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THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13: 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.
During the period from 1970 to 1981, our Company owned Aqua-Chem, Inc., now known as Cleaver-Brooks,
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 believed we were 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 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 six 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 remaining
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.
The Company is discussing with the Competition Directorate of the European Commission (the ‘‘European
Commission’’) issues relating to parallel trade within the European Union arising out of comments received by
the European Commission from third parties. The Company is cooperating fully with the European Commission
and is providing information on these issues and the measures taken and to be taken to address any issues
raised. The Company is unable to predict at this time with any reasonable degree of certainty what action, if any,
the European Commission will take with respect to these issues.
At the time we acquire or divest our interest in an entity, we sometimes agree to indemnify the seller or
buyer for specific contingent liabilities. Management believes that any liability to the Company that may arise as
a result of any such indemnification agreements will not have a material adverse effect on the financial condition
of the Company taken as a whole.
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