coca-cola holdings nz annual report for the year ended 31...

Coca-Cola Holdings NZ

Annual Report

For the year ended 31 December 2016

Coca-Cola Holdings NZ Limited

Annual Report


Contents

Company Directory

Auditors Report

Directors Review

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Consolidated Statement of Financial Position

Consolidated Statement of Cash Flows

Notes to the Financial Statements

Page

2

3

5

6

7

8

9

10


Company directory

As at 31 December 2016

Registered Office

Directors

Bankers

Business Location

The Oasis

Oasis Road

Mount Wellington

AUCKLAND

Caroline Beaumont

Christopher Litchfield

Bank of New Zealand

Westpac Banking Corporation

Australia & New Zealand Banking Group

The Oasis

Oasis Road

Mount Wellington

AUCKLAND

2

A member firm of Ernst & Young Global Limited

Chartered Accountants

Independent Auditor’s Report to the Shareholder of Coca-Cola Holdings NZ Limited

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Coca-Cola Holdings NZ Limited (“the Company”) and its subsidiaries (together “the Group”) on pages 6 to 29, which comprise the consolidated statement of financial position of the Group as at 31 December 2016, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended of the Group, and the notes to the consolidated financial statements including a summary of significant accounting policies.

In our opinion, the consolidated financial statements on pages 6 to 29 present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2016 and its consolidated financial performance and cash flows for the year then ended in accordance with New Zealand equivalents to International Financial Reporting Standards Reduced Disclosure Regime.

This report is made solely to the Company’s shareholder. Our audit has been undertaken so that we might state to the Company’s shareholder those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholder, for our audit work, for this report, or for the opinions we have formed.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.

We are independent of the Group in accordance with Professional and Ethical Standard 1 (revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

We provide consultancy and audit services to the Group. We have no other relationship with, or interest in, the Group. Partners and employees of our firm may deal with the Group on normal terms within the ordinary course of trading activities of the business of the Group.

Information Other than the Financial Statements and Auditor’s Report

The directors of the Company are responsible for the Annual Report, which includes information other than the consolidated financial statements and auditor’s report.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained during the audit, or otherwise appears to be materially misstated.

If, based upon the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Directors’ Responsibilities for the Financial Statements

The directors are responsible, on behalf of the entity, for the preparation and fair presentation of the consolidated financial statements in accordance with New Zealand equivalents to International Financial Reporting Standards Reduced Disclosure Regime, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

A member firm of Ernst & Young Global Limited

Chartered Accountants

In preparing the consolidated financial statements, the directors are responsible for assessing on behalf of the entity the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or cease operations, or have no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (New Zealand) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

A further description of our responsibilities for the audit of the consolidated financial statements is located at the

External Reporting Board website: https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-

responsibilities. This description forms part of our auditor’s report

Auckland

23 August 2017


Directors Review


The Directors of Coca-Cola Holdings NZ Limited present this Annual Report,

being the financial statements of the Group for the financial year ended 31

December 2016 and the auditor's report thereon.

The shareholder of the Group has exercised its right under section 211(3) of the

Companies Act 1993 and agreed that this Annual Report need not comply with

any of paragraphs (a), and (e) to (j) of section 211(1) and section 211(2) of the

Act.

For and on behalf of the Board, who authorised these financial statements for

issue on 23 August 2017

-') � { � ...... i& .... �� ................... Director

2 1 . � _ 2..a \, ..................................................... Date

5


Consolidated Statement of Comprehensive Income


Note 2016 2015

S'000's S'000's

Trading Revenue 632,204 531,708

Other income 3 11,065 8,367

643,269 540,075

Cost of goods sold 356,254 276,079

Selling and Marketing 87,407 81,267

Warehouse and Distribution 50,961 45,078

Administrative & Other 38,131 32,988

Total Expenses 4a 532,753 435,412

Profit before interest and income

tax 110,516 104,663

Net Finance Cost 4b 11,781 10,910

Income Tax Expense 13a 27,870 26,634

Net Profit for the year 70,865 67,119

Other Comprehensive Income

Cash flow Hedges: Gain / (loss)

taken to reserves (3,938) (1,872) Income tax on items of other

comprehensive income 1,103 524

Other Comprehensive Income for

the year net of tax (2,835) (1,348)

Total Comprehensive Income for

the year 68,030 65,771

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the

accompanying notes

EV 6


Consolidated Statement of changes in Equity


GROLi'

At 1 January 2016 (Restated)'

Profit for the period

Other comprehensive income

Total income and expense for the period

Equit) Transactions:

Shareholder equity contribution

At 31 December 2016

At 1 January 2015 (Restated)'

Profit for the period

Other comprehensive income

Total income and expense for the period

Equity Transactions:

Shareholder equity contribution

Finalisation of VMSL restructuring

Dividends paid

At 31 December 2015 (Restated)'

Ordinary Shares

$'000

142,419

142,419

Ordinary Shares

$'000

142,419

142,419

Share base payment reserve

S'OOO

426

305

731

Share base payment reserve $'000

130

296

426

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes

1 Refer to change in accounting policy note under basis of preparation for further details.

cash Flow Hedge Reserve

$'000

6,108

(2,835)

(2,835)

3,273

Cash Flow Hedge Reserve

$'000

7,456

(1,348)

1,348

6,108

Amalgamation Reserve

$'000

Amalgamation Reserve

$'000

(2,692)

2,692

Retained Earnings

$'000

85,124

70,865

70,865

155,989

Retained Earnings

$'000

120,697

67,119

67,119

(2,692)

(100,000)

