doubtful accounts are also determined based on the restated valued of expected credit losses pursuant to IFRS 9.

 

2.23.4       Useful life, residual value and impairment of property, plant, and equipment

 

Property, plant, and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful life of those assets. Changes in circumstances, such as technological advances, changes to the Company’s business model, or changes in its capital strategy might modify the effective useful lives as compared to our estimates. Whenever the Company determines that the useful life of Property, plant and equipment might be shortened, it depreciates the excess between the net book value and the estimated recoverable amount according to the revised remaining useful life. Factors such as changes in the planned usage of manufacturing equipment, dispensers, transportation equipment and

 

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computer software could make the useful lives of assets shorter. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of any of those assets may not be recovered. The estimate of future cash flows is based, among other factors, on certain assumptions about the expected operating profits in the future. The Company’s estimation of discounted cash flows may differ from actual cash flows because of, among other reasons, technological changes, economic conditions, changes in the business model, or changes in operating profit. If the sum of the projected discounted cash flows (excluding interest) is less than the carrying amount of the asset, the asset shall be written-off to its estimated recoverable value.

 

2.23.5       Liabilities for deposits of returnable container

 

The Company records a liability for deposits received in exchange for bottles and containers provided to its customers and distributors. This liability represents the amount of deposits that must be reimbursed if the customer or distributor returns the bottles and containers in good condition, together with the original invoice. This liability is estimated based on the number of bottles given on loan to customers and distributors, estimates of bottles in circulation and the weighted average historical cost per bottle or container. Management makes several assumptions in order to estimate this liability, including the number of bottles in circulation, the amount of deposit that must be reimbursed and the timing of disbursements.

 

2.24.1       New accounting standards (Standards, Interpretations and Amendments) effective application for annual periods beginning on or after January 1, 2018.

 

Standards and interpretations, as well as the improvements and amendments to IFRS, which have been issued, effective at the date of these financial statements, are detailed below. The Company has applied these rules concluding that they will not significantly affect the financial statements.

 

 

 

Standards, Interpretations and Amendments

 

Mandatory
Application
Date

IFRS 9

 

Financial Instruments

 

January 1, 2018

IFRS 15

 

Revenue from Contracts with Customers

 

January 1, 2018

IFRIC 22

 

Foreign Currency Transactions and Advanced Considerations

 

January 1, 2018

IAS 28

 

Investments in Associates and Joint Ventures— decision to measure participation in associates and joint ventures at fair value with changes in results

 

January 1, 2018

 

IFRS 9 “Financial Instruments”

 

The final version of IFRS 9 Financial Instruments was issued in July 2014, incorporating all the phases of the IASB project to replace IAS 39 Financial Instruments: Recognition and Measurement for the annual periods beginning on or after January 1, 2018, this standard includes new requirements based on classification, measurement, impairment and hedge accounting principles, it introduces a “more prospective” model for expected credit losses for impairment accounting and a significantly reformed focus for hedge accounting.

 

The adoption of the aforementioned standards, interpretations and amendments do not have a significant impact on the Company’s Consolidated Financial Statements.

 

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IFRS 15 “Revenue from Contracts with Customers”

 

IFRS 15 Revenue from Contracts with Customers, issued in May 2014 is a new standard applicable to all contracts with customers, except leases, financial instruments and insurance contracts.  It is a joint project with the FASB to eliminate differences upon recognizing revenue between IFRS and US GAAP.  This new standard pretends to improve inconsistencies and weaknesses of IAS 18 and deliver a model that will facilitate comparability of companies in different industries and regions. It grants a new model for recognizing revenue and more detailed requirements for contracts with multiple elements.  It also requires more detailed disclosure.

 

With regards to the reporting segment of Embotelladora Andina, revenue channels are mainly related to the sale of finished product and the delivery of promotional products, which are currently being recognized in the statement of income when the Company transfers these products to the customers. These revenue channels are supported by contracts with different retailers through traditional and modern channels, in which prices with such customers are constantly negotiated due to the high turnover of the Company’s products and in order to remain competitive in the market.

 

The adoption of the aforementioned standards, interpretations and amendments do not have a significant impact on the Company’s Consolidated Financial Statements.

 

IFRIC Interpretation 22 “Foreign Currency Transactions and Advanced Considerations”

 

The Interpretation addresses the way to determine the date of the transaction in order to establish the exchange rate to be used on the initial recognition of the related asset, expense or income (or the corresponding part of these) in the de-recognition of accounts of a non-monetary asset or liability arising from a payment or collection of advanced consideration in foreign currency, for this purpose the date of the transaction corresponds to the moment in which an entity initially recognizes the non-monetary asset or liability arising from the payment or collection of the advanced consideration.  If there are multiple advanced payments or collections, the entity shall determine a transaction date for each advanced consideration payment or collection.

 

The adoption of the aforementioned standards, amendments and interpretations do not have a significant impact on the Company’s Consolidated Interim Financial Statements.

 

IAS 28 “Investments in associates and joint ventures - decision to measure participation in associates and joint ventures at fair value with changes in results

 

The amendment clarifies that an entity that is a venture capital organization, or another qualifying entity, can choose in the initial recognition to assess its investments in associates and joint ventures at fair value with changes in results. If an entity that is not itself an investment entity has an interest in an associate or joint venture that is an investment entity, it may choose to keep the measurement at fair value applied by its associate. The amendment must be applied retrospectively.

 

The adoption of the aforementioned standards, amendments and interpretations do not have a significant impact on the Company’s Consolidated Financial Statements.

 

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2.24.2    New accounting standards (Standards, Interpretations and Amendments) effective application for annual periods beginning on or after January 1, 2019.

 

Standards and interpretations, as well as the improvements and amendments to IFRS, which have been issued, but are still not effective at the date of these financial statements, are detailed below. The Company has not performed an early application of these rules:

 

 

 

New Standards

 

Mandatory application
date

IFRS 16

 

Leases

 

January 1, 2019

IFRIC 23

 

Uncertainty over Income Tax Treatments

 

January 1, 2019

Conceptual Framework

 

Revised Conceptual Framework

 

January 1, 2020

 

IFRS 16 “Leases”

 

In January 2016, the IASB issued IFRS 16 Leases.

 

IFRS 16 sets the definition of a lease agreement and specifies the accounting treatment of assets and liabilities arising from these contracts from the point of view of the lessor and lessee. The new standard does not differ significantly from the preceding standard, IAS 17 Leases, regarding accounting treatment from the point of view of the lessor. However, from the point of view of the lessee, the new standard requires the recognition of assets and liabilities for most of leasing contracts. IFRS 16 will be mandatory for annual periods beginning after January 1, 2019. Early application is permitted if adopted together with IFRS 15 Revenue from Contracts with Customers.

 

The adoption of the aforementioned standards, amendments and interpretations do not have a significant impact on the Company’s consolidated financial statements.

 

IFRIC 23 “Uncertainty over Income Tax Treatments”

 

In June 2017, the IASB issued IFRIC Interpretation 23, clarifying the application of recognition and measurement criteria required by IAS 12 Income Taxes when there is uncertainty about the tax treatments. This interpretation shall be applied for annual periods beginning after January 1, 2019.

 

The adoption of the aforementioned standards, amendments and interpretations do not have a significant impact on the Company’s consolidated financial statements.

 

Revised Conceptual Framework

 

The IASB issued a Revised Conceptual Framework in March 2018, incorporating some new concepts, providing updated definitions and recognition criterion for assets and liabilities and clarifying some important concepts.

 

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Changes in the Conceptual Framework may affect the application of IFRS when no standard applies to a given transaction or event.  The Revised Conceptual Framework becomes effective for periods ending on or after January 1, 2020.

 

The Company will assess the impact of these new definitions.

 

 

 

Amendments and Improvements

 

Mandatory application
date

IFRS 3

 

Business Combinations

 

January 1, 2019

IFRS 9

 

Financial Instruments

 

January 1, 2019

IFRS 11

 

Joint Arrangements

 

January 1, 2019

IAS 12

 

Income Taxes

 

January 1, 2019

IAS 23

 

Borrowing Costs

 

January 1, 2019

IAS 28

 

Investments in Associates

 

January 1, 2019

IAS 19

 

Employee Benefits — Amendment, reduction or liquidation of the plan

 

January 1, 2019

IFRS 10 and IAS 28

 

Consolidated Financial Statements — sale or contribution of assets between an investor and its associate or joint venture

 

To be defined

 

IFRS 3 “Business Combinations”

 

The amendments clarify that when an entity gets control of an entity that is a joint venture, the requirements for a phased business combination are applicable, including the interests previously held on the assets and liabilities of a joint venture presented at fair value. The amendments must apply to business combinations made after January 1, 2019. Early application is allowed.

 

The entity will perform an assessment of the impact of the improvement once it becomes effective.

 

IFRS 9 “Financial Instruments — Payments with negative compensation”

 

A debt instrument can be measured at amortized cost, cost or at fair value through another comprehensive result, provided that the contractual cash flows are only principal and interest payments on the outstanding principal capital and the instrument is carried out within the business model for that classification. Amendments to IFRS 9 aim to clarify that a financial asset meets the criterion of only principal plus interest payments regardless of the event or circumstance that causes the anticipated termination of the contract or of which party pays or receives reasonable compensation for early termination of the contract.

 

Amendments to IFRS 9 shall apply when prepayment is approximate to unpaid capital and interest amounts in such a way as to reflect the change in reference interest rate. This implies that prepayments at fair value or for an amount including the fair value of the cost of an associated hedging instrument will normally satisfy the criterion only principal payments plus interest only if other elements of the change in fair value, such as the effects of credit risk or liquidity are not representative. Application begins January 1, 2019 and will be retrospectively performed with early adoption allowed.

 

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The Company will assess the impact of the amendment once it becomes effective.

 

IFRS 11 “Joint Arrangements”

 

The amendment affects joint arrangements on interests previously held in a joint operation. A participating party, but that does not have the joint control of a joint operation could gain control if the joint operation activity constitutes a business as defined by IFRS 3. The amendments clarify that the interests previously maintained in that joint operation are not re-measured at the time of the operation. The amendments shall apply to transactions in which the joint control is acquired after January 1, 2019. Early application is allowed.

 

The Company will assess the impact of the amendment once it becomes effective.

 

IAS 12 “Income Taxes”

 

The amendments clarify that the income tax on dividends generated by financial instruments classified as equity are more directly linked to past transactions or events that generated distribution of profits than distribution to the owners. Therefore, an entity recognizes income tax on dividends in results, other comprehensive income or equity, according to where the entity originally recognized those transactions or past events. The amendments shall apply to dividends recognized after January 1, 2019.

 

The Company will assess the impact of the amendment once it becomes effective.

 

IAS 23 “Borrowing Costs”

 

The amendments clarify that an entity treats any indebtedness originally made to develop a qualified asset as a general loan when substantially all the activities necessary to culminate that asset for use or sale are complete. Amendments should be applied beginning January 1, 2019.

 

The Company will assess the impact of the amendment once it becomes effective.

 

IAS 28 Investments in Associates

 

The amendments clarify that an entity applies IFRS 9 Financial Instruments for long-term investments in associates or joint ventures for those investments that do not apply the equity method but which, in substance, is part of the net investment in the associate or joint venture. This clarification is relevant because it implies that the expected credit loss model, described in IFRS 9, applies to these long-term interests. Entities should apply the amendments retrospectively, with certain exceptions, and shall become effective beginning January 1, 2019. Early application is allowed.

 

The Company will assess the impact of the amendment once it becomes effective.

 

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IAS 19 Employee Benefits — Amendment, reduction or liquidation of the plan

 

Amendments to IAS 19 address accounting when the plan is amended, reduced or liquidated during a reporting period.

 

The amendments specify that when a plan has been amended, reduced or liquidated during the annual reporting period, the entity must:

 

·                  Determine the current cost of services for the remainder of the period following the amendment, reduction or liquidation of the plan, using the actuarial assumptions used to re-measure the liability (asset) for net defined benefits, reflecting the benefits offered under the plan and the assets of the plan after that event.

 

·                  Determine the net interest for the remainder of the period after the amendment, reduction or liquidation of the plan using: net liabilities (assets), for defined benefits that reflect the benefits offered under the plan and the assets of the plan after that event; and the discount rate used to re-measure net liabilities (assets) for defined benefits.

 

The amendments clarify that an entity first determines any past service costs, or a gain or loss in liquidation, without considering the asset ceiling effect. This amount is recognized under income. An entity then determines the asset ceiling effect after the plan is amended, reduced, or liquidated. Any change in that effect, excluding the amounts included in net interest, is recognized under other comprehensive income.

 

This clarification states that entities may have to recognize a past service cost, or a result in liquidation that reduces a surplus that was not recognized before. Changes to the asset ceiling effect are not offset by those amounts.

 

The amendments apply to amendments, reductions or liquidations of the plan occurring at or after the commencement of the first annual reporting period beginning on or after January 1, 2019. Early application is permitted, which must be disclosed.

 

The entity will evaluate the impact of the amendment once it becomes effective.

 

IFRS 10 Consolidated Interim Financial Statements and IAS 28 Investment in Associates and Joint Ventures — sale or contribution of assets between an investor and its associate or joint venture

 

The amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011) address a recognized inconsistency between the requirements of 10 IFRS and IAS 28 (2011) in the treatment of the contribution or sale of assets between an investor and the associate or joint venture. Amendments, issued in September of 2014, established that when the transaction involves a business (both in a subsidiary or not) it recognizes all profit or loss generated. A partial gain or loss is recognized when the transaction involves assets that do not constitute a business, even when the assets are in a subsidiary. The date of mandatory application of these amendments is to be determined since IASB is waiting for the results of its research project on accounting using the equity method. These amendments must be applied retrospectively, and early adoption is permitted, which must be disclosed.

 

The Company will assess the impact of the amendment once it becomes effective.

 

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NOTE 3 — REPORTING BY SEGMENT

 

The Company provides information by segments according to IFRS 8 “Operating Segments,” which establishes standards for reporting by operating segment and related disclosures for products and services, and geographic areas.

 

The Company’s Board of Directors and Management measures and assesses performance of operating segments based on the operating income of each of the countries where there are Coca-Cola franchises.

 

The operating segments are determined based on the presentation of internal reports to the Company´s chief strategic decision-maker. The chief operating decision-maker has been identified as the Company´s Board of Directors who makes the Company’s strategic decisions.

 

The following operating segments have been determined for strategic decision making based on geographic location:

 

·                 Operation in Chile

·                 Operation in Brazil

·                 Operation in Argentina

·                 Operation in Paraguay

 

The four operating segments conduct their businesses through the production and sale of soft drinks and other beverages, as well as packaging materials.

 

Expenses and income related to corporate management, have been assigned to the Chilean soft drinks segment, since Chile is the country that manages and pays corporate expenses, which would also be substantially incurred, independent to the existence of foreign subsidiaries.

 

Total revenues by segment include sales to unrelated customers and inter-segments, as indicated in the consolidated statement of income.

 

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A summary of the Company’s operating segments in accordance to IFRS is as follows:

 

For the period ended September 30, 2018

 

Chile
Operation

 

Argentina
Operation

 

Brazil
Operation

 

Paraguay
Operation

 

Intercompany
Eliminations

 

Consolidated
total

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Net sales

 

404,496,731

 

229,271,952

 

380,017,381

 

106,245,595

 

(1,167,666

)

1,118,863,993

 

Cost of sales

 

(241,837,766

)

(122,238,013

)

(230,740,020

)

(63,087,362

)

1,167,666

 

(656,735,495

)

Distribution expenses

 

(39,993,324

)

(34,624,770

)

(27,757,536

)

(5,644,618

)

 

(108,020,248

)

Administrative expenses

 

(85,025,452

)

(48,249,638

)

(67,637,383

)

(16,260,448

)

 

(217,172,921

)

Finance income

 

1,377,335

 

812,513

 

1,591,365

 

180,603

 

 

3,961,816

 

Finance expense

 

(11,114,708

)

(129,202

)

(22,650,782

)

 

 

(33,894,692

)

Interest expense, net*

 

(9,737,373

)

683,311

 

(21,059,417

)

180,603

 

 

(29,932,876

)

Share of the entity in income of associates

 

136,364

 

 

717,407

 

 

 

853,771

 

Income tax expense

 

(14,713,387

)

(12,372,713

)

(5,393,177

)

(3,280,831

)

 

(35,760,108

)

Other income (loss)

 

(9,116,591

)

(2,520,352

)

(8,228,107

)

330,262

 

 

(19,534,788

)

Net income of the segment reported

 

4,209,202

 

9,949,777

 

19,919,148

 

18,483,201

 

 

52,561,328

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

31,224,674

 

12,404,586

 

19,620,562

 

7,255,922

 

 

70,505,744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

178,501,109

 

59,595,074

 

98,360,123

 

34,538,483

 

 

370,994,789

 

Non-current assets

 

629,902,588

 

117,122,264

 

629,976,015

 

235,264,601

 

 

1,612,265,468

 

Segment assets, total

 

808,403,697

 

176,717,338

 

728,336,138

 

269,803,084

 

 

1,983,260,257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying amount in associates and joint ventures accounted for using the equity method, total

 

35,727,662

 

 

47,719,448

 

 

 

83,447,110

 

Capital expenditures and other

 

39,523,924

 

15,347,753

 

26,502,262

 

6,457,567

 

 

87,831,506

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

145,263,154

 

51,119,065

 

82,708,184

 

20,177,138

 

 

299,267,541

 

Non-current liabilities

 

467,445,244

 

13,693,061

 

404,495,447

 

15,371,069

 

 

901,004,821

 

Segment liabilities, total

 

612,708,398

 

64,812,126

 

487,203,631

 

35,548,207

 

 

1,200,272,362

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows provided by in Operating Activities

 

69,741,402

 

13,823,147

 

17,447,149

 

6,470,379

 

 

107,482,077

 

Cash flows (used in) provided by Investing Activities

 

(24,873,924

)

(16,618,143

)

(26,502,262

)

(6,457,568

)

 

(74,451,897

)

Cash flows (used in) provided by Financing Activities

 

(75,084,757

)

(8,125,264

)

(4,227,002

)

(231,213

)

 

(87,668,236

)

 


(*) Financial expenses associated with external financing for the purchase of companies, including capital contributions are presented in this item.

 

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For the period ended September  30, 2017

 

Chile
Operation

 

Argentina
Operation

 

Brazil
Operation

 

Paraguay
Operation

 

Intercompany
Eliminations

 

Consolidated
total

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Net sales

 

393,039,441

 

392,349,561

 

439,460,061

 

101,109,016

 

(1,377,165

)

1,324,580,914

 

Cost of sales

 

(235,730,847

)

(212,016,316

)

(267,333,061

)

(60,721,468

)

1,377,165

 

(774,424,527

)

Distribution expenses

 

(39,828,796

)

(58,824,853

)

(31,460,246

)

(5,551,497

)

 

(135,665,392

)

Administrative expenses

 

(85,350,841

)

(75,502,076

)

(81,462,165

)

(15,543,894

)

 

(257,858,976

)

Finance income

 

1,891,448

 

1,183,613

 

4,712,682

 

221,488

 

 

8,009,231

 

Finance expense

 

(11,184,375

)

(2,580,383

)

(26,996,896

)

(9,655

)

 

(40,771,309

)

Interest expense, net*

 

(9,292,927

)

(1,396,770

)

(22,284,214

)

211,833

 

 

(32,762,078

)

Share of the entity in income of associates

 

208,006

 

 

143,019

 

 

 

351,025

 

Income tax expense

 

(9,899,006

)

(12,825,622

)

(7,173,215

)

(2,899,095

)

 

(32,796,938

)

Other income (loss)

 

(6,536,117

)

(6,308,058

)

(4,045,256

)

(136,730

)

 

(17,026,161

)

Net income of the segment reported

 

6,608,913

 

25,475,866

 

25,844,923

 

16,468,165

 

 

74,397,867

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

31,898,033

 

13,333,523

 

21,340,155

 

8,256,550

 

 

74,828,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

196,212,971

 

90,724,098

 

125,234,719

 

28,400,386

 

 

440,572,174

 

Non-current assets

 

640,513,884

 

98,299,671

 

681,230,356

 

239,982,850

 

 

1,660,026,761

 

Segment assets, total

 

836,726,855

 

189,023,769

 

806,465,075

 

268,383,236

 

 

2,100,598,935

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying amount in associates and joint ventures accounted for using the equity method, total

 

30,636,829

 

9,661,284

 

62,106,415

 

 

 

102.404.528

 

Capital expenditures and other

 

47,004,044

 

32,816,007

 

57,414,106

 

12,850,401

 

 

150,084,558

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

144,121,444

 

96,161,922

 

114,413,487

 

21,494,330

 

 

376,191,183

 

Non-current liabilities

 

466,112,579

 

(1,145,675

)

417,246,192

 

15,103,494

 

 

897,316,590

 

Segment liabilities, total

 

610,234,023

 

95,016,247

 

531,659,679

 

36,597,824

 

 

1,273,507,773

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows provided by Operating Activities

 

47,102,607

 

11,954,298

 

61,121,896

 

25,768,877

 

 

145,947,678

 

Cash flows (used in) provided by Investing Activities

 

(35,341,057

)

(32,814,559

)

(30,547,409

)

(12,850,403

)

 

(111,553,428

)

Cash flows (used in) provided by Financing Activities

 

(72,769,419

)

19,415,197

 

(9,984,484

)

 

 

(63,338,706

)

 


(*) Financial expenses associated with external financing for the purchase of companies, including capital contributions are presented in this item.

