NOTE 3 — REPORTING BY SEGMENT

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

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

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

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

Operation in Chile

Operation in Brazil

Operation in Argentina

Operation in Paraguay

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

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

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

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


For the period ended December 31, 2017	Chile Operation		Argentina Operation		Brazil Operation		Paraguay Operation		Intercompany Eliminations		Consolidated total
	ThCh$		ThCh$		ThCh$		ThCh$		ThCh$		ThCh$
Softdrinks	391,629,010		444,872,352		387,545,053		113,314,824		(96,999)		1,337,264,240
Other beverages	160,244,448		99,712,939		216,352,694		27,962,406		—		504,272,487
Packaging	—		9,202,768		—		—		(1,860,876)		7,341,892
Net sales	551,873,458		553,788,059		603,897,747		141,277,230		(1,957,875	)	1,848,878,619
Cost of sales	(328,579,003	)	(294,370,581	)	(362,686,353	)	(85,346,902	)	1,957,875		(1,069,024,964	)
Distribution expenses	(54,777,094	)	(87,032,428	)	(43,483,958	)	(7,634,395	)	—		(192,927,875	)
Administrative expenses	(110,969,260	)	(106,504,163	)	(109,095,660	)	(21,630,238	)	—		(348,199,321	)
Finance income	19,057,630		2,116,590		6,575,528		257,906		(16,813,279	)	11,194,375
Finance expense	(32,594,796	)	(4,663,527	)	(34,767,713	)	(7,612	)	16,813,279		(55,220,369	)

Interest expense, net.	(13,537,166	)	(2,546,937	)	(28,192,185	)	250,294		—		(44,025,994	)

Share of the entity in income of associates	246,084		(243	)	(326,201	)	—		—		(80,360	)
Income tax expense	(16,871,257	)	(17,683,875	)	(13,719,506	)	(3,522,996	)	—		(51,797,634	)
Other income (loss)	(11,312,509	)	(10,441,173	)	(1,855,039	)	(213,025	)	—		(23,821,746	)

Net income of the segment reported	16,073,253		35,208,659		44,538,845		23,179,968		—		119,000,725


Depreciation and amortization	42,688,326		17,648,018		27,879,514		10,948,033		—		99,163,891

Current assets	223,245,173		97,529,488		132,815,545		30,419,844		—		484,010,050
Non-current assets	636,482,010		96,532,150		663,556,969		234,278,288		—		1,630,849,417

Segment assets, total	859,727,183		194,061,638		796,372,514		264,698,132		—		2,114,859,467


Carrying amount in associates and joint ventures accounted for using the equity method, total	33,789,538		—		53,019,531		—		—		86,809,069
Capital expenditures and other	64,480,973		40,347,989		91,198,657		14,476,783		—		210,504,402

Current liabilities	169,508,083		105,886,744		135,595,155		17,297,339		—		428,287,321
Non-current liabilities	463,997,113		1,368,167		393,125,740		14,847,776		—		873,338,796

Segment liabilities, total	633,505,196		107,254,911		528,720,895		32,145,115		—		1,301,626,117


Cash flows provided by in Operating Activities	79,451,122		38,904,028		98,783,329		30,821,869		—		247,960,348
Cash flows (used in) provided by Investing Activities	(49,677,671	)	(40,344,994	)	(64,331,960	)	(14,476,785	)	—		(168,831,410	)
Cash flows (used in) provided by Financing Activities	(91,800,089	)	16,891,759		(3,437,442	)	—		—		(78,345,770	)

For the period ended December 31, 2016	Chile Operation		Argentina Operation		Brazil Operation		Paraguay Operation		Intercompany Eliminations		Consolidated total
	ThCh$		ThCh$		ThCh$		ThCh$		ThCh$		ThCh$
Softdrinks	391,479,133		424,427,824		389,048,385		106,953,951		(334,784)		1,311,574,509
Other beverages	148,948,285		83,518,724		201,097,188		25,051,552		—		458,615,749
Packaging	—		9,112,468		—		—		(1,843,406)		7,269,062
Net sales	540,427,418		517,059,016		590,145,573		132,005,503		(2,178,190	)	1,777,459,320
Cost of sales	(319,213,825	)	(279,308,400	)	(359,156,149	)	(78,409,843	)	2,178,190		(1,033,910,027	)
Distribution expenses	(52,540,986	)	(80,066,734	)	(44,107,337	)	(6,961,838	)			(183,676,895	)
Administrative expenses	(117,615,991	)	(97,788,860	)	(109,345,331	)	(21,452,613	)			(346,202,795	)
Finance income	2,426,279		1,095,411		5,800,712		339,290				9,661,692
Finance expense	(16,262,215	)	(587,216	)	(34,504,760	)	(20,780	)			(51,374,971	)

Interest expense, net*	(13,835,936	)	508,195		(28,704,048	)	318,510		—		(41,713,279	)

