Coca-Cola settles antifraud and periodic reporting charges

[The Straight Story]

THE COCA-COLA COMPANY SETTLES ANTIFRAUD AND PERIODIC REPORTING CHARGES
RELATING TO ITS FAILURE TO DISCLOSE JAPANESE GALLON PUSHING

The Commission today announced an enforcement action against The Coca-
Cola Company relating to its failure to disclose certain end-of-quarter
sales practices used to meet earnings expectations. Coca-Cola
simultaneously agreed, without admitting or denying the Commission’s
findings, to settle the proceedings by consenting to a cease-and-desist
order finding violations of the antifraud and periodic reporting
requirements of the federal securities laws. Coca-Cola also voluntarily
has undertaken steps to strengthen its internal disclosure review
process to prevent future violations.

Richard Wessel, District Administrator of the Commission’s Atlanta
District Office, stated, “MD&A requires companies to provide investors
with the truth behind the numbers. Coca-Cola misled investors by
failing to disclose end of period practices that impacted the company’s
likely future operating results.”

Katherine Addleman, Associate Director of Enforcement for the
Commission’s Atlanta District Office, stated, “In addition, Coca-Cola
made misstatements in a January 2000 Form 8-K concerning a subsequent
inventory reduction and in doing so continued to conceal the impact of
prior end of period practices and further mislead investors.”

In its order, the Commission found that, at or near the end of each
reporting period between 1997 and 1999, Coca-Cola implemented an
undisclosed “channel stuffing” practice in Japan known as “gallon
pushing” for the purpose of pulling sales forward into a current period.
To accomplish gallon pushing’s purpose, Japanese bottlers were offered
extended credit terms to induce them to purchase quantities of beverage
concentrate the bottlers otherwise would not have purchased until a
following period. As Coca-Cola typically sells gallons of concentrate
to its bottlers corresponding to its bottlers’ sales of finished
products to retailers, typically bottlers’ concentrate inventory levels
increase approximately in proportion to their sales of finished products
to retailers.

http://www.sec.gov/news/digest/dig041805.txt