<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
( MARK ONE )
/X/ Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 2000.
OR
/ / Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from___________to ________.
Commission File No. 0-16469
INTER PARFUMS, INC.
( Exact name of registrant as specified in its charter )
Delaware 13-3275609
---------------------------------------------------------------
( State or other jurisdiction of ( I.R.S. Employer
incorporation or organization ) Identification No.)
551 Fifth Avenue, New York, New York 10176
------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(212) 983-2640
---------------------------------------------------
(Registrants telephone number, including area code:)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days: Yes X No
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.
At August 5, 2000 there were 11,754,002 shares of common stock, par value $.001
per share, outstanding.
<PAGE>
INTER PARFUMS, INC. AND SUBSIDIARIES
INDEX
Page Number
Part I. Financial Information
Item 1. Financial Statements 1
Consolidated Balance Sheets as
of June 30, 2000 (unaudited)
and December 31, 1999 (audited) 2
Consolidated Statements of
Income for the Three Month and
Six Month Periods Ended
June 30, 2000 (unaudited)
and June 30, 1999 (unaudited) 3
Consolidated Statements of
Cash Flows for the Six
Month Periods Ended
June 30, 2000 (unaudited) and
June 30, 1999 (unaudited) 4
Notes to Unaudited Financial Statements 5
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 8
Part II. Other Information
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 16
<PAGE>
INTER PARFUMS, INC. AND SUBSIDIARIES
Part I. Financial Information
Item 1. Financial Statements
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial position
of the Company and its results of operations and cash flows for the interim
periods presented. Such financial statements have been condensed in accordance
with the rules and regulations of the Securities and Exchange Commission and
therefore, do not include all disclosures required by generally accepted
accounting principles. These financial statements should be read in conjunction
with the Company's audited financial statements for the year ended December 31,
1999 included in the Company's annual report filed on Form 10-K.
The results of operations for the six months ended June 30, 2000 are
not necessarily indicative of the results to be expected for the entire fiscal
year.
Page 1
<PAGE>
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
2000 1999
------------------ ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 25,016,988 $ 24,936,361
Marketable securities 1,904,790 4,424,043
Accounts receivable, net 26,273,927 26,032,673
Inventories 27,306,126 19,450,212
Receivables, other 979,231 874,829
Other 1,768,065 1,168,480
Deferred tax benefit 943,498 858,035
------------------ ------------------
Total current assets 84,192,625 77,744,633
Equipment and leasehold improvements, net 3,357,505 3,126,162
Other assets 504,621 508,184
Intangible assets, net 5,256,465 5,843,720
------------------ ------------------
$ 93,311,216 $ 87,222,699
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable, banks $ 3,178,810 $ 786,217
Accounts payable 20,480,011 18,449,190
Accrued expenses 6,058,160 4,351,536
Income taxes payable 385,893 768,940
Deferred taxes payable 937,678 987,654
------------------ ------------------
Total current liabilities 31,040,552 25,343,537
------------------ ------------------
Long-term debt, less current portion 1,451,379 1,531,394
------------------ ------------------
Minority interests 7,958,345 7,988,208
------------------ ------------------
Shareholders' equity:
Common stock, $.001 par; authorized 30,000,000 shares; outstanding
11,754,002 and 11,832,721 shares at June 30, 2000 and
December 31, 1999, respectively 11,754 11,833
Additional paid-in capital 26,654,336 26,518,082
Retained earnings 55,008,509 52,078,296
Accumulated other comprehensive income (6,054,545) (4,289,854)
Treasury stock, at cost, 5,506,805 and
5,392,805 shares at June 30, 2000 and
December 31, 1999, respectively (22,759,114) (21,958,797)
------------------ ------------------
52,860,940 52,359,560
------------------ ------------------
$ 93,311,216 $ 87,222,699
================== ==================
</TABLE>
See notes to financial statements.