85,124

Total

$'000

Total

$'000

EY

234,077

70,865

(2,835t

68,030

305

302,412

268,010

67,119

(1,348)

65,772

296

(100,000)

234,077

7


Consolidated Statement of Financial Position

As at 31 December 2016

Current Assets

Cash and cash equivalents

Prepayments

Trade and other receivables

Inventories

Derivative financial instruments

Total Current Assets

Non-current Assets

Property, Plant and Equipment

Intangible assets

Prepayments


Total Non-current Assets Total Assets

Current Liabilities

Trade and other payables

Provisions


Interest bearing borrowings

Deferred income

Income Tax Payable

Total current liabilities

Non-Current Liabilities


Deferred income

Deferred tax liability

Interest bearing borrowings

Total non-current liabilities

Total Liabilities

Net Assets

Equity

Contributed Equity

Reserves

Retained earnings

Total Equity

5

6

2016

$'000's

41,738

9,310

131,133

76,400

(Restated)1

2015

$'000's

56,864

7,267

122,728

80,952

100 7 __________________ ___;;;.;:...;;. _____ _

8

9

7

lla

llb

7

12a

7

13c

258,581 267,911

241,652 233,782

244,665 246,593

2,432 1,602

____ ...;;..,.:_.:;;. ___________ ___;;..;.;.:_...;...;;. ______ _

17,717 21,700

506,466 503,677

765,047 771,588

150,987 150,588

3,992

2

34,275

47 153

8,901 8,037

194,210 162,772

13,314 10,930

873

80,012 82,880

12b ___ _,;;;.��----------___;;�c.:...::.c:.__ ____ _ 174,226 280,929

14

15

268,425

462,635

302,412

142,419

4,004

155,989

302,412

374,739

537,511

234,077

142,419

6,534

85,124

234,077

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes


EV s


Consolidated Statement of Cash Flows


Operating activities

Profit before Interest and Tax

Adjustments to reconcile profit before tax to net cash flows:

Depreciation of PPE

Amortisation of intangible assets

Changes in adjusted working capital

Changes in deferred income

Non cash share based payments

Changes on disposal of PPE

Changes in prepayments

Changes in provisions

Interest received

Interest paid

Income taxes paid

Other non-cash expenses

Net cash flows from operating activities

Investing activities

Proceeds from

disposal of PPE & SDA

Payments for -

PPE

Software development assets

Net cash flows used in investing activities

Financing activities

Proceeds from borrowings

Borrowings repaid

Dividends paid

Net cash flows from financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at 1 January

Cash and cash equivalents at 31 December

8

9

Note 2016

$'000's

110,516

25,448

3,184

(3,611)

768

305

529

(2,874)

(3,992)

555

(11,979)

(28,517)

90,332

759

(34,815)

(1,013)

(35,069)

17,719

(88,108)

(70,389)

(15,126)

56,864

41,738

2015

$'000's

104,663

24,594

2,521

13,910

(75)

296

(199)

798

(691)

1,106

(12,315)

(26,111)

690

109,187

597

(26,208)

(355)

(25,966)

110,398

(72,226)

(100,000)

(61,828)

21,393

35,471

56,864

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes

E.Y 9

Coca-Cola Holdings NZ Notes to the consolidated financial statements

Annual Report for the year ended 31 December 2016

1 General information

Coca-Cola Holdings NZ Limited (CCH) is a wholly owned subsidiary of Coca-Cola Amatil Limited Australia (CCA). It is the holding company of

Coca-Cola Amatil (NZ) Limited (CCANZ) and Vending Management Services Limited (VMSL), together known as Group

CCANZ is the largest non-alcoholic beverage company in New Zealand. Its products include soft drinks, juice drinks, water, energy drinks,

sports drinks, dairy drinks, cordials, and coffee products. CCANZ also has a number of alcoholic distribution arrangements consisting of beers,

ciders, spirits and ready to drink beverages.

2 Summary of significant accounting policies

(a) Basis of preparation

The consolidated financial statements comprise the financial statements of CCH and its subsidiaries (the Group). The consolidated financial

statements of the Group comply with New Zealand Equivalents to International Financial Reporting Standards Reduced Disclosure Regime (NZ

IFRS RDR).

The consolidated financial statements have been prepared in accordance with generally accepted accounting practice in New Zealand (NZ

GAAP) and the requirements of the Companies Act 1993. For the purposes of complying with NZ GAAP the Group is a for-profit entity. The

Group is eligible to report in accordance with NZ IFRS RDR on the basis that it does not have public accountability and is not a large for-profit

public sector entity.

The consolidated financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars unless

otherwise stated.

Measurement Base

These consolidated financial statements have been prepared under the historical cost convention, except where mentioned in the accounting

policies.

Comparative Information

Where necessary, comparative figures have been amended to correspond with current year classifications.

Change in Accounting Policy

As a result of the recent International Financial Reporting Standards Interpretation Committee's published agenda decision in relation to the

accounting requirements for deferred tax and specifically clarifying the criteria that entities are required to apply when determining the

recovery through sale or through use basis to determine tax values in relation to indefinite lived intangible assets, we have made the below

mentioned adjustments to our financial statements.

Previously, CCA had assessed that the recovery of the indefinite lived intangible assets would be through sale and therefore used tax bases for

this purpose (for example capital gains tax cost bases) to determine taxable temporary differences. However, as a result of the interpretation,

the deferred tax on CCA's investments in bottler agreement (IBA) assets have been adjusted to reflect recovery through use. The tax base for

the recovery through use approach is zero, in that there are no tax deductions available to the Group. Accordingly, deferred tax liabilities have

increased as a result.

