6-K 1 tm2027330-1_6k.htm FORM 6-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN ISSUER

PURSUANT TO RULE 13a-16 OR 15b-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

 

August 2020

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 ¨

 

Indicate by check mark if the Registrant is submitting this Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes ¨ No x

 

Indicate by check mark if the Registrant is submitting this Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes ¨ No x

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form 6-K is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934

Yes ¨ No x

 

 

 

 

 

 

Consolidated Interim Financial Statements

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Santiago, Chile

as of June 30, 2020, and December 31, 2019

 

 

 

 

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Interim Financial Statements

 

As of June 30, 2020 (unaudited) and December 31, 2019

 

 

 

 

 

Report of the Independent Auditor

(Translation of the report originally issued in Spanish)

 

To

Shareholders and Directors

Embotelladora Andina S.A.

 

We have reviewed the accompanying interim consolidated financial statements of Embotelladora Andina S.A. and Subsidiaries, which comprise the interim consolidated statement of financial position as of June 30, 2020, and the interim consolidated comprehensive income statement for the six and three month periods ended June 30, 2020 and 2019, the interim consolidated statements of changes in equity and cash flows for the six month periods then ended and the related notes to the interim consolidated financial statements.

 

Management’s Responsibility for the Interim Consolidated Financial Statements

 

Management is responsible for the preparation and fair presentation of the interim consolidated financial statements in conformity with IAS 34 “Interim Financial Reporting” of the International Financial Reporting Standards (IFRS). This includes the design, implementation and maintainenance of sufficient internal control that provides the basis for the preparation and fair presentation of interim consolidated financial statements in accordance with the applicable financial reporting preparation and presentation framework.

 

Auditor’s Responsibility

 

Our responsibility is to perform a review in accordance with Generally Accepted Auditing Standards in Chile applicable to interim financial statement reviews. An interim financial statement review involves performing analytical procedures and making inquiries of the persons in charge of accounting and financial matters. The review is substantially less broad in scope than an audit to the financial statements in accordance with Generally Accepted Auditing Standards in Chile for the purpose of expressing an opinion on the financial statements. Therefore, we express no such opinion.

 

Conclusion

 

On the basis of our review, we are not aware of any material modifications that should be made to the interim consolidated financial statements referred to above for it to be in conformity with IAS 34 “Interim Financial Reporting” of the International Financial Reporting Standards (IFRS).

 

Other matters

 

On February 25, 2020 we issued an unqualified opinion on the consolidated financial statements as of December 31, 2019 and 2018 of Embotelladora Andina S.A and Subsidiaries, which includes the statement of financial position as of December 31, 2019 as presented in the accompanying consolidated interim financial statements, and corresponding notes.

 

Tatiana Ramos S. EY Audit SpA.
   
Santiago, July 28, 2020  

 

 

 

 

 

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Interim Financial Statements

 

I.Consolidated Interim Statements of Financial Position as of June 30, 2020 (unaudited) and December 31, 2019 1
    
II.Consolidated Interim Statements of Income by Function (unaudited) 3
    
III.Consolidated Interim Statements of Comprehensive Income (unaudited) 4
    
IV.Consolidated Interim Statements of Changes in Equity (unaudited) 5
    
V.Consolidated Interim Statements of Direct Cash Flows(unaudited) 6
    
VI.Notes to the Consolidated Interim Financial Statements (unaudited) 7

 

  1.Corporate information 7
  2.Basis of preparation of consolidated interim financial statements and application of accounting criteria 8
  3.Financial reporting by segment 28
  4.Cash and cash equivalents 31
  5.Other financial assets, current and non-current 31
  6.Other non-financial assets, current and non-current 32
  7.Trade debtors 33
  8.Inventory 34
  9.Tax assets and liabilities 35
  10.Income tax and deferred taxes 35
  11.Property, plant and equipment 38
  12.Related parties 41
  13.Employee benefits, current and non-current 43
  14.Investments accounted for using the equity method 44
  15.Intangible assets other than goodwill 47
  16.Goodwill 48
  17.Other financial liabilities, current and non-current 48
  18.Trade accounts payable and other accounts payable 60
  19.Other provisions, current and non-current 60
  20.Other non-financial liabilities 61
  21.Equity 61
  22.Assets and liabilities for derivative instruments 64
  23.Litigations and contingencies 66
  24.Financial risk management 70
  25.Expenses by nature 75
  26.Other income 75
  27.Other expenses by function 75
  28.Income and financial costs 76
  29.Other (loss) gains 76
  30.Local and foreign currency 77
  31.Environment 81
  32.Subsequent events 81

 

 

 

 

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Interim Statements of Financial Position

as of June 30, 2020 (unaudited) and December 31, 2019

 

ASSETS 

 

  

NOTE 

 

   

06.30.2020

CLP (000’s)

   

12.31.2019

CLP (000’s)

 
      (unaudited)     
Current assets:            
Cash and cash equivalents   4    371,105,249    157,567,986 
Other financial assets   5    1,427,525    347,278 
Other non-financial assets   6    31,764,440    16,188,965 
Trade and other accounts receivable, net   7    127,266,796    191,077,588 
Accounts receivable from related companies   12.1    7,257,381    10,835,768 
Inventory   8    132,855,842    147,641,224 
Current tax assets   9    5,161,640    9,815,294 
Total Current Assets        676,838,873    533,474,103 
                
Non-Current Assets:               
Other financial assets   5    179,421,154    110,784,311 
Other non-financial assets   6    96,596,596    125,636,150 
Trade and other receivables   7    63,438    523,769 
Accounts receivable from related parties   12.1    166,752    283,118 
Investments accounted for under the equity method   14    91,638,828    99,866,733 
Intangible assets other than goodwill   15    645,497,775    675,075,375 
Goodwill   16    108,880,446    121,221,661 
Property, plant and equipment   11    665,078,622    722,718,863 
Deferred tax assets   10.2    1,979,386    1,364,340 
Total Non-Current Assets        1,789,322,997    1,857,474,320 
                
Total Assets        2,466,161,870    2,390,948,423 

 

The accompanying notes 1 to 32 form an integral part of these Consolidated Interim Financial Statements

 

1

 

 

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Interim Statements of Financial Position

as of June 30, 2020 (unaudited) and December 31, 2019

 

LIABILITIES AND EQUITY 

 

 

NOTE

 

   

06.30.2020

CLP (000’s)

   

12.31.2019

CLP (000’s)

 
      (unaudited)     
LIABILITIES            
Current Liabilities               
Other financial liabilities   17    40,699,766    40,593,878 
Trade and other accounts payable   18    174,134,864    243,700,553 
Accounts payable to related parties   12.2    37,774,527    53,637,601 
Provisions   19    2,169,540    2,068,984 
Income taxes payable   9    1,826,682    6,762,267 
Employee benefits current provisions   13    21,941,547    38,392,854 
Other non-financial liabilities   20    29,844,839    26,502,215 
Total Current Liabilities        308,391,765    411,658,352 
                
Other financial liabilities, non-current   17    1,110,024,497    743,327,057 
Accounts payable, non-current   18    343,414    619,587 
Accounts payable to related companies, non-current   12.2    17,510,694    19,777,812 
Other provisions, non-current   19    55,330,204    67,038,566 
Deferred tax liabilities   10.2    126,013,424    169,449,747 
Employee benefits non-current provisions   13    10,790,330    10,173,354 
Non-Current Liabilities:        1,320,012,563    1,010,386,123 
                
EQUITY:   21           
Issued capital        270,737,574    270,737,574 
Retained earnings        617,492,391    600,918,265 
Other reserves        (71,483,438)   76,993,851 
Equity attributable to equity holders of the parent        816,746,527    948,649,690 
Non-controlling interests        21,011,015    20,254,258 
Total Equity        837,757,542    968,903,948 
Total Liabilities and Equity        2,466,161,870    2,390,948,423 

 

The accompanying notes 1 to 32 form an integral part of these Consolidated Interim Financial Statements

 

2

 

 

 

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Interim Statements of Income by Function

as of June 30, 2020 and 2019 (unaudited)

 

       01.01.2020   01.01.2019   04.01.2020   04.01.2019 
   NOTE   06.30.2020   06.30.2019   06.30.2020   06.30.2019 
       (unaudited)   (unaudited)   (unaudited)   (unaudited) 
      CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Net sales        809,295,916    840,180,450    312,303,124    379,717,932 
Cost of sales   25    (485,931,100)   (496,674,197)   (197,117,673)   (228,330,444)
Gross Profit        323,364,816    343,506,253    115,185,451    151,387,488 
Other income   26    1,929,039    263,560    1,333,133    178,597 
Distribution expenses   25    (76,822,641)   (80,186,199)   (31,898,825)   (36,613,404)
Administrative expenses   25    (155,543,021)   (158,566,505)   (67,046,649)   (79,625,359)
Other expenses   27    (10,104,774)   (1,975,892)   (6,682,496)   490,898 
Other (loss) gains   29    918    -    (114)   - 
Financial income   28    8,637,440    2,910,856    6,558,588    1,489,405 
Financial expenses   28    (23,493,230)   (22,319,856)   (11,106,064)   (11,046,152)
Share of profit (loss) of investments in associates and joint ventures accounted for using the equity method   14.3    1,274,640    7,885    239,245    (608,547)
Foreign exchange differences        (2,016,556)   (724,633)   (2,328,268)   319,037 
Income by indexation units        (8,726,880)   (3,183,062)   (1,475,209)   (3,110,161)
Net income before income taxes        58,499,751    79,732,407    2,778,792    22,861,802 
Income tax expense   10.1    (9,427,351)   (17,750,421)   (2,198,708)   (7,829,534)
Net income        49,072,400    61,981,986    580,084    15,032,268 
                          
Net income attributable to                         
Owners of the controller        48,796,601    61,618,029    1,302,415    15,199,739 
Non-controlling interests        275,799    363,957    (722,331)   (167,471)
Net income        49,072,400    61,981,986    580,084    15,032,268 
                          
Earnings per Share, basic and diluted                         
Earnings per Series A Share   21.5    49.10    62.0    1.31    15.98 
Earnings per Series B Share   21.5    54.01    68.2    1.44    17.58 

 

The accompanying notes 1 to 32 form an integral part of these Consolidated Interim Financial Statements

 

3

 

 

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Interim Statements of Comprehensive Income

as of June 30, 2020 and 2019 (unaudited)

 

   01.01.2020   01.01.2019   04.01.2020   04.01.2019 
   06.30.2020   06.30.2019   06.30.2020   06.30.2019 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Net income                    
Other Comprehensive Income:   49,072,400    61,981,986    580,084    15,032,268 
Components of other comprehensive income that will not be reclassified to net income for the period, before taxes                    
Actuarial Gains (losses) from defined benefit plans   10,009    -    10,009    - 
Components of other comprehensive income that will be reclassified to net income for the period, before taxes                    
Gain (losses) from exchange rate translation differences   (109,760,742)   (48,822,177)   (102,524,332)   8,501,378 
Gain (losses) from cash flow hedges   (102,986,196)   1,134,306    (90,616,323)   (620,728)
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   (2,702)   -    (2,702)   - 
                     
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   37,477,762    10,857,577    32,447,623    (479,310)
Income tax related to cash flow hedges   27,265,538    (453,628)   25,361,364    385,918 
Other comprehensive income, total   (147,996,331)   (37,283,922)   (135,324,361)   (7,787,258)
Total comprehensive income   (98,923,931)   24,698,064)   (134,744,277)   22,819,526 
Total comprehensive income attributable to:                    
Equity holders of the controller   (99,680,688)   25,024,000    (133,849,671)   23,483,460 
Non-controlling interests   756,757    (325,936)   (894,606)   (663,934)
Total comprehensive income   (98,923,931)   24,698,064    (134,744,277)   22,819,526 

 

The accompanying notes 1 to 32 form an integral part of these Consolidated Interim Financial Statements

 

4

 

 

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Interim Statements of Changes in Equity

For the periods ended June 30, 2020 and 2019 (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
 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Opening balance as of 01.01.2020   270,737,574    (339,076,340)   (14,850,683)   (2,230,752)   433,151,626    76,993,851    600,918,265    948,649,690    20,254,258    968,903,948 
Changes in equity                                                  
Comprehensive Income                                                  
Earnings   -    -    -    -    -    -    48,796,601    48,796,601    275,799    49.072.400 
Other Comprehensive Income   -    (72,762,686)   (75,721,909)   7,306    -    (148,477,289)   -    (148,477,289)   480,958    (147.996.331)
Comprehensive Income   -    (72,762,686)   (75,721,909)   7,306    -    (148,477,289)   48,796,601    (99,680,688)   756,757    (98.923.931)
Dividends   -    -    -    -    -    -    (51,682,734)   (51,682,734)   -    (51,682,734)
Increase (decrease) from other changes   -    -    -    -    -    -    19,460,259    19,460,259    -    19,460,259 
Total changes in equity   -    (72,762,686)   (75,721,909)   7,306    -    (148,477,289)   16,574,126    (131,903,163)   756,757    (131,146,406)
Ending balance as of 06.30.2020   270,737,574    (411,839,026)   (90,572,592)   (2,223,446)   433,151,626    (71,483,438)   617,492,391    816,746,527    21,011,015    837,757,542 

 

         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
 
    CLP (000’s)    CLP (000’s)    CLP (000’s)    CLP (000’s)    CLP (000’s)    CLP (000’s)    CLP (000’s)    CLP (000’s)    CLP (000’s)    CLP (000’s)  
Opening balance as of 01.01.2019   270,737,574    (306,674,528)   (13,668,932)   (1,954,077)   433,151,626    110,854,089    462,221,463    843,813,126    19,901,617    863,714,743 
Changes in equity                                                  
Comprehensive Income                                                  
Earnings   -    -    -    -    -    -    61,618,029    61,618,029    363,957    61.981.986 
Other Comprehensive Income   -    (37,632,712)   674,726    -    -    (36,957,986)   -    (36,957,986)   (325,936)   (37.283.922)
Comprehensive Income   -    (37,632,712)   674,726    -    -    (36,957,986)   61,618,029    24,660,043    38,021    24.698.064 
Dividends   -    -    -    -    -    -    (42,737,646)   (42,737,646)   (486,405)   (43,224,051)
Increase (decrease) from other changes   -    -    -    -              28,479,567    28,479,567    -    28,479,567 
Total changes in equity   -    (37,632,712)   674,726    -    -    (36,957,986)   47,359,950    10,401,964    (448,384)   9,953,580 
Ending balance as of 06.30.2019   270,737,574    (344,307,240)   (12,994,206)   (1,954,077)   436,415,009    73,896,103    509,581,413    854,215,090    19,453,233    873,668,323 

 

The accompanying notes 1 to 32 form an integral part of these Consolidated Interim Financial Statements

 

5

 

 

 

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Consolidated Interim Statements of Direct Cash Flows

For the periods ended June 30, 2020 and 2019 (unaudited)

 

       01.01.2020   01.01.2019 
Cash flows provided by (used in) Operating Activities  NOTE   06.30.2020   06.30.2019 
      CLP (000’s)   CLP (000’s) 
Cash flows provided by Operating Activities            
Receipts from the sale of goods and the rendering of services (including taxes)        1,260,783,254    1,271,549,665 
Payments for Operating Activities               
Payments to suppliers for goods and services (including taxes)        (874,799,406)   (883,431,125)
Payments to and on behalf of employees        (105,215,100)   (104,793,892)
Other payments for operating activities (value-added taxes on purchases, sales and others)        (147,643,227)   (153,423,164)
Interest payments        (20,300,438)   (20,797,233)
Interest received        2,734,839    1,496,854 
Income tax payments        (17,090,068)   (19,838,714)
Other cash movements (tax on bank debits Argentina and others)        (2,012,049)   (2,028,355)
Cash flows provided by (used in) Operating Activities        96,457,805    88,734,036 
                
Cash flows provided by (used in) Investing Activities               
Dividends received            240,804 
Proceeds from sale of Property, plant and equipment            1,989 
Purchase of Property, plant and equipment        (52,980,811)   (57,250,050)
Purchase of intangible assets        (117,114)   (426,949)
Payments on forward, term, option and financial exchange agreements            117,814 
Collection on forward, term, option and financial exchange agreements        4,039,956     
Other payments on the purchase of financial instruments        (51,345)    
Net cash flows used in Investing Activities        (49,109,314)   (57,316,392)
                
Cash Flows generated from (used in) Financing Activities               
Proceeds from short term loans            1,494,143 
Loan payments        (1,079,271)   (1,093,885)
Lease liability payments        (1,665,591)   (1,228,976)
Dividend payments by the reporting entity        (48,312,850)   (42,737,646)
Other inflows (outflows) of cash (Placement and payment of public obligations)        221,468,226    (6,686,473)
Net cash flows (used in) generated by Financing Activities        170,410,514    (50,252,837)
Net increase in cash and cash equivalents before exchange differences        217,759,005    (18,835,193)
Effects of exchange differences on cash and cash equivalents        (3,890,029)   (136,948)
Effects of inflation in cash and cash equivalents in Argentina        (331,713)   (1,116,131)
Net increase (decrease) in cash and cash equivalents        213,537,263    (20,088,272)
Cash and cash equivalents – beginning of period   4    157,567,986    137,538,613 
Cash and cash equivalents - end of period   4    371,105,249    117,450,341 

 

The accompanying notes 1 to 32 form an integral part of these Consolidated Financial Statements

 

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EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

Notes to the Consolidated Interim Financial Statements

 

1 - CORPORATE INFORMATION

 

Embotelladora Andina S.A. RUT (Chilean Tax Id. N°) 91.144.000-8 (hereinafter “Andina,” and together with its subsidiaries, the “Company”) is an open stock corporation, whose corporate address and principal offices are located at Miraflores 9153, borough of Renca, Santiago, Chile. The Company is registered under No. 00124 of the Securities Registry and is regulated by Chile’s Financial Market Commission (hereinafter “CMF”) and pursuant to Chile’s Law 18,046 is subject to the supervision of this entity. It is also registered with the U.S. Securities and Exchange Commission (hereinafter “SEC”) and its stock is traded on the New York Stock Exchange since 1994.

 

The principal activity of Embotelladora Andina S.A. is to produce, bottle, commercialize and distribute the products under registered trademarks of The Coca-Cola Company (TCCC). The Company maintains operations and is licensed to produce, commercialize and distribute such products in certain territories in Chile, Brazil, Argentina and Paraguay

 

In Chile, the territories in which it has such a license are the Metropolitan Region; the province of San Antonio, the V Region; the province of Cachapoal including the commune of San Vicente de Tagua-Tagua, the VI Region; the II Region of Antofagasta; the III Region of Atacama, the IV Region of Coquimbo XI Region de Aysén del General Carlos Ibáñez del Campo; XII Region of Magallanes and Chilean Antarctic. In Brazil, the aforementioned license covers much of the state of Rio de Janeiro, the entire state of Espirito Santo, and part of the states of Sao Paulo and Minas Gerais. In Argentina it includes the provinces of Córdoba, Mendoza, San Juan, San Luis, Entre Ríos, as well as part of the provinces of Santa Fe and Buenos Aires, Chubut, Santa Cruz, Neuquén, Río Negro, La Pampa, Tierra del Fuego, Antarctica and South Atlantic Islands. Finally, in Paraguay the territory comprises the whole country. The bottling agreement for the territories in Chile expires in October 2023; in Argentina it expires in 2022; in Brazil it expires in 2022, and in Paraguay it expires in 2020.