Page 2
<PAGE>
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Net sales $ 24,277,090 $ 22,192,297 $ 46,445,604 $ 41,775,848
Cost of sales 12,540,957 11,740,839 24,785,777 21,839,870
------------------ ------------------ ------------------ ------------------
Gross margin 11,736,133 10,451,458 21,659,827 19,935,978
Selling, general and administrative 9,199,843 8,259,920 16,665,935 15,393,889
Litigation expense 556,043 556,043
------------------ ------------------ ------------------ ------------------
Income from operations 1,980,247 2,191,538 4,437,849 4,542,089
------------------ ------------------ ------------------ ------------------
Other charges (income):
Interest 104,481 83,620 162,386 189,472
(Gain) loss on foreign currency (18,671) 48,342 20,486 116,806
Interest and dividend (income) (283,794) (145,925) (511,782) (345,260)
Loss on sale of stock of subsidiary, net 10,243 26,214 10,243 26,214
Realized (gain) on sale of investments (1,077,110) (1,577,261)
------------------ ------------------ ------------------ ------------------
(1,264,851) 12,251 (1,895,928) (12,768)
------------------ ------------------ ------------------ ------------------
Income before income taxes 3,245,098 2,179,287 6,333,777 4,554,857
Income taxes 1,393,220 845,704 2,806,549 1,823,660
------------------ ------------------ ------------------ ------------------
Net income before minority interest 1,851,878 1,333,583 3,527,228 2,731,197
Minority interest in net income
of consolidated subsidiary 344,003 249,593 597,015 490,277
------------------ ------------------ ------------------ ------------------
Net income $ 1,507,875 $ 1,083,990 $ 2,930,213 $ 2,240,920
================== ================== ================== ==================
Net income per common share:
Basic $0.13 $0.10 $0.25 $0.20
Diluted $0.12 $0.09 $0.23 $0.19
================== ================== ================== ==================
Number of common shares outstanding:
Basic 11,754,490 11,149,728 11,760,787 11,491,145
Diluted 13,026,453 11,784,033 12,975,711 11,873,435
================== ================== ================== ==================
</TABLE>
See notes to financial statements.
Page 3
<PAGE>
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six months ended
June 30,
2000 1999
---------------- ------------------
<S> <C> <C>
Operating activities:
Net income $ 2,930,213 $ 2,240,920
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 1,019,675 788,777
Realized (gain) on sale of marketable securities (1,577,261)
Loss on sale of stock of subsidiary 10,243 26,214
Minority interest in net income 597,015 490,277
Increase (decrease) in cash from changes in:
Accounts receivable (1,263,368) (754,800)
Inventories (8,659,074) 583,967
Other assets (812,136) (271,490)
Accounts payable and accrued expenses 4,769,727 23,478
Income taxes payable (129,377) (1,495,646)
---------------- ------------------
Net cash provided by (used in) operating activites (3,114,343) 1,631,697
---------------- ------------------
Investing activities:
Purchase of equipment and leasehold improvements (1,001,751) (364,352)
Trademark and license acquisitions (950) (336,001)
Purchase of marketable securities (1,895,083)
Sale of marketable securities 4,992,684
---------------- ------------------
Net cash provided by (used in) investing activities 2,094,900 (700,353)
---------------- ------------------
Financing activities:
Increase in loan payable, bank 2,450,337 1,464,892
Proceeds from sale of stock of subsidiary 27,802 31,192
Proceeds from exercise of stock options 136,250 23,000
Dividends paid (134,543) (92,371)
Purchase of treasury stock (800,392) (6,760,696)
---------------- ------------------
Net cash provided by (used in) financing activities 1,679,454 (5,333,983)
---------------- ------------------
Effect of exchange rate changes on cash (579,384) (1,261,842)
---------------- ------------------
Increase (decrease) in cash and cash equivalents 80,627 (5,664,481)
Cash and cash equivalents at beginning of period 24,936,361 23,355,915
---------------- ------------------
Cash and cash equivalents at end of period $ 25,016,988 $ 17,691,434
================ ==================
Supplemental disclosure of cash flows information:
Cash paid during the period for:
Interest $ 197,000 $ 189,000
Income taxes 2,262,000 3,116,000
</TABLE>
See notes to financial statements.
Page 4
<PAGE>
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Unaudited Financial Statements
1. Significant Accounting Policies:
The accounting policies followed by the Company are set forth in the
notes to the Company's financial statements included in its Form 10-K
which was filed with the Securities and Exchange Commission for the
year ended December 31, 1999.