 

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NOTE 4 — CASH AND CASH EQUIVALENTS

 

Cash and cash equivalents are detailed as follows:

 

Description

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

By item

 

 

 

 

 

Cash

 

295,177

 

139,835

 

Bank balances

 

50,353,990

 

29,234,531

 

Time deposits

 

 

10,616,688

 

Mutual funds

 

23,059,919

 

96,251,062

 

Total cash and cash equivalents

 

73,709,086

 

136,242,116

 

 

By currency

 

ThCh$

 

ThCh$

 

Dollar

 

15,581,574

 

6,973,298

 

Euro

 

51,360

 

17,245

 

Argentine Peso

 

725,342

 

19,681,449

 

Chilean Peso

 

43,683,559

 

80,985,719

 

Paraguayan Guaraní

 

6,922,258

 

6,804,997

 

Brazilian Real

 

6,744,993

 

21,779,408

 

Total cash and cash equivalents

 

73,709,086

 

136,242,116

 

 

4.1             Time deposits

 

Time deposits defined as cash and cash equivalents are detailed as follows:

 

Placement

 

Institution

 

Currency

 

Principal

 

Annual
rate

 

09.30.2018

 

12.31.2017

 

 

 

 

 

 

 

ThCh$

 

%

 

ThCh$

 

ThCh$

 

12-29-2017

 

Banco Santander

 

Chilean pesos

 

7,500,000

 

2.52

%

 

7,516,275

 

12-29-2017

 

Banco Santander

 

Chilean pesos

 

2,700,000

 

2.40

%

 

2,700,360

 

12-29-2017

 

Banco Santander

 

Chilean pesos

 

400,000

 

2.40

%

 

400,053

 

Total

 

 

 

 

 

 

 

 

 

 

10,616,688

 

 

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4.2          Money Market

 

Money market mutual fund´s shares are valued using the share values at the close of each reporting period. Below is a description for the end of each period:

 

Institution

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

 

 

 

 

 

 

Mutual fund Banco Estado - Chile

 

1,086,159

 

9,002,000

 

Mutual fund Larrain Vial - Chile

 

6,076,277

 

6,349,486

 

Mutual fund Scotiabank - Chile

 

 

5,878,523

 

Mutual fund Banco Security - Chile

 

651,819

 

14,242,343

 

Mutual fund BTG - Chile

 

991,231

 

5,823,608

 

Wester Asset Institutional Cash Reserves - USA

 

10,575,781

 

3,740,526

 

Mutual fund Itaú - Brazil

 

1,856,087

 

4,922,923

 

Mutual fund Santander - Brazil

 

896,981

 

4,748,368

 

Mutual fund Bradesco - Brazil

 

925,584

 

5,046,882

 

Mutual fund Votorantim

 

 

 

Fima fund Saving Plus C - Argentina

 

 

8,275,073

 

Fima fund Saving Pesos C - Argentina

 

 

8,308,664

 

Mutual fund Corporativo Banchile - Chile

 

 

17,645,940

 

Fima fund Primium B - Argentina

 

 

1,495,556

 

Citi Institutional Liquid Reserves Limited. (C.GAM)

 

 

771,170

 

Total mutual funds

 

23,059,919

 

96,251,062

 

 

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NOTE 5 —         OTHER CURRENT AND NON-CURRENT FINANCIAL ASSETS

 

Below are the financial instruments held by the Company other than cash and cash equivalents.  They consist of time deposits with short-term maturities (more than 90 days), restricted mutual funds and derivative contracts. Financial instruments are detailed as follows:

 

a)             Current portion

 

a.1 Time deposits

 

Placement

 

Maturity

 

Institution

 

Currency

 

Principal

 

Annual rat

 

09.30.2018

 

12.31.2017

 

 

 

 

 

 

 

 

 

ThCh$

 

%

 

 

 

 

 

03-15-2018

 

03-15-2019

 

Votorantim

 

Brazilian reais

 

12,729

 

8.82

%

12,762

 

 

08-09-2017

 

02-12-2018

 

Banco Santander - Chile

 

Unidad de fomento

 

7,000,000

 

1.04

%

 

7,082,167

 

09-25-2017

 

02-26-2018

 

BCI

 

Unidad de fomento

 

1,500,000

 

1.36

%

 

1,516,454

 

09-25-2017

 

05-28-2018

 

Banco Santander - Chile

 

Unidad de fomento

 

5,000,000

 

0.94

%

 

5,049,376

 

06-13-2017

 

03-15-2018

 

Votorantim

 

Brazilian reais

 

20,013

 

8.82

%

 

21,145

 

 

 

 

 

 

 

 

 

 

 

 

 

12,762

 

13,669,142

 

 

a.2 Rights in Forward Contracts

 

 

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Rights in Forward Contracts — Forward (see details in Note 20)

 

4,036,743

 

469,019

 

Total other Financial Assets, current

 

4,049,505

 

14,138,161

 

 

b)             Non-current

 

 

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Rights in forward contracts (see note 20)

 

96,889,821

 

61,898,833

 

Rights in Ades(*) manufacturing companies

 

8,514,558

 

14,153,111

 

Increase (decrease) in foreign currency exchange

 

(4,827,524

)

(1,792,859

)

Effects of IAS 29 on Ades rights

 

1,496,061

 

 

Total

 

102,072,916

 

74,259,085

 

 


(*) On December 27, 2016, Coca-Cola Andina confirmed to The Coca-Cola Company its decision to participate in the “AdeS” business and commercialize said products in all its franchise territories,  As a result, the operation materialized on March 28, 2017, and pursuant to the agreements, implied a disbursement of US$39 million, ThCh$14,153,111 were allocated to the purchase of rights in the manufacturing company “AdeS” and ThCh$11,923,449 were allocated to distribution rights of the “AdeS” products.  The rights in the acquired companies are distributed as follows:

 

·                  Purchase of 13.0% interest in the Argentine company Alimentos de Soya S.A. for ThCh$9,661,283.

·                  Purchase of 8.5% interest in the Brazilian company UBI 3 Participações Ltda. for ThCh$4,491,828.

 

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NOTE 6 — OTHER CURRENT AND NON-CURRENT NON-FINANCIAL ASSETS

 

Note 6.1                          Other current, non-financial assets

 

Description 

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Prepaid expenses

 

4,925,494

 

4,839,465

 

Tax credit remainder

 

319,541

 

169,120

 

Guarantee deposit (Argentine)

 

3,209

 

6,608

 

Other current assets

 

747,951

 

596,668

 

Total

 

5,996,195

 

5,611,861

 

 

Note 6.2                          Other non-current, non-financial assets

 

Description 

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Advance payment to suppliers of property, plant & equipment (1)

 

14,980,968

 

24,269,901

 

Judicial deposits (see note 21.2)

 

17,173,846

 

18,393,546

 

Fiscal credits

 

1,612,466

 

2,287,051

 

Prepaid expenses

 

892,491

 

1,113,154

 

Others

 

2,020,176

 

1,330,693

 

Total

 

36,679,947

 

47,394,345

 

 


(1)         Corresponds to advance payments made for the construction of the new “Duque de Caxias” bottling plant in Brazil.

 

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NOTE 7 — TRADE AND OTHER RECEIVABLES

 

The composition of trade and other receivables is detailed as follows:

 

 

 

09.30.2018

 

12.31.2017

 

Trade and other receivables

 

Assets before
provisions

 

Allowance
for doubtful
accounts

 

Commercial
debtors net
assets

 

Assets
before
provisions

 

Allowance
for
doubtful
accounts

 

Commercial
debtors net
assets

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Current commercial debtors

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade debtors

 

104,789,903

 

(2,795,896

)

101,994,007

 

157,926,958

 

(3,521,734

)

154,405,224

 

Other current debtors

 

29,892,544

 

(2,829,196

)

27,063,348

 

31,015,390

 

(2,825,453

)

28,189,937

 

Current commercial debtors

 

134,682,447

 

(5,625,092

)

129,057,355

 

188,942,348

 

(6,347,187

)

182,595,161

 

Prepayments suppliers

 

9,553,447

 

 

9,553,447

 

8,057,544

 

 

8,057,544

 

Other current accounts receivable

 

1,528,160

 

(114,995

)

1,413,165

 

778,901

 

(146,926

)

631,975

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial debtors and other current accounts receivable

 

145,764,054

 

(5,740,087

)

140,023,967

 

197,778,793

 

(6,494,113

)

191,284,680

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current accounts receivable

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade debtors

 

50,610

 

 

50,610

 

58,336

 

 

58,336

 

Other non-current debtors

 

1,515,576

 

 

1,515,576

 

2,335,322

 

 

2,335,322

 

Other non-current accounts receivable

 

1,073

 

 

1,073

 

2,193

 

 

2,193

 

Non-current accounts receivable

 

1,567,259

 

 

1,567,259

 

2,395,851

 

 

2,395,851

 

Trade and other receivables

 

147,331,313

 

(5,740,087

)

141,591,226

 

200,174,644

 

(6,494,113

)

193,680,531

 

 

Stratification of portfolio current and non-current debtors from credit operations

 

 

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Up to date non-securitized portfolio until 30 days

 

98,948,655

 

151,275,377

 

31 and 60 days

 

999,931

 

908,980

 

61 and 90 days

 

481,069

 

1,050,476

 

91 and 120 days

 

415,446

 

331,740

 

121 and 150 days

 

456,992

 

709,400

 

151 and 180 days

 

175,742

 

62,834

 

181 and 210 days

 

605,368

 

82,863

 

211 and 250 days

 

204,640

 

538,081

 

More than 250 days

 

2,552,671

 

3,025,543

 

Total

 

104,840,514

 

157,985,294

 

 

The Company has an approximate number of 276,000 clients, which may have balances in the different sections of the stratification. The number of clients is distributed geographically with 65,400 in Chile, 89,200 in Brazil, 64,400 in Argentina and 57,000 in Paraguay.

 

 

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Current commercial debtors

 

104,789,903

 

157,926,958

 

Non-current commercial debtors

 

50,611

 

58,336

 

Total

 

104,840,514

 

157,985,294

 

 

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The movement in the allowance for doubtful accounts is presented below:

 

 

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Opening balance

 

6,494,113

 

6,697,156

 

Bad debt expense

 

1,082,522

 

2,004,958

 

Provision application

 

(1,130,240

)

(1,708,602

)

Change due to foreign exchange differences

 

(706,307

)

(499,399

)

Movement

 

(754,025

)

(203,043

)

Ending balance

 

5,740,087

 

6,494,113

 

 

NOTE 8 — INVENTORIES

 

The composition of inventories is detailed as follows:

 

Details

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Raw materials (1)

 

85,864,069

 

78,216,172

 

Finished goods

 

29,510,450

 

32,097,377

 

Spare parts and supplies

 

19,482,510

 

19,774,056

 

Work in progress

 

713,403

 

676,609

 

Other inventories

 

6,888,946

 

4,134,237

 

Obsolescence provision (2)

 

(2,085,638

)

(3,535,451

)

Total

 

140,373,740

 

131,363,000

 

 

The cost of inventory recognized as cost of sales as of September 30, 2018 and 2017, is ThCh$656,735,495 and ThCh$774,424,527, respectively

 


(1)        Approximately 80% is composed of concentrate and sweeteners used in the preparation of beverages, as well as caps and PET supplies used in the packaging of the product.

(2)        The obsolescence provision is related mainly with the obsolescence of spare parts classified as inventories and to a lesser extent to finished products and raw materials. The general standard is to provision all those multi-functional spare parts without utility in rotation in the last four years prior to the technical analysis technical to adjust the provision. In the case of raw materials and finished products, the obsolescence provision is determined according to maturity.

(3)        Includes an increase of ThCh$ 3,549,264 in opening balances due to the adoption of IAS 29

 

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NOTE 9 — CURRENT AND DEFERRED INCOME TAXES

 

9.1          Tax Reform

 

On September 29, 2014, the Official Daily Newspaper published Law N°20,780 that amends the Chilean tax regime, with the main following changes:

 

·                  It establishes a new system of semi-integrated taxation, which can be used as an alternative to the integrated regime of attributed income. Taxpayers may opt freely to any of the two to pay their taxes. In the case of Embotelladora Andina S.A. by a general rule established by law the semi-integrated taxation system applies, which was ratified by the Shareholders’ Meeting.

·                  The semi-integrated system establishes the gradual increase in the first category tax rate for the business years 2014, 2015, 2016, 2017 and 2018 onwards, increasing to 21%, 22.5%, 24%, 25.5% and 27% respectively.

 

9.2                              Current tax assets

 

Description

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Tax credits (1)

 

3,652,393

 

 

Total

 

3,652,393

 

 

 


(1)    Tax credits correspond to income tax credits on training expenses, purchase of Property, plant and equipment, and donations, and additionally income tax recoveries requested by Brazil.

 

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9.3                              Current tax liabilities

 

Current tax payable are detailed as follows:

 

Description

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Income tax expense

 

3,791,309

 

3,184,965

 

Total

 

3,791,309

 

3,184,965

 

 

9.4                              Income tax expense

 

The current and deferred income tax expenses are detailed as follows:

 

Item

 

09.30.2018

 

09.30.2018

 

 

 

ThCh$

 

ThCh$

 

Current income tax expense

 

28,691,333

 

22,473,095

 

Current tax adjustment previous period

 

340,973

 

141,037

 

Withholding tax expense foreign subsidiaries

 

4,410,550

 

4,606,040

 

Provision additional tax 15% due to interest accrual

 

185,564

 

183,598

 

Other current tax expense (income)

 

52,674

 

 

Current income tax expense

 

33,681,094

 

27,403,770

 

Income (expense) for the creation and reversal of current tax difference

 

(1,188,911

)

5,393,168

 

Effects adoption IAS 29

 

3,267,925

 

 

Expense (income) for deferred taxes

 

2,079,014

 

5,393,168

 

Total income tax expense

 

35,760,108

 

32,796,938

 

 

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9.5                              Deferred income taxes

 

The net cumulative balances of temporary differences that give rise to deferred tax assets and liabilities are detailed as follows:

 

 

 

09.30.2018

 

12.31.2017

 

Temporary differences

 

Assets

 

Liabilities

 

Assets

 

Liabilities

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Property, plant and equipment

 

5,951,073

 

54,033,273

 

5,978,377

 

47,179,903

 

Obsolescence provision

 

1,497,762

 

97,612

 

2,215,341

 

200,979

 

Employee benefits

 

4,095,137

 

 

5,391,796

 

 

Post-employment benefits

 

68,916

 

1,005,731

 

61,155

 

1,020,522

 

Tax loss carried-forwards (1)

 

9,625,519

 

 

10,056,534

 

 

Tax Goodwill Brazil

 

16,060,764

 

 

23,195,957

 

 

Contingency provision

 

31,653,207

 

 

31,177,351

 

 

Foreign exchange differences (2)

 

7,121,641

 

 

7,631,498

 

 

Allowance for doubtful accounts

 

1,208,875

 

 

1,155,542

 

 

Coca-Cola incentives (Argentina)

 

208,813

 

 

451,790

 

 

Assets and liabilities for placement of bonds

 

 

1,256,015

 

 

1,297,000

 

Lease liabilities

 

881,807

 

 

1,083,010

 

 

Inventories

 

362,538

 

 

350,746

 

 

Distribution rights

 

 

156,598,768

 

 

163,850,599

 

Others

 

1,828,597

 

4,200,380

 

3,729,093

 

920,772

 

Subtotal

 

80,564,649

 

217,191,779

 

92,478,190

 

214,469,775

 

Total liabilities net

 

1,454,107

 

138,081,237

 

3,212,981

 

125,204,566

 

Total net movement fiscal year

 

 

136,627,130

 

 

121,991,585

 

 


(1)    Tax losses mainly associated with the subsidiary Embotelladora Andina Chile S.A. In Chile tax losses have no expiration date

(2)    Corresponds to differed taxes for exchange rate differences generated on the translation of debt expressed in foreign currency in the subsidiary Rio de Janeiro Refrescos Ltda. and which for tax purposes are recognized in Brazil when incurred.

(3)    Adoption of IAS 29 resulted in an ThCh$ 17,586,461 increase in liabilities

 

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9.6                              Deferred tax liability movement

 

The movement in deferred income tax accounts is as follows:

 

Item

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Opening Balance

 

121,991,585

 

125,608,802

 

Effect IAS 29, opening balances

 

17,586,461

 

 

Increase (decrease) in deferred tax

 

(3,570,323

)

(3,417,011

)

Increase (decrease) due to foreign currency translation

 

619,407

 

(200,206

)

Movements

 

14,635,545

 

(3,617,217

)

Ending balance

 

136,627,130

 

121,991,585

 

 

9.7                              Distribution of domestic and foreign tax expense

 

The composition of domestic and foreign tax expense is detailed as follows:

 

Income tax

 

09.30.2018

 

09.30.2017

 

 

 

ThCh$

 

ThCh$

 

Current income taxes

 

 

 

 

 

Foreign

 

(20,027,556

)

(18,075,308

)

Domestic

 

(13,653,538

)

(9,328,462

)

Current income tax expense

 

(33,681,094

)

(27,403,770

)

 

 

 

 

 

 

Deferred income taxes

 

 

 

 

 

Foreign

 

(1,019,165

)

(4,822,625

)

Domestic

 

(1,059,849

)

(570,543

)

Deferred income tax expense

 

(2,079,014

)

(5,393,168

)

Income tax expense

 

(35,760,108

)

(32,796,938

)

 

39


Table of Contents

 

9.8                              Reconciliation of effective rate

 

Below is the reconciliation between the effective tax rate and the statutory rate:

 

Reconciliation of effective rate

 

09.30.2018

 

09.30.2017

 

 

 

ThCh$

 

ThCh$

 

Net income before taxes

 

88,321,438

 

107,194,805

 

Tax expense at legal rate (25.5%)

 

 

(27,334,675

)

Tax expense at legal rate (27.0%)

 

(23,846,788

)

 

Effect of a different tax rate in other jurisdictions

 

1,505,098

 

(2,611,819

)

 

 

 

 

 

 

Permanent differences:

 

 

 

 

 

Non-taxable revenues

 

5,955,100

 

6,466,037

 

Non-deductible expenses

 

(7,574,048

)

(3,425,592

)

Effect of tax monetary restatement Chilean companies

 

(1,896,707

)

(1,031,722

)

Foreign subsidiaries tax withholding expense and other legal tax debits and credits

 

(6,173,306

)

(4,859,167

)

Effect IAS 29 adoption

 

(3,729,457

)

 

Adjustments to tax expense

 

(13,418,418

)

(2,850,444

)

 

 

 

 

 

 

Tax expense at effective rate

 

(35,760,108

)

(32,796,938

)

Effective rate

 

40.5

%

30.6

%

 

Below are the income tax rates applicable in each jurisdiction where the Company operates:

 

 

 

Rate

 

Country

 

2018

 

2017

 

Chile

 

27.0

%

25.5

%

Brazil

 

34.0

%

34.0

%

Argentina

 

30.0

%

35.0

%

Paraguay

 

10.0

%

10.0

%

 

40


Table of Contents

 

NOTE 10 — PROPERTY, PLANT AND EQUIPMENT

 

10.1                       Balances

 

Property, plant and equipment are detailed below at the end of each period:

 

 

 

Property, plant and equipment, gross

 

Cumulative depreciation and
impairment

 

Property, plant and equipment,
net

 

Item

 

09.30.2018

 

12.31.2017

 

09.30.2018

 

12.31.2017

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$ 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Construction in progress

 

40,537,285

 

84,118,716

 

 

 

40,537,285

 

84,118,716

 

Land

 

96,130,542

 

96,990,155

 

 

 

96,130,542

 

96,990,155

 

Buildings

 

336,531,760

 

222,101,850

 

(141,989,340

)

(59,716,002

)

194,542,420

 

162,385,848

 

Plant and equipment

 

524,994,299

 

431,876,945

 

(364,537,043

)

(276,043,865

)

160,457,256

 

155,833,080

 

Information technology

 

22,168,551

 

20,697,750

 

(17,142,007

)

(16,070,425

)

5,026,544

 

4,627,325

 

Fixed facilities and accessories

 

38.538.105

 

32,990,387

 

(19.500.215

)

(13,400,510

)

19.037.890

 

19,589,877

 

Vehicles

 

47,805,176

 

52,587,886

 

(28,661,191

)

(23,324,621

)

19,143,985

 

29,263,265

 

Leasehold improvements

 

134,761

 

115,768

 

(100,246

)

(108,353

)

34,515

 

7,415

 

Other Property, plant and equipment (1)

 

413.413.828

 

395,823,718

 

(314.742.346

)

(288,888,900

)

98.671.482

 

106,934,818

 

Total

 

1,520,254,307

 

1,337,303,175

 

(886,672,388

)

(677,552,676

)

633,581,919

 

659,750,499

 

 


(1)       Other Property, plant and equipment is composed of bottles, market assets, furniture and other minor assets.

 

41


Table of Contents

 

The net balance of each of these categories is detailed as follows:

 

Other Property, plant and equipment

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Bottles

 

47,479,424

 

51,876,569

 

Marketing and promotional assets

 

37,601,854

 

42,798,282

 

Other Property, plant and equipment

 

13,590,204

 

12,259,967

 

Total

 

98,671,482

 

106,934,818

 

 

The Company has insurance to protect its Property, plant and equipment and its inventory from potential losses. The geographic distribution of those assets is detailed as follows:

 

Chile

:

Santiago, Puente Alto, Maipú, Renca, Rancagua y San Antonio, Antofagasta, Coquimbo and Punta Arenas.

Argentina

:

Buenos Aires, Mendoza, Córdoba y Rosario, Bahía Blanca, Chacabuco, La Pampa, Neuquén, Comodoro Rivadavia, Trelew, and Tierra del Fuego

Brazil

:

Río de Janeiro, Niteroi, Campos, Cabo Frío, Nova Iguazú, Espirito Santo, Vitoria, part of São Paulo and Minas Gerais.

Paraguay

:

Asunción, Coronel Oviedo, Ciudad del Este and Encarnación.