 

Said agreements are renewable upon the request of the licensee and at the sole discretion of The Coca-Cola Company.

 

As of the date of these consolidated financial statements, regarding Andina’s principal shareholders, the Controlling Group holds 45.16% of the outstanding shares with voting rights, corresponding to the Series A shares. The Controlling Group is composed of the Chadwick Claro, Garcés Silva, Hurtado Berger, Said Handal and Said Somavía families, who control the Company in equal parts.

 

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 July 28, 2020.

 

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2 - BASIS OF PREPARATION OF CONSOLIDATED INTERIM FINANCIAL STATEMENTS AND APPLICATION OF ACCOUNTING CRITERIA

 

2.1       Accounting principles and basis of preparation

 

The Company’s Consolidated Interim Financial Statements for the periods ended June 30, 2020 and December 31, 2019, have been prepared in accordance with 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").

 

These Consolidated Interim Financial Statements have been prepared following the going concern principle by applying the historical cost method, with the exception, according to IFRS, of those assets and liabilities that are recorded at fair value.

 

These Consolidated Interim Statements reflect the consolidated financial position of Embotelladora Andina S.A. and its Subsidiaries as of June 30, 2020 and December 31, 2019 and the results of operations for the periods between January 1 and June 30, 2020 and 2019 and April 30 and June 30, 2020 and 2019, together with the statements of changes in equity and cash flows for the periods between January 1 and June 30, 2020 and 2019.

 

These Consolidated Interim Financial Statements have been prepared based on the accounting records maintained by the Parent Company and by the other entities that are part of the Company and are presented in thousands of Chilean pesos (unless expressly stated) as this is the functional and presentation currency of the Company. Foreign operations are included in accordance with the accounting policies established in Notes 2.5.

 

2.2       Subsidiaries and consolidation

 

Subsidiary entities are those companies directly or indirectly controlled by Embotelladora Andina. 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 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 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.

 

Intercompany transactions, balances and unrealized gains on transactions between Group entities are eliminated. Unrealized losses are also eliminated. When necessary, the accounting policies of the subsidiaries are modified to ensure uniformity with the policies adopted by the Group.

 

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.

 

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The consolidated financial statements include all assets, liabilities, income, expenses, and cash flows of the Company and its subsidiaries after eliminating balances and transaction among the Group’s entities, the subsidiary companies included in the consolidation are the following:

 

      Ownership interest 
      06.30.2020   12.31.2019 
Taxpayer ID  Company Name  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.   0.70    99.28    99.98    0.70    99.28    99.98 
96.842.970-1  Andina Bottling Investments S.A.   99.9    0.09    99.99    99.9    0.09    99.99 
96.972.760-9  Andina Bottling Investments Dos S.A.   99.9    0.09    99.99    99.9    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 
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.   99.9    0.09    99.99    99.9    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.   99.9    0.09    99.99    99.9    0.09    99.99 
78.861.790-9  Transportes Andina Refrescos Ltda.   99.9    0.09    99.99    99.9    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       Investments in associates and joint ventures

 

Ownership interest held by the Group in joint ventures and associates are recorded following the equity method. According to the equity method, the investment in an associate or joint venture is initially recorded at cost. As of the date of acquisition, the investment in the statement of financial position is recorded by the proportion of its total assets, which represents the Group's participation in its capital, once adjusted, where appropriate, the effect of the transactions made with the Group, plus capital gains that have been generated in the acquisition of the company.

 

Dividends received from these companies are recorded by reducing the value of the investment and the results obtained by them, which correspond to the Group according to its ownership, are recorded under the item “Participation in profit (loss) of associates accounted for by the equity method.”

 

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2.3.1       Investments in Associates

 

Associates are all entities over which the Group exercises significant influence but does not have control. Significant influence is the power to intervene in the financial and operating policy decisions of the associate, without having control or joint control over it. 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.

 

 

2.3.2       Joint arrangements

 

Joint arrangements are those entities in which the Group exercises control through an agreement with other shareholders and jointly with them, that is, when decisions on their relevant activities require the unanimous consent of the parties that share control.

 

Depending on the rights and obligations of the parties, joint arrangements are classified as:

 

-Joint venture: agreement whereby the parties exercising joint control are entitled to the net assets of the entity. Joint ventures are integrated into the consolidated financial statements by the equity method, as described above.

 

-Joint operation: agreement whereby the parties exercising joint control are entitled to the assets and obligations with respect to the liabilities related to the agreement. Joint operations are consolidated by proportionally integrating the assets and liabilities affected by said operation.

 

To determine the type of joint agreement that derives from a contractual agreement, Group Management evaluates the structure and legal form of the agreement, the terms agreed by the parties, as well as other relevant factors and circumstances.

 

Embotelladora Andina does not have joint arrangements that qualify as a joint operation business.

 

2.4       Financial reporting by operating segment

 

“IFRS 8 Operating Segments” 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:

 

·Operation in Chile
·Operation in Brazil
·Operation in Argentina
·Operation in Paraguay

 

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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

 

Embotelladora del Atlántico Argentine Peso (ARS)
Embotelladora Andina Chilean Peso (CLP)
Paraguay Refrescos Paraguayan Guaraní (PYG)
Rio de Janeiro Refrescos Brazil Real (BRL)

 

Foreign currency-denominated monetary assets and liabilities are converted to the functional currency at the spot exchange rate in effect on the closing date.

 

All differences arising from the liquidation or conversion of monetary items are recorded in the income statement, with the exception of the monetary items designated as part of the hedging of the Group's net investment in a business abroad. These differences are recorded under other comprehensive income until the disposal of the net investment, at which point they are reclassified to the income statement. Tax adjustments attributable to exchange differences in these monetary items are also recognized under other comprehensive income.

 

Non-monetary items that are valued at historical cost in a foreign currency are converted using the exchange rate in effect at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are converted using the exchange rate in effect at the date on which fair value is determined. Losses or gains arising from the conversion of non-monetary items measured at fair value are recorded in accordance with the recognition of losses or gains arising from the change in the fair value of the respective item (e.g., exchange differences arising from items whose fair value gains or losses are recognized in another overall result or in results are also recognized under comprehensive income ).

 

Functional currency in hyperinflationary economies

 

Beginning July 2018, Argentina's economy is considered as hyperinflationary, according to the criteria established in the International Accounting Standard No. 29 “Financial information in hyperinflationary economies” (IAS 29). This determination was carried out based on a series of qualitative and quantitative criteria, including an accumulated inflation rate of more than 100% for three years. In accordance with IAS 29, the financial statements of companies in which Embotelladora Andina S.A. participates in Argentina have been retrospectively restated by applying a general price index to the historical cost, in order to reflect the changes in the purchasing power of the Argentine peso, as of the closing date of these financial statements.

 

Non-monetary assets and liabilities were restated since February 2003, the last date an inflation adjustment was applied for accounting purposes in Argentina. In this context, it should be mentioned that the Group made its transition to IFRS on January 1, 2004, applying the attributed cost exemption for Property, plant and equipment.

 

For consolidation purposes in Embotelladora Andina S.A. and as a result of the adoption of IAS 29, the results and financial situation of our Argentine subsidiaries were converted to the closing exchange rate (ARS/CLP) as June 30, 2020, in accordance with IAS 21 "Effects of foreign currency exchange rate variations", when dealing with a hyperinflationary economy.

 

The comparative amounts in the consolidated financial statements are those that were presented as current year amounts in the relevant financial statements of the previous year (i.e., not adjusted for subsequent changes in price level or exchange rates). This results in differences between the closing net equity of the previous year and the opening net equity of the current year and, as an accounting policy option, these changes are presented as follows: (a) the re-measurement of initial balances under IAS 29 as an adjustment to equity and (b) subsequent effects, including re-expression under IAS 21 , as "Exchange rate differences in the conversion of foreign operations" under other comprehensive income.

 

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Whereas the functional and presentation currency of Embotelladora Andina S.A. does not correspond to that of a hyperinflationary economy, according to the guidelines set out in IAS 29, the re-expression of periods is not required in the consolidated financial statements of the Group.

 

Inflation for the periods January to June 2020 and January to December 2019 amounted to 13.58% and 54.85%, respectively.

 

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 statement of financial position is translated to the closing exchange rate at the financial statement 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.
·In the case of the disposal of an investment abroad, the component of other comprehensive income (OCI) relating to that investment is reclassified to the income statement.

 

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

 

Financial statements of economies with a hyperinflationary economic environment, are recognized according to IAS 29 Financial Information in Hyperinflationary Economies, and subsequently converted to Chilean pesos as follows:

 

·The statement of financial position sheet is translated at the closing exchange rate at the financial statements date.
·The income statement is translated at the closing exchange rate at the financial statements date
·The statement of cash flows is converted to the closing exchange rate at the date of the financial statements.
·In the case of the disposal of an investment abroad, the component of other comprehensive income (OCI) relating to that investment is reclassified to the income statement.

 

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2.5.3       Exchange rates

 

Exchange rates regarding the Chilean peso ​​in effect at the end of each period are as follows:

 

 Date   USD     BRL     ARS     PGY  
06.30.2020     821.23       149.96       11.66       0.121  
12.31.2019     748.74       185.76       12.50       0.116  
06.30.2019     679.15       177.22       15.99       0.110  

 

2.6       Property, plant, and equipment

 

The elements of Property, plant and equipment, are valued for their acquisition cost, net of their corresponding accumulated depreciation, and of the impairment losses they have experienced.

 

The cost of the items of Property, plant and equipment include in addition to the price paid for the acquisition: i) the financial expenses accrued during the construction period that are directly attributable to the acquisition, construction or production of qualified assets, which are those that require a substantial period of time before being ready for use, such as production facilities. The Group defines a substantial period as one that exceeds twelve months. The interest rate used is that corresponding to specific financing or, if it does not exist, the weighted average financing rate of the Company making the investment; and ii) personnel expenses directly related to the construction in progress.

 

Construction in progress is transferred to operating assets after the end of the trial period when they are available for use, from which moment depreciation begins.

 

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 since it has an indefinite useful life. 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.

 

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 Property, plant and equipment are reviewed and adjusted at the end of each fiscal year, if appropriate.

 

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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 or other gains, as appropriate in the statement of comprehensive income.

 

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

 

2.7.1Goodwill

 

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 indefinite useful life and are not amortized, (as they are permanently renewed by The Coca-Cola Company) and therefore are subject to impairment tests on an annual basis.

 

2.7.3Software

 

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. Their accounting recognition is initially realized for their acquisition or production cost and, subsequently, they are valued at their net cost of their corresponding accumulated amortization and of the impairment losses that, if applicable, they have experienced. The aforementioned software is amortized within four years.

 

2.8        Impairment 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.

 

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

 

Regardless of what was stated in the previous paragraph, in the case of CGUs to which capital gains or intangible assets have been assigned with an indefinite useful life, the analysis of their recoverability is carried out systematically at the end of each fiscal year. These indications may include new legal provisions, change in the economic environment that affects business performance indicators, competition movements, or the disposal of an important part of a CGU.

 

Management reviews business performance based on geographic segments. Goodwill is monitored at the operating segment level that includes the different cash generating units in operations in Chile, Brazil, Argentina and Paraguay. The impairment of distribution rights is monitored geographically in the CGU or group of cash generating units, which 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 of the following segments:

 

-Operation in Chile (excluding the Metropolitan Region, Rancagua Province and San Antonio Province);
-Operation in Argentina (North and South region);
-Operation in Brazil (State of Rio de Janeiro and Espirito Santo, Ipiranga territories, investment in the Sorocaba associate and investment in the Leão Alimentos S.A. associate);
-Operation in Paraguay

 

To check if goodwill has suffered a loss due to impairment of value, the Company compares the book value thereof with its recoverable value, and recognizes an impairment loss, for the excess of the asset's carrying amount over its recoverable amount. To determine the recoverable values ​​of the CGU, management considers the discounted cash flow method as the most appropriate.

 

The main assumptions used in the annual test are:

 

a)Discount rate

 

The discount rate applied in the annual test carried out in December 2019 was estimated using the CAPM (Capital Asset Pricing Model) methodology, which allows estimating a discount rate according to the level of risk of the CGU in the country where it operates. A nominal discount rate before tax is used according to the following table:

 

  Discount rates 2019
Argentina 35.3%
Chile 8.5%
Brazil 11.4%
Paraguay 11.5%

 

b)Other assumptions

 

The financial projections to determine the net present value of the future cash flows of the CGUs are modeled based on the main historical variables and the respective budgets approved by the CGU. In this regard, a conservative growth rate is used, which reaches 3% for the carbonated beverage category and up to 7% for less developed categories such as juices and waters. Beyond the fifth year of projection, growth perpetuity rates are established per operation ranging from 1% to 2.5% depending on the degree of maturity of the consumption of the products in each operation. In this sense, the variables with greatest sensitivity in these projections are the discount rates applied in the determination of the net present value of projected cash flows, growth perpetuities and EBITDA margins considered in each CGU.

 

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In order to sensitize the impairment test, variations were made to the main variables used in the model. Ranges used for each of the modified variables are:

 

-Discount Rate: Increase / Decrease of up to 100 bps as a value in the rate at which future cash flows are discounted to bring them to present value
-Perpetuity: Increase / Decrease of up to 75 bps in the rate to calculate the perpetual growth of future cash flows
-EBITDA margin: Increase / Decrease of 100 bps of EBITDA margin of operations, which is applied per year for the projected periods, that is, for the years 2020-2024

 

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

 

As a result of tests conducted, no signs of impairments in any of the CGUs were identified, assuming conservative EBITDA margin projections in line with market history.

 

Despite the deterioration in macroeconomic conditions experienced by the economies of the countries where cash-generating units operate, the impairment test resulted in recovery values higher than the book values including sensitivity calculations to which it was submitted.

 

During this period Company management has performed an interim analysis, where no impairment indicators have been identified.

 

2.9 Financial instruments

 

A financial instrument is any contract that results in the recognition of a financial asset in one entity and a financial liability or equity instrument in another entity.

 

2.9.1       Financial assets

 

Pursuant to IFRS 9 “Financial Instruments”, 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 (i) fair value with changes in P&L (FVPL), (ii) amortized cost or (iii) fair value through other comprehensive income (FVOCI). The classification is based on two criteria: (a) the Group's business model for the purpose of managing financial assets to obtain contractual cash flows; and (b) if the contractual cash flows of financial instruments represent "solely payments of principal and interest” on the outstanding principal amount (the “SPPI criterion”).

 

The subsequent classification and measurement of the Group's financial assets are as follows:

 

-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.

 

-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.

 

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-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.

 

A financial asset (or, where applicable, a portion of a financial asset or a portion of a group of similar financial assets) is initially disposed (for example, canceled in the Group's consolidated financial statements) when:

 

-The rights to receive cash flows from the asset have expired,
-The Group has transferred the rights to receive the cash flows of the asset or has assumed the obligation to pay all cash flows received without delay to a third party under a transfer agreement; and the Group (a) has substantially transferred all risks and benefits of the asset, or (b) has not substantially transferred or retained all risks and benefits of the asset, but has transferred control of the asset.

 

2.9.2       Financial Liabilities

 

Financial liabilities are classified as a fair value financial liability at the date of their initial recognition, as appropriate, with changes in results, loans and credits, accounts payable or derivatives designated as hedging instruments in an effective coverage.

 

All financial liabilities are initially recognized at fair value and transaction costs directly attributable are netted from loans and credits and accounts payable.

 

The Group's financial liabilities include trade and other accounts payable, loans and credits, including those discovered in current accounts, and derivative financial instruments.

 

The classification and subsequent measurement of the Group's financial liabilities are as follows:

 

-Fair value financial liabilities with changes in results include financial liabilities held for trading and financial liabilities designated in their initial recognition at fair value with changes in results. The losses or gains of liabilities held for trading are recognized in the income statement.
-Loans and credits are valued at cost or amortized using the effective interest rate method. Gains and losses are recognized in the income statement when liabilities are disposed, as well as interest accrued in accordance with the effective interest rate method.

 

A financial liability is disposed of when the obligation is extinguished, cancelled or expires. Where an existing financial liability is replaced by another of the same lender under substantially different conditions, or where the conditions of an existing liability are substantially modified, such exchange or modification is treated as a disposal of the original liability and the recognition of the new obligation. The difference in the values in the respective books is recognized in the statement of income.

 

2.9.3 Offsetting financial instruments

 

Financial assets and financial liabilities are offset with the corresponding net amount presenting the corresponding net amount in the statement of financial position, if:

 

-          There is currently a legally enforceable right to offset the amounts recognized, and

 

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-          It is intended to liquidate them for the net amount or to realize the assets and liquidate the liabilities simultaneously.

 

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 at each closing date. Derivatives are accounted as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. 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.

 

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 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 June 30, 2020, the Company had no implicit derivatives.

 

2.10.3        Fair value hierarchy

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the date of the transaction. Fair value is based on the presumption that the transaction to sell the asset or to transfer the liability takes place;

 

-In the asset or liability main market, or

 

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-In the absence of a main market, in the most advantageous market for the transaction of those assets or liabilities.

 

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:     Quote values (unadjusted) in active markets for identical assets or liabilities

Level 2:     Valuation techniques for which the lowest level variable used, which is significant for the calculation, is directly or indirectly observable

Level 3:     Valuation techniques for which the lowest level variable used, which is significant for the calculation, is not observable.

 

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.

 

2.11Inventories

 

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 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.

 

The initial cost of inventories includes the transfer of losses and gains from cash flow hedges, recognized under other comprehensive income, related to the purchase of raw materials.

 

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

 

2.12Trade receivables

 

Trade accounts and other accounts receivable are measured and recognized at the transaction price at the time they are generated less the provision for expected credit losses, pursuant to the requirements of IFRS 15, since they do not have a significant financial component. The provision for expected credit losses is made applying a value impairment model based on expected credit losses for the following 12 months. The Group applies a simplified focus for trade receivables, thereby impairment is always recorded referring to expected losses during the whole life of the asset. The carrying amount of the asset is reduced by the provision of expected credit losses, and the loss is recognized in administrative expenses in the consolidated income statement by function.

 

2.13Cash 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 from the date of acquisition.

 

2.14Other 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.

 

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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.

 

2.15Income 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.

 

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.

 

2.16Employee benefits

 

The Company records a liability regarding 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 “Employee Benefits”.

 

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.

 

2.17Provisions

 

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.

 

2.18Leases

 

In accordance with IFRS 16 “Leases” Embotelladora Andina analyzes, at the beginning of the contract, the economic background of the agreement, to determine if the contract is, or contains, a lease, evaluating whether the agreement transfers the right to control the use of an identified asset for a period of time in exchange for a consideration. Control is considered to exist if the client has i) the right to obtain substantially all the economic benefits from the use of an identified asset; and ii) the right to direct the use of the asset.