2. Comprehensive Income:
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 2000 June 30, 1999
---------------- -----------------
<S> <C> <C>
Comprehensive income:
Net income $ 2,930,213 $ 2,240,920
Other comprehensive income, net of tax:
Foreign currency translation adjustment (1,383,951) (3,100,031)
Unrealized gains on securities:
Unrealized holding gains arising
during period 347,954
Less: reclassification adjustment for
gains realized in net income ( 728,694)
---------- ----------
Comprehensive income $ 1,165,522 $( 859,111)
========== ==========
</TABLE>
3. Geographic areas:
Segment information related to domestic and foreign operations is as
follows:
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 2000 June 30, 1999
---------------- -----------------
<S> <C> <C>
Net sales:
United States $ 15,362,350 $ 12,332,884
Europe 31,143,254 29,492,964
Eliminations ( 60,000) ( 50,000)
----------- -----------
$ 46,445,604 $ 41,775,848
=========== ===========
Net Income:
United States $ 840,258 $ 453,401
Europe 2,094,088 1,824,894
South America ( 4,133) ( 37,375)
----------- -----------
$ 2,930,213 $ 2,240,920
=========== ===========
</TABLE>
Page 5
<PAGE>
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Unaudited Financial Statements
4. Earnings Per Share:
Basic earnings per share are computed using the weighted average number
of shares outstanding during each period. Diluted earnings per share
are computed using the weighted average number of shares outstanding
during each period, plus the incremental shares outstanding assuming
the exercise of dilutive stock options.
5. Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Raw materials and component parts $ 10,202,871 $ 8,239,528
Finished goods 17,103,255 11,210,684
------------ -------------
$ 27,306,126 $ 19,450,212
============ =============
</TABLE>
6. Shareholders' Equity:
In May 2000, the Company's Board of Directors authorized a 3 for 2
stock split for shareholders' of record on June 1, 2000, payable June
15, 2000. The effect of the stock split has been retroactively
reflected in the accompanying financial statements.
7. Income taxes:
Income taxes for the six months ended June 30, 2000 includes a $470,000
addition to the accrual, originally established in 1999, to cover the
potential exposure related to a tax audit of Inter Parfums, S.A.
commenced by the French Tax Authorities. The original accrual of
$260,000 was established to cover an estimate of potential exposure
based on an assessment issued by the French Tax Authorities for the
1996 tax year. This additional accrual covers, what we believe could be
our exposure for the 1997 and 1998 tax years on issues similar to that
of the 1996 tax year.
8. Litigation:
As previously reported, Inter Parfums, S.A., the Company's majority
owned French subsidiary is a party to litigation with Jean Charles
Brosseau, S.A. ("Brosseau"), the licensor of the Ombre Rose trademark.
The licensor has claimed damages of approximately $7.0 million and is
seeking termination of the license agreement.
Page 6
<PAGE>
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Unaudited Financial Statements
In October 1999, Inter Parfums, S.A. received notice of a judgment in
favor of Brosseau, which awarded damages of approximately $600,000 and
which directed Inter Parfums, S.A. to turn over its license to Brosseau
within six months.
Inter Parfums S.A. is appealing the judgment as it vigorously and
categorically denies the claims of Brosseau. The payment of the
judgment has been stayed, and Inter Parfums, S.A. can continue to
operate under the license agreement during the appeal process.
In June 2000, the president of the Court of Appeal granted a petition
filed by Brosseau regarding ongoing payments for minimum royalties due
to Brosseau. In the same intermediary judgment, the president of the
Court of Appeal rejected Inter Parfums, S.A.'s request for the
appointment of a new judicial expert. Such request was made by Inter
Parfums, S.A. to refute the findings of the judicial expert originally
appointed by the Commercial Court which resulted in the $600,000
judgement against the Inter Parfums, S.A.
As a result of these further developments, Inter Parfums, S.A. and its
special litigation counsel consider it likely that the judgment will be
sustained and has therefore taken a charge against earnings for
$600,000, the full amount of the judgment. Inter Parfums, S.A. will
continue its appeal as it still denies the claims of Brosseau as well
as the findings of the judicial expert originally appointed by the
Commercial Court.
Management does not believe that such litigation will have any further
material adverse effect on the financial condition or operations of the
Company. In 1999 the Company had set up a reserve of approximately
$275,000 against the unamortized portion of the license agreement.
After such reserve the remaining unamortized portion of the license
agreement is approximately $234,000 as of June 30, 2000.
