KO » Topics » Item 3. Quantitative and Qualitative Disclosures About Market Risk

These excerpts taken from the KO 10-K filed Feb 28, 2008.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our Company uses derivative financial instruments primarily to reduce our exposure to adverse fluctuations in interest rates and foreign currency exchange rates, commodity prices and other market risks. We do not enter into derivative financial instruments for trading purposes. As a matter of policy, all our derivative positions are used to reduce risk by hedging an underlying economic exposure. Because of the high correlation between the hedging instrument and the underlying exposure, fluctuations in the value of the instruments are generally offset by reciprocal changes in the value of the underlying exposure. The Company generally hedges anticipated exposures up to 36 months in advance; however, the majority of our derivative instruments expire within 24 months or less. Virtually all of our derivatives are straightforward, over-the-counter instruments with liquid markets.

Foreign Exchange

We manage most of our foreign currency exposures on a consolidated basis, which allows us to net certain exposures and take advantage of any natural offsets. In 2007, we generated approximately 74 percent of our net operating revenues from operations outside of the United States; therefore, weakness in one particular currency might be offset by strengths in other currencies over time. We use derivative financial instruments to further reduce our net exposure to currency fluctuations.

Our Company enters into forward exchange contracts and purchases currency options (principally euro and Japanese yen) and collars to hedge certain portions of forecasted cash flows denominated in foreign currencies. Additionally, we enter into forward exchange contracts to offset the earnings impact relating to exchange rate fluctuations on certain monetary assets and liabilities. We also enter into forward exchange contracts as hedges of net investments in international operations.

Interest Rates

We monitor our mix of fixed-rate and variable-rate debt, as well as our mix of short-term debt versus long-term debt. From time to time, we enter into interest rate swap agreements to manage our mix of fixed-rate and variable-rate debt.

Value-at-Risk

We monitor our exposure to financial market risks using several objective measurement systems, including value-at-risk models. Our value-at-risk calculations use a historical simulation model to estimate potential future losses in the fair value of our derivatives and other financial instruments that could occur as a result of adverse movements in foreign currency and interest rates. We have not considered the potential impact of favorable movements in foreign currency and interest rates on our calculations. We examined historical weekly returns over the previous 10 years to calculate our value-at-risk. The average value-at-risk represents the simple average of quarterly amounts over the past year. As a result of our foreign currency value-at-risk calculations, we estimate with 95 percent confidence that the fair values of our foreign currency derivatives and other financial instruments, over a one-week period, would decline by not more than approximately $20 million, $14 million and $9 million, respectively, using 2007, 2006 or 2005 average fair values, and by not more than approximately $19 million and $14 million, respectively, using December 31, 2007 and 2006 fair values. According to our interest rate value-at-risk calculations, we estimate with 95 percent confidence that any increase in our net interest expense due to an adverse move in our 2007 average or in our December 31, 2007, interest rates over a one-week period would not have a material impact on our consolidated financial statements. Our December 31, 2006 and 2005 estimates also were not material to our consolidated financial statements.

 

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our Company uses derivative
financial instruments primarily to reduce our exposure to adverse fluctuations in interest rates and foreign currency exchange rates, commodity prices and other market risks. We do not enter into derivative financial instruments for trading
purposes. As a matter of policy, all our derivative positions are used to reduce risk by hedging an underlying economic exposure. Because of the high correlation between the hedging instrument and the underlying exposure, fluctuations in the value
of the instruments are generally offset by reciprocal changes in the value of the underlying exposure. The Company generally hedges anticipated exposures up to 36 months in advance; however, the majority of our derivative instruments expire within
24 months or less. Virtually all of our derivatives are straightforward, over-the-counter instruments with liquid markets.

Foreign
Exchange

We manage most of our foreign currency exposures on a consolidated basis, which allows us to net certain exposures and
take advantage of any natural offsets. In 2007, we generated approximately 74 percent of our net operating revenues from operations outside of the United States; therefore, weakness in one particular currency might be offset by strengths in
other currencies over time. We use derivative financial instruments to further reduce our net exposure to currency fluctuations.

Our
Company enters into forward exchange contracts and purchases currency options (principally euro and Japanese yen) and collars to hedge certain portions of forecasted cash flows denominated in foreign currencies. Additionally, we enter into forward
exchange contracts to offset the earnings impact relating to exchange rate fluctuations on certain monetary assets and liabilities. We also enter into forward exchange contracts as hedges of net investments in international operations.


Interest Rates

We monitor
our mix of fixed-rate and variable-rate debt, as well as our mix of short-term debt versus long-term debt. From time to time, we enter into interest rate swap agreements to manage our mix of fixed-rate and variable-rate debt.

STYLE="margin-top:18px;margin-bottom:0px; margin-left:4%">Value-at-Risk

We monitor our
exposure to financial market risks using several objective measurement systems, including value-at-risk models. Our value-at-risk calculations use a historical simulation model to estimate potential future losses in the fair value of our derivatives
and other financial instruments that could occur as a result of adverse movements in foreign currency and interest rates. We have not considered the potential impact of favorable movements in foreign currency and interest rates on our calculations.
We examined historical weekly returns over the previous 10 years to calculate our value-at-risk. The average value-at-risk represents the simple average of quarterly amounts over the past year. As a result of our foreign currency value-at-risk
calculations, we estimate with 95 percent confidence that the fair values of our foreign currency derivatives and other financial instruments, over a one-week period, would decline by not more than approximately $20 million,
$14 million and $9 million, respectively, using 2007, 2006 or 2005 average fair values, and by not more than approximately $19 million and $14 million, respectively, using December 31, 2007 and 2006 fair values. According to
our interest rate value-at-risk calculations, we estimate with 95 percent confidence that any increase in our net interest expense due to an adverse move in our 2007 average or in our December 31, 2007, interest rates over a one-week
period would not have a material impact on our consolidated financial statements. Our December 31, 2006 and 2005 estimates also were not material to our consolidated financial statements.

STYLE="margin-top:0px;margin-bottom:0px"> 


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This excerpt taken from the KO 10-Q filed Jul 26, 2007.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

        We have no material changes to the disclosure on this matter made in our Annual Report on Form 10-K for the year ended December 31, 2006.

This excerpt taken from the KO 10-Q filed Apr 26, 2007.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

        We have no material changes to the disclosure on this matter made in our Annual Report on Form 10-K for the year ended December 31, 2006.

This excerpt taken from the KO 10-Q filed Jul 27, 2006.
Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

We have no material changes to the disclosure on this matter made in our Annual Report on Form 10-K for the year ended December 31, 2005.

 

This excerpt taken from the KO 10-Q filed Apr 27, 2006.
Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

We have no material changes to the disclosure on this matter made in our Annual Report on Form 10-K for the year ended December 31, 2005.

 

This excerpt taken from the KO 10-Q filed Oct 27, 2005.
Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

We have no material changes to the disclosure on this matter made in our Annual Report on Form 10-K for the year ended December 31, 2004.

 

This excerpt taken from the KO 10-Q filed Aug 1, 2005.
Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

We have no material changes to the disclosure on this matter made in our Annual Report on Form 10-K for the year ended December 31, 2004.

 

This excerpt taken from the KO 10-Q filed Apr 28, 2005.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

        We have no material changes to the disclosure on this matter made in our Annual Report on Form 10-K for the year ended December 31, 2004.

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