These adjustments have been applied as a retrospective change in accounting policy, meaning adjustment to the opening balance sheet

position (1 January 2015) against retained earnings and goodwill, depending on whether the underlying IBA was acquired before or after New

Zealand's transition to International Financial Reporting Standards in 2004. The effect of these adjustments on the financial statements are as

follows:

Deferred tax liability

Retained earnings

1 January 2015

(restated)

$M

84,133

268,010

I January 2015 (as 31 December 2015

reported) (restated)

SM $M

22,830 82,880

329,313 234,077

31/12/2015 (as

reported)

$M

21,577

295,380

EV 10



(b) Foreign currency translation

Foreign monetary balances are converted to New Zealand dollars at the rates of exchange ruling at balance date and any unrealised gain or loss

resulting from the conversion is reflected in the consolidated statement of comprehensive income.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the

reporting date. Differences arising on settlement or translation of monetary items are recognised in the profit or loss with the exception of

monetary items that are designated as part of the hedge of the Group's net investment of a foreign operation. These are recognised in OCI until

the net investment is disposed of, at which time, the cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to

exchange differences on those monetary items are also recorded in OCI.

Summary of significant accounting policies (continued)

(c) Basis of consolidation

Subsidiaries are all those entities over which the Group has control.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting

policies.

In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses

resulting from intra-group transactions have been eliminated in full.

Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on

which control is transferred out of the Group.

The acquisition of subsidiaries is accounted for using the acquisition method. The acquisition method involves allocating the cost of the

business combination to the fair value of the assets acquired and the liabilities and contingent liabilities assumed at the date of acquisition.

Where consideration for an acquisition is in excess of the net assets of the entity at the date of acquisition, and the entity was previously an

entity under common control of the ultimate parent, the excess is recorded in an amalgamation reserve in equity.

(d) Revenue recognition

Revenue is recognised and measured at the fair value of the consideration received or receivable net of discounts, allowances and applicable

amounts of value added taxes such as the New Zealand Goods and Services Tax (GST). The following specific recognition criteria must also be

met before revenue is recognised:

(i) Sale of goods

Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the amount of revenue

can be measured reliably.

(ii) Equipment rental

Revenue from installation and maintenance of equipment is recognised when the services have been performed and the amount can be

measured reliably.

{iii) Interest income

Interest income is recognised as the interest accrues using the effective interest method.

(iv) Rendering of services

Revenue from rendering of services is recognised when the services have been performed and the amount can be measured reliably.

EV 11




(e) Investment in Bottler's Agreements

Notes to the consolidated financial statements

The Group has a Bottler's Agreement with The Coca-Cola Company (TCCC) which provides CCH with the exclusive rights to manufacture,

distribute, market and sell TCCC branded products in New Zealand, and are subject to certain performance criteria.

The agreements are generally for 10 year terms, and reflect a long and ongoing relationship between the Group and TCCC. No consideration is

payable upon renewal or extension of the agreements. In assessing the useful life of the agreements, consideration is given to the Group's

history of dealings with TCCC since 1939, their established international practices and equity interests in the Group, participation of nominees

of TCCC on CCA's Board of Directors and the ongoing profitability of TCCC brands. Accordingly, no factor can be identified that would result in

the agreements not being renewed or extended and therefore the agreements have been assessed as having indefinite useful lives, which

requires annual impairment testing.

(f) Goodwill

Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non

controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed), subsequently, goodwill on

acquisition of business is included in intangible assets. It is carried at cost less any accumulated impairment losses and is tested for indicators

of impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is not amortised.

(g) Other intangible assets

Software development costs

Costs associated with developing or maintaining software programs are recognised as an expense as incurred. Costs that are directly

associated with the production of identifiable and unique software products controlled by CCH or Group and that will generate economic

benefits beyond one year, are recognised as intangible assets. Direct costs include the costs of employees dedicated to software development

and an appropriate portion of relevant overheads. Subsequent software development costs are measured at cost less accumulated

amortisation and impairment. Capitalised costs are amortised over the useful economic life of 2-10 years.

Licensing agreements

Costs associated with licensing agreements are capitalised. Subsequently they are carried at cost less accumulated amortisation and

impairment. They are amortised over the period during which benefits are expected to be received. This period does not exceed 20 years.

Trade Marks I Brand Names

Trademarks and brand names arising from acquisition are carried at cost less impairment and amortised over their useful economic life of 50

years.

(h) Cash and cash equivalents

Cash and cash equivalents comprise of cash on hand, cash at banks and short term deposits with a maturity of one year or less that are

repayable to the Group on demand and are subject to an insignificant risk of changes in value.

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying periods, depending

on the immediate cash requirements of the Group, and earn interest at the respective short term deposit rates.

EV 12




(i) Trade receivables

Trade and other receivables are recognised initially at fair value and subsequently carried at amortised cost using the effective interest rate

method. Where there is evidence that amounts due may not be fully or partly recoverable, an allowance for doubtful receivables is recognised

in the profit or loss.

(j) Inventories

Inventories are stated at the lower of cost (including fixed and variable factory overheads where applicable) and net realisable value. Cost is

determined on the basis of first-in-first-out, average or standard, whichever is the most appropriate in each case. Net realisable value is the

estimated selling price in the ordinary course of business, less the cost of completion and selling expenses.

(k) Financial assets and liabilities

The Group classifies its financial assets and liabilities as either at amortised cost or fair value through the consolidated statement of

comprehensive income. The classification of financial assets depends on -

• the entity's business model for managing financial assets; and

• the contractual cash flow characteristics of the financial asset.