Page 7
<PAGE>
INTER PARFUMS, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Our Company is a leading manufacturer and distributor of fragrances, cosmetics
and personal care products. Innovation and creativity are combined to produce
quality products for our customers around the world.
We specialize in the production of both prestige fragrances and mass market
fragrances and cosmetics:
O Prestige products -- For each prestige brand, owned or licensed, we
create an original concept for the perfume consistent with world market
trends;
O Mass market products -- We design, market and distribute inexpensive
fragrances and personal care products including alternative designer
fragrances and mass market cosmetics.
Three and Six Months Ended June 30, 2000 as Compared to the Three and
Six Months Ended June 30, 1999
Net sales for the three months ended June 30, 2000 increased 9% to $24.3
million, as compared to $22.2 million for the corresponding period of the prior
year. At comparable foreign currency exchange rates, net sales increased 20% for
the period.
Net sales for the six months ended June 30, 2000 increased 11% to $46.4 million,
as compared to $41.8 million for the corresponding period of the prior year. At
comparable foreign currency exchange rates, net sales increased 21% for the
period.
The increase in net sales represents the third consecutive quarter of revenue
growth and is attributable to across-the-board increases in both our prestige
and mass market product lines. The precipitous rise of the US dollar relative to
the French franc masks the reality of our real revenue growth rate.
Growth in net sales of prestige products, which was up approximately 20% in
constant dollars for the six months ended June 30, 2000, was fueled in part by
the tremendous success of the launch of our S.T. Dupont "Signature" line. Our
"Signature" line, was designed around the theme of writing, for which S.T.
Dupont is famous, and is a perfect complement to our S.T. Dupont "Paris"
fragrance line.
Page 8
<PAGE>
INTER PARFUMS, INC. AND SUBSIDIARIES
The introduction of our first Paul Smith fragrance line, and our newest Burberry
offering are scheduled to roll out in the third and fourth quarter making the
remainder of 2000 look very favorable for revenue growth. Management believes
that a better than 20% constant dollar growth rate can be maintained throughout
the remainder of this year as a result of the strong market conditions we are
experiencing with existing products and all the new product offerings we have
planned.
Net sales of mass market products achieved a 25% growth rate for the six months
ended June 30, 2000 as compared to the corresponding period of the prior year.
For three straight quarters we have been able to capitalize on the economic
recoveries of certain Latin American countries. Sales growth from our wide
selection of mass market fragrances continue to exceed our expectations.
Our new Aziza II line of eye shadow kits, mascaras, colorful lip gloss products
and pencils have also achieved widespread acceptance and reorders with
distribution in over 12,000 doors. As a result, we are expanding our product
offerings to include liquid eyeliners, liquid lipsticks as well as a
coordinating lipstick and nail polish duo. These new products which have also
been created primarily for the "Discount Store" market, will be available in
time for the Christmas selling season.
Growing sales within existing product lines, new product launches and an active
new business development program is how we plan to continue to grow our
business. With respect to new business development, our company has been very
active. In May, we announced the signing of an exclusive worldwide license
agreement with CELINE for the development of a perfume line. Celine, a division
of LVMH Moet Hennessy Louis Vuitton S.A., is a French fashion and accessory
company known throughout the world for its luxury and quality products, as well
as the unique designs of Michael Kors. We will commence distributing Magic,
Celine's existing fragrance line, beginning January 1, 2001. Two new fragrance
lines will be created and a launch is planned for late 2001.
In June, we announced the signing of an exclusive worldwide license agreement
with FUBU for the development of a perfume line. FUBU, founded in 1992, exploded
onto the young men's fashion scene. Music, movie, television and sport stars
have worn the designs all recognizable by the FUBU logos. Today, FUBU product
sales exceed $350 million, and encompass men's sportswear-formalwear, ladies,
and children's apparel, as well as footwear and accessory items. The exposure
FUBU has received has helped to create a loyal brand following from ages 5-55 in
both the U.S. and abroad. Today's FUBU customers are both men and women, living
in big cities and small towns, and encompass many diverse ethnic, racial and
cultural backgrounds which creates a unique opportunity for a fragrance line. We
expect the first FUBU fragrance products will be ready for launch in late 2001.
