Coca Cola 2008 Annual Report Download - page 110

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13: COMMITMENTS AND CONTINGENCIES (Continued)
future payments that we could be required to make under the guarantees; however, we do not consider it
probable that we will be required to satisfy these guarantees.
On September 3, 2008, we announced our intention to make cash offers to purchase China Huiyuan Juice
Group Limited, a Hong Kong listed company which owns the Huiyuan juice business throughout China
(‘‘Huiyuan’’). The making of the offers is subject to preconditions relating to Chinese regulatory approvals. We
are offering HK$12.20 per share, and making a comparable offer for outstanding convertible bonds and options.
We have accepted irrevocable undertakings from three shareholders for acceptance of the offers, in aggregate
representing approximately 66 percent of the Huiyuan shares, and upon satisfaction of the preconditions the
Company plans to commence a tender offer under Hong Kong securities laws for the remaining shares.
Assuming full acceptance of the offers, the transaction is valued at approximately $2.4 billion.
We believe our exposure to concentrations of credit risk is limited due to the diverse geographic areas
covered by our operations.
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 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 in Georgia 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. During the course of the Wisconsin coverage litigation, Aqua-Chem and the Company reached
settlements with several of the insurers, including plaintiffs, who have or will pay funds into an escrow account
for payment of costs arising from the asbestos claims against Aqua-Chem. On July 24, 2007, the Wisconsin trial
court entered a final declaratory judgment regarding the rights and obligations of the parties under the
insurance policies issued by the remaining defendant insurers, which judgment was not appealed. The judgment
directs, among other things, that each insurer whose policy is triggered is jointly and severally liable for
one-hundred percent of Aqua-Chem’s losses up to policy limits. The Georgia litigation remains subject to the
stay agreement.
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