 

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The Company when operating as a lessee, at the beginning of the lease (on the date the underlying asset is available for use) records an asset for the right-of-use in the statement of financial position (under Property, plant and equipment) and a lease liability (under Other financial liabilities). This asset is initially recognized at cost, which includes: i) value of the initial measurement of the lease liability; ii) lease payments made up to the start date less lease incentives received; iii) the initial direct costs incurred; and iv) the estimation of costs for dismantling or restoration. Subsequently, the right-of-use asset is measured at cost, adjusted by any new measurement of the lease liability, less accumulated depreciation and accumulated losses due to impairment of value. The right-of-use asset is depreciated in the same terms as the rest of similar depreciable assets, if there is reasonable certainty that the lessee will acquire ownership of the asset at the end of the lease. If such certainty does not exist, the asset depreciates at the shortest period between the useful life of the asset or the lease term.

 

On the other hand, the lease liability is initially measured at the present value of the lease payments, discounted at the incremental loan rate of the Company, if the interest rate implicit in the lease could not be easily determined. Lease payments included in the measurement of the liability include: i) fixed payments, less any lease incentive receivable; ii) variable lease payments; iii) residual value guarantees; iv) exercise price of a purchase option; and v) penalties for lease termination.

 

The lease liability is increased to reflect the accumulation of interest and is reduced by the lease payments made. In addition, the carrying amount of the liability is measured again if there is a modification in the terms of the lease (changes in the term, in the amount of payments or in the evaluation of an option to buy or change in the amounts to be paid). Interest expense is recognized as an expense and is distributed among the periods that constitute the lease period, so that a constant interest rate is obtained in each year on the outstanding balance of the lease liability.

 

Short-term leases, equal to or less than one year, or lease of low-value assets are excepted from the application of the recognition criteria described above, recording the payments associated with the lease as an expense in a linear manner throughout the lease term. The Company does not act as lessor.

 

2.19Deposits 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.

 

2.20Revenue recognition

 

The Company recognizes revenue when control over a good or service is transferred to the client. Control refers to the ability of the client to direct the use and obtain substantially all the benefits of the goods and services exchanged. Revenue is measured based on the consideration to which it is expected to be entitled for such transfer of control, excluding amounts collected on behalf of third parties.

 

Management has defined the following indicators for revenue recognition, applying the five-step model established by IFRS 15 “Revenue from contracts with customers”: 1) Identification of the contract with the customer; 2) Identification of performance obligations; 3) Determination of the transaction price; 4) Assignment of the transaction price; and 5) Recognition of revenue.

 

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All the above conditions are met at the time the products are delivered to the customer. Net sales reflect the units delivered at list price, net of promotions, discounts and taxes.

 

The revenue recognition criteria of the good provided by Embotelladora Andina corresponds to a single performance obligation that transfers the product to be received to the customer.

 

2.21Contributions 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.

 

2.22Dividend 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, unless otherwise agreed in the respective meeting, by the unanimity of the issued shares.

 

Interim and final dividends are recorded at the time of their approval by the competent body, which in the first case is normally the Board of Directors of the Company, while in the second case it is the responsibility of General Shareholders’ Meeting.

 

2.23Critical  accounting estimates and judgments

 

The Company makes estimates and judgments concerning the future. Actual results may differ from previously estimated amounts.

 

In preparing the consolidated financial statements, the Company has used certain judgments and estimates made to quantify some of the assets, liabilities, income, expenses and commitments.

 

Following is an explanation of the estimates and judgments that might have a material impact on future financial statements.

 

2.23.1Impairment of goodwill and intangible assets with indefinite useful lives

 

The Company tests 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 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.

 

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2.23.2Fair 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.

 

2.23.3Allowances for doubtful accounts

 

The Group uses a provision matrix to calculate expected credit losses for trade receivables. Provisions are based on due days for various groups of customer segments that have similar loss patterns (i.e. by geography region, product type, customer type and rating, and credit letter coverage and other forms of credit insurance).

 

The provision matrix is initially based on the historically observed non-compliance rates for the Group. The Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. For example, if expected economic conditions (i.e. gross domestic product) are expected to deteriorate over the next year, which can lead to more non-compliances in the industry, historical default rates are adjusted. At each closing date, the observed historical default rates are updated and changes in prospective estimates are analyzed. The assessment of the correlation between observed historical default rates, expected economic conditions and expected credit losses are significant estimates.

 

2.23.4Useful 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 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.

 

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2.23.5Liabilities 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 uses professional judgment 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.

 

2.24.1New Standards, Interpretations and Amendments for annual periods beginning on or after January 1, 2020.

 

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.

 

  Standards and Interpretations   Mandatory application date
Conceptual Framework Revised Conceptual Framework   January 1, 2020

 

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. Changes in the Conceptual Framework may affect the application of IFRS when no standard applies to a given transaction or event. Application of the revised Conceptual Framework did not have significant impacts on the financial statements of the Company.

 

Amendments to IFRS which have been issued and are in effect beginning January 1, 2020 are detailed below:

 

  Amendments   Implementation date
IFRS 3 Definition of a business   January 1,2020
IAS 1 and IAS 8 Definition of material   January 1,2020
IFRS 9, IAS 39 and IFRS 7 Reference Interest Rate Reform   January 1,2020
IFRS 16 COVID-19-Related Rent Concessions   January 1,2020

 

IFRS 3 Business Combinations - Definition of Business

 

The IASB issued amendments to the definition of business in IFRS 3 Business Combinations, to help entities determine whether an acquired set of activities and assets is a business or not. The IASB clarifies the minimum requirements for defining a business, eliminates the assessment of whether market participants are able to replace any missing elements, includes guidance to help entities assess whether a process acquired is substantial, reduces the definitions of a business and products and introduces an optional fair value concentration test.

 

Amendments have to be applied to business combinations or asset acquisitions that occur on or after the start of the first annual reporting period beginning on or after January 1, 2020. As a result, entities do not have to review transactions that occurred in previous periods. Early application is permitted and must be disclosed.

 

Because the amendments apply prospectively to transactions or other events that occur on or after the date of the first application, most entities will probably not be affected by these amendments in the transition. However, those entities that consider the acquisition of a set of activities and assets after implementing the amendments must first update their accounting policies in a timely manner.

 

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Amendments may also be relevant in other areas of IFRS (e.g. they may be relevant when a controller loses control of a subsidiary and has anticipated the sale or contribution of assets between an investor and its associate or joint venture) (Amendments to IFRS 10 and IAS 28).

 

Company management performs the impact assessment of the previously mentioned amendments once these types of transactions take place.

 

IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors – Definition of Material

 

In October 2018, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, changes in accounting estimates and errors, to align the definition of "material" in all standards and to clarify certain aspects of the definition. The new definition states that information is material if when omitted, misstated, or reasonably hidden could be expected to influence decisions that primary users of general-purpose of the financial statements make based on those financial statements, which provide financial information about a specific reporting entity.

 

Amendments should be applied prospectively. Early application is permitted and must be disclosed.

 

While amendments to the definition of material are not expected to have a significant impact on an entity's financial statements, the introduction of the term "hide" in the definition could impact the way materiality judgments are made, increasing the importance of how information is communicated and organized in the financial statements.

 

Company management performs the impact assessment of the previously mentioned amendments once these types of transactions take place.

 

IFRS 9, IAS 39 and IFRS 7 Reference Interest Rate Reform

 

In September 2019, the IASB issued amendments to IFRS 9, IAS 39 and IFRS 7, which concludes the first stage of its work to respond to the effects of the reform of interbank offer rate (IBOR) in financial information. The amendments provide temporary exceptions that allow hedge accounting to continue during the uncertain period, prior to replacing existing benchmark interest rates with near-risk free alternative interest rates.

 

Amendments should be applied retrospectively. However, any hedge relationship that has previously been discontinued cannot be reinstated with the application of these amendments, nor can a hedge relationship be designated using the retrospect reasoning benefit. Early application is permitted and must be disclosed.

 

The Company will perform an impact assessment of the amendment once it takes effect.

 

IFRS 16 COVID-19-Related Rent Concessions

 

In May 2020, the IASB issued an amendment to IFRS 16 Leases to provide relief for lessees in the application of IFRS 16 guidance regarding lease modifications due to rent concessions occurring as a direct consequence of the Covid-19 pandemic. The amendment does not affect lessors.

 

As a practical solution, a lessee may choose not to assess whether the Covid-19-related rent reduction granted by a lessor is a modification of the lease. A lessee making this choice will recognize changes in lease payments from Covid-19-related rent reductions in the same way as it would recognize the change under IFRS 16 as if such a change was not a modification of the lease.

 

A lessee shall apply this practical solution retroactively, recognizing the cumulative effect of the initial application of the amendment as an adjustment in the initial balance of accumulated results (or another component of equity, as appropriate) at the beginning of the annual reporting period in which the lessee first applies the amendment.

 

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A lessee will apply this amendment for annual periods beginning on or after June 1, 2020. Early application is permitted, including in the financial statements not authorized for publication as of May 28, 2020.

 

Company management has not implemented this amendment because it has no Covid-19-related lease modifications.

 

2.24.2  New Accounting Standards, Interpretations and Amendments with effective application for annual periods beginning on or after January 1, 2020.

 

Standards and interpretations, as well as IFRS amendments, which have been issued, but have still not become effective as of the date of these financial statements are set forth below. The Company has not made an early adoption of these standards.

 

  Standards and Interpretations   Mandator y application date
IFRS 17 Insurance Contracts   January 1, 2021

 

IFRS 17 - Insurance Contracts

 

In May 2017, the IASB issued IFRS 17 Insurance Contracts, a new accounting standard for insurance contracts that covers recognition, measurement, presentation and disclosure. Once it enters into force it will replace IFRS 4 Insurance Contracts issued in 2005. The new rule applies to all types of insurance contracts, regardless of the type of entity that issues them.

 

In June 2019, the IASB issued a draft IFRS 17 standard with proposed amendments. The IASB proposed 12 specific amendments in eight areas, which includes deferring the application date of IFRS 17 for two years, including two additional years of deferral for the application of IFRS 9 to qualified insurance entities (i.e. qualified insurers may apply IFRS 17 and IFRS 9 for the first time in periods beginning on or after January 1, 2023).

 

In March 2020, the IASB completed its deliberations on the draft IFRS 17 standard and aims to. issue the amendments by mid-2020.

 

Amendments to IFRS that have been issued to become effective in the near future are detailed below.

 

  Amendments   Date of application
IAS 1 Classification of liabilities as currents or non-current   January 1, 2021
IFRS 3 Reference to the Conceptual Framework   January 1, 2022
IAS 16 Property, Plant and Equipment — Proceeds before Intended Use   January 1, 2022
IAS 37 Onerous Contracts—Cost of Fulfilling a Contract   January 1, 2022
IFRS 10 and IAS 28       Consolidated Financial Statements - sale or contribution of assets between an investor and its associate or joint venture   To be determined

 

IAS 1 Presentation of Financial Statements - Classification of liabilities as current or non-current

 

In June 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify requirements for the classification of liabilities as current or non-current.

 

The amendments are effective for periods beginning on or after January 1, 2022. Entities should carefully consider whether there are any aspects of the amendments suggesting that the terms of their existing loan agreements should be renegotiated. In this context, it is important to stress that amendments must be implemented retrospectively

 

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IFRS 3 Reference to the Conceptual Framework

 

In May 2020, the IASB issued amendments to IFRS 3 Business Combinations – Reference to the Conceptual Framework. These amendments are intended to replace the reference to an earlier version of the IASB Conceptual Framework (1989 Framework) with a reference to the current version issued in March 2018 without significantly changing its requirements.

 

The amendments shall be effective for periods beginning on or after January 1, 2022 and should be applied retrospectively. Early application is permitted if, at the same time or before, an entity also applies all amendments contained in the amendments to the Conceptual Framework References of the IFRS Standards issued in March 2018.

 

The amendments will provide consistency in financial information and avoid potential confusion by having more than one version of the Conceptual Framework in use.

 

IAS 16 Property, Plant and Equipment — Proceeds before Intended Use

 

The amendment prohibits deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the cost of producing those items, in profit or loss for the period, pursuant to applicable standards.

 

The amendment shall be effective for periods beginning on or after January 1, 2022. The amendment should be applied retrospectively only property, plant and equipment items available for use on or after the beginning of the first period presented in the financial statements in which the entity first applies the amendment.

 

IAS 37 Onerous Contracts—Cost of Fulfilling a Contract

 

In May 2020, the IASB issued amendments to IAS 37 Provisions, Contingent Liabilities, and Contingent Assets to specify the costs an entity needs to include when assessing whether a contract is onerous, or it generates losses.

 

The amendment shall be effective for periods beginning on or after January 1, 2022. The amendment should be applied retrospectively to existing contracts at the beginning of the annual reporting period in which the entity first applies the amendment (date of initial application). Early application is permitted and must be disclosed.

 

The amendments are intended to provide clarity and help ensure consistent implementation of the standard. Entities that previously applied the incremental cost approach will see an increase in provisions to reflect the inclusion of costs directly related to contract activities, while entities that previously recognized contractual loss provisions using the guidance to the previous standard, IAS 11 Construction Contracts, should exclude the allocation of indirect costs from their provisions.

 

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

 

Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011) address a recognized inconsistency between IFRS 10 requirements and IAS 28 (2011) requirements in the treatment of the sale or contribution of assets between an investor and its associate or joint venture. The amendments, issued in September 2014, state that when the transaction involves a business (whether it is in a subsidiary or not) all gains, or losses generated are recognized. 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 mandatory implementation date of these amendments is yet to be determined because the IASB is awaiting the results of its research project on accounting according to the equity method of accounting. These amendments must be applied retrospectively, and early adoption is allowed, which must be disclosed.

 

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Company management will perform an impact assessment of the above described amendments once they become effective.

 

3 – FINANCIAL REPORTING BY SEGMENT

 

The Company provides financial 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 revenue associated with the Corporate Officer were assigned to the operation in Chile in the soft drinks segment because Chile is the country that manages and pays the corporate expenses, which would also be substantially incurred, regardless of the existence of subsidiaries abroad.

 

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

 

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

 

For the period ended June 30, 2020 

Chile

Operation

   Argentina Operation  

Brazil

Operation

   Paraguay Operation   Intercompany Eliminations  Consolidated total  
Net sales   283,342,395    167,367,959    282,520,372    77,425,200    (1,360,010 )  809,295,916  
Cost of sales   (168,165,784)   (91,126,705)   (184,852,736)   (43,145,885)   1,360,010   (485,931,100 )
Distribution expenses   (29,014,394)   (25,405,721)   (18,085,542)   (4,316,984)   -   (76,822,641 )
Administrative expenses   (58,858,736)   (38,838,712)   (45,251,418)   (12,594,155)   -   (155,543,021 )
Finance income   2,132,895    547,912    5,839,519    117,114    -   8,637,440  
Financial expense   (8,420,098)   (159,110)   (14,914,022)   -    -   (23,493,230 )
Financial expenses, net (*)   (6,287,203)   388,802    (9,074,503)   117,114    -  

(14,855,790

)
Share of entity in income of associates accounted for using the equity method, total   (65,714)   -    1,340,354    -    -   1,274,640  
Income tax expense   2,259,061    (3,999,976)   (6,178,224)   (1,508,212)   -   (9,427,351 )
Other income(expenses)   (10,488,757)   (5,242,217)   (3,393,226)   205,947    -   (18,918,253 )
Net income of the segment reported   12,720,868    3,143,430    17,025,077    16,183,025    -   49,072,400  
                               
Depreciation and amortization   22,061,576    12,226,598    14,524,538    5,312,324    -   54,125,036  
                               
Current assets   413,550,651    59,101,811    149,150,699    55,035,712    -   676,838,873  
Non-current assets   649,725,479    169,805,176    713,371,521    256,420,821    -   1,789,322,997  
Segment assets, total   1,063,276,130    228,906,987    862,522,220    311,456,533    -  

2,466,161,870

 
                               
Carrying amount in associates and joint ventures accounted for using the equity method, total   49,845,360    -    41,793,468    -    -   91,638,828  
                               
Segment disbursements of non-monetary assets   27,652,078    8,724,036    8,932,089    7,672,608    -   52,980,811  
                               
Current liabilities   142,714,726    60,525,274    83,687,739    21,464,026    -   308,391,765  
Non-current liabilities   777,515,821    13,970,194    511,739,682    16,786,866    -   1,320,012,563  
Segment liabilities, total   920,230,547    74,495,468    595,427,421    38,250,892    -   1,628,404,328  
                               
Cash flows (used in) provided by in Operating Activities   39,242,209    1,457,010    29,386,503    26,372,083       96,457,805  
Cash flows (used in) provided by Investing Activities   (23,663,467)   (8,841,150)   (8,932,089)   (7,672,608)   -   (49,109,314 )
Cash flows (used in) provided by Financing Activities   172,659,482    (298,817)   (1,719,117)   (231,034)      170,410,514  
                               

 

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

 

29

 

 

 

 

For the period ended June 30, 2019 

Chile

Operation

   Argentina Operation  

Brazil

Operation

   Paraguay Operation   Intercompany Eliminations  Consolidated total  
Net sales   289,633,297    193,174,594    286,698,840    71,895,957    (1,222,238 )  840,180,450  
Cost of sales   (175,119,020)   (104,786,160)   (176,233,594)   (41,757,661)   1,222,238   (496,674,197 )
Distribution expenses   (29,077,603)   (26,211,429)   (20,816,556)   (4,080,611)   -   (80,186,199 )
Administrative expenses   (59,155,568)   (42,672,920)   (45,679,738)   (11,058,279)   -   (158,566,505 )
Finance income   793,006    587,921    1,398,903    131,026    -   2,910,856  
Financial expense   (6,474,998)   (120,040)   (15,724,818)   -    -   (22,319,856 )
Financial expenses, net (*)   (5,681,992)   467,881    (14,325,915)   131,026    -   (19,409,000 )
Share of entity in income of associates accounted for using the equity method, total   (518,389)   -    526,274    -    -   7,885  
Income tax expense   (5,514,532)   (1,418,417)   (8,018,269)   (2,799,203)   -   (17,750,421 )
Other income(expenses)   (4,816,832)   (1,094,507)   415,274    (123,962)   -   (5,620,027 )
Net income of the segment reported   9,749,361    17,459,042    22,566,316    12,207,267    -   61,981,986  
                               
Depreciation and amortization   23,010,728    11,980,571    14,307,664    4,596,277    -   53,895,240  
                               
Current assets   184,053,952    69,172,630    141,324,277    30,778,484    -   425,329,343  
Non-current assets   657,776,765    169,111,054    663,545,990    230,588,598    -   1,721,022,407  
Segment assets, total   841,830,717    238,283,684    804,870,267    261,367,082    -   2,146,351,750  
                               
Carrying amount in associates and joint ventures accounted for using the equity method, total   49,237,481         51,950,215    -    -   101,187,696  
                               
Segment disbursements of non-monetary assets   -    -    -    -    -   -  
                               
Current liabilities   151,073,828    54,513,494    105,841,776    27,755,695    -   339,184,793  
Non-current liabilities   487,601,264    15,703,003    414,967,231    15,227,136    -   933,498,634  
Segment liabilities, total   638,675,092    70,216,497    520,809,007    42,982,831    -   1,272,683,427  
                               
Cash flows (used in) provided by in Operating Activities   41,910,504    14,380,529    26,701,745    5,741,258    -    88,734,036  
Cash flows (used in) provided by Investing Activities   (30,432,470)   (12,843,664)   (8,031,659)   (6,008,599)   -    (57,316,392 )
Cash flows (used in) provided by Financing Activities   (45,522,143)   (264,641)   (4,338,417)   (127,636)       (50,252,837 )
                        -       

 

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

 

30

 

 

 

 

4 – CASH AND CASH EQUIVALENTS

 

The composition of Cash and cash equivalents is as follows:

 

By item  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Cash   259,492    2,331,714 
Bank balances   59,501,012    51,176,617 
Other fixed rate instruments   311,344,745    104,059,655 
Total cash and cash equivalents   371,105,249    157,567,986 

 

Time deposits expire in less than three months from their acquisition date and accrue market interest for this type of short-term investment. Other fixed-income instruments mainly correspond to purchase transactions with the resale of debt instruments with a maturity of less than 90 days, from the date of investment. There are no restrictions for significant amounts available to cash.