Page 9
<PAGE>
INTER PARFUMS, INC. AND SUBSIDIARIES
Gross profit margin was 48% and 47% of net sales for the three and six month
periods ended June 30, 2000, respectively, as compared to 47% and 48% for the
three and six month periods ended June 30, 1999, respectively. Our target gross
margin percentage has historically been 45% to 46%. Gross profit margins have
remained relatively constant for the past two years and fluctuate mildly as a
result of sales mix. However, the Company has seen some gross profit margin
improvement as a result of the strength of the US dollar relative to the French
franc, as certain European sales are denominated in US dollars.
Selling, general and administrative expenses aggregated $9.2 million for the
three months ended June 30, 2000, as compared to $8.3 million for the
corresponding period of the prior year. As a percentage of sales, selling,
general and administrative expenses was 38% for the three months ended June 30,
2000, as compared to 37% for the corresponding period of the prior year.
Selling, general and administrative expenses aggregated $16.7 million for the
six months ended June 30, 2000, as compared to $15.4 million for the
corresponding period of the prior year. As a percentage of sales, selling,
general and administrative expenses was 36% for the six months ended June 30,
2000, as compared to 37% for the corresponding period of the prior year.
In the United States, selling, general and administrative expenses were $2.3
million for the three months ended June 30, 2000, as compared to $2.1 million
for the corresponding period of the prior year. As a percentage of sales,
selling, general and administrative expenses declined to 31% for the three
months ended June 30, 2000, as compared to 35% for the corresponding period of
the prior year. We continue to experience the benefit of cost cutting
initiatives put into place in 1999. We are well positioned to grow our sales
without incurring significant increases in selling, general and administrative
expenses.
Selling, general and administrative expenses incurred by our French subsidiary
Inter Parfums, S.A. were $6.9 million for the three months ended June 30, 2000,
as compared to $6.2 million for the corresponding period of the prior year. As a
percentage of sales, selling, general and administrative expenses aggregated 41%
of sales for the three months ended June 30, 2000, as compared to 38% for the
corresponding period of the prior year. Our existing prestige product lines
together with the complete calender of new product launches planned for this
year, require a reasonable level of advertising to support their growth and to
build upon each brand's awareness.
As previously reported, Inter Parfums, S.A., is a party to litigation with Jean
Charles Brosseau, S.A. ("Brosseau"), the licensor of the Ombre Rose trademark.
The licensor has claimed damages of approximately $7.0 million and is seeking
termination of the license agreement.
Page 10
<PAGE>
INTER PARFUMS, INC. AND SUBSIDIARIES
In October 1999, Inter Parfums, S.A. received notice of a judgment in favor of
Brosseau, which awarded damages of approximately $600,000 and which directed
Inter Parfums, S.A. to turn over its license to Brosseau within six months.
Inter Parfums, S.A. is appealing the judgment as it vigorously and categorically
denies the claims of Brosseau. The payment of the judgment has been stayed, and
Inter Parfums, S.A. can continue to operate under the license agreement during
the appeal process.
In June 2000, the president of the Court of Appeal granted a petition filed by
Brosseau regarding ongoing payments for minimum royalties due to Brosseau. In
the same intermediary judgment, the president of the Court of Appeal rejected
Inter Parfums, S.A.'s request for the appointment of a new judicial expert. Such
request was made by Inter Parfums, S.A. to refute the findings of the judicial
expert originally appointed by the Commercial Court which resulted in the
$600,000 judgement against the Inter Parfums, S.A.
As a result of these further developments, Inter Parfums, S.A. and its special
litigation counsel consider it likely that the judgment will be sustained and
has therefore taken a charge against earnings for $600,000, the full amount of
the judgment. Inter Parfums, S.A. will continue its appeal as it still denies
the claims of Brosseau as well as the findings of the judicial expert originally
appointed by the Commercial Court.
Management does not believe that such litigation will have any further material
adverse effect on the financial condition or operations of the Company. In 1999
the Company had set up a reserve of approximately $275,000 against the
unamortized portion of the license agreement. After such reserve the remaining
unamortized portion of the license agreement is approximately $234,000 as of
June 30, 2000.
During the three month period ended June 30, 2000 we sold a portion of our
investment in marketable securities and realized a gain of $1.1 million
($500,000 after taxes and minority interest). For the six month period ended
June 30, 2000 such gain aggregated $1.5 million ($700,000 after taxes and
minority interest). On occasion, we invest excess cash in marketable securities
which are classified as available-for-sale. These funds are available to support
current operations or to take advantage of other investment opportunities.