Financial assets or liabilities recognised initially at fair value are subsequently measured at either fair value or amortised cost using the effective

interest method. In the case of financial assets or liabilities not subsequently measured at fair value, the initial fair value is adjusted for directly

attributable transaction costs.

Recognition and derecognition

All regular purchases and sales of financial assets and liabilities are recognised on the trade date, which is the date the Group commits to

purchase or sell the asset or liability. Financial assets and liabilities are derecognised when the right to receive or pay cash flows has expired or

been transferred.

i) Financial assets and liabilities at fair value through profit or loss.

Financial assets or liabilities at fair value through profit or loss are derivatives or financial assets or liabilities designated as at fair value through

profit and loss. The effective portion of the fair value gain or loss on derivative instruments designated in cash flow hedge relationships is

recognised directly in equity. The Group's accounting policy in this regard is explained in Note 7.

ii) Financial assets and liabilities at amortised cost

A financial asset or liability is classified at amortised cost if it is acquired by the Group where the objective is to collect or pay contractual cash

flows on specified dates for payments of principal and interest.

Financial assets and financial liabilities at amortised cost include trade and other receivables and payables, bonds, loans, and bank overdrafts.

Hedge accounting is applied to certain interest bearing liabilities (refer to Note 7). In such instances, the resulting fair value adjustments mean

that the carrying value differs from amortised cost.

The fair value of all financial assets and liabilities are based on an active market price. If the market for a financial asset is not active, the Group

establishes fair value by using valuation techniques such as discounted cash flow analysis and option pricing models. These include reference to

the fair values of recent arm's length transactions, involving the same instruments or other instruments that are substantially the same.

E.Y 13




(I) Derivative Financial Instruments

Offsetting of derivative financial assets and derivative financial liabilities

The Group presents all its derivative financial assets and derivative financial liabilities arising from fair value measurement on a gross basis. The

net movements on the derivative financial assets and derivative financial liabilities are disclosed under Note 7.

(ml Contributed Equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of any new shares are shown in equity as a

deduction, net of tax.

(n) Property, plant and equipment

Property, plant and equipment are stated at cost less depreciation and impairment. Land and buildings are measured at deemed cost, as of the

date of transition to NZ IFRS, less depreciation on buildings and less any impairment losses.

For accounting purposes, the depreciation of property, plant and equipment other than land is provided for on a straight line basis over their

estimated economic lives. Estimated economic lives are as follows:

Buildings

Plant & equipment

Finance leases

50 years

5-15 years

2-20 years

Useful lives and depreciation methods are reviewed at the end of every financial year.

Capital work in progress is not depreciated as assets are not yet in the location and condition necessary to be capable of operating in the

manner intended.

For taxation purposes, the maximum rates of depreciation allowable are used.

Disposal

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its

use.

Any gain or loss arising on derecognition of the asset (cal cu lated as the difference between the net disposal proceeds and the carrying amount

of the asset) is included in the profit or loss in the year the asset is de recognised.

EV 14



Summary of significant accounting policies (continued) (o) Trade and Other PayablesTrade and other payables are recognised initially at fair value and subsequently carried at amortised cost using the effective interest rate

method. Liabilities are brought to account for amounts payable in relation to goods received and services rendered, whether or not billed at

reporting date.

(Pl Borrowing costs Interest expense is recognised on an accrual basis. Borrowing costs are capitalised when they are directly attributable to the acquisition,

construction or production of a qualifying asset. A qualifying asset is an asset that takes a substantial period of time to get ready for its

intended use or sale. Specific and general borrowing costs are capitalised. Amounts capitalised in any period do not exceed the borrowing

costs incurred during the period, and the resulting carrying amount of the qualifying asset will not exceed its recoverable amount.

Capitalisation commences when expenditures and borrowings are being incurred for the asset and when activities that are necessary to

prepare the asset for its intended use or sale are in progress.

(q) Income tax

(i) Current tax

Current tax liability or asset represents amounts payable or receivable in relation to income taxes attributable to taxable profits of the current

or prior financial years, less instalments of income tax paid. The tax rates and tax laws used to compute the amount are those that are enacted

or substantially enacted by the Statement of Financial Position date.

(ii)Deferred tax

Deferred tax is provided for using the liability method for all temporary differences arising between the tax bases of assets and liabilities and

their carrying value for financial reporting purposes. Tax rates enacted or substantively enacted at the Statement of Financial Position date are

used to determine deferred tax.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which temporary

differences can be utilised.

Deferred tax liabilities are recognised for all taxable temporary differences, except where the deferred tax liability arises from the initial

recognition of an asset or liability in a transaction, other than a business combination, and at the time of the transaction affect neither

accounting profit nor taxable profit or loss.

Deferred tax is provided on temporary differences arising on investments in controlled entities, except where the timing of the reversal of

temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset only when there is a legally enforceable right to offset current tax assets and liabilities and when

the deferred tax balances relate to the same authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable

right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

EV 1s




Current and deferred taxes relating to transactions recorded in equity are recorded in the matching class of equity.

(iii) Other taxes

Revenue, expenses and assets are recognised net of the amount of GST except:

· When the GST incurred on the purchase of goods and services is not recoverable from the taxation authority, in which case the GST is

recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

· Receivables and payables, which are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance

sheet.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to the taxation authority.

(r) Leases

Operating leases are those where the lessor effectively retains substantially all the risks and benefits incident to ownership of the leased

property. Operating lease payments are charged to the profit or loss on a straight line basis over the lease term. Lease income from operating

leases is recognised in the profit or loss on a straight line basis over the lease term.

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at

the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments

are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining

balance of the liability. Finance charges are recognised in finance costs in profit or loss.