 

By currency  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
USD   19,103,837    16,733,249 
EUR   361,657    9,722 
ARS   860,791    3,830,199 
CLP   267,179,349    78,420,966 
PGY   26,914,266    12,383,873 
BRL   56,685,349    46,189,977 
Cash and cash equivalents   371,105,249    157,567,986 

 

5 – OTHER CURRENT AND NON-CURRENT FINANCIAL ASSETS

 

The composition of other financial assets is as follows:

 

   Balance 
   Current   Non-current 
Other financial assets  06.30.2020   12.31.2019   06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Financial assets measured at amortized cost (1)   11,103    30,073    1,216,865    1,216,865 
Financial assets at fair value (2)   1,416,422    317,205    166,910,595    98,918,457 
Other financial assets measured at amortized cost (3)   -    -    11,293,694    10,648,989 
Total   1,427,525    347,278    179,421,154    110,784,311 

 

(1)Financial instrument that does not meet the definition of cash equivalents as defined in Note 2.13.
(2)Market value of hedging instrument. See detail in Note 22
(3)Correspond to the rights in the Argentinean company Alimentos de Soya S.A., which are framed in the purchase of the "AdeS" brand managed by The Coca-Cola Company at the end of 2016.

 

31

 

 

 

 

6 – OTHER CURRENT AND NON-CURRENT NON-FINANCIAL ASSETS

 

The composition of other non-financial assets is as follows:

 

   Balance 
   Current   Non-current 
Other non-financial assets  06.30.2020   12.31.2019   06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Prepaid expenses   11,605,476    11,242,456    417,441    595,045 
Tax credit remainder (1)   1,324,063    180,695    77,778,162    103,540,639 
Guaranty deposit   16,323    422    -    - 
Deposit in courts   -    -    16,125,823    19,226,030 
Others (2)   18,818,578    4,765,392    2,275,170    2,274,436 
Total   31,764,440    16,188,965    96,596,596    125,636,150 

 

(1) In November 2006, Rio de Janeiro Refrescos Ltda. ("RJR") filed a court order No. 0021799-23.2006.4.02.5101 seeking recognition of the right to exclude ICMS (Tax on Commerce and Services) from the PIS (Program of Social Integration) and COFINS (Contribution for the Financing of Social Security) calculation base, as well as recognition of the right to obtain reimbursement of amounts unduly collected since November 14, 2001, duly restated using the Selic interest rate. On May 20, 2019, the ruling favoring RJR became final, allowing the recovery of amounts overpaid from November 14, 2001 to August 2017. It is worth noting that in September 2017, RJR had already obtained a Security Mandate, which granted it the right to exclude, from that date, the ICMS from the PIS and COFINS calculation base.

 

The company took steps to assess the total amount of the credit at issue for the period of unduly collection of taxes from November 2001 to August 2017, totaling CLP 103,540 million (BRL 567 million, of which BRL 357 million corresponds to capital and BRL 210 million to interest and monetary restatement. These amounts were recorded as of December 31, 2019. In addition, the company acknowledged the indirect costs (attorneys' fees, consulting, auditing, indirect taxes and other obligations) resulting from the recognition of the right acquired in court, totaling BRL 161 million.

 

The payment of income tax occurs when liquidating the credit, thus the respective deferred tax liability recorded was CLP 25,200 million (BRL 138 million).

 

Compañía de Bebidas Ipiranga ("CBI") acquired in September 2013, also filed a court order No. 0014022-71.2000.4.03.6102 in order to recognize the same issue as the one previously described for RJR. In September 2019, the ruling favoring CBI became final, allowing the recovery of the amounts overpaid from September 12, 1990 to December 1, 2013 (date when CBI was incorporated by RJR). CBI's credit will be generated in the name of RJR, however, pursuant to the contractual clause ("Subscription Agreement for Shares and Exhibits"), as soon as collected by RJR, this payment should be immediately paid to former CBI shareholders (supervention favoring former CBI shareholders).

 

In addition, RJR has an associate called Sorocaba Refrescos SA ("Sorocaba"), where it has a 40% shareholding in the capital, which also filed a court order seeking recognition of the right to the same issue as RJR's action. On June 13, 2019, the ruling favoring Sorocaba became final, allowing the recovery of the amounts overpaid from July 5, 1992 until the date on which the decision became final. As of June 30, 2020 the impacts were recognized under RJR’s results derived from its participation in Sorocaba.

 

Based on the information available for the CBI lawsuits, the Company concluded that there was not enough documentary support to say that the credit is almost certain for the tax authorities and therefore, did not record the respective asset in the booking accounts.

 

(2)       Other non-financial assets are mainly composed of advances to suppliers

 

32

 

 

 

 

7 – TRADE AND OTHER RECEIVABLES

 

The composition of trade and other receivables is as follows:

 

   Balance 
   Current   Non-current 
Trade debtors and other accounts receivable, Net  06.30.2020   12.31.2019   06.30.2020   12.31.2019 
  

CLP

(000’s)

  

CLP

(000’s)

  

CLP

(000’s)

   CLP
(000’s)
 
Trade debtors   81,911,306    150,509,528    -    - 
Other debtors   43,704,370    39,620,246    6,687    466,007 
Other accounts receivable   1,651,120    947,814    56,751    57,762 
Total   127,266,796    191,077,588    63,438    523,769 

 

   Balance 
   Current   Non-current 
Trade debtors and other accounts receivable, Gross  06.30.2020   12.31.2019   06.30.2020   12.31.2019 
  

CLP

(000’s) 

  

CLP

(000’s) 

  

CLP

(000’s)

   CLP
(000’s)
 
Trade debtors   87,183,154    153,654,549    -    - 
Other debtors   46,719,200    42,719,679    6,687    466,007 
Other accounts receivable   1,905,471    1,196,347    56,751    57,762 
Total   135,807,825    197,570,575    63,438    523,769 

 

The stratification of the portfolio is as follows:

 

   Balance 
Current trade debtors without impairment impact  06.30.2020
CLP (000’s)
   12.31.2019
CLP (000’s)
 
Less than one month   76,923,722    148,150,717 
Between one and three months   3,440,353    1,872,144 
Between three and six months   3,564,882    838,277 
Between six and eight months   402,603    482,596 
Older than eight months   2,851,594    2,310,815 
Total   87,183,154    153,654,549 

 

The Company has approximately 266,000 clients, which may have balances in the different sections of the stratification. The number of clients is distributed geographically with 64,000 in Chile, 85,000 in Brazil, 59,000 in Argentina and 58,000 in Paraguay.

 

33

 

 

 

 

The movement in the allowance for expected credit losses is presented below:

 

   06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Opening balance   6,492,987    6,298,208 
Increase (decrease)   2,436,053    1,762,246 
Provision reversal   (375,969)   (1,184,953)
Increases (decrease) for changes of foreign currency   (12,042)   (382,514)
Sub – total movements   2,048,042    194,779 
Ending balance   8,541,029    6,492,987 

 

8 – INVENTORIES

 

The composition of inventories is detailed as follows:

 

Details  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Raw materials (1)   84,972,683    93,524,911 
Finished goods   23,588,864    32,337,670 
Spare parts and supplies   22,319,887    20,769,626 
Work in progress   133,719    567,973 
Other inventories   4,538,134    3,625,488 
Obsolescence provision (2)   (2,697,445)   (3,184,444)
Total   132,855,842    147,641,224 

 

The cost of inventory is recognized as cost of sales which amounts to CLP 485,931,100 thousand and CLP 496,674,197 thousand as of June 30, 2020 and 2019, 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.

 

34

 

 

 

  

9 – TAX ASSETS AND LIABILITIES

 

The composition of current tax accounts receivable is the following:

 

Tax assets  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Tax credits (1)   5,161,640    9,815,294 
Total   5,161,640    9,815,294 

 

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

 

The composition of current tax accounts payable is the following:

 

Tax liabilities  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Income tax expense   1,826,682    6,762,267 
Total   1,826,682    6,762,267 

 

10 – INCOME TAX EXPENSE AND DEFERRED TAXES

  

10.1 Income tax expense

 

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

 

Details 

 

06.30.2020

  

 

06.30.2019

 
   CLP (000’s)   CLP (000’s) 
Current income tax expense   17,214,103    17,402,081 
Current tax adjustment previous period   (647,743)   195,747 
Foreign dividends withholding expense   2,079,416    1,661,607 
Other current tax expense (income)   (681,569)   (209,530)
Current income tax expense   17,964,207    19,049,905 
Expense (income) for the creation and reversal of temporary differences of deferred tax and others   (8,536,856)   (1,299,484)
Expense (income) for deferred taxes   (8,536,856)   (1,299,484)
Total income tax expense   9,427,351    17,750,421 

  

35

 

  

 

 

The distribution of national and foreign tax expenditure is as follows:

 

Income taxes  06.30.2020   06.30.2019 
   CLP (000’s)   CLP (000’s) 
Current taxes          
Foreign   (16,123,000)   (10,937,042)
National   (1,841,207)   (8,112,863)
Current tax expense   (17,964,207)   (19,049,905)
Deferred taxes          
Foreign   5,070,588    (1,298,846)
National   3,466,268    2,598,330 
Deferred tax expense   8,536,856    1,299,484 
Income tax expense   (9,427,351)   (17,750,421)

  

The reconciliation of the tax expense using the statutory rate with the tax expense using the effective rate is as follows:

  

Reconciliation of effective rate  06.30.2020   06.30.2019 
   CLP (000’s)   CLP (000’s) 
Net income before taxes   58,499,751    79,732,407 
Tax expense at legal rate (27.0%)   (15,794,933)   (21,527,750)
Effect of a different tax rate in other jurisdictions   1,182,571    (233,863)
Permanent differences:          
Non-taxable revenues   1,113,420    4,042,581 
Non-deductible expenses   (4,690,947)   (869,676)
Foreign subsidiaries tax withholding expense and other legal tax debits and credits   8,762,538    838,287 
Adjustments to tax expense   5,185,011    4,011,192 
Tax expense at effective rate   (9,427,351)   (17,750,421)
Effective rate   16.1%,   22.3%,

  

The applicable income tax rates in each of the jurisdictions where the Company operates are the following:

 

   Rate 
Country  2020   2019 
Chile   27.0%   27.0%
Brazil   34.0%   34.0%
Argentina   30.0%   30.0%
Paraguay   10.0%   10.0%

   

36

 

 

 

 

10.2       Deferred income taxes

 

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

  

   06.30.2020   12.31.2019 
Temporary differences  Assets   Liabilities   Assets   Liabilities 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Property, plant and equipment   5,609,380    47,501,644    5,445,810    51,414,971 
Obsolescence provision   1,305,540    -    1,588,563    - 
ICMS exclusion credit   -    20,540,839    -    25,651,794 
Employee benefits   1,855,239    7,723    5,418,561    12,157 
Post-employment benefits   144,382    792,198    148,853    787,576 
Tax loss carry forwards (1)   14,941,563    -    7,607,813    - 
Tax goodwill Brazil   4,977,285    -    10,341,033    - 
Contingency provision   27,705,553    -    34,109,458    - 
Foreign Exchange differences (2)   13,058,830    -    9,284,450    - 
Allowance for doubtful accounts   911,857    -    756,895    - 
Assets and liabilities for placement of bonds   387,163    2,675,159    390,163    1,187,649 
Lease liabilities   1,725,404    -    2,242,439    - 
Inventories   891,940    -    447,192    - 
Distribution rights   -    150,449,075    -    163,107,412 
Hedging derivatives   27,858,227    -    -    - 
Others   4,489,809    7,929,572    -    3,705,078 
Subtotal   105,862,172    229,896,210    77,781,230    245,866,637 
Total assets and liabilities net   1,979,386    126,013,424    1,364,340    169,449,747 

  

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

 

The movement in deferred income tax accounts is as follows:

 

Movement   06.30.2020     12.31.2019  
    CLP (000’s)     CLP (000’s)  
Opening Balance     168,085,407       145,245,948  
Increase (decrease) in deferred tax     (8,536,856 )     20,905,005  
Increase (decrease) due to foreign currency translation (*)     (35,514,513 )     1,934,454  
Total movements     (44,051,369 )     22,839,459  
Ending balance     124,034,038       168,085,407  

 

(*)Includes IAS 29 effect, due to inflation in Argentina

 

37

 

 

 

 

11 – PROPERTY, PLANT AND EQUIPMENT

 

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

 

Property, plant and equipment, gross  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Construction in progress   29,570,755    27,290,581 
Land   98,725,872    104,196,754 
Buildings   281,007,212    299,282,674 
Plant and equipment   557,384,001    571,154,695 
Information technology equipment   23,951,622    23,912,963 
Fixed installations and accessories   47,838,413    46,062,659 
Vehicles   47,651,213    55,128,493 
Leasehold improvements   172,440    214,886 
Rights of use (1)   38,261,309    40,498,400 
Other properties, plant and equipment (2)   427,258,698    452,600,945 
Total Property, plant and equipment, gross   1,551,821,535    1,620,343,050 

 

Accumulated depreciation of

Property, plant and equipment

  06.30.2020  

12.31.2019

 
   CLP (000’s)   CLP (000’s) 
Buildings   (87,241,283)   (87,308,899)
Plant and equipment   (390,852,111)   (385,801,471)
Information technology equipment   (19,589,645)   (18,911,118)
Fixed installations and accessories   (28,600,085)   (26,219,378)
Vehicles   (29,766,069)   (33,167,346)
Leasehold improvements   (148,087)   (144,865)
Rights of use (1)   (12,944,451)   (8,254,568)
Other properties, plant and equipment (2)   (317,601,182)   (337,816,542)
Total accumulated depreciation   (886,742,913)   (897,624,187)
           
Total Property, plant and equipment, net   665,078,622    722,718,863 

 

(1) For adoption of IFRS 16. See details of underlying assets in Note 11.1

(2) The net balance of each of these categories is presented below:

 

 

Other Property, plant and equipment, net  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Bottles   42,340,665    44,071,742 
Marketing and promotional assets   53,123,789    57,442,154 
Other Property, plant and equipment   14,193,062    13,270,507 
Total   109,657,516    114,784,403 

 

38

 

 

 

 

11.1       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
   Others   Right-of-use,
net
   Property,
plant &
equipment,
net
 
   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Opening balance at January 1, 2020   27,290,581    104,196,754    211,973,775    185,353,224    5,001,845    19,843,281    21,961,147    70,021    114,784,403    32,243,832    722,718,863 
Additions   14,003,091    -    142,735    3,592,055    18,642    -    237,733    -    18,503,407    -    36,497,663 
Additions right-of-use (1)   -    -    -    -    -    -    -    -    -    446,323    446,323 
Divestitures   -    -    (625)   (14,783)   (990)   -    (13,086)   -    (2,821,179)   -    (2,850,663)
Transfers between items of Property, plant and equipment   (10,039,844)   -    1,036,171    3,123,298    191,870    477,793    579,043    -    4,631,669    -    - 
Right-of-use transfers   (135,054)   -    -    -    -    -    -    -    -    135,054    - 
Depreciation expense   -    -    (3,989,131)   (18,167,597)   (1,042,400)   (1,581,820)   (2,931,382)   (37,808)   (20,761,501)   -    (48,511,639)
Amortization   -    -    -    -    -    -    -    -    -    (4,197,730)   (4,197,730)
Increase (decrease) to due foreign currency translation differences   (161,003)   (5,532,110)   (16,307,098)   (6,173,262)   (253,259)   455,853    (1,949,697)   (7,863)   (3,456,531)   (3,303,538)   (36,688,508)
Other increases (decreases) (2)   (1,387,016)   61,228    910,102    (1,181,045)   446,269    43,221    1,386    3    (1,222,752)   (7,083)   (2,335,687)
Total movements   2,280,174    (5,470,882)   (18,207,846)   (18,821,334)   (639,868)   (604,953)   (4,076,003)   (45,668)   (5,126,887)   (6,926,974)   (57,640,241)
Ending balance al 06.30.2020   29,570,755    98,725,872    193,765,929    166,531,890    4,361,977    19,238,328    17,885,144    24,353    109,657,516    25,316,858    665,078,622 

 

(1)For IFRS 16 adoption. See detail of underlying assets in Note 11.1
(2)Corresponds mainly to the effect of adopting IAS 29 in Argentina

 

Right of use assets as of June 30, 2020 is composed as follows:

 

Right-of-use  Gross asset   Accumulated
depreciation
   Net asset 
   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Constructions   1,448,816    (467,320)   981,496 
Plant and Equipment   27,100,252    (8,051,782)   19,048,470 
IT Equipment   240,701    (96,997)   143,704 
Motor vehicles   4,805,754    (2,549,082)   2,256,672 
Others   4,665,786    (1,779,270)   2,886,516 
Total   38,261,309    (12,944,451)   25,316,858 

 

Lease liabilities interest expense at the closing of the period reached CLP 982,884 thousand

 

39

 

 

 

 

   Construction
in progress
   Land   Buildings,
net
   Plant and
equipment,
net
   IT
equipment,
net
   Fixed
facilities and
accessories,
net
   Vehicles,
net
   Leasehold
improvements,
net
   Others   Right-of-use,
net
   Property,
plant &
equipment,
net
 
   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Opening balance at January 1, 2019   26,048,670    100,479,196    214,160,351    207,403,985    5,184,721    21,057,169    21,798,601    32,177    114,606,098    -    710,770,968 
Additions   49,134,461    -    749,800    11,582,259    675,974    7,271    (342,001)   1,309    32,640,210    -    94,449,283 
Additions right-of-use (1)   -    -    -    -    -    -    -    -    -    21,721,728    21,721,728 
Divestitures   (8,761)   -    (5,902)   (352,204)   (977)   (8,911)   (52,095)   (155)   (1,135,304)   -    (1,564,309)
Transfers between items of property, plant and equipment   (48,358,902)   2,268,316    430,971    20,735,065    1,019,048    1,379,012    7,650,847    65,250    14,810,393    -    - 
Right-of-use transfers (1)   (25,991)   -    (266,007)   (13,788,120)   (23,712)   -    (1,181,465)   -    (2,520,405)   17,805,700    - 
Depreciation expense   -    -    (7,681,481)   (37,572,910)   (1,949,851)   (2,977,512)   (6,267,039)   (30,737)   (42,410,016)        (98,889,546)
Amortization (2)   -    -    -    -    -    -    -    -    -    (8,254,568)   (8,254,568)
Increase (decrease) to due foreign currency translation differences   688,063    1,529,526    4,685,319    3,228,519    83,757    386,253    464,563    2,177    2,216,555    1,024,539    14,309,271 
Other increase (decrease) (3)   (186,959)   (80,284)   (99,276)   (5,883,370)   12,885    (1)   (110,264)   -    (3,423,128)   (53,567)   (9,823,964)
Total movements   1,241,911    3,717,558    (2,186,576)   (22,050,761)   (182,876)   (1,213,888)   162,546    37,844    178,305    32,243,832    11,947,895 
Ending balance at 12.31.2019   27,290,581    104,196,754    211,973,775    185,353,224    5,001,845    19,843,281    21,961,147    70,021    114,784,403    32,243,832    722,718,863 

 

(1)By adoption of IFRS 16.
(2)Of the total of CLP 8,254,468 thousand recorded as amortization for the current period, CLP 5,994,037 thousand correspond to right-of-use amortization arising from the adoption of the IFRS, effective beginning on January 1, 2019. The remaining CLP 2,260,531 thousand correspond to depreciation (today amortization) of goods acquired under the financial lease method, which until December 31, 2018 were classified and valued pursuant to the accounting criteria of Property, plant and equipment.
(3)Mainly correspond to the effects of adopting IAS 29 in Argentina.