 

42


Table of Contents

 

10.2                       Movements

 

Movements in Property, plant and equipment are detailed as follows:

 

 

 

Construction
in progress

 

Land

 

Buildings, net

 

Plant and
equipment,
net

 

IT
Equipment,
net

 

Fixed
facilities and
accessories,
net

 

Vehicles, net

 

Leasehold
improvements,
net

 

Other,
net

 

Property, plant
and equipment,
net

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Opening balance at January 1, 2018

 

84,118,716

 

96,990,155

 

162,385,848

 

155,833,080

 

4,627,325

 

19,589,877

 

29,263,265

 

7,415

 

106,934,818

 

659,750,499

 

Restatement

 

 

5,821,454

 

20,587,522

 

19,198,782

 

178,973

 

4,042,199

 

366,546

 

 

8,934,630

 

59,130,106

 

Restated opening balances

 

84,118,716

 

102,811,609

 

182,973,370

 

175,031,862

 

4,806,298

 

23,632,076

 

29,629,811

 

7,415

 

115,869,448

 

718,880,605

 

Additions

 

37,882,090

 

 

209,453

 

3,364,370

 

487,122

 

149,549

 

546,539

 

1,429

 

29,227,815

 

71,868,367

 

Disposals

 

(6,700

)

 

(30,066

)

(197,640

)

 

 

(163,144

)

 

(1,054,014

)

(1,451,564

)

Transfers between items of Property, plant and equipment

 

(72,793,165

)

 

36,706,612

 

32,577,489

 

468,500

 

519,486

 

(3,888,711

)

21,904

 

6,387,885

 

 

Depreciation expense

 

 

 

(4,968,000

)

(27,466,076

)

(1,330,904

)

(1,757,745

)

(3,902,771

)

(7,145

)

(28,779,704

)

(68,212,345

)

Increase (decrease) due to foreign currency translation differences

 

(8,940,912

)

(7,855,038

)

(24,589,944

)

(24,361,147

)

(635,156

)

(4,721,762

)

(2,997,484

)

(1,363

)

(24,177,146

)

(98,279,952

)

Other increase (decrease) (1)

 

277,256

 

1,173,971

 

4,240,995

 

1,508,398

 

1,230,684

 

1,216,286

 

(80,255

)

12,275

 

1,197,198

 

10,776,808

 

Total movements

 

(43,581,431

)

(6,681,067

)

11,569,050

 

(14,574,606

)

220,246

 

(4,594,186

)

(10,485,826

)

27,100

 

(17,197,966

)

(85,298,686

)

Ending balance at September 30, 2018

 

40,537,285

 

96,130,542

 

194,542,420

 

160,457,256

 

5,026,544

 

19,037,890

 

19,143,985

 

34,515

 

98,671,482

 

633,581,919

 

 


(1)         Mainly correspond to inflation effects during the period in Argentina from the adoption of IAS 29.

 

43


Table of Contents

 

 

 

Construction
in progress

 

Land

 

Buildings, net

 

Plant and
equipment,
net

 

IT
Equipment,
net

 

Fixed
facilities and
accessories,
net

 

Vehicles, net

 

Leasehold
improvements,
net

 

Other,
net

 

Property, plant
and equipment,
net

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Opening balance at January 1, 2017

 

49,986,111

 

91,961,876

 

173,073,161

 

190,402,625

 

6,122,912

 

20,466,113

 

23,896,425

 

190,523

 

110,051,139

 

666,150,885

 

Additions

 

89,392,003

 

4,955,929

 

1,674,734

 

4,992,508

 

945,827

 

(4,161

)

1,512,162

 

13,529

 

44,451,636

 

147,934,167

 

Disposals

 

 

 

(300,079

)

(700,973

)

(1,062,530

)

 

(173,190

)

 

(790,242

)

(3,027,014

)

Transfers between items of Property, plant and equipment

 

(41,957,409

)

 

3,450,060

 

24,250,647

 

1,133,684

 

2,548,441

 

2,253,061

 

 

8,321,516

 

 

Depreciation expense

 

 

 

(5,880,770

)

(36,026,939

)

(2,190,107

)

(2,112,681

)

(5,303,332

)

(61,033

)

(45,746,096

)

(97,320,958

)

Increase (decrease) due to foreign currency translation differences

 

(13,319,346

)

72,350

 

(9,538,737

)

(20,492,851

)

(320,634

)

(1,307,835

)

7,441,057

 

(34,272

)

(7,670,229

)

(45,170,497

)

Other increase (decrease) (1)

 

17,357

 

 

(92,521

)

(6,591,937

)

(1,827

)

 

(362,918

)

(101,332

)

(1,682,906

)

(8,816,084

)

Total movements

 

34,132,605

 

5,028,279

 

(10,687,313

)

(34,569,545

)

(1,495,587

)

(876,236

)

5,366,840

 

(183,108

)

(3,116,321

)

(6,400,386

)

Ending balance at December 31, 2017

 

84,118,716

 

96,990,155

 

162,385,848

 

155,833,080

 

4,627,325

 

19,589,877

 

29,263,265

 

7,415

 

106,934,818

 

659,750,499

 

 


(1)         Mainly correspond to property, plant & equipment write-offs.

 

44


Table of Contents

 

NOTE 11 — RELATED PARTY DISCLOSURES

 

Balances and main transactions with related parties are detailed as follows:

 

11.1                                Accounts receivable:

 

11.1.1                      Current:

 

Taxpayer ID

 

Company

 

Relationship

 

Country
of origin

 

Currency

 

09.30.2018

 

12.31.2017

 

 

 

 

 

 

 

 

 

 

 

ThCh$

 

ThCh$

 

96.891.720-K

 

Embonor S.A.

 

Related to Shareholder

 

Chile

 

Chilean pesos

 

3,023,417

 

4,220,936

 

96.517.210-2

 

Embotelladora Iquique S.A.

 

Related to Shareholder

 

Chile

 

Chilean pesos

 

126,108

 

303,866

 

96.919.980-7

 

Cervecería Austral S.A.

 

Related to director

 

Chile

 

Dollars

 

37,962

 

16,674

 

77.755.610-k

 

Comercial Patagona Ltda.

 

Related to director

 

Chile

 

Chilean pesos

 

2,416

 

 

Foreign

 

Servicios y Productos para Bebidas Refrescantes S.R.L.

 

Shareholder

 

Argentina

 

Argentine pesos

 

 

181,414

 

76.572.588-7

 

Coca Cola del Valle New Ventures S.A.

 

Associate

 

Chile

 

Chilean pesos

 

 

647,342

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

3,189,903

 

5,370,232

 

 

11.1.2                      Non-current:

 

Taxpayer ID

 

Company

 

Relationship

 

Country
of origin

 

Currency

 

09.30.2018

 

12.31.2017

 

 

 

 

 

 

 

 

 

 

 

ThCh$

 

ThCh$

 

96.714.870-9

 

Coca-Cola de Chile S. A.

 

Shareholder

 

Chile

 

Chilean pesos

 

57,253

 

156,492

 

Total

 

 

 

 

 

 

 

 

 

57,253

 

156,492

 

 

45


Table of Contents

 

11.2                                Accounts payable:

 

11.2.1                      Current:

 

Taxpayer ID

 

Company

 

Relationship

 

Country of
origin

 

Currency

 

09.30.2018

 

12.31.2017

 

 

 

 

 

 

 

 

 

 

 

ThCh$

 

ThCh$

 

Foreign

 

Recofarma do Industrias Amazonas Ltda,

 

Related to Shareholder

 

Brazil

 

Brazilian real

 

4,346,949

 

15,891,797

 

96.714.870-9

 

Coca-Cola de Chile S.A.

 

Shareholder

 

Chile

 

Chilean pesos

 

12,702,659

 

12,458,055

 

Foreign

 

Servicio y Productos para Bebidas Refrescantes S.R.L.

 

Shareholder

 

Argentina

 

Argentine pesos

 

2,897,966

 

 

Foreign

 

Leão Alimentos e Bebidas Ltda.

 

Associate

 

Brazil

 

Brazilian real

 

1,979,696

 

2,539,052

 

86.881.400-4

 

Envases CMF S.A.

 

Associate

 

Chile

 

Chilean pesos

 

2,999,308

 

2,807,572

 

Foreign

 

UBI 3 (Ades)

 

Related to Shareholder

 

Brazil

 

Brazilian real

 

404,471

 

 

Foreign

 

Alimentos de Soja S.A.U.

 

Related to Shareholder

 

Argentina

 

Argentine pesos

 

 

71,276

 

76.572.588-7

 

Coca Cola del Valle New Ventures S.A.

 

Associate

 

Chile

 

Chilean pesos

 

277

 

 

Foreign

 

Monster

 

Related to Shareholder

 

Brazil

 

Brazilian real

 

440,122

 

 

Foreign

 

Verde Campo

 

Related to Shareholder

 

Brazil

 

Brazilian real

 

8,403

 

 

89.996.200-1

 

Envases del Pacífico S.A.

 

Related to director

 

Chile

 

Chilean pesos

 

137,801

 

193,685

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

25,917,652

 

33,961,437

 

 

46


Table of Contents

 

11.3        Transactions:

 

Taxpayer ID

 

Company

 

Relationship

 

Country of
origin

 

Description of transaction

 

Currency

 

Cumulative
09.30.2018

 

 

 

 

 

 

 

 

 

 

 

 

ThCh$

96.714.870-9

 

Coca-Cola de Chile S.A.

 

Shareholder

 

Chile

 

Purchase of concentrates

 

Chilean pesos

 

103,004,899

96.714.870-9

 

Coca-Cola de Chile S.A.

 

Shareholder

 

Chile

 

Purchase of advertising services

 

Chilean pesos

 

2,536,392

96.714.870-9

 

Coca-Cola de Chile S.A.

 

Shareholder

 

Chile

 

Lease of water fountain

 

Chilean pesos

 

3,666,327

96.714.870-9

 

Coca-Cola de Chile S.A.

 

Shareholder

 

Chile

 

Sale of raw materials and other

 

Chilean pesos

 

811,703

86.881.400-4

 

Envases CMF S.A.

 

Associate

 

Chile

 

Purchase of bottles

 

Chilean pesos

 

12,481,735

86.881.400-4

 

Envases CMF S.A.

 

Associate

 

Chile

 

Purchase of raw materials

 

Chilean pesos

 

9,609,735

86.881.400-4

 

Envases CMF S.A.

 

Associate

 

Chile

 

Purchase of caps

 

Chilean pesos

 

307,392

86.881.400-4

 

Envases CMF S.A.

 

Associate

 

Chile

 

Purchase services and others

 

Chilean pesos

 

871,698

86.881.400-4

 

Envases CMF S.A.

 

Associate

 

Chile

 

Purchase of packaging

 

Chilean pesos

 

14,787

86.881.400-4

 

Envases CMF S.A.

 

Associate

 

Chile

 

Compra de Embalajes

 

Pesos chilenos

 

2,613,304

86.881.400-4

 

Envases CMF S.A.

 

Associate

 

Chile

 

Sale of packaging and raw materials

 

Chilean pesos

 

2,661,530

96.891.720-K

 

Embonor S.A.

 

Related to Shareholder

 

Chile

 

Sale of finished products

 

Chilean pesos

 

30,045,281

96.891.720-K

 

Embonor S.A.

 

Related to Shareholder

 

Chile

 

Venta Servicios y Otros

 

Pesos chilenos

 

29,524

96.517.310-2

 

Embotelladora Iquique S.A.

 

Related to Shareholder

 

Chile

 

Sale of finished products

 

Chilean pesos

 

1,777,101

89.996.200-1

 

Envases del Pacífico S.A.

 

Related to director

 

Chile

 

Purchase of raw materials and materials

 

Chilean pesos

 

22,455

89.996.200-1

 

Envases del Pacífico S.A.

 

Related to director

 

Chile

 

Compra de materias primas y materiales

 

Pesos chilenos

 

909,734

94.627.000-8

 

Parque Arauco S.A.

 

Related to director

 

Chile

 

Rent of spaces

 

Chilean pesos

 

91,685

Foreign

 

Recofarma do Industrias Amazonas Ltda.

 

Related to Shareholder

 

Brazil

 

Purchase of concentrates

 

Brazilian real

 

79,463,535

Foreign

 

Recofarma do Industrias Amazonas Ltda.

 

Related to Shareholder

 

Brazil

 

Refund and other purchases

 

Brazilian real

 

4,055,164

Foreign

 

Servicio y Productos para Bebidas Refrescantes S.R.L.

 

Shareholder

 

Argentina

 

Purchase of concentrates

 

Argentine pesos

 

48,107,559

Foreign

 

Servicio y Productos para Bebidas Refrescantes S.R.L.

 

Shareholder

 

Argentina

 

Advertising participation payment

 

Argentine pesos

 

4,000,196

Foreign

 

KIAK Participaciones

 

Subsidiary

 

Brazil

 

Purchase of concentrate and marketing recovery

 

U.S. dollar

 

31,731

Foreign

 

Leão Alimentos e Bebidas Ltda.

 

Associate

 

Brazil

 

Purchase of products

 

Brazilian real

 

258,074

Foreign

 

Sorocaba Refrescos S.A.

 

Associate

 

Brazil

 

Purchase of products

 

Brazilian real

 

426,014

76.572.588-7

 

Coca Cola Del Valle New Ventures SA

 

Common Shareholder

 

Chile

 

Sale of services and others

 

Chilean pesos

 

824,968

Extranjera

 

Trop Frutas do Brasil Ltda.

 

Associate

 

Brazil

 

Compra de productos

 

Reales brasileros

 

71,903

Foreign

 

Alimentos de Soja S.A.U.

 

Related to Shareholder

 

Argentina

 

Payment of fees and services

 

Argentine pesos

 

87,036

96.633.550-5

 

Sinea S.A.

 

Ownership held by an officer’s uncle

 

Chile

 

Compra Materia Prima

 

Pesos chilenos

 

567,563

 

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Table of Contents

 

Taxpayer ID

 

Company

 

Relationship

 

Country
of origin

 

Description of transaction

 

Currency

 

Cumulative
12.31.2017

 

 

 

 

 

 

 

 

 

 

 

 

ThCh$

96.714.870-9

 

Coca-Cola de Chile S.A.

 

Shareholder

 

Chile

 

Purchase of concentrates

 

Chilean pesos

 

140,609,445

96.714.870-9

 

Coca-Cola de Chile S.A.

 

Shareholder

 

Chile

 

Purchase of advertising services

 

Chilean pesos

 

1,823,190

96.714.870-9

 

Coca-Cola de Chile S.A.

 

Shareholder

 

Chile

 

Lease of water fountain

 

Chilean pesos

 

2,989,115

96.714.870-9

 

Coca-Cola de Chile S.A.

 

Shareholder

 

Chile

 

Sale of raw materials and other

 

Chilean pesos

 

2,163,225

86.881.400-4

 

Envases CMF S.A.

 

Associate

 

Chile

 

Purchase of bottles

 

Chilean pesos

 

20,865,624

86.881.400-4

 

Envases CMF S.A.

 

Associate

 

Chile

 

Purchase of raw materials

 

Chilean pesos

 

12,617,540

86.881.400-4

 

Envases CMF S.A.

 

Associate

 

Chile

 

Purchase of caps

 

Chilean pesos

 

477,188

86.881.400-4

 

Envases CMF S.A.

 

Associate

 

Chile

 

Purchase services and others

 

Chilean pesos

 

357,456

86.881.400-4

 

Envases CMF S.A.

 

Associate

 

Chile

 

Sale services and others

 

Chilean pesos

 

14,944

86.881.400-4

 

Envases CMF S.A.

 

Associate

 

Chile

 

Purchase of packaging

 

Chilean pesos

 

2,960,894

86.881.400-4

 

Envases CMF S.A.

 

Associate

 

Chile

 

Sale of packaging and raw materials

 

Chilean pesos

 

2,942,690

96.891.720-K

 

Embonor S.A.

 

Related to Shareholder

 

Chile

 

Sale of finished products

 

Chilean pesos

 

42,561,124

96.517.310-2

 

Embotelladora Iquique S.A.

 

Related to Shareholder

 

Chile

 

Sale of finished products

 

Chilean pesos

 

2,650,329

89.996.200-1

 

Envases del Pacífico S.A.

 

Related to director

 

Chile

 

Purchase of raw materials and materials

 

Chilean pesos

 

1,676,013

94.627.000-8

 

Parque Arauco S.A.

 

Related to director

 

Chile

 

Rent of spaces

 

Chilean pesos

 

90,032

99.279.000-8

 

Euroamerica Seguros de Vida S.A.

 

Related to director

 

Chile

 

Purchase of insurance policies

 

Chilean pesos

 

312,231

Foreign

 

Recofarma do Industrias Amazonas Ltda.

 

Related to Shareholder

 

Brazil

 

Purchase of concentrates

 

Chilean pesos

 

196,738,018

Foreign

 

Recofarma do Industrias Amazonas Ltda.

 

Related to Shareholder

 

Brazil

 

Refund and other purchases

 

Chilean pesos

 

5,099,040

Foreign

 

Servicio y Productos para Bebidas Refrescantes S.R.L.

 

Shareholder

 

Argentina

 

Purchase of concentrates

 

Argentine pesos

 

272,541,272

Foreign

 

Servicio y Productos para Bebidas Refrescantes S.R.L.

 

Shareholder

 

Argentina

 

Advertising participation payment

 

Argentine pesos

 

12,584,231

Foreign

 

KAIK Participações

 

Associate

 

Brazil

 

Refund and other purchases

 

Brazilian real

 

6,614

Foreign

 

Leão Alimentos e Bebidas Ltda.

 

Associate

 

Brazil

 

Purchase of products

 

Brazilian real

 

104,103

Foreign

 

Coca-Cola Peru

 

Related to Shareholder

 

Peru

 

Purchase of concentrate and marketing recovery

 

U.S. dollar

 

7,147,534

Foreign

 

Sorocaba Refrescos S.A.

 

Associate

 

Brazil

 

Purchase of products

 

Brazilian real

 

574.881

89.862.200-2

 

Latam Airlines Group S.A.

 

Related to director

 

Chile

 

Sale of products

 

Chilean pesos

 

652.588

76.572.588-7

 

Coca Cola Del Valle New Ventures SA

 

Common Shareholder

 

Chile

 

Sale of services and others

 

Chilean pesos

 

1.444.162

Foreign

 

Trop Frutas do Brasil Ltda.

 

Associate

 

Brazil

 

Purchase of products

 

Brazilian real

 

317.565

Foreign

 

Alimentos de Soja S.A.U.

 

Related to Shareholder

 

Argentina

 

Payment of fees and services

 

Argentine pesos

 

538.546

 

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11.4                                Key management compensation

 

Salaries and benefits paid to the Company’s key management personnel including directors and managers are detailed as follows:

 

Description

 

09.30.2018

 

09.30.2017

 

 

 

ThCh$

 

ThCh$

 

Executive wages, salaries and benefits

 

4,815,598

 

4,345,940

 

Director allowances

 

1,117,123

 

1,135,100

 

Total

 

5,932,721

 

5,481,040

 

 

NOTE 12 — CURRENT AND NON-CURRENT EMPLOYEE BENEFITS

 

Employee benefits are detailed as follows:

 

Description

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Accrued vacations

 

14,602,214

 

20,769,275

 

Employee remuneration payable

 

9,216,991

 

15,186,368

 

Indemnities for years of service

 

8,897,348

 

8,286,355

 

Total

 

32,716,553

 

44,241,998

 

 

 

 

ThCh$

 

ThCh$

 

Current

 

23,819,205

 

35,955,643

 

Non-current

 

8,897,348

 

8,286,355

 

Total

 

32,716,553

 

44,241,998

 

 

12.1        Indemnities for years of service

 

The movements of post-employment benefits that are determined as stated in Note 2 are detailed as follows:

 

Movements

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Opening balance

 

8,286,355

 

8,157,745

 

Service costs

 

723,293

 

1,727,905

 

Interest costs

 

334,336

 

300,755

 

Net actuarial losses

 

163,759

 

(530,059

)

Benefits paid

 

(610,395

)

(1,369,991

)

Total

 

8,897,348

 

8,286,355

 

 

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12.1.1        Assumptions

 

The actuarial assumptions used are detailed as follows:

 

Assumptions

 

09.30.2018

 

12.31.2017

 

 

 

 

 

 

 

Discount rate

 

2.7%

 

2.7%

 

Expected salary increase rate

 

2.0%

 

2.0%

 

Turnover rate

 

5.4%

 

5.4%

 

Mortality rate

 

RV-2009

 

RV-2009

 

Retirement age of women

 

60 years

 

60 years

 

Retirement age of men

 

65 years

 

65 years

 

 

12.2           Personnel expenses

 

Personnel expenses included in the consolidated statement of income are as follows:

 

Description

 

09.30.2018

 

09.30.2017

 

 

 

ThCh$

 

ThCh$

 

Wages and salaries

 

128,595,677

 

170,284,661

 

Employee benefits

 

35,682,977

 

37,725,764

 

Severance and post-employment benefits

 

4,346,440

 

4,708,291

 

Other personnel expenses

 

10,794,315

 

10,676,226

 

Total

 

179,419,409

 

223,394,942

 

 

12.3           Number of Employees

 

 

 

09.30.2018

 

09.30.2017

 

 

 

 

 

 

 

Number of employees

 

15,215

 

14,806

 

Number of average employees

 

15,101

 

14,928

 

 

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Table of Contents

 

NOTE 13 — INVESTMENTS IN ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD

 

13.1           Balances

 

Investments in associates using equity method of accounting are detailed as follows:

 

Taxpayer

 

 

 

Country of

 

Functional

 

Carrying Value

 

Percentage interest

 

ID

 

Name

 

Incorporation

 

Currency

 

09.30.2018

 

12.31.2017

 

09.30.2018

 

12.31.2017

 

 

 

 

 

 

 

 

 

ThCh$

 

ThCh$

 

%

 

%

 

86.881.400-4

 

Envases CMF S.A. (1)

 

Chile

 

Chilean peso

 

18,669,998

 

18,528,567

 

50.00

%

50.00

%

Foreign

 

Leão Alimentos e Bebidas Ltda. (2)

 

Brazil

 

Brazilian real

 

19,849,463

 

22,163,333

 

10.26

%

10.26

%

Foreign

 

Kaik Participações Ltda. (2)

 

Brazil

 

Brazilian real

 

1,120,118

 

1,228,350

 

11.32

%

11.32

%

Foreign

 

SRSA Participações Ltda.

 

Brazil

 

Brazilian real

 

87,285

 

189,290

 

40.00

%

40.00

%

Foreign

 

Sorocaba Refrescos S.A.

 

Brazil

 

Brazilian real

 

20,885,414

 

23,079,130

 

40.00

%

40.00

%

Foreign

 

Trop Frutas do Brasil Ltda. (2)

 

Brazil

 

Brazilian real

 

5,777,170

 

6,359,428

 

7.52

%

7.52

%

76.572.588-7

 

Coca Cola del Valle New Ventures S.A.

