Commitments And Contingencies

9 Months Ended

Sep. 30, 2011

Commitments And Contingencies [Abstract]

Commitments And Contingencies

Note 12. Commitments and Contingencies:

At September 30, 2011, we had outstanding bank guarantees and undrawn letters of credit from financial institutions. These relate to ongoing business operations, including commercial commitments, and governmental requirements associated with audits or litigation that are in process with various jurisdictions.

We also have contingencies principally related to the jurisdictions in which we operate including such items as value-add taxes and other indirect taxes, customs and duties and sales and use taxes.

The Company assesses contingencies related to litigation and/or other matters to determine the degree of probability and range of possible loss. A loss contingency is accrued in the Company's consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly sensitive and requires judgments about future events. On at least a quarterly basis, the Company reviews contingencies related to litigation to determine the adequacy of accruals. The amount of ultimate loss may differ from these estimates and further events may require the Company to increase or decrease the amounts it has accrued on any matter. It is possible that cash flows or results of operations could be materially affected, by the unfavorable or favorable resolution of one or more of these contingencies.

Periodically, we assess our insurance coverage for all known claims, where applicable, taking into account aggregate coverage by occurrence, limits of coverage, self-insured retentions and deductibles, historical claims experience and claims experience with our insurance carriers. The liabilities are recorded at management's best estimate of the probable outcome of the lawsuits and claims, taking into consideration the facts and circumstances of the individual matters as well as past experience on similar matters. At each balance sheet date, the key issues that management assesses are whether it is probable that a loss as to asserted or unasserted claims has been incurred and if so, whether the amount of loss can be reasonably estimated. We record the expected liability with respect to claims in Other liabilities and expected recoveries from our insurance carriers in Other assets. We recognize a receivable when we believe that realization of the insurance receivable is probable under the terms of the insurance policies and our payment experience to date.

Popcorn and Flavor Litigation

From January 2007 through the third quarter of 2011, we had been named as a party to a number of lawsuits and claims related primarily to flavoring supplied by us and by other third party suppliers, in most instances to manufacturers of butter flavored popcorn. During the third quarter 2011, we settled all cases that were then outstanding, approximately 16 actions involving approximately 260 claimants for an amount, net of insurance recoveries, which was not material. Subsequent to the settlement, we have been named as defendants in five new actions involving 13 claimants, that have been brought against us and other flavor suppliers and related companies. These new claims against us primarily arise from allegations based on the same flavoring as those actions which were settled during the third quarter of 2011. With respect to these new claims, individually or in the aggregate, we do not believe that there is a reasonable possibility that (i) any loss has been incurred that exceed amounts already recognized or (ii) the aggregate amount of additional losses, if any, would have a material adverse effect on our financial condition, results of operations or liquidity.

Patent Claims

A complaint, captioned V. Mane Fils S.A. v. International Flavors and Fragrances Inc. was filed in U.S. District Court for the District of New Jersey in May 2006, and alleges that the Company has and continues to infringe U.S. Patent Nos. 5,725,856 and 5,843,466, relating to a flavor ingredient that may provide a cooling effect. The Company answered the complaint by denying liability, asserting that both patents are invalid and various other defenses. In June 2008, plaintiff amended its complaint to add claims for violations of the Lanham Act, tortious interference and unfair competition. The Company answered the amended complaint by denying all liability. In connection with the patent claims, the plaintiff seeks monetary damages, damages for alleged willful infringement, injunctive relief and fees, costs and interest. In connection with the additional claims, plaintiff also seeks monetary damages, punitive damages, fees and costs. In May 2010, following reexamination of the patents in question by the U.S. Patent Office, all of the patent claims, initially rejected in the reexamination proceeding were reallowed. The Company and the plaintiff have each filed motions for summary judgment with respect to various claims. No trial date has been scheduled. Although the Company denies the allegations and intends to defend its position in Court, the parties are engaged in settlement discussions to try to resolve this litigation. There is no certainty as to whether the parties will settle this case or as to the outcome of the settlement, if any.

We analyze our liability on at least a quarterly basis and accrue for litigation loss contingencies when they are probable and estimable. During the second quarter 2010, we recorded a provision related to this case which is reflected in Other liabilities. The Company is unable to reasonably estimate the amount or realistic range of reasonably possible losses above its recorded liability, if any, that might result if the outcome of this matter is unfavorable. Based on present information, the Company believes that its ultimate liability, if any, arising from this proceeding would not have a material adverse effect on our financial condition, results of operations or liquidity. Due to the unpredictability regarding the litigation process and the ongoing settlement discussions, such claims, if ultimately resolved against us, could potentially have a material impact on our cash flows or results of operations in a particular period. An adverse outcome could also potentially affect our ability to sell one or more flavor products to the extent the Court ultimately issued an injunction related to the patents. Although settlement discussions are ongoing, the Company disputes the allegations of wrongdoing, believes it has meritorious defenses and is vigorously defending all claims.

Environmental

Over the past approximately 20 years, various federal and state authorities and private parties have claimed that we are a Potentially Responsible Party ("PRP") as a generator of waste materials for alleged pollution at a number of waste sites operated by third parties located principally in New Jersey and have sought to recover costs incurred and to be incurred to clean up the sites.

We have been identified as a PRP at ten facilities operated by third parties at which investigation and/or remediation activities may be ongoing. We analyze our liability on a regular basis and accrue for environmental liabilities when they are probable and estimable. At September 30, 2011, we estimated our share of the total future costs for these sites to be less than $5 million and we have provided for such future costs based on our best estimate of our share of future costs.

While joint and several liability is authorized under federal and state environmental laws, we believe that the amounts we have paid and anticipate paying in the future for clean-up costs and damages at all sites are not and will not have a material adverse effect on our financial condition, results of operations or liquidity. Our assessment is based upon, among other things, the involvement of other PRP's at most sites, the status of the proceedings, including various settlement agreements and consent decrees, the extended time period over which payments will likely be made and an agreement reached in July 1994 with three of our liability insurers pursuant to which defense costs and indemnity amounts payable by us in respect of the sites will be shared by the insurers up to an agreed amount. There can be no assurance, however, that future events will not require us to materially increase the amounts we anticipate paying for clean-up costs and damages at these sites.

Other Contingencies

We have several tax audits and/or litigation in process and of these, the most significant is related to ongoing tax assessments and uncertain tax positions within our European operations. See Note 7. Income Taxes for further information.

In addition to the matters above, we are a party to other claims or litigation arising in the ordinary course of business. We do not expect the outcome of these cases, singly or in the aggregate, to have a material adverse effect on our financial condition, results of operations or liquidity.