 

40

 

 

 

 

12 – RELATED PARTIES

 

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

 

12.1       Accounts receivable:

 

               06.30.2020   12.31.2019 
Tax ID No.  Company  Relationship  Country  Currency  Current   Non-Current   Current   Non-Current 
               CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
96.891.720-K  Embonor S.A.  Shareholder related  Chile  CLP   1,729,915    -    6,589,539    - 
96.714.870-9  Coca-Cola de Chile S.A.  Shareholder  Chile  CLP   14,839    166,752    14,839    283,118 
Foreign  Coca-Cola de Argentina  Director related  Argentina  ARS   3,170,082    -    1,203,389    - 
Foreign  Alimentos de Soja S.A.U.  Shareholder related  Argentina  ARS   351,964    -    428,802    - 
96.517.210-2  Embotelladora Iquique S.A.  Shareholder related  Chile  CLP   68,940    -    278,176    - 
86.881.400-4  Envases CMF S.A.  Associate  Chile  CLP   11    -    217,510    - 
96.919.980-7  Cervecería Austral S.A.  Director related  Chile  USD   38,827    -    45,644    - 
77.755.610-K  Comercial Patagona Ltda.  Director related  Chile  CLP   3,459    -    3,872    - 
77.526.480-2  Comercializadora Nova Verde  Common shareholder  Chile  CLP   160,743    -    -    - 
76.572.588-7  Coca-Cola del Valle New Ventures S.A.  Associate  Chile  CLP   1,655,637    -    2,003,203    - 
76.140.057-6  Monster  Associate  Chile  CLP   62,964    -    50,794    - 
Total               7,257,381    166,752    10,835,768    283,118 

 

12.2       Accounts payable:

 

               06.30.2020   12.31.2019 
Tax ID No.  Company  Relationship  Country  Currency  Current   Non-Current   Current   Non-Current 
               CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
96.714.870-9  Coca-Cola de Chile S.A.  Shareholder  Chile  CLP   12,945,836    -    20,555,135    - 
Foreign  Recofarma do Indústrias Amazonas Ltda.  Shareholder related  Brazil  BRL   11,670,173    17,510,694    14,888,934    19,777,812 
86.881.400-4  Envases CMF S.A.  Associate  Chile  CLP   3,229,252    -    6,359,797    - 
Foreign  Ser. y Prod. para Bebidas Refrescantes S.R.L.  Shareholder  Argentina  ARS   6,908,365    -    5,887,070    - 
Foreign  Leão Alimentos e Bebidas Ltda.  Associate  Brazil  BRL   464,187    -    1,841,377    - 
Foreign  Monster Energy Brasil Com de Bebidas Ltda.  Shareholder related  Brazil  BRL   252,758    -    827,300    - 
76.572.588-7  Coca-Cola del Valle New Ventures S.A.  Associate  Chile  CLP   975,459    -    1,247,961    - 
89.996.200-1  Envases del Pacífico S.A.  Director related  Chile  CLP   5,414    -    25,202    - 
96.891.720-K  Embonor S.A.  Shareholder related  Chile  CLP   370,712    -    275,565    - 
Foreign  Alimentos de Soja S.A.U.  Shareholder related  Argentina  ARS   803,753    -    929,986    - 
77.526.480-2  Comercializadora Nova Verde  Common shareholder  Chile  CLP   138,143    -    765,521    - 
Foreign  Coca-Cola Panamá  Shareholder related  Panamá  USD   7,739    -    7,739    - 
Foreign  Sorocaba Refrescos S.A.  Associate  Brazil  BRL   2,736    -    26,014    - 
Total               37,774,527    17,510,694    53,637,601    19,777,812 

 

41

 

 

 

12.3 Transactions:                 

 

Tax ID No.  Company  Relationship  Country  Transaction description  Currency  Accumulated
06.30.2020
   Accumulated
12.31.2019
 
                  CLP (000’s)   CLP (000’s) 
96.714.870-9  Coca-Cola de Chile S.A.  Shareholders  Chile  Concentrate purchase  CLP   65,620,395    150,548,253 
96.714.870-9  Coca-Cola de Chile S.A.  Shareholders  Chile  Advertising services purchase  CLP   11,748,970    4,369,500 
96.714.870-9  Coca-Cola de Chile S.A.  Shareholders  Chile  Water source lease  CLP   1,008,687    5,324,194 
96.714.870-9  Coca-Cola de Chile S.A.  Shareholders  Chile  Sale of raw materials and others  CLP   1,610,605    1,196,793 
86.881.400-4  Envases CMF S.A.  Associate  Chile  Purchase of bottles  CLP   5,726,667    19,422,280 
86.881.400-4  Envases CMF S.A.  Associate  Chile  Raw material purchase  CLP   9,945,477    16,814,062 
86.881.400-4  Envases CMF S.A.  Associate  Chile  Purchase of caps  CLP   165,815    281,174 
86.881.400-4  Envases CMF S.A.  Associate  Chile  Purchase of services and others  CLP   800,093    6,425,579 
86.881.400-4  Envases CMF S.A.  Associate  Chile  Purchase of packaging  CLP   3,027,635    521,466 
86.881.400-4  Envases CMF S.A.  Associate  Chile  Sale of packaging/raw materials  CLP   2,831,586    6,132,091 
96.891.720-K  Embonor S.A.  Shareholder related  Chile  Sale of finished products  CLP   21,684,415    50,315,292 
96.891.720-K  Embonor S.A.  Shareholder related  Chile  Sale of services and others  CLP   229,174    268,526 
96.891.720-K  Embonor S.A.  Shareholder related  Chile  Minimum dividend  CLP   -    212,517 
96.517.310-2  Embotelladora Iquique S.A.  Shareholder related  Chile  Sale of finished products  CLP   1,554,491    3,208,559 
89.996.200-1  Envases del Pacífico S.A.  Director related  Chile  Raw material and material purchase  CLP   20,912    93,117 
Foreign  Recofarma do Indústrias Amazonas Ltda.  Shareholder related  Brazil  Concentrate purchase  BRL   33,919,412    91,426,935 
Foreign  Recofarma do Indústrias Amazonas Ltda.  Shareholder related  Brazil  Reimbursements and other purchases  BRL   429,450    5,977,419 
Foreign  Serv. y Prod. para Bebidas Refrescantes S.R.L.  Shareholder related  Argentina  Concentrate purchase  ARS   38,397,673    97,321,567 
Foreign  Serv. y Prod. para Bebidas Refrescantes S.R.L.  Shareholder related  Argentina  Advertising participation  ARS   1,747,991    4,111,764 
Foreign  KAIK Participações  Associate  Brazil  Reimbursements and other purchases  BRL   10,918    39,382 
Foreign  Sorocaba Refrescos S.A.  Associate  Brazil  Product purchase  BRL   6,827,729    1,049,709 
76.572.588-7  Coca-Cola Del Valle New Ventures SA  Associate  Chile  Sale of services and others  CLP   2,205,111    3,959,962 
Foreign  Alimentos de Soja S.A.U.  Shareholder related  Argentina  Payment of fees and services  ARS   607,828    802,563 
Foreign  Alimentos de Soja S.A.U.  Shareholder related  Argentina  Product purchase  ARS   2,142,846    4,274,236 
77526480-2  Comercializadora Novaverde S.A.  Common shareholder  Chile  Sale of raw materials  CLP   186,263    - 
77526480-2  Comercializadora Novaverde S.A.  Common shareholder  Chile  Raw material purchase  CLP   13,720    - 

 

 

42 

 

 

 

 

12.4Salaries and benefits received by key management

 

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

 

Description  06.30.2020   06.30.2019 
   CLP (000’s)   CLP (000’s) 
Executive wages, salaries and benefits   4,795,393    3,626,378 
Director allowances   759,000    748,000 
Total   5,554,393    4,374,378 

 

 

13 – CURRENT AND NON-CURRENT EMPLOYEE BENEFITS

 

Employee benefits are detailed as follows:

 

Description  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Accrued vacation   14,012,719    17,584,587 
Participation in profits and bonuses   8,012,050    20,896,357 
Indemnities for years of service   10,707,108    10,085,264 
Total   32,731,877    48,566,208 

 

    CLP (000’s)    CLP (000’s) 
Current   21,941,547    38,392,854 
Non-current   10,790,330    10,173,354 
Total   32,731,877    48,566,208 

 

13.1 Indemnities for years of service

 

The movements of employee benefits, valued pursuant to Note 2 are detailed as follows:

 

Movements  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Opening balance   10,085,264    9,415,541 
Service costs   572,498    784,984 
Interest costs   199,573    354,471 
Actuarial losses   776,662    (210,956)
Benefits paid   (926,889)   (258,776)
Total   10,707,108    10,085,264 

 

43 

 

 

 

13.1.1 Assumptions

 

The actuarial assumptions used are detailed as follows:

 

Assumptions  06.30.2020   12.31.2019 
Discount rate   2.7%   2.7%
Expected salary increase rate   2.0%   2.0%
Turnover rate   5.4%   5.4%
Mortality rate   RV-2014    RV-2009 
Retirement age of women   60 years    60 years 
Retirement age of men   65 years    65 years 

 

13.2 Personnel expenses

 

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

 

Description  06.30.2020   06.30.2019 
    CLP (000’s)    CLP (000’s) 
Wages and salaries   88,765,605    93,032,594 
Employee benefits   19,708,804    25,943,028 
Severance benefits   2,183,958    3,426,116 
Other personnel expenses   5,549,882    7,478,967 
Total   116,208,249    129,880,705 

 

14 – INVESTMENTS IN ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD

 

14.1 Description

 

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

 

         Functional  Investment value   Ownership interest 
Taxpayer ID  Company  Country  currency  06.30.2020   12.31.2019   06.30.2020   12.31.2019 
86.881.400-4  Envases CMF S.A. (1)  Chile  CLP   19,268,438    18,561,835    50.00%   50.00%
Foreign  Leão Alimentos e Bebidas Ltda. (2)  Brasil  BRL   11,464,674    17,896,839    10.26%   10.26%
Foreign  Kaik Participações Ltda. (2)  Brasil  BRL   1,070,336    1,313,498    11.32%   11.32%
Foreign  SRSA Participações Ltda.  Brasil  BRL   52,324    65,301    40.00%   40.00%
Foreign  Sorocaba Refrescos S.A.  Brasil  BRL   24,063,699    24,636,945    40.00%   40.00%
Foreign  Trop Frutas do Brasil Ltda. (2)  Brasil  BRL   5,142,312    6,250,481    7.52%   7.52%
76.572.588.7  Coca-Cola del Valle New Ventures S.A.  Chile  CLP   30,577,045    31,141,834    35.00%   35.00%
Total            91,638,828    99,866,733           

 

1.In Envases CMF S.A., 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

 

44 

 

 

 

 

  

14.2       Movement

 

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

 

Description  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Opening balance   99,866,733    102,410,945 
Dividends received   (507,499)   (1,076,491)
Share in operating income   1,865,840    (2,495,621)
Amortization unrealized income in associates   123,698    (919,462)
Increase (decrease) in foreign currency translation, investments in associates   (9,709,944)   1,947,362 
Ending balance   91,638,828    99,866,733 

  

The main movements are explained below:

 

·In 2020 Leão Alimentos e Bebidas Ltda. recognized the value of a plant at its value of use less the costs of sale, reducing the value previously recognized. Andina recognized as results for the 2020 period a loss of CLP 2,931 million.
·In the 2020 period Sorocaba Refrescos S.A., recognized a tax credit for excluding ICMS from the PIS and COFINS calculation base. Andina recognized as results for the 2020 period a proportional result of CLP 4,277 million.

   

14.3       Reconciliation of share of profit in investments in associates:

  

Description  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Equity value on income of associates   1,865,841    484,321 
Unrealized earnings from product inventory acquired from associates and not sold at the end of the period, which is presented as a discount in the respective asset account (containers and / or inventory)   (329,671)   (519,069)
Amortization goodwill in the sale of fixed assets of Envases CMF S.A.   (261,530)   42,633 
Income statement balance   1,274,640    7,885 

 

45

 

     

 

 

14.4       Summary financial information of associates:

 

 

At June 30, 2020:

 

   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. 
   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Total assets   71,347,713    92,321,029    9,455,530    315,365    183,891,061    81,851,499    33,212,806 
Total liabilities   32,640,304    43,123,176    28    184,549    34,205,191    16,347,710    9,626,011 
Total revenue   28,920,470    23,331,809    71,714    127,816    43,116,070    14,447,180    13,043,968 
Net income (loss) of associates   1,554,107    728,106    71,714    127,816    (9,957,252)   (296,434)   (840,567)
                                    
Reporting date   06.30.2020    05.31.2020    05.31.2020    05.31.2020    05.31.2020    05.31.2020    06.30.2020 

  

At June 30, 2019:

 

   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. 
   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Total assets   71,314,290    106,460,187    10,970,861    379,087    239,970,976    95,577,819    105,533,625 
Total liabilities   33,792,306    47,849,221    33    220,311    39,705,070    20,906,601    19,974,502 
Total revenue   27,654,284    30,339,013    110,666    155,195    64,078,835    20,049,468    14,701,402 
Net income (loss) of associates   368,683    1,483,870    110,666    155,195    698,671    (896,172)   762,450 
                                    
Reporting date   06.30.2019    05.31.2019    05.31.2019    05.31.2019    05.31.2019    05.31.2019    05.31.2019 

  

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15 - INTANGIBLE ASSETS OTHER THAN GOODWILL

  

Intangible assets other than goodwill are detailed as follows:

 

   June 30, 2020   December 31, 2019 
   Gross   Accumulated   Net   Gross   Accumulated   Net 
Description  Value   Amortization   Value   Value   Amortization   Value 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Distribution rights (1)   637,877,961    (367,881)   637,510,080    667,148,383    (393,187)   666,755,196 
Software   34,417,334    (26,737,257)   7,680,077    34,347,843    (26,484,427)   7,863,416 
Others   641,223    (333,605)   307,618    750,309    (293,546)   456,763 
Total   672,936,518    (27,438,743)   645,497,775    702,246,535    (27,171,160)   675,075,375 

   

(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.

 

The distribution rights together with the assets that are part of the cash-generating units, are annually subjected to the impairment test. Such distribution rights have an indefinite useful life 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  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Chile (excluding Metropolitan Region, Rancagua and San Antonio)   305,194,170    305,235,247 
Brazil (Rio de Janeiro, Espirito Santo, Ribeirão Preto and investments in Sorocaba and Leão Alimentos e Bebidas Ltda.)   151,468,645    187,616,890 
Paraguay   178,671,902    171,841,663 
Argentina (North and South)   2,175,363    2,061,396 
Total   637,510,080    666,755,196 

 

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

 

    January 1 to June 30, 2020     January 1 to December 31, 2019  
Description   Distribution
Rights
    Others     Software     Total     Distribution
Rights
    Others     Software     Total  
    M$     M$     M$     M$     M$     M$     M$     M$  
Opening balance     666,755,196       456,763       7,863,416       675,075,375       661,026,400       430,196       7,365,957       668,822,553  
Additions     117,114       -       1,473,487       1,590,601       -       -       3,296,558       3,296,558  
Amortization     (140,866 )     -       (1,274,801 )     (1,415,667 )     (133,753 )     -       (2,324,225 )     (2,457,978 )
Other increases (decreases) (1)     (29.221.364 )     (149,145 )     (382,025 )     (29,752,534 )     5,862,549       26,567       (474,874 )     5,414,242  
Ending balance     637,510,080       307,618       7,680,077       645,497,775       666,755,196       456,763       7,863,416       675,075,375  

   

(1)Mainly corresponds to restatement due to the effects of translation of distribution rights of foreign subsidiaries.

 

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16 - GOODWILL

 

Movement in Goodwill is detailed as follows:

 

Operating segment  01.01.2020   Translation
differences from functional currency
   06.30.2020 
   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Chilean operation   8,503,023    -    8,503,023 
Brazilian operation   75,674,072    (14,383,496)   61,290,576 
Argentine operation   29,750,238    1,752,124    31,502,362 
Paraguayan operation   7,294,328    290,157    7,584,485 
Total   121,221,661    (12,341,215)   108,880,446 

 

Operating segment  01.01.2019   Translation
differences from functional currency
   12.31.2019 
   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Chilean operation   8,503,023    -    8,503,023 
Brazilian operation   73,080,100    2,593,972    75,674,072 
Argentine operation   28,318,129    1,432,109    29,750,238 
Paraguayan operation   7,327,921    (33,593)   7,294,328 
Total   117,229,173    3,992,488    121,221,661 

 

17 – OTHER CURRENT AND NON-CURRENT FINANCIAL LIABILITIES

 

Liabilities are detailed as follows:

 

   Balance 
   Current   Non-current 
   06.30.2020   12.31.2019   06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Bank loans (17.1.1 – 2)   383,582    1,438,161    744,803    909,486 
Bonds payable, net1 (17.2)    22,888,539    21,604,601    988,781,176    718,962,871 
Deposits in guarantee   11,695,373    11,163,005    -    - 
Derivative contract liabilities (Note 22)   97,548    374,576    102,066,343    - 
Leasing agreements (17.4.1 – 2)   5,634,724    6,013,535    18,432,175    23,454,700 
Total   40,699,766    40,593,878    1,110,024,497    743,327,057 

 

 

 

1 Amounts net of placement expenses and discounts related to placement

 

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The fair value of financial assets and liabilities is presented below:

 

Current 

Book Value

06.30.2020

  

Fair Value

06.30.2020

  

Book Value

12.31.2019

  

Fair Value

12.31.2019

 
   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Cash and cash equivalent (2)   371,105,249    371,105,249    157,567,986    157,567,986 
Other financial assets (1)   1,416,422    1,416,422    317,205    317,205 
Trade debtors and other accounts receivable (2)   127,266,796    127,266,796    191,077,588    191,077,588 
Accounts receivable related companies (2)   7,257,381    7,257,381    10,619,740    10,619,740 
Bank loans (2)   383,582    401,699    1,438,161    1,434,255 
Bonds payable (2)   22,888,539    15,462,837    21,604,601    24,188,060 
Bottle guaranty deposits (2)   11,695,373    11,695,373    11,163,005    11,163,005 
Derivative contracts liabilities (see note 20) (1)   97,548    97,548    374,576    374,576 
Leasing agreements (2)   5,634,724    5,634,724    6,013,535    6,013,535 
Accounts payable (2)   174,134,864    174,134,864    243,700,553    243,700,553 
Accounts payable related companies (2)   37,774,527    37,774,527    53,637,601    53,637,601 

 

Non-current  06.30.2020   06.30.2020   12.31.2019   12.31.2019 
   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Other financial assets (1)   165,209,345    165,209,345    98,918,457    98,918,457 
Accounts receivable, non-current (2)   63,438    63,438    523,769    523,769 
Accounts receivable related companies (2)   166,752    166,752    283,118    283,118 
Bank loans (2)   744,803    741,269    909,486    867,025 
Bonds payable (2)   988,781,176    1,069,220,583    718,962,871    803,017,145 
Leasing agreements (2)   18,432,175    18,432,175    23,454,700    23,454,700 
Accounts payable, non-current (2)   343,414    343,414    619,587    619,587 

 

(1)Fair values are based on discounted cash flows using market discount rates at the close of the six-month and one-year period and are classified as Level 2 of the fair value measurement hierarchies.