 

Chile

 

Chilean peso

 

17,057,662

 

15,260,971

 

35.00

%

35.00

%

 Total

 

 

 

 

 

 

 

83,447,110

 

86,809,069

 

 

 

 

 

 


(1)             In these company, regardless of the percentage of ownership interest, it was determined that no controlling interest was held, only a significant influence, given that there was not a majority vote of the Board of Directors to make strategic business decisions.

(2)             In these companies, regardless of the percentage of ownership interest held, the Company has significant influence, given that it has a representative on each entity’s Board of Directors.

 

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13.2     Movement

 

The movement of investments in associates accounted for using the equity method is shown below:

 

Details

 

09.31.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Opening Balance

 

86,809,069

 

77,197,781

 

Other investment increases in associates (Capital Contribution Leão Alimentos e Bebidas Ltda. and Coca-Cola del Valle New Ventures S.A.)

 

1,500,000

 

15,570,161

 

Dividends received

 

(240,507

)

(1,540,090

)

Share in operating income

 

1,343,096

 

932,340

 

Unrealized income

 

63,950

 

85,268

 

Increase (Decrease) due to foreign currency translation differences

 

(6,028,498

)

(5,436,391

)

Ending Balance

 

83,447,110

 

86,809,069

 

 

The main movements for the nine months ended September 30, 2018 and fiscal year ended December 31, 2017, are the following:

 

·             During  2018, Embotelladora Andina S.A. has made capital contributions in Coca-Cola del Valle New Ventures S.A. in the amount of ThCh$1,500,000.

 

·             During fiscal year 2017, Leão Alimentos e Bebidas Ltda. carried out capital increases.  Rio de Janeiro Refrescos Ltda. participated in these capital increases regarding its ownership interest for amounts of ThCh$5,385,161.

 

·             During fiscal year 2017, Embotelladora Andina S.A. has made capital contributions to Coca-Cola del Valle New Ventures S.A. in the amount of ThCh$10,185,000.

 

·             During fiscal year 2017, Envases CMF S.A. declared ThCh$1,540,090 in dividends, which were paid during the second half of 2017.

 

·             During the nine-month period of  2018 and fiscal year ended December 2017, Sorocaba Refrescos S.A. did not distribute dividends.

 

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13.3     Reconciliation of share of profit in investments in associates:

 

Details

 

09.30.2018

 

06.30.2017

 

 

 

ThCh$

 

ThCh$

 

Share of profit of investment accounted for using the equity method

 

1,343,096

 

948,884

 

Unrealized earnings in inventory acquired from associates and not sold at the end of period, presented as a discount in the respective asset account (containers and/or inventories)

 

(553,274

)

(661,809

)

Amortization of Fair Value in Envases CMF S.A.

 

63,950

 

63,950

 

Income Statement Balance

 

853,772

 

351,025

 

 

13.4     Summary financial information of associates:

 

The following table presents summarized information regarding the Company´s equity investees as of September 30, 2018:

 

 

 

Envases
CMF S.A.

 

Sorocaba
Refrescos S.A.

 

Kaik
Participações
Ltda.

 

SRSA
Participações
Ltda.

 

Leão Alimentos
e Bebidas
Ltda.

 

Trop Frutas
do Brasil
Ltda.

 

Coca-Cola del
Valle New
Ventures S.A.

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Total assets

 

76,297,976

 

94,158,035

 

9,895,320

 

449,565

 

235,560,985

 

80,046,326

 

51,040,809

 

Total liabilities

 

38,489,019

 

42,100,041

 

31

 

231,350

 

52,832,739

 

10,873,781

 

2,609,356

 

Total revenue

 

36,385,837

 

36,841,511

 

234,501

 

214,916

 

110,423,443

 

2,677,100

 

201382

 

Net income (loss) of associate

 

635,974

 

(134,600

)

234,501

 

214,916

 

952,429

 

1,428,845

 

373,995

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reporting date

 

30-09-2018

 

31-08-2018

 

31.-08-2018

 

31-08-2018

 

31-08-2018

 

31-08-2018

 

31-08-2018

 

 

NOTE 14 — INTANGIBLE ASSETS AND GOODWILL

 

14.1           Intangible assets other than goodwill

 

Intangible assets other than goodwill as of the end of each reporting period are detailed as follows:

 

 

 

09-30-2018

 

12-31-2017

 

 

 

Gross

 

Cumulative

 

Net

 

Gross

 

Cumulative

 

Net

 

Detail

 

Amount

 

Amortization

 

Amount

 

Amount

 

Amortization

 

Amount

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Distribution rights (1)

 

645,938,412

 

(5,837,615

)

640,100,797

 

656,411,004

 

(116,387

)

656,294,617

 

Software

 

29,741,888

 

(21,718,145

)

8,023743

 

27,595,084

 

(21,087,741

)

6,507,343

 

Others

 

502,738

 

(28,007

)

474,731

 

511,470

 

(40,552

)

470,918

 

Total

 

676,183,038

 

(27,583,767

)

648,599,271

 

684,517,558

 

(21,244,680

)

663,272,878

 

 

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(1)         Correspond to the contractual rights to produce and distribute Coca-Cola products in certain parts of Argentina, Brazil, Chile and Paraguay. Distribution rights result from the valuation process at fair value of the assets and liabilities of the companies acquired in business combinations. Production and distribution contracts are renewable for periods of 5 years with Coca-Cola. The nature of the business and renewals that Coca-Cola has permanently done on these rights, allow qualifying them as indefinite contracts. These production and distribution rights, and in conjunction with the assets that are part of the cash-generating units, are annually subjected to the impairment test. Such distribution rights are composed in the following manner and are not subject to amortization: except for the Monster rights that are amortized in the term of the agreement which is 4 years.

 

Distribution rights

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Chile (excluding Metropolitan Region, Rancagua and San Antonio)

 

304,969,889

 

304,969,889

 

Brazil (Rio de Janeiro, Espirito Santo, Ribeirão Preto and the investments in Sorocaba and Leão Alimentos e Bebidas Ltda.)

 

166,593,621

 

187,695,738

 

Paraguay

 

165,874,163

 

162,825,074

 

Argentina (North and South)

 

2,663,124

 

803,916

 

Total

 

640,100,797

 

656,294,617

 

 

The movement and balances of identifiable intangible assets are detailed as follows:

 

 

 

01-01-2018 to 09-30-2018

 

01-01-2017 to 12-31-2017

 

 

 

Distribution

 

 

 

 

 

 

 

Distribution

 

 

 

 

 

 

 

Details

 

Rights

 

Rights

 

Software

 

Total 

 

Rights

 

Rights

 

Software

 

Total 

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Opening balance

 

656,294,617

 

470,918

 

6,507,343

 

663,272,878

 

674,920,063

 

470,918

 

5,605,081

 

680,996,062

 

Effect IAS 29 (3)

 

3,061,574

 

 

 

62,011

 

3,123,585

 

 

 

 

 

 

 

 

 

Additions 

 

 

 

2,668,399

 

2,668,399

 

11,923,449

(1)

 

2,907,715

 

14,831,164

 

Amortization

 

 

 

(2,293,399

)

(2,293,399

)

(116,387

)

 

(1,842,933

)

(1,959,320

)

Other increases (decreases) (2)

 

(19.255.394

)

3,813

 

1,079,389

 

(18,172,192

)

(30,432,508

)

 

(162,520

)

(30,595,028

)

Total

 

640,100,797

 

474,731

 

8,023,743

 

648,599,271

 

656,294,617

 

470,918

 

6,507,343

 

663,272,878

 

 


(1)          Corresponds to distribution rights paid in Argentina, Paraguay and Chile resulting from the transaction in which The Coca-Cola Company acquired the “AdeS” business described in previous notes.

(2)          Mainly corresponds to the foreign currency effect of converting foreign subsidiaries’ distribution rights into the presentation currency.

(3)          Effect IAS 29 adoption, opening balances

 

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14.2                       Goodwill

 

Goodwill is considered as the excess acquisition cost over fair value of the group´s ownership interest in identifiable net assets of the acquired subsidiary at the acquisition date.

 

14.2.1    Measurement of recoverable goodwill value

 

Goodwill is annually reviewed but its recoverable value is checked during anticipated periods, if there are facts indicating a possible impairment. These signs may include new legal dispositions, changes in the economic environment affecting business operating performance indicators, movements in the competition, or the sale of a significant part of the cash-generating unit (CGU).

 

Management reviews business performance based on geographic segments.  Goodwill is monitored by operating segment that includes different cash generating units of the operations in Chile, Brazil, Argentina and Paraguay.  Impairment of distribution rights is geographically monitored at the CGU or group of cash generating units that correspond to specific territories for which Coca-Cola distribution rights have been acquired.  These cash generating units or groups of cash generating units are composed by:

 

·                  Regions in Chile (excluding Metropolitan Region, province of Rancagua and province of San Antonio)

·                  Argentina North

·                  Argentina South

·                  Brazil (state of Rio de Janeiro and Espirito Santo)

·                  Brazil (Ipiranga territories)

·                  Brazil: (investment in the associate Sorocaba)

·                  Brazil: (investment in the associate Leão Alimentos S.A.)

·                  Paraguay

 

In order to check if goodwill has suffered an impairment loss, the company compares its book value with its recoverable value, and an impairment loss is recognized for the excess of the book value amount of the asset over its recoverable amount. To determine the recoverable values of the CGU, management considers the discounted cash flow method as the most appropriate method.

 

14.2.2              Main assumptions used in the annual test:

 

a.         Discount rate:

 

The real discount rate applied in the annual test carried out in December 2017 was estimated with the Capital Asset Pricing Model, which allows estimating a discount rate according to the risk level of the CGU in the country where it operates.  A nominal discount rate before taxes is used according to the following table:

 

 

 

Discount Rate

 

Discount Rate

 

 

 

2017

 

2017

 

Argentina

 

17.1

%

17.1

%

Chile

 

7.2

%

7.2

%

Brazil

 

9.6

%

9.6

%

Paraguay

 

9.1

%

9.1

%

 

Management carries out the annual goodwill impairment test as of December 31 of each year for each CGU.

 

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b.                  Other assumptions

 

Financial projections to determine the net value of future cash flows are modelled considering the main variables of the historical flows of the CGU, and approved budgets. In this sense, a conservative growth rate is used, which reach 3% for the soft drinks category and up to 7% for the less developed categories such as juices and water. Perpetuity growth rates between 2% and 2.5% depending on the level of per capita consumption of the products at each operation are set beyond the fifth year of projection. In this sense, the variables of greater sensitivity in these projections correspond to discount rates applied in order to determine the net present value of projected flows and EBITDA margin.

 

For the purpose of the impairment test, sensitivities were conducted in these critical variables according to the following:

 

·                  EBITDA Margin: corresponds to an increase or decrease of up to 150 bps of the EBITDA margin of the operations.

·                  Discount rate: corresponds to an increase or decrease of 150 bps in the discount rate of future cash flows

 

14.2.3              Conclusions

 

The Company performs annual impairment tests, and as a result of the annual test for 2017, no impairments have been identified in any of the CGUs assuming conservative EBITDA margin projections and in line with the markets’ history.  As of the date of the report, no signs of impairment have been detected.

 

Despite the deterioration of the macroeconomic conditions experienced by the economies of the countries where the cash generating units develop their operations, recovery values from the impairment test were higher than the book values of assets.

 

14.2.4              Goodwill by business segment and country

 

Movement in Goodwill as of September 30, 2018 and December 31, 2017 is detailed as follows:

 

Operating segment

 

01.01.2018

 

Additions/
Disposals

 

Effect
IAS 29

 

Foreign currency
translation differences
where functional
currency is different
from presentation
currency

 

09.30.2018

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Chilean operation

 

8,503,023

 

 

 

 

8,503,023

 

Brazilian operation

 

73,509,080

 

 

 

(6,200,085

)

67,308,995

 

Argentine operation

 

4,672,971

 

 

29,629,569

 

(12,351,473

)

21,951,067

 

Paraguayan operation

 

6,913,143

 

 

 

129,458

 

7,042,601

 

Total

 

93,598,217

 

 

29,629,569

 

(18,422,100

)

104,805,686

 

 

56


Table of Contents

 

Operating segment

 

01.01.2017

 

Additions/
Disposals

 

Effect
IAS 29

 

Foreign currency
translation differences
where functional
currency is different
from presentation
currency

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Chilean operation

 

8,503,023

 

 

 

 

8,503,023

 

Brazilian operation

 

81,145,834

 

 

 

(7,636,754

)

73,509,080

 

Argentine operation

 

5,972,515

 

 

 

(1,299,544

)

4,672,971

 

Paraguayan operation

 

7,298,133

 

 

 

(384,990

)

6,913,143

 

Total

 

102,919,505

 

 

 

(9,321,288

)

93,598,217

 

 

NOTE 15 — OTHER CURRENT AND NON-CURRENT FINANCIAL LIABILITIES

 

Liabilities are detailed as follows:

 

Current

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Bank loans

 

12,281,592

 

31,470,003

 

Bonds payable

 

15,016,510

 

20,156,295

 

Deposits in guarantee

 

13,573,290

 

13,849,504

 

Derivative contract obligations (see note 20)

 

 

445,278

 

Leasing agreements

 

1,218,050

 

2,060,325

 

Total

 

42,089,442

 

67,981,405

 

 

Non-current

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Bank loans

 

10,764,100

 

13,057,542

 

Bonds payable

 

670,944,969

 

648,228,554

 

Leasing agreements

 

12,196,146

 

14,481,105

 

Total

 

693,905,215

 

675,767,201

 

 

57


Table of Contents

 

The fair value of financial assets and liabilities as of September 30, 2018 and December 31, 2017 is presented below:

 

Current

 

Book Value
09.30.2018

 

Fair Value
09.30.2018

 

Book Value
12.31.2017

 

Fair Value
12.31.2017

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Cash and cash equivalents (3)

 

73,709,086

 

73,709,086

 

136,242,116

 

136,242,116

 

Other financial assets (3)

 

4,049,505

 

4,049,505

 

14,138,161

 

14,138,161

 

Trade and other accounts receivable (3)

 

140,023,967

 

140,023,967

 

191,284,680

 

191,284,680

 

Accounts receivable from related companies (3)

 

3,189,903

 

3,189,903

 

5,370,232

 

5,370,232

 

Bank loans (1)

 

12,281,592

 

11,613,376

 

31,470,003

 

31,006,898

 

Bonds payable (2)

 

15,016,510

 

16,794,788

 

20,156,295

 

22,484,452

 

Deposits in guarantee (3)

 

13,573,290

 

13,573,290

 

13,849,504

 

13,849,504

 

Derivative contract obligations (3) (see note 20)

 

 

 

445,278

 

445,278

 

Leasing agreements (3)

 

1,218,050

 

1,218,050

 

2,060,325

 

2,060,325

 

Trade and other accounts payable (3)

 

176,261,193

 

176,261,193

 

257,519,477

 

257,519,477

 

Accounts payable from related companies (3)

 

25,917,652

 

25,917,652

 

33,961,437

 

33,961,437

 

 

Non-current

 

09.30.2018

 

09.30.2018

 

12.31.2017

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Other financial assets (3)

 

102,072,916

 

102,072,916

 

74,259,085

 

75,259,085

 

Trade and other receivables

 

1,567,259

 

1,567,259

 

2,395,851

 

2,395,851

 

Accounts receivable from related companies (3)

 

57,253

 

57,253

 

156,492

 

156,492

 

Bank loans (1)

 

10,764,100

 

9,786,130

 

13,057,542

 

11,588,575

 

Bonds payable (2)

 

670,944,969

 

749,867,253

 

648,228,554

 

722,044,324

 

Leasing agreements (3)

 

12,196,146

 

12,196,146

 

14,481,105

 

14,481,105

 

Trade and other accounts payable (3)

 

732,338

 

732,338

 

1,132,926

 

1,132,926

 

 


(1)         The fair values are based on discounted cash flows using market discount rates as of the first half and year-end and are Level 2 fair value measurements.

(2)         The fair value of corporate bonds is classified as Level 2 fair value measurements based on quoted prices for the Company’s obligations.

(3)         The fair value approximates book value considering the nature and term of the obligations.

 

58


 

 

Table of Contents

 

15.1.1 Bank obligations, current

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity

 

Total

 

Indebted Entity

 

Creditor Entity

 

 

 

Type

 

Effective

 

Nominal

 

Up to

 

90 days

 

at

 

at

 

Tax ID,

 

Name

 

Country

 

Tax ID,

 

Name

 

Country

 

Currency

 

Amortization

 

Rate

 

Rate

 

90 days

 

To 1 year

 

09.30.2018

 

12.31.2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

91.144.000-8

 

Embotelladora Andina S.A.

 

Chile

 

97032000-8

 

Banco Bilbao Viscaya Argentaria

 

Chile

 

Chilean pesos

 

Monthly

 

3.64

%

3.64

%

 

 

 

300,000

 

96.705.990-0

 

Envases Central S.A.

 

Chile

 

97.006.000-6

 

Banco BCI

 

Chile

 

UF

 

Semiannually

 

2.13

%

2.13

%

368,267

 

368,223

 

736,490

 

709,794

 

Foreign

 

Embotelladora del Atlántico S.A.

 

Argentina

 

Foreign

 

Banco de la Nación Argentina

 

Argentina

 

Argentine pesos

 

Monthly

 

20.00

%

20.00

%

 

 

 

9,965,133

 

Foreign

 

Embotelladora del Atlántico S.A.

 

Argentina

 

Foreign

 

Banco Galicia y Buenos Aires S.A.

 

Argentina

 

Argentine pesos

 

Monthly

 

20.00

%

20.00

%

 

 

 

3,352,417

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Itaú

 

Brazil

 

Brazilian real

 

Monthly

 

7.48

%

7.48

%

 

 

 

 

298,456

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Santander

 

Brazil

 

Brazilian real

 

Monthly

 

6.63

%

6.63

%

 

 

 

1,359,471

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Itaú

 

Brazil

 

Brazilian real

 

Monthly

 

6.63

%

6.63

%

99,791

 

129,481

 

229,272

 

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Santander

 

Brazil

 

Brazilian real

 

Monthly

 

7.15

%

7.15

%

76,699

 

207,500

 

284,199

 

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Itaú

 

Brazil

 

Brazilian real

 

Quarterly

 

7.15

%

7.15

%

 

 

 

1,611,747

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Itaú

 

Brazil

 

Brazilian real

 

Semiannually

 

4.50

%

4.50

%

 

 

 

2,541,016

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Santander

 

Brazil

 

Brazilian real

 

Quarterly

 

4.50

%

4.50

%

567,738

 

1,691,503

 

2,259,241

 

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Itaú

 

Brazil

 

Brazilian real

 

Quarterly

 

6.24

%

6.24

%

 

8,772,391

 

8,772,391

 

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Bano Itaú

 

Brazil

 

Brazilian real

 

Semiannually

 

6.24

%

6.24

%

 

 

 

11,331,969

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,281,592

 

31,470,003

 

 

59


Table of Contents

 

15.1.2 Bank obligations, non-current

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

More 4

 

 

 

 

 

Indebted Entity

 

Creditor Entity

 

 

 

Type

 

Effective

 

Nominal

 

1 year up to

 

More 2 years

 

More 3 years

 

years
Up to 5

 

More 5

 

at

 

Tax ID

 

Name

 

Country

 

Tax ID

 

Name

 

Country

 

Currency

 

Amortization

 

Rate

 

Rate

 

2 years

 

Up to 3 years

 

Up to 4 years

 

years

 

Years

 

09.30.2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

96.705.990-0

 

Envases Central S.A.

 

Chile

 

97.006.000-6

 

Banco BCI

 

Chile

 

UF

 

Semiannually

 

2.13

%

2.13

%

1,779,927

 

 

 

 

 

1,779,927

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Itaú

 

Brazil

 

Brazilian real

 

Monthly

 

6.63

%

6.63

%

83,957

 

39,587

 

39,587

 

84,616

 

 

247,747

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Santander

 

Brazil

 

Brazilian real

 

Monthly

 

7.15

%

7.15

%

180,112

 

6,103

 

 

 

 

186,215

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Santander

 

Brazil

 

Brazilian real

 

Quarterly

 

6.24

%

6.24

%

7,422,488

 

 

 

 

 

7,422,488

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Itaú

 

Brazil

 

Brazilian real

 

Quarterly

 

4.50

%

4.50

%

1,127,723

 

 

 

 

 

1,127,723

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,764,100

 

 

60


Table of Contents

 

15.1.2 Bank obligations, non-current December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 year up

 

 

 

 

 

 

 

 

 

 

 

Indebted Entity

 

Creditor Entity

 

 

 

Type

 

Effective

 

Nominal

 

to

 

More 2 years

 

More 3 years

 

More 4 years

 

More 5

 

at

 

Tax ID

 

Name

 

Country

 

Tax ID

 

Name

 

Country

 

Currency

 

Amortization

 

Rate

 

Rate

 

2 years

 

Up to 3 years

 

Up to 4 years

 

Up to 5 years

 

Years

 

31.12.2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

M$

 

M$

 

M$

 

M$

 

M$

 

M$

 

96.705.990-0

 

Envases Central S.A.

 

Chile

 

97.006.000-6

 

Banco BCI

 

Chile

 

Unidad de fomento

 

Semiannually

 

2.1

%

2.1

%

2,092,245

 

 

 

 

 

2,092,245

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Alfa

 

Brazil

 

Brazilian real

 

Monthly

 

7.48

%

7.5

%

125,461

 

125,461

 

125,461

 

627,305

 

 

1,003,688

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Itaú

 

Brazil

 

Brazilian real

 

Monthly

 

6.6

%

6.6

%

504,700

 

197,779

 

44,639

 

128,887

 

 

876,005

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Santander

 

Brazil

 

Brazilian real

 

Monthly

 

7.2

%

7.2

%

1,593,608

 

1,202,096

 

663,779

 

2,449,851

 

 

5,909,334

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Itaú

 

Brazil

 

Brazilian real

 

Quarterly

 

4.5

%

4.5

%

3,176,270

 

 

 

 

 

3,176,270

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,057,542

 

 

15.1.3    Current and non-current bank obligations “Restrictions”

 

Bank obligations are not subject to restrictions for the reported periods.