Share of the entity in income of associates	717,947		—		(980,529	)	—		—		(262,582	)
Income tax expense	(19,763,700	)	(17,427,278	)	(8,911,762	)	(2,704,353	)	—		(48,807,093	)
Other income (loss)	(13,481,333	)	(8,284,072	)	(9,322,611	)	250,478		—		(30,837,538	)

Net income of the segment reported	4,693,594		34,691,867		29,617,806		23,045,844		—		92,049,111


Depreciation and amortization	43,619,318		16,445,143		25,666,094		11,603,897		—		97,334,452

Current assets	251,357,854		115,280,140		150,820,924		35,283,479		—		552,742,397
Non-current assets	644,817,201		98,810,807		659,123,444		243,615,898		—		1,646,367,350

Segment assets, total	896,175,055		214,090,947		809,944,368		278,899,377		—		2,199,109,747


Carrying amount in associates and joint ventures accounted for using the equity method, total	23,854,602		—		53,343,179		—		—		77,197,781
Capital expenditures and other	47,755,389		37,029,524		51,779,625		9,239,522		—		145,804,060

Current liabilities	137,438,744		134,624,014		130,279,607		17,192,489		—		419,534,854
Non-current liabilities	509,625,208		(1,981,066	)	413,749,384		16,011,340		—		937,404,866

Segment liabilities, total	647,063,952		132,642,948		544,028,991		33,203,829		—		1,356,939,720


Cash flows provided by Operating Activities	71,077,982		54,162,992		67,963,682		30,241,904		—		223,446,560
Cash flows (used in) provided by Investing Activities	(15,781,118	)	(37,017,204	)	(51,873,047	)	(9,244,948	)	—		(113,916,317	)
Cash flows (used in) provided by Financing Activities	(23,591,062	)	(17,777,191	)	(36,806,173	)	(20,050,099	)	—		(98,224,525	)

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

For the period ended December 31, 2015	Chile Operation		Argentina Operation		Brazil Operation		Paraguay Operation		Intercompany Eliminations		Consolidated Total
	ThCh$		ThCh$		ThCh$		ThCh$		ThCh$		ThCh$
Softdrinks	375,993,430		523,460,939		417,508,814		105,709,646		(281,091	)	1,422,391,738
Other beverages	138,739,166		93,409,514		189,538,968		24,329,754		—		446,017,402
Packaging	—		10,387,685		—		—		(1,402,569	)	8,985,116

Net sales	514,732,596		627,258,138		607,047,782		130,039,400		(1,683,660	)	1,877,394,256

Cost of sales	(309,387,177	)	(351,139,902	)	(369,212,113	)	(78,650,614	)	1,683,660		(1,106,706,146	)
Distribution expenses	(51,642,087	)	(97,485,454	)	(46,571,390	)	(6,791,861	)	—		(202,490,792	)
Administrative expenses	(105,959,018	)	(115,611,438	)	(109,802,964	)	(21,227,426	)	—		(352,600,846	)
Finance income	1,859,795		1,669,559		6,239,526		349,495		—		10,118,375
Finance expense	(16,699,299	)	(3,916,370	)	(35,021,529	)	(32,019	)	—		(55,669,217	)

Interest expense, net*	(14,839,504	)	(2,246,811	)	(28,782,003	)	317,476		—		(45,550,842	)

Share of the entity in income of associates accounted for using the equity method, total	777,620		—		(3,105,449	)	—		—		(2,327,829	)
Income tax expense	(14,949,823	)	(16,740,817	)	(6,887,666	)	(3,064,256	)	—		(41,642,562	)
Other income (loss)	(15,363,727	)	(9,902,996	)	(10,809,496	)	(1,901,094	)	—		(37,977,313	)

Net income of the segment reported	3,368,880		34,130,720		31,876,701		18,721,625		—		88,097,926


Depreciation and amortization	40,083,270		21,171,806		26,572,048		12,805,208		—		100,632,332

Current assets	256,380,151		111,228,338		145,809,121		33,992,246		—		547,409,856
Non-current assets	668,605,326		102,027,611		631,923,188		259,395,043		—		1,661,951,168

Segment assets, total	924,985,477		213,255,949		777,732,309		293,387,289		—		2,209,361,024


Carrying amount in associates and joint ventures accounted for using the equity method, total	17,793,784		—		36,396,762		—		—		54,190,546
Capital expenditures and other	50,042,740		30,056,170		25,745,746		7,469,941		—		113,314,597

Current liabilities	81,766,688		113,185,338		164,173,404		21,448,780		—		380,574,210
Non-current liabilities	571,635,493		6,708,979		381,506,922		17,401,120		—		977,252,514

Segment liabilities, total	653,402,181		119,894,317		545,680,326		38,849,900		—		1,357,826,724


Cash flows provided by in Operating Activities	105,897,100		83,290,552		66,272,643		9,448,935		—		264,909,230
Cash flows (used in) provided by Investing Activities	(40,431,754	)	(28,732,653	)	(29,150,493	)	(4,816,170	)	—		(103,131,070	)
Cash flows (used in) provided by Financing Activities	(50,804,304	)	(15,529,951	)	(31,576,973	)	(649,149	)	—		(98,560,377	)