 

(2)Financial instruments such as: Cash and Cash Equivalents, Trade and Other Accounts Receivable, Accounts Receivable, Bottle Guarantee Deposits and Trade Accounts Payable, and Other Accounts Payable present a fair value that approximates their carrying value, considering the nature and term of the obligation. The business model is to maintain the financial instrument in order to collect/pay contractual cash flows, in accordance with the terms of the contract, where cash flows are received/cancelled on specific dates that exclusively constitute payments of principal plus interest on that principal. These instruments are revalued at amortized cost.

 

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17.1.1 Bank obligations, current

 

      Maturity   Total 
Indebted entity  Creditor entity     Type of  Effective   Nominal   Up to   90 days to   at   at 
Taxpayer ID  Name  Country  Taxpayer ID  Name  Country  Currency  Amortization  Rate   Rate   90 days   1 year   06.30.2020   12.31.2019 
                                   CLP (000’S)    CLP (000’S)    CLP (000’S)    CLP (000’S) 
96.705.990-0  Envases Central S.A.  Chile  97.006.000-6  Banco BCI  Chile  UF  Semiannually   2.13%   2.13%   191,441    191,442    382,883    748,838 
Foreign  Embotelladora del Atlántico S.A.  Argentina  Foreign  Banco Galicia y Buenos Aires S.A.  Argentina  ARS  Upon maturity   82.00%   82.00%   676    0    676    8,453 
Foreign  Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Banco Itaú  Brazil  BRL  Monthly   6.63%   6.63%   23    0    23    635,727 
Foreign  Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Banco Itaú  Brazil  BRL  Quarterly   4.50%   4.50%   -    -    -    45,143 
Total                                            383,582    1,438,161 

 

17.1.2 Bank obligations, non-current

 

                    Maturity  
Indebted Entity   Creditor Entity       Type    Effective      Nominal     1 year up
to
    More than 2 years
Up to
  More than 3 years
Up to
  More than 4 years
Up to
  More
than 5
    at  
Tax ID   Name   Country   Tax ID   Name   Country   Currency   Amortization   Rate     Rate     2 years     3 years   4 years   5 years   Years     06.30.2019  
                                CLP (000’s)   CLP (000’s)  CLP (000’s)  CLP (000’s)  CLP (000’s)   CLP (000’s) 
96.705.990-0  Envases Central S.A.  Chile  97.006.000-6  Banco BCI  Chile  UF  Semiannually   2.13%   2.13%   744,803   -  -  -   -    744,803 
TOTAL                                                     744,803 
 

17.1.2 Bank obligations, non-current previous year

 

                    Maturity  
Indebted Entity   Creditor Entity       Type    Effective      Nominal     1 year up
to
    More than 2 years
Up to
  More than 3 years
Up to
  More than 4 years
Up to
  More
than 5
    at  
Tax ID   Name   Country   Tax ID   Name   Country   Currency   Amortization   Rate     Rate     2 years     3 years   4 years   5 years   Years     06.30.2019  
                                            CLP (000’s)     CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)     CLP (000’s)  
96.705.990-0   Envases Central S.A.   Chile   97.006.000-6   Banco BCI   Chile   UF   Semiannually     2.13 %     2.13 %     736,033     -   -   -     -       736,033  
Foreign   Rio de Janeiro Refrescos Ltda.   Brazil   Foreign   Banco Itaú   Brazil   BRL   Monthly     6.63 %     6.63 %     44,621     44,621   44,621   39,590     -       173,453  
TOTAL                                                                             909,486  

 

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17.1.3 Current and non-current bank obligations “Restrictions”

 

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

 

17.2       Bonds payable

 

During 2018, Andina carried out a debt restructuring process that consisted of a partial repurchase in the amount of USD 210 million of the 144A/RegS Senior Notes and refinancing it with the placement of Series F bonds in the local market in the amount of UF 5.7 million due 2039 and accruing an annual interest rate of 2.83%. The costs corresponding to the repurchase of bonds, associated with premium payments, overpricing and proportional amortization of placement costs and discounts in bonds in original U.S. Dollars amounting to CLP 9,583,000 thousand, were recorded in results under the item financial costs.

 

On January 21, 2020, the Company issued corporate bonds on the international market for USD 300 million with a 30-year maturity, with a bullet structure and an annual interest rate of 3.950%.

 

 

   Current   Non-current   Total 
Composition of bonds payable  06.30.2020   12.31.2019   06.30.2020   12.31.2019   06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Bonds (face value) 2   23,615,798    22,189,595    997,248,214    721,950,553    1,011,669,715    744,140,148 

 

 

2 Gross amounts, do not consider placement expenses and discounts related to placement

 

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17.2.1       Current and non-current balances

 

Bonds payable correspond to bonds in UF issued by the parent company on the Chilean market and bonds in U.S. dollars issued by the Parent Company on the international market. A detail of these instruments is presented below:

 

                        Current   Non-current 
Bonds  Series   Current Nominal amount   Adjustment Unit  Interest Rate   Final Maturity  Interest payment  06.30.2020   12.31.2019   06.30.2020   12.31.2019 
                        CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
CMF Registration N°254 06.13.2001   B    1,771,585   UF   6.5%  12-01-2026  Semi-annually   7,454,769    7,160,809    43,641,091    46,659,296 
CMF Registration N°641 08.23.2010   C    1,500,000   UF   4.0%  08-15-2031  Semi-annually   637,000    630,731    43,044,630    42,464,910 
CMF Registration N°759 08.20.2013   C    250,000   UF   3.5%  08-16-2020  Semi-annually   3,633,212    7,168,907    0    - 
CMF Registration N°760 08.20.2013   D    4,000,000   UF   3.8%  08-16-2034  Semi-annually   1,602,651    1,587,051    114,785,680    113,239,760 
CMF Registration N°760 04.02.2014   E    3,000,000   UF   3.75%  03-01-2035  Semi-annually   1,051,701    1,048,938    86,089,269    84,929,828 
CMF Registration N°912 10.10.2018   F    5,700,000   UF   2.83%  09-25-2039  Semi-annually   1,198,850    1,195,700    163,569,594    161,366,658 
Bonds USA   -    365,000,000   USD   5.0%  10-01-2023  Semi-annually   3,685,438    3,397,459    299,748,950    273,290,101 
Bonds USA 2   -    300,000,000   USD   3.95%  01-21-2050  Semi-annually   4,352,177    -    246,369,000    - 
Total                           23,615,798    22,189,595    997,248,214    721,950,553 

 

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17.2.3       Non-current maturities

 

       Year of maturity       Total non-current 
   Series   More than 1 up to 2   More than 2 up to 3   More than 3 up to 4   More than 5   06.30.2020 
      

CLP (000’s)

  

CLP (000’s)

  

CLP (000’s)

   CLP (000’s)   CLP (000’s) 
CMF Registration N°254 06.13.2001   B    7,664,885    8,163,098    8,693,701    19,119,407    43,641,091 
CMF Registration N°641 08.23.2010   C    3,913,148    3,913,148    3,913,148    31,305,186    43,044,630 
CMF Registration N°760 08.20.2013   D    -    -    -    114,785,680    114,785,680 
CMF Registration N°760 04.02.2014   E    -    -    -    86,089,269    86,089,269 
CMF Registration N°912 10.10.2018   F    -    -    -    163,569,594    163,569,594 
USA Bonds   -    -    -    299,748,950    -    299,748,950 
USA 2 Bonds   -    -    -    -    246,369,000    246,369,000 
Total        11,578,033    12,076,246    312,355,799    661,238,136    997,248,214 

 

17.2.4       Market rating

 

The bonds issued on the Chilean market had the following rating:

 

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 had the following rating:

 

BBB: Standard&Poors Global Ratings
BBB+: Fitch Ratings Inc.

 

17.2.5 Restrictions

 

17.2.5.1       Restrictions regarding bonds placed abroad.

 

Obligations with bonds placed abroad are not affected by financial restrictions for the periods reported.

 

17.2.5.2       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 on the issuance of bonds for a fixed amount registered under number 254.

 

·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 Financial Statements. Consolidated Equity will be regarded as total equity including non-controlling interest.

 

As of June 30, 2020, indebtedness level is 1.17 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.

 

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·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.

 

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 June 30, 2020, this index is 1.55 times.

 

Restrictions to bond lines registered in the Securities Registered under number 641, series C

 

·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 June 30, 2020, Net Financial Debt level was 0.73 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 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 June 30, 2020, this index is 1.55 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 minus 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.

 

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As of June 30, 2020, Net Financial Coverage level is 86.01 times.

 

Restrictions to bond lines registered in the Securities Registrar under numbers 759 and 760 D-E.

 

·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 June 30, 2020, Indebtedness Level is 0.73 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 June 30, 2020, this index is 1.55 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 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".

 

55

 

 

 

 

Restrictions to bond lines registered in the Securities Registrar under number 912.

 

·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 June 30, 2020, this index equals 0.73 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 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 June 30, 2020, this index equals 1.55 times.

 

·Not lose, sell, assign, or transfer to a third party any other territory of Argentina or Brazil, which as of the issuance date of local bonds Series C, D and E 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 June 30, 2020 and December 31, 2019, the Company complies with all financial collaterals.

 

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17.2.6       Repurchased bonds

 

On January 21, 2020, the Company issued corporate bonds on the international market for USD 300 million. The transaction consisted of the issuance of 30-year bonds with bullet structure and an annual coupon rate of 3.950%. In parallel, derivatives (Cross Currency Swaps) have been contracted that cover 100% of the financial obligations of the bond that are denominated in US dollars re-denominating that liability to UFs.

 

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

 

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, 2019, 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 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.

 

17.3       Derivative contract obligations

 

Please see details in Note 22

 

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17.4.1       Current liabilities for leasing agreements

 

                             Maturity   Total 
Indebted Entity  Creditor Entity     Type of  Effective   Nominal   Up to   90 days to   at   at 
Name  Country  Taxpayer ID  Name  Country  Currency  Amortization  Rate   Rate   90 days   1 year   06.30.2020   12.31.2019 
                             CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Cogeração - Light ESCO  Brazil  BRL  Monthly   13.00%   12.28%   147,171    593,258    740,429    839,502 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Tetra Pack  Brazil  BRL  Monthly   7.65%   7.39%   73,491    213,676    287,167    360,854 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Property  Brazil  BRL  Monthly   8.20%   8.20%   71,089    156,577    227,666    300,338 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Leão  Brazil  BRL  Monthly   6.56%   6.56%   102,683    243,123    345,806    497,386 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Tetra Pak SRL  Argentina  USD  Monthly   12.00%   12.00%   24,105    72,314    96,419    132,815 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Banco Comafi  Argentina  USD  Monthly   12.00%   12.00%   36,077    108,231    144,308    88,739 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Property  Argentina  ARS  Monthly   50.00%   50.00%   46,482    88,259    134,741    189,320 
Vital Aguas S.A.  Chile  76.389.720-6  Coca Cola del Valle New Ventures S.A  Chile  CLP  Linear   6.20%   6.20%   284,574    867,937    1,152,511    1,169,884 
Envases Central S.A.  Chile  96.705.990-0  Coca Cola del Valle New Ventures S.A  Chile  CLP  Linear   6.20%   6.20%   556,316    1,696,892    2,253,208    2,198,998 
Paraguay Refrescos S.A.  Paraguay  80.003.400-7  Tetra Pack Ltda. Suc. Py  Paraguay  PGY  Monthly   0.00%   0.00%   64,561    187,908    252,469    235,699 
                                     Total    5,634,724    6,013,535 

 

The Company maintains lease agreements on forklifts, vehicles, real estate and machinery. These leases have an average life of between one and eight years without including a renewal option in the contracts.

 

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17.4.2        Non-current liabilities for leasing agreements, non-current

 

                         Maturity         
Indebted Entity  Creditor Entity     Type of  Effective   Nominal   1 year to   2 years to   3 years to   4 years to   more tan   at 
Name  Country  Taxpayer ID  Name  Country  Currency  Amortization  Rate   Rate   2 years   3 years   4 years   5 years   5 years   06.30.2020 
                             CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Cogeração - Light ESCO  Brazil  BRL  Monthly   13.00%   12.28%   813,976    919,793    977,753    1,104,861    6,068,813    9,885,196 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Tetra Pack|  Brazil  BRL  Monthly   7.65%   7.39%   128,312    41,487    -    -    -    169,799 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Property  Brazil  BRL  Monthly   8.20%   8.20%   52,183    1,680    -    -    -    53,863 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Leão Alimentos e Bebidas Ltda.  Brazil  BRL  Monthly   6.56%   6.56%   289,146    283,175    267,380    267,261    169,731    1,276,693 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Tetra Pak SRL  Argentina  USD  Monthly   12.00%   12.00%   -    72,314    -    -    -    72,314 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Banco Comafi  Argentina  USD  Monthly   12.00%   12.00%   -    288,617    -    288,617    156,380    733,614 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Property  Argentina  ARS  Monthly   50.00%   50.00%   -    106,232    -    -    -    106,232 
Vital Aguas S.A  Chile  76.572.588-7  Coca Cola del Valle New Ventures S.A.  Chile  CLP  Monthly   6.2%   0.27%   1,697,609    -    -    -    -    1,697,609 
Envases Central S.A  Chile  76.572.588-7  Coca Cola del Valle New Ventures S.A.  Chile  CLP  Monthly   6.7%   0.27%   4,122,411    -    -    -    -    4,122,411 
Paraguay Refrescos SA  Paraguay  80.003.400-7  Tetra Pack Ltda. Suc. Py  Paraguay  PGY  Monthly   0.00%   0.00%   -    314,444    -    -    -    314,444 
                                                   Total     18,432,175 

 

17.4.3 Non-current liabilities for leasing agreements (previous year) 

 

                         Maturity        

 

Indebted Entity

 

 Creditor Entity 

     

 

Type of

  Effective   Nominal   1 year to   2 years to   3 years to   4 years to   more tan   at 
Name  Country  Taxpayer ID  Name  Country    Currency   Amortization  Rate   Rate  

2 years

  

3 years

  

4 years

  

5 years

  

5 years

  

12.31.2019

 
                                CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Cogeração - Light ESCO  Brazil    BRL   Monthly   13.00%   12.28%   948,466    1,071,766    1,211,096    1,368,538    8,101,730    12,701,596 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Tetra Pack|  Brazil    BRL   Monthly   7.65%   7.39%   271,264    111,005    -    -    -    382,269 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Property  Brazil    BRL   Monthly   8.20%   8.20%   97,784    9,144    -    -    -    106,928 
Rio de Janeiro Refrescos Ltda.  Brazil  Foreign  Leão Alimentos e Bebidas Ltda.  Brazil    BRL   Monthly   6.56%   6.56%   365,671    355,172    339,020    331,185    375,688    1,766,736 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Tetra Pak SRL  Argentina    USD   Monthly   12.00%   12.00%   -    398,442    -    343,104    -    741,546 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Banco Comafi  Argentina    USD   Monthly   12.00%   12.00%   -    110,924    -    -    -    110,924 
Embotelladora del Atlántico S.A.  Argentina  Foreign  Property  Argentina    ARS   Monthly   50.00%   50.00%   -    55,222    -    -    -    55,222 
Vital Aguas S.A  Chile  76.572.588-7  Coca Cola del Valle New Ventures S.A  Chile    CLP   Monthly   6.2%   0.27%   2,242,278    -    -    -    -    2,242,278 
Envases Central S.A  Chile  76.572.588-7  Coca Cola del Valle New Ventures S.A  Chile    CLP   Monthly   6.7%   0.27%   4,947,745    -    -    -    -    4,947,745 
Paraguay Refrescos SA  Paraguay  80.003.400-7  Tetra Pack Ltda. Suc. Py  Paraguay    PGY   Monthly   0.00%   0.00%   399,456                        399,456 
                                                       Total    23,454,700 

 

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

 

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18 – TRADE AND OTHER ACCOUNTS PAYABLE

 

Trade and other current accounts payable are detailed as follows:

 

Classification  06.30.2020   12.31.2019 
   CLP (000’S)   CLP (000’S) 
Current   174,134,864    243,700,553 
Non-current   343,414    619,587 
Total   174,478,278    244,320,140 

  

Description  06.30.2020   12.31.2019 
   CLP (000’S)   CLP (000’S) 
Trade accounts payable   123,586,639    172,142,472 
Withholding tax   32,712,912    53,326,254 
Others   18,178,727    18,851,414 
Total   174,478,278    244,320,140 

  

19 – OTHER PROVISIONS, CURRENT AND NON-CURRENT

 

19.1       Balances

 

The composition of provisions is as follows:

 

Description  06.30.2020   12.31.2019 
   CLP (000’S)   CLP (000’S) 
Litigation (1)   57,499,744    69,107,550 
Total   57,499,744    69,107,550 
           
Current   2,169,540    2,068,984 
Non-current   55,330,204    67,038,566 
Total   57,499,744    69,107,550 

 

(1)Correspond to the provision made for the probable losses of fiscal, labor and commercial contingencies, based on the opinion of our legal advisors, according to the following detail:

  

Description (see note 23.1)  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Tax contingencies   31,378,934    38,853,059 
Labor contingencies   9,526,997    10,569,754 
Civil contingencies   16,593,813    19,684,737 
Total   57,499,744    69,107,550 

 

 

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19.2       Movements

 

The movement of principal provisions over litigation is detailed as follows:

 

 Detail  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Opening balance as of January 1   69,107,550    62,452,526 
Additional provisions   122,899    121,003 
Increase (decrease) in existing provisions(*)   (774,042)   (13,085,051)
Payments   819,517    21,506,141 
Adjustment to existing provision   -    (2,511,589)
Increase (decrease) due to foreign exchange differences   (11,776,180)   624,520 
Total   57,499,744    69,107,550 

 

(*) During 2019, provisions consisting of fines demanded by the Brazilian tax authority on the use of tax credits resulting from favorable sentencing to Rio de Janeiro Refrescos Ltda. which are not present in 2020.

  

20 – OTHER CURRENT NON-FINANCIAL LIABILITIES

 

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

 

Description  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Dividends payable   26,014,867    22,639,150 
Others   3,829,972    3,863,065 
Total   29,844,839    26,502,215 

 

21 – EQUITY

 

21.1        Number of shares:

 

   Number of shares subscribed at nominal value   Number of shares paid in   Number of voting shares 
Series  2020   2019   2020   2019   2020   2019 
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 

 

21.1.1       Equity:

 

   Subscribed Capital   Paid-in capital 
Series  2020   2019   2020   2019 
   CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
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 

  

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21.1.2        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.