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement at inception date, whether

fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if

that right is not explicitly specified in an arrangement.

EV 16




(s) Employee entitlements

(i) Wages, salaries, annual leave, long service leave, sick leave and other benefits

Provision is made for employee benefits accumulated as a result of employees rendering services up to balance date including related on-costs.

The benefits include wages and salaries, annual leave, long service leave, incentives, compensated absences, and other benefits, which are

charged against profits in their respective expense categories when services are provided or benefits vest with the employee. The provision for

employee benefits is measured at the remuneration rates expected to be paid when the liability is settled. The liability for employee

entitlements is carried at the present value of the estimated future cash flows.

(ii)Equity compensation plans

Certain employees of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as

consideration for equity instruments of CCA.

CCA shares are awarded to employees of the Group in accordance with the requirements of three share plans, being:

i) CCA Long Term Incentive Plan

ii) CCA Employees Share Plan; and

iii) CCA Executive Post Tax Share Purchase Plan

Further details in relation to these plans are covered in Note 16.

Employer contributions to the CCA Employees Share Plan are charged as an expense over the vesting period. Any amounts of unvested shares

held by the related trust are controlled by the Group until they vest and are recorded at cost in CCA's statement of financial position within

equity as shares held by equity compensation plans until they vest.


(t) Comparative information

Where necessary, comparative information is reclassified to achieve consistency in disclosure with the current financial amounts and other

disclosures.

(u) Restructuring Provision

Restructuring provisions are only recognised when general recognition criteria are fulfilled. The Group needs to follow a detailed formal plan

regarding the business (or part of the business) concerned, i.e. the location, the number of employees effected, a detailed estimate of

associated costs and general time frames. The employees affected must have a valid expectation that restructuring is being carried out and/or

that the implementation has been initiated.

(v) Impairment

Non-financial assets

Non-financial assets, except for inventory and deferred tax, are assessed annually for any indication of impairment.

Impairment losses are recognised in the profit or loss under administrative and other expenses.

Goodwill

Impairment is determined by assessing the recoverable amount of the cash-generating unit, to which·the goodwill relates. An asset's

recoverable amount is the higher of an asset's or CGU's fair value less costs of disposal and its fair value in use. The recoverable amount is

determined for an individual asset, unless the asset does not generate cash inflows that are largely dependent of those from other assets or

groups of assets. When the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised.

When the goodwill forms part of a cash-generating unit and an operation within that unit is disposed of, the goodwill associated with the

operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation.

Goodwill disposed of in this manner is measured based on the relative values of the operation disposed of and the portion of the cash

generating unit retained. Impairment losses recognised for goodwill are not subsequently reversed.

E.V 17



GROUP

2016 2015

$'000 $'000

3 Other Income

Equipment Rental 246 490

Royalties Received 41 209

Rendering services 10,426 7,473

Management fees 352 195

Total Other Revenue 11,065 8,367

GROUP

2016 2015

$'000 $'000

4 Expenses

(a) Total expenses include:

Depreciation and Amortisation expense

Buildings 1,427 1,429

Plant and Equipment 24,021 23,165

Amortisation of Software 2,745 2,281

Amortisation of trademarks/brand names 439 239

Total depreciation & amortisation expense 28,632 27,114

Employee entitlements

Wages and salaries 84,415 79,333

Defined contribution superannuation plan 2,880 2,701

Share based payment expense 1,098 1,078

Other Employee Benefits 4,397 3,624

Total employee entitlements 92,790 86,736

Lease Payments

Minimum lease payments-operating 6,946 6,722

6,946 6,722

Other Expenses

Management Fees 28 66

28 66

(bl Financing cost

Bank loans and overdraft interest 11,461 11,262

Guarantee fees 875 754

Total Interest cost 12,336 12,016

Interest received-external parties 555 1,106

Total interest received 555 1,106

Net financing cost 11,781 10,910

EV 18



5 Trade and other receivables

Trade Debtors Impairment Provision Owing by related parties Other Receivables Total Trade and other receivables

2016

$'000

126,523 (758)

2,168 3,200

131,133

Terms and conditions of related party receivables are disclosed in note 20.

6 Inventories

Raw materials

Finished goods Other Inventories Total inventories

2016

$'000

22,646 49,123

4,631 76,400


GROUP

GROUP

2015

$'000

119,032 (371) 774

3,293 122,728

2015

$'000

26,850 49,989

4,113 80,952

Other inventories include work in progress, spare parts (manufacturing and cold drink equipment) and fountain stock (post mix products)

7 Derivative financial instruments

All derivative financial instruments are in hedging relationships. The fair value of the derivatives are as follows:

Current Assets Non- Current assets

Current liabilities Non- Current liabilities

2016

$'000

17,717

13,314

The notional amounts of the instruments relating to the above fair values are as follows

Notional amounts

Interest rate swaps Cross currency swaps

2016

$'000

55,000 118,653

GROUP

2015

$'000 100

21,700 2

10,930

2015

$'000

50,000 118,653

EV 19



7 Derivative financial instruments (continued)

Recognition and measurement

Derivative financial instruments are used to manage exposures to certain financial risks and are recognised initially at fair value. On subsequent

revaluation, for example, from trade date, derivatives are carried as assets when their fair value is positive and as liabilities when their fair

value is negative.

