Coca Cola 2004 Annual Report Download - page 94

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Coca-Cola Company and Subsidiaries
NOTE 11: COMMITMENTS AND CONTINGENCIES (Continued)
In 2003, the Securities and Exchange Commission (‘‘SEC’’) began conducting an investigation into whether
the Company or certain persons associated with the Company violated federal securities laws in connection with
the conduct alleged by a former employee of the Company. Additionally, in 2003 the United States Attorney’s
Office for the Northern District of Georgia commenced a criminal investigation of the allegations raised by the
same former employee. The Company is continuing to cooperate with the United States Attorney’s office and
the SEC.
During the period from 1970 to 1981, our Company owned Aqua-Chem, Inc. (‘‘Aqua-Chem’’). A division of
Aqua-Chem manufactured certain boilers that contained gaskets that Aqua-Chem purchased from outside
suppliers. Several years after our Company sold this entity, Aqua-Chem received its first lawsuit relating to
asbestos, a component of some of the gaskets. In September 2002, Aqua-Chem notified our Company that it
believes we are obligated to them for certain costs and expenses associated with the litigation. Aqua-Chem
demanded that our Company reimburse it for approximately $10 million for out-of-pocket litigation-related
expenses incurred over the last 18 years. Aqua-Chem has also demanded that the Company acknowledge a
continuing obligation to Aqua-Chem for any future liabilities and expenses that are excluded from coverage
under the applicable insurance or for which there is no insurance. Our Company disputes Aqua-Chem’s claims,
and we believe we have no obligation to Aqua-Chem for any of its past, present or future liabilities, costs or
expenses. Furthermore, we believe we have substantial legal and factual defenses to Aqua-Chem’s claims. The
parties entered into litigation to resolve this dispute, which was stayed by agreement of the parties pending the
outcome of litigation filed by certain insurers of Aqua-Chem. In that case, five plaintiff insurance companies
filed a declaratory judgment action against Aqua-Chem, the Company and 16 defendant insurance companies
seeking a determination of the parties’ rights and liabilities under policies issued by the insurers. That litigation
remains pending, and the Company believes it has substantial legal and factual defenses to the insurers’ claims.
Aqua-Chem and the Company have reached an agreement in principle to settle with five of the insurers in the
Wisconsin insurance coverage litigation, and those insurers will pay funds into an escrow account for payment of
costs arising from the asbestos claims against Aqua-Chem. Aqua-Chem and the Company will continue to
litigate their claims for coverage against the 16 other insurers that are parties to the Wisconsin insurance
coverage case. The Company also believes Aqua-Chem has substantial insurance coverage to pay Aqua-Chem’s
asbestos claimants. An estimate of possible losses, if any, cannot be made at this time.
Since 1999, the Competition Directorate of the European Commission (the ‘‘Commission’’) has been
conducting an investigation of various commercial and market practices of the Company and its bottlers in
Austria, Belgium, Denmark, Germany and Great Britain. On October 19, 2004, our Company and certain of our
bottlers submitted a formal Undertaking to the Commission, and the Commission accepted the Undertaking.
The Undertaking will potentially apply in 27 countries and in all channels of distribution where our carbonated
soft drinks account for over 40 percent of national sales and twice the nearest competitor’s share. It will take
more than 12 months to fully implement the Undertaking and for the market to react to any resulting changes.
The commitments we made in the Undertaking relate broadly to exclusivity, percentage-based purchasing
commitments, transparency, target rebates, tying, assortment or range commitments, and agreements
concerning products of other suppliers. The Undertaking will also apply to shelf space commitments in
agreements with take-home customers and to financing and availability agreements in the on-premise channel.
In addition, the Undertaking includes commitments that will be applicable to commercial arrangements
concerning the installation and use of technical equipment (such as coolers, fountain equipment and vending
machines). The commitments set forth in the Undertaking have been published for third-party comments.
Following the comment period, the Commission presented to the Company certain comments it had received
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