Page 11
<PAGE>
INTER PARFUMS, INC. AND SUBSIDIARIES
Our effective income tax rate was 43% for the three months ended June 30, 2000,
as compared to 39% for the corresponding period of the prior year. Our effective
income tax rate was 44% for the six months ended June 30, 2000, as compared to
40% for the corresponding period of the prior year. The effective tax rate for
the three and six month periods ended June 30, 2000 includes a $150,000
($115,000 after minority interest) and $480,000 ($370,000 after minority
interest), respectively, addition to an accrual, originally established in 1999,
to cover the potential exposure related to a tax audit of Inter Parfums, S.A.
commenced by the French Tax Authorities. The original accrual of $260,000 was
established to cover, what we believed to be, our exposure based on an
assessment issued by the French Tax Authorities for the 1996 tax year. This
additional accrual covers, what we believe could be our exposure for the 1997
and 1998 tax years on issues similar to that of the 1996 tax year.
Net income increased 39% to $1.5 million for the three months ended June 30,
2000, as compared to $1.1 million for the corresponding period of the prior
year. Net income for the three months ended June 30, 2000 includes charges of
$375,000 and a gain of $495,000, all after taxes and minority interest. The
charges represent an accrual for exposure relating to the Brosseau litigation of
$260,000 and a potential tax assessment of $115,000. The gain represents a
realized gain on sale of marketable securities. Excluding the effects of these
charges and the gain, net income increased 27% to $1.4 million for the three
months ended June 30, 2000.
Net income increased 31% to $2.9 million for the six months ended June 30, 2000,
as compared to $2.2 million for the corresponding period of the prior year. Net
income for the six months ended June 31, 2000 includes charges of $630,000 and a
gain of $725,000, all after taxes and minority interest. The charges represent
an accrual for exposure relating to the Brosseau litigation of $260,000 and a
potential tax assessment of $370,000. The gain represents a realized gain on
sale of marketable securities. Excluding the effects of these charges and the
gain, net income increased 26% to $2.8 million for the six months ended June 30,
2000.
Diluted earnings per share increased 33% to $0.12 for the three months ended
June 30, 2000, as compared to $0.09 for the corresponding period of the prior
year. Excluding the effects of the charges and the gain, referred to above,
diluted earnings per share increased 22% to $0.11 for the three months ended
June 30, 2000.
Diluted earnings per share increased 21% to $0.23 for the six months ended June
30, 2000, as compared to $0.19 for the corresponding period of the prior year.
Excluding the effects of the charges and the gain, referred to above, diluted
earnings per share increased 16% to $0.22 for the six months ended June 30,
2000.
Page 12
<PAGE>
INTER PARFUMS, INC. AND SUBSIDIARIES
After giving effect to the recent 3 for 2 stock split, weighted average shares
outstanding aggregated 11.8 million for both the three and six month periods
ended June 30, 2000, as compared to 11.1 million and 11.5 million for the three
and six month periods ended June 30, 1999, respectively. On a diluted basis,
average shares outstanding were 13.0 million for both the three and six month
periods ended June 30, 2000, as compared to 11.8 million and 11.9 million for
the three and six month periods ended June 30, 1999, respectively. Shares issued
upon exercise of options were offset by shares repurchased pursuant to our stock
repurchase program. The increase in our stock price has increased the dilutive
effect of outstanding stock options, thereby increasing diluted shares
outstanding.
Liquidity and Capital Resources
Profitable operating results continues to strengthen our financial position. At
June 30, 2000, working capital aggregated $53 million and we had a working
capital ratio of almost 3 to 1. Cash and marketable securities on hand
aggregated $27 million and our net book value was $4.50 per outstanding share as
of June 30, 2000. Furthermore, we had only $1.5 million in long-term debt.
We recently used a portion of our cash to make an investment in marketable
equity securities which are classified as available-for-sale. These funds are
available to support current operations or to take advantage of other investment
opportunities. This investment was made to maximize our return on cash.
During the six months ended June 30, 2000, we continued our stock repurchase
program by acquiring 114,000 of our common shares at an average cost of $7.02
per share. Our 77% owned publically traded French subsidiary, Inter Parfums,
S.A., has a current market cap of in excess of $130 million, which exceeds that
of the Company. Considering the Market cap of Inter Parfums, S.A. and the
Company's recent growth trends, management is of the opinion that the current
market price of the Company's common shares understates its real value.