The Group designates its derivatives as hedges for either:

• hedges for the fair values of certain liabilities (fair value hedges)

• hedges for the cash flows associated with assets and liabilities and highly probable forecast transactions (cash flow hedges)

Derivatives - debt related

Debt related derivatives apply solely to hedging of the foreign currency principal amounts and fair values of borrowings. During the financial

year, the Group held cross currency swaps to mitigate exposures to changes in the fair value of foreign currency denominated debt from

fluctuations in foreign currency and interest rates. The hedged items designated were a portion of the Group's foreign currency denominated

borrowings. The changes in fair values of the hedged items resulting from movements in exchange rates and interest rates are offset against

the changes in the value of the cross currency swaps. The objective of this hedging is to convert foreign currency borrowings to local currency

borrowings. Hence, at inception, no significant portion of the change in fair value of the cross currency swap is expected to be ineffective.

Ineffectiveness may arise from credit valuation adjustments and is recognised in the income statement as finance costs.

Gains or losses from remeasuring the fair value of the hedge instruments are recognised within net finance costs in the income statement and

are offset with the gains and losses from the hedged item where those gains or losses relate to the hedged risks. The hedge relationship is

designed to be highly effective because the notional amount of the cross currency swaps is the same as that of the underlying debt and all cash

flow and reset dates coincide between the borrowing and the swaps.

The effectiveness of the hedging relationship is tested at inception and at regular intervals thereafter by means of cumulative dollar offset

effectiveness calculations. The primary objective is to determine if changes to the hedged item and the derivative are highly correlated and

thus support the assertion that there will be a high degree of offset in fair values achieved by the hedge.

Derivatives - non-debt related

Non-debt derivatives relate to all other derivatives other than those that are debt related (being foreign currency, commodity and interest rate

because they do not impact the calculation of net debt). Cash flow hedges are used to hedge future cash flows or a probable transaction that

could affect the income statement. Any gain or loss on effective portions of the hedging instrument is recognised directly in equity, while the

ineffective portion is recognised in the income statement as finance costs. Amounts recognised in equity are transferred to the income

statement as and when the asset is consumed. If the forecast transaction is revoked or no longer expected to occur, amounts previously

recognised in equity are transferred to the income statement over the life of the underlying exposure. Derivatives financial instruments in a

hedge relationship are initially recognised in equity. Any gain or loss is reclassified to the income statement when the Group exercises,

terminates, or revokes designation of the hedge relationship. Ineffectiveness may arise from credit valuation adjustments and is recognised in

the income statement as finance costs.

Interest bearing loans of the Group currently bear an average variable interest rate of 3.4% (2015: 3. 7%). The Group has entered into Interest

Rate Swap and Cross Currency Swap contracts under which it has a right to receive interest at variable rates and to pay interest at fixed rates

ranging between 4.5% and 6.5%_ (2015: 4.4% and 6.5%). Swap contracts are in place to cover 56.5% (2015: 60%) of the outstanding borrowings.

EV 20



8 Property, plant and equipment

Cost or valuation

At 1 January 2015

Additions

Disposals/ write offs

Transfers

At 31 December 2015

Additions


Transfers

At 31 December 2016

Depreciation

At 1 January 2015

Depreciation charge for the year


At 31 December 2015

Depreciation charge for the year


At 31 December 2016

Net book value

At 31 December 2016

At 31 December 2015

Land and Construction

Buildings in progress

$'000 $'000

85,375 7,597

164 25,365

1,027 (1,360)

86,566 31,602

178 6,652

(43)

12 (30,818)

86,713 7,436

11,801

1,429

13,230

1,427

(72)

14,585

72,128 7,436

73,336 31,602


Plant and Total

Equipment

$'000 $'000

360,990 453,962

4,390 29,920

(3,844) (3,844)

637 304

362,173 480,341

27,913 34,743

(17,800) (17,843)

30,565 (242)

402,851 496,999

212,887 224,688

23,165 24,595

(2,724) (2,724)

233,329 246,559

24,021 25,448

(16,588) (16,660)

240,762 255,347

162,089 241,652

128,844 233,782

EV 21



9 Intangible Assets

Bottlers Goodwill

1 Computer

Agreement Software

$'000 $'000 $'000 Cost

At 1 January 2015 218,939 9,462 23,425

Additions 654 Disposals/ write offs (299)

Transfers (304) At 31 December 2015 218,939 9,462 23,476

Additions 1,013 Disposals/ write offs

Transfers 242 At 31 December 2016 218,939 9,462 24,731

Amortisation or impairment

At 1 January 2015 8,903

Amortisation 2,281 Disposals/ write offs (108)

At 31 December 2015 11,076

Amortisation 2,745 Disposals/ write offs

At 31 December 2016 13,821

Net book value

At 31 December 2016 218,939 9,462 10,911

At 31 December 2015 218,939 9,462 12,400

1 Goodwill relates to the purchase of the Cafe Direct business from Amatil Beverages NZ limited in 2007

2 Trade marks/Brand names relates to the purchase of the Baker Halls Brand in 2009

Trademarks/

Brand Names2

$'000

11,974

11,974

11,974

5,942

239

6,181

439

6,621

5,353

5,793

Total

$'000

263,800

654

(299)

(304) 263,851

1,013

242 265,106

14,845

2,521

(108) 17,258

3,184

20,442

244,665

246,594

EV 22



10 Investment in subsidiary

The consolidated financial statements include the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in Note 2(c)

Name of entity

Coca-Cola Amatil (N.Z.) Limited

Vending Management Services Limited1

1 Company deregistered on 23 June 2016

lla Trade and other payables

Creditors and Borrowings Owing to related parties Employee entitlements Accrued expenses Total trade and other payables

llb Provisions

Provision - Current Total Provisions

Principal activity

Manufacture and distribution of beverages

Hardware and software design for the vending industry

GROUP

2016

$'000

77,404 14,770

9,821 48,992

150,987

GROUP

2016

$'000

Provisions in 2015 relate to relocation and redundancy costs associated with the new Keri juice plant.