 

15.2.1        Bonds payable

 

 

 

Current

 

Non-current

 

Total

 

Composition of bonds payable

 

09.30.2018

 

12.31.2017

 

09.30.2018

 

12.31.2017

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Bonds (face value)

 

15,187,203

 

20,547,117

 

674,027,745

 

651,459,940

 

689,214,948

 

672,007,057

 

Expenses of bond issuance and discounts on placement

 

(170,693

)

(390,822

)

(3,082,776

)

(3,231,386

)

(3,253,469

)

(3,622,208

)

Net balance presented in statement of financial position

 

15,016,510

 

20,156,295

 

670,944,969

 

648,228,554

 

685,961,479

 

668,384,849

 

 

61


Table of Contents

 

15.2.2    Current and non-current balances

 

Obligations with the public correspond to bonds in UF issued by the parent company on the Chilean market and bonds in US dollars issued by the parent company on the international market:

 

 

 

 

 

Face

 

Unit of

 

Interest

 

final

 

Interest

 

Date
Amortization

 

 

 

 

 

 

 

Series

 

amount

 

Adjustment

 

rate

 

Maturity

 

Payment

 

of capital

 

09.30.2018

 

12.31.2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ThCh$

 

ThCh$

 

Bonds, current portion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CMF Registration N°254 CMF 06.13.2001

 

B

 

2.228.199

 

UF

 

6.5

%

06.01.2026

 

Semiannually

 

12.01.2018

 

7,338,595

 

6,071,687

 

CMF Registration N°641 08.23.2010

 

C

 

1,500,000

 

UF

 

4.0

%

08.15.2031

 

Semiannually

 

02.15.2021

 

203,170

 

597,049

 

CMF Registration N°759 08.20.2013

 

C

 

750,000

 

UF

 

3.5

%

08.16.2020

 

Semiannually

 

02.16.2018

 

6,897,400

 

6,959,157

 

CMF Registration N°760 08.20.2013

 

D

 

4,000,000

 

UF

 

3.8

%

08.16.2034

 

Semiannually

 

02.16.2032

 

503,756

 

1,502,299

 

CMF Registration N°760 04.02.2014

 

E

 

3,000,000

 

UF

 

3.75

%

03.01.2035

 

Semiannually

 

09.01.2032

 

244,282

 

998,409

 

Bonds USA

 

 

575,000,000

 

US$

 

5.0

%

10.01.2023

 

Semiannually

 

10.01.2023

 

 

4,418,516

 

Total current portion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,187,203

 

20,547,117

 

Bonds non-current portion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CMF Registration N°254 CMF 06.13.2001

 

B

 

2.228.199

 

UF

 

6.5

%

06.01.2026

 

Semiannually

 

12.01.2018

 

54,908,550

 

56,795,423

 

CMF Registration N°641 08.23.2010

 

C

 

1,500,000

 

UF

 

4.0

%

08.15.2031

 

Semiannually

 

02.15.2021

 

41,036,175

 

40,197,210

 

CMF Registration N°759 08.20.2013

 

C

 

750,000

 

UF

 

3.5

%

08.16.2020

 

Semiannually

 

02.16.2018

 

6,839,362

 

13,399,069

 

CMF Registration N°760 08.20.2013

 

D

 

4,000,000

 

UF

 

3.8

%

08.16.2034

 

Semiannually

 

02.16.2032

 

109,429,800

 

107,192,560

 

CMF Registration N°760 04.02.2014

 

E

 

3,000,000

 

UF

 

3.75

%

03.01.2035

 

Semiannually

 

09.01.2032

 

82,072,358

 

80,394,428

 

Bonds USA

 

 

575,000,000

 

US$

 

5.0

%

10.01.2023

 

Semiannually

 

10.01.2023

 

379,741,500

 

353,481,250

 

Bonds non-current portion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

674,027,745

 

651,459,940

 

 

Accrued interest included in the current portion of bonds totaled ThCh$ 2,298,553 and ThCh$8,105,642 at September 30, 2018 and December 31, 2017, respectively.

 

62


Table of Contents

 

15.2.3                       Non-current maturities

 

 

 

 

 

Year of maturity

 

Total non-

 

 

 

 

 

more than 1

 

more than 2

 

more than 3

 

 

 

current

 

 

 

Series

 

to 2

 

to 3

 

to 4

 

More than 5

 

09.30.2018

 

 

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

SVS Registration N°254 06.13.2001

 

B

 

6,442,495

 

6,861,259

 

7,307,240

 

34,297,556

 

54,908,550

 

SVS Registration N°641 08.23.2010

 

C

 

 

1,865,231

 

3,730,462

 

35,440,482

 

41,036,175

 

SVS Registration N°759 08.20.2013

 

C

 

3,419,681

 

3,419,681

 

 

 

6,839,362

 

SVS Registration N°760 08.20.2013

 

D

 

 

 

 

109,429,800

 

109,429,800

 

SVS Registration N°760 04.02.2014

 

E

 

 

 

 

82,072,358

 

82,072,358

 

Bonds USA

 

 

 

 

 

379,741,500

 

379,741,500

 

Total

 

 

 

9,862,176

 

12,146,171

 

11,037,702

 

640,981,696

 

674,027,745

 

 

15.2.4                       Market rating

 

The bonds issued on the Chilean market had the following rating as of September 30, 2018:

 

AA                              :                    ICR Compañía Clasificadora de Riesgo Ltda. rating

AA                              :                    Fitch Chile Clasificadora de Riesgo Limitada rating

 

The rating of bonds issued on the international market as of September 30, 2018, is the following:

 

BBB                     :                    Standard&Poors rating

BBB+              :                    Fitch Chile Clasificadora de Riesgo Limitada rating.

 

15.2.5                       Restrictions

 

15.2.5.1             Restrictions regarding bonds placed abroad.

 

On September 26, 2013, Andina issued a bond in the U.S. Market (Bonds USA) for US$575 million at a coupon rate of 5.0% maturing on October 1, 2023.  These bonds do not have financial restrictions.

 

15.2.5.2             Restrictions regarding bonds placed in the local market.

 

For purposes of the calculation of the covenants, the amount of EBITDA that was agreed on each bond issue is included.

 

Restrictions regarding the issuance of bonds for a fixed amount registered under number 254.

 

The outstanding series as of September 30, 2018, is Series B for a nominal amount of up to UF 4 million, of which amount UF 3.7 million in bonds were placed with final maturity in the year 2026 at a 6.50% annual interest rate. The balance of outstanding capital as of September 30, 2018 is UF 2,228 million.

 

Series B was issued with charge to the bonds line registered with the Securities Registered under number 254 dated September 13, 2001.

 

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Regarding Series B, the Issuer is subject to the following restrictions:

 

·             Maintain an indebtedness level where Consolidated Financial Liabilities to Consolidated Equity does not exceed 1.20 times. For these purposes Consolidated Financial Liabilities shall be regarded as Liabilities Receivables accruing interest, namely: (i) other current financial liabilities, plus (ii) other non-current financial liabilities, less (iii) asset balances of derivative financial instruments, taken to cover exchange rate or interest rate risks on financial liabilities under “Other Current Financial Assets” and “Other non-current Financial Assets” of the Issuer’s Consolidated Interim Financial Statements. Consolidated Equity will be regarded as total equity including non-controlling interest.

 

As of September 30, 2018, indebtedness level is 0.80 times of Consolidated Equity.

 

·             Maintain, and in no manner lose, sell, assign or transfer to a third party, the geographical area currently denominated as the “Metropolitan Region” (Región Metropolitana) as a territory in Chile in which we have been authorized by The Coca-Cola Company for the development, production, sale and distribution of products and brands of the licensor, in accordance to the respective bottler or license agreement, renewable from time to time.

 

·             Not lose, sell, assign, or transfer to a third party any other territory of Argentina or Brazil, which as of this date is franchised by TCCC to the Company for the development, production, sale and distribution of products and brands of such licensor, as long as any of these territories account for more than 40% of the Issuer’s Adjusted Consolidated Operating Cash Flow.

 

·             Maintain consolidated assets free of any pledge, mortgage or other encumbrances for an amount at least equal to 1.3 times of the issuer’s unsecured consolidated liabilities.

 

Unsecured consolidated liabilities payable shall be regarded as the total liabilities, obligations and debts of the issuer that are not secured by real guarantees on goods and assets of the latter, voluntarily and conventionally constituted by the issuer less the asset balances of derivative financial instruments, taken to cover exchange rate or interest rate risks on financial liabilities under “Other Current Financial Assets” and “Other non-current Financial Assets” of the Issuer’s Consolidated Statement of Financial Position.

 

The following will be considered in determining Consolidated Assets:  assets free of any pledge, mortgage or other lien, as well as those assets having a pledge, mortgage or real encumbrances that operate solely by law, less asset balances of derivative financial instruments, taken to hedge exchange rate or interest rate risks on financial liabilities under “Other Current Financial Assets” and “Other non-current Financial Assets” of the Issuer’s Consolidated Statement of Financial Position. Therefore, Consolidated Assets free of any pledge, mortgage or other lien will only be regarded as those assets free of any pledge, mortgage or other real lien voluntarily and conventionally constituted by the issuer less asset balances of derivative financial instruments, taken to cover exchange rate or interest rate risks on financial liabilities and under “Other Current Financial Assets” and “Other non-current Financial Assets” of the Issuer’s Consolidated Statement of Financial Position.

 

As of September 30, 2018, this index is 1.67 times.

 

Restrictions regarding bond lines registered in the Securities Registered under number 641.

 

Because of our merger with Coca-Cola Polar S.A., Andina became a debtor of the following two bonds placed in the Chilean market in 2010:

 

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·             UF 1.5 million of Series C bonds due 2031, bearing an annual interest rate of 4.00%. As of September 30, 2018, the balance of outstanding capital is UF 1.5 million.

 

Series C was issued with charge to the Bond Lines registered with the Securities Registrar, under number 641, on August 23, 2010.

 

Regarding Series C, the Issuer is subject to the following restrictions:

 

·             Maintain a level of “Net Financial Debt” within its quarterly financial statements that may not exceed 1.5 times, measured over figures included in its consolidated statement of financial position.   To this end, net financial debt shall be defined as the ratio between net financial debt and total equity of the issuer (equity attributable to controlling owners plus non-controlling interest). On its part, net financial debt will be the difference between the Issuer’s financial debt and cash.

 

As of September 30, 2018, Net Financial Debt was 0.71 times.

 

·             Maintain consolidated assets free of any pledge, mortgage or other encumbrances for an amount at least equal to 1.3 times of the issuer’s unsecured consolidated liabilities.

 

Unencumbered assets refer to the assets that meet the following conditions: are the property of the issuer; classified under Total Assets of the Issuer’s Financial Statements; and that are free of any pledge, mortgage or other liens constituted in favor of third parties, less “Other Current Financial Assets” and “Other Non-Current Financial Assets” of the Issuer’s Financial Statements (to the extent they correspond to asset balances of derivative financial instruments, taken to hedge exchange rate and interest rate risk of the financial liabilities).

 

Unsecured total liabilities correspond to: liabilities from Total Current Liabilities and Total Non-Current Liabilities of Issuer’s Financial Statement which do not benefit from preferences or privileges, less “Other Current Financial Assets” and “Other Non-Current Financial Assets” of the Issuer’s Financial Statements (to the extent they correspond to asset balances of derivative financial instruments, taken to hedge exchange rate and interest rate risk of the financial liabilities).

 

As of September 30, 2018, this index is 1.67 times.

 

·             Maintain a level of “Financial net coverage” in its quarterly financial statements of more than 3 times. Net financial coverage means the ratio between the Issuer’s Ebitda for the past 12 months and net financial expenses (financial income less financial expenses) of the issuer for the past 12 months. However, this restriction will be considered breached when the mentioned net financial coverage level is lower than the level previously indicated during two consecutive quarters.

 

As of September 30, 2018, Net Financial Coverage level is 7.24 times.

 

Restrictions regarding bond lines registered in the Securities Registrar under numbers 759 and 760.

 

During 2013 and 2014, Andina placed local bonds in the Chilean market. The issuances were structured into three series.

 

·             Series C outstanding as of September 30, 2018, for a nominal value of up to UF 3 million, of which bonds were placed for a nominal amount of UF1.0 million with final maturity during year 2020 at an annual

 

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interest rate of 3.50% issued against line number 759.  Outstanding capital as of September 30, 2018, is UF 0.5 million.

 

·             Series D and E outstanding as of September 30, 2018, for a total nominal value of UF 8 million, of which UF 4 million were placed in bonds during August 2013 (series D) and UF 3 million during April 2014 (series E), with final maturity in 2034 and 2035, respectively, issued with charge against line number 760.  The annual interest rates are 3.8% for Series D and 3.75% for Series E. The outstanding capital balance as of September 30, 2018, of both series amounts to UF 7.0 million.

 

Regarding Series C, D and E, the Issuer is subject to the following restrictions:

 

·             Maintain an indebtedness level where Consolidated Financial Liabilities to Consolidated Equity does not exceed 1.20 times. For these purposes Consolidated Financial Liabilities shall be regarded as Liabilities Receivables accruing interest, namely: (i) other current financial liabilities, plus (ii) other non-current financial liabilities, less (iii) cash and cash equivalent and (iv) other current financial assets, and (v) other non-current financial assets (to the extent they are asset balances of derivative financial instruments, taken to hedge exchange rate or interest rate risks on financial liabilities). Consolidated Equity will be regarded as total equity including non-controlling interest.

 

As of September 30, 2018, Indebtedness Level is 0.71 times of Consolidated Equity.

 

·             Maintain consolidated assets free of any pledge, mortgage or other encumbrances for an amount at least equal to 1.3 times of the issuer’s unsecured consolidated liabilities payable.

 

Unsecured Consolidated Liabilities Payable shall be regarded as the total liabilities, obligations and debts of the issuer that are not secured by real guarantees on goods and assets of the latter, voluntarily and conventionally constituted by the issuer less the asset balances of derivative financial instruments, taken to cover exchange rate or interest rate risks on financial liabilities under “Other Current Financial Assets” and “Other non-current Financial Assets” of the Issuer’s Consolidated Statement of Financial Position.

 

The following will be considered in determining Consolidated Assets:  assets free of any pledge, mortgage or other lien, as well as those assets having a pledge, mortgage or real encumbrances that operate solely by law, less asset balances of derivative financial instruments, taken to hedge exchange rate or interest rate risks on financial liabilities under “Other Current Financial Assets” and “Other non-current Financial Assets” of the Issuer’s Consolidated Financial Statements. Therefore, Consolidated Assets free of any pledge, mortgage or other lien will only be regarded as those assets free of any pledge, mortgage or other real lien voluntarily and conventionally constituted by the issuer less asset balances of derivative financial instruments, taken to cover exchange rate or interest rate risks on financial liabilities and under “Other Current Financial Assets” and “Other non-current Financial Assets” of the Issuer’s Consolidated Statement of Financial Position.

 

As of September 30, 2018, this index is 1.67 times.

 

·             Maintain, and in no manner, lose, sell, assign or transfer to a third party, the geographical area currently denominated as the “Metropolitan Region” as a territory franchised to the Issuer in Chile by The Coca-Cola Company, hereinafter also referred to as “TCCC” or the “Licensor” for the development, production, sale and distribution of products and brands of said licensor, in accordance to the respective bottler or license agreement, renewable from time to time. Losing said territory, means the non-renewal, early termination or cancellation of this license agreement by TCCC, for the geographical area today called “Metropolitan

 

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Region”. This reason shall not apply if, as a result of the loss, sale, transfer or disposition, of that licensed territory is purchased or acquired by a subsidiary or an entity that consolidates in terms of accounting with the Issuer.

 

·             Not lose, sell, assign, or transfer to a third party any other territory of Argentina or Brazil, which as of the issuance date of these instruments is franchised by TCCC to the Issuer for the development, production, sale and distribution of products and brands of such licensor, as long as any of these territories account for more than 40% of the Issuer’s Adjusted Consolidated Operating Cash Flow of the audited period immediately before the moment of loss, sale, assignment or transfer.  For these purposes, the term “Adjusted Consolidated Operating Cash Flow” shall mean the addition of the following accounting accounts of the Issuer’s Consolidated Statement of Financial Position: (i) “Gross Profit” which includes regular activities and cost of sales; less (ii) “Distribution Costs”; less (iii) “Administrative Expenses”; plus (iv) “Participation in profits (losses) of associates and joint ventures that are accounted for using the equity method”; plus (v) “Depreciation”; plus (vi) “Intangibles Amortization”.

 

As of September 30, 2018, and December 31, 2017, the Company complies with all financial collaterals.

 

15.2.6                       Repurchased bonds

 

In addition to UF bonds, the Company holds bonds that it has repurchased in full through companies that are included in the consolidation:

 

Through its subsidiaries, Abisa Corp S.A. (formerly Pacific Sterling), Embotelladora Andina S.A. repurchased its Bonds USA issued on the U.S. Market during the years 2000, 2001, 2002, 2007 and 2008. The entire placement amounted to US$350 million, of which US$200 million are outstanding as of December 31, 2013. On December 15, 2014, Embotelladora Andina S.A. rescued US$200 million in outstanding bonds from its subsidiary Abisa Corp S.A., thus since legally debtor and creditor are joined in a single entity, the mentioned bond liability becomes extinguished.

 

The subsidiary Rio de Janeiro Refrescos Ltda. maintains a liability corresponding to a bond issuance for US $75 million due in December 2020 and semi-annual interest payments. As of December 31, 2017, these issues are held by Andina. On January 1, 2013, Abisa Corp S.A. transferred the totality of this asset to Embotelladora are Andina S.A., the latter becoming the creditor of the above-mentioned Brazilian subsidiary. Consequently, the assets and liabilities related to the transaction have been eliminated from these Consolidated Interim Financial Statements. In addition, the transaction has been treated as a net investment of the group in the Brazilian subsidiary; consequently, the effects of exchange rate differences between the dollar and the functional currency of each one has been recorded in other comprehensive income.

 

15.3.1                       Derivative contract obligations

 

Please see details in Note 20.

 

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15.4.1                                                              Current liabilities for leasing agreements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity

 

Total

 

Indebted Entity

 

Creditor Entity 

 

 

 

Amortization

 

Effective

 

Nominal

 

Up to

 

90 days to

 

at

 

At

 

Name

 

Country

 

Tax ID

 

type

 

Type

 

Currency

 

Type

 

rate

 

rate

 

90 days

 

1 year

 

09.30.2018

 

12.31.2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Itaú

 

Brazil

 

Brazilian real

 

Monthly

 

10.215

%

10.227

%

9,567

 

10,886

 

20,453

 

41,467

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Santander

 

Brazil

 

Brazilian real

 

Monthly

 

9.65

%

9.47

%

58,225

 

68,617

 

126,842

 

504,815

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Citibank

 

Brazil

 

Brazilian real

 

Monthly

 

8.54

%

8.52

%

110,678

 

99,956

 

210,634

 

528,801

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Cogeração Light Esco

 

Brazil

 

Brazilian real

 

Monthly

 

13.00

%

12.28

%

152,589

 

487,080

 

639,669

 

657,610

 

Embotelladora del Atlántico S.A.

 

Argentina

 

Foreign

 

Tetra Pak SRL

 

Argentina

 

Dollars

 

Monthly

 

12.00

%

12.00

%

220,452

 

 

220,452

 

327,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,218,050

 

2,060,325

 

 

15.4.2                                                              Non-current liabilities for leasing agreements September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity

 

 

 

Indebted Entity

 

Creditor Entity

 

 

 

Amortization

 

Effective

 

Nominal

 

1 year to

 

2 years to

 

3 years to

 

4 years to

 

More

 

at

 

Name

 

Country

 

Tax ID

 

Name

 

type

 

Currency

 

Type

 

rate

 

Rate

 

2 years

 

3 years

 

4 years

 

5 years

 

5 years

 

09.30.2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Cogeração Light Esco

 

Brazil

 

Brazilian real

 

Monthly

 

13.00

%

12.28

%

722,793

 

816,804

 

923,028

 

1,043,107

 

8,690,414

 

12,196,146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,196,146

 

 

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15.4.3                                                              Non-current liabilities for leasing agreements December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity

 

 

 

Indebted Entity

 

Creditor Entity

 

 

 

Amortization

 

Effective

 

Nominal

 

1 year to

 

2 years to

 

3 years to

 

4 years to

 

More

 

at

 

Tax ID

 

Name

 

Country

 

Tax, ID

 

Name

 

Country

 

Currency

 

Type

 

rate

 

Rate

 

2 years

 

3 years

 

4 years

 

5 years

 

5 years

 

12.31.2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Itaú

 

Brazil

 

Brazilian real

 

Monthly

 

10.21

%

10.22

%

11,764

 

 

 

 

 

11,764

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Santander

 

Brazil

 

Brazilian real

 

Monthly

 

9.65

%

9.47

%

73,799

 

 

 

 

 

73,799

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Banco Citibank

 

Brazil

 

Brazilian real

 

Monthly

 

8.54

%

8.52

%

105,807

 

 

 

 

 

105,807

 

Foreign

 

Rio de Janeiro Refrescos Ltda.

 

Brazil

 

Foreign

 

Cogeração Light Esco

 

Brazil

 

Brazilian real

 

Monthly

 

13.00

%

12.28

%

743,100

 

839,703

 

948,864

 

1,072,216

 

10,685,852

 

14,289,735

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,481,105

 

 

15.4.4                                                              Current and non-current leasing agreements obligations “Restrictions”

 

Leasing agreement obligations are not subject to financial restrictions for the reported periods.

 

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NOTE 16 —   TRADE AND OTHER ACCOUNTS PAYABLE, CURRENT AND NON-CURRENT

 

Trade and other current accounts payable are detailed as follows:

 

Item

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Trade accounts payable

 

135,440,247

 

187,872,116

 

Withholdings tax

 

27,669,470

 

49,857,086

 

Accounts payable Inamar Ltda. (1)

 

 

356,221

 

Others

 

13,883,814

 

20,566,980

 

Total

 

176,993,531

 

258,652,403

 

 

 

 

 

 

 

Current

 

176,261,193

 

257,519,477

 

Non-current

 

732,338

 

1,132,926

 

Total

 

176,993,531

 

258,652,403

 

 

The Company maintains commercial lease agreements for forklifts, vehicles, properties and machinery.  These lease agreements have an average duration of one to eight years excluding renewal options.