  

21.2       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 2020, the shareholders agreed to pay out of the 2019 earnings a final dividend and another additional dividend to the 30% required by Chile’s Law 18,046 which are paid in May 2020 and August 2020, respectively.

 

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 accumulated earnings for future distribution.

 

The dividends declared and paid per share are presented below:

 

Periods

approved - paid

 

 

Type of dividend

   Dividend allocation income   

CLP

Series A

  

CLP

Series B

 
04.17.2019   08.29.2019    Additional   Accumulated Earnings   21.50    23.65 
09.24.2019   10.24.2019    Interim   2019 Results   21.50    23.65 
12.20.2019   01.23.2020    Interim   2019 Results   22.60    24.86 
02.25.2020   05.29.2020    Final   2019 Results   26.00    28.60 
02.25.2020   08.28.2020    Additional   Accumulated Earnings   26.60    28.60 

   

21.3       Other Reserves

  

The balance of other reserves includes the following:

 

Description  06.30.2020   06.30.2019 
   CLP (000’s)   CLP (000’s) 
Goodwill in share exchange reserve   421,701,520    421,701,520 
Translation differences reserves   (411,839,026)   (344,307,255)
Cash flow hedge reserves   (90,572,592)   (12,994,206)
Reserve for employee benefits actuarial gains or losses   (2,223,446)   (1,954,077)
Legal and statutory reserves   5,435,538    5,435,538 
Other   6,014,568    6,014,583 
Total   (71,483,438)   73,896,103 

 

21.3.1       Goodwill in share exchange reserve

 

This amount corresponds to the difference between the valuation at fair value of the issuance of shares of Embotelladora Andina S.A. and the book value of the paid capital of Embotelladoras Coca-Cola Polar S.A., which was finally the value of the capital increase notarized in legal terms.

  

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21.3.2       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 22).

 

21.3.3       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.

 

21.3.4       Legal and statutory reserves

  

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 CLP 5,435,538 thousand as of December 31, 2009.

 

21.3.5       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  06.30.2020   06.30.2019 
   CLP (000’s)   CLP (000’s) 
Brazil   (171,719,872)   (117,744,296)
Argentina   (255,586,081)   (220,444,428)
Paraguay   15,466,927    (6,118,516)
Total   (411,839,026)   (334,307,240)

 

The movement of this reserve for the periods ended on the dates indicated below, is detailed as follows:

 

Details  06.30.2020   06.30.2019 
   CLP (000’s)   CLP (000’s) 
Brazil   (72,925,754)   (3,564,099)
Argentina   (9,170,159)   (19,326,248)
Paraguay   9,333,227    (14,742,365)
Total   (72,762,686)   (37,632,712)

 

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21.4       Non-controlling interests

 

This is the recognition of the portion of equity and income from subsidiaries owned by third parties. This account is detailed as follows:

 

   Non-controlling interests 
   Ownership interest %   Shareholders’ Equity   Income 
           June   June   June   June 
 Description  2020   2019   2020   2019   2020   2019 
           CLP (000’s)   CLP (000’s)   CLP (000’s)   CLP (000’s) 
Embotelladora del Atlántico S.A.   0.0171    0.0171    25,081    27,382    440    2,764 
Andina Empaques Argentina S.A.   0.0209    0.0209    2,455    2,468    30    224 
Paraguay Refrescos S.A.   2.1697    2.1697    5,927,848    4,738,367    351,129    264,866 
Vital S.A.   35.0000    35.0000    7,939,813    7,657,221    (43,960)   (98,902)
Vital Aguas S.A.   33.5000    33.5000    1,731,719    2,036,106    (103,927)   38,592 
Envases Central S.A.   40.7300    40.7300    5,384,099    4,991,689    72,087    156,413 
Total             21,011,015    19,453,233    275,799    363,957 

 

21.5       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:

 

Earnings per share  06.30.2020 
   SERIES A   SERIES B 
Earnings attributable to shareholders (CLP 000’s)   23,236,673    25,559,928 
Average weighted number of shares   473,289,301    473,281,303 
Earnings per share (in CLP)   49.10    54.01 

 

Earnings per share   06.30.2019  
    SERIES A     SERIES B  
Earnings attributable to shareholders (CLP 000’s)     29,342,166       32,275,863  
Average weighted number of shares     473,289,301       473,281,303  
Earnings per share (in CLP)     62.00       68.20  

 

22 – DERIVATIVE ASSETS AND LIABILITIES

 

Embotelladora Andina currently maintains “Cross Currency Swaps” and “Currency Forward” agreements as derivative financial instruments.

 

Cross Currency Swaps ("CCS"), also known as interest rate and currency swaps are valued by the method of discounted future cash flows at a market rate corresponding to the currencies and rates of the transaction.

 

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.

 

As of June 30, 2020 and December 31, 2019, the Company held the following derivative instruments:

 

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22.1       Currency swap of items recognized for accounting purposes

 

Cross Currency Swaps associated with Local Bonds (Chile)

 

At the closing date of these financial statements, the Company maintains derivative contracts to secure part of its bond liabilities issued in Unidades de Fomento totaling UF 10,271,585, to convert these obligations to Chilean pesos.

 

These contracts were valued at their fair values, yielding a net asset of CLP 1,701,250 thousand at the closing date of the financial statements which is presented under other non-current financial assets. The expiration date of derivative contracts is distributed in the years 2026, 2031, 2034 and 2035.

 

Cross Currency Swaps associated with International Bonds (US)

 

At the closing date of these financial statements, the Company maintains derivatives contracts to secure US Dollar public bond obligations of USD 360 million due in 2023, to convert such obligations into Brazilian Real. In addition, derivative contracts amounting to USD 300 million are held to convert such obligation into Unidades de Fomento (UF - CLP re-adjustable by the Consumer Price Index) due in 2050. The net valuation of both contracts was made at fair values, yielding a net asset of CLP 63,143,002 thousand at the closing date of the financial statements.

The amount of exchange differences recognized in the statement of income related to financial liabilities in U.S. dollars and are absorbed by the amounts recognized under comprehensive income.

 

22.2. Forward currency transactions expected to be very likely:

 

During 2020 and 2019, Embotelladora Andina entered into forward contracts to ensure the exchange rate on future commodity purchasing needs for its 4 operations, i.e. closing USD/ARS, USD/BRL, USD/CLP and USD/GYP forward instruments. As of June 30, 2020, outstanding contracts amount to USD 42.62 million (USD 46.9 million as of December 31, 2019).

 

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 June 30, 2020, the Company held assets for derivative contracts for CLP 168,327,017 thousand (CLP 99,235,662 thousand as of December 31, 2019) and held liabilities for derivative contracts as of June 30, 2020 for CLP 102,163,892 thousand (CLP 374,576 thousand as of December 31, 2019). 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.

 

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.

 

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   Fair Value Measurements at June 30, 2020    
    Quoted prices in active
markets for identical
assets or liabilities
    Observable
market data
  Unobservable market data     
    (Level 1)    (Level 2)  (Level 3)   Total 
    CLP (000’S)    CLP (000’S)  CLP (000’S)   CLP (000’S) 
Assets                 
Current assets                 
Other current financial assets   -    1,416,422  -   1,416,422 
Other non-current financial assets   -    166,910,595  -   166,910,595 
Total assets   -    168,327,017  -   168,327,017 

 

Liabilities

                 
Current liabilities                 
Other current financial liabilities   -    97,548  -   97,548 
Other non-current financial liabilities   -    102,066,343  -   102,066,343 
Total liabilities   -    102,163,891  -   102,163,891 

 

   Fair Value Measurements at December 31, 2019    
    

Quoted prices in active
markets for identical
assets or liabilities

    

Observable

market data

  Unobservable market data     
    (Level 1)    (Level 2)  (Level 3)   Total 
    CLP (000’s)    CLP (000’s)  CLP (000’s)   CLP (000’s) 
Assets                 

Current assets

Other current financial assets

   -    317.205      317.205 
Other non-current financial assets   -    98.918.457  -   98.918.457 
Total assets   -    99.235.662  -   99.235.662 

 

Liabilities

                 
Current liabilities                 
Other current financial liabilities   -    374.576  -   374.576 
Total liabilities   -    374.576  -   374.576 

 

23 – LITIGATION AND CONTINGENCIES

 

23.1       Lawsuits and other legal actions:

 

In the opinion of the Company's legal counsel, the Parent Company and its subsidiaries do not face legal or extrajudicial 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 CLP 938,303 thousand. 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 CLP 480,682 thousand 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 CLP 54,377,860 thousand. 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 Deposit in courts and assets given in pledge to secure the compliance of certain processes, irrespective of whether these have been classified as a possible, probable or remote. The amounts deposited or pledged as legal guarantees As of June 30, 2020 and December 31, 2019 , amounted to CLP 26,496,250 thousand and CLP 32,166,823 thousand, respectively.

 

Part of the assets held under warranty by Rio de Janeiro Refrescos Ltda. as of December 31, 2014, are in the process of being released and others have already been released in exchange for guarantee insurance and bond letters for BRL 1,217,416,760.43, with different Financial Institutions and Insurance Companies in Brazil, these entities receive an annual commission fee of 0.91%. and 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.

 

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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 BRL 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 BRL 598,745,218, was settled in favor of the Company, however, there are new lawsuits arising after the purchase of ex-Companhia de Bebidas Ipiranga (October 2013) that amount to BRL 377,661,670.

 

The Company does not share 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 legal 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 BRL 698,997,678 (including readjustments of current lawsuits), the Company recorded a provision for the beginning of business combination accounting in the amount BRL 214,731,590 equivalent to CLP 39,888,389 thousand.

 

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. Based on this criterion, a starting provision has been made in the accounting of the business combination for BRL 80,218,414 equivalent to CLP 14,901,316 thousand.

 

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 CLP 2,165,914 thousand. 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 CLP 3,627 thousand. 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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23.2       Direct guarantees and restricted assets:

 

Guarantees and restricted assets are detailed as follows:

 

Guarantees that commit assets included in the financial statements:

 

         Committed assets  Accounting value 
Guaranty creditor  Debtor name  Relationship  Guaranty  Type  06.30.2020   12.31.2019 
               CLP (000’s)   CLP (000’s) 
Transportes San Martin  Embotelladora Andina S.A.  Parent Company  Cash  Trade accounts and other account receivable   2,860    2,805 
Cooperativa Agricola Pisquera Elqui Limitada  Embotelladora Andina S.A.  Parent Company  Cash  Other non-current financial assets   1,216,865    1,216,865 
Inmob. e invers. supetar Ltda.  Transportes Polar  Subsidiary  Cash  Other non-current non-financial assets   4,579    4,579 
María Lobos Jamet  Transportes Polar  Subsidiary  Cash  Other non-current non-financial assets   2,565    2,565 
Bodega San Francisco  Transportes Polar  Subsidiary  Cash  Other non-current non-financial assets   6,483    6,483 
Workers Claims  Rio de Janeiro Refrescos Ltda.  Subsidiary  Judicial deposit  Other non-current non-financial assets   5,790,931    6,600,863 
Civil and tax claims  Rio de Janeiro Refrescos Ltda.  Subsidiary  Judicial deposit  Other non-current non-financial assets   9,914,307    12,186,432 
Governmental institutions  Rio de Janeiro Refrescos Ltda.  Subsidiary  Plant and Equipment  Property, plant & equipment   10,790,801    13,379,610 
Distribuidora Baraldo S.H.  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   233    250 
Acuña Gomez  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   350    375 
Nicanor López  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   250    268 
Labarda  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   4    5 
Municipalidad Bariloche  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   33,854    36,313 
Municipalidad San Antonio Oeste  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   25,729    27,598 
Municipalidad Carlos Casares  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   1,040    1,116 
Municipalidad Chivilcoy  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   160,913    172,602 
Others  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   50    53 
Granada Maximiliano  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   2,098    2,250 
Cicsa  Embotelladora del Atlántico S.A.  Subsidiary  Cash deposit  Other current non-financial assets   2,917    3,128 
Several lessors  Embotelladora del Atlántico S.A.  Subsidiary  Cash deposit  Other current non-financial assets   15,943    15,289 
Aduana de EZEIZA  Embotelladora del Atlántico S.A.  Subsidiary  Cash deposit  Other current non-financial assets   394    422 
Municipalidad de Junin  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   335    360 
Almada Jorge  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   2,847    3,054 
Mirgoni Marano  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   71    76 
Farias Matias Luis  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   1,306    1,401 
Temas Industriales SA - Embargo General de Fondos  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   146,143    156,759 
DBC SA C CERVECERIA ARGENTINA SA ISEMBECK  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   26,224    28,129 
Coto Cicsa  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   4,662    5,001 
Cencosud  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   2,914    3,125 
Kreitzer Jose Luis, Beade Alexis Y Bechetti Cesa  Embotelladora del Atlántico S.A.  Subsidiary  Judicial deposit  Other non-current non-financial assets   11,541    - 
Marcus A.Peña  Paraguay Refrescos  Subsidiary  Property  Property, plant & equipment   4,567    3,955 
Mauricio J Cordero C  Paraguay Refrescos  Subsidiary  Property  Property, plant & equipment   953    917 
José Ruoti Maltese  Paraguay Refrescos  Subsidiary  Property  Property, plant & equipment   767    738 
Alejandro Galeano  Paraguay Refrescos  Subsidiary  Property  Property, plant & equipment   1,325    1,275 
Ana Maria Mazó  Paraguay Refrescos  Subsidiary  Property  Property, plant & equipment   1,261    1,213 

 

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

 

           Committed assets   

 Amounts involved

 
Guaranty Creditor  Debtor name   Relationship   Guaranty  Type   06.30.2020    12.31.2019 
                  CLP (000’s)    CLP (000’s) 
Labor procedures  Rio de Janeiro Refrescos Ltda.   Subsidiary   Guaranty receipt  Legal proceeding   2,007,186    2,601,353 
Administrative procedures  Rio de Janeiro Refrescos Ltda.   Subsidiary   Guaranty receipt  Legal proceeding   8,389,793    8,233,853 
Federal Government  Rio de Janeiro Refrescos Ltda.   Subsidiary   Guaranty receipt  Legal proceeding   118,658,646    116,192,877 
State Government  Rio de Janeiro Refrescos Ltda.   Subsidiary   Guaranty receipt  Legal proceeding   49,115,972    43,015,207 
Sorocaba Refrescos  Rio de Janeiro Refrescos Ltda.   Associate   Loan  Guarantor   2,999,379    3,586,095 
Others  Rio de Janeiro Refrescos Ltda.   Subsidiary   Guaranty receipt  Legal proceeding   1,403,744    3,236,092 
Aduana de EZEIZA  Embotelladora del Atlántico S.A.   Subsidiary   Surety insurance  Faithful compliance of contract   216,643    673,854 
Aduana de EZEIZA  Andina Empaques Argentina S.A.   Subsidiary   Surety insurance  Faithful compliance of contract   247,043    506,623 

 

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24 – 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 June 30, 2020, the Company maintains all 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 seven contracts for own issued Chilean local bonds at a fixed rate for UF 16,097 million denominated in UF (“UF”), debt indexed to inflation in Chile (Company sales are correlated with the UF variation), of which five of these Local Bonds have been redenominated through Cross Currency Swaps to Chilean Pesos (CLP).

 

On the other hand, there is also the Company’s indebtedness on the international market through two 144A/RegS Bonds at a fixed rate, one for USD 365 million, denominated in dollars, and practically 100% of which has been re-denominated to BRL through Cross Currency Swaps, and another one for USD 300 million denominated in USD, and practically 100% of which has been re-denominated to Unidades de Fomento (UF) 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 266 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 USD 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 USD 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 USD 250,000 according to the country’s reality.

 

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.

 

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iii.Prepayment to suppliers

 

The Policy establishes that USD 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 USD 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.

 

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 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:

 

i.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 or higher (S&P) or equivalent for deposits of more than 1 year.

 

ii.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 a rating greater than or equal to AA+ (S&P) or equivalent.

 

iii.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 the functional currencies of each country, originates decreases and increases in equity, respectively. The Company does not hedge this risk.

 

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a.1 Investment in Argentina

 

As of June 30, 2020, the Company maintains a net investment of CLP 154,411,518 thousand. in Argentina, composed by the recognition of assets amounting to CLP 228,906,987 thousand and liabilities amounting to CLP 74,495,469. These investments accounted for 20.5% of the Company’s consolidated sales revenues

 

As of June 30, 2020, the Argentine peso devalued by 6.8% with respect to the Chilean peso.

 

If the exchange rate of the Argentine Peso devalued an additional 5% with respect to the Chilean Peso, the Company would have lower income from the operation in Argentina of CLP 9,521 thousand and a decrease in equity of CLP 7,103,016 thousand, originated by lower asset recognition of CLP 10,719,879 thousand and by lower liabilities recognition of CLP 3,616,863 thousand.

 

a.2 Investment in Brazil

 

As of June 30, 2020, the Company maintains a net investment of CLP 267,094,799 thousand in Brazil, composed by the recognition of assets amounting to CLP 62,522,220 thousand and liabilities amounting to CLP 595,427,421 thousand. These investments accounted for 34.9% of the Company's consolidated sales revenues.

 

As of June 30, 2020, the Brazilian Real devalued by 19.3% with respect to the Chilean peso.

 

If the exchange rate of the Brazilian Real devalued an additional 5% with respect to the Chilean Peso, the Company would have lower income from the operation in Brazil of CLP 810,718 thousand and a decrease in equity of CLP 12,601,438 thousand, originated by lower asset recognition of CLP 36,842,488 thousand and by lower liabilities recognition of CLP 24,241,050 thousand.

 

a.3 Investment in Paraguay

 

As of June 30, 2020, the Company maintains a net investment of CLP 273,205,641 thousand in Paraguay, composed by the recognition of assets amounting to CLP 311,456,533 thousand and liabilities amounting to CLP 38,250,892 thousand. These investments accounted for 9.6% of the Company's consolidated sales revenues.

 

As of June 30, 2020, the Paraguayan Guarani appreciated by 4.0% with respect to the Chilean peso.

 

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 CLP 770,620 thousand and a decrease in equity of CLP 12,250,806 thousand originated by lower asset recognition of CLP 14,337,852 thousand and lower liabilities recognition of CLP 2,087,046 thousand.

 

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.

 

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.

 

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c) Exposure of assets purchased or indexed to foreign currency

 

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.

 

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.

 

Commodities risk

 

The Company is subject to a risk of price fluctuations in the international markets mainly for sugar, PET resin and aluminum, which are inputs used to produce beverages and containers, which together, account for 35% to 40% of operating costs. Procurement and anticipated purchase contracts are made frequently to minimize and/or stabilize this risk. 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, with interest calculated for each period:

 

   Maturity 
Item  1 year   More than
1 up to 2
   More than
2 up to 3
   More than 3
up to 4
   More than 5 
   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Bank debt   377,189    742,191    0    0    0 
Bonds payable   14,668,575    11,301,339    11,782,443    323,285,776    673,447,507 
Lease obligations   15,609,812    16,499,967    16,061,461    12,006,989    18,613,277 
Contractual obligations   40,450,493    4,753,536    3,810,975    2,743,297    2,721,520 
Total   71,106,069    33,297,033    31,654,879    338,036,062    694,782,304 

 

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COVID-19-Related Risk

 

As a result of the impact that COVID-19 is having in different countries around the world, including its more recent outbreak in the countries where we operate, Coca-Cola Andina has taken measures necessary to protect its employees and to ensure the continuity of the Company’s operations.