GROUP

2016

$'000 12 Interest bearing borrowings

(a) Current

Loan Facility -current1 33,000 Lease Liability - current 1,275

34,275

(b) Non current

Loan Facility- non-current1

Bonds-non-current2 168,515 Lease Liability - non current 5,711

174,226

1. The loan facility matures in October 20172. The bonds are in 3 tranches. The maturity dates are detailed below.

2016

Face Value Tranche

(NZD) (OOO's) Maturity

Tranche 1 - NZD 50,000 Aug-18 Tranche 2 - AUD 46,676 Jul-21 Tranche 3 - USO 71,839 Sep-23

168,515

2016

100%

2015

$'000

95,169 14,203

8,501 32,715

150,588

2015

$'000

3,992 3,992

2015

$'000

110,000

170,929

280,929

2015

Face Value (NZD) (OOO's)

50,000 47,830 73,099

170,929

2015

100%

100%

Maturity

Aug-18 Jul-21

Sep-23

EV 23



13 Income Taxation

(a) Reconciliation of effective tax rate

Net Profit before taxation Prima Facie tax at 28% Tax effect of permanent differences: Other non-allowable expenses Adjustment in respect of Prior year Income tax expense

(b) Components of income tax expense

Current income tax expense Deferred tax expense Adjustments in respect of prior years Income tax expense reported in statement of comprehensive income

(c) Deferred tax assets (liabilities)

(i) Deferred taxes

Deferred tax liabilities

2016

$'000

98,735 27,646

370 (146)

27 870

27,980 36

(146)

27,870

80,012

(ii) Movement in Net Deferred tax assets/(liabilities) for the financial year

GROUP (Restated) 1

2015

$'000

93,753 26,251

226 157

26 634

27,202 (725) 157

26,634

82 880

Opening Balance (82,880) (84,133) Deferred tax expense (36) 725 Recognised against equity 1,103 524 Adjustment in respect of prior year ---�1,_8_0 _1 _________________ 4 ______ _ Net deferred tax liability (80,012} (82,880)

==::::::!::::===::::::::::::!::::::=============================

(iii) Components of deferred tax liabilities

Gross taxable temporary differences: Provision for employee benefits Provision for current assets Property, plant and equipment and intangibles Recognised in equity Other Total

Deferred tax liability at 28%

3,706 1,041

(286,373) (4,167)

35 (285,758}

(80,012)


5,453 841

(293,484) (8,705)

(106) (296,001}

(82,880)

EV 24



14 Contributed equity

Ordinary shares -1,015

Total contributed equity

2016

$'000

142,419

142,419

GROUP

2015

$'000

142,419

142,419

All ordinary shares are issued and fully paid up. The shares have equal voting rights and share equally in dividends and surplus on winding up.

Employee Equity Compensation Plan reflects shares awarded to employees of the Group; refer to note 16 for further details.

15 Reserves

Sharebased Payment Reserve

Cash Flow Hedge Reserve

Total Reserves

16 Long Term Incentive Plans (LTIP)

2016

$'000

731

3,273

4,004

GROUP

2015

$'000

426

6,108

6,534

Under CCA's LTIP, senior executives (upon approval by the Board) have the opportunity to be rewarded with fully paid ordinary shares,

providing the LTIP meets minimum pre-determined hurdles covering a three year period, as set by the People Committee. These shares are

purchased on market or issued to the trustee once the LTIP vests. In prior years, half of the grant was subject to a Relative Total Shareholder

Return (T5R) performance condition and the other half was subject to an Earnings per Share (EPS) performance condition. Employees remain

subject to service conditions as determined by the Board in its absolute discretion.

Commencing with the LTIP 2015-2017, there are now three performance conditions namely Relative TSR, Absolute TSR and EPS.

Dividends are payable to participants of the LTIP 2016-2018 only once the rights vest into shares.

The fair value of shares offered in the LTIP 2016-2018 is determined by an independent external valuer using an option pricing model with the

following inputs:

Grant date

Grant date share price

Volatility

Dividend yield

Risk free rate

18 May 2016

$8.99

21.0%

5.1%

1.6%

During the financial year, the number of share rights offered to executives of the Group under the Plan, and which are subject to performance

hurdles, was 51,920 (2015: 52,404), with a weighted average fair value of NZD $4.83 / AUD $4.66 (2015: NZD $6.48 / AUD $6.08).

The amount expensed in relation to the LTIP is $304,506 (2015: $296,761).

EV 2s



Employees Share Plan (ESP)

The ESP provides all full time and part time permanent employees with an opportunity to contribute up to 3% of their base salary to acquire

shares in CCA. The ESP is administered by a trustee which acquires and holds shares for the benefit of the participants. These shares have been

purchased on market at the prevailing market price. Shares that have been forfeited under the terms of the ESP are also utilised. For every

share acquired with amounts contributed by each participant, a matching share is acquired by the trustee, which under normal circumstances

vests with the employee after a period of two years from their date of issue (acquisition or utilisation) and are acquired with contributions

made by the employing entities. There are no performance conditions. Members of the ESP receive dividends on both vested and unvested

shares held on their behalf by the trustee.

The amount expensed in relation to the Employee Share Plan is $789,703 (2015: $772,414).

Executive Post-tax Share Purchase Plan

All senior executives are required to have a portion of their short term incentives deferred as restricted shares. The shares are purchased on

market and trading of these shares is restricted for 12 months for 50% of the shares, with the remaining 50% restricted for 24 months.

Dividends are payable to the participants of the Plan.

