Coca Cola 2005 Annual Report Download - page 96

Download and view the complete annual report

Please find page 96 of the 2005 Coca Cola annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 142

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: COMMITMENTS AND CONTINGENCIES (Continued)
The Company is involved in various legal proceedings. We establish reserves for specific legal proceedings
when we determine that the likelihood of an unfavorable outcome is probable and the amount of loss can be
reasonably estimated. Management has also identified certain other legal matters where we believe an
unfavorable outcome is reasonably possible and/or for which no estimate of possible losses can be made.
Management believes that any liability to the Company that may arise as a result of currently pending legal
proceedings, including those discussed below, will not have a material adverse effect on the financial condition
of the Company taken as a whole.
In 2003, the Securities and Exchange Commission (‘‘SEC’’) initiated 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. On April 18, 2005, the Company announced that it had reached a settlement ending the
SEC’s investigation. Pursuant to the settlement, the Company agreed to maintain certain measures implemented
prior to or during the preceding two years and to undertake additional remedial measures in the areas of
corporate compliance and disclosure. The settlement did not require the payment of a fine or other monetary
sanction. On April 18, 2005, the Company also announced that it had received notification that the United
States Attorney’s Office was terminating its investigation without taking further action.
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 for certain costs and expenses associated with its asbestos litigations. Aqua-Chem
demanded that our Company reimburse it for approximately $10 million for out-of-pocket litigation-related
expenses. 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 in Wisconsin 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 and reimbursement for
amounts paid by plaintiffs in excess of their obligations. That litigation remains pending, and the Company
believes it has substantial legal and factual defenses to the insurers’ claims. Aqua-Chem and the Company
subsequently reached a settlement agreement 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 has also reached a settlement agreement with an additional insurer
regarding payment of that insurer’s policy proceeds for Aqua-Chem’s asbestos claims. Aqua-Chem and the
Company will continue to negotiate with the 15 other insurers that are parties to the Wisconsin insurance
coverage case and will litigate their claims against such insurers to the extent negotiations do not result in
settlements. The Company also believes Aqua-Chem has substantial insurance coverage to pay Aqua-Chem’s
asbestos claimants.
94