 

Accruable liabilities pursuant to the Company’s operating leasing agreements are detailed as follows:

 

 

 

Accruable
liability

 

 

 

ThCh$

 

Maturity within one year

 

1,669,966

 

Maturity between one and five years

 

2,223,065

 

Maturity more than five years

 

 

Total

 

3,893,031

 

 

Total expenses related to operating leases maintained by the Company as of September 30, 2018 amount to ThCh$4,418,470

 

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NOTE 17 — OTHER PROVISIONS, CURRENT AND NON-CURRENT

 

17.1           Balances

 

This account is detailed as follows:

 

Description

 

09.30.2018

 

12.31.2017

 

 

 

M$

 

M$

 

Litigation (1)

 

61,754,065

 

65,624,166

 

Total

 

61,754,065

 

65,624,166

 

 

 

 

 

 

 

Current

 

2,365,381

 

2,676,418

 

Non-current

 

59,388,684

 

62,947,748

 

Total

 

61,754,065

 

65,624,166

 

 


(1)             Corresponds to the provision for probable fiscal, labor and trade contingency losses based on the opinion of our legal advisors, detailed as follows:

 

Detail (see note 21.1)

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

 

 

 

 

 

 

Tax Contingencies

 

45,813,807

 

49,185,234

 

Labor Contingencies

 

9,170,248

 

10,468,704

 

Civil Contingencies

 

6,770,010

 

5,970,228

 

Total

 

61,754,065

 

65,624,166

 

 

17.2           Movements

 

The movement of principal provisions over law suits is detailed as follows:

 

Description

 

09.30.2018

 

12.31.2017 

 

 

 

ThCh$

 

ThCh$

 

Opening Balance as of January 01

 

65,624,166

 

73,081,893

 

Additional provisions

 

50,743

 

2,493,968

 

Restatement IAS 29, opening balances

 

395,755

 

 

Increase (decrease) in existing provisions

 

(3,946,798

)

(19,083,499

)

Payments

 

6,876,161

 

22,985,793

 

Reverse unused provision (*)

 

226,068

 

(6,769,384

)

Increase (decrease) due to foreign exchange differences

 

(7,472,030

)

(7,084,605

)

Total

 

61,754,065

 

65,624,166

 

 


(*) During 2017 there was a reversal of provisions amounting to Th$6,769,384, which resulted from fines demanded by the Brazilian Treasury on the use of IPI tax credits in the Free Zone of Manaus, because of favorable rulings on the subject for Rio de Janeiro Refrescos Ltda.

 

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NOTE 18 —   OTHER CURRENT AND NON-CURRENT NON-FINANCIAL LIABILITIES

 

Other current non - financial liabilities at each reporting period end are detailed as follows:

 

Description

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Dividend payable

 

21,641,158

 

21,679,922

 

Other

 

3,382,198

 

5,328,055

 

Total

 

25,023,356

 

27,007,977

 

 

NOTE 19 —   EQUITY

 

19.1           Number of shares:

 

 

 

Number of shares subscribed

 

Number of shares paid in

 

Number of voting shares

 

Series

 

2018

 

2017

 

2018

 

2017

 

2018

 

2017

 

A

 

473,289,301

 

473,289,301

 

473,289,301

 

473,289,301

 

473,289,301

 

473,289,301

 

B

 

473,281,303

 

473,281,303

 

473,281,303

 

473,281,303

 

473,281,303

 

473,281,303

 

 

19.1.1                                    Equity:

 

 

 

Subscribed Capital

 

Paid-in capital

 

Series

 

2018

 

2017

 

2018

 

2017

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

A

 

135,379,504

 

135,379,504

 

135,379,504

 

135,379,504

 

B

 

135,358,070

 

135,358,070

 

135,358,070

 

135,358,070

 

Total

 

270,737,574

 

270,737,574

 

270,737,574

 

270,737,574

 

 

19.1.2                    Rights of each series:

 

·                                                   Series A: Elects 12 of the 14 Directors

·                                                   Series B: Receives an additional 10% of dividends distributed to Series A and elects 2 of the 14 Directors.

 

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19.2    Dividend policy

 

According to Chilean law, cash dividends must be paid equal to at least 30% of annual net profit, barring a unanimous vote by shareholders to the contrary. If there is no net profit in a given year, the Company will not be legally obligated to pay dividends from retained earnings. At the ordinary Shareholders’ Meeting held in April 2018, the shareholders agreed to pay out of the 2017 earnings are final dividend to complete the 30% required by the Law 18,046 which will be paid in May 2018 , and an additional dividend will be paid in August 2018.

 

Pursuant to Circular Letter N° 1,945 of the Chilean Financial Market Commission (CMF) dated September 29, 2009, the Company’s Board of Directors decided to maintain the initial adjustments from adopting IFRS as retained earnings for future distribution.

 

Accumulated earnings at the date of IFRS adoption as of January 1, 2009, amounted to ThCh$ 19,260,703, of which ThCh$ 8,992,711 have been realized as of September 30, 2018 , and are available for distribution as dividends in accordance with the following:

 

Description

 

Event when
amount is
realized

 

Amount of
accumulated
earnings at
01.01.2009

 

Realized at
09.30.2018

 

Amount of
accumulated
earnings at
09.30.2018

 

 

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

Revaluation of assets parent Company

 

Sale or impairment

 

14,800,384

 

(11,985,378

)

2,815,006

 

Foreign currency translation differences of investments in related companies and subsidiaries

 

Sale or impairment

 

4,653,301

 

2,622,766

 

7,276,067

 

Full absorption cost accounting parent Company

 

Sale of products

 

305,175

 

(305,175

)

 

Post-employment benefits actuarial calculation parent Company

 

Termination of employees

 

946,803

 

(769,884

)

176,919

 

Deferred taxes complementary accounts parent Company

 

Depreciation

 

(1,444,960

)

1,444,960

 

 

Total

 

 

 

19,260,703

 

(8,992,711

)

10,267,992

 

 

The dividends declared and paid per share are presented below:

 

Period

 

 

 

Dividend
type

 

Profits
imputable to
dividends

 

Ch$ per Series
A Share

 

Ch$ per Series
B Share

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

 

January

 

Interim

 

2016

 

19.00

 

20.90

 

2017

 

May

 

Final

 

2016

 

19.00

 

20.90

 

2017

 

August

 

Additional

 

Retained Earnings

 

19.00

 

20.90

 

2017

 

October

 

Interim

 

2017

 

19.00

 

20.90

 

2018

 

January 

 

Interim

 

2017

 

21.50

 

23.65

 

2018

 

May

 

Final

 

2017

 

21.50

 

23.65

 

2018

 

August

 

Additional

 

Retained Earnings

 

21.50

 

23.65

 

2018

 

September (*)

 

Interim

 

2018

 

21.50

 

23.65

 

 


(*) Dividend payment pending

 

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19.3           Other Reserves

 

The balance of other reserves includes the following:

 

Description

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Polar acquisition

 

421,701,520

 

421,701,520

 

Foreign currency translation reserves

 

(329,080,444

)

(237,077,572

)

Cash flow hedge reserve

 

(7,059,258

)

(3,094,671

)

Reserve for employee benefit actuarial gains or losses

 

(1,916,204

)

(1,915,587

)

Legal and statutory reserves

 

5,435,538

 

5,435,538

 

Total

 

89,081,152

 

185,049,228

 

 

19.3.1        Polar acquisition

 

This amount corresponds to the fair value of the issuance of shares of Embotelladora Andina S.A., used to acquire Embotelladoras Coca-Cola Polar S.A., which was the value of the capital increase notarized in legal terms.

 

19.3.2        Cash flow hedge reserve

 

They arise from the fair value of the existing derivative contracts that have been qualified for hedge accounting at the end of each financial period. When contracts are expired, these reserves are adjusted and recognized in the income statement in the corresponding period (see Note 20).

 

19.3.3        Reserve for employee benefit actuarial gains or losses

 

Corresponds to the restatement effect of employee benefits actuarial losses that according to IAS 19 amendments must be carried to other comprehensive income.

 

19.3.4        Legal and statutory reserves

 

The balance of other reserves is established through the following concept:

 

In accordance with Official Circular N° 456 issued by the Chilean Financial Market Commission (CMF), the legally required price-level restatement of paid-in capital for 2009 is presented as part of other equity reserves and is accounted for as a capitalization from Other Reserves with no impact on net income or retained earnings under IFRS. This amount totaled ThCh$ 5,435,538 as of December 31, 2009

 

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19.3.5        Foreign currency translation reserves

 

This corresponds to the conversion of the financial statements of foreign subsidiaries whose functional currency is different from the presentation currency of the Consolidated Financial Statements. Additionally, exchange differences between accounts receivable kept by the companies in Chile with foreign subsidiaries are presented in this account, which have been treated as investment equivalents accounted for using the equity method. Translation reserves are detailed as follows:

 

Details

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Brazil

 

(121,285,357

)

(90,156,924

)

Argentina(*)

 

(189,210,661

)

(128,348,112

)

Paraguay

 

(685,309

)

(4,862,332

)

Exchange rate differences in related companies

 

(17,899,117

)

(13,710,204

)

Total

 

(329,080,444

)

(237,077,572

)

 

The movement of this reserve for the fiscal years ended September 30, 2018 and December 31, 2017, is detailed as follows:

 

Details

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Brazil

 

(36,390,544

)

(32.963.533

)

Argentina

 

(59,789,351

)

(19.961.899

)

Paraguay

 

4,177,023

 

(15.407.785

)

Total

 

(92,002,872

)

(68,333,217

)

 

19.4           Non-controlling interests

 

This is the recognition of the portion of equity and income from subsidiaries owned by third parties. As of September 30, 2018 and December 31, 2017, this account is detailed as follows:

 

 

 

Non-controlling Interests

 

 

 

Ownership %

 

Shareholders’ Equity

 

Income

 

 Details

 

2018

 

2017

 

September
2018

 

December
2017

 

September
2018

 

December
2017

 

 

 

 

 

 

 

ThCh$

 

ThCh$

 

ThCh $

 

ThCh $

 

Embotelladora del Atlántico S.A.

 

0.0171

 

0.0171

 

18,369

 

13,765

 

1,749

 

5,590

 

Andina Empaques Argentina S.A.

 

0.0209

 

0.0209

 

1,901

 

2,213

 

22

 

711

 

Paraguay Refrescos S.A.

 

2.1697

 

2.1697

 

5,082,718

 

5,045,792

 

401,037

 

502,945

 

Vital S.A.

 

35.0000

 

35.0000

 

7,661,055

 

9,261,108

 

172,871

 

283,327

 

Vital Aguas S.A.

 

33.5000

 

33.5000

 

1,856,896

 

2,117,098

 

(92,719

)

151,647

 

Envases Central S.A.

 

40.7300

 

40.7300

 

5,348,018

 

5,483,317

 

(205,322

)

220,715

 

Total

 

 

 

 

 

19,968,957

 

21,923,293

 

277,638

 

1,164,935

 

 

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19.5           Earnings per share

 

The basic earnings per share presented in the statement of comprehensive income is calculated as the quotient between income for the period and the average number of shares outstanding during the same period.

 

Earnings per share used to calculate basic and diluted earnings per share is detailed as follows:

 

 

 

09.30.2018

 

Earnings per share

 

SERIES A

 

SERIES B

 

TOTAL

 

Earnings attributable to shareholders (ThCh$)

 

24,897,207

 

27,386,485

 

52,283,692

 

Average weighted number of shares

 

473,289,301

 

473,281,303

 

946,570,604

 

Earnings per basic and diluted share (in Chilean pesos)

 

52.60

 

57.87

 

55.23

 

 

 

 

09.30.2017

 

Earnings per share

 

SERIES A

 

SERIES B

 

TOTAL

 

Earnings attributable to shareholders (ThCh$)

 

35,108,445

 

38,618,666

 

73,727,111

 

Average weighted number of shares

 

473,289,301

 

473,281,303

 

946,570,604

 

Earnings per basic and diluted share (in Chilean pesos)

 

74.18

 

81.60

 

77.89

 

 

NOTE 20 —   DERIVATIVE ASSETS AND LIABILITIES

 

Embotelladora Andina currently maintains “Cross Currency Swaps” and “Currency Forward” agreements as Derivative Financial Assets.

 

Cross Currency Swaps, also known as interest rate and currency swaps, are valued by the method of discounted future cash flows at a rate corresponding to the risk of the operation. The basis of the information used in the calculations is obtained in the market by using the Bloomberg terminal. Currently Embotelladora Andina maintains Cross Currency Swap for UF/USD and BRL/USD, for which it is necessary to discount future cash flows in UFs, in Brazilian Reais and in U.S. Dollars. For this calculation, the Company uses as discount curves, the UF Zero-Coupon, the Brazilian Real Zero-Coupon and the U.S. Dollar Zero-Coupon.

 

On the other hand, the fair value of forward currency contracts is calculated in reference to current forward exchange rates for contracts with similar maturity profiles. To perform the above calculation, the Company uses market information available on the Bloomberg terminal.

 

As of the closing dates as of September 30, 2018 and December 31, 2017, the Company held the following derivative instruments:

 

20.1     Derivatives accounted for as cash flow hedges:

 

a)     Cross Currency Swaps associated with US Bonds

 

At September 30, 2018, the Company entered into cross currency swap derivative contracts to convert US Dollar public bond obligations of US$570 million into UF and Real liabilities to hedge the Company’s exposure to variations in foreign exchange rates. Said contracts are valued at their value and the net value to be received as of September 30, 2018 amounted to ThCh$96,889,821. These swap contracts have the same terms of the underlying bond obligation and expire in 2023.  Additionally, the fair value of these derivatives

 

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which is lower than the hedged items amounted to ThCh$9,829,807 and has been recognized within other equity reserves as of September 30, 2018. The ineffective portion for ThCh$2,631,299 in losses associated with this hedge was recorded in other gains and losses as of September 30, 2018.

 

The amount of exchange differences recognized in the statement of income related to financial liabilities in U.S. dollars and the identified effective portion that was absorbed by the amounts recognized under comprehensive income amounted to ThCh$30,124,439 as of  September 30, 2018.

 

20.2. Forward currency transactions expected to be very likely:

 

During 2018 and 2017, the Company entered into foreign currency forward contracts to hedge its exposure to expected future raw materials purchases in US Dollars during these years. The total amount of outstanding forward contracts was US$61.9 million as of September 30, 2018 (US$62.8 million as of December 31, 2017). These agreements were recorded at fair value, resulting in net earnings due to hedge recycling of ThCh$6,532,168 for the period ended September 30, 2018, and a hedge asset of ThCh$4,036,743.

 

Contracts that ensure future flows of foreign currency have been designated as hedge agreements, as of September  30, 2018 with a pending amounted to be recycled to income in the amount of ThCh$2,770,549.

 

Futures contracts that ensure prices of future raw materials have not been designated as hedge agreements, since they do not fulfill IFRS documentation requirements, whereby its effects on variations in fair value are accounted for directly under statements of income in the “other gains and losses” account.

 

Fair value hierarchy

 

As of  September 30, 2018, the Company had total assets related to its foreign exchange derivative contracts for ThCh$100,926,564 (ThCh$62,367,852  as of December 31, 2017), as of September 30, 2018 no liabilities have been recorded in regard to foreign currency derivative contracts (ThCh$445,278  as of December 31, 2017). Those contracts covering existing items have been classified in the same category of hedged, the net amount of derivative contracts by concepts covering forecasted items have been classified in financial assets and financial liabilities. All the derivative contracts are carried at fair value in the consolidated statement of financial position. The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

 

Level 1:  quoted (unadjusted) prices in active markets for identical assets or liabilities

Level 2:  Inputs other than quoted prices included in level 1 that are observable for the assets and liabilities, either directly (that is, as prices) or indirectly (that is, derived from prices)

Level 3:  Inputs for assets and liabilities that are not based on observable market data.

 

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During the reporting period, there were no transfers of items between fair value measurement categories; all of which were valued during the period using level 2.

 

 

 

Fair Value Measurements at September 30, 2018

 

 

 

 

 

Quoted prices in
active markets
for identical assets or
liabilities

 

Observable
market data

 

Unobservable
market data

 

 

 

 

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Total

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Assets

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Other current financial assets

 

 

 

 

 

 

 

 

 

Current financial assets

 

 

4,036,743

 

 

 

4,036,743

 

Other non-current financial assets

 

 

96,889,821

 

 

96,889,821

 

Total assets

 

 

100,926,564

 

 

100,926,564

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Other current financial liabilities

 

 

 

 

 

Total liabilities

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2017

 

 

 

 

 

Quoted prices in
active markets
for identical assets or
liabilities

 

Observable
market data

 

Unobservable
market data

 

 

 

 

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Total

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Assets

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Other current financial assets

 

 

469,019

 

 

469,019

 

Other non-current financial assets

 

 

61,898,833

 

 

61,898,833

 

Total assets

 

 

62,367,852

 

 

62,367,852

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Other current financial liabilities

 

 

445,278

 

 

445,278

 

Total liabilities

 

 

445,278

 

 

445,278

 

 

NOTE 21 —   CONTINGENCIES AND COMMITMENTS

 

21.1                       Lawsuits and other legal actions:

 

In the opinion of the Company’s legal counsel, the Parent Company and its subsidiaries do not face judicial or extra-judicial contingencies that might result in material or significant losses or gains, except for the following:

 

1)   Embotelladora del Atlántico S.A. faces labor, tax, civil and trade lawsuits. Accounting provisions have been made for the contingency of a probable loss because of these lawsuits, totaling ThCh$792,547. Management considers it unlikely that non-provisioned contingencies will affect the Company’s income and equity, based on the opinion of its legal counsel.  Additionally, Embotelladora del Atlántico S.A. maintains time deposits for an amount of ThCh$545,471 to guaranty judicial liabilities

 

2)   Rio de Janeiro Refrescos Ltda. faces labor, tax, civil and trade lawsuits. Accounting provisions have been made for the contingency of a probable loss because of these lawsuits, totaling ThCh$21,045,069 Management considers it unlikely that non-provisioned contingencies will affect the Company’s income and equity, based on the opinion of its legal counsel. As it is customary in Brazil, Rio de Janeiro Refrescos Ltda. maintains judicial deposits and assets given in pledge to secure the compliance of certain processes,

 

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irrespective of whether these have been classified as a possible, probable or remote. The amounts deposited or pledged as legal guarantees as of September 30, 2018 and December 31, 2017, amounted to ThCh$28,848,737 and ThCh$31,953,725 respectively.

 

To ensure fulfillment of the obligations arising from judicial proceedings faced in Brazil, Rio de Janeiro Refrescos Ltda., has taken guarantee insurance and guarantee letters amounting to R$820,181,404 with different financial institutions and insurance companies in Brazil, through which these entities after a 0.28% commission, become responsible of fulfilling obligations with the Brazilian tax authorities should any trial result against Rio de Janeiro Refrescos Ltda.  Additionally, if the warranty and bail letters are executed, Rio de Janeiro Refrescos Ltda. promises to reimburse to the financial institutions and Insurance Companies any amounts disbursed by them to the Brazilian government.

 

Main contingencies faced by Rio de Janeiro Refrescos are as follows:

 

a)             Tax contingencies resulting from credits on tax on industrialized products (IPI).

 

Rio de Janeiro Refrescos is a party to a series of proceedings under way, in which the Brazilian federal tax authorities demand payment of value-added tax on industrialized products (Imposto sobre Produtos Industrializados, or IPI) allegedly owed by ex-Companhia de Bebidas Ipiranga. The initial amount demanded reached R$1,330,473,161 (historical amount without adjustments), corresponding to different trials related to the same cause. In September 2014, one of these trials for R$598,745,218, was settled in favor of the Company, and additionally during 2017 several trials were settled in favor of the Company in the amount for R$135,282,155 however, there are new lawsuits arising after the purchase of ex-Companhia de Bebidas Ipiranga (October 2013) that amount to R$759,192,465.

 

The Company rejects the position of the Brazilian tax authority in these procedures and considers that Companhia de Bebidas Ipiranga was entitled to claim IPI tax credits in connection with purchases of certain exempt raw materials from suppliers located in the Manaus free trade zone.

 

Based on the opinion of its advisers, and judicial outcomes to date, Management estimates that these procedures do not represent probable losses and has not recorded a provision on these matters.

 

Notwithstanding the above, the IFRS related to business combination in terms of distribution of the purchase price establish that contingencies must be measured one by one according to their probability of occurrence and discounted at fair value from the date on which it is deemed the loss can be generated. According to this criterion, from a total of identified contingencies amounting R$1,100,235,116 (including readjustments of current lawsuits), the Company recorded a provision for the beginning of business combination accounting in the amount R$201,897,968 equivalent to ThCh$33,301,895.

 

b)             Tax contingencies on ICMS and IPI causes.

 

They refer mainly to tax settlements issued by advance appropriation of ICMS credits on fixed assets, payment of the replacement of ICMS tax to the operations, untimely IPI credits calculated on bonuses, among other claims.

 

The Company does not consider that these judgments will result in significant losses, given that their loss, according to its legal counsel, is considered unlikely. However, the accounting standards of financial information related to business combination in terms of distribution of the purchase price, establish contingencies must be valued one by one according to their probability of occurrence and discounted to fair value from the date on which it is deemed that the loss can be generated. According to this criterion, an

 

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initial provision has been made in the business combination accounting for an amount of R$50,561,477 equivalent to ThCh$ 8,339,821.

 

3)   Embotelladora Andina S.A. and its Chilean subsidiaries face labor, tax, civil and trade lawsuits. Accounting provisions have been made for the contingency of a probable loss because of these lawsuits, totaling ThCh$7,283,400. Management considers it is unlikely that non-provisioned contingencies will affect income and equity of the Company, in the opinion of its legal advisors.

 

4)        Paraguay Refrescos S.A. faces tax, trade, labor and other lawsuits. Accounting provisions have been made for the contingency of any loss because of these lawsuits amounting to ThCh$81,981. Management considers it is unlikely that non-provisioned contingencies will affect income and equity of the Company, in the opinion of its legal advisors.