The Company's short-term financing requirements are expected to be met by
available cash at June 30, 2000, cash generated by operations and short-term
credit lines provided by domestic and foreign banks. The principal credit
facilities for 2000 are a $12.0 million unsecured revolving line of credit
provided by a domestic commercial bank and approximately $12.0 million in credit
lines provided by a consortium of international financial institutions.
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INTER PARFUMS, INC. AND SUBSIDIARIES
During the six month period ended June 30, 2000 the Company used $3.1 million in
cash for operating activities, as compared to $1.6 million which was provided by
operating activities during the six month period ended June 30, 1999. This cash
was used primarily to build up inventory for the upcoming launches of our Paul
Smith fragrance line and our new Burberry "Touch" fragrance line.
Management of the Company believes that funds generated from operations,
supplemented by its present cash position and available credit facilities, will
provide it with sufficient resources to meet all present and reasonably
foreseeable future operating needs.
In January 1999, certain member countries of the European Union established
permanent fixed rates between their existing currencies and the European Union's
common currency ("the Euro"). The transition period for the introduction of the
Euro is scheduled to phase in over a period ending January 1, 2002. The
introduction of the Euro and the phasing out of the other currencies should not
have a material impact on the Company's consolidated financial statements.
Inflation rates in the U.S. and foreign countries in which the Company operates
have not had a significant impact on operating results for the six months ended
June 30, 2000.
Statements included herein which are not historical in nature are forward
looking statements. Forward looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results to be
materially different from projected results. Such factors include changes in
product acceptance by consumers, effectiveness of sales and marketing efforts,
currency fluctuations and competition. Given these uncertainties, persons are
cautioned not to place undue reliance on the forward looking statements.
Part II. Other Information
Items 2, 3 and 5 are omitted as they are either not applicable or have
been included in Part I.
Item 1. Legal Proceedings
See Notes 7 and 8 in Notes to Unaudited Financial Statements included
in Part I.
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INTER PARFUMS, INC. AND SUBSIDIARIES
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders of Inter Parfums, Inc. (the
"Company"), was held on 12 July 2000 at 10:00 a.m., local time, at the offices
of the Company, 551 Fifth Avenue, New York, New York 10176. The following
information does not give effect to the 3 for 2 stock split effected after the
record date for the annual meeting.
(b) The following individuals were nominated for election as members of
the Board of Directors to hold office for a term of one (1) year until the next
annual meeting of stockholders and until their successors are elected and
qualify: Jean Madar, Philippe Benacin, Russell Greenberg, Francois Heilbronn,
Joseph A. Caccamo, Jean Levy, Robert Bensoussan-Torres, Daniel Piette, Jean
Cailliau and Philippe Santi.
The results of the voting were as follows: 6,388,580 votes were cast
for each director, and 629,700 votes were withheld from each director. A
plurality of the votes having been cast in favor of each of the above-named
Directors, they were duly elected to serve a one (1) year term.
(c) (i) The final item on the agenda was a proposal to adopt an
amendment to the Company's Restated Certificate of Incorporation, to provide for
unanimous board voting in certain circumstances. The results of the voting on
such resolution were as follows:
5,867,697 votes for the resolution,
793,423 votes against and
3,050 votes abstained.
A majority of the outstanding shares were cast for the above referenced
resolution, and the resolution was duly passed.
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INTER PARFUMS, INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) The following document is filed herewith:
Exhibit No. and Description
3.1(e) Amendment to the Company's Restated Certificate of Incorporation, as
amended, dated July 12, 2000
(b) The Company filed the following reports on Form 8-K:
-------------------------------------------------------------------------------
Report Date of Event Items Reported
-------------------------------------------------------------------------------
Form 8-K 18 May 2000 5,7
-------------------------------------------------------------------------------
Form 8-K/A no. 1 18 May 2000 7
-------------------------------------------------------------------------------
Form 8-K 23 June 2000 5,7
-------------------------------------------------------------------------------
Form 8-K/A no. 1 23 June 2000 7
-------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on the 10th day of August 2000.
INTER PARFUMS, INC.
By: /s/ Russell Greenberg
---------------------------------------------
Russell Greenberg,
Executive Vice President and
Chief Financial Officer
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