 

Among the measures it has adopted to protect its employees are the following:

·campaign to educate our employees on actions to be taken to avoid the spread of COVID-19;

 

·sending home any employee that has been exposed to the virus;

 

·implementation of additional cleaning protocols for our facilities;

 

·modifying certain work practices and activities, keeping customer service:

 

-home office has been implemented for those employees whose work can be performed remotely

 

-domestic and international traveling has been canceled

 

·providing personal protection items to all our employees who need to keep working at plants and distribution centers, as well as to truck drivers and assistants, including face masks and sanitizers.

 

Since mid-March, governments of the countries where the Company operates, have adopted several measures to reduce infection rates of COVID-19. Among these measures are, the closing of schools, universities, shopping centers, restaurants and bars, prohibiting social gathering events, issuing stay-at-home orders and establishing quarantine requirements, imposing additional sanitary requirements on exports and imports, and limiting international travel and closing borders. Governments in the countries where we operate have also announced economic stimulus programs for families and businesses, including in Argentina a temporary restriction on workforce reductions. To date, none of our plants has had to suspend their operations.

 

As a result of the COVID-19 pandemic and the restrictions imposed by the authorities in the four countries where we operate, we have seen great volatility in our sales across channels. During this period, at the consolidated level, we have observed a significant decline in our sales volumes on the on-premise channel, consisting mainly of restaurants and bars, which have mostly been temporarily closed. We have also observed a decrease in volume in the supermarket channel, and stable volumes in the traditional (mom & pops) and wholesale channels. On consolidated terms, volume decreased by 20.8% in April, by 17.1% in May and by 4.2% in June, while July will be closing with a similar decrease to that of June. Because the pandemic and the measures taken by governments are changing very rapidly, we believe it is too early to draw conclusions about changes in the long-term consumption pattern, and how these may affect our operating and financial results in the future.

 

Due to uncertainties regarding the COVID-19 pandemic and the above-mentioned government restrictions, including how long these conditions may persist, and the effects they will have on our sales volumes and our business in general, we cannot accurately predict the ultimate financial impact from these new trends. In any event, we estimate that we will not face liquidity constraints, or difficulties in complying with covenants under our debt instruments. We do not anticipate any significant provisions or impairments at this time. Finally, we have reduced the Company’s investment plan for this year from USD 165 million to USD 90 million.

 

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25 – EXPENSES BY NATURE

 

Other expenses by nature are:

 

   01.01.2020   01.01.2019   04.01.2020   04.01.2019 
Description  06.30.2020   06.30.2019   06.30.2020   06.30.2019 
    CLP (000’s)    CLP (000’s)    CLP (000’s)    CLP (000’s) 
Direct production costs   401,631,236    413,735,343    148,434,360    180,209,809 
Employee expenses   116,208,249    129,880,705    45,792,999    64,667,554 
Transportation and distribution   66,156,865    64,098,927    28,770,191    23,370,185 
Advertising   11,775,379    12,118,113    1,280,072    5,857,861 
Depreciation and amortization   54,125,036    53,895,240    26,587,015    27,275,029 
Repairs and maintenance   11,932,039    13,656,953    6,018,647    7,649,545 
Other expenses   56,467,958    48,041,620    39,179,863    35,539,224 
Total (1)   718,296,762    735,426,901    296,063,147    344,569,207 

 

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

 

26 – OTHER INCOME

 

Other income by function is detailed as follows:

 

   01.01.2019   01.01.2019   04.01.2020   04.01.2019 
Description  06.30.2019   06.30.2019   06.30.2020   06.30.2019 
    CLP (000’s)    CLP (000’s)    CLP (000’s)    CLP (000’s) 
Gain on disposal of Property, plant and equipment   3,894    94,644    3,348    81,462 
Others   1,925,145    168,916    1,329,785    97,135 
Total   1,929,039    263,560    1,333,133    178,597 

 

27 – OTHER EXPENSES BY FUNCTION

 

Other expenses by function are detailed as follows:

 

   01.01.2020   01.01.2019   04.01.2020   04.01.2019 
Description  06.30.2020   06.30.2019   06.30.2020   06.30.2019 
    CLP (000’S)    CLP (000’S)    CLP (000’S)    CLP (000’S) 
Contingencies and non-operating fees   6,550,646    3,580,545    4,431,106    2,263,694 
Reversal IPI Manaus processes   -    (3,770,309)   -    (3,770,309)
Tax on bank debits   1,857,237    2,187,617    675,090    910,299 
Donations   1,500,000    -    1,500,000    - 
Write-offs, disposal and loss of Property, plant and equipment   (173,187)   (37,653)   (53,426)   (64,168)
Others   370,078    15,692    129,726    169,586 
Total   10,104,774    1,975,892    6,682,496    (490,898)

 

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28 – FINANCIAL INCOME AND EXPENSES

 

Financial income and expenses are detailed as follows:

 

a)Financial income

 

   01.01.2020   01.01.2019   04.01.2020   04.01.2019 
Description  06.30.2020   06.30.2019   06.30.2020   06.30.2019 
    CLP (000’S)    CLP (000’S)    CLP (000’S)    CLP (000’S) 
Interest income   2,829,246    1,565,744    1,240,748    771,734 
Other financial income   5,808,194    1,345,112    5,317,840    717,671 
Total   8,637,440    2,910,856    6,558,588    1,498,405 

 

b)Financial costs

 

   01.01.2020   01.01.2019   04.01.2020   04.01.2019 
Description  06.30.2020   06.30.2019   06.30.2020   06.30.2019 
    CLP (000’S)    CLP (000’S)    CLP (000’S)    CLP (000’S) 
Bond interest   19,576,321    18,967,900    9,839,347    9,399,971 
Bank loan interest   350,791    855,626    -    386,817 
Other financial costs   3,566,118    2,496,330    1,266,717    1,259,364 
Total   23,493,230    22,319,856    11,106,064    11,046,152 

 

29 – OTHER (LOSSES) GAINS

 

Other (losses) gains are detailed as follows:

 

   01.01.2020   01.01.2019   04.01.2020   04.01.2019 
Description  06.30.2020   06.30.2019   06.30.2020   06.30.2019 
    CLP (000’S)    CLP (000’S)    CLP (000’S)    CLP (000’S) 
Other (losses) gains   918    -    (114)   - 
Total   918    -    (114)   - 

 

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30. LOCAL AND FOREIGN CURRENCY

Local and foreign currency balances are the following:

 

CURRENT ASSETS  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Cash and cash equivalents   371,105,249    157,567,986 
USD   19,103,837    16,732,278 
EUR   361,657    9,723 
CLP   267,179,349    78,421,936 
BRL   56,685,349    46,189,977 
ARS   860,791    3,830,199 
PGY   26,914,266    12,383,873 
           
Other current financial assets   1,427,525    347,278 
CLP   172,889    275,407 
BRL   1,153,390    13,498 
ARS   19    16,575 
PGY   101,227    41,798 
           
Other current non-financial assets   31,764,440    16,188,965 
USD   1,651,112    893,571 
EUR   622,285    615,636 
UF   412,909    410,203 
CLP   7,940,742    5,642,901 
BRL   2,133,315    1,738,793 
ARS   15,991,051    3,918,728 
PGY   3,013,026    2,969,133 
           
Trade accounts and other accounts receivable   127,266,796    191,077,588 
USD   709,850    1,431,079 
EUR   5,296    - 
UF   546,487    453,469 
CLP   60,046,431    83,328,449 
BRL   55,017,574    79,586,461 
ARS   7,602,103    19,088,164 
PGY   3,339,055    7,189,966 
           
Accounts receivable related entities   7,257,381    10,835,768 
USD   38,827    45,644 
CLP   3,633,544    9,157,922 
BRL   62,964    - 
ARS   3,522,046    1,632,202 
           
Inventory   132,855,842    147,641,224 
USD   681,962    6,027,076 
CLP   52,853,755    48,320,784 
BRL   33,475,953    43,820,564 
ARS   33,291,558    34,262,914 
PGY   12,552,614    15,209,886 
           
Current tax assets   5,161,640    9,815,294 
CLP   4,227,571    9,815,294 
BRL   685,118    - 
ARS   248,951      
           
Total current assets   676,838,873    533,474,103 
USD   22,185,588    25,129,648 
EUR   989,238    625,359 
UF   959,396    863,672 
CLP   396,054,281    234,962,693 
BRL   149,213,663    171,349,293 
ARS   61,516,519    62,748,782 
PGY   45,920,188    37,794,656 

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NON-CURRENT ASSETS  06.30.2020   12.31.2019 
   CLP (000’s)   CLP (000’s) 
Other non-current financial assets   179,421,154    110,784,311 
UF   2,918,115    1,216,865 
BRL   165,209,345    98,918,457 
ARS   11,293,694    10,648,989 
           
Other non-current non-financial assets   96,596,596    125,636,150 
UF   328,229    318,533 
CLP   47,531    47,531 
BRL   93,900,861    122,922,979 
ARS   2,240,036    2,223,600 
PGY   79,939    123,507 
           
Accounts receivable, non-current   63,438    523,769 
UF   6,687    465,371 
BRL   -    - 
ARS   2,088    636 
PGY   54,663    57,762 
           
Accounts receivable related entities, non-current   166,752    283,118 
CLP   166,752    283,118 
           
Investments accounted for using the equity method   91,638,828    99,866,733 
CLP   49,845,359    49,703,673 
BRL   41,793,469    50,163,060 
ARS          
           
Intangible assets other than goodwill   645,497,775    675,075,375 
USD   3,959,421    3,959,421 
CLP   306,865,382    307,324,953 
BRL   152,958,174    189,240,893 
ARS   3,042,896    2,708,445 
PGY   178,671,902    171,841,663 
           
Goodwill   108,880,446    121,221,661 
CLP   9,523,767    9,523,767 
BRL   60,269,832    74,653,328 
ARS   31,502,362    29,750,238 
PGY   7,584,485    7,294,328 
           
Property, plant & equipment   665,078,622    722,718,863 
CLP   274,084,852    282,861,852 
BRL   199,239,840    251,080,517 
ARS   121,724,098    119,784,304 
PGY   70,029,832    68,992,190 
           
Deferred tax assets   1,979,386    1,364,340 
CLP   1,979,386    1,364,340 
           
Total non-current assets   1,789,322,997    1,857,474,320 
USD   3,959,421    3,959,421 
UF   3,253,031    2,000,769 
CLP   642,513,029    651,109,234 
BRL   713,371,521    786,979,234 
ARS   169,805,174    165,116,212 
PGY   256,420,821    248,309,450 

 

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   06.30.2020   12.31.2019 
CURRENT LIABILITIES  Up to 90 days   90 days to 1 year   Total   Up to 90 days   90 days to 1 year   Total 
   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Other financial liabilities, current  9,053,458   31,646,308   40,699,766   9,719,894   30,873,984   40,593,878 
USD   60,182    7,651,896    7,712,078    55,388    3,147,441    3,202,829 
UF   7,646,210    8,153,861    15,800,071    7,535,228    11,836,936    19,372,164 
CLP   840,890    12,026,915    12,867,805    842,221    11,700,946    12,543,167 
BRL   394,434    1,387,440    1,781,874    1,153,072    2,119,141    3,272,213 
ARS   47,181    910,228    957,409    75,060    704,921    779,981 
PGY   64,561    1,515,968    1,580,529    58,925    1,364,599    1,423,524 
                               
Trade accounts and other accounts payable, current   164,181,373    9,953,491    174,134,864    228,259,216    15,441,337    243,700,553 
USD   9,198,844    -    9,198,844    10,049,567    -    10,049,567 
EUR   1,454,442    -    1,454,442    2,024,156    -    2,024,156 
UF   2,069,588    -    2,069,588    2,044,871    -    2,044,871 
CLP   49,496,126    9,953,491    59,449,617    84,602,547    15,441,337    100,043,884 
BRL   54,187,906    -    54,187,906    75,051,089    -    75,051,089 
ARS   38,654,068    -    38,654,068    40,826,489         40,826,489 
PGY   9,120,399    -    9,120,399    13,660,497    -    13,660,497 
                               
                               
Accounts payable related entities, current   37,774,527    -    37,774,527    53,637,601    -    53,637,601 
CLP   17,664,816    -    17,664,816    28,471,399    -    28,471,399 
BRL   13,193,607    -    13,193,607    19,279,132    -    19,279,132 
ARS   6,916,104    -    6,916,104    5,887,070    -    5,887,070 
                               
                               
Other current provisions   1,665,054    504,486    2,169,540    1,637,799    431,185    2,068,984 
CLP   1,665,054    500,859    2,165,913    1,637,799    427,697    2,065,496 
PGY   -    3,627    3,627    -    3,488    3,488 
                               
Tax liabilities, current   302,312    1,524,370    1,826,682    3,097,223    3,665,044    6,762,267 
CLP   302,312    -    302,312    896,975    -    896,975 
BRL   -    -    -    2,107,381    -    2,107,381 
ARS   -    -    -    92,867    3,446,054    3,538,921 
PGY   -    1,524,370    1,524,370    -    218,990    218,990 
                               
Employee benefits current provisions   10,390,502    11,551,045    21,941,547    26,513,813    11,879,041    38,392,854 
CLP   761,709    3,723,659    4,485,368    1,241,603    5,509,351    6,750,954 
BRL   8,440,064    -    8,440,064    20,681,694    -    20,681,694 
ARS   1,188,729    5,833,800    7,022,529    4,590,516    5,260,142    9,850,658 
PGY   -    1,993,586    1,993,586    -    1,109,548    1,109,548 
                               
Other current non-financial liabilities   220,603    29,624,236    29,844,839    328,441    26,173,774    26,502,215 
CLP   189,474    29,508,522    29,697,996    327,847    26,064,658    26,392,505 
ARS   31,129    7,753    38,882    594    5,286    5,880 
PGY   -    107,961    107,961    -    103,830    103,830 
                               
Total current liabilities   223,587,829    84,803,936    308,391,765    323,193,987    88,464,365    411,658,352 
USD   9,259,026    7,651,896    16,910,922    10,104,955    3,147,441    13,252,396 
EUR   1,454,442    -    1,454,442    2,024,156    -    2,024,156 
UF   9,715,798    8,153,861    17,869,659    9,580,099    11,836,936    21,417,035 
CLP   70,920,381    55,713,446    126,633,827    118,020,391    59,143,989    177,164,380 
BRL   76,216,011    1,387,440    77,603,451    118,272,368    2,119,141    120,391,509 
ARS   46,837,211    6,751,781    53,588,992    51,472,596    9,416,403    60,888,999 
PGY   9,184,960    5,145,512    14,330,472    13,719,422    2,800,455    16,519,877 

 

79

 

 

 

 

   06.30.2020   12.31.2019 
NON-CURRENT LIABILITIES  More than 1 year up to 3   More than 3
and up to 5
  More than
5 years
  Total   More than 1 year up to 3   More than 3
and up to 5
   More than
5 years
   Total 
   CLP (000’S)   CLP (000’S)  CLP (000’S)  CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S)   CLP (000’S) 
Other financial liabilities, non-current   33,530,460    315,261,671   761,232,366   1,110,024,497    34,794,568    299,661,490    408,870,999    743,327,057 
USD   360,931    300,037,567   239,070,493   539,468,991    509,366    271,700,335    -    272,209,701 
UF   23,654,279    12,606,849   413,856,986   450,118,114    22,584,954    24,627,105    400,393,581    447,605,640 
CLP   6,564,822    -   102,066,343   108,631,165    7,926,056    -    -    7,926,056 
BRL   2,529,752    2,617,255   6,238,544   11,385,551    3,319,514    3,334,050    8,477,418    15,130,982 
ARS   106,232    -   -   106,232    55,222    -    -    55,222 
PGY   314,444    -   -   314,444    399,456    -    -    399,456 
                                       
Accounts payable, non-current   343,414    -   -   343,414    619,587    -    -    619,587 
CLP   343,414    -   -   343,414    618,509    -    -    618,509 
ARS   -    -   -   -    1,078    -    -    1,078 
                                       
Accounts payable related entities   17,510,694    -   -   17,510,694    19,777,812    -    -    19,777,812 
BRL   17,510,694    -   -   17,510,694    19,777,812    -    -    19,777,812 
                                       
Other provisions, non-current   952,344    54,377,860   -   55,330,204    968,404    66,070,162    -    67,038,566 
BRL   -    54,377,860   -   54,377,860    -    66,070,162    -    66,070,162 
ARS   952,344    -   -   952,344    968,404    -    -    968,404 
                                       
Deferred tax liabilities   13,565,280    38,616,160   73,831,984   126,013,424    12,834,788    49,848,536    106,766,423    169,449,747 
UF   1,542,766    234,877   57,976,540   59,754,183    -    -    1,298,050    1,298,050 
CLP   -    38,381,283   -   38,381,283    1,449,404    181,418    90,271,026    91,901,848 
BRL   12,022,514    -   -   12,022,514    -    49,667,118    -    49,667,118 
ARS   -    -   15,855,444   15,855,444    11,385,384    -    -    11,385,384 
PGY                     -    -    15,197,347    15,197,347 
                                       
Employee benefits non-current provisions   1.066.950    154,046   9,569,334   10,790,330    1,114,051    148,954    8,910,349    10,173,354 
CLP   366,750    154,046   9,569,334   10,090,130    461,587    148,954    8,910,349    9,520,890 
ARS   83,222    -   -   83,222    88,090    -    -    88,090 
PGY   616,978    -   -   616,978    564,374    -    -    564,374 
                                       
                                       
Total non-current liabilities   66,969,142    408,409,737   844,633,684   1,320,012,563    70,109,210    415,729,142    524,547,771    1,010,386,123 
USD   360,931    300,037,567   239,070,493   539,468,991    509,366    271,700,335    -    272,209,701 
UF   23,654,279    12,606,849   413,856,986   450,118,114    22,584,954    24,627,105    401,691,631    448,903,690 
CLP   8,817,752    388,923   169,612,217   178,818,892    10,455,556    330,372    99,181,375    109,967,303 
BRL   20,040,446    95,376,398   6,238,544   121,655,388    23,097,326    119,071,330    8,477,418    150,646,074 
ARS   13,164,312    -   -   13,164,312    12,498,178    -    -    12,498,178 
PGY   931,422    -   15,855,444   16,786,866    963,830    -    15,197,347    16,161,177 

 

80

 

 

 

31 – THE ENVIRONMENT  

 

The Company has made disbursements 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:

 

    2020 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
 
    CLP (000’s)     CLP (000’s)     CLP (000’s)   CLP (000’s)  
Chile   757,449     -     -     -  
Argentina   176,981     -     32,118     -  
Brazil   483,695     16,074

  505,755     101,677  
Paraguay   77,084     5,823     -     -  
Total   1,495,209     21,897     537,873     101,677  

 

32 – SUBSEQUENT EVENTS

 

No other events have occurred after June 30, 2020 that may significantly affect the Company's consolidated financial situation.

 

81

 

 

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, August 12, 2020