Coca Cola 2005 Annual Report Download - page 18

unrest and governmental changes, could undermine consumer confidence and reduce the consumers’ purchasing
power, thereby reducing demand for our products. In addition, product boycotts resulting from political activism
could reduce demand for our products, while restrictions on our ability to transfer earnings or capital across
borders that may be imposed or expanded as a result of political and economic instability could impact our
profitability. Without limiting the generality of the preceding sentence, the current unstable economic and
political conditions and civil unrest and political activism in the Middle East, India or the Philippines, the
unstable situation in Iraq, or the continuation or escalation of terrorist activities could adversely impact our
international business.
Changes in commercial and market practices within the European Economic Area may affect the sales of our
products.
We and our bottlers are subject to an Undertaking, rendered legally binding in June 2005 by a decision of
the European Commission, pursuant to which we committed to make certain changes in our commercial and
market practices in the European Economic Area Member States. The Undertaking potentially applies 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. The commitments we and our bottlers 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 also applies 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
are applicable to commercial arrangements concerning the installation and use of technical equipment (such as
coolers, fountain equipment and vending machines). Adjustments to our business model in the European
Economic Area Member States as a result of these commitments or of future interpretations of European
Union competition laws and regulations could adversely affect our sales in the European Economic Area
markets.
Litigation or legal proceedings could expose us to significant liabilities and thus negatively affect our financial
results.
We are party to various litigation claims and legal proceedings. We evaluate these litigation claims and legal
proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of
potential losses. Based on these assessments and estimates, if any, we establish reserves and/or disclose the
relevant litigation claims or legal proceedings, as appropriate. These assessments and estimates are based on the
information available to management at the time and involve a significant amount of management judgment. We
caution you that actual outcomes or losses may differ materially from those envisioned by our current
assessments and estimates. In addition, new or adverse developments in existing litigation claims or legal
proceedings involving our Company could require us to establish or increase litigation reserves or enter into
unfavorable settlements or satisfy judgments for monetary damages for amounts significantly in excess of current
reserves, which could adversely affect our financial results for future periods.
Adverse weather conditions could reduce the demand for our products.
The sales of our products are influenced to some extent by weather conditions in the markets in which we
operate. Unusually cold weather during the summer months may have a temporary effect on the demand for our
products and contribute to lower sales, which could have an adverse effect on our results of operations for those
periods.
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