 

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21.2           Direct guarantees and restricted assets:

 

Guarantees and restricted assets are detailed as follows:

 

Guarantees that compromise assets including in the financial statements:

 

 

 

Provided by

 

 

 

Committed assets

 

 

 

Balance pending payment on the closing date
of the financial statements

 

Guarantee in favor of

 

Name

 

Relationship

 

Guarantee

 

Type

 

09.30.2018

 

12.31.2017

 

 

 

 

 

 

 

 

 

 

 

ThCh$

 

ThCh$

 

Industria Metalúrgica Inamar Ltda.

 

Embotelladora Andina S.A.

 

Parent Company

 

Land

 

Property, plant and equipment

 

17,991,202

 

17,991,202

 

Gas Licuado Lipigas S.A

 

Embotelladora Andina S.A.

 

Parent Company

 

Cash and cash equivalents

 

Trade and other receivables

 

1,140

 

1,140

 

Hospital Militar

 

Servicios Multivending

 

Subsidiary

 

Cash and cash equivalents

 

Trade and other receivables

 

 

4,727

 

Parque Arauco

 

Servicios Multivending

 

Subsidiary

 

Cash and cash equivalents

 

Trade and other receivables

 

 

5,345

 

Aeropuerto Nuevo Pudahuel

 

Servicios Multivending

 

Subsidiary

 

Cash and cash equivalents

 

Other receivables

 

 

10,129

 

Hospital FACH

 

Servicios Multivending

 

Subsidiary

 

Cash and cash equivalents

 

Other receivables

 

 

697

 

Inmob. E Invers. Supetar Ltda

 

Transportes Polar S.A.

 

Subsidiary

 

Cash and cash equivalents

 

Other non-current, non-financial assets

 

4,579

 

4,579

 

Bodegas San Francisco Ltda.

 

Transportes Polar S.A.

 

Subsidiary

 

Cash and cash equivalents

 

Other non-current, non-financial assets

 

 

6,483

 

Maria Lobos Jamet

 

Transportes Polar S.A.

 

Subsidiary

 

Cash and cash equivalents

 

Trade and other receivables

 

2,265

 

2,565

 

Reclamaciones Trabajadores

 

Rio de Janeiro Refrescos Ltda.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

5,110,301

 

4,626,086

 

Reclamaciones Civiles Y Tributarias

 

Rio de Janeiro Refrescos Ltda.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

11,575,123

 

13,104,186

 

Instituciones Gubernamentales

 

Rio de Janeiro Refrescos Ltda.

 

Subsidiary

 

Property, plant and equipment

 

Property, plant and equipment

 

12,163,314

 

14,223,453

 

Distribuidora Baraldo S.H.

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

320

 

659

 

Acuña Gomez

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

480

 

989

 

Nicanor López

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

343

 

707

 

Labarda

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

6

 

12

 

Municipalidad Bariloche

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

18,609

 

38,315

 

Municipalidad San Antonio Oeste

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

35,342

 

72,768

 

Municipalidad Carlos Casares

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

1,429

 

2,943

 

Municipalidad Chivilcoy

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

221,037

 

455,104

 

Others

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

68

 

140

 

Granada Maximiliano

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

2,882

 

5,934

 

Cicsa

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other current, non-financial assets

 

4,006

 

8,249

 

Locadores Varios

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other current, non-financial assets

 

49,748

 

53,900

 

Aduana De EZEIZA

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other current, non-financial assets

 

3,209

 

6,608

 

Municipalidad De Junin

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

1,383

 

5,755

 

Almada Jorge

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

4,300

 

8,853

 

Municipalidad De Picun Leufu

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

62

 

128

 

Migoni Marano

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

97

 

 

Farias Matias Luis

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

921

 

1,226

 

Temas Industriales SA - Embargo General de Fondos

 

Embotelladora del Atlántico S.A.

 

Subsidiaria

 

Judicial deposit

 

Other non-current, non-financial assets

 

200,749

 

 

 

Gomez Alejandra Raquel

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

30

 

62

 

Lopez Gustavo Gerardo C/Inti Saic Y Otros

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Judicial deposit

 

Other non-current, non-financial assets

 

196

 

403

 

Fondo Fima Ahorro Plus C

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Cash and cash equivalents

 

Other current, financial assets

 

 

519

 

Tribunal Superior De Justicia De La Provincia De Córdoba

 

Embotelladora del Atlántico S.A.

 

Subsidiaria

 

Judicial deposit

 

Other non-current, non-financial assets

 

252

 

 

Marcus A.Peña

 

Paraguay Refrescos

 

Subsidiary

 

Building

 

Property, plant and equipment

 

3,962

 

3,782

 

Mauricio J Cordero C

 

Paraguay Refrescos

 

Subsidiary

 

Building

 

Property, plant and equipment

 

859

 

800

 

José Ruoti Maltese

 

Paraguay Refrescos

 

Subsidiary

 

Building

 

Property, plant and equipment

 

728

 

715

 

Alejandro Galeano

 

Paraguay Refrescos

 

Subsidiary

 

Building

 

Property, plant and equipment

 

1,189

 

1,107

 

Ana Maria Mazó

 

Paraguay Refrescos

 

Subsidiary

 

Building

 

Property, plant and equipment

 

1,132

 

1,054

 

Total

 

 

 

 

 

 

 

 

 

47,401,263

 

50,651,324

 

 

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Guarantees provided without obligation of assets included in the financial statements:

 

 

 

Provided by

 

 

 

Committed assets

 

 

 

Amounts involved

 

Warranty creditor

 

Name

 

Relationship

 

Guarantee

 

Type

 

09.30.2018

 

12.31.2017

 

 

 

 

 

 

 

 

 

 

 

ThCh$

 

ThCh$

 

Importadora Casa y Regalos

 

Trans-Heca S.A.

 

Subsidiary

 

Guarantee insurance

 

Compliance lease contract

 

 

2,050

 

Inmobiliaria e Inversiones Gestion Activa Ltda

 

Trans-Heca S.A.

 

Subsidiary

 

Guarantee insurance

 

Compliance lease contract

 

 

4,585

 

Inmobiliaria Portofino

 

Red de Transportes comerciales Ltda.

 

Subsidiary

 

Guarantee insurance

 

Guarantee bond

 

 

900

 

Teléfonica Chile S.A.

 

Red de Transportes comerciales Ltda.

 

Subsidiary

 

Guarantee insurance

 

Guarantee bond

 

 

1,000

 

Inmobiliaria San Martin Logista S.A

 

Red de Transportes comerciales Ltda.

 

Subsidiary

 

Guarantee insurance

 

Guarantee bond

 

 

3,461

 

Procesos trabajadores

 

Rio de Janeiro Refrescos Ltda.

 

Subsidiary

 

Guarantee insurance

 

Judicial action

 

1,481,199

 

1,496,862

 

Procesos administrativos

 

Rio de Janeiro Refrescos Ltda.

 

Subsidiary

 

Guarantee insurance

 

Judicial action

 

6,084,791

 

7,185,511

 

Gobierno Federal

 

Rio de Janeiro Refrescos Ltda.

 

Subsidiary

 

Guarantee insurance

 

Judicial action

 

105,382,836

 

91,903,312

 

Gobierno Estadual

 

Rio de Janeiro Refrescos Ltda.

 

Subsidiary

 

Guarantee insurance

 

Judicial action

 

16,957,416

 

20,527,817

 

HSBC

 

Sorocaba Refrescos S.A.

 

Associate

 

Loan

 

co-signers

 

3,298,884

 

3,716,747

 

Otros

 

Rio de Janeiro Refrescos Ltda.

 

Subsidiary

 

Guarantee insurance

 

Judicial action

 

2,079,121

 

2,449,103

 

Aduana de Ezeiza

 

Embotelladora del Atlántico S.A.

 

Subsidiary

 

Bond insurance

 

Faithful fulfillment of contract

 

607,694

 

63,777

 

Aduana de Ezeiza

 

Andina Empaques S.A.

 

Subsidiary

 

Bond insurance

 

Faithful fulfillment of contract

 

260,114

 

347,990

 

 

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NOTE 22 — FINANCIAL RISK MANAGEMENT

 

The Company’s businesses are exposed to a variety of financial and market risks (including foreign exchange risk, interest rate risk and price risk). The Company’s global risk management program focuses on the uncertainty of financial markets and seeks to minimize potential adverse effects on the performance of the Company. The Company uses derivatives to hedge certain risks. A description of the primary policies established by the Company to manage financial risks are provided below:

 

Interest Rate Risk

 

As of September 30, 2018, the Company maintains all of its debt liabilities at a fixed rate as to avoid fluctuations in financial expenses resulting from tax rate increases.

 

The Company’s greatest indebtedness corresponds to own issued Chilean local bonds at a fixed rate in the amount of UF 11,228 million denominated in UF (“UF”), a currency indexed to inflation in Chile (the Company’s sales are correlated with the UF variation).

 

There is also the Company’s indebtedness on the international market through a 144A/RegS Bond at a fixed rate for US$575 million, denominated in dollars, and practically 100% of which has been re-denominated to UF and BRL through Cross Currency Swaps.

 

Credit risk

 

The credit risk to which the Company is exposed comes mainly from trade accounts receivable maintained with retailers, wholesalers and supermarket chains in domestic markets; and the financial investments held with banks and financial institutions, such as time deposits, mutual funds and derivative financial instruments.

 

a.              Trade accounts receivable and other current accounts receivable

 

Credit risk related to trade accounts receivable is managed and monitored by the area of Finance and Administration of each business unit. The Company has a wide base of more than 100 thousand clients implying a high level of atomization of accounts receivable, which are subject to policies, procedures and controls established by the Company. In accordance with such policies, credits must be based objectively, non-discretionary and uniformly granted to all clients of a same segment and channel, provided these will allow generating economic benefits to the Company. The credit limit is checked periodically considering payment behavior. Trade accounts receivable pending of payment are monitored on a monthly basis.

 

i.                                          Sale Interruption:

 

In accordance with Corporate Credit Policy, the interruption of sale must be within the following framework: when a customer has outstanding debts for an amount greater than US$ 250,000, and over 60 days expired, sale is suspended.  The General Manager in conjunction with the Finance and Administration Manager authorize exceptions to this rule, and if the outstanding debt should exceed US$1,000,000, and in order to continue operating with that client, the authorization of the Chief Financial Officer is required. Notwithstanding the foregoing, each operation can define an amount lower than US$250,000 according to the country’s reality.

 

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ii.                                       Impairment

 

The impairment recognition policy establishes the following criteria for provisions: 30% is provisioned for 31 to 60 days overdue, 60%between 60 and 91 days, 90%between 91 and 120 days overdue and 100% for more than 120 days.  Exemption of the calculation of global impairment is given to credits whose delays in the payment correspond to accounts disputed with the customer whose nature is known and where all necessary documentation for collection is available, therefore, there is no uncertainty on recovering them. However, these accounts also have an impairment provision as follows: 40% for 91 to 120 days overdue, 80% between 120 and 170, and 100% for more than 170 days.

 

iii.                                    Prepayment to suppliers

 

The Policy establishes that US$25,000 prepayments can only be granted to suppliers if its value is properly and fully provisioned.  The Treasurer of each subsidiary must approve supplier warranties that the Company receives for prepayments before signing the respective service contract. In the case of domestic suppliers, a warranty ballot (or the instrument existing in the country) shall be required, in favor of Andina executable in the respective country, non-endorsable, payable on demand or upon presentation and its validity will depend on the term of the contract. In the case of foreign suppliers, a stand-by credit letter will be required which shall be issued by a first line bank; in the event that this document is not issued in the country where the transaction is done, a direct bank warranty will be required.  Subsidiaries can define the best way of safeguarding the Company’s assets for prepayments under US$25,000.

 

iv.                                   Guarantees

 

In the case of Chile, we have insurance with Compañía de Seguros de Crédito Continental S.A.  (AA rating —according to Fitch Chile and Humphreys rating agencies) covering the credit risk regarding trade debtors in Chile for 86% both for the existing as well as the expired debt, total amount of the trade debtors in Chile reached ThCh$54,528,905 . A provision of ThCh$1,269,861 has been made for the portion of past due outstanding debt portfolio not covered by the insurance.

 

The rest of the operations do not have credit insurance, instead mortgage guarantees are required for volume operations of wholesalers and distributors in the case of trade accounts receivables. In the case of other debtors, different types of guarantees are required according to the nature of the credit granted.

 

Historically, uncollectible trade accounts have been lower than 0.5% of the Company’s total sales.

 

b.         Financial investments

 

The Company has a Policy that is applicable to all of the companies of the group in order to cover credit risks for financial investments, restricting both the types of instruments as well as the institutions and degree of concentration.  The companies of the group can invest in:

 

a.              Time deposits: only in banks or financial institutions that have a risk rating equal or higher than Level 1  (Fitch) or equivalent for deposits of less than 1 year and rated A (S&P) or equivalent for deposits of more than 1 year.

 

b.              Mutual funds: investments with immediate liquidity and no risk of capital (funds composed of investments at a fixed-term, current account, fixed rate Tit BCRA, negotiable obligations, Over Night, etc.) in all those counter-parties that have a rating greater than or equal to AA-(S&P) or equivalent, Type 1 Pacts and Mutual Funds, with AA+ rating (S&P) or equivalent.

 

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c.               Other investment alternatives must be evaluated and authorized by the office of the Chief Financial Officer.

 

Exchange Rate Risk

 

The company is exposed to three types of risk caused by exchange rate volatility:

 

a)   Exposure of foreign investment

 

This risk originates from the translation of net investment from the functional currency of each country (Brazilian Real, Paraguayan Guaraní, and Argentine Peso) to the Parent Company’s reporting currency (Chilean Peso). Appreciation or devaluation of the Chilean Peso with respect to each of the functional currencies of each country, originates decreases and increases in equity, respectively. The Company does not hedge this risk.

 

a.1 Investment in Argentina

 

As of September 30, 2018, the Company maintains a net investment of ThCh$111,905,210 in Argentina, composed by the recognition of assets amounting to ThCh$176,717,338 and liabilities amounting to Ch$64,812,128. These investments accounted for 20.5% of the Company’s consolidated sales revenues

 

As of September 30, 2018, the Argentine peso devalued by 51.4% with respect to the Chilean peso.

 

If the exchange rate of the Argentine Peso appreciated an additional  5% with respect to the Chilean Peso, the Company would have higher income from the operation in Argentina of ThCh$523,672 and an increase in equity of ThCh$2,108,029, originated by higher asset recognition of ThCh$4,717,031 and by higher liabilities recognition of ThCh$2,609,002.

 

a.2 Investment in Brazil

 

As of September 30, 2018, the Company maintains a net investment of ThCh$241,132,507 in Brazil, composed by the recognition of assets amounting to ThCh$728,336,138 and liabilities amounting to ThCh$487,203,631. These investments accounted for 33.9% of the Company’s consolidated sales revenues.

 

As of September 30, 2018, the Brazilian Real devalued by 11.2% with respect to the Chilean peso.

 

If the exchange rate of the Brazilian Real appreciated an additional 5% with respect to the Chilean Peso, the Company would have higher income from the operation in Brazil of ThCh$1,048,408 and an increase in equity of ThCh$11,878,014, originated by higher asset recognition of ThCh$35,341,927 and by higher liabilities recognition of ThCh$ 23,463,913 .

 

a.3 Investment in Paraguay

 

As of September 30, 2018, the Company maintains a net investment of ThCh$234,254,878 in Paraguay, composed by the recognition of assets amounting to ThCh$269,803,084 and liabilities amounting to ThCh$35,548,206. These investments accounted for 9.5% of the Company’s consolidated sales revenues.

 

As of September 30. 2018, the Paraguayan Guarani appreciated by 1,9% with respect to the Chilean peso.

 

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If the exchange rate of the Paraguayan Guaraní devalued by 5% with respect to the Chilean Peso, the Company would have lower income from the operations in Paraguay of ThCh$880,149 and a decrease in equity of ThCh$11,281,326 originated by lower asset recognition of ThCh$12,840,710 and lower liabilities recognition of ThCh$1,559,384.

 

b)   Net exposure of assets and liabilities in foreign currency

 

This risk stems mostly from carrying liabilities in US dollar, so the volatility of the US dollar with respect to the functional currency of each country generates a variation in the valuation of these obligations, with consequent effect on results.

 

As of September 30, 2018 , the Company maintains a net liability position totaling ThCh$364,159,926, basically composed of bonds payable for ThCh$379,741,500 offset partially by financial assets denominated in dollars for ThCh$15,581,574.

 

All U.S. Dollar liabilities amounting to ThCh$379,741,500 correspond to dollar liabilities of the Chilean and Brazilian operations and are, therefore, exposed to the volatility of the Chilean peso against the U.S. Dollar.

 

In order to protect the Company from the effects on income resulting from the volatility of the Brazilian Real and the Chilean Peso against the U.S. dollar, the Company maintains derivative contracts (cross currency swaps) to cover almost 100% of US dollar-denominated financial liabilities.

 

By designating such contracts as hedging derivatives, the effects on income for variations in the Chilean Peso and the Brazilian Real against the US dollar, are mitigated annulling its exposure to exchange rates.

 

The Company’s net exposure as of September 30, 2018 , to foreign currency over existing assets and liabilities, discounting the derivatives contracts, is an asset position of ThCh$12,279,474.

 

c) Assets purchased or indexed to foreign currency exposure

 

This risk originates from purchases of raw materials and investments in Property, plant and equipment, whose values are expressed in a currency other than the functional currency of the subsidiary. Changes in the value of costs or investments can be generated through time, depending on the volatility of the exchange rate.

 

Annual purchases of raw materials denominated or indexed in U.S. dollars, amounts to 19% of our cost of sales or approximately US$340 million.

 

In order to minimize this risk, the Company maintains a currency hedging policy stipulating that it is necessary to enter into foreign currency derivatives contracts to lessen the effect of the exchange rate over cash expenditures expressed in US dollars, corresponding mainly to payment to suppliers of raw materials in each of the operations.  This policy stipulates a 12-month forward horizon.  As of September 30, 2018, US$61.9 million for future purchases have been hedged-for the following 12 months.

 

According to the percentage of purchases of raw materials which are carried out or indexed to U.S. dollars, a possible change in the value of the US dollar by 5% in the four countries where the Company operates, and excluding derivatives contracts taken to mitigate the effect of currency volatility, keeping everything constant,

 

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would lead to a lower accumulated result amounting to ThCh$3,979,724 as of September 30, 2018. Currently, the Company has contracts to hedge this effect in Chile, Argentina, Paraguay and Brazil.

 

Commodities risk

 

The Company is subject to a risk of price fluctuations in the international markets mainly for sugar, aluminum and PET resin, which are inputs required to produce beverages and, as a whole, account for 35% to 40% of operating costs. Procurement and anticipated purchase contracts are made frequently to minimize and/or stabilize this risk. The possible effects in these Consolidated Financial Statements, in case of a 5% increase in prices of its main raw materials, would be a reduction of ThCh$5,155,932  in earnings for the period ended September 30, 2018 . To minimize this risk or stabilize often supply contracts and anticipated purchases are made when market conditions warrant.

 

Liquidity risk

 

The products we sell are mainly paid for in cash and short-term credit; therefore, the Company´s main source of financing comes from the cash flow of our operations. This cash flow has historically been sufficient to cover the investments necessary for the normal course of our business, as well as the distribution of dividends approved by the General Shareholders’ Meeting. Should additional funding be required for future geographic expansion or other needs, the main sources of financing to consider are: (i) debt offerings in the Chilean and foreign capital markets (ii) borrowings from commercial banks, both internationally and in the local markets where the Company operates; and (iii) public equity offerings

 

The following table presents an analysis of the Company’s committed maturities for liability payments throughout the coming years:

 

 

 

Maturity

 

Item

 

1 year

 

More than 1
year up to 2

 

More than 2
years up to 3

 

More than 3
up to 4

 

More than 4
years

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Bank debt

 

1,973,053

 

18,769,459

 

1,509,080

 

763,091

 

114,397

 

Bond payable

 

44,889,949

 

44,652,638

 

41,328,914

 

41,181,154

 

754,773,632

 

Operating lease obligations

 

6,700,212

 

9,328,976

 

8,823,707

 

8,752,825

 

22,881,195

 

Purchase obligations

 

17,138,843

 

1,950,915

 

312,418

 

220,687

 

221,487

 

Total

 

70,702,057

 

74,701,988

 

51,974,119

 

50,917,757

 

777,990,711

 

 

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NOTE 23 — EXPENSES BY NATURE

 

Other expenses by nature are:

 

 

 

01.01.2018

 

01.01.2017

 

07.01.2018

 

07.01.2017

 

Details

 

09.30.2018

 

09.30.2017

 

09.30.2018

 

09.30.2017

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Direct production costs

 

569,057,604

 

586,629,457

 

176,508,677

 

186,006,113

 

Payroll and employee benefits

 

179,419,409

 

223,394,942

 

57,408,464

 

73,821,930

 

Transportation and distribution

 

58,167,449

 

132,595,209

 

29,532,153

 

59,224,483

 

Marketing

 

15,562,506

 

24,322,322

 

3,802,530

 

5,829,485

 

Depreciation and amortization

 

70,505,744

 

74,828,261

 

23,956,547

 

24,507,916

 

Repairs and maintenance

 

14,137,075

 

25,562,521

 

5,973,698

 

9,257,223

 

Other expenses

 

75,078,877

 

100,616,183

 

12,922,531

 

15,399,003

 

Total

 

981,928,664

 

1,167,948,895

 

310,104,600

 

374,046,153

 

 


(1) Corresponds to the addition of cost of sales, administration expenses and distribution cost.