The amount expensed in relation to the Executive Post-tax Share Purchase Plan for the Group was $372,142 (2015: $276,930).

Recognition and Measurement

The value of services provided by employees to the Group in return for shares granted under employee ownership plans, is measured by

reference to the fair value of the shares as at the grant date. Fair values are determined as the cost of shares purchased for employer

contributions to the ESP (shares are purchased at grant date), and are determined by an independent external valuer for shares granted under

the LTIP (shares are purchased at vesting date).

The fair value of shares is charged to the income statement over the vesting period, and a matching increase in the share based remuneration

reserve is recognised, representing the obligation to provide these shares on vesting. On vesting, the treasury shares account and this reserve

are reduced.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition,

such as Relative TSR and Absolute TSR or subject to service conditions being fulfilled (as determined by the Board in its absolute discretion).

EV 26



17 Remuneration to auditors

During the year the following fees were paid or are payable for the services provided by the auditor of the parent entity and its related

practices firms.

Amounts received or due and receivable by Ernst & Young for:

Audit of the financial reports-Ernst & Young

Advisory Services1

Total remuneration for audit and non-audit services

2016

170

37

207

1. Advisory services provided relate to remuneration benchmarking services.

18 Contingent liabilities

The directors have not identified any contingent liabilities.

19 Commitments

Lease commitments

Not later than one year

Later than one year but not later than five years

Later than 5 years

Total lease commitments

2016

$000

5,330

12,107

24,312

41,749

The above balances are lease commitments under non-Cancellable operating leases.

The amounts in the schedule above are GST inclusive.

Capital Expenditure commitments

Not later than one year

Later than one year but not later than five years

Total capital expenditure commitments

3,484

3,484

GROUP

GROUP

2015

2015

163

24

187

$000

7,986

17,840

25,257

51,083

6,357

4,264

10,621

The above balances have been contracted for the purchase of property, plant and equipment but not provided for.

EV 27



20 Related party transactions

Coca-Cola Holdings NZ Limited (CCH) is a wholly owned subsidiary of Coca-Cola Amatil Limited (CCA). It is the holding company of Coca-Cola

Amatil (NZ) Limited (CCANZ) and Vending Management Services Limited (VMSL).

Key management personnel compensation

The key management personnel are all the directors of the Company and the executives with the authority for the strategic direction and

management of the Company. The compensation paid or payable tci key management personnel is $4,099,052 (2015: $3,860,131).

All subsidiaries of CCA are considered to be a related party of The Group. The Coca-Cola Company (TCCC) directly and through its subsidiary,

Coca-Cola Holdings (overseas) Limited holds 29.2% (2015:29.2%) of CCA's fully paid up ordinary shares. Coca-Cola Oceania Ltd (CCO) is also

owned by TCCC.

2016

Sales

$000

Transactions with ultimate parent

Coca-Cola Amatil Limited

Transactions with entities under common control

Coca-Cola Amatil (Fiji) Ltd Coca-Cola Amatil (Aust) Pty Ltd Coca-Cola Amatil (PNG) Ltd PT Coca-Cola Distribution Indonesia Paradise Beverages Ltd

Transactions with Entitles with Significant influence over the Group

3,700 1,275

TCCC and its subsidiaries 400

2015

Transactions with ultimate parent

Coca-Cola Amatil Limited

Transactions with entities under common control

Coca-Cola Amatil (Fiji) Ltd Coca-Cola Amatil (Aust) Pty Ltd

Transactions with Entitles with Significant influence over the Group

TCCC and its subsidiaries

2,799 1,383

514

Purchases

$000

5,176

96

94,660

5,322

85,454

Owed by Owed to related

Other1

related parties parties

$000 $000

(3,165)

1,168 1,622

21

20

6,572

(3,471)

112 1,115

3,412

2,124

22

22

774

$000

2,256

842

96

11,576

1,802

1,312

11,089

1. Other transactions relate to PPE, other revenue, reimbursements, management fees, marketing services and other expenses.

E.Y 28



CCA charges CCANZ for management services provided, for acting as guarantor of the bank facility owed by CCANZ, and also for expenses

associated with NZ participants of the group Long Term Incentive Share Plans.

Under a series of arrangements, CCANZ participates with CCO under which they jointly contribute to the development of the market in the

territories in which it operates. These arrangements include a regular share marketing expenses program, under which the Group contributes

to certain CCO incurred marketing expenditure and CCO contributes to certain expenditure incurred by CCANZ. CCO provides marketing

support to CCANZ, which is in addition to the usual contribution to shared marketing initiatives. This is designed to assist CCANZ with the

necessary development of certain territories. Amounts received are either accounted for as a credit to revenue or as a reduction to expense, as

appropriate.

CCANZ purchases concentrate and beverage bases from Pacific Refreshment Ltd & Atlantic Industries Ltd, both subsidiaries of TCCC.

CCANZ sells certain finished product and raw materials to CCA and purchases finished product and packaging raw material in return.

CCANZ sells certain finished product and raw materials to Coca-Cola Amatil (Fiji) Ltd (CCAF) and purchases finished product and packaging raw

material in return. CCAF also pays CCA a fee for management services rendered.

CCANZ also sells certain finished products to CCO.

Terms and conditions of transactions with related parties

Outstanding balances at year end are unsecured and settlement occurs in cash.

There have been no guarantees provided or received for any related party receivables. For the financial year ended 31 December 2016, the

company has not raised any provision for doubtful receivables relating to amounts owed by related parties (2015: nil).

21 Events after balance sheet date

There have been no significant events after the balance sheet date.

EV 29

coca-cola holdings nz annual report for the year ended 31...

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