 

NOTE 24 — OTHER INCOME

 

Other income by function is detailed as follows:

 

 

 

01.01.2018

 

01.01.2017

 

07.01.2018

 

07.01.2017

 

Details

 

09.30.2018

 

09.30.2017

 

09.30.2018

 

09.30.2017

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Gain on disposal of Property, plant and equipment

 

173,416

 

194,743

 

55,614

 

19,332

 

PIS/CONFINS Leasing tax recovery

 

 

37,955

 

 

 

Recovery AFIP claim

 

175,875

 

 

175,875

 

 

 

Others

 

249,769

 

221,932

 

132,871

 

47,270

 

Total

 

599,060

 

454,630

 

364,360

 

66,602

 

 

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NOTE 25 — OTHER EXPENSES

 

Other expenses are detailed as follows:

 

 

 

01.01.2018

 

01.01.2017

 

07.01.2018

 

07.01.2017

 

Detail

 

09.30.2018

 

09.30.2017

 

09.30.2018

 

09.30.2017

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Contingencies and Non-operating fees

 

8,249,454

 

6,455,767

 

2,101,139

 

1,038,460

 

Tax on bank debits

 

2,726,815

 

5,557,710

 

936,193

 

1,619,636

 

Disposal and write-off of Property, plant and equipment

 

1,099

 

231,910

 

 

167,456

 

Others

 

343,131

 

371,261

 

4,981

 

 

Total

 

11,320,499

 

12,616,648

 

3,042,313

 

2,825,552

 

 

NOTE 26 — FINANCIAL INCOME AND EXPENSES

 

Financial income and expenses are detailed as follows:

 

a)             Finance income

 

 

 

01.01.2018

 

01.01.2017

 

07.01.2018

 

07.01.2017

 

Detail

 

09.30.2018

 

09.30.2017

 

09.30.2018

 

09.30.2017

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Interest income

 

1,649,637

 

6,590,258

 

782,010

 

1,544,219

 

Other interest income

 

2,312,180

 

1,418,973

 

53,135

 

416,139

 

Total

 

3,961,817

 

8,009,231

 

835,145

 

1,960,358

 

 

b)             Finance expenses

 

 

 

01.01.2018

 

01.01.2017

 

07.01.2018

 

07.01.2017

 

Detail

 

09.30.2018

 

09.30.2017

 

09.30.2018

 

09.30.2017

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Bond interest

 

28,714,093

 

31,921,325

 

9,359,363

 

10,540,078

 

Bank loan interest

 

1,395,973

 

4,573,253

 

48,296

 

1,529,073

 

Other interest costs

 

3,784,626

 

4,276,731

 

1,330,880

 

1,454,016

 

Total

 

33,894,692

 

40,771,309

 

10,738,539

 

13,523,167

 

 

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NOTE 27 — OTHER (LOSSES) AND GAIN

 

Other (losses) and gains are detailed as follows:

 

 

 

01.01.2018

 

01.01.2017

 

07.01.2018

 

07.01.2017

 

Details

 

09.30.2018

 

09.30.2017

 

09.30.2018

 

09.30.2017

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

(Losses) gains on ineffective portion of hedge derivatives

 

(2,631,299

)

(2,268,472

)

(937,970

)

(780,242

)

Other income and (expenses)

 

56

 

(1,189

)

 

 

Total

 

(2,631,243

)

(2,269,661

)

(937,970

)

(780,242

)

 

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NOTE 28 — LOCAL AND FOREIGN CURRENCY

 

Local and foreign currency balances as of September 30, 2018 and December 31, 2017, are the following:

 

CURRENT ASSETS

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Cash and cash equivalents

 

73,709,086

 

136,242,116

 

US Dollars

 

15.581.569

 

6,973,298

 

Euros

 

51.360

 

17,245

 

Chilean pesos

 

43.683.564

 

80,985,719

 

Brazilian Real

 

6,744,993

 

21,779,408

 

Argentine Pesos

 

725,342

 

19,681,449

 

Paraguayan Guarani

 

6,922,258

 

6,804,997

 

 

 

 

 

 

 

Other financial assets

 

4,049,505

 

14,138,161

 

U.S. Dollars

 

 

 

Chilean pesos

 

230,389

 

 

Unidad de Fomento

 

 

13,647,997

 

Brazilian Real

 

1,149,781

 

366,595

 

Argentine Pesos

 

2,611,008

 

123,569

 

Paraguayan Guarani

 

58,327

 

 

 

 

 

 

 

 

Other non-financial assets

 

5,996,195

 

5,611,861

 

US Dollars

 

5,230

 

70,975

 

Unidad de Fomento

 

10,472

 

9,790

 

Chilean pesos

 

3,489,186

 

3,049,402

 

Brazilian Real

 

1,533,140

 

1,447,790

 

Argentine Pesos

 

529,188

 

632,428

 

Paraguayan Guarani

 

428,979

 

401,476

 

 

 

 

 

 

 

Trade and other accounts receivable, net

 

140,023,967

 

191,284,680

 

US Dollars

 

1,133,858

 

541,579

 

Euros

 

2,292

 

112,763

 

Unidad de Fomento

 

1,823,948

 

1,673,147

 

Chilean pesos

 

65,507,416

 

75,797,942

 

Brazilian Real

 

51,095,854

 

75,387,122

 

Argentine Pesos

 

15,649,836

 

30,870,192

 

Paraguayan Guarani

 

4,810,763

 

6,901,935

 

 

 

 

 

 

 

Accounts receivable from related companies

 

3,189,903

 

5,370,232

 

US Dollars

 

 

16,674

 

Chilean pesos

 

2,821,990

 

5,172,144

 

 Argentine Pesos

 

367,913

 

181,414

 

 

 

 

 

 

 

Inventory

 

140,373,740

 

131,363,000

 

US Dollars

 

1,637,198

 

3,046,600

 

Euros

 

253,015

 

262,204

 

Chilean pesos

 

49,505,813

 

39,750,597

 

Brazilian Real

 

35,011,024

 

33,834,631

 

Argentine Pesos

 

37,013,713

 

43,857,361

 

Paraguayan Guarani

 

16,952,977

 

10,611,607

 

 

 

 

 

 

 

Current tax assets

 

3,652,393

 

 

Chilean pesos

 

827,061

 

 

Brazilian Real 

 

2,825,332

 

 

 

 

 

 

 

 

Total Current Assets

 

370,994,789

 

484,010,050

 

US Dollars

 

18,357,855

 

10,649,126

 

Euros

 

306,667

 

392,212

 

Unidad de Fomento

 

1,834,420

 

15,330,934

 

Chilean pesos

 

166,065,419

 

204,755,804

 

Brazilian Real

 

98,360,124

 

132,815,546

 

Argentine Pesos

 

56,897,000

 

95,346,413

 

Paraguayan Guarani

 

29,173,304

 

24,720,015

 

 

91


Table of Contents

 

NON-CURRENT ASSETS

 

09.30.2018

 

12.31.2017

 

 

 

ThCh$

 

ThCh$

 

Other financial assets

 

102,072,916

 

74,259,085

 

Chilean pesos

 

1,164,143

 

2,212,688

 

Brazilian Real

 

95,725,679

 

63,531,839

 

Argentine Pesos

 

5,183,094

 

8,514,558

 

 

 

 

 

 

 

Other non-financial assets

 

36,679,947

 

47,394,345

 

US Dollars

 

 

 

Unidad de Fomento

 

307,591

 

 

Chilean pesos

 

57,222

 

395,857

 

Brazilian Real

 

34,161,542

 

45,334,405

 

Argentine Pesos

 

2,038,392

 

1,626,255

 

Paraguayan Guarani

 

115,200

 

37,828

 

 

 

 

 

 

 

Trade and other receivables

 

1,567,259

 

2,395,851

 

Unidad de Fomento

 

1,515,576

 

2,335,322

 

Argentine Pesos

 

1.072

 

2,193

 

Paraguayan Guarani

 

50.611

 

58,336

 

 

 

 

 

 

 

Accounts receivable from related parties

 

57,253

 

156,492

 

Chilean pesos

 

57,253

 

156,492

 

 

 

 

 

 

 

Investments accounted for under the equity method

 

83,447,110

 

86,809,069

 

Chilean pesos

 

35,727,662

 

33,789,538

 

Brazilian Real

 

47,719,448

 

53,019,531

 

 

 

 

 

 

 

Intangible assets other than goodwill

 

 

 

 

 

US Dollars

 

648,599,271

 

663,272,878

 

Chilean pesos

 

4,980,938

 

3,959,421

 

Brazilian Real

 

305,919,734

 

307,165,028

 

Argentine Pesos

 

167,966,668

 

188,401,129

 

Paraguayan Guarani

 

3,857,768

 

922,226

 

 

 

165,874,163

 

162,825,074

 

Goodwill

 

 

 

 

 

Chilean pesos

 

104,805,686

 

93,598,217

 

Brazilian Real

 

9,523,767

 

9,523,767

 

Argentine Pesos

 

66,288,252

 

72,488,336

 

Paraguayan Guarani

 

21,951,067

 

4,672,971

 

 

 

7,042,600

 

6,913,143

 

Property, plant and equipment

 

 

 

 

 

US Dollars

 

633,581,919

 

659,750,499

 

Euros

 

 

190,365

 

Chilean pesos

 

 

5,362,096

 

Brazilian Real

 

269,194,596

 

271,391,436

 

Argentine Pesos

 

218,114,425

 

240,781,729

 

Paraguayan Guarani

 

84,090,871

 

77,580,966

 

 

 

62,182,027

 

64,443,907

 

Deferred income tax assets

 

 

 

 

 

Argentine Pesos

 

1,454,107

 

3,212,981

 

 

 

1,454,107

 

3,212,981

 

 

 

 

 

 

 

Total Non-Current Assets

 

1,612,265,468

 

1,630,849,417

 

US Dollars

 

4,980,938

 

4,149,786

 

Euros

 

 

5,362,096

 

Unidad de Fomento

 

1,823,167

 

2,335,322

 

Chilean pesos

 

623,098,484

 

624,634,806

 

Brazilian Real

 

629,976,014

 

663,556,969

 

Argentine Pesos

 

117,122,264

 

96,532,150

 

Paraguayan Guarani

 

235,264,601

 

234,278,288

 

 

92


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As of September 30, 2018

 

As of December 31, 2017

 

CURRENT LIABILITIES

 

Until 90 days

 

More 90 days until 1
year

 

Total

 

Until 90 days

 

More 90 days until 1
year

 

Total

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Other financial liabilities

 

2,899,518

 

39,189,923

 

42,089,442

 

13,536,530

 

54,444,875

 

67,981,405

 

US Dollars

 

220,452

 

 

220,452

 

25,540

 

4,563,131

 

4,588,671

 

Unidad de Fomento

 

736,445

 

 

736,445

 

6,735,155

 

9,892,144

 

16,627,299

 

Chilean peso

 

 

25,152,987

 

25,152,987

 

 

10,342,404

 

10,342,404

 

Brazilian real

 

1,075,370

 

13,105,897

 

14,181,267

 

5,084,725

 

15,589,691

 

20,674,416

 

Argentine peso

 

867,251

 

 

867,251

 

1,691,110

 

13,185,694

 

14,876,804

 

Paraguayan Guaraní

 

 

931,040

 

931,040

 

 

871,811

 

871,811

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and other accounts payable

 

169,351,772

 

6,909,421

 

176,261,193

 

251,551,666

 

5,967,811

 

257,519,477

 

US Dollars

 

5,032,929

 

 

5,032,929

 

11,716,262

 

29,728

 

11,745,990

 

Euros

 

1,255,680

 

 

1,255,680

 

2,202,581

 

80,070

 

2,282,651

 

Unidad de Fomento

 

355,148

 

 

355,148

 

2,198,131

 

 

2,198,131

 

Chilean peso

 

73,618,730

 

6,825,443

 

80,444,173

 

82,576,800

 

5,823,291

 

88,400,091

 

Brazilian real

 

43,850,225

 

 

43,850,225

 

74,524,169

 

 

74,524,169

 

Argentine peso

 

35,778,829

 

71,276

 

35,850,105

 

69,859,508

 

52,403

 

69,911,911

 

Paraguayan Guaraní

 

9,460,231

 

12,702

 

9,472,933

 

8,472,550

 

(17,681

)

8,454,869

 

Other Currency

 

 

 

 

1,665

 

 

1,665

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and other accounts payable to related companies

 

25,710,018

 

207,634

 

25,917,652

 

33,728,629

 

232,808

 

33,961,437

 

Chilean peso

 

12,686,705

 

207,634

 

12,894,339

 

15,297,780

 

232,808

 

15,530,588

 

Brazilian real

 

13,023,313

 

 

13,023,313

 

18,430,849

 

 

18,430,849

 

Argentine peso

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions

 

1,839,317

 

526,064

 

2,365,381

 

2,616,340

 

60,078

 

2,676,418

 

Chilean peso

 

1,839,317

 

444,082

 

2,283,399

 

2,616,340

 

 

2,616,340

 

Paraguayan Guaraní

 

 

81,982

 

81,982

 

 

60,078

 

60,078

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes payable

 

 

 

 

543,874

 

2,641,091

 

3,184,965

 

Chilean peso

 

1,343,400

 

2,447,909

 

3,791,309

 

184,406

 

 

184,406

 

Brazilian real

 

1,343,400

 

 

1,343,400

 

359,468

 

359,468

 

718,936

 

Argentine peso

 

 

1,948,206

 

1,948,206

 

 

2,155,680

 

2,155,680

 

Paraguayan Guaraní

 

 

499,703

 

499,703

 

 

125,943

 

125,943

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee benefits current provisions

 

4,647,576

 

19,171,629

 

23,819,205

 

 

35,955,643

 

35,955,643

 

Chilean peso

 

4,647,576

 

782,990

 

5,430,566

 

 

6,365,543

 

6,365,543

 

Brazilian real

 

 

11,653,379

 

11,653,379

 

 

16,412,363

 

16,412,363

 

Argentine peso

 

 

5,980,345

 

5,980,345

 

 

12,371,827

 

12,371,827

 

Paraguayan Guaraní

 

 

754,915

 

754,915

 

 

805,910

 

805,910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other non-financial liabilities

 

345,509

 

24,677,847

 

25,023,356

 

648,171

 

26,359,806

 

27,007,977

 

Chilean peso

 

257,179

 

24,467,650

 

24,724,829

 

190,529

 

26,111,396

 

26,301,925

 

Brazilian real

 

 

 

 

 

 

 

Argentine peso

 

88,330

 

 

88,330

 

457,642

 

 

457,642

 

Paraguayan Guaraní

 

 

210,197

 

210,197

 

 

248,410

 

248,410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

206,137,110

 

93,130,428

 

299,267,538

 

302,625,210

 

125,662,112

 

428,287,322

 

US Dollars

 

5,253,381

 

 

5,253,381

 

11,741,802

 

4,592,859

 

16,334,661

 

Euros

 

1,255,680

 

 

1,255,680

 

2,202,581

 

80,070

 

2,282,651

 

Unidad de Fomento

 

1,091,593

 

 

1,091,593

 

8,933,286

 

9,892,144

 

18,825,430

 

Chilean peso

 

94,392,907

 

57,880,786

 

152,273,693

 

100,865,855

 

48,875,442

 

149,741,297

 

Brazilian real

 

57,948,908

 

24,759,276

 

82,708,184

 

98,399,211

 

32,361,522

 

130,760,733

 

Argentine peso

 

36,734,410

 

7,999,827

 

44,734,237

 

72,008,260

 

27,765,604

 

99,773,864

 

Paraguayan Guaraní

 

9,460,231

 

2,490,539

 

11,950,770

 

8,472,550

 

2,094,471

 

10,567,021

 

Other Currency

 

 

 

 

1,665

 

 

1,665

 

 

93


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As of September 30, 2018

 

As of December 31, 2017

 

NON-CURRENT LIABILITIES

 

More than 1 until
3 years

 

More than 3 years
until 5 years

 

More than
5 years

 

Total

 

More than 1 until
3 years

 

More than 3 years
until 5 years

 

More than
5 years

 

Total

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Other financial liabilities

 

681,344,553

 

3,870,287

 

8,690,375

 

693,905,215

 

8,185,760

 

8,153,247

 

659,428,194

 

675,767,201

 

US$ Dollars

 

478,010

 

 

 

478,010

 

513,788

 

 

350,016,750

 

350,530,538

 

Unidad de Fomento

 

 

1,779,927

 

 

1,779,927

 

 

2,092,245

 

298,725,592

 

300,817,837

 

Chilean peso

 

670,466,959

 

 

 

670,466,959

 

 

 

 

 

Brazilian real

 

10,399,584

 

2,090,360

 

8,690,375

 

21,180,319

 

7,671,972

 

6,061,002

 

10,685,852

 

24,418,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and other payables

 

732,338

 

 

 

732,338

 

1,132,926

 

 

 

1,132,926

 

US$ Dollars

 

612,180

 

 

 

612,180

 

748,565

 

 

 

748,565

 

Chilean peso

 

114,493

 

 

 

114,493

 

356,221

 

 

 

356,221

 

Argentine peso

 

5,665

 

 

 

5,665

 

28,140

 

 

 

28,140

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions

 

5,792,542

 

53,596,142

 

 

59,388,684

 

62,947,748

 

 

 

62,947,748

 

Chilean peso

 

5,000,000

 

 

 

5,000,000

 

5,000,000

 

 

 

 

 

5,000,000

 

Brazilian real

 

 

53,596,142

 

 

53,596,142

 

56,607,720

 

 

 

56,607,720

 

Argentine peso

 

792,542

 

 

 

792,542

 

1,340,028

 

 

 

1,340,028

 

Paraguayan Guaraní

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred income tax liabilities

 

13,902,983

 

16,019,487

 

108,158,767

 

138,081,237

 

19,317,808

 

91,769

 

105,794,989

 

125,204,566

 

Unidad de Fomento

 

 

 

1,309,036

 

1,309,036

 

 

 

 

 

Chilean peso

 

1,008,129

 

 

92,432,646

 

93,440,775

 

252,448

 

91,769

 

92,319,662

 

92,663,879

 

Brazilian real

 

 

16,019,487

 

 

16,019,487

 

19,065,360

 

 

 

19,065,360

 

Argentine peso

 

12,894,854

 

 

 

 

 

12,894,854

 

 

 

 

 

 

 

 

 

Paraguayan Guaraní

 

 

 

14,417,085

 

14,417,085

 

 

 

13,475,327

 

13,475,327

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Post-employment benefit liabilities

 

571,967

 

62,552

 

8,262,829

 

8,897,348

 

359,760

 

62,742

 

7,863,853

 

8,286,355

 

Chilean peso

 

230,163

 

62,552

 

8,262,829

 

8,555,544

 

163,756

 

62,742

 

7,863,853

 

8,090,351

 

Paraguayan Guaraní

 

341,804

 

 

 

341,804

 

196,004

 

 

 

196,004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other non-financial liabilities

 

 

 

 

 

 

 

 

 

Brazilian real

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total non-current liabilities

 

702,344,383

 

73,548,468

 

125,111,971

 

901,004,822

 

91,944,002

 

8,307,758

 

773,087,036

 

873,338,796

 

US$ Dollars

 

1,090,190

 

 

 

1,090,190

 

1,262,353

 

 

350,016,750

 

351,279,103

 

Unidad de Fomento

 

 

1,779,927

 

1,309,036

 

3,088,963

 

 

2,092,245

 

298,725,592

 

300,817,837

 

Chilean peso

 

676,819,744

 

62,552

 

100,695,475

 

777,577,774

 

5,772,425

 

154,511

 

100,183,515

 

106,110,451

 

Brazilian real

 

10,399,584

 

71,705,989

 

8,690,375

 

90,795,948

 

83,345,052

 

6,061,002

 

10,685,852

 

100,091,906

 

Argentine peso

 

13,693,061

 

 

 

13,693,061

 

1,368,168

 

 

 

1,368,168

 

Paraguayan Guaraní

 

341,804

 

 

14,417,085

 

14,758,889

 

196,004

 

 

13,475,327

 

13,671,331

 

 

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NOTE 29 — THE ENVIRONMENT (unaudited)

 

The Company has made disbursements totaling ThCh$957,215 for improvements in industrial processes, equipment to measure industrial waste flows, laboratory analysis, consulting on environmental impacts and others,

 

These disbursements by country are detailed as follows:

 

 

 

2018 Period

 

Future commitments

 

Country

 

Recorded as
expenses

 

Capitalized to
Property, plant
and equipment

 

To be
Recorded as
expenses

 

To be capitalized
to Property,
plant and
equipment

 

 

 

ThCh$

 

ThCh$

 

ThCh$

 

ThCh$

 

Chile

 

204,109

 

 

 

 

Argentina

 

191,174

 

 

29,174

 

 

Brazil

 

439,302

 

5,082

 

123,362

 

350,461

 

Paraguay

 

49,156

 

68,392

 

 

 

Total

 

883,741

 

73,474

 

152,536

 

350,461

 

 

NOTE 30 — SUBSEQUENT EVENTS

 

The following material events have occurred, during the period between the date of issuance and the closing of these financial statements:

 

·                  On October 3, materialization of the purchase of 100% of the shares of Comercializadora Novaverde S.A. (“Novaverde”), a company dedicated to the manufacture and commercialization of fruits, ice cream, etc., under the brand Guallarauco. The foregoing, because of the fulfillment of all conditions precedent as set forth in the stock purchase agreement executed on January 5, 2018, between Embotelladora Andina S.A., Coca-Cola de Chile S.A., Coca-Cola del Valle New Ventures S.A. and Embonor S.A., as buyers, and Inversiones Siemel S.A., as seller.

 

The total purchase price reached Ch$46,074,321,558. As a result, the property of Novaverde is currently as follows: (i) Coca-Cola del Valle New Ventures S.A. owns 2,999,994 shares, (ii) Coca-Cola de Chile S.A. owns 3 shares, (iii) Embotelladora Andina S.A. owns 2 shares, and (iv) Embonor S.A. owns 1 share.

 

Embotelladora Andina S.A. is a shareholder of Coca-Cola del Valle New Ventures S.A. and its total direct and indirect ownership in Novaverde is approximately 35%.

 

·                  On October 5,  Embotelladora Andina S.A. registered Series F dematerialized bearer bonds in the local market for a total amount of UF 5,700,000 at a placement rate of 2.83% expiring September 25, 2039.

 

·                  On October 10, Embotelladora Andina S.A., repurchased US$ 210,000,000 of Senior Notes issued by the Company on September 26, 2013, whose expiration was 2023.

 

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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/ Andrés Wainer

 

Name: Andrés Wainer

 

Title: Chief Financial Officer

 

 

Santiago, December 